Louisville & N. R. R. v. Hart County

75 S.W. 288, 116 Ky. 186, 1903 Ky. LEXIS 184

• Court: Court of Appeals of Kentucky
• Decided: June 19, 1903
• Status: Published

Opinions

■Opinion of the court ivy

JUDGE PAYNTER

Affirming on appeal. • of Hart County and Reversing on cross-appeal of L. & N. R. R. Co.

The charter of the Louisville & Nashville Railroad Company was granted on March 5, 1850. Several amendments to it were passed by subsequent Legislatures. The company w-as organized by the election of directors in September, 1851. Under the charter, the-counties through which the' proposed line of railroad was to he constructed were authorized to subscribe to the capital stock of the company. The city of Louisville was also authorized to subscriba therefor. The counties and municipalities seem to have subscribed for $3,200,000 of it. In January, 1853, Hart ■county subscribed for $100,000 of the stock, but did not pay for same when subscribed. To pay the subscription -the county issued bonds aggregating $100,000. The appellee claims that the bonds were delivered to it as • follows: August 14, 1853, $33,000; August 6, 1856, $33,000; and September 30, 1857, $34,000. The bonds bore dates- as follows: April 1, 1853, $33,000; April 1,1854, $33,000; and April j, 1855, $34,000. To- obviate the necessity 'of an elaborate statement of the facts as to the differences out of which this suit grew, they will he made to appear as far as necessary in -our dtiscus-sion of the questions involved. This action was filed -on March 23, 1870, amd the answer was not filed for many years thereafter. The action was brought in -equity, and for the purpose of compelling the appellee to issue to her certificates of stock for interest which matured on her subscription to blie capital stock during certain periods, for certificates of stock for taxes paid by the taxpayers of the county to meet the interest which matured on the bonds which had been issued to piay for 'her subscription, and also to recover certain alleged cash dividends which she claimed she was entitled to receive. For convenience, we will designate I-Iart county as appellant, and the Louisville & Nashville Railroad Company as appellee.

The first question that will be 'considered is, did interest accrue on the subscription from dates on which the appellee claims the bonds were actually delivered to it in payment of the subscription?

Section 5 of the act of March 20, 1851 (2 Acts 1850-51, p. áái, c. 505), reads as follows: “Said company shall allow to /all subscribers and holders of stock under the company, interest on the same from the time of paying for said stock up to the time of making the first dividend, and to issue to the holder stock therefor; and when stock shall be subscribed for a branch they may provide that said stock shall not be entitled to draw dividends until said branch is completed, but may allow interest on the payments up-to the completion thereof, and pay it in stock.” It will be observed that it is made the -duty of the company to allow interest on the stock issued by it, from the time of paying for' the stock up to- "the time of making the first dividend, and to 'issue to- the holders of stock certificates-therefor. The Counties were authorized to issue bonds to pay their stock subscriptions. Although the bonds delivered to the appellee in payment of the stock subscription bore date anterior to the delivery of the same, and although the party who purchased them would be entitled to the interest thereon from their date, still the interest on the subscription for which stock was to be issued did not begin -to run until the subscription was actually paid — in this case,, until the stock was actually delivered in payment of the subscription. The interest on the bonds and interest on the stock subscriptions are separate and distinct things provided for in the charter and amendments. As an inducement to the .counties to subscribe for the capital stock of .the appellee, interest was to be paid on tbe subscription from the date, of its payment. Besides, the charter provisions indicated a hope of the promoters that the dividends declared on the stock would pay the interest on the bonds. And it was therefore provided that, if they did not do so that the taxpayers, who were required to> pay taxes for that purpose, were entitled to certificates of stock in, .the company for the amount of the taxes paid by each. The bonds having been delivered almost a 'half century ago, no one could possibly have any recollection as to the dates they were delivered in payment of the stock. It was the business of the company to keep ,a record of the transactions between the company and subscribers to the capital stock of the company. Their books should have shown who were subscribers, the amount of each subscription, and the díate the bonds were delivered in payment of the subscription. This is ,an action by one who at that time and for many years thereafter in part constituted the corporation. The county had the right .at any time to examine the books of tbe company. In Turnbull v. Payson, 95 U. S., 421, 24 L. Ed., 437, the court said: “Where the name of an individual appears on the stock book of a corporation as a stockholder, the prima facie presumption is that he is the owner of the stock, in case where there is nothing to rebut that presumption; and, in an action. against him as a stockholder, the burden of proving that he is not a stockholder, or of rebutting that presumption, is cast upon the defendant.” If the books of the appellee are prima facie evidence that one is a stockholder, they would be still stronger evidence, when it is admitted a party is a stockholder, to show when he paid his subscription. There was no evidence offered to impeach the correctness of the record kept by’ the appellee as to the time the bonds were delivered, nor to overcome the presumption that the record was-correctly kept. Counsel for the appellant contend that the presumption should be indulged that the bonds were delivered .on the day they bear .date, but there is evidence in the -record which shows that counties frequently delivered their bonds in payment of stock subscriptions after the tlime they bore date, and this fact tends to-overcome the presumption claimed by -counsel for the appellant to exist. Our opinion is, hlowiever, that the record kept by. the company showing date of delivery in this case is the best 'evidence as to- the date w/hem the stock subscription was paid.

The county co,nit-ends -that the holders of tax receipts were only entitled to the dividends that were declared after the stock was delivered to them for same. The appellee claims that it issued to the holders of tax receipts, when presented, a-n amount of stock equal to the tax receipt, and also all cash and stock dividend® which had been declared on the stock issued for the -tax receipts. The claim is made that the county is 'entitled to the dividends as in the case where stock is sold after -a dividend has’ been declared. There was no sale by the county of her stock to a taxpayer. The stock went to the taxpayer by virtue of the statute. At the time these -taxes were paid, or at least part of them, the county did not hold certificates for her stock. Until the certificates for the stock were issued, the county’s claim for stock was of the same equitable character as was that of the taxpayer to the stock which the law declared he was entitled 'to upon the payment of taxes. The law compelled the tax-paying citizens of Hart county to pay for the stock for which she subscribed, by paying taxes to be used. in the payment of interest and principal of her bonds. Section 15 of the act of January 9, 1852 (Acts 1851-52, p. 742, c. 429), reads as follows: “That the said Louisville & Nashville Railroad shall, upon the date of the first dividend, and thereafter upon presentation and surrender, at the office of the company, of tax receipts for taxes paiid to defray interest upon bonds given by any county, under this act, issue to the holders thereof stock for the same. Said tax receipts shall be negotiable by endorsement, and no stock shall be issued for a less amount than one share.” By section 4 of the act of January 17, 1856 (1 Acts 1855-56, p. 188, c. 20), it Was provided that the county courts shall appoint the clerk of The county or circuit court, or one of the commissioners of the sinking fund, to issue certificates to the taxpayers, etc., of taxes paid, when the amount due the holder, is $100. This is to be done at the end of each month. The concluding clause of section 4 is as follows : “The holders of such stock shall, to all intents and purposes, be entitled to all the rights and privileges of stockholders, but such stock .shall not bear interest.” The stock thus held by a taxpayer or his assignee was entitled to all rights and privileges of other stockholders, except such stock “shall not bear interest.” The ownership of the stock by a taxpayer did not depend upon the fact that he held a certificate from the clerk or commissioner, but upon the fact that he had paid taxes. It is shown that the appellee delivered the stock to the taxpayers or their assignees as required by the act. After having fully and satisfactorily meit the demands of the taxpayers or their assignees, the county is here asking that she be adjudged certificates for part of the amounts for which the appellee ha,s issued stock to the taxpayers or their assignees. In other words, the county demands' certificates of stock, and dividends thereon, which by the express terms of the statute are declared to belong to others. There is absolutely no merit or justice in the claim, and it would certainly be very inequitable to allow it.

There is another question in the case, involving the right of the county to have issued to her stock for interest which accrued on her subscription between April 1, 1862, and June 30, 1864; the latter being the date on which the first cash dividend was made. In October, 1861, at a stockholders’ meeting, a one-fourth of 1 per cent, stock dividend was declared, of date of April 1, 1862. Hardin county, being one of the counties which had subscribed for stock, denied the right of appellee to stop the running of interest on stock subscriptions by declaring the stock dividend mentioned; her contention being that nothing but the declaring of a cash dividend would stop interest on the stock subscriptions. Although iher representative ,wa,s present at the meeting, and made no objection to the proceedings declaring the dividend, yet the county repudiated it, and continued to do so, and at subsequent meetings of stockholders protested against it, which culminated in a suit which finally reached this court, which held that the interest did not cease to run on the subscription until the cash dividend was declared, in June, 1864. Hardin County v. Louisville & Nashville Railroad Company, 92 Ky., 412, 14 R., 401, 17 S. W., 860. The conclusion of the court is now adhered to. Therefore the necessity is obviated to again discuss the question. The course Hart county pursued is entirely different from that of Hardin county. At the meeting declaring the one-fourth of 1 per cent, dividend, Hart county w.as represented by -one of her sinking fund commissioners. At the meeting of the stockholders in 1865, the question arose -as to the claim and position of Hardin county; she claiming that she was entitled to Stock for interest which .accumulated between April 1, 1861, and June 30, 1861, and the dividends -on that -stock, as well as the other stock -held by her. At this- meeting Hart county was represented by two- of her three commissioners, and Hardin county’s claim was unanimously -denied, and proper record was made 'thereof. This action was acquiesced in until this suit was filed. In the meantime several cash dividends were declared upon the basis that none of the counties (and there- were many of them) were entitled to stock for interest during the time mentioned, or dividends thereon. Hart county joined with all the other counties in thus construing their rights under the charter. All other counties, except Hardin, acquiesced in this- interpretation -of their rights under the charter as amended, and never did assert any claim against the company for interest st-ock covering the period in question. Thus Hart county voted that she -and the other counties were not entitled to -this -stock, .and 'the other counties adhered to that conclusion, and never claimed or received such stock. Hart county now attempts to repudiate the action -taken with the approval of her representatives at the -stockholders’ meetings, and claims that which she formerly said she did not own. After the proceedings at the stockholders’ meetings, she st-ood by and saw other counties who had subscribed for stock acquiesce in the actio-n -of the stockholders; saw the appellee declare and pay dividends upon the basis that the right to such stock did not exist in stock-subscribing counties and municipalities. It is suggested that there is nothing to show that these commissioners were present at the meeting of the stockholders by authority of Hart county. The law authorized them to be present at such meetings .to represent the county, and we must presume, after the lapse oif so many years, that they were there acting with the consent and approval of the county, and we therefore say that Hart county acquiesced. The reason for refusing to grant relief on this claim of Hart county is as good as it was in the case of Simpson County v. Louisville & Nashville Railroad Company, 14 R., 673, 19 S. W., 666, wherein-Judge Lewis, delivering the opinion of the court, said: “If the county court had authority to so order application of the stock dividends, the county and sinking fund commissioners as well are estopped to claim the stock from the company, for it was disposed of and applied precisely in accordance with the order and direction of that court. And if it be conceded, .as is argued, -that the sinking fund commissioners, and not the county court, had the right to control and dispose of the dividend stock, their conduct was not such as to entitle them to relief that involved injustice to the company, that is not shown to have acted in bad faith. For the evidence is entirely satisfactory that they knew of and consented to, if they did not directly advise, the action of the county court, and also were aware of the fact that the company was applying the stock as directed and authorized by the county court. Yet they made no objection then, nor thereafter, ‘for more than five years. To suppose the commissioners were no-t aware of the disposition that was -being made of the stock in question, that they now claim to have had the exclusive right to hold and control, is to -assume they were utterly unmindful of their duties; and, if they did know, it was their duty to then speak, and, having acquiesced so long, they can not now equitably ask the relief sought.” We are of the opinion that it would he inequitable to the other stockholders and to the appellee to grant this relief, and we therefore conclude that Hart county has been estopped by her action to demand it.

From the conclusion we have reached, that Hart county was not entitled to the stock claimed, it necessarily follows that she is not entitled to any dividends thereon.

In addition to the other reasons given for denying the county’s right to recover interest stock, there is another which we deem conclusive. Hart county in 1879 sold her principal stock. By section 5, supra, she was entitled to interest on her principal stock from the time she paid for it to the date of the first cash dividend, and for which she was entitled to have stock issued to her. This interest was like’ any other interest that might accumulate upon a debt, but, instead of its being paid' in cash, it was to be paid in stock. It was an incident to the principal stock, exactly the same as interest is an incident to- a debt. If the debt is assigned, and interest has matured thereon, the interest passes to the assignee as effectually as the debt. If the .interest had been payable in cash instead of stock, the party to whom the county transferred the principal stock would certainly at the same time have acquired the interest due thereon. This is because it would have been an incident to the stock. The mere fact that the appellee could pay it in stock did not make it different from what it would have been, had it been payable in cash. We, are 'of the opinion that, when she sold and, transferred her principal stock, if any interest k,ad been due thereon (we have said none was), it would have passed to the purchaser. This view is supported by Boardman v. Lake Shore Railroad Co., 84 N. Y., 157; Jermain v. Lake Shore Railroad Co., 91 N. Y., 483; and Manning v. Quicksilver Mining Co., 24 Hun., 361.

In 'view of the conclusions reached, we have not -thought it necessary to discuss the effect of the 10% per cent, stock dividends declared, nor the question of limitation.

The judgment is, affirmed on the appeal of Hart county, and reversed on the appeal and cross-appeal of the Louisville & Nashville Railroad Company, for proceedings consistent with this opinion.