Johnson v. Atlantic, Gulf & West India Transit Co.

156 U.S. 618 (1895)

JOHNSON
v.
ATLANTIC, GULF AND WEST INDIA TRANSIT COMPANY.

No. 77.

Supreme Court of United States.

Argued November 14, 1894. Decided March 4, 1895. APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF FLORIDA.

Mr. George F. Curtis, Mr. Wilkinson Call, and Mr. A.H. Garland for appellants. Mr. Heber J. May was on their brief.

Mr. A.H. Wintersteen, (with whom was Mr. John A. Henderson on the brief,) for appellees.

MR. JUSTICE SHIRAS, after stating the case, delivered the opinion of the court.

On the 21st day of August, 1873, Robert H. Johnson, a citizen of the State of New York, filed, in the Circuit Court of the United States for the Northern District of Florida, a bill of complaint against the Atlantic, Gulf and West India Transit Company, a corporation of the State of Florida, the Florida Railroad Company, and other persons.

The complainant alleged that he was the owner of two bonds of one thousand dollars each, made by the Florida Railroad Company, dated March 1, 1856, payable on March 1, 1891, and secured by a second mortgage on the railroad, franchises, and property of said company, and which bonds, with interest thereon, were due and unpaid.

The object of the bill was to set aside and have declared null and void a sale of the property and franchises of the Florida Railroad Company, made on November 1, 1866, by the trustees of the internal improvement fund, in pursuance of the provisions of the acts of assembly under which the company was incorporated, and possessed its rights and property. It appears that after said sale a deed, bearing date November 3, 1866, was executed and delivered by the trustees to Edward N. Dickerson and his associates representing the purchasers at the sale, and that subsequently the purchasers organized themselves into a new corporation by the name of the Florida Railroad Company. This new company was reorganized January 1, 1870, under authority of an act of the legislature of Florida of June 24, 1869, and afterwards, by an act of assembly dated January 18, 1872, its name was changed to that of the Atlantic, Gulf and West India Transit Company.

As already stated, the original bill of Robert H. Johnson was filed August 21, 1873 — almost seven years after the sale. W.W. Corcoran filed an intervening bill alleging ownership of some of the second mortgage bonds on April 2, 1877. In 1883, Bella A. Johnson, as executrix of Robert H. Johnson, deceased, W.W. Corcoran, and some new parties applied for leave to file a supplementary bill, which was refused by the court. In February, 1886, Karrick V.Z. Riggs, Francis B. Riggs, and William C. Riggs, of New York, filed intervening petitions, alleging ownership of second mortgage bonds, and praying to be admitted as parties entitled to share in the relief prayed for.

On December 7, 1887, after final hearing, a decree was filed dismissing the bills. On November 6, 1889, an appeal was allowed to this court.

The principal grounds for relief stated in the bill were illegality in the form and manner of the sale and fraud and collusion between Dickerson, Yulee, and others, the purchasers, sufficient to vitiate the sale, even if it were valid in form. The charge of illegality in the sale of the railroad is based on two particulars — first, that the power of sale given to the trustees of the internal improvement fund in the act approved January 6, 1855, entitled "An act to provide for and encourage a liberal system of internal improvements in this State," did not authorize a sale, even in event of a default, until after the completion of the railroad in question, and that the said railroad was not completed at the time of the sale; and, secondly, because the persons who officiated as such trustees and made the sale were not lawfully constituted officers of the State, and their action was consequently null and void.

The original company was incorporated by an act approved January 8, 1853, entitled "An act to incorporate a company to construct a railroad across the peninsula of Florida, under the style of the Florida Railroad Company." The route of the railroad was thus designated in the second section of the act: "That the said railroad shall commence in East Florida, upon some tributary of the Atlantic Ocean, within the limits of the State of Florida, having a sufficient outlet to the ocean to admit of the passage of sea steamers, and shall run through the eastern and southern part of the State in the most eligible direction to some point, bay, arm, or tributary of the Gulf of Mexico in South Florida, south of the Suwanee River, having a sufficient outlet for sea steamers, to be determined by a competent engineer, with the approval of a majority of the directors of the said company." Under this proviso a route was selected beginning at Fernandina on Amelia Island, and terminating at Cedar Key, being on a bay of the Gulf of Mexico and south of the Suwanee River.

Afterwards the general improvement act of January 6, 1855, was passed, in the fourth section of which were enumerated certain lines of railroad as proper improvements to be aided in manner provided in said law, and among them "a line from Amelia Island on the Atlantic to the waters of Tampa Bay, in South Florida, with an extension to Cedar Key." The fifth section of the act provided that the several railroad companies then organized or chartered by the legislature, or that might thereafter be chartered, any portion of whose routes, as authorized by their different charters and amendments, should be within the lines or routes laid down in section four, should have the right and privilege of constructing that part of the line embraced by their charter, on giving notice to the trustees of the internal improvement fund of their full acceptance of the provisions of said act, specifying the part of the route they proposed to construct. The Florida Railroad Company, it is undeniably shown, gave such notice of acceptance, specifying the line from Amelia Island to Cedar Key as the part of the route which it proposed to construct; and, on June 11, 1855, entered into a contract with Joseph Finegan & Company, whereby the latter agreed to construct a railroad from Fernandina, on Amelia Island, to Cedar Key, in all respects conformable to the requirements of the general improvement act of January 6, 1855.

Afterwards, in December, 1855, the legislature authorized the Florida Railroad Company to "construct the railroad from Amelia Island, on the Atlantic, to the waters of Tampa Bay, in South Florida, with an extension to Cedar Key, in East Florida, under the provisions of the act approved January 6, 1855."

The line between Amelia Island and Cedar Key was completed in 1861.

The general improvement act of January 6, 1855, authorized companies accepting its provisions to issue first mortgage bonds at the rate of $10,000 per mile, which bonds were to be countersigned by the state treasurer and the trustees. It was further provided that the railroad company should pay to the trustees of the improvement fund fifty per cent of its net receipts every six months, to be applied by the trustees towards the payment of the interest on the bonds of the company, and should further pay, after the completion of the road, to the trustees at least one-half of one per cent on the amount of indebtedness or bond account as a sinking fund.

Upon the failure of any railroad company accepting the provisions of the act to provide interest on the bonds issued by it and the percentage for the sinking fund, it was made the duty of the trustees, after the expiration of thirty days from said default or refusal, to take possession of said railroad and all its property and to advertise the same for sale at public auction to the highest bidder, either for cash or approved security, as they might think most advantageous, the proceeds to be applied to the purchase and cancelling of outstanding bonds, but the purchasers of the road to be bound to continue the payment of one per cent into the sinking fund until all the outstanding bonds should be discharged.

In pursuance of these provisions and of the contracts of June, 1855, the Florida Railroad Company issued and paid over to the contractors and their successors, from time to time as the work progressed, all its first mortgage bonds, secured by a mortgage on its railroad from Fernandina to Cedar Key, and also a portion of its bonds, secured by a mortgage which was a second lien on the railroad from Fernandina to Cedar Key, but a first lien on certain town sites and other lands belonging to the company.

As heretofore stated, the road from Fernandina to Cedar Key was completed in 1861, and, the company having failed to pay its interest, the trustees of the internal improvement fund took possession of the road, and sold it at auction to the highest and best bidder as provided for in the act of 1855.

The contention now is that such sale was void, because the road between Fernandina and Cedar Key was not the road designated and pointed out, in the various acts of the legislature, as the one on whose completion and after default the trustees were authorized to sell; that the road intended should extend from Fernandina to Tampa Bay.

We think that this contention has not been successfully maintained. No doubt, some of the language used in the act of 1853 and in the amendatory act of December, 1855, might be read as indicating or designating Tampa Bay as the western terminus of the railroad, and Cedar Key as the terminus of a branch or extension. Yet the history of the legislation and of the transactions thereunder satisfactorily shows that such a construction was not put upon the acts of incorporation, either by the company itself, by the contractors who constructed the road, by the trustees of the internal improvement fund, or by the State of Florida.

As we have seen, the company, in accepting the benefits of the act of January 6, 1855, designated the road which they intended to build as extending from Amelia Island in the direction of Tampa, as far as a point proper for divergence, to Cedar Key, and from said diverging point to Cedar Key. In the same letter of acceptance it was further said that if the amendment to their charter then pending in the legislature (meaning the act of December, 1855) were granted, they would also construct the balance of the road to Tampa.

Before the act of December, 1855, was passed the company contracted for the construction of the road from Fernandina to Cedar Key, and agreed to pay the contractors with first mortgage bonds upon that road, and these bonds and mortgage were issued accordingly. Subsequently the company made separate contracts for the construction of the route from the diverging point to Tampa and put a distinct mortgage upon it.

The railroad company, upon the completion of its road to Cedar Key, and the trustees of the improvement fund, recognized this as a road completed under the provisions of the act of 1855, the one by paying and the other by receiving the interest and the sinking fund charges on the first mortgage bonds from March, 1861, to November 5, 1863, when default was made.

The contractors agreed to build the road as an entirety from Fernandina, or Amelia Island, to Cedar Key, and accepted in payment, and sold to the public, bonds of the company, secured by a first mortage thereon.

The trustees of the improvement fund not only recognized these first mortgage bonds as securities coming within the provisions of the act of 1855 by receiving and applying the interest paid them by the company, but, at last, in 1866, took possession of the road and franchises, as they were empowered to do in the act, and sold them to parties, who organized a new company.

Finally, the State of Florida, by its act of January 18, 1872, recognized the new company as one owning the property formerly belonging to the Florida Railroad Company, and authorized its change of names.

The second ground relied on by the appellants, as invalidating the regularity of the sale, is the allegation that the persons who acted as trustees of the internal improvement fund, in taking possession of the railroad and selling it, were not legally entitled to act as such; that they were not really officers of the State of Florida.

The second section of the act of January 6, 1855, declares that the governor of the State, the comptroller of public accounts, the state treasurer, the attorney general, and the register of state lands, and their successors in office, shall constitute the trustees to act under the provisions of the act. And we are asked to take notice of the historical facts of the civil war, and that the state government of Florida, in 1866, was declared by the act of March 2, 1867, to be illegal, and that between the outbreak of the rebellion and the adoption by the people of Florida, in May, 1868, of a new constitution, there was an interim or interregnum, during which there were no state officers in Florida qualified and competent to exercise the powers and duties of trustees of the internal improvement fund in accordance with the provisions of the act of 1855.

This contention is disposed of by referring to the well-settled doctrine, affirmed in repeated decisions of this court, that "the acts of the several States, in their individual capacities and of their different departments of government — executive, judicial, and legislative — during the war, so far as they did not impair, or tend to impair, the supremacy of the National authority or the just rights of citizens under the Constitution, are, in general, to be treated as valid and binding. The existence of a state of insurrection and war did not loosen the bonds of society or do away with civil government, or the regular administration of the laws. Order was to be preserved, police regulations maintained, crime prosecuted, property protected, contracts enforced, marriages celebrated, estates settled, and the transfer and descent of property regulated, precisely as in time of peace. No one that we are aware of seriously questions the validity of judicial or legislative acts in the insurrectionary States touching these and kindred subjects when they were not hostile in their purpose or mode of enforcement to the authority of the National government, and did not impair the rights of citizens under the Constitution." Horn v. Lockhart, 17 Wall. 570, 580.

In Sprott v. United States, 20 Wall. 459, 464, the same views were expressed: The insurgent States "merely transferred the existing state organizations to the support of a new and different national head. The same constitutions, the same laws for the protection of property and personal rights, remained, and were administered by the same officers. These laws, necessary in their recognition and administration to the existence of organized society, were the same, with slight exceptions, whether the authorities of the State acknowledged allegiance to the true or false Federal power. They were the fundamental principles for which civil society is organized into government in all countries, and must be respected in their administration under whatever temporary dominant authority they may be exercised. It is only when in the use of these powers substantial aid and comfort were given or intended to be given to the rebellion, when the functions necessarily reposed in the State for the maintenance of civil society were perverted to the manifest and intentional aid of treason against the government of the Union, that their acts are void."

Without further citation or consideration, we conclude that the act of the trustees in selling this railroad in November, 1866, cannot be impeached for want of power to act.

It is next claimed on behalf of the appellants that the sale and conveyance of the railroad were voidable by reason of the alleged fraud and collusion of the defendants Yulee, Dickerson, and their associates, conspiring together to procure the default of the Florida Railroad Company in the payment of its interest, and thus to bring about the sale of the road.

We do not feel constrained to enter at length into a discussion of the evidence adduced under this part of the case. We have, however, examined the evidence and considered it in the light of the verbal and printed arguments on behalf of the appellants; but we are unable to see that the complainants have overcome the direct, positive, and responsive answers of the several defendants. As against those answers the complainants have adduced very little, if any, satisfactory proof. The weight of the evidence, apart from the evidential character of the answers, is clearly to the effect that the railroad, at the time of the sale, was in a thoroughly dilapidated condition, and that, in view of such condition and of the state of the country, the price realized was not inadequate.

The court below, in dismissing the bills, proceeded chiefly on the ground that the complainants had lost whatever rights they might have had by their gross laches. In this view of the case we fully concur.

Robert H. Johnson did not file his bill till nearly seven years had elapsed from the time of the sale, and he gives no satisfactory explanation of his delay. Within that time, in May, 1869, a mortgage had been issued by the new company to Stewart and Conkling as trustees, and who are parties defendant by intervention. This mortgage was to secure an issue of bonds amounting to $2,300,000, the proceeds of which have gone into the reconstruction and equipment of the railroad. Those trustees and the purchasers and holders of those bonds must be deemed bona fide purchasers, without notice of the claim of the complainants. The other complainants, Corcoran and Riggs, did not come into the case till it had been pending for years. Neither do they or Johnson give any explanation of their long delay. They do not aver any concealment of the facts as they existed at the time of the sale of the road in 1866. They do not aver, much less prove, that they were in ignorance of those facts, or that they were in anywise prevented or impeded from ascertaining the facts or from instituting proceedings.

In Galliher v. Cadwell, 145 U.S. 368, 372, this court said: "In Harwood v. Railroad Co., 17 Wall. 78, a delay of five years on the part of stockholders in a railroad company in bringing suit to set aside judicial proceedings, regular on their face, under which the railroad property was sold, was held inexcusable. In Twin Lick Oil Co. v. Marbury, 91 U.S. 587, a director of a corporation who had loaned money to it, and subsequently bought its property at a fair public sale by a trustee, was protected in his title as against the corporation, suing four years thereafter to hold him as trustee of the property for its benefit, it appearing that in the meantime the property purchased had increased rapidly in value. In Brown v. County of Buena Vista, 95 U.S. 157, a county was held barred by its laches from maintaining, at the end of seven years, a suit to set aside a judgment fraudulently obtained against it; and that, too, though it did not affirmatively appear that the supervisors of the county had knowledge of the existence of the judgment till about twenty months before the commencement of the suit ... The cases all proceed upon the theory that laches is not, like limitation, a mere matter of time, but principally a question of the inequity of permitting the claim to be enforced — an inequity founded upon some change in the condition or relations of the property or the parties." In Johnston v. Standard Mining Co., 148 U.S. 360, it was said: "The law is well settled that where the question of laches is in issue, the plaintiff is chargeable with such knowledge as he might have obtained upon inquiry, provided the facts already known by him were such as to put upon a man of ordinary intelligence the duty of inquiry. This principle was applied ... in Foster v. Mansfield &c. Railway, 146 U.S. 88, to a case where a stockholder in a railway company sought to set aside the sale of the road, which had taken place ten years before, when the facts upon which he relied to vacate the sale were of record, and within easy reach... . Where property has been developed by the courage and energy, and at the expense of the defendants, courts will look with disfavor upon the claims of those who have lain idle while awaiting the results of this development, and will require not only clear proof of fraud but prompt assertion of plaintiff's rights."

We are thus brought to the conclusion that the appellants have not sustained their claim that the action of the trustees in making the sale of the railroad was void either from a mistake in interpreting the meaning of the statutes or from any want of power as official persons; that they have likewise failed to show by preponderating evidence any fraud or collusion on the part of Dickerson and his associates in their purchase of the Florida railroad; and, finally, that they are precluded by the long and unexplained lapse of time between the acts complained of and the institution of legal proceedings from maintaining such proceedings as against innocent third parties whose interests have become involved.

The decree of the court below dismissing the bills of complaint is

Affirmed.