Sullivan v. Portland & Kennebec Railroad Company
94 U.S. 806 (1876)

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U.S. Supreme Court

Sullivan v. Portland & Kennebec Railroad Company, 94 U.S. 806 (1876)

Sullivan v. Portland & Kennebec Railroad Company

94 U.S. 806

Syllabus

A railroad company, on the 30th of April, 1850, mortgaged to trustees a specifically described portion of its road to secure certain certificates of indebtedness bearing interest at the rate of ten percent per annum. Subsequent mortgages, covering the entire line of road, were made. As the work progressed, the company issued certificates of preferred stock, on which dividends of ten percent per annum were to be paid. In October, 1852, the company made a proposition to waive, until Nov. 1, 1870, its right to redeem at pleasure the portion of its road first mortgaged, provided the holders of the certificates of indebtedness would, by endorsement thereon, authorize the trustees, after paying the holders three percent semiannually on the said certificates, to pay over semiannually to the treasurer of the company, for its use and benefit, the balance of the income (for interest) which the stockholders were then entitled to receive, viz., two percent, to be held by him, and appropriated, as far as might be required, or as the same might go, to the payment of interest to such preferred stockholders as should surrender their old certificates and receive new

Page 94 U. S. 807

certificates of preferred stock, bearing three percent interest or income semiannually in lieu of five percent, as then stipulated. The company authorized the president to issue such a new certificates of preferred stock, and to waive the right to redeem. None of the holders of the preferred stock accepted the proposition until Sept. 1, 1853. The trustees of the second mortgage foreclosed; the bondholders formed a new corporation, and have operated and owned the road since November, 1862. The holders of the new certificates of preferred stock filed their bill, Feb. 21, 1871, to recover the four percent per annum relinquished under the first mortgage. On final hearing, the bill was dismissed.

Held:

1. That there is no privity between the complainants and the new corporation.

2. That there was no privity between the holders of the certificates under the first mortgage and the preferred stockholders.

3. That the defense of the statute of limitations not having been set up by plea or answer, the case in that aspect cannot be considered.

4. That as the complainants, if they could recover the moneys claimed, would be entitled to discovery and an account, the objection that they have a remedy at law is not available. Where such an objection lies, it is the duty of the court sua sponte to take notice of it and give it effect.

5. That it is not necessary, in order to let in a defense that the claim is stale, that a foundation should be laid by any averment in the answer. Where the facts disclose laches and neglect on the part of the complainant, the court will refuse relief.

The facts are stated in the opinion of the Court.

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