Miller v. New York & Erie Railroad — 8 Abb. Pr. 431

Majority

p. 431

MILLER a. THE NEW YORK AND ERIE RAILROAD COMPANY.

Supreme Court, First District; Special Term,

June, 1859.

Headnote

Pleading.—Requisites of Complaint on Railroad Bond.

In an action against a railroad company to recover upon a bond issued by it, under the power conferred by the general railroad act of 1848, the complaint alleged that the bond was issued for the extension of the defendants’ road west of B.

Held, on demurrer sufficient.

Whether, if the bond had been issued under the provisions of the general railroad act of 1850, it would be necessary to allege that it was necessary to issue it, and that the money was borrowed for the completion, furnishing, or operating of the road,—Query?

Form of a complaint on a railroad bond.

Demurrer to amended complaint.

The action was brought to recover the amount of a bond issued by the defendants. The allegations of the amended complaint were as follows:

p. 432

That at the times hereinafter mentioned the defendants were a corporation, duly incorporated under and by virtue of the laws of the State of Bew York.

That on the first day of March, 1849, at the city of Bew. York, said defendants made and executed a certain bond in writing, and caused the same to be sealed with their seal and signed by their president and secretary, whereby they acknowledged themselves indebted to John J. Palmer, or bearer, in the sum of one thousand dollars, and which sum they promised to pay to the said John J. Palmer, or bearer, in the city of Bew York, on the first day, of March, 1859, with interest at the rate of seven per cent, per annum, payable semi-annually on the first days of September and March in each year, and for value said defendants delivered the said bond to this plaintiff, who is now the lawful owner and holder thereof.

That said bond was issued by the defendants for the extension of the Bew York and Erie Bailroad west of Binghampton.^[1]

And the plaintiff further says, that the said defendants have failed to comply with the conditions of the said bond by omitting to pay the principal sum of one thousand dollars, which became due by the terms thereof on the 1st day of March, 1859, or any part thereof, although the same was demanded of the defendants, at their office in the said city of Bew York, when the same became due and payable.

That no part thereof has been paid, and that there is now justly due to the plaintiff, from the defendants, upon the said bond, the said sum of one thousand dollars principal, with interest thereon from the first day of March, 1859.

Wherefore, &c.

The defendants demurred on the ground that the complaint did not state facts sufficient to constitute a cause of action.

Ira 0. Miller, for the plaintiff.

D. B. Eaton, for the defendants.

I. The complaint shows no authority in the defendants to issue the bond, and, for all that appears, there may have been no consideration for it. The

p. 433

defendants are subject, by their charter (Laws of 1832), to title 3 of chapter 18 of part 1 of the Revised Statutes. (1 Rev. Stats., 4th ed., 1172.)

■II. Section 3 of that title contains a clear definition of implied powers, beyond which the court cannot go. The complaint does not set forth any facts which show that the right to issue bonds generally, or the bond in question, was necessary to the exercise of any of the six powers given in the 1st section. This is an action to recover the face of the bond, without reference to any consideration. It is not necessary to consider how the case would stand in an action to recover any amount actually paid to and received by the company.

III. The provisions of the general railroad act of 1850 (Laws of 1850, 225, ch. 140, § 28, subdiv. 10), granting for the first time the right to issue bonds, and under restrictions as to the necessity for the issue and the amount—show that the Legislature understood that in 1849 no such general right to issue bonds existed, as is assumed in this complaint. Had such right existed, there was no occasion for these provisions in the act of 1850.

IV. The clause of the complaint alleging the purpose of the issue does not bring the case within the authority given by the act of 1850 to issue bonds. 1. It is not alleged that it was necessary to issue bonds. 2. The action is not claimed to be for money loaned, nor is it for any amount advanced. 3. It is not said to be for the completion, furnishing, or operating of the road, as required by the statute. 4. The language of the complaint would apply just as well to a road extended into Pennsylvania, where the company would have no authority to go.

V. The authority of a corporation to issue bonds or notes must be affirmatively shown by the party who claims on them; and unless the corporation had authority to issue them, no recovery can be had on them. (McCullough a. Moss, 5 Den., 567 ; Hodges a. City of Buffalo, 2 Ib., 110 ; Talmadge a. Pell, 3 Seld., 328,; The Bank, &c., a. The State Bank, 3 Ib., 513 ; Halstead a. The Mayor, &c., 5 Barb., 218 , 3 Comst., 430.)

The act of 1848, relative to railroad companies, enacts that all existing railroad companies in this State shall possess all the powers contained in this act (Laws of 1848, 221, ch. 140, § 46). That act (§17, sub. 10) allows them to borrow

p. 434

money to be applied to the construction of their railroads and fixtures.

The bond upon which this action is brought was made on the 1st day of March, 1849, and the complaint alleges that it was issued by the defendants for the extension of their road west of Binghampton. This sufficiently shows that it was for the purpose stated in the act, nor are we to presume that it was for the purpose of extending it beyond its limits in this State. But it is maintained that no authority is expressly given by any act previous to that of 1850, “ to issue bonds.” This was not necessary. If the company were allowed “ to borrow money,” it is of little consequence in-what manner or by what description of instrument they acknowledged the indebtedness and promised payment. The counsel for the defendants, however, argues, because the act of 1850 gives the power to issue bonds, the Legislature must have understood that in 1849 no right to issue bonds existed. This would not, by any means, be a legitimate inference. The power to borrow, given by the act of 1849, was not accompanied, as we have seen, by any restriction as to the manner of evidencing the debt. On examining the act of 1850, where the powers of the act of 1848 are enumerated in an extended form (Laws of 1850, 225, eh. 140, § 10), it will be found that the right to issue bonds is indeed given, but it seems to be introduced rather for the purpose of an additional power, which it was deemed expressly to provide for, namely, giving the directors the power to confer on any holder of a bond, issued for money borrowed, the right to convert the principal due into stock of the company.

There is nothing in this act, or in any act, ignoring the idea that a corporation, having the right to contract an obligation for a specific purpose, has also the right to issue any instrument which either party may consider convenient in acknowledgment of it.

The complaint is id every respect sufficient; at least, it contains no defects which can be taken advantage of by demurrer. The plaintiff is not obliged to allege that it was neoesswry to issue the bond, or that the money was borrowed for “ the completion, furnishing, or operating of the road.” If the money was borrowed after 1850, this language may be requisite; but the money in question was borrowed under the power given by the act of 1848.

The demurrer must be overruled with costs, with liberty to defendants to answer within twenty days.