APPEALS from the Circuit Court of the United States for the Northern District of Florida. The facts are stated in the opinion of the court.
The opinion of the court was delivered by: Mr. Chief Justice Waite delivered the opinion of the court.
Mr. George F. Edmunds, Mr. William A. Maury, Mr. Samuel F. Phillips, and Mr. James M. Baker for the Florida Central Railroad Company.
Mr. James M. Baker and Mr. James Baker for the Jacksonville, Pensacola, and Mobile Railroad Company.
Mr. George F. Edmunds, Mr. Samuel F. Phillips, and Mr. Joseph B. Stewart for the Western North Carolina Railroad Company.
Mr. Matthew H. Carpenter and Mr. Wayne Mac Veagh, contra.
These cases, although separate in form, are so connected in their facts that they may properly be considered and decided together. The facts are these:––
The Florida, Atlantic, and Gulf Central Railroad Company, incorporated by the General Assembly of Florida in 1853, built a railroad from Jacksonville to Lake City. The Pensacola and Georgia Railroad Company, also incorporated during the same year, built a road from Lake City through Tallahassee to Quincy in the direction of Mobile, with a branch to Monticello; and the Tallahassee Railroad Company, incorporated at a somewhat earlier date, built another road from Tallahassee to St. Marks. Each of these companies became indebted to the State of Florida under the provisions of the internal improvement law, and, as a consequence, the road of the Florida, Atlantic, and Gulf Central company was sold, on the 4th of March, 1868, by the trustees of the internal improvement fund, under the authority of law, to William E. Jackson and his associates, that of the Pensacola and Georgia company, on the 6th of February, 1869, to F. Dibble and his associates, and that of the Tallahassee company on the same day and to the same parties.
The road from Jacksonville to Lake City was paid for in full, and a conveyance in due form executed to the purchasers, who, on the 29th of July, 1868, were, under the name of the Florida Central Railroad Company, incorporated by the General Assembly of the State, with all the powers and franchises of the Florida, Atlantic, and Gulf Central company. They were also authorized to fix the amount of the capital stock of the company, and the number of shares into which it should be divided. In this way the capital was put at $550,000, with five thousand five hundred shares. Of these shares George W. Swepson afterwards became the purchaser of four thousand three hundred and seventy, which he paid for with money in his hands belonging to the Western Division of the western North Carolina Railroad Company, a North Carolina corporation, which he fraudulently diverted from the use to which it had been appropriated by that company.
Swepson also purchased, with the funds of the same North Carolina corporation, bonds of the Pensacola and Georgia and the Tallahassee companies to the amount of $960,000, or thereabouts, and on the 24th of April, 1869, he entered into a contract with the purchasers of the roads of those companies by which he was to deliver them these bonds to use in making their payments of purchase-money; and they, as soon as they could get the necessary authority from the legislature, were to raise money by a mortgage on the property and pay him what he had advanced to buy the bonds, with certain commissions and attorney's fees, and $100,000 in addition. The contract contemplated an incorporation of the purchasers after the manner of the Florida Central company, with a distribution of one-third of the stock to Swepson. As security for the payment of the sum agreed to be paid, the bonds issued under the contemplated mortgage were to be disposed of in a particular way, and Swepson was to be given certain privileges in the election of directors. Under this arrangement Swepson handed over $960,300 of Pensacola and Georgia and Tallahassee bonds to the purchasers; but after these bonds had been applied in the way contemplated there still remained a balance of the purchase-money, amounting to $472,065, to be paid. Deeds conveying the property to Dibble for himself and his associates were executed in due form, but their delivery was withheld on account of this default in payment. Dibble and his associates being unable to raise the money, Swepson, by putting off on the trustees of the improvement fund a worthless check that was never paid for the amount that was due, got possession of the deeds and had them duly recorded April 22, 1869. On the same day Dibble, for himself and his associates, party of the first part, executed a paper which on its face purported to convey the roads to Swepson, 'said party of the second part, in trust for the express purpose of enabling said party of the second part–which he hereby agrees and binds himself to do–to convey the same to that incorporation, consisting or to consist as incorporators of said F. Dibble and his associates, as soon as said Dibble and his associates shall have granted to them such a similar relief as the legislature of the said State of Florida granted to William E. Jackson and his associates by act for relief of William E. Jackson and his associates, approved July 29, 1868, and also for the further purpose of securing said party of the second part in all advances made as specified and agreed upon in the said agreement between these parties, executed and dated March 26, 1869, and the advancement, as aforesaid, of said sum of four hundred and seventy-two thousand and sixty-five dollars, until such time as said relief shall have been granted and said party of the second part shall have conveyed said property to said incorporation, as hereinbefore prescribed.'
This instrument was never acknowledged or recorded.
On the 24th of June, 1869, the proposed act of incorporation was obtained, by which Dibble and his associates, as purchasers of the roads, were made a body corporate under the name of the Tallahassee Railroad Company, to hold, operate, and enjoy the property purchased, with all the powers, privileges, and franchises of the Pensacola and Georgia and the original Tallahassee companies, and with power to issue bonds secured by mortgage; 'Provided, that any deed of trust, mortgage, or conveyance, bond or bonds, or security which may have been executed, made, created, or contracted for, as a lien on said railroad or otherwise, by said Franklin Dibble, in behalf of himself and his associates, prior to the passage of this act, shall be valid and effectual to all intents, either at law or in equity, as a lien or a mortgage, or security on said railroad, as if the same had been made by virtue of this act, and shall in nowise be affected by any provisions thereof.' Sect. 6.
The new Tallahassee company was duly organized under this charter, and took possession of and operated the roads. Afterwards, to remove all doubts as to the title of the corporation to the property of the old companies, Dibble, for himself and his associates, at some time during the year 1870, executed a paper which purported to be a conveyance, in due form, for that purpose, by which he professed to relinquish and quitclaim to the corporation all his rights. This paper was not acknowledged, and was not in fact a legal conveyance of the property. No conveyance in form was ever executed by Swepson, neither has he at any time, so far as appears, attempted to exercise any rights under the conveyance or transfer which was made to him.
On the 24th of June, 1869, an act was passed by the General Assembly of Florida to 'perfect the public works of the State.' By this act, 'in order to secure the speedy completion, equipment, and maintenance of a connection by railroad between Jacksonville, on the Atlantic coast, and Pensacola, on the Gulf coast, and Mobile, in Alabama,' George W. Swepson, Milton S. Littlefield, J. P. Sanderson, J. L. Re Qua, William H. Hunt, their associates, successors, and assigns, were constituted a body politic and corporate under the name of the Jacksonville, Pensacola, and Mobile Bailroad Company. This company was authorized to build a railroad from Quincy to the Alabama State line, and there connect with any road running to Mobile, and to consolidate with the several companies owning roads from Quincy to Jacksonville, from Tallahassee to St. Marks, and the branch to Monticello. The original charter was somewhat amended on the 28th of January, 1870, after which sects. 9, 10, 11 of the original charter, and sect. 4 of the amended charter, were as follows:––
'SECT. 9. In order to aid the said Jacksonville, Pensacola, and Mobile Railroad Company to complete, equip, and maintain its road, and to aid in perfecting one of the public works embraced in the internal improvements of the State, the governor of the State is hereby directed to deliver to the president of the said company coupon bonds of the State to an amount equal to sixteen thousand dollars per mile for the whole line of road and length of railroad owned by or belonging to said Jacksonville, Pensacola, and Mobile Railroad Company, in exchange for first-mortgage bonds of said railroad company, of the denomination of one thousand dollars, when the president thereof shall certify upon his oath that the road or parts of road for which he asks for an exchange of bonds is completed, and is in good running order. The said bonds shall be of the denomination of one thousand dollars, signed by the governor, countersigned by the treasurer, sealed with the great seal of the State; shall bear eight per cent interest, payable semi-annually, and shall be payable to bearer. They shall be dated on the first day of January, A. D. 1870, and shall be due thirty years thereafter, and principal and interest shall be payable at such place in the city of New York as the governor shall designate. The coupons for interest shall be payable to bearer, and shall be authenticated by the written or engraved signature of the treasurer: Provided, however, that when the Jacksonville, Pensacola, and Mobile Railroad Company shall or may determine to pay the interest in gold for or upon their bonds or the bonds designated in the tenth section of an act entitled 'An Act to perfect the public works of the State,' approved June 24, 1869, upon giving notice to the governor of such intention, then the State bonds aforesaid and the coupons for interest on said bonds shall be payable in gold, notice of which shall be given by the governor in some paper published in the city of New York, and at the capital of this State, to be designated by the governor.
'SECT. 10. In exchange for the bonds of the State above described, the president of the company shall deliver to the governor of the State coupon bonds of the company, bearing a like rate of interest, payable to the State of Florida, signed by the president, sealed with the corporate seal; coupons payable to State of Florida, authenticated by the written or engraved signature of the president. The bonds shall be of such denominations, not less than one thousand dollars, as the said company may choose, and principal and interest shall be payable at the same time and place as the aforesaid State bonds.
'SECT. 11. To secure the principal and interest of the said company bonds, 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 the State 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 a failure of 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, after having first given ninety days' notice by public advertisement in at least one newspaper published in each of the following places: the city of New York, in the State of New York, the city of Savannah, in the State of Georgia, and the city of Tallahassee, in the State of Florida, for lawful money of the United States, and for nothing else, except that the State, for its own protection, may become the purchaser at said sale, and may pay on said purchase any evidences of indebtedness the State may hold against said roads, which purchase-money or said evidences of indebtedness shall be paid on the day of sale into the treasury of this State, or within ten days thereafter; and all moneys arising from said sale and paid into the treasury of this State, as heretofore prescribed, shall be promptly and exclusively applied to the payment and satisfaction of the bonds issued by the State of Florida, under this act, and in case the holders of said bonds do not present them for redemption within ninety days after said sale, the treasurer shall invest the same, or any part thereof which may be remaining in his hands, in the securities of the United States, to be held by the State of Florida, as trustee for the bondholders, until said bondholders shall demand the same, upon which demand the treasurer shall immediately turn over or pay said securities to the bondholders. The purchaser or purchasers of said road shall be by said sale possessed of all the rights, privileges, and franchises of said defaulting company, together with the franchise of use and being a body politic, and the governor shall, upon the payment of said purchase-money into the treasury of this State, as above provided, immediately cause the purchaser or purchasers of said road at said sale to be placed in the actual possession, use, and enjoyment thereof, and cause all the books, papers, and real and personal property of said company, of every description, together with its franchise of use and being a body politic and corporate, to be turned over to said purchaser or purchasers, and the purchaser or purchasers of said road shall be by said sale possessed of all the rights, privileges, and franchises of said defaulting company, together with the franchise of use and being a body politic and corporate, and may use any new corporate name they see fit, and make and use a new seal upon signifying their action in writing to the governor, and thereafter may exercise all the rights of a body corporate and privileges thereof, and of said defaulting company, under said new name, for the term of thirty-five years, to date from the time of purchase as aforesaid. That any such sale shall be ratified by the legislature before the same shall become effective.'
'SECT. 4. That the governor shall, for the purpose of further aiding said Jacksonville, Pensacola, and Mobile Railroad Company in the speedy construction of its road, deliver to the president of said company coupon bonds of this State, of the same character as those above described in this act, to the amount of sixteen thousand dollars per mile, upon receiving for and from the president of said company first-mortgage bonds of like amount on any part or portion of the road between Quincy and Jacksonville: Provided, however, the State bonds under this section shall not be exchanged for first-mortgage bonds for a greater length than one hundred miles of any part of railroad between Quincy and Jacksonville: Provided, the said railroad company or companies shall not issue first mortgage bonds to a greater amount than sixteen thousand dollars per mile.'
Under the authority of this act the new Tallahassee company was consolidated with the Jacksonville, Pensacola, and Mobile company, May 25, 1870, by the name and having the corporate powers of the Jacksonville, Pensacola, and Mobile Railroad Company, with a capital of $6,000,000, divided into 60,000 shares. Previous to this time M. S. Littlefield had succeeded to all the rights of Swepson in these several transactions, and in the distribution of stock in the consolidated company he was given 38,433 shares of the agreed capital. He represented 9,930 out of the 10,000 shares at the meeting of the stockholders of the Jacksonville, Pensacola, and Mobile company which voted for the consolidation, and 17,998 of the 30,000 shares of the Tallahassee company voting to the same effect. The Florida Central company never entered into the consolidation, and the consolidated company, therefore, only became the owner of the roads west of Lake City.
After the consolidation was perfected the Jacksonville, Pensacola, and Mobile company executed its bonds, payable to the State for $3,000,000, as allowed by sect. 10 of its charter, and received in exchange bonds of the State for the same amount, such as were provided for in sect. 9, and in the following–form:––
'UNITED STATES OF AMERICA.
'No. ___.] State of Florida. [No. ___
'It is hereby certified that the State of Florida justly owes to _____ or bearer, one thousand dollars, redeemable in gold coin of the United States, at the Florida State agency, in the city of New York, on the first day of January, at the rate of eight per centum per at the rate of eight per contum per annum, payable half-yearly at the said Florida State agency, in gold, on the first days of July and January in each year, from the date of this bond and until the principal be paid, on surrendering the proper coupons hereto annexed.
'Tallahassee, January 1st, 1870. HARRISON REED, Governor.
'[FLORLDA GREAT SEAL.] S. B. CONNER, Treasurer.
'Issued in accordance with act of the legislature of Florida, approved January 28th, 1870.
'The State of Florida will pay to bearer forty dollars in gold, at the State agency, in the city of New York, for ...