Ex parte Brown

58 Ala. 536
CourtSupreme Court of Alabama
DecidedDecember 15, 1877
StatusPublished
Cited by21 cases

This text of 58 Ala. 536 (Ex parte Brown) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ex parte Brown, 58 Ala. 536 (Ala. 1877).

Opinion

MANNING, J.

Petitioner is a stockholder of The Selma, Marion and Memphis Railroad Company of Alabama; and his petition, and the exhibits thereto, represent that there was a corporation of “the same name in Mississippi, and another of the same name in Tennessee; that proceedings were taken in March, 1871, by persons claiming authority to do so, to consolidate the three companies into one; which proceedings were legally ineffectual and invalid; that certain persons, who were at that time elected and appointed to constitute and be a board of directors and president and other officers of the consolidated company of the same name, had taken possession of the railroad and other property of the Alabama Company, and proceeded in the construction of its railroad and the conduct of its business, as part of the railroad property and business of such consolidated company, with a line of operations extending from Selma, Alabama, through the State of Mississippi, to Memphis, in Tennessee; that in the prosecution of this enterprise, said board of directors and the president (N. B. Forrest, of Memphis,) caused to be issued a large amount of bonds, and had undertaken to secure the payment of them by a mortgage trust deed of all the present and future property of said supposed consolidated company, executed to trustees ; which mortgage and bonds, bearing date March 17,1871, was called the “first mortgage” and “first mortgage bonds” of The Selma, Marion and Memphis Railroad Company, and were [538]*538outstanding in tbe bands of holders, who asserted, by virtue thereof, a mortgage lien upon the railroad and other property, which- petitioner insists belong to the Alabama corporation alone. It further appears that there was issued, under date of September 1, 1869, a series of bonds of the company, to the amount of $16,000 per mile of completed road, with ''the endorsement of the State of Alabama, purporting to be by authority of “an act to establish a system of- internal improvements in the State of Alabama,” approved February 19, 1867, and an act amendatory thereof, approved September 22, 1868, by which acts, called the “State aid law,” it was provided that the State should have a first lien upon the railroad, and its appurtenances, of any company whose bonds the State should endorse, to indemnify it against loss; and that a large amount of these bonds were also outstanding, held by persons who asserted a right of recourse against the Alabama company and its property therefor.

The petition further sets out that certain judgment creditors of the Alabama company filed a bill — that of T. T. May and others, (February 8, 1875,) on behalf of themselves and other creditors, against each of the three State companies and the consolidated company aforesaid, and against N. B. Forrest, as holder of some of the bonds aforesaid, and other holders of such bonds, — in the chancery court of Perry county — -to contest the validity of said supposed consolidation, and of the said first mortgage and first mortgage bonds, and of the State indorsed bonds, — alleging that the latter were illegally issued, — and denying that any of the bonds-created a lien in favor of the .holders upon the railroad property. The bill charges that the railroad company is insolvent, and prays that it be decreed that no lien exists in favor of the holders on its property, &c.; that the property be sold to pay debts of complainants, and that a receiver be appointed to take possession of and care of the property in the meantime. A receiver was appointed, upon the company having filed an answer acknowledging its insolvency and inability to proceed in the’ construction of the road. To this bill, Butterfield & Co. and others became parties defendant, answered and filed a cross-bill, setting up that they were owners of a large amount of the State endorsed bonds, claiming for them, under the statute, a first lien on the railroad property in favor of the State, and that they were, by subrogation, entitled to benefit of this lien to pay a large amount of past due coupons for interest on the bonds — and praying a sale of the property to pay them. It prayed also that Fawlkes, the receiver, be continued in the meantime in possession of the property.

[539]*539Petitioner further shows that he, Wilson R. Brown, as stockholder of the Alabama company, on behalf of himself and all other stockholders, filed his bill in the same court March 21, 1876, against all the companies aforesaid, and against N. B. Forrest and others, as holder of first mortgage bonds, and Butterfield & Co. and others, as holders of State endorsed bonds, and other persons, — in which he also alleged that there had been no legal consolidation of the three State companies — that the first mortgage bonds were not valid against the Alabama company and property, and that the State endorsed bonds were illegally issued and created no lien on said property. He charged also that the holders of the bonds of both classes were scheming and combining to sell the road and property and get possession of it, to the detriment of other just creditors and the stockholders ; that if this were prevented, all just debts could be paid, as stockholders desired; and that Fowlkes, the receiver, was managing the property advantageously; wherefore, he prayed continuance of the receiver; that the bonds and mortgage be declared void and cancelled; that it be decreed there was no lien for the endorsed bonds, and that it be ascertained who the just creditors are, and that they be paid, &c.

To this bill, too, Butterfield & Co. and others, filed answer and cross-bill, setting up their claims as holders of the State endorsed bonds.

The petition further alleges that, while these' causes and cross-causes were pending, one I). Luddington, claiming to be holder of a large amount of the State endorsed bonds, including the same identical bonds of which Butter-field & Co. and others, in said causes, claimed to be holders, and which were obtained from them by Luddington, with full and positive knowledge of the litigation pending concerning the same, filed his bill for himself and other creditors, on the sixth of September, 1877, in the same chancery court of Perry county, against The Selma, Marion and Memphis Railroad Company of Alabama, as sole defendant, and therein averred that he was holder of over 400 of the 600 State endorsed bonds which that company had issued under the “State aid acts” aforesaid; that by said acts a lien was created in favor of the State on the railroad and other property and franchises of the company for the payment of the bonds and interest; that interest on said bonds, due by coupons, had accrued to a large amount, and neither the company nor the State had paid the same; and that by reason thereof complainant and other holders of said State endorsed bonds, were subrogated to the benefits of the lien created by the statute in behalf of the State. But the bill [540]*540makes no mention of any consolidation of this corporation with those of other States, or of the execution of the mortgage and bonds aforesaid; or of the pendency of either of the other causes aforesaid, or of the fact that the railroad and property were in the hands of a receiver of the court in such causes, or any other cause. It alleges, though, the insolvency of the company, and prays for a sale of the railroad and other property of the company, and of its franchises, for the payment of the amount due on said State endorsed bonds, and for the appointment of a receiver.

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Bluebook (online)
58 Ala. 536, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ex-parte-brown-ala-1877.