State of Florida v. Anderson - 91 U.S. 667 (1875)
U.S. Supreme Court
State of Florida v. Anderson, 91 U.S. 667 (1875)
State of Florida v. Anderson
91 U.S. 667
Certain railroad companies, availing themselves of the provisions of an Act of the Legislature of Florida of Jan. 10, 1855, to provide for and encourage a liberal system of internal improvements in that state, issued their bonds to the extent of $10,000 per mile, the interest whereon was duly guaranteed by the trustees of the internal improvement fund created by the act. Such bonds thereby became a first lien or mortgage on the roads, their equipments, and the franchises of the respective companies. The latter having failed to pay the interest on the bonds, or the installments due the sinking fund for their ultimate redemption, the roads were seized by the trustees, pursuant to their authority under the act, and sold for an amount equal to the principal of the bonds. The purchasers being allowed the privilege of paying the purchase money by delivering the bonds at their par value, nearly a million dollars of them were
thus surrendered and cancelled, but a balance of about $472,000 remained unpaid. The purchasers obtained, however, a deed for, and took possession of, the property, being a line of road from Lake City to Quincy, with a branch from Tallahassee to St. Mark's, and procured a new charter from the legislature, under the name of "The Tallahassee Railroad Company." Having subsequently consolidated their interests with the Florida Central Railroad Company, owning the road from Lake City eastward to Jacksonville, they procured another charter, with enlarged powers, creating a corporation by the name of "The Jacksonville, Pensacola & Mobile Railroad Company." This last act of incorporation authorized the company to acquire and consolidate certain lines of road and extend the same from Quincy westward to the western boundary of the state, and, with a view to aid the company in the completion of this work, the act, as subsequently amended by the legislature, authorized the governor to loan the company bonds of the state, to an amount equal to $16,000 per mile in exchange for an equal amount of the first mortgage bonds of the company. In order to secure the principal and interest of the company's bonds, it was declared
"That the State of Florida shall, by this act, have a statutory lien which shall be valid to all intents and purposes as a first mortgage duly registered on the part of the road for which said bonds were delivered, and on all the property of the company, real and personal, appertaining to that part of the line which it may now have or may hereafter acquire, together with all the rights, franchises, and powers thereto belonging, and in case of failure by the company to pay either principal or interest of its bonds, or any part thereof for twelve months after the same shall become due, it shall be lawful for the governor to enter upon and take possession of said property and franchises, and sell the same at public auction."
Under this power, bonds of the state to the amount of $4,000,000 were delivered to the company. The balance of the purchase money due on the trustees' sale remaining unpaid, and the Jacksonville, Pensacola & Mobile Railroad Company having also failed to pay the interest on their bonds delivered to the state in exchange for those of the state aforesaid, the state and the trustees of the improvement fund commenced suit in a circuit court of the state to recover by a sale of the road the balance of such purchase money, which was claimed to be a lien thereon. All then known parties having liens against
the road were made defendants. Suit was also brought against the company,
in another circuit, by certain first mortgage bondholders. The Circuit Court of the United States for the Northern District of Florida also entertained, at the instance of certain other bondholders, a suit in equity against the company and the trustees, but the bill, as against the latter, was dismissed by the complainants. Under an arrangement between the complainants and the company, a consent decree was obtained declaring the bonds a first lien on the road and directing its sale to pay the same. Subsequently to the issue of the execution a bill was filed to carry the decree into execution, making the trustees of the internal improvement fund defendants, and charging them with intent to seize the road, and praying for an injunction. Meanwhile suit was commenced in the same court against the company by one H. for services alleged to have been rendered it. Judgment was recovered accordingly for $60,000, and, at the sale of the road thereunder, he became the purchaser for $10,000, and entered into possession. Under these circumstances, the State of Florida filed the bill in this suit.
First, that the state has a direct interest in the railroad by reason of holding the $4,000,000 of bonds, which were a statutory lien on the road. That as the title to the lands composing the internal improvement fund were vested in the trustees merely as the agents of the state for a particular purpose, her interest is sufficient to give her a standing in court whenever the interests of that fund are brought before a court for inquiry. It is competent for her, therefore, in seeking equitable relief against citizens of another state for the protection of her interests, to file an original bill in this Court.
Second, that the equitable lien for the unpaid purchase money accruing upon the sale by the trustees resulted primarily to them as vendors, and became binding on the road in the hands of all subsequent purchasers taking with notice of the nonpayment.
Third, that, as the guaranteed bonds import on their face an absolute promise to pay, the company giving them is primarily liable to the holder thereof for principal and interest as they respectively become due, and while he can, upon a breach of such promise, bring suit against the company, he cannot, as the primary right to proceed under the statutory lien is in the trustees, avail himself of that lien directly, as he could if it were a mortgage given to secure the bonds alone, but must induce the trustees to act in the mode pointed out by the statute. Upon their refusal so to act at the propel time, he may either compel them by mandamus or file a bill in equity to obtain the relief to which he may be entitled.
Fourth, where a sale is made by the trustees for the nonpayment of interest or installments due the sinking fund, and the principal of the bonds is not due, they have an option, after satisfying the arrears of interest, either to purchase up and retire the bonds or to pay the balance into the sinking fund and postpone the payment of the principal until the bonds arrive at maturity. By the purchase of a portion of the bonds, an obligation to purchase the remainder is not imposed upon the trustees, nor are they precluded from changing a resolution so to purchase.
Fifth, holders of bonds so guaranteed, by procuring with the consent of the company a decree for the sale of the road to pay the interest, and especially the principal thereof, when the bonds contain no stipulation that the principal shall become due by the nonpayment of interest, in a proceeding in which neither the state nor the trustees were represented, and when the latter were pursuing their lawful remedy to subject the road to the payment of the purchase money at a sale made by them, was an inequitable interference with, and a fraud upon, their rights.