Morgan County v. Thomas , 76 Ill. 120 ( 1875 )

Mr. Justice Scholfield

delivered the opinion of the Court:

This is the third time this court has been called upon to determine questions aifecting the claim of William Thomas to a portion of the bonds involved in this controversy. In the first case, Thomas et al. v. The County of Morgan, 39 Ill. 496, it was in evidence, as it is now, that the question whether Morgan county should subscribe for $50,000 of the capital stock of the Illinois River Railroad Company, payable in the bonds of the county, was submitted to the voters of that county at an election held for that purpose, on the 1st day of September, 1856; that a majority of the legal votes cast at such election were in favor of the subscription ; that at the next ensuing December term of the county court, an order was made and entered of record, directing the subscription to be made ; that the General Assembly, by an act to amend the charter of the Illinois River Railroad Company, approved January 29, 1857, legalized the election and directed the subscription to be made, and the bonds to be issued therefor; that soon after the passage of this act the subscription was made, and the county court, by an order absolute in its terms, subsequently, and at its September term, 1857, directed that the bonds be issued and delivered to the Illinois River Railroad Company. But it was then assumed that William Thomas was a director of the Illinois River Railroad Company at the time the bonds were placed in the hands of Elliott & Brown, whereas it now appears that he was not then, nor for several months afterwards, such director.

In the next case, Thomas v. The County of Morgan et al. 59 Ill. 479, the questions presented grew out of the action of the court below in sustaining a demurrer to complainant’s bill; and the allegations of the bill were, necessarily, assumed to be true. Two important modifications of facts, upon which considerable stress was then laid in the opinion as published, are made by the present record. 1. The court was then required to assume that the Peoria, Pekin and Jacksonville Railroad Company was the successor of the Illinois River Railroad Company, in the sense that the new company was but a reorganization Jof the old one, possessing the same property rights and burdened with the same obligations and duties, both public and private. 2. That the Peoria, Pekin and Jacksonville Railroad Company was making no claim, for itself, to the bonds in controversy.

By'the case now presented, the Peoria, Pekin and Jacksonville Railroad Company is a totally distinct and independent corporation from the Illinois River Railroad Company, and claims that $20,000 of the bonds, all that have not been canceled by the county, were delivered to it by the county in consideration that it constructed the railroad which the Illinois River Railroad Company failed to construct, between Virginia and Jacksonville ; that it thereby became the lawful owner of such bonds, free from any claims of the creditors of the Illinois River Railroad Company; that it has since transferred $10,000, in nominal amount, of them to Isaac L. Morrison, who has since transferred $1000 of them to innocent parties, and is claiming still to own the residue, and that it still retains for itself the other $10,000, in nominal amount, of the bonds, and insists that its right thereto can not be questioned.

The difference in the facts thus presented, from what they formerly appeared to the court to be, has made it necessary to re-examine, with some care, the grounds of the previous decisions alluded to, and having done so, we have come to the conclusion that the claim of William Thomas should be sustained; not for the reason that the supposed condition upon which the bonds were placed in the custody of Elliott <& Brown was performed, but because no such condition, so far as the stockholders and creditors of the Illinois River Railroad Company, including Mr. Thomas, were concerned, ever existed.

The subscription which the county court was authorized .to make for capital stock in the Illinois River Railroad Company by the vote of the people, and the subsequent enactment of the legislature, was not conditional, but absolute, and the subscription made pursuant to this authority was unconditional. It was made prior to any issue of bonds, and when made, the contract between the county on the one side and the railroad company on the other was complete. The county was then legally bound to issue and deliver its bonds to the company in conformity with the terms of its subscription, and upon its doing so, the company was bound to deliver to the county the requisite certificate showing that it was the owner of the number of shares subscribed for in its capital stock. This claim for unpaid subscription then became a part of the assets of the company. Creditors might rely upon it for payment of their debts as implicitly as upon any other assets of the company, and this, too, although the company, subsequently to the making of the subscription, may have abandoned all proceedings under its charter, on account of its insolvency. Henry v. TheVermilion and Ashland Railway Co. 17 Ohio, 187 ; Miers v. Z. and M. T. Co. 11 Ohio, 273; 1 Redfield on Railways (3d Ed.) 170. Or, the company might have sold and assigned it to a purchaser in good faith, and a court of equity would have protected the assignee in his purchase and enforced for his benefit payment of the subscription. Morris, Admr. et al. v. Cheney, 51 Ill. 451. And, upon this principle, it was said, correctly, as we think, in Thomas v. The County of Morgan et al. supra, that the two orders to Allen & McGrady, subsequently assigned to Thomas, operated as an equitable transfer of so much of the county subscription from the railroad company to Thomas. The fact that the railroad company was honestly indebted to Allen & McGrady at the time the orders were delivered to them—that they were, in good faith, delivered and received as a payment of so much indebtedness, and that the purchase of Thomas was free from objection—is not questioned.

Whether the county bonds had been absolutely delivered to Elliott & Brown for the company before the orders were drawn, or not, we do not conceive is of any consequence. They were supposed to have been, and for that reason the orders were addressed to them. But the object in giving the orders was not to invest Allen & McGrady with the title to any particular bonds; it was simply to give them the right to have bonds of the county to that amount, thus paying that much of the company’s indebtedness by transferring to them a like amount of indebtedness from the county. The orders were conclusive on the company whether the bonds were delivered on presentation of the orders or not, and they were notice to the county of the holder’s rights if brought to the knowledge of its proper officers before the delivery of the bonds in payment of its subscription. The-company could not, after delivering the orders, make claim to this portion of the county’s indebtedness, nor could the county, after notice of their delivery, before payment of its subscription, disregard the claim.

If, therefore, the bonds have been delivered to the railroad company, the debt of the county has been paid, and Thomas is entitled to have the bonds called for by the orders. If they have not been delivered, and the county was not released from its obligation to deliver them, by the railroad company, prior to receiving notice of the orders, the county still owes, at least; so much of the debt, unless Thomas is, by some act of Allen & McGrady, or of himself, estopped from resorting to the county for payment; and he is entitled to now have the proper bonds issued and delivered to him.

It appears that Allen & McGrady had entered into a contract with the railroad company for the construction of the road, and that it was provided in that contract that the bonds of Morgan county should be applied to payment for work done in that county alone. No work was done in the county, and the contract was abandoned by Allen & McGrady without the fault of the company. Subsequently, on a final settlement between Allen & McGrady and the railroad company, it was found to be indebted to them for work done elsewhere, and the orders held by Thomas were given to them by the company in payment of such indebtedness. Had the contract not been -abandoned, Allen & McGrady could not, in attempting to enforce it, have insisted that the Morgan county bonds should be otherwise applied than as provided by the contract. But when the contract was abandoned and the company acknowledged an indebtedness to them, which was honestly due, they were then certainly entitled to look for its payment to any assets of the company which were available for the payment of its debts generally. The subscription being absolute in its terms, and therefore constituting a part of the assets of the company, R. S. Thomas had no authority, simply as president of the company, to consent that it should become conditional; nor could the county make such claim as a matter of right. ■ As was held in Thomas et al. v. Morgan County, supra, R. S. Thomas might, however, bind himself to treat the subscription as conditional, and so might other creditors, or the stockholders of the company. But there is no evidence that Allen & McGrady, or William Thomas, were either parties or privies to any arrangement made between R. S. Thomas and Morgan county with regard to the delivery of the bonds due from the county. When the contract between Allen & McGrady and the railroad company was made, no bonds had been issued, and the county stood bound . by the terms of its subscription to deliver them to the company without any conditions.

It -would, in our opinion, be going too far to say, because Allen & McGrady made a contract with the railroad company to receive from it Morgan county bonds for payment of work to be done in Morgan county alone, they must also be held to have agreed that the subscription of Morgan county was changed from an absolute to a conditional one. They had no contract with Morgan county, and had nothing to do in reference to its obligations to the company. They only had to look to the company for the bonds when their work was done, in conformity with the contract, and could not have had, so far as we can perceive, the slightest motive to consent that the character of the county subscription should be changed. Nor can we perceive how any act of theirs, in making a contract with the railroad company, could have so far prejudiced the county as to work an estoppel in favor of it and against them with regard to the subscription. The county’s obligations were fixed and known. The company was entitled to have the bonds, and whether it made conditional or absolute contracts on the faith of them was a matter to be solely determined by it, and in which the county had no other concern than that of any other stockholder.

It can not be questioned that it was competent for the company, under proper circumstances, to consent that Allen & McGrady should abandon their contract and acknowledge any indebtedness which was justly due them. The debtor, merely as such, can have no special interest in the question, whether the creditor shall permit others with whom he contracts to abandon their contracts and become general creditors or not, for this can not possibly affect his debt. These orders were issued to Allen & McGrady as creditors of the Illinois River Railroad Company, just as they might have been to any other creditor, and we fail to discover sufficient evidence of any contract or act of estoppel on their part which Morgan county is entitled to interpose as a reason why they should not, in common with other creditors, have recourse on its bonds as assets of the company.

So far as the acts of William Thomas have been shown, it appears that he was not a director in the company when the bonds were issued, and had no connection with or knowledge of the circumstances attending their delivery.

Passing from this branch of the question, it becomes necessary to inquire whether the evidence shows that the bonds were actually delivered to the company or not. The preponderance, in our opinion, is clearly that they were. The bonds were ordered to be delivered by the county court at its September term, 1857; and it appears, by the preamble preceding the order, as entered of record, that R. S. Thomas had certified to the court that the contract for the construction of the road provided that the bonds of Morgan county were to be paid out for work done in that county and not elsewhere, but the order itself is unqualified by any conditions. The record, after referring to the law authorizing the court to issue the bonds, and directing the delivery of certain bonds to other railroad companies, is as follows:

“And, whereas, the Illinois River Railroad Company has actually undertaken and is now proceeding with the construction of so much of said last mentioned railroad as extends from Pekin, in Tazewell county, to Virginia, in Cass county, and R. S. Thomas having certified to this court that the last mentioned company have placed their said railroad under contract, to be completed by the 1st day of December, 1858, from Virginia, in Cass county, to Jacksonville, and that it is provided in the contract for the construction thereof that the Morgan county bonds shall be expended for work done in Morgan county, and not elsewhere; and this court being satisfied that the interest and advantage of the county will be promoted by the delivery to the last mentioned company, as hereinafter provided, of the bonds heretofore subscribed by the county to the capital stock of said company, it is therefore ordered that there be delivered to the Illinois River Railroad Company the amount of §50,000 in bonds of this county, of this date,” etc.

Subsequent to the making of this order and the issue of the bonds, the county voted as a stockholder in the election of directors for the railroad company, and for two years it paid the interest on th.e bonds.

Opposed to the presumptions created by this evidence is only the recollection of the county judge and one of his associates, to the effect that the bonds were delivered conditionally, and that is fully balanced by the contrary recollection of Elliott & Brown.

It is scarcely reasonable to suppose that if the bonds had not been intended to be delivered until, and as the work on the road progressed in the county, the record would have been silent in this respect; and it is still less reasonable to suppose that, if conditions precedent to the delivery of the bonds had been agreed upon, there would not have been, also, some definite wav prescribed by which it was to be determined when those conditions were performed. How much, and what kind of work was to be done before any bonds were to be delivered? Who was to determine when the requisite amount and quality of the work was done ? If there was a condition precedent to the delivery of the bonds to be performed, as claimed, these were important questions, and yet 'the record contains no evidence by which they are answered.

That it was expected and believed, and even intended, when the bonds were issued, that they were to be paid out on work to be done in Morgan county, and not elsewhere, is abundantly proved; but this was to be done by the railroad company to whom the bonds were rightfully due, and not by the county.

Where a party receives property from another in discharge of a precedent liability, and the party delivering the property has no legal right to prescribe its future disposition or use, as in the present instance, the mere fact that when he delivers it he expects and intends that it shall be applied to a particular disposition or use, does not make such an application of it a condition precedent to the vesting of title.

What has been said with regard to the claim of Thomas, will apply with equal force to that of Schooley, and no objections have been urged against the claim of West.

The views we have expressed in regard to the claims against the county, leave but little to be added on the question between the county and the Peoria, Pekin and Jacksonville Railroad Company, and Isaac L. Morrison.

The trustees, under the deed of trust from the Illinois River Railroad Company, and Allen, Arnold and Trowbridge; described in the act of incorporation as“holders of bonds or obligations secured by the deed of trust, and their associates, who should thereafter become purchasers at the sale under the deed of trust,”were incorporated as the Peoria, Pekin and Jacksonville Railroad Company, and empowered to purchase and own the franchise and property of the Illinois River Railroad Company, and upon such purchase and ownership, to be invested with all the corporate powers, privileges, rights, immunities, etc., theretofore given or granted to the Illinois River Railroad Company.

Until the title of the Illinois River Railroad Company was legally divested, the Peoria, Pekin and Jacksonville Railroad Company owned no franchise or railroad, and of course had no authority to exercise the incidental immunities, privileges and powers connected with such ownership. Deriving its title under the sale, it took what it purchased, subject to no liens or claims save such, if any, as were paramount to the deed of trust under which the sale was made. The act of incorporation imposed no conditions subject to which the purchase under the deed of trust was to be made, and the consequent rights and privileges enjoyed. It neither provided that the stockholders in the Illinois River Railroad Company should be stockholders in the Peoria, Pekin and Jacksonville Railroad Company, nor that the latter company should be liable for the payment of debts due from the former. The franchise granted was upon a new and valuable consideration, moving from parties other than those who composed the Illinois River Railroad Company. The effect of the act was simply to create a legal entity, capable in law of purchasing, owning and using that which was conveyed by the deed of trust.

Both upon principle and authority, therefore, the Peoria, Pekin and Jacksonville Railroad Company was not a reorganization of the Illinois River Railroad Company, but a new and totally independent corporation. Bruffett v. G. W. Ry. Co. 25 Ill. 353; Villar v. Milwaukee and Prairie DuChien R. R. Co. 17 Wis. 497; Smith v. Chicago and Northwestern Railway Co. 18 id. 17; Commonwealth v. Passenger Railway Co. 52 Pa. (St.) 506 ; S. and S. E. R. R. Co. v. Barnhill Township, 74 Ill.-.

The Peoria, Pekin and Jacksonville Eailroad Company acquired no claim to the Morgan county bonds at the sale under the deed of trust, because they were neither expressly nor by necessary implication included within its terms; and it is, for that reason, unnecessary to inquire whether they were turned over to the trustees, or whether the trustees renounced all claim to them. Their powers and duties were measured by the deed, and could not have been otherwise enlarged. The language of the charter of the Illinois Eiver Eailroad Company was, undoubtedly, comprehensive enough to have enabled it to include the bonds in the deed, but it was not compelled to do so, and it was not done.

The bonds, then, remaining as assets of the Illinois Eiver Eailroad Company, could not have been donated by the county to the Peoria, Pekin and Jacksonville Eailroad'Company. Nor was it competent for the legislature, by enactment, to make such donation. 1 Eedfield on Eailways, 3d Ed. 168-9. They were a trust fund, to be held for the payment' of the debts of the company to which they belonged, and this, even if the failure of that corporation to exercise its corporate powers had worked its dissolution. James v. Woodruff et at. 2 Paige, 541; same, again reported in 2 Denio, 574 ; Angell & Ames on Corp. 5 Ed. 779a; 1 Redfield on Railways, supra.

But it is said, in this view of the case, the decree is erroneous, for the county is not interested as to who may be in possession of the bonds. We think differently. As a stockholder in the Illinois River Railroad Company, the county is interested in the preservation of its assets, and their appropriation to the payment of its debts. It is, moreover, interested in having its bonds restored to the custody whence they were improperly removed, that its obligations to others having claims upon them may be discharged.

Perceiving no error in the decree of the court below, it is affirmed. Decree affirmed.