Vermont & Canada Railroad v. Vermont Central Railroad

34 Vt. 1

• Court: Supreme Court of Vermont
• Decided: January 15, 1861
• Status: Published

Opinion

Barrett, J.

Under the lease of August 24th, 1849, and the addition thereto of July 9th, 1850, the orators, with the co-operation of the Vermont Central Railroad company, proceeded in the completion of their road from Essex Junction to Rouse’s Point, and, upon such completion, the Vermont Central company took possession thereof, and, by themselves and the trustees under the first mortgage, with the incidental interposition of the court of chancery, have continued to possess and operate said road to the present time. The first and second mortgages were both made subject to the rights and duties provided and stipulated in said lease and the addition thereto. The bonds that were issued by the Vermont Central company were upon the security created by the said mortgages respectively, and the rights of the bondholders in reference to such security are created by, and derived through said mortgages.

•The rent was paid to June, 1854. That falling due in December, 1854, remaining unpaid for more than tour months, this bill was brought to enforce the security for the same, created by the indenture of July 9th, 1850, and was entered in the court of chancery for Franklin county, June Term, 1855. In the meantime no rent has been paid since that which fell due and was paid in June, 1854.

The Vermont Central company and the trustees under the first mortgage, in argument before this court, admit the legality and binding force of the lease of August 24th, 1849, and also of the indenture of July 9th, 1850, so far as it was designed, and may operate to give security upon the earnings of the roads for the payment of the stipulated rent. They object to possession of the roads and property being given to the orators under the last indenture, claiming that to that intent the contract is illegal and invalid. They also object to the claim as made by the orators in respect to the cost of construction, and to their claim for incidental expenses.

The second mortgage is not represented in this court. Mr. Sohier, a bondholder under the first mortgage, made answer to the bill, ■ and appeared in the court of chancery, standing upon the bill, his answer and the proofs taken in the case, so far as they were pertinent to the issues made by his answer. He is represented in this court by counsel, who in his behalf, and, through him, in behalf of some other bondholders, contest the rights claimed by the orators. A leading • point made and urged by the learned counsel in the argument is, that the indentures of August 24, 1849, and of July 9th, 1850, are not valid, and never were binding on the Vermont Central company, by reason of being ultra vires of either corporation to make, though their validity is not put in issue on this ground by Mr. Sohier’s answer.

Various other points are taken and urged, which will be considered, so far as may be necessary in deciding the case. Upon the point first named the contest is between the orators on the one hand, and Mr. Sohier as a bondholder, on the other, standing upon his rights to the security created and furnished by the first mortgage. The character of the question is such, in the relation that the parties to it sustain to each other and to the subject matter involved, that we have given it full consideration, irrespective of the defect in the record in this particular.

It is too late to question the doctrine that a corporation has only such powers as were conferred by the power that has created it. By the original acts of incorporation, neither of the parties were endowed with the power to enter into such contracts of lease and security as were made in this case. If this case was standing only upon the original acts of incorporation, they would be subject to impeachment for invalidity, in behalf of parties sustaining such a relation to either of the companies and to the contracts as to entitle them to question their validity.

In considering this subject as it is presented in the argument, a distinction is to be noted between the invalidity of a contract resulting from the want of capacity to make it, and that resulting from its being in violation of law, or contrary to public policy. If such contract is not in violation of some public law or contrary to public policy, it would seem that only the immediate parties to it, as the corporations themselves, or the stockholders, who are parties by representation, would hold such a legal position in relation to it, as to entitle them to raise the question of validity on account of the want of capacity ; while on the other hand, if such contract was in violation of some public law, or against public policy, in such sense as to make it void and of no efficacy to any intent, any person standing in a relation of interest to the subject matter of the contract, and to be affected by its operation, might undoubtedly set up and insist on such fatal vice in it, for the purpose of clearing himself from the consequences of its being carried into- effect.

Though the original acts of incorporation of the two railroad companies do not provide for such contracts as were made in this case, still they do not in terms prohibit them. Whether it was or was not competent for the legislature, by subsequent general or special enactments, to vary in this respect the powers and capacity of the corporations, without their assent thereto, it certainly would not be unlawful, in the sense of being in violation of some public law, or contrary to public policy, as those terms are used in relation to such subjects, for the corporations to exercise any powers or rights conferred by such subsequent legislation. So far as one corporation, as an immediate party to a contract made in the exercise of such powers or rights, should, concurrently with the other party, assent to the legality of such contract, it is difficult to see upon what principle a party holding under such corporation, by virtue of a contract that expressly recognizes the existence of such prior contract, and the rights and duties thereby created, and in express subjection to them, can be permitted to impeach its validity and binding force. As between the two corporations, both conceding and asserting the lawfulness of the contract to which they were parties, it would seem that no plausible pretext could be assigned why they might not have a sure standing in the courts for the enforcement of their respective rights created by such contracts. Suppose, in the present case, that there had been no mortgage to secure the bonds issued by the Vermont Central company, who but the corporation, or its individual corporators, could have denied the validity of the lease, in defence to the enforcement of its provisions ? And can a party who stands upon a security taken in express subjeciion to that lease and the rights and duties thereby created, stand upon better ground, than the one giving the security, so far as the question of the validity of the lease depends on the question of lawful capacity to make it ?

The act of 1847, sec._34, (Comp, Stat., chap. 26, sec. 66) provides in terms that “ all railroads incorporated, or which may be incorporated under the authority of this State, shall have power to make contracts and arrangements with each other» * *' for leasing and running their roads or any part thereof,” etc.

This, in terms, does, and clearly, in purpose was designed to, confer the powers named upon corporations then already existing. This of itself is conclusive upon the question of public policy in this respect, as well as upun the question of lawfulness, in the sense in which it has been thus far considered.

But however the above views may be regarded, there is another light in which the subject seems to stand upon clear ground.

It was competent for the corporations, by the unanimous consent of their stockholders, to accept such additional powers conferred by a general law, and exercise them with the same efficacy, to every intent, as if they had been conferred by the original act of incorporation. It is shown by the evidence that the corporations, did exercise these powers in making said contract of lease and security for the rent, and that, too, by the dir ect action of a stockholders’ meeting, called and held for that purpose on the 9th of July, 1850. Such exercise of those powers is, in the absence of any averment or evidence to the contrary, sufficient ground for assuming that the corporations, as such, had accepted them as a part of their organic law; and particularly is this assumption well made, since no member of the corporations has ever interposed any protest or dissent. The ordinary rules of presumption require this, until the contrary is asserted by some party lawfully competent to make issue upon it, and who does make and maintain such issue in a mode and by means warranted by-the law.

We are unable to assent to the criticism made as to the character of the notice of that meeting. It seems to us that it comprehensively indicates in substance the matters to be acted on, to the full extent of the action that was contemplated or taken. It does not seem adapted to mislead anybody interested and having a right to participate in the action contemplated, nor do we discover in it, or in the circumstances and occasion, evidence of any sinister or improper intent on the part'of those at whose instance the meeting was called. That no one of the stockholders was in fact misled by it, or dissents from the action there token, is clearly evinced by the fact that no one has ever, by any from of proceeding, asserted any immunity against that action or the consequences flowing from it. Inasmuch as that meeting of the stopkholders was properly called, and all had an opportunity to be present and act upon the subject of it, and as the vote of those present was without any dissenting voice, and as no one of them has since in any form objected to the action then had, it is to be taken and held, for the purposes "of this ease, that all the stockholders concurred in that aclion, and that they assent to its effect for all legitimate purposes touching the rights, either- of the corporation or of themselves individually as members of such corporation ; Redf. on Railways ll; 11 Vt. 302, Ang. and A. on Corp., sec. 238, 1.

The ground on which it is held that an original charter that has been acted upon by the organization of the corporation under it, and by the investment of funds in its capital stock in-pursuance of its provisions, and for the accomplishment of the prescribed purposes of its creation," cannot be materially altered, by subsequent legislation, so as to bind the corporation itself, or the individual corporators, without their assent respectively, is, that, as between the State and the corporation, the original charter becomes a contract mutually obligatory, and that, as between the corporation and the stockholders, it is matter of contract that the corporation shall administer the funds and exercise the functions according to the provisions, and in accomplishment of the purposes, prescribed by the charter. The stockholder has distinct individual rights as against the corporation, growing out of that relation, which he cannot be compelled to yield or forego without, his assent. In this respect he is not subject to the will or vote of the majority. It is only as to matters within the prescribed limits of corporate power and capacity, that he, as a stockholder, becomes, on common principles, subject to the vote of the majority. Standing upon those rights and in the exercise thereof, he may, at his pleasure, and effectually, assent to or dissent from measures adopted by corporate vote in the usual mode But. this is personal to himself alone, unless by privity of personal contract with him, another obtains this his personal right. In the present case the bondholders stand in no relation of privity with the individual stockholders, in reference to the rights above referred to. They hold their relation of interest in virtue of their contract with the corporation, itself, evidenced by the bonds held by them, and the mortgage given by the corporation to secure them. They came into that relation after the enactment oí the general law conferring the enlarged powers in question upon railroad corporations, and after the exercise of those powers by said corporations in the making of the contracts of lease and security for rent, and in exp 'ess subjection to those contracts.

Those contracts, then, in relation to the bondholders, so far as their validity depends on the capacity of the corporations to make them, must stand upon the action of said corporations in exercising and adopting the additional powers conferred by the general law of 1847, in pursuance of which said contracts were made.

It seems proper in this connection to notice a point much and mainly urged in the argument of Judge Perlet, viz : that the indentures are -not what they purport, — a lease and security for rent; but are a pretext and cover under which, in point of fact, the Vermont Central Company went on and built, with its own funds and means, the Vermont and Canada Railroad, the same as if the latter company had not existed, the pretended taking of stock in that company being, in fact, a loan of money by the stockholders to the Vermont Central Company at a guaranteed interest of eight per cent. This being assumed to be the true character of the transaction, then it is claimed and argued that this is beyond the powers conferred either by the original charter or by the general law of 1847. It is, perhaps, true that the stockholders expected to get eight per cent, on their money invested in the purchase of stocks, and that the provisions for rent, according to the practice of the Vermont Central Company and the trustees, in the payments made by them under the lease, would substantially accord that to them. But we fail to find sufficient ground for sustaining the point thus made. The instruments themselves purport in their provisions to be a lease of a road then already chartered and located, with stipulations as to its being seasonably completed, and in a lawful and proper manner, all to be done with the money and means of the Vermont and Canada Company. The reason which induced the Vermont Central Company to enter into this arrangement cannot vary the true character of the transaction as it was consummated between the parties. It was important for the Vermont Central Company that the Vermont and Canada Road should be built. The latter company, as depending on the ultimate character and profitableness of the road as an independent enterprize, in the condition of the public mind then prevalent, as to railroad stocks and securities, found itself unable to dispose of its stock to a sufficient extent to realize the necessary means for constructing the road. In this condition of things, the Vermont Central Company deemed it advisable to propose,in a mode provided and authorized by law, to remove the cause for hesitating and declining to take the stock, by taking a lease of the Vermont and Canada Railroad, paying a rent therefor that would render the stock a safe and eligible investment, if the latter company would go on and make it. Being satisfied that, under such a contract of lease, it could proceed with the enterprize of making the road in reliance on the sale of the stock, as the ultimate source of means with which to do it, the Vermont and Canada Company entertained the pioposition, and the indentures were accordingly made. That the means, thus raised, in fact disbursed the cost and expense of making the road is not denied. But it is claimed that all this was only a kind of machinery, by which the Vermont Central Company in fact had a loan of the stockholders of the Vermont and Canada Company of the amount of money thus raised, at an interest of eight per cent.

If this be so, it is noticeable as a peculiarity of this loan that there is no obligation or duty ever to pay the principal. It is also noticeable that the Vermont Central Company have no title or ownership of the road, depots, lands and appurtenances, except what is created by the indentures, and that is of a mere lease hold. It is particularly worthy of notice that all the stipulations in the indentures, as well as all that has been done in pursuance of them, are as consistent with the character of a lease to be given to the transaction, as that of a loan of money to the Vermont Central Company. The fact that the Vermont Central Company advanced money for the current expenses to some extent, while the road was in process of construction, in reliance upon Vermont and Canada Company stock, and sold some of that stock at a discount as a mode of raising funds, does not, as matter of law, vary the character of the indentures. This could be regarded at most as a temporary advance or raising of money for the Vermont and Canada Company, under arrangements for the time being, to which only the stockholders of the Vermont Central Company would have the right to make objection, and that too at the time of the transaction, and would not fix or taint the character of the arrangement created and evidenced by the indentures. We see nothing in the case requiring, or that would warrant the court to give to the transaction the character imputed to it, or to hold it to be other than the indentures give to it — a lease.

As to the indenture of July 9, 1850. We are not sufficiently . concurring to warrant us to decide that it should be held operative, so far as it purports to grant, sell and convey to theVermont and Canada Railroad Company, its successors and assigns forever, the said Vermont Central Railroad, as now built and constructed, and all its lands, depots and easements, &c., with the right to enter or take possession of, and use and run, not only theVermont and Canada, but also the Vermont Central, together with all lands, depots and other property, rights and privileges owned and enjoyed by each of said companies, and used in connection with, or for the purpose of running or working each of said railroads, as is specifically provided therein. So we refrain from any discussion of that feature of the instrument.

It is obvious that one leading purpose of the instrument was to make “reasonable security” to the Vermont and Canada Company for the payment of the stipulated rent. The question whether it was competent for the Vermont Central Company to contract .for the pledge of “ all tolls, fares, and other lawful income receivable for the use of said railroad,” after paying the expenses of running, and keeping in repair, and furnishing proper furniture, for the payment of the rent in arrear, runs clear of, and is distinct from, the question of the right of that Company to convey in mortgage its property, franchises, easements, and privileges, with the possession thereof.

The Vermont t entral Company, and the trustees under the 1st mortgage, concede the right to- make such a pledge, and admit the validity of the indenture of July 9th,. 1850, as such pledge of the tolls, fares and income. Mr. Sohier avers nothing to the contrary in his answer. His counsel in the argument do not question the right in this particular and to this extent.

They question and deny the validity of the instrument as a conveyance in mortgage of the property, franchises, easements, and privileges, with the right of possession, as being ultra vires, and also for the reason that, if enforced in that respect, it would substantially transfer the railroad, .and all the property, franchises and privileges of the Vermont Central Company to the orators, without consideration.

The argument, predicated upon the alleged want of consideration, would legitimately apply to the right of the orators to enforce the instrument in its feature of a pledge of the tolls, fares, and income, as well as to the other feature, viz: that of a conveyance in mortgage as before named. But it is to be noticed that Mr. Sohier, in his answer, does not aver any want of original consideration, as a ground of invalidity of either of said indentures, but insists that, by reason of the failure of the orators to do certain things required by their charter, and the act in amendment, of November 18, 1858, the Vermont Central Company has been, and is absolved from obligation to perform any of the covenants and agreements contained in said indentures ; and that they have become void, and the orators have no rights under them; that the consideration for the making of them by the Vermont Central Company has wholly failed, from the acts and omissions of the orators ; that the execution of said covenants and agreements has become impossible, through the aforesaid acts and omissions of the orators, and then specifier wherein ; thus controverting the validity of both the instruments solely on the ground of matters accruing long after their execution and delivery, and in no manner on the ground of an original want of consideration. In this state of the case, the duty is not incumbent upon the court to discuss or decide questions that are not brought in issue by the record.

Before discussing the questions raised upon the answer, as to the rights of the orators, as affected by the alleged failure of consideration, it seems proper to consider the point made by the answer, that by reason of non-compliance with the requirements of the 2d section of the act of November 18, 1858, the orators’ charter is forfeited. Whether forfeited or not depends on the effect to be given to the provision in the 2d section of the charter, and the subsequent legislation in respect thereto. The language is, “ If the company shall not, within five years, commence the construction of the road, and shall not within thirteen years, complete and put in operation said road connecting, &c., then this corporation shall cease, and this act be void.” The act of 1858 substituted a new section for that 2d section, giving the company further time, and prescribed more particularly the manner and conditions of the connection to be made in Burlington with the Rutland and Burlington Railroad, and providing that, unless the provisions of that act of 1858 should be complied with, the company should take no benefit from the act.

If those provisions were not complied with, then of course the matter stood the same as if that act had not been passed. By an act of November 25th, 1858, it was provided, that, in case the company shall fail to comply with the provisions of said act of November 18,1858, and its charter shall thereby become forfeited, it shall be lawful for the receivers and managers of said road to continue to operate it until January 1st, 1860, and until otherwise provided, under the direction of the chancellor, who may require such persons to give bonds, &c., “Provided, nothing in this act shall be construed to give effect to the same, only in the event of the forfeiture of the charter of said company.” It is claimed that, under these acts, the non-compliance with the 2d section-of the charter, and of the amendment of.it by the act of • November 18, 1858, operated as a forfeiture, without the intervention of any proceedings in that behalf.

Whatever might be the legal consequences of such non-compliance, we do not understand from this peculiar form of enactment that the legislature have undertaken to declare a forfeiture, but only to prescribe the consequences to flow from certain acts and omissions. Whether such acts and omissions had in fact occurred the legislature did not assume or design to determine. Whether they had occurred or not was left to be determined upon proofs to be adduced in a proper proceeding, to be instituted for the purpose of testing the question of forfeiture. It is beyond question, that, unless the legislature undertake to declare a forfeiture upon facts that have already occurred, it appertains to the judicial department of the government to determine whether such forfeiture has been incurred. When the act of the legislature only prescribes the elements which shall operate as a forfeiture, whether such elements exist or not is an open question, which the party, against whom they are alleged, has a right to contest before a judicial tribunal.

The provision in the act of November 25th, 1858, as to its being lawful for the receivers and managers of said road to continue to operate the same under the direction of the chancellor, is entirely consistent with this view, and was as necessary in case of a forfeiture declared by the court as by the legislature, until further provision should be made for the operation or disposition of said road after the taking of such forfeiture.

Again, the intention of the legislature on this point is quite clearly indicated by its further action on the subject in 1859, when, instead of either assuming or declaring that a forfeiture had occurred, they proceeded again to amend the 2d section of the charter by providing and prescribing further time, and other modes of completing the road into Burlington, and making connection with the Rutland and Burlington Railroad ; in failure to do which, the same language is used as in the original charter, and in the act of November 18, 1858, viz: “then this corporation shall cease, and the charter thereof be void” — láriguage quite inappropriate, if, in the understanding and intention of the legislature, a forfeiture had been already taken by force of the prior action of the legislature on that subject. A forfeiture of a corporation can only be taken in behalf of the public, and by some form of proceeding to which the public, by proper representation, is the party moving it, and in which, by competent authority, such forfeiture is declared. On this general subject — see 11 Vt. 302 ; Angelí and A mes on Corp., secs. 776-777, Redfield on Railways603, (3.) Inasmuch as the legislature have not, in this case, undertaken to declare such forfeiture, it is needless to discuss, whether, in such a ease as this, it appertains to the legislative department of the government to take upon itself the exercise of such a prerogative. Regarding the orators as a still existing corporation, under their charter and the laws of the state, it becomes unimportant to consider the arguments of counsel predicated upon the assumption of the extinction of the corporation by forfeiture.

Assuming, what is not controverted in the answer of Mr. Sohier, and is admitted by the Vermont Central Company, and the trustees under the first mortgage, that the indentures of August 24th, 1849, and of July 9th, 1850, are not affected with any want of original consideration, it is to be determined whether by what has occurred since their execution and delivery, the orators have lost their right under them to claim the rent and the security thereby stipulated and provided.

It is clear from those instruments, that it was the understanding and design of the parties, that the Vermont Central Company should pay rent at eight per cent, on the cost of such portions of the road as should be accepted by them in the manner provided therein. The road was constructed and accepted accordingly from Essex Junction to Rouse’s Point; and thereupon the Vermont Central Company went into the possession and use of it as thus constructed, and by themselves, and assigns, have h.ad the possession and use ever since. This suit is instituted for the enforcement of the security for the payment of rent accrued and in arrear for the road as thus located, constructed and used, and that may accrue up to such time as all the rent in arrear shall have been paid, conformably to the provisions and stipulations of said instruments. In the absence of any vice of illegality in the contracts under which the road has been thus used, and in the absence of any averment or evidence of fraud or bad faith towards the bondholders,.if the orators are' to be precluded from enforcing the security provided for the payment of the rent, it is to he by force of some stringent rule of law.

As to the neglect of the orators to build and complete their road so as to meet the Rutland and Burlington Railroad in the village of Burlington, and to connect the same with the Canada line in Highgate, within the time limited in the original act of incorporation, and in accordance with the covenants of the orators contained in said indentures, by reason of which it is claimed that the Vermont Central Company has become wholly absolved from all legal or equitable duty to perform any of the covenants in said indentures, and the same have become wholly void and inoperative :

It is obvious from the indentures taken together, and, particularly, from the last item of agreement in that of July 9, 1850, that the parties did not contemplate the building of the road other than from Essex Junction to Rouse’s Point, unless, as matter of necessity, in order to save the corporate existencé and rights of the Vermont and Canada Company, to an extent sufficient to enable the Vermont Central Company to enjoy the road under the lease. The substantial thing was the road from Essex Junction to Rouse’s Point. If it should become necessary to build more, in order to a compliance with the law binding upon, and to be enforced against, the orators, then such additional road, when"built, was to be the subject of rent, the same as that then already located and in the process of construction. In view of any evidence in the case, it is not pretended that the Vermont Central Company, or any party or interest in privity with it, has as yet suffered any detriment by the failure to locate and make the residue of the road within the prescribed time. The Vermont Central Company, and the trustees who appear in this court, are making no claim against the right of the orators to the rent, and the security therefor, on this account. Up to the present time the lease has yielded all the benefit to the lessees and their assigns, that was originally provided or designed by it. They have had all the use they expected or wanted, and all that they desire to have hereafter, as is clearly evinced by the circumstances and history of the matter, developed by the evidence in the case. But it is said, that, by reason of the neglect to comply with the requirements of the 2d section of the charter, the orators, in order to. save their existence, have been obliged to accept an amendment- of their charter in this respect, which, when complied with, will put the Vermont Central Company in a position of disadvantage under the lease, a's compared with that which they would have held, if the orators had complied with the requirements of the original charter; in fact, that it has become impossible tor the orators to fulfill their undertakings in the instruments of lease. It is to be borne in mind that this bill was brought, and the whole proceeding has gone forward, with reference to enforcing payment of rent for the road, as it has thus far been located, constructed and occupied. The proceeding before the masters, and all the evidence bearing on the question of the sum for which rent is to be paid, has reference only to the road as already constructed and occupied. And any decree to be made in the case, under the present bill, in favor of the orators, must be. predicated upon the cost of the road as it was at the time it was so completed as to be the subject of rent under the lease.

The Vermont Central Company, under the instruments of lease, are not to be called upon to pay rent for any other portion of the orators’ road, till the same shall have been constructed and proffered for acceptance. Whether such further portion of the road shall be built or not is a matter to be settled between the orators and the state. When it shall have been built, and proffered for acceptance, and rent claimed therefor, the question may then properly be raised as to the obligation of the Vermont Central Company to accept the same, and pay rent therefor, depending upon the duties and liabilities yvith which the possession and use of it may be incumbered by virtue of additional legislation in that behalf, on account of the failure of the orators to comply with the requirements of the original charter.

The immediate duty to the public, under the charter and subsequent legislation in respect thereto, rests upon the orators. The Vermont Central Company has assumed to perform so much of that duty, and in such manner, and upon such terms and conditions, as are specified and stipulated in the instruments of lease.

Their duty in that respect is owing to the Vermont and Canada Company. It is matter of contract between them. The provisions for remaining duties to be performed by the Vermont and Canada Company towards the public are contained in the act of 1859. The time therein limited, upon the expiration of which the discharge of that' duty to the public is to commence, has not yet expired : so of course, it cannot now be known, or determined, whether, at that time, the performance of that duty will be exacted in the manner and measure provided in that act, nor, if it should be so exacted, what will be the consequences of a failure to perform it. If it should be exacted in that manner and measure, the question might then arise whether^ by the instruments of lease, the Vermont Central Company was under obligation to assume the performance of it in behalf of the orators. If it should be held not to be under such obligation, it would then rest with the orators to delermine whether they themselves would undertake the performance of it, by means and. measures of their own, or neglect to do it, and hazard the consequences. Whether, in this latter event, such consequences would follow as would affect the rights and liabilities of the parties under the instruments of lease, cannot now be forecast or assumed.

It would seem to be.seasonable to determine that, when the case shall have arisen involving the question, with a feeling of reasonable assurance in the mean time, that the law will afford ample protection to all interests involved. In the present posture of the case, we are unable to say that there has been such a failure on the part of the orators to perform the undertakings in their part in the instruments pf lease, or that, by means of a failure on their part to perform the requirements of the charter, and the' amendments thereto, they are now in such a position of inability to perform said undertakings, as to preclude them from the right to enforce the payment of^the rent which shall have accrued prior to the happening of those events which, it is claimed, should thus operate against them. «

In this view, it is impossible for us to see how there has as yet been a failure of the consideration, upon which the Vermont Central Company undertook and covenanted to pay the rent stipulated, and made provision for securing the payment thereof.

The most that, the case furnishes ground for saying is, that there is some reason to fear that, in some respects, the orators may fail to make good their undertakings, which, in part, constituted the consideration upon which the Vermont Central Company agreed to pay the stipulated rent and made the security therefor.

In the absence of any evidence of bad faith or willful default on the part of the orators towards the lessees and their assigns, in the course taken by them in reference to the unperformed requirements of the second section of the charter, either original oías amended, and in view of the fact shown by the evidence, that both the Vermont Central Company, and the trustees under the first mortgage, have approbated the course thus taken, and by the fact that none of the bondholders have manifested any disapprobation till since the act of November 18,1858, and in the absence of any prejudice that has as yet occurred to any interest of, or derived through, the lessees, by the course thus taken, and in the want of any sufficient ground for determining that any prejudice is destined hereafter to accrue therefrom, the inequity of holding the orators disentitled to enforce their security for the rent becomes very palpable, and particularly so, when it is considered that the lessees, and their assigns, have had the full use and benefit of the orators’ road, located and constructed to the approbation and acceptance of the lessees, with the money and means furnished by the orators, in substance agreeably to the stipulation in the instruments of lease.

This view being satisfactory to the court in reference to the points made in the answer of the trustees and of Mr. Sohier, as to the effect of the acts and omissions of the orators, since the execution and delivery of said instruments, upon the right of the orators to the rent accrued,-and the liability of the Vermont Central Company and assigns in reference thereto and the security provided therefor ; we regard it unimportant to discuss various points and views presented by the counsel for the orators, and particularly, as to the'relation of the trustees and bondholders to each other, and how the bondholders should be affected bythe acts of the trustees, in reference to the possession under the mortgage and deed of surrender, and the use of the road, and the payments of rent made by them.

And, as before intimated, we do not- feel called upon to discuss and decide many questions made in the argument by counsel for the respective parties,,, which are not raised by the issues made by the pleadings, by and in behalf of such parties.

Owing to the lack of concurrence before named, as to one feature of the instrument of July 9, 1850, many points made in the argument are not properly debatable on this occasion.

Under the view in which the court do concur, in relation to that instrument, the case stands, not upon the ground of a bill to enforce a specific performance, as w,is claimed in respect of the feature of it which calls for the enforcement of that instrument as a grant, sale, and transfer in mortgage of the road, property, franchises and privileges of the Vermont Central Company with the right of possession; but upon the ground of a pledge and lieu by way of security, and as a means of obtaining payment of the rents in arrear, upon the earnings and income of the two roads, with the right to have them applied for that purpose, in priority to the other creditors of the Vermont Central Company, who became such, and took their security, in subjection to such pledge and lien of the orators.

This being a pledge and lien by way of security, which, it is not denied, the Vermont Central Company was competent to give, and the orators to take, the principles and rules, governing the enforcement of it, are less specific and rigid than those governing the class of cases which, in equity law, fall under the head of bills for specific performance.

In pursuance of the views thus presented, we hold the indenture of August 24, 1849, to be a valid instrument, between the parties, and that of July 9, 1850, to be valid as constituting a pledge, and lien, by way of security, for the payment of the stipulated rent, upon the tolls, fares and incomes of the two roads, in priority to the trustees and bondholders, and that the same is enforceable for the rents in arrear of the road as already constructed and used.

As to the sum on which eight per cent., as rent, is to be computed :

If it was now presented as an open question, in no way affected by the conduct of the parties, we should be inclined to construe the provisions in respect to rent, as contemplating the cost of construction, &c., to be measured by the actual outlay of money directly for those particular purposes. It was incumbent on the orators by the terms of the contract to furnish the means, and construct the road, and furnish depots, &c. This was to be done on their part, in order to produce the subject matter where-for the stipulated rent was to be paid. The language of the stipulation to pay as rent therefor, “ a sum equal to eight per cent, upon the amount of the whole cost, for the time being, of said road, its buildings, fixtures, lands and appurtenances, as the same shall have been paid by the Vermont and Canada Railroad Company,” in its first and most natural impression, would seem to have reference to the money expended for those things, in payment for the making and purchase of them. But it seems that the immediate parties to the contract understood that a different measure of that cost was to be adopted, and, in fact, was adopted, and acted upon by them, and by the trustees in possession, down to and including the payment of rent made in June, 1854. The view which seems to have been taken was, that as all the funds of the orators were devoted, directly or incidentally, to the accomplishment of the ultimate purpose of providing the road fiir the acceptance and use of the Vermont Central Company as the subject matter of the lease, the funds so devoted were regarded and treated as the cost of construction, &c., and this was represented and measured by the capital stock paid in, with the addition of interest computed on the expenditures from the time they were made, in pursuance of the provisions of the contracts of lease.

However singular it may appear, that the Vermont Central Company should make the contract with this view of what was to be deemed the cost upon which the rent was to be computed, the evidence, and particularly that furnished by the acts of that company, as shown by various reports of their officers, and by accounts investigated and stated, and most emphatically, by the payments of rent computed upon that basis, renders it free of doubt that the respective companies, acting through their authorized officers, did understand and mean, in making the contracts, that such was, and was to be treated as, the cost upon which the computation of the rent was to be made.

Where the language of a contract is not explicit and incapable of but a single meaning and application in reference to the subject matter of it, what was the particular meaning and application which the parties mutually intended is open to inquiry upon evidence pertinent thereto. And the acts of the parties themselves, in carrying out the stipulations of the contract, and, particularly, the acts of a party in assuming the burdens imposed on him, to the most onerous extent of which the language of the contract is capable, are evidence of the most convincing character as to what their meaning was by the language used. When their meaning in this respect is determined upon evidence, in aid of the written instrument, that instrument, with that meaning, is the contract between them, and is effective to the same intents between them, and all in privity with them, or to be affected by it, as if that meaning had been expressed in unequivocal words in the instrument itself; unless, as to persons other than the parties, it should appear that it would be inequitable or unjust in the party claiming under and by force of the contract, in respect to or against them, to enforce it according to the true meaning and intent of the original parties to it.

In the present case it would not be enough, in order for the bondholders to avoid the effect of the contract as understood and acted upon by the two companies, to show, that, as between themselves and the Vermont Central Company, it would be prejudicial and unjust to them to give the contract that effect. They must go further, and show that it would be inequitable and unjust on the part of the Vermont and Canada Company, as against them, to have such effect given to it. The books furnish ample authority and illustration in this respect.

With a strong inclination to avoid such effect to the contracts in question, in the particular now under consideration, we have sought'in vain for any evidence showing grounds for impugning the right, the justice, or the equity, in the orators to have the contract enforced against the trustees and bondholders according to its meaning and intent, as understood by the parties who made it. Indeed the counsel for the trustees do not controvert these views, but,- on this subject, confine the argument to the point that the evidence is not sufficient to show the meaning of the parties to have been what the orators now claim. Nor do the counsel for Mr. Sotuer controvert them, but, on this subject, confine the argument to showing that various items of cost of construction, claimed by the orators in the accounting before the' masters, were properly disallowed, and to showing that, in the rent account as made up and allowed by the masters, interest on the rent in arrear ought not to be allowed- Under the view we take, as to the basis on which the rent is to be computed, the former of said topics of argument requires no consideration. As to the latter, though the question of the allowance of interest does not arise in the precise form and connection contemplated by counsel in the argument, still the point taken is equally applicable under the view we take of the case as to the basis of computing the rent.

It is well settled in this State that if the contract is silent on the subject of interest, and does not by implication exclude it, on money due and payable under the contract, the law implies that interest is to be paid from the time it becomes payable and should have been paid; Porter et al. v. Munger, 22 Vt. 191; Wood v. Smith, 24 Vt. 606; Gleason v. Briggs, 28 Vt. 135.

As to the claim that there should be added as cost of construction the sum of thirty-two thousand six hundred and seventy-two dollars and fifteen cents:

The history of that claim, as developed in the case, shows-that it was a very proper subject of investigation before the masters. It is well understood, that, unless the result at which the masters arrive in taking an account is clearly shown to be wrong, the court will not disturb such result. The reasons for disallowing this claim are very clearly stated on the seventeenth and eighteenth pages of their report, appended to the printed case, and they are cogent. As against the reasons upon which they disal-. lowed it, the alternative of its allowance by the chancellor is submitted by them as resting upon the agreement of the parties in April, 1857. That agreement may be well and effective between the two corporations ; but since the trustees and bondholders had long before that time supplanted the Vermont Central Company in the immediate interest to be affected by the allowance of that claim, it would transcend any principle of law with which we are acquainted to give that settlement the effect suggested, and especially so, in view of the facts reported, touching the origin and character of the claim, and the mode of adjusting it between the two corporations. For the conditions and details of that adjustment, the masters refer to the testimony of Levi Underwood and John G. Smith, taken in the case before them and (as they say) attached to the report; but it fails of being so attached, and is not contained in the case as it is made up and furnished to the court. Probably it was not contemplated that the court should revise the finding of the masters, upon the evidence that was adduced before them, and upon which they came to their result in this particular ; but that, by the effect to be givea to the settlement, and to what had transpired between the parties, as shown by the documentary evidence, and to the averment of claims in the answers of the Vermont Central Company and the trustees, the court should be asked to hold that this claim ought to be allowed, notwithstanding the finding of the masters as to the true relation of it to the actual cost of construction. Without discussing the topic further, it is sufficient to say that we are unable to yield assent to the allowance of the claim. If it is not cost of construction, then it ought not to be allowed. The masters have failed to find it to be such, upon a thorough investigation, and have disallowed it. We have not sufficient evidence before us to warrant us in saying that the masters came to a wrong result.

Incidental expenses.

The bill is brought to enforce the security provided by the instrument of July 9th, 1850. The original lease of August 24th, 1849, made no provision in this respect. The rights and duties of the parties to it rested only in the covenants it contained. Only in this latter instrument is anything provided or agreed as to incidental expenses. The first named instrument alone provides for security, and it specifically states what such security is for. By way of removing all ground of doubt as to the meaning of the parties in reference to the payment of the stipulated rent, it specifies precisely what they did mean. In the same instrument they make provision for the security now sought to be enforced; and it is security for rent only. The subject of the incidental expenses, which is provided for in connection with the rent in the original lease, is not mentioned, nor in any way connected with the rent, in the provision for the security in the instrument of July 9th, 1850. The orators under their bill seek to establish a priority of right over subsequent incumbrancers. Settled principles of law require them to stand upon the legitimate force of the contract creating the security. Aside from that contract, there is no ground for asserting the right to the priority which they claim. Whether as against the Vermont Central Company the provisions of the lease might not bind it to the payment of the incidental expenses, or whether, if the bill had been properly framed, a decree might not be made against that company for the incidental expenses, as well as the rents, it is of no importance to inquire. There is no ground in the contract providing for the security, nor in the bill as framed, for a decree against the trustees and bondholders, that shall embrace the incidental expenses, and put them on the same footing as the rent specified and stipulated in the instruments of lease.

The question of a right to enforce the security, in priority to the rights of subsequent incumbrances, stands on a different ground from the question whether the trustees might not be subjected to the covenants in the original lease. The. bill is not framed with any aspect involving that question, nor with any aspect beyond the enforcement of the security for the rent, eo nomine, which is provided in the instrument of July 9th, 1850.

Upon the whole case we hold that the sum on which, as cost of construction, the eight per cent, is to be computed as the measure of the rent to which the orators are entitled, is one million three huudred and forty-eight thousand five hundred dollars, and that for that rent alone was security provided in and by the indenture of July 9th, 1850, and only in respect to that are the orators entitled to a decree.

In the present posture of- the case, the court being unable to decide that the orators are entitled to the possession of the roads, property, etc., if seems obvious, in view of the character of the property and of the various interests involved, that the only proper or practicable course is to have the roads and property remain in the hands of receivers, under the control of the court of chancery. A mandate will be drawn in detail according to these views and points of decision, and sent to that court.

The decree of the court of chancery is reversed,- the orators to recover their costs, and the case is remanded to that court, to be there proceeded with conformably to the mandate aforenamed.