Welsh v. First Div. St. Paul & Pac. R. Co.

• Decision Date: 10 October 1878
• Parties: WILLIAM WELSH <I>vs.</I> FIRST DIVISION OF THE ST. PAUL & PACIFIC RAILROAD COMPANY.
• Court: Minnesota Supreme Court

25 Minn. 314

WILLIAM WELSHvs.

FIRST DIVISION OF THE ST. PAUL & PACIFIC RAILROAD COMPANY.

Supreme Court of Minnesota.

October 10, 1878.

On reargument, March 3, 1879.

The St. Paul & Pacific Railroad Company, being authorized by its charter to construct and operate a line of railroad from

St. Paul via St. Anthony to Breckenridge, with a branch from St. Anthony via St. Cloud and Crow Wing to St. Vincent, for the purpose of raising money to construct that part of its railroad extending from St. Paul via St. Anthony and up the valley of the Mississippi river to Watab, issued and negotiated its bonds to a large amount, bearing date June 2, 1862, payable June 1, 1892, with interest at seven per cent. per annum, payable semi-annually, according to the tenor of interest warrants or coupons thereto annexed. At the same time, to secure the payment of the bonds and interest, the company executed and delivered to trustees a mortgage upon its line of railroad from St. Paul to Watab, and the lands, franchises and appurtenances thereto appertaining. The bonds and the mortgage contained a provision empowering the trustees to declare the principal of the bonds due and payable, after six months' default in the payment of any instalment of interest.

Prior to the date of the mortgage the company had contracted with Litchfield & Co. for the building of that part of its road between St. Paul and Watab. The contractors had built a part of the road when the company became unable to make the payments due the contractors, and thereupon procured an act of the legislature, authorizing it to issue preferred and special stock, and to make agreements with the holders of such stock for the organization of the holders of such stock, and the exercise by them of all the powers of the company in respect to that portion of its railroad to which such special stock should pertain. After the passage of this act, the company issued to E. B. Litchfield, one of the firm of Litchfield & Co., special stock pertaining to that part of the road between St. Paul and Watab, and that part between St. Anthony and Breckenridge, and on February 6, 1864, an agreement was made between the company and E. B. Litchfield, by which the company sold and conveyed to him, as holder of such special stock, all its property and franchises in the lines of road to which the stock pertained, and he agreed to form a new organization by the name of the First Division of the St. Paul & Pacific Railroad Company, to construct the road and exercise the franchises thus transferred. The agreement contains the following covenant on the part of Litchfield: "And the party of the second part, for the separate organization herein contemplated, agrees to assume all liabilities of the party of the first part, so far as relate to the lines of road hereinbefore mentioned, of every name and nature, and to save the said party of the first part harmless therefrom." In pursuance of this agreement, Litchfield and others to whom he assigned a portion of his special stock organized the First Division of the St. Paul & Pacific Railroad Company, the defendant in this action. The proceedings by which this company was thus created were legalized by subsequent legislation; and in First Div. St. Paul & Pac. R. Co. v. Parcher, 14 Minn. 297, it was held that the new company was a legal corporation separate and distinct from the old. The new company, defendant herein, for some years paid the interest coupons on the bonds of the issue of 1862, but afterwards made default, and the plaintiff's first cause of action is upon certain coupons of bonds of that issue, for the instalment of interest thereon falling due June 1, 1877. The coupons are in the following form, the blanks being filled according to the number and denomination of the bond: "The St. Paul & Pacific Railroad Company will pay to the bearer ______ dollars at their office or agency in the city of New York, on the first day of June, 1877, interest due on that day on their real estate bond No. ___.

                                                 HENRY ACKER, Secretary
                

"June 2, 1862."

On March 1, 1864, the defendant the First Division of the St. Paul & Pacific Railroad Company, for the purpose of procuring the means to construct its line from St. Anthony westward, known as its Main Line, issued its bonds to the amount of $3,000,000, payable May 1, 1894, with interest at seven per cent. per annum, payable semi-annually on May 1st and November 1st in each year, according to the tenor of interest coupons thereto annexed. To secure the payment of the bonds and interest, the defendant, on March 1, 1864, executed and delivered to trustees a mortgage on the first 150 miles of such main line. The bonds and the mortgage alike provided that in case of six months' default in payment of interest, the principal of the bonds should, at the election of the trustees, become immediately due and payable. The defendant failed to pay the instalment of interest falling due May 1, 1873, and never afterwards made any further payments but continued in default. On May 4, 1874, the trustees brought suit in the late court of common pleas to foreclose the mortgage, and in their complaint set forth the occurrence and continuance of the default, and declared the principal of the bonds to be due and payable. This action was transferred to the district court for Ramsey county and was still pending, and no judgment had been rendered therein, when this action was brought. The plaintiff's second cause of action is upon certain coupons of the last-mentioned mortgage for the instalment of interest falling due May 1, 1877. The form of these coupons is the same as that above set forth.

The plaintiff in his complaint alleges himself to be the bona-fide holder for value of the coupons sued on, and of the bonds to which they were attached; but no copy of the bonds is annexed to the complaint, nor were any bonds produced at the trial.

A jury was waived, and the action tried in the district court for Ramsey county, before Brill, J., who ordered judgment for the plaintiff for the face of his coupons, with interest from the time when they respectively became due. A new trial was refused, and the defendant appealed.

Bigelow, Flandrau & Clark, for appellant.

Gilman & Clough, for respondent.

CORNELL, J.

In respect to the first error assigned by defendant, it is urged and insisted that "in order to the existence of a coupon, there must be or must have been a bond; that to prove a coupon, it is essential first to show the execution of a bond; that no recovery can be had in an action upon coupons, without producing the bonds, or showing in some way their issuance with the coupons annexed, and that the latter have been subsequently separated therefrom; that in this case there is no evidence, either of the issuance of the bonds, or that the papers called coupons, upon which a recovery was had herein, were ever attached to, or in any manner connected with, any other instrument whatever," and consequently the findings of the court in this regard are unsupported by evidence. This objection of want of proof is made as to both classes of coupons sued on, but if good as to either, it is especially so as to those claimed to have been issued by the St. Paul & Pacific Railroad Company. In reference to these latter, it is admitted in the answer that an issue of mortgage coupon bonds, of the tenor and character described in the complaint, was made by the said St. Paul & Pacific Railroad Company, on or about the second day of June, 1862, and that a portion thereof was afterwards issued and negotiated for value, and that the same are still outstanding and unpaid; but the defendant denies all knowledge or information as to how many of said bonds were so issued and negotiated, or whether the ninety-eight bonds particularly described in the complaint were of such portion. It is alleged in the complaint, and admitted in the answer substantially as alleged, that all the bonds of such issue, with the coupons annexed as mentioned in the complaint, including the ninety-eight in question, were secured by a trust mortgage deed cotemporaneously given and executed by that company upon its said branch line of railroad, and the lands and franchises thereto appertaining, to Edmund Rice, Horace Thompson and Samuel J. Tilden, as trustees. It appears in evidence that in October, 1865, the defendant made a new issue of bonds secured by a mortgage deed in trust, for the express purpose, among other things, of retiring and taking up the issue of June 2, 1862, in which it is recited and stated, as an admitted fact, that such last-named issue and mortgage amounted to $1,200,000, and that all the bonds of that issue were issued and negotiated by said St. Paul & Pacific Railroad Company, and became an indebtedness against said company, and a lien upon the said mortgaged branch line of road, its lands and franchises, which it was the object of the defendant to provide for, so far as the bonds were outstanding and unpaid, by its new issue of October, 1865. This indebtedness is also recognized by the defendant in its annual report of 1874 to the railroad commissioner of the state. The coupons themselves, produced by the plaintiff and introduced in evidence, correspond in their tenor and character, and in their numbers, with those specified in the complaint. They bear the same date as the bonds issued June 2, 1862, and purport on their face to represent the interest to accrue upon the real-estate bonds of that company,...