Union P. R. Co. v. Credit Mobilier of America

• Citation: 135 Mass. 367
• Parties: Union Pacific Railroad Company v. Credit Mobilier of America
• Decision Date: 04 September 1883
• Court: United States State Supreme Judicial Court of Massachusetts

135 Mass. 367

Union Pacific Railroad Company v. Credit Mobilier of America

Supreme Court of Massachusetts

September 4, 1883

Argued November 20, 1879; March 8, 1882

Suffolk. Bill in equity, filed April 10, 1876, to restrain the defendant, a corporation chartered by the State of Pennsylvania, from the prosecution of an action at law by the present defendant against the present plaintiff, and now pending in this court, upon an account stated between the two corporations on March 28, 1867, for the sum of $ 1,994,769.96; for the additional sum of $ 268,850.17, alleged to be due on September 11, 1868; and upon a promissory note for $ 2,000,000, given by the present plaintiff to the present defendant in partial settlement of said account, and dated August 4, 1869.

Hearing upon the pleadings and evidence, before Endicott, J., who reserved the case for the consideration of the full court.

Bill dismissed.

The case was argued in November, 1879, by S. Bartlett & F. Bartlett, for the plaintiff, and by W. G. Russell & G. Putnam, (G. F. Betts, of New York, with them,) for the defendant; and was reargued in March, 1882, and in March 1883, by Bartlett & Bartlett, for the plaintiff, and by Russell & Putnam, for the defendant.

C Allen J. Morton, C. J., Devens & Colburn, JJ., did not sit.

OPINION

C. Allen J.

This case is submitted to us upon the pleadings and a report of the whole evidence taken; without any finding of facts by the judge before whom it was heard.

Upon the pleadings, the plaintiff's case must depend upon the equity of its stockholders. It has, indeed, been suggested in argument, that the bill may be maintained on the equity of creditors. It appears incidentally in the course of the evidence that the government lent its security to the Union Pacific Railroad Company, to aid in the construction of the railroad; and that other indebtedness exists. But this is no substantive part of the plaintiff's case. The bill does not purport to be brought in the interest of the government, or of creditors; but it is made to rest expressly upon the equity of stockholders. Neither party contends, or admits, that any violation of the charter of the Union Pacific Railroad Company, or of its duty to the government, was involved in the transactions set forth. Both parties, indeed, at an earlier stage of the case, have united in a statement, and in an elaborate argument, to the contrary. The bill contains no averment whatever of any indebtedness of the plaintiff; and, of course, there is no statement of how much is due to creditors, and how much it is necessary to realize in order to supply any deficiency of other means and resources of the plaintiff to make such creditors whole. In considering the case, therefore, the equity of the plaintiff corporation, in behalf of its stockholders, as against the defendant corporation, is alone to be considered.

It is also to be borne in mind that the relief sought for is founded upon the money and securities averred to have been received by the Credit Mobilier under the Hoxie contract, after its assignment to the defendant. There was testimony to the effect that, prior to such assignment, certain profits were realized under this contract by one Durant; but he is not a party to the suit, and no consideration need be given to the question of what rights the plaintiff might have as against him, except as this may affect the further question of its rights as against the defendant.

The facts, upon which the determination of the case must depend, not having been found by the single justice, it is expedient, in the first instance, to state the material facts, as they are found by us to exist, upon the evidence which has been introduced.

The Hoxie contract, so called, and other formal papers relating thereto, were as follows: By a proposition dated August 8, 1864, addressed "to the President and Committee on Contracts of the Union Pacific Railroad Company," and signed "H. M. Hoxie, by H. C. Crane, attorney," Hoxie proposed to enter into a contract to build and equip one hundred miles of railroad and telegraph, commencing at Omaha, according to certain specifications and upon certain terms and conditions. Appended to this proposition was a paper addressed to Hoxie, and signed "George T. M. Davis, Special Committee," as follows: "H. M. Hoxie, Esq., Dear Sir: You will please to go on with the work, under the above proposition, and, if the company do not accept it before the first day of October next, they will pay you upon the same terms and conditions for what work may be done, as shown by the estimates of the engineers, made as provided in this proposition, first giving you thirty days' notice that they do not accept. George T. M. Davis, special committee."

Underneath this paper was the following: "September 23, 1864. Above contract is approved and ratified. John A. Dix, C. S. Bushnell, George T. M. Davis."

The following additional papers were also executed between the same parties. "New York, October 4, 1864. To the President and Executive Committee of the Union Pacific Railroad Company. On condition that your railroad company will extend my contract from its present length for one hundred miles, so as to embrace all that portion of the road between Omaha and the one hundredth meridian of longitude, I will subscribe, or cause to be subscribed, for five hundred thousand dollars of the stock of your company. Respectfully yours, H. M. Hoxie, by H. C. Crane, attorney.

"The above proposition is hereby accepted for and on behalf of the Union Pacific Railroad Company. John A. Dix, C. S. Bushnell, Geo. T. M. Davis, special committee. October 3, 1864."

At these dates, there were twenty-eight directors and two government directors of the Union Pacific Railroad Company, and an executive committee consisting of Dix, Bushnell, Davis, and four others. Dix was president and Durant was vice-president of the corporation. There was no evidence of the extent of the authority conferred upon the executive committee, or of the existence of any committee known as the committee on contracts. The bill, however, alleges that the proposition of August 8th was accepted by a committee of the board of directors of the Union Pacific Railroad Company on the 23d of September, 1864, and that the subsequent proposition of October 4, 1864, was accepted by a committee of said corporation by a writing bearing date the third day of the same month of October; and the answer admits that said propositions were accepted by the plaintiff, at or about the dates alleged in the bill.

On October 5, 1864, a new board of officers was elected, with fifteen directors and five government directors, and an executive committee of seven. With one exception, the fifteen directors thus chosen were members of the former board; with two exceptions, the executive committee remained the same as before, including Dix, Bushnell and Davis; Dix continued president, and Durant vice-president.

By a paper dated September 30, 1864, and executed at about that date, an agreement was made between Hoxie, for himself and as agent, and Durant, for the assignment of the contract for the construction of the one hundred miles of railroad and telegraph to Durant, or any party or parties he might direct. A paper dated October 7, 1864, was drawn up for signatures, at about the time of its date, reciting the last-mentioned paper, and providing that the subscribers agreed to take an interest in the Hoxie contract to the extent set opposite their respective names. This paper was signed by Durant and others, but was not fully carried out, as hereinafter stated.

On or about March 15, 1865, various papers were executed as follows:

1. A letter from Hoxie, by H. C. Crane, attorney, to the president and directors of the Union Pacific Railroad Company, consenting to their terminating the contract for building one hundred miles of railroad.

2. An agreement between Hoxie and the Credit Mobilier, by which Hoxie assigned to it his contract with the Union Pacific Railroad Company, and the Credit Mobilier agreed to execute to said company a guaranty of the performance thereof, and to indemnify him from all claims under the same.

3. A guaranty of such performance, executed by the Credit Mobilier to the Union Pacific Railroad Company.

On April 6, 1865, the board of directors of the Union Pacific Railroad Company passed a resolution, accepting and recognizing the said assignment and guaranty, and ordering them and the Hoxie proposition or contract to be recorded in the directors' book of minutes. Another resolution was also adopted on the same day, that additional surveys and contracts for construction should be made as fast as the means of the company would properly justify.

Prior to the passage of these votes, Durant had proceeded with the work under the Hoxie contract, and taken to his own use such profits as arose therefrom. No other contracts were put in evidence; and the Credit Mobilier, after these votes, proceeded to build the railroad and telegraph, not only for the distance of one hundred miles, but to the one hundredth meridian, a point two hundred and forty-seven miles west from Omaha.

Assuming without deciding, that the papers constituting the Hoxie contract were signed in such form and by such officers as to bind the Union Pacific Railroad Company, said contract was made and entered into with the expectation and understanding that Hoxie would assign it to Durant, or to such party or parties as he should designate. This understanding on Durant's part was with the view and in order that, if the scheme could be carried out on that basis, all the stockholders of the Union Pacific Railroad Company should have an opportunity to become interested in it,...