FROM CHESHIRE CIRCUIT COURT. We think the conclusions of the judge at the trial, as stated in the printed case, with respect to the right of the Ashuelot Railroad corporation to redeem the mortgaged property, the appointment of a master to take an account, and the instructions to the master there suggested, are right, and that an order should be entered accordingly.
The defendants make two objections to the right of the corporation to redeem: (1) that they have permitted the matter to sleep so long that their present claim is stale; and (2) that the reorganization of the corporation by the election of officers at the meeting of August *Page 408 17, 1872, was invalid for the reason that the magistrate who called the meeting was disqualified by the fact that he was a stockholder at the time. Neither of these objections can, in our judgment, be sustained.
Mr. Elliot had been in possession of the road as trustee since about January 1, 1861 — a little more than eleven and a half years. There can be no pretence that any rights at law against the corporation had been gained either by him or by the bondholders by virtue of the statute of limitations; the time was not sufficient, even if the holding and management of the road by him had been such as to give the plaintiffs clear notice of an unequivocal renunciation of the trust. Nor have we been able to discover anything in the facts stated, which would justify the court in denying the plaintiffs the relief they ask, by all application of any known doctrine of equity respecting state demands. So far as regards the rights of the plaintiffs to redeem, the situation of affairs since January 1, 1861, is simply that their road and property have been in the hands of the mortgagee. No reason is seen why their rights to an account and to redeem should be lost by the lapse of eleven or twelve years, any more than the right of a mortgagor of any other property to redeem and to an account of the rents and profits should be lost by permitting the mortgagee to hold possession for the same length of time. The rents and profits in one case, as well as in the other, may in time be sufficient to pay off the whole mortgage debt; and it would be a singular consequence if the mortgagor is to be deprived of all benefit of such payment, and, in addition, be despoiled of his rights in the mortgaged property itself, merely because both parties have been content the one to pay and the other to receive payment on his debt in that way for a series of years less than the period of limitation fixed by law.
As to the disqualification of Mr. Lane to call the meeting of August 17, 1872, if it were admitted that he was disqualified, and that the doings of the meeting were thereby rendered void, it would seem to follow that the Ashuelot Railroad Co. is improperly made a party plaintiff to the bill. What would be the technical effect of such a holding upon the present proceeding we need not inquire, because we think the plaintiffs are right in their view that the act of the magistrate in calling the meeting was simply ministerial, and that the doings of the meeting were not thereby rendered invalid.
Upon these two points the court, after careful examination, are, as suggested, with the plaintiffs; and the reasons, most of which have been elaborately considered by counsel in their briefs, need not be enlarged upon. If the act of Lane in refusing the votes offered by Elliot was unauthorized and illegal, any person aggrieved had a plain and sufficient remedy by quo warranto or mandamus. Besides, the court found (and we are unable to doubt the correctness of the finding on this point) that the votes were properly rejected, because the shares upon which they were offered had been previously extinguished by the act of the corporation in buying them in; so that no wrong was in fact done, even had Lane been disqualified to rule upon the question *Page 409 when the votes were offered. But the only act which Lane did, in his official capacity as justice of the peace, by virtue of the statute, was to call the meeting. Gen. Stats., ch. 133, secs. 15, 16. After the meeting assembled, in pursuance of the call, it was necessary in order to commence proceedings that some one should assume the duties of the chair. No one not a stockholder was entitled to be present or take part in the meeting. Certainly, then, a stockholder must act as temporary as well as permanent chairman of the meeting, and no reason can be conceived why Mr. Lane, being a stockholder, might not do so as well as any one else. The rulings of the chairman, of which the defendant complained, and which, if wrong, furnished the basis of a proceeding to have the matter set right, were not made by virtue of any authority derived from the statute by Lane as a justice of the peace, but by virtue of his election by the stockholders to preside in the meeting. His functions as a public officer ended with the calling of the meeting. After it assembled he stood the same as other stockholders, and might vote and be voted for in the same way.
The defendants object to the finding that the transaction with Levi Chamberlain, in reference to the $1,000 bond, was a breach of trust on the part of Elliot. We are unable to doubt that the finding was right and that Elliot must be held to account accordingly. It is true he had not at that time taken possession of the road as trustee under the mortgage; but he was treasurer and clerk of the corporation, and we think it is very clear he had no right to make use of his official position, by any such device as this, to transfer to himself funds belonging to the company he was bound to serve. His counsel have argued that the transaction was strictly legal, — that is, that he did not go beyond his strict legal right in the matter, — and therefore cannot justly be held to account. Suppose he had accomplished exactly the same result without making use of Mr. Chamberlain or his name at all: how would it be then? He was treasurer of the corporation, and in that capacity had charge of their bonds. He was at the same time owner in his private capacity of stock in the corporation worth $200 on $1,000 less than the bonds: would it be argued that he could directly appropriate to himself a $1,000 bond of the corporation, and in place of it substitute $1,000 of his own sock worth $200 less? How does the indirect and circuitous route he took to reach the same result help the matter? In any view suggested to us by the case, or by counsel in argument, we cannot but regard this transaction as entirely indefensible, and are unable to doubt that Elliot should restore to the corporation what he took from it in this way, just as much as though it had been taken directly, without any such attempt to give it color of right. The direction to the master, suggested in the printed case, as to the other $1,000 bond to Samuel Towns, stands the same, and is approved.
Upon the facts stated in the printed case with respect to Elliot's dealings in the bonds of the Ashuelot Railroad Company after he took possession of the road as trustee, no reason is now seen why he should not account to the corporation for the profits of those transactions *Page 410 We think it is impossible to sustain the view of his counsel, that his relation to the corporation after he took possession under the mortgage was not that of a trustee. Undoubtedly he represented the bondholders in respect of their rights and interests by virtue of the mortgage, but we think it equally clear that he represented the corporation in respect of their rights and interests in the mortgaged property. All his title, and all his right to possess and manage the property, was a trust. As to the mortgage debt, the real mortgagees, that is, the bondholders, were his cestuis que trust; as to the property itself and the equity of redemption, the mortgagors, that is, the corporation, were his cestuis que trust. The bonds formed the whole basis of this trust. With their extinguishment his legal title, and his consequent legal right to the possession of the road, would be gone. His general duty to the corporation lay in the direction of their extinguishment. It is not impossible but his private interest might in some contingency lie in the opposite direction. At all events, from what now appears, it is plain enough, we think, that he could not speculate in those bonds for his own private gain without violating very fundamental principles established for the government of those sustaining this fiduciary relation to others, and approved by courts of equity from the earliest times. The master may, however, be directed to report specially the facts respecting those transactions, and the final order in relation thereto may be delayed until the coming in of the report. The instructions to the master on this point, found in the printed case, are approved and adopted.
The court lay down no rule at this time as to the computation of interest, but leave that matter to be determined by the master, subject to reexamination by the court upon the coming in of the report.
No question as to the good faith of the Cheshire Railroad in making or carrying out the contracts with Elliot is to be regarded as open to inquiry before the master in any way to affect the rights of that corporation. A master is to be appointed, who is to act under instructions drawn in accordance with these general views.
George A. Ramsdell, Esq., of Nashua, was afterwards appointed master, to take the accounts ordered, and the following instructions issued to him: In the hearing you will be governed by the opinion of the court announced at this term, as explained and supplemented by the printed case transferred at the January adjourned term, 1874. Copies of both said documents are hereto annexed for your information and guidance.
As to interest, you will make a computation and report results, upon such basis as to rests, c., as in your judgment ought to be adopted; but you may report specially any facts relating to that matter, which either party desires reported, for the purpose of having the opinion of the court thereon.
As to contracts between the defendant Elliot and the Cheshire Railroad, and the operation and management of the Ashuelot Railroad under them, they may be the subject of investigation and report so far *Page 411 as they may bear upon a just settlement by Elliot of the affairs of his trust with the plaintiff.
It is the intention of the court to make these instructions so general that a full hearing may be had upon the merits of all matters in controversy which have not already been determined by the court; and to this end you may hear the parties and report specially to the court any fact not already determined, which either party desires, and which in your judgment may be material.
At the March adjourned term, 1874, the master returned a very full and carefully considered report upon all the matters submitted to him, the concluding portion of which is as follows:
"ELLIOT'S TRANSACTIONS IN ASHUELOT BONDS.
"I find that at the time Elliot took possession of the Ashuelot Railroad as trustee, he was the owner of its bonds to the amount of $24,000. From 1861 to 1867 (or the time he commenced to exchange Ashuelot bonds for Cheshire bonds) he purchased Ashuelot bonds to the amount of $46,000, for which he paid the market price of the bonds from time to time. For some he paid fifty per cent. of the par value, for some fifty-two and a half, and for some seventy-five per cent.
"As to the amount paid by Elliot for the $46,000 Ashuelot bonds, the evidence before the master was limited. The trustee testified that he had no means of showing the amount he paid for these bonds; that he paid from fifty cents on the dollar upward. In the absence of satisfactory evidence, I find that these bonds cost Elliot, upon the average, fifty-two and a half cents on the dollar, and that he exchanged these, together with the $24,000 before mentioned, for Cheshire Railroad bonds, which he afterwards sold for ninety-three cents on the dollar, or about that price. The $30,000 bonds which, with Elliot's $70,000, went to make up the first $100,000 which the Cheshire Railroad owned, were procured by Elliot under his agreement with the Cheshire Railroad.
"Elliot purchased a portion of these bonds and exchanged them for Cheshire bonds, and some parties directly exchanged Ashuelot bonds for Cheshire bonds. Elliot testified, and he was not contradicted, that he made no profit on the $30,000 bonds so obtained. I therefore find that Elliot made no profit on this part of the $100,000 bonds obtained for Cheshire Railroad.
"As to all bonds now held by the Cheshire road above $100,000, I find that Elliot acted as the agent of the Cheshire Railroad in procuring them, with the exception of the last $10,000; that these bonds so procured were obtained by direct exchange of Cheshire bonds for Ashuelot bonds, and that Elliot made nothing by the transaction."
As bearing on the question of the liability of Elliot, growing out of his transactions in Ashuelot bonds while he was treasurer and trustee, the master reports the following general findings: *Page 412
"1. I find that the bonds purchased by Elliot, before he took possession of the road as trustee, were bought with his own money.
"2. I find that, at the time he so took possession of the road, the funds which I have theretofore found in his hands as treasurer were invested in Missouri bonds, and remained so invested for several years, and that his action in so investing the funds of the company, although lacking legal authority, was not accompanied with bad faith as a matter of fact.
"3. I find that when Elliot took possession of the road as trustee, or soon after, he understood that the stock of the Ashuelot Railroad was substantially extinguished, and that the real capital of the road was represented by its bonds, and that he was acting as the executive officer of this new organization which he supposed to exist.
"4. I find that Elliot had funds of the Ashuelot Railroad in his hands to some extent while he was purchasing bonds for himself and the Cheshire Railroad, and that some of these funds may have been used by him in the purchase of bonds. I also find that his accounts as treasurer and trustee have not been settled, nor his compensation for services in either of these offices adjusted, during the twenty-five years preceding this hearing.
"His claim for services, which was much larger than I have allowed (and based upon an agreement with the president of the road, according to Elliot's testimony), would show, if admitted, much less money of the company in his hands from time to time than appears by the foregoing exhibit.
"The evidence also showed Elliot to be possessed of ample means and credit to carry through any enterprise in the way of bond purchases he was shown to have been engaged in without the aid of the Ashuelot Railroad funds. I therefore find that so far as he used the funds of the Ashuelot Railroad in the purchase of bonds (the exact amount of which, on the evidence submitted, I cannot state), he so used the funds without any intention to defraud the Ashuelot road.
"5. I find that Elliot did not declare smaller dividends to the bondholders than he had the means of doing, or mismanage the trust property for the purpose of depreciating the price of the bonds so that he could buy them at a greater discount.
"6. I find that by reason, in part, of the action of Elliot in buying up and concentrating so many of the Ashuelot bonds in the hands of the Cheshire Railroad, while he was trustee of the first road and director in the latter, the Ashuelot bonds have risen in the market from fifty per cent. of par value to par value, or nearly par value, and that the Ashuelot Railroad is prejudiced by this action, the extent of which it is impossible to state, upon the evidence submitted to the master, and perhaps upon any evidence in existence.
"7. I find that the Cheshire Railroad, if it becomes material, is chargeable with full knowledge of the fact that Elliot was treasurer or trustee of the Ashuelot Railroad from January 1, 1861, to the present time. *Page 413
"BONDS HELD BY CHESHIRE RAILROAD.
"The Cheshire Railroad now owns $160,000 of the whole amount of bonds of the Ashuelot Railroad outstanding. William Haile is supposed to be the owner of $12,500, F. A. Faulkner of $4,000, and other persons, whose names were given to the master, of bonds to the amount of $10,000. As to the whereabouts of bonds to the amount of $3,000 nothing seems to be known. This amount may never be presented. At the request of the Cheshire Railroad, I find that there is due on the bonds held by said railroad (a copy of bond is hereto annexed), computing interest with semi-annual rests, and deducting the payments of interest by the trustee from time to time as the payments were made the first day of January, 1875,
Principal, $160,000.00 Interest (less dividends paid), 100,391.69 ----------- Total amount due January 1, 1875, $260,391.69
ANOTHER STATEMENT MADE BY THE MASTER.
Bonds, $160,000.00 Simple interest 14 years, 134,400.00 ------------ $294,400.00 Amount of dividends paid on these bonds from 1861 to 1875, $68,800 Simple interest on these dividends from time of payment to January 1, 1875, 28,992 97,792.00 ------------ Total amount due January 1, 1876, $196,608.00
THIRD STATEMENT, MADE AT REQUEST OF ASHUELOT RAILROAD.
Bonds, $160,000.00 Simple interest on same from time of purchase by Cheshire Railroad, 56,101.52 ------------ $216,101.52 Dividends received by Cheshire Railroad, $24,850.00 Simple interest on dividends received, 6,469.73 31,310.73 ------------ Amount due January 1, 1875, $184,781.79
"At the request of the Cheshire Railroad, I report to the court that subsequent to taking the lease of the land in the Y, the Cheshire Railroad Co., relying upon the validity of the lease, proceeded to erect thereon an engine-house, and other permanent brick structures, at a large expense; that the Cheshire Railroad will suffer great loss by reason of the occupation of this leased land in this manner, unless the court can in some way protect the lessees.
"The Cheshire Railroad claimed before the master, and offered to *Page 414 prove, that the sums I have found as paid to the trustee, from 1861 to 1868, were the amounts justly due for that time from the Cheshire Railroad to the Ashuelot Railroad; that there was no contract or lease in force from 1864 to 1868; that the accounts between the roads for the years 1861, 1862, and 1863 were settled by the trustee and the directors of the Cheshire Railroad; that no settlement was made after 1863 until the making of the contract in 1868, because the parties were not agreed as to the terms upon which the road should be run; that at the time of the making of the contract of 1868 it was agreed by the Cheshire Railroad and the trustee that the settlement for 1864, 1865, 1866, and 1867 should be made upon the basis of the contract of 1868.
"The Cheshire Railroad also claimed, and offered to prove, that Mr. Justice HIBBARD did not inquire into the fact of the existence of the leases or contracts as found to exist by him on page five of his case, and that the master should consider the question open whether or not such leases or contracts did exist as a matter of fact.
"The Ashuelot Railroad claimed, and offered to prove, that these matters were inquired into at length by Mr. Justice HIBBARD; that he found the fact of the existence of certain definite leases and contracts between the Cheshire Railroad and the trustee covering all the time from 1861 to the time of the hearing; and the further fact, that, although payments have been made from time to time by the Cheshire Railroad to the trustee, no settlement in accordance with the leases or contracts had been made.
"The master, being of the opinion that Mr. Justice HIBBARD had found on the fifth page of his case substantially as claimed by the Ashuelot Railroad, declined to go into the question whether or not any particular lease or contract was in force at any particular time, and, at the request of the Cheshire Railroad, reports this ruling for the consideration of the court."
The material part of the Ashuelot bonds is as follows: "Be it known by these presents, that the Ashuelot Railroad Company, for value received, acknowledges itself indebted to A. Boody Co. in the sum of five hundred dollars, which sum it hereby promises to pay to the said Boody Co., or bearer, at the office of its treasurer, on the first day of January, in the year of our Lord one thousand eight hundred and sixty-one, with interest at the rate of six per cent. per annum, payable half yearly at said treasurer's office, on the first days of July and January of each year after the first day of January of the year eighteen hundred and fifty-one, upon the surrender of the corresponding warrants hereto annexed."
Upon the coming in of the master's report, the Cheshire Railroad moved that the same be recommitted, for a purpose which fully appears from the opinion below. A large amount of testimony was taken, and the motion was argued by Sargent for the Cheshire Railroad, and Lane for the plaintiffs.
At the December term, 1875, the following opinion of the whole court was delivered by *Page 415