Tyrell v. Cairo & St. Louis R.R. Co.

• Decision Date: 03 June 1879
• Citation: 7 Mo.App. 294
• Parties: MICHAEL TYRELL, Respondent, v. CAIRO AND ST. LOUIS RAILROAD COMPANY, Appellant.
• Court: Missouri Court of Appeals

7 Mo.App. 294

MICHAEL TYRELL, Respondent,

v.CAIRO AND ST. LOUIS RAILROAD COMPANY, Appellant.

St. Louis Court of Appeals, Missouri.

Jun. 3, 1879.

1. Where bonds and coupons payable in another State are so framed as to be negotiable by the general law-merchant, they will, in the absence of evidence to the contrary, be presumed to be negotiable by the law of such other State.

2. A creditor who, in consideration of the transfer of negotiable bonds to him, extends time for the payment of a debt, becomes a purchaser for value, and that the bonds were taken for a preexisting debt does not deprive him of the rights of a purchaser for value before maturity without notice of the equities between the original parties to the bonds.

3. The defence of ultra vires will not avail against holders for value of negotiable bonds issued by the directors of a corporation, where the stockholders of the corporation failed to take any steps to repudiate the action of the directors, but allowed the bonds to be sold, and availed themselves of the benefits thereof.

4. Where no prejudice can result from the omission, that the law in regard to annexing exhibits to a deposition has not been complied with is not a sufficient ground for a reversal.

APPEAL from St. Louis Circuit Court.

Affirmed.

T. Z. BLAKEMAN, for appellant: The deposition offered was improperly allowed to be read.--Wag. Stats. 537, sects. 27, 28. The directors, in attempting to issue the bonds, exceeded their authority, and the bonds were not binding upon the corporation.--1 Potter on Corp., sects. 85-92; Rev. Stats. Ill. 1877, pp. 765, 766; Railway Co. v. Allerton, 18 Wall. 233; Rollins v. Clay, 33 Me. 139; Ang. & Ames on Corp., sect. 299; Eidman v. Bowman, 58 Ill. 444; Pitman v. Adams, 44 Mo. 578. The title to the pledged property was in the pledgeor.--Story on Bail., sects. 93, 308, 310; 2 Kent's Comm. (12th ed.) 578, 582; Wheeler v. Newbold, 5 Duer, 35; Morris Canal v. Lewis, 12 N. J. 329. One who takes negotiable paper before maturity as security for an antecedent debt is considered to hold it subject to all the equities existing between the original parties.-- Goodman v. Simonds, 19 Mo. 106; Brainard v. Reavis, 2 Mo. App. 490. Under the law of Missouri, the instruments sued on are not negotiable paper, and hence were open to all defences in the hands of respondent.-- International Bank v. German Bank, 3 Mo. App. 362; Bailey v. Smock, 61 Mo. 219; Lowenstein v. Knopf, 2 Mo. App. 159.

DONOVAN & CONROY, for respondent: Where the charter of a corporation authorizes the issue of bonds in aid of the purposes of the company, or to pay its debts, a bona fide holder of bonds issued by the directors under such power is not bound to inquire into the regularity of the steps taken by the directors prior to such issue.-- Supervisors, etc. v. Cook, 38 Ill. 50; Moran v. Commissioner, etc., 2 Black, 722; Big. on Estop. 421, 423, and cases. Where the charter of a railroad company provides that a board of directors shall manage its affairs, and the charter further provides that the corporation may issue bonds to pay debts, the directors have the power for the purposes aforesaid to execute and issue such bonds without first submitting their action to a meeting of stockholders.-- Dana v. Bank, 5 Watts & S. 245; Bank v. Dandridge, 12 Wheat. 113; Burnell v. Bank, 2 Metc. 163; Union Turnpike Co. v. Jenkins, 1 Caines, ^*391. And the validity of stock so issued cannot be questioned in the hands of bona fide holders for value.--Big. on Estop. 423.

HAYDEN, J., delivered the opinion of the court.

This is an action brought upon seven coupons, one of which is as follows: “40: The Cairo and St. Louis Railroad Company will pay the bearer forty dollars on the first day of July, 1874, at its office or agency in the city of New York, being six months' interest due on that day on said company's eight per cent mortgage bonds. F. Bross, Secretary.” The defence was that the bonds, being certain second-mortgage bonds of the defendant, which was incorporated by act of the Legislature of Illinois, were issued by the directors without the consent or authority of the stockholders of the company. The purpose of the corporation was to construct and operate a railway from Cairo to St. Louis; and, in addition to the usual powers, it had such as were conferred upon any other railroad company incorporated by the laws of Illinois. Its charter provided that the affairs of the company should be managed by a board of seven directors, and that the company should have power from time to time to borrow money, issue and dispose of bonds, and mortgage their corporate property, real or personal, and their franchise, to secure money borrowed or other debts. The company made a contract with Payson & Co., as contractors, the members of this firm being the chief managers and stockholders of the company. In October, 1871, the board of directors issued first-mortgage bonds to the amount of $2,500,000, secured by mortgage on the road, and this issue never appears to have been questioned. The corporation was formed in 1866, and the first meeting of stockholders was in 1875. In September, 1873, the company being largely indebted to the contractors and others, in order to relieve the road from debts that threatened the further construction, issued second-mortgage bonds to the amount of $856,000, the coupons of some of which are here in suit. These were issued by the board of directors in due form, and secured by a second mortgage on the road; but, doubt being thrown upon their legality, only a few of them were actually used.

It is contended that the plaintiff is not in the position of a bona fide holder for value of these coupons, and that the rules applicable to such holders, as against a corporation raising the defence of ultra vires, are not to be here applied in his favor. See Singer v. Railroad Co., 6 Mo. App. 427. It is said, first, that the words “for value received” are not in the coupons, and that consequently they are not negotiable under the statute. Wag. Stats. 216, sect. 15. It is not necessary here to decide whether the statute has reference to coupons of a railway mortgage-bond, which are payable to bearer, and understood to be, and treated as negotiable throughout the commercial world. It is sufficient that here both bonds and coupons are payable in New York, and the question is as to the law of that State. Stix v. Matthews, 63 Mo. 371. No statute was introduced in evidence upon this point, and accordingly the lex loci solutionis must be presumed to be the general law-merchant, by...