Board of Supervisors v. Walbridge

Equity. (1) Necessary parties to suit in equity. (2) Joinder of causes of action. Pi.eadiNg. (4) Bight to equitable relief. Multifariousness. Pm'ties. County Boabd on Supebvisobs : (3) Cannot modify contract for aid to a railroad company accepted by vote of the people. 1. In general, one who will be directly affected by a decree in equity, is a necessary parly to the suit; and this rule is departed from only when the parties are so numerous that compliance with it would be impossible or inconvenient-. 2. Where the grounds of action averred against several defendants to a suit in equity arise out of the same transaction or series of transactions forming one course of dealing, and all tending to one end, the bill is not multifarious. 3. Where a proposition for county aid to a railroad upon stipulated conditions has been submitted to the electors of the county and approved by their vote (under acts like ch. 32C, P. & L. Laws of 1870), such conditions cannot afterwards be essentially modified by any agreement between the railroad company and the board of county supervisors. 4. A county, under authority conferred by statute, voted a subscription of $350,000 to the capital stock of a railroad company upon certain conditions specified in an agreement previously made between the company and the county board of supervisors; one of such conditions, which formed the chief object of the electors in voting such aid, being the speedy completion of a railroad connecting their county with the Northern Pacific Railroad. Upon the issue of the bonds, they were transferred by the railroad company to certain of its directors as contractors, who assumed to perform the conditions on which the subscription was voted, but, soon after receiving the bonds, discharged their workmen, and abandoned the construction of the road, without having completed a mile of it. Subsequently an agreement was made between such company, the contractors aforesaid, and the Northern Pacific Railroad Company, by which the contractors, in consideration of the work they had done upon the road and the surrender of certain property (the total value of both not exceeding $10,000), were to retain $75,000 of the bonds, turning over the remainder to a trustee selected by the parties, to be disposed of from time to time in specified methods for the construction and equipment of the road by the last named company; or, in default of the completion of the road by a time certain, to be delivered up to the county to be canceled. To this agreement the board of supervisors gave their assent by resolution, which also extended the time for the completion of the road two years beyond that specified in the original agreement voted on by the electors. Afterward, however, upon being advised that their action was without authority, said board offered to deliver up the certificates of stock issued to the county, and demanded the return of their bonds, which was refused. The Northern Pacific Railroad Company became soon after entirely insolvent; the company to which aid was subscribed had no property of value; and the county had no security for the completion of the road, except a bond, in the sum of $200,000, given by said railroad company as principal, with the contractors above referred to as sureties. In this action by the hoard of county supervisors against the (wo railroad companies, the contractors and the trustee, the complaint alleges these facts, and demands judgment: 1. That the original contract between the county and the railroad company be rescinded. 2. That said company and the trustee deliver up the bonds held by the latter, for cancellation, and that said trustee he enjoined from selling or parting with the possession of such bonds or the attached coupons until the further order of the court. 8. That the said company and the contractors deliver up the $75,000 of bonds held by the last named parties; or, in default thereof, pay to the plainlifl's the sum of $75,000 with interest, i. That the tripartite agreement above referred to be rescinded. Held, upon demurrer, (1) That plaintiffs have no adequate remedy by an action for damages, and a proper case is shown for the equitable relief sought. (2) That the contracting directors (as well as the two railroad companies and the trustee) are interested in the question, of rescinding the original contract under which the bonds were issued, and are proper (if not necessary) parties to the action for that reason; and that they are necessary parties to the action so far as it seeks to have declared void the tripartite agreement referred to; and the complaint is not had for mullifariousness.

APPEAL from the Circuit Court for Dane Count}'. This action was brought by the Board of Supervisors of Douglas County against Horace S. Walbridge and others, constituting the firm of Walbridge Bros. & Sargcant, the Superior & St. Croix Railroad Company, the Northern Pacific Railroad Company and the First National Bank- of Madison. The following statement of tbe facts alleged in the coinplaint is taken from the opinion as originally prepared by Mr. Justice Cole ; a few additional statements, inserted by the reporter, being enclosed in brackets. “It appears that in October, 1871, the board of supervisors of Douglas county entered into an arrangement with the Superior & St.' Croix Eailroad Company to subscribe $350,000 to the capital stock of the company, and to pay for the same in the bonds of the county. The terms and conditions of the arrangement were submitted to the electors of the county, who voted to grant the aid proposed, under the authority conferred by ch. 326, P. & L. Laws of 1870. The complaint states that the chief object which the electors of the county had in view in voting aid was to secure the speedy completion of a railroad from the bay of Superior to a connection with the Northern ‘Pacific Eailway, in-Carlton county, Minnesota. According to one of the stipulations in the arrangement upon which aid was voted, the Superior & St. Croix Company agreed, by the 1st of July, 1873, to complete and operate a good and substantial railroad from the bay of Superior westerly to the Minnesota state line, and from thence so'as to connect with the Northern Pacific at some practicable and convenient point in the county of Carlton, so as to .make a continuous railway from the bay of Superior to the Northern Pacific; and by another stipulation the slid company agreed to place upon the railway thus constructed two first class locomotives and forty platform cars on or before the first day of January, 1873. A further stipulation was, that before the bonds of the county should be delivered, no't less than $350,000 in addition to the subscription then existing to the stock of said company, and to the amount to be subscribed by the county, should be subscribed by good and responsible parties ; and that the company as principal, and the defendants Walbridge Bros. & Sargeant as sureties, should execute to the county a bond in the penal sum of $200,000, conditioned for the performance of the arrangement on the part of the company. These stipulations were entered into by the company, and the indemnifying bond given with the required sureties; [and $850,000 of bpnds of the county were executed and delivered to the railway company in March, 1872.] It further appears that prior to the time when aid was voted by the county, Walbridge Bros. & Sargeant had entered into a contract with the Superior & St. Croix Company, by which they agreed to build and put in operation by July 1, 1878, a substantial railroad from the bay of Superior to the Northern Pacific in Carlton county, and to place on the same by'the first of Janu-uary, 1873, two locomotives and forty platform cars for the consideration specified, which -included the $350,000 in the bonds of the plaintiff county. It was a part of this arrangement, that $200,000 of these bonds should pass immediately into the hands of the firm of Walbridge Bros. & Sargeant. The complaint states [that $200,000 of the bonds were accordingly-paid to Walbridge Bros. ¿ Sargeant at or about the time they were received by the eompany]; that prior to May, 1872, a small amount of work was done by Walbridge Bros. & Sargeant in grubbing and clearing a portion of the line, and beginning the excavation of some of the cuts, and getting out some ties ; that within about a month after the bonds of the county were delivered to them, they discharged all their hands and stopped all work in the construction of-the proposed road, and never afterwards resumed work thereon, but abandoned the com struction of the road entirely; that the little work done upon said road is of no possible use to the county or its inhabitants; and that not a mile of road has been completed, nor a single car or locomotive furnished. In June, 1873, the county board passed a resolution extending the time for the completion of the road for two years from the first of July, 1873, and assenting to a certain agreement of June 26, 1873, between the Superior & St. Croix and Northern Pacific railway companies and Walbridge Bros. & Sargeant. By this latter agreement, Walbridge Bros. & Sergeant turned over to the Northern Pacific Bailroad Company all their interest in the contract made by them with the Superior & St. Croix Railroad Company for the construction of the road, and received the $75,000 bonds of the county as payment for the work they had performed, the materials furnished, and tools and implements used by them in the construction of the road under their contract. They were also released from all liability upon the bond which they had executed to the county as sureties for the Superior & St. Croix Railroad Company. They likewise surrendered their certificates of stock in the later company, and deposited with the First National Bank of Madison, as trustee, the remaining $275,000 of bonds, which were to be hold by such trustee, and to be disposed of in a certain manner specified in the agreement, for the benefit of both the Northern Pacific Railway Company and the Superior & St. Croix Railway Company, as the proposed road should be completed and equipped.” It further appears that by the terms of said agreement the Northern Pacific Railroad Company was to “-construct and equip said road by July 1, 1875, but that in fact no part of the same has been constructed or equipped; and it js averred that said company is insolvent, and that the Superior and St. Croix Railroad Company has no property of any considerable value. The objects of the action were, 1. To rescind the contract between the plaintiff and the Superior & St. Croix Railroad Company for the issue of bonds of the county in exchange for stock of the company. 2. To cancel the $275,000 of bonds deposited in trust with the Bank of Madison, as above stated; and a temporary injunction is asked restraining the bank from parting with the bonds or the attached coupons. 3. To obtain for cancellation the $75,000 of bonds retained by Walbridge Bros. & Sargeant, or, in default thereof, to recover judgment for their amount against said firm and the Superior & St. Croix Railroad Companjn 4. To have the tripartite agreement of June 26, 1873, adjudged void. on the ground that it did not state facts sufficient to constitute a cáuse of action against them or either of them, and also on the ground that several causes of action were improperly joined; and they appealed from an order overruling their demurrer. 1. There is a misjoinder of causes of action. (1) When the $275,000 of bonds were delivered up, upon the execution of the tripartite agreement, Walbridge Bros. & Sargeant ceased to, have any further interest in them, and cannot properly be dragged into a litigation respecting them. None of the defendants, except the Superior & St. Croix R. R. Co., ever had any-interest in the remainder of the bonds held by Walbridge Bros. & Sargeant; nor can they have in a litigation respecting them. Causes of action joined must affect all parties to the action. Warth v. Radde, 28 How. Pr., 230; Alger v. Scoville, 6 id., 131; Ernosv. Thomas, 4 id., 48; Boyd v. Hoyt, 5 Paige, 65 ; Gardiner v. Ogden, 22 N. Y., 327. (2) The plaintiff seeks an equitable remedy by injunction against one of the defendants, and a personal judgment for damages for the conversion of the $75,000 of bonds against others. These causes cannot be joined. Gary v. Wheeler, 14 Wis., 281; Stillwell v. Kellogg, id., 461; Faesi v. Goetz, 15 id., 231. 2. The facts stated do not show a right to the relief sought. (1-) The Superior & St. Croix R. R. Co., upon the delivery of the bonds to it, obtained an absolute title thereto, and had an undoubted right to transfer them to Walbridge Bros. & Sargeant as compensation for the work performed and materials furnished by the latter; and the rights of the latter as bona fide holders are not affected by the fact that they were officers in the company. Whatever right of action may exist in favor of the county as a stockholder in the railroad company, to recover back the bonds, the question is not presented in this action; for the county here repudiates the relation of stockholder, and seeks to annul its subscription. But even as a stockholder the county cannot recover, because, whether the supervisors had authority to extend the time for constructing the road or not, they certainly had authority to exercise full control over the stock owned by the county, and cannot repudiate an agreement to which they gave their consent for the county as a stockholder. (2) The board of supervisors had power to extend the time for the completion of the road, and to consent to the agreement that the appellants should retain, as their absolute property, the $75,000 of bonds. Ch. 326, Laws of 1870, under which the subscription of stock was made, confers full power upon them to determine and control all the terms of the contract of subscription and all other matters connected with the ownership of the stock by the county. It contemplates a submission to the electors of the question only of the granting of the aid, and its amount, leaving the terms and conditions to the discretion of the board. An intelligent vote upon all the details of such a loan would be very nearly impracticable. But even were this required by the statute, the power, upon such vote being taken, would be spent, and the stock would become a part of the general property of the county, while the bonds would become a part of its indebtedness, both to be managed by the board of supervisors under the general powers conferred upon them by the constitution and general statutes. Const, of Wis., art. IV", sec. 22; Tay. Stats., p. 291, §§ 2, 3, 4 and 6, and p. 297, §§ 1 and 6. No vote after the first was authorized, and,it was necessary that the supervisors should have power to manage the business and protect the interests of the county in any emergency that might arise. That power they exercised in modifying or consenting to the modification of the contract for building the road; and this action cannot be sustained against the appellants. 1. The resolution of the county board extending the time for the completion of, the road and making other 'changes in the terms upon which aid was granted by vote of the people, was without authority and void. Town of Rochester v. Alfred Rank, 13 Wis., 430; Lawson v. Schnellen, 33 id., 288; Reich-ard v. Warren Co., 31 Iowa, 381; Bell v. Railroad Co., 4 Wall., 598. 2. The agreement between the Superior & St. Croix B. B. Co. and Walbridge Bros. & Sargeant, that the latter should Retain in their hands $75,000 of the bonds, is invalid, because the members of that firm were directors of the railroad company. Pickett v. School Dist., 25 Wis., 551; Tay. Stats., 1053, § 66. As such they sustained a fiduciary character toward the plaintiff in respect to the subject matter of the contract; and the latter, as a special stockholder, has a right to raise and insist upon the question, whether the corporation does or not. 8. The consideration of the subscription by the county having utterly failed, it had a right to treat the contract as rescinded, and, upon tendering a return of its stock, demand that its bonds be canceled. 8 Foster, 57.4; 24 Ill., 203; 16 id., 48; Mitt PL, 146; 13 Ohio St., 59 ; Barnes v. Savage, 14 Mass., 425 ; Lyon v. Amiable,-4 Conn., 350 ; Gilleti v. Maynard, 5 Johns., 85 ; Raymond v. Bearnard, 12 id.,. 274 ; Putnam v. Wescott, 19 id., 73 ; 2 Parsons on Con., 670, 678; Cites v. Edwards, 7 Term, 181. This complaint is an application under the well established head of equity jurisdiction'for the rescission and cancellation of- agreements; the equity for relief in all such cases originating in the fraud which, but for the interposition of the court, would be perpetrated on the complaining party ; and such relief is granted not as a matter of strict right, but in the sound discretion of the court, regulated upon such grounds as make it judicial. 1 Story’s Eq. Jur., §§ 692-4 et seq; Willard’s Eq., 802-7. A contract may be avoided in equity where the object of the agreement is defeated or rendered unattainable by default. Morrill v. Aden, 19 Yt., 505 ; Baker v. Thompson, 16 Ohio, 504; Selby v. Hutchinson, 4 Gilm., 319. The firm of Walbridge Bros, é Sargeant never performed the conditions precedent in their contract with the Superior & St. Croix B. B. Co. upon which their right to the bonds of the plaintiff county depended ; and, the subsequent agreement by which they retained $75,000 of the bonds being void, they stand in no better position, as respects' the plaintiff, than that company. The resort to equity was made necessary by the bankruptcy of the railroad company, and the necessity of a rescission of the contracts for the protection of the county. 4. The complaint is not multifarious. The general rule as to parties in equity is, that Jany one who will be directly affe'cted by a decree, or is interested in the controversy, or who, if not interested in the controversy between the immediate litigants, has an interest in the subject matter which may be conveniently settled 'in the suit, so as to prevent litigation, is at least a proper if not in all cases a necessary party (Story’s Eq. PL, §§ 72, 76, n. 2 ; E. S., ch. 122, sec. 19 ; Williams v. Bankhead, 19 Wall., 571 ; id., 284 ; Shields v. Barrow, 17 How., 180); and this, although the different defendants may have separate interests in distinct or independent questions, all connected with and arising out of the single subject of the suit, or their rights in respect to the general subject of the action may be different, and some may be directly interested in only a part of the general claim. Oliver v. Piatt, 3 How., 411; Fitch v. Creighton, 24 id., 159, 163 ; Boyd v. Hoyt, 5 Paige, 65 ; Wins-low v. Dousman, 18 Wis., 456 ; Fellows v. Fellows, 4 Oow., 682, 700 ; 2 Wis., 673 ; Story’s Eq. PL, § 271a ; Damon v. Damon, ■ 28 Wis., 510 ; Bassett v. Warner, 23 id., 673. Ih this case a part of the relief sought is the rescission of the tripartite agreement, in which all the defendants are directly interested.