Woods v. Lawrence County - 66 U.S. 386 (1861)
U.S. Supreme Court
Woods v. Lawrence County, 66 U.S. 1 Black 386 386 (1861)
Woods v. Lawrence County
66 U.S. (1 Black) 386
1. Where the charter of a railroad company authorizes the counties "through which it may pass" to subscribe to its stock, a county lying between the two termini of the road may subscribe without waiting until the route is actually located.
2. If the statute requires the grand jury to fix the amount of the subscription and to approve of it, and upon their report's being filed empowers the commissioners to carry the same into effect by making the subscription in the name of the county, and if these things be done agreeably to the law, the county cannot afterwards deny its obligation to pay the amount subscribed.
3. Where the charter provided that payment of the stock should be made upon such terms and in such manner as might be agreed on between the company and the county, an agreement to pay in bonds, with coupons attached for the semiannual interest, is binding, and the bonds being issued accordingly, are lawful and valid securities.
4. In a suit brought to recover the arrears of interest on such bonds, it is not necessary for the holder to show that the grand jury fixed the manner and terms of paying for the stock; nor is it a defense for the county to show that the grand jury omitted to do so. It is enough that the manner and terms of payment were agreed upon between the company and the commissioners.
5. In a suit brought upon the coupons by a bona fide holder, his right to recover is not affected by the fact that the railroad company sold the bonds at a discount of twenty-five percent, contrary to the charter, which forbids the sale of them at less than their par value.
This was an action of debt brought in the Circuit Court of the United States for the Western District of Pennsylvania by Alexander G. Woods, a citizen of New York, against the County of Lawrence in the State of Pennsylvania to recover the amount of certain coupons for interest on bonds given by
the defendant to the Northwestern Railroad Company. The defendant denied its obligation to pay the coupons or the bonds.
The plaintiff, to maintain the issue on his part, gave in evidence the act of the Pennsylvania Legislature by which the Northwestern Railroad Company was incorporated. Section 1 appointed certain persons therein named to open books, receive subscriptions, and organize a company with all the powers and subject to all the duties, restrictions, and regulations prescribed by the general railroad law of the state. Section 2 fixes the capital stock at 20,000 shares of $50 each, to be increased to $2,000,000 hereafter if found expedient. Section 3 fixes the termini and prescribes the gauge &c., of the road to be built. Section 4 authorizes the company to use any section of five miles when finished, as fully as the whole might be used if it were all finished. The remaining three sections of the act are as follows:
"SECTION 5. That said company be, and they are hereby, authorized to borrow money to an amount not exceeding the capital stock of said company upon bonds to be issued by said company whenever the said president and directors shall deem the issue of such bonds expedient, provided that the rate of interest on said bonds shall not exceed seven percentum per annum, and that said bonds shall be convertible into the stock of said company, at the option of said company and the holder or holders of said bonds, and that no bond shall be issued for a sum less than one hundred dollars."
"SECTION 6. That the president and directors of said company are hereby authorized to pay to the stockholders, in the months of January and July in each year, interest at the rate of six percentum per annum on all installments paid by them, and to continue to pay the same until the road shall be completed, and all the profits or earnings of the said railroad within the said time shall be credited to the cost of construction; and all interest paid shall be charged to the cost of construction, but no interest shall be paid on any share of stock upon which any installment that has been called for remains
unpaid, and the stock of said company shall not be subject to any tax in consequence of the payment of the interest hereby authorized, nor until the net earnings of the company shall amount to at least six percentum per annum upon the capital invested."
"SECTION 7. That the counties through parts of which said railroads may pass shall be and they are hereby severally authorized to subscribe to the capital stock of said railroad company and to make payments on such terms and in such manner as may be agreed upon by said company and the proper county, provided that the amount of subscription by any county shall not exceed ten percentum of the assessed valuation thereof, and that before any such subscription is made, the amount thereof shall be fixed and determined by one grand jury of the proper county and approved by the same. Upon the report of such grand jury being filed, the county commissioners may carry the same into effect by making, in the name of the county, the subscription so directed by the said grand jury, provided that whenever bonds of the respective counties are given in payment of subscriptions, the same shall not be sold by said railroad company at less than par value, and no bonds shall be in less amount than one hundred dollars; and such bonds shall not be subject to taxation until the clear profits of said railroad shall amount to six percent upon the cost thereof; and that all subscriptions made or to be made in the name of any county shall be held and deemed valid if made by a majority of the commissioners of the respective counties."
It was proved that the grand jury of Lawrence County, on the 21st of May, 1853, passed a resolution recommending that the county commissioners
"subscribe stock to the Northwestern Railroad to the amount of $200,000, agreeably to the act of assembly incorporating said company, and to issue bonds for the payment of said stock, making the conditions such as will best promote the interest of said railroad company and the County of Lawrence."
On the 20th of August, 1853, the county commissioners
subscribed $200,000 for the county to the capital stock of the railroad company, by affixing their names and their official seal to the following instrument:
"By authority of an Act of the General Assembly of the Commonwealth of Pennsylvania passed the 9th day of February, A.D. 1853, entitled 'An act to incorporate the Northwestern Railroad Company,' and by virtue of the action of the grand jury of the County of Lawrence had at May session, A.D. 1853, at the court of said county, fixing and determining the amount of subscription to be made to the said Northwestern Railroad Company by said County of Lawrence, we, the undersigned, commissioners of said county, do hereby subscribe for and in the name of the County of Lawrence to the capital stock of the Northwestern Railroad Company the sum of two hundred thousand dollars, being four thousand shares in said capital stock. It is understood that whenever the amount of this subscription is required from the County of Lawrence by the said company, it is to be paid in the bonds of this county, to be given in sums of not less than one thousand dollars each, payable in twenty years after date or such other time after date as may be agreed upon between the Commissioners of Lawrence County and said railroad company. The interest on said bonds to be paid semiannually, and said interest to be paid by said railroad company until such time as the Northwestern Railroad is completed."
"In testimony whereof we have hereunto set our hands and affixed the seal of the said County of Lawrence this 20th day of August, A.D. one thousand eight hundred and fifty-three."
To pay this subscription, bonds were signed, sealed, and delivered to the railroad company in the following from:
"Know all men by these presents that the County of Lawrence, in the Commonwealth of Pennsylvania, is indebted to the Northwestern Railroad Company, in the full and just sum of one thousand dollars, which sum of money said county agrees and promises to pay, twenty years after date hereof, to the said Northwestern Railroad Company or bearer, with interest at the rate of six percent per annum, payable semiannually, on the first day of January and July, at the office
of the Pennsylvania Railroad Company in the City of Philadelphia upon the delivery of the coupons severally hereto annexed, for which payments of principal and interest, well and truly to be made, the faith, credit, and property of said County of Lawrence are hereby solemnly pledged, under the authority of an Act of Assembly of this Commonwealth entitled 'An act to incorporate the Northwestern Railroad Company,' which said act was approved the ninth day of February, A.D. eighteen hundred and fifty-three."
"In testimony whereof, and pursuant to said act of the Legislature of Pennsylvania, and resolution of the county commissioners, in their official capacity, passed the _____ _____ _____ _____, the commissioners of said county have signed, and the clerk of said commissioners has countersigned these presents, and have hereto caused the seal of said county to be affixed this ___ day of _____ A.D. one thousand eight hundred and fifty-___."
To each of these bonds forty coupons were attached, of which the following is a specimen:
"COUNTY OF LAWRENCE"
"Warrant, No. 37 For thirty dollars"
"Being for six months' interest on bond No. ___, payable on the first day of January, A.D. 1873, at the office of the Pennsylvania Railroad Company in the City of Philadelphia."
"$30 ________ ________, Clerk"
On the part of the defendant, it was not only proved but it was conceded by the plaintiff to be true that the presentment or recommendation of the grand jury was made before the railroad company was organized; that the subscription by the commissioners was made before the railroad was located, and that in fact the railroad or any part of it never was located within the limits of Lawrence County. It was also proved that the bonds of the county, after they came into the hands of the railroad company, were disposed of not at their par value, as the act of incorporation requires, but for seventy-five percent of that value.
The defendants on these facts asked the circuit court to charge that:
1. The county was not authorized by the act of
assembly to make this subscription.
2. The subscription is void because the grand jury did not prescribe the manner and terms of payment.
3. The county was not authorized to issue the bonds.
4. The sale of the bonds, contrary to law, at a less price than par, avoided them in the hands of the purchaser.
Upon the points of law the judges of the circuit court differed in opinion, and made a certificate of their division, which brought the cause into this Court.