Black v. Shreeve

A., B., C. and others were constituted a body corporate, with a certain capital to be divided into shares, and authorized to construct a rail or McAdamized road. A loan becoming necessary to complete the road, it was resolved, at a meeting of the Directors and stockholders, that the Company should borrow a certain sum. The money could not be borrowed on the credit of the Company, and A., B. and C. borrowed the money on their individual credit, and advanced it as a loan to the Company ; and the Company, to secure the repayment thereof, with interest, executed to A., B. and C. an obligation conditioned for the payment of said sum in five years, with interest semi-annually, and a mortgage of all the lands contained within the bounds of their road as located, graded, &c., and all the materials of which said road was constructed, and the appendages thereof, and all dividends, proceeds and profits which might thereafter be declared or accrue from the use of the road. And the Company, by a clause in the mortgage, covenanted, that the proceeds and profits arising from the road should be applied, in the first place, at the end of each half year from the date of the mortgage, to the payment of, the half year’s interest. And in order to indemnify A., B. and C. against more than their proportionate part of any loss that might accrue by reason of any insufficiency of the mortgaged property to pay the sum so loaned, certain other stockholders of the Company, together with A., B. and C., entered into an agreement under seal, by which the said other stockholders agreed with A., B. and C. that if the mortgaged property should be insufficient to pay the said sum and interest, so that any loss or deficiency should happen, each of them, and each of the said A., B. and C. should bear an equal portion of such loss or deficiency; and that if any of them should, before or at the time such loss or deficiency should be ascertained, become or be unable to pay his proportionate share thereof, then, such of them as should remain solvent and able should sustain such loss equally with the said A., B. and C. And they further covenanted and agreed to and with the said A., B. and C., that if the mortgaged property should prove insufficient to pay said sum and interest, so that a loss or deficiency should happen, then they, their executors, &c., would forthwith pay such sum to A., B. and C., their executors, &c., as would divide said loss or deficiency equally between such of them as remain solvent at the time such loss or deficiency should be ascertained ■ and that the said A., B. and 0., severally, should bear an equal part of such loss. The mortgage becoming payable and remaining unpaid, A., B. and O. filed their foreclosure bill, and obtained a decree for the sale of the mortgaged property; and it was sold by the Sheriff. The amount of the sales was insufficient to pay the mortgage ; and the amount of the deficiency was ascertained by and on the day of the sale. A., B. and C. filed their bill, charging, that certain of the parties to the said agreement (naming them) were, at the time when such deficiency was ascertained, unable to pay their respective portions thereof; and that certain other parties to the said agreement (naming them) remained and were solvent and able to pay their respective proportions of such deficiency, and were the only parties to the said agreement, other than the complainants, that remained and were solvent and able as aforesaid ; and these last named persons only were made defendants in the bill. The bill prayed that the defendants might discover whether they were solvent and able to pay tbeir respective proportions of the deficiency, or anypart and howmuch of their said proportions; and that they might be decreed to bear the said loss and deficiency equally with the complainants; and that if it should appear by the said discovery, or otherwise, that at the time when said deficiency was ascertained any or either of the defendants was unable to pay his proportion, then, that such of the defendants as then were solvent and able might be decreed to pay to the complainants their respective proportions of the deficiency. The construction of the agreement was held to be, that the loss which should accrue, either from the deficiency of the mortgaged premises or from inability in any of the parties to the agreement to pay their full proportion of the deficiency, should be borne equally by such of the parties to the agreement as should be able to boar an equal proportion of such whole loss with each of the complainants; and that, therefore, all the parties to the agreement, other than the complainants, should have been made parties defendants in the bill. If, upon the true construction of an agreement set out in the bill, subscribers to it who are not made defendants should have been made defendants, the defect of parties may be taken advantage of by demurrer, though the complainant, in his bill, has put a construction on the agreement which would make it unnecessary to make such subscribers defendants. Held, that the complexity of the said agreement, and the muí tiplicity of suits it might give rise to at law, wore grounds on which a court of equity might entertain a bill for the adjustment of the contribution called for by the agreement in one suit. One of the subscribers to the said agreement had died, after the amount of the deficiency was ascertained, leaving a will of which C., D. and®, were appointed executors. 0., in his individual capacity, was a complainant on the bill, andD. and B., the other two of the said executors, were made defendants as such executors. Held, that it was not necessary that C. should bo made a defendant as one of the said executors. A demurrer can only be founded on a fact or omission appearing in the bill. It cannot set up a fact or omission not appearing in the bill and thereupon demur. Held, that, the terms of the said mortgage required a sale under it of whatever could bo sold under it; and that such sale and the proceeds of It fixed the amount of the deficiency.

On tlie lltli of June, 18-16, John Black, Joseph Smith and Benj. Jones exhibited their bill stating that on the 11th Feb., 1833, the Legislature of this State passed an act entitled “ An act to incorporate the Delaware and Jobstown rail or McAdamized road Co.,” by the 1st sec. of which it was enacted, that the said John Black, &c., should be a body corporate &c., and be capable of holding and conveying real or personal estate, &c. That by the 2d sec. of said act it was enacted, that the capital stock of the corporation should bo $60,000, with liberty to increase it to $200,000, and should be divided into shares of $50 each. And by the 5th section, that five directors should form a board, who, or a majority of them, should be competent to transact the business of the corporation, and make by-laws, rules, and regulations, respecting the management of the stock and property of the Co. That by the 6th section, the corporation was authorized to survey, lay out, construct and repair a rail or MeAdamizedroad from the river Del., at the mouth of Craft’s creek, to the vicinity of New Lisbon, following the route in said act designated ; with liberty, nevertheless, given by the 17th sec. of said act to alter such parts of said route as the Co. might deem proper, subject in said alteration to the restrictions in that section mentioned. And, by the 15th section, that said act should be deemed and taken to be a public act. That the stock was subscribed and apportioned, and on the 3d June, 1833, directors were chosen, and the Co. duly organized and proceeded to effect the object of their incorporation by surveying, laying out and constructing a railroad in accordance with the provisions of the act. That on or about Jan. 21, 1834, the Legislature passed a supplement to the act; by the 5th sec. of which supplement it was enacted, that the said Co. should thereafter be known by the name of “ The Delaware and Atlantic railroad Company.” That numerous difficulties and embarrassments impeded and oppressed the Co. in the construction of their said road; the most important of which was the inadequacy of its funds and the deficiency of means within its control for the prosecution of such a work; which difficulties increased until on or about Jan. 7, 1835, when á general meeting of the directors and stockholders was held, upon due notice, for the purpose of examining into the affairs of the Co., and the state of the road, and devising means to extricate the Co. from its embarrassments and to complete the .road. That at said meeting, which was numerously attended, and at which the complainants Black and Smith were present,the complainant Jones being absent, a statement of the affairs of the Co. was submitted to the meeting, by which it appeared that on the 30th Dec., 1834, the debts and liabilities of the Co., incluí ding $9772,06, being the sum estimated by the engineers of the Co. to be necessary to complete the road, amounted to $52,822,13 ; which debts and liabilities consisted of $4000, borrowed from the Philadelphia bank; $2000 borrowed from the Buck’s hank, Pa., and $500 borrowed from the Farmers’ hank of New Jersey, and a large sum due to various individuals for lands, materials, work and labor, and money borrowed; among which last sums $1240,09 was due to Andrew M. Jones; $12,417,75 to Messrs. A. and G. Ralston; $1724 to R. S. Johnson, and $96,75 to Daniel White; together with large sums of money due and owing to each of the complainants. That at the same meeting an examination of the state of the road was made, by which it appeared that it was embanked, excavated and graded from the Delaware to the head of Lisbon pond, and that the iron and other rails were laid upon the road a part of the distance between the points aforesaid; hut that a considerable part of the road between said points was still without iron rails, and that none were in the possession of the Co., and that $9772 would be required for the purchase of said rails, and for the other expenditures necessary to complete the said road, so as to fulfil the object for which its construction had been undertaken, and to enable the Co. to deriye from it a revenue. That from said statement of the affairs of the Co., it further appeared that the receipts of the Co. up to Dec. 30, 1834, amounted as the complainants have been informed and believe, to $58,823,80, including sundry loans made to tbo Co., by banks and individuals, a part of which was still unpaid, as above stated, and including $44015, being the whole amount realized up to that date from the stock of the Co. subscribed and taken, though the subscriptions read the sum of $60,050, and though all the installments had been called for and required, a number of the stockholders having failed to pay, in whole or in part, the sums due from them. That by the said statement it further appeared that, out of the said $58,828,80, so received by the Co., disbursements had been made up to the said date, for and on account of the Co.,and for and on account of the road, to the amount of $56,569,59 ; leaving in the treasury at that date $2,254,20; while its road was unfinished and the Co. embarrassed with numerous and heavy debts ; that payments to the amount of $52,822,13 must be made by the Co. before tbe road could be completed and tbe Co. relieved from its debts and liabilities; and that the only means tbe Co. bad or could resort to for tbe payment of tbe said $52,822,13 was tbe said balance of $2,254,20, and tbe further sum of $16,035, due from tbe stockholders as aforesaid; so that even if tbe last sum was promptly paid, there would still be a deficiency of $34,532 for tbe payment of its debts and liabilities, and tbe completion of tbe road. That from tbe said statement it became apparent to tbe directors and stockholders attending tbe meeting that a new loan must be made, or that tbe road must be left in its unfinished state, and tbe money already paid by tbe stockholders be sunk. That, urged by these considerations, it was resolved and determined by tbe directors of tbe Co., and by tbe stockholders assembled at said meeting, that tbe Co. should borrow $35,000. That a committee consisting of Chalkly Atkinson and tbe complainants Black and Jones, were appointed to negotiate tbe said loan for and on tbe credit of tbe Company. That a knowledge of tbe embarrassment of tbe Co., and of tbe unfinished state of the road generally existed, and in consequence tbe efforts of tbe said commitmittee to borrow tbe said $35,000 on tbe credit of tbe Co. and pledge of tbe road were unavailing, and that tbe committee so reported to a second general meeting of tbe directors and stockholders of tbe Co., held on tbe 23d of tbe same month of January. That numerous attempts were afterwards made by and on behalf of tbe Co. to procure tbe said loan, but without success. That tbe stockholders in arrears as aforesaid, either from inability or disinclination, failed to pay up their arrearages, and tbe small^balance aforesaid in tbe treasury was rapidly diminishing under tbe necessary current expenditures of tbe Co., and tbe times of payment of several of tbe heaviest loans already made by tbe Co. were rapidly approaching, and, if not paid at maturity, it was apparent that tbe credit of tbe Co. already shaken, would be entirely prostrated. That at this crisis in tbe affairs of tbe Co, tbe complainants were induced, by an offer of tbe securities hereinafter stated, and more especially by tbe offer of tbe covenant or agreement herein after set forth, to borrow upon their credit tbe said $35,000 and advance it as a loan to and for the use of the Co. ; and the said sum was so borrowed by the complainants and was lent, upon the faith of the said securities, by the complainants, to and for the use of the Co. That, in order to secure to the complainants the repayment of the said $35,000, with the interest that might accrue thereon, the Co. executed and delivered to the complainants a bond or obligation, by order of the Co. and of the directors thereof, sealed with the seal of the Co., and signed by Thomas Haynes, then secretary of the Co., dated Feb. 2,1835, conditioned for the payment to the complainants of the said sum of $35,000, in five years, with interest thereon semi-annually. That in order to secure the payment of said bond the said Co. executed and delivered to the complainants a mortgage, by order as aforesaid, and sealed and signed as aforesaid, bearing even date with the said bond, by which the Co. mortgaged to the complainants all the lands contained within the bounds of their said railroad, as at the last mentioned date actually located, graded excavated and embanked from the Delaware river to the head of New Lisbon pond, and all the materials of which the said road was constructed, and the appendages thereof, and all dividends, proceeds and profits which might thereafter be declared, grow due or become payable from the use of the said road, together with the hereditaments and appurtenances thereunto belonging ; and all the estate, right, title &c., of the said Co. of in or to the same. And that said Co., in and by the said mortgage, did covenant and agree to and with the complainants, that the proceeds and profits arising from the road should be applied, in the first place, at the end of each half year from the date of said mortgage, to the payment of the half year’s interest which should be then due on said $35,000, before any dividend of such proceeds and profits should be made among the stockholders, and that no dividend of such proceeds and profits should at any time thereafter be made before the said debt of $35,000 should be fully paid, until all interest due upon the said sum of $35,000 at the time of declaring such dividend should be satisfied, and then a dividend of such part of said proceeds and profits only as might remain after the payment of all interest then accrued upon the said debt of $>35,000 should be declared among the stockholders. That in order to indemnify the complainants against more than a proportionate part of any loss that might arise in consequence of the corporate property so mortgaged to the complainants proving insufficient to pay the sum so loaned by the complainants to the Company, and in consequence of an agreement to that effect, made and entered into between the parties hereinafter next mentioned, previous to the consent of the complainants to loan the said sum to the Company, and upon the faith- and security of which said agreement the complainants were mainly induced to make the said loan, James Shreeve, Clayton G. Atkinson, Chalkley Atkinson, Jon. Smith, Timothy Field, Thomas Haines, Jon. Scattergood, Richard Jones, Philip R. Dakin, Thos. Black, Jacob Ridgway, Restore S. Lamb, Jas. Newbold, John B. Bispham, John Chambers, Jos. Burr, Nathan Atkinson, Amzi B. Wood, together with the complainants, all being stockholders of the Company, did execute, enter into and deliver a covenant or agreement, dated Feb. 2, 1835, as follows (it is given at length): u To all &c., we, (giving the names last above mentioned, to and including the name of Amzi B. Wood,) send greeting.” It then recites that the Company have borrowed of John Black, Jos. Smith and Benjamin Jones, also stockholders in the Company, $35,000, to be applied towards completing the road and its appendages; and that the Company had given their bond and mortgage (stating the terms of the mortgage) to the said Black, Smith and Jones, bearing even date with these presents ; and that they whose names are subscribed and seals affixed have agreed with the said Black, Smith and Jones, that in case the corporate property so mortgaged should prove insufficient to pay the said sum and its interest, so that a loss or deficiency should happen, that in such event each of them and each of the said Black, Smith and Jones, should bear an equal portion of such loss or deficiency. And that in the event that any of them who had signed this instrument should, before or at the time such loss or deficiency shall be ascertained, become or be unable to pay his proportion of such loss or deficiency, that in such case such of them as remain solvent and able shall bear and sustain such loss equally with the said Black, Smith and 3 ones, that is to say, each of them who remain solvent to bear an equal part thereof with each of them the said Black, Smith and Jones, and then provides that, in order to confirm said agreement and give it legal operation, they whose names are thereto subscribed and seals affixed do covenant and agree to and with the said Black, Smith and Jones, that in case the said corporate property so mortgaged to said Black, Smith and Jones should prove insufficient to pay said sum and interest, so that a loss or deficiency should happen, then they, their executors &c., should and would forthwith pay such sum to said Black, Smith and Jones, their executors &e., as will divide said loss or deficiency equally between such of them as remain solvent at the time such loss or deficiency is ascertained and the said Black, Smith and Jones, ■that is to say, each of the said several individuals is to bear an equal part of such loss. That it was upon the faith and security of the s aid covenant that the complainants were induced to make said loan of $35,000 to the Company, and that without it the said loan could not have been obtained from them. That the said loan afforded but temporary relief to the Company, and that, on or about May 28, 1836, as the complainants have been informed and believe, the Company executed and delivered a certain other mortgage on the said railroad, premises and property, as well as upon other premises and property not so mortgaged, to the said Thomas Black, James Newbold and Jon. Smith, to secure $14,165 04, or some other sum ; and that numerous judgments were recovered by different individuals against the said Company, in the Supreme Court and in the Common Pleas of Burlington. That, the principal and interest of the complainants’ said mortgage remaining unpaid, except the sum of $1,067 50 paid in 1835 on account of interest, the complainants, in January, 1844, filed their bill of foreclosure on their said mortgage; and such proceedings were thereupon had that, in July, 1844, a decree was made for the sale of the said railroad, lands and premises mentioned in the complainants’ said mortgage, and all the materials of which the said the road was constructed, and the appurtenances and appendages thereto and thereof, and all dividends, proceeds and profits of the said road, and all and singular, the hereditaments and appurtenances thereunto belonging or in any wise appertaining; to raise and satisfy 153,765 83, the amount reported by the Master to be due on the said mortgage,, with interest thereon from the date of said decree, with the complainants’ costs; and that a fi-fa. issue &c. That a fi.fa. was issued accordingly, returnable to the April term, 1845. That the Sheriff, after having advertised &c., and after making one adjournment, on the 2d of June, 1845, sold the said railroad, lands, premises, materials, dividends, proceeds and.profits,, with the appendages, and all and singular the hereditaments and appurtenances thereunto belonging. That the Sheriff, in the first place, set up and exposed to sale the dividends, proceeds and profits above mentioned ; and Richard Jones, a defendant to-this bill, bid for the same $117 31, and the said dividends, proceeds and profits were struck off to him for that sum ; and that the Sheriff, in the second place, exposed to sale the said railroad,, land, premises and materials, with the appendages, and the hereditaments and appurtenances thereunto belonging, and the' said Richard Jones having bid therefor $1,000, the same were struck off to him for that sum; and that, after deducting &c., there remained, on the said 2d day of June, $54,522 89. That the los» and deficiency and the amount thereof were ascertained on the said 2d of June, 1845. The bill then states the death of James Newbold and Jon. Smith, parties to the said covenant, and makes, their representatives parties. That said Newbold died before said 2d of June, 1845, and Jon. Smith died after that day. That on the said 2d of June, when the said loss and deficiency were ascertained, the parties to the said covenant, other than the complainants, who then remained and were solvent and able, and the estates of such of the said other parties who had died previous thereto which remained solvent and able, became and were and .still are liable and bound to bear and sustain the said loss and deficiency equally with the complainants. That upon the solvency and ability of the said other parties and estates depends their liability to the complainants and their obligation to pay the complainants their several proportions of said loss or deficiency, and the amount of the proportions to be paid depends on the number of the said other parties and estates remaining solvent and able. That the solvency and ability of a party or an estate to pay a specified sum at any given time, except in extreme and notorious cases, is a fact exclusively in the knowledge of the party himself, or of the representatives of such estate, and is not capable of proof by any other party without a discovery from such party himself or such representatives. The bill charges that on the said 2d June, and for a long time before, Thomas Haynes, Timothy Field, Jon. Scattergood, Clayton G. Atkinson, Chalkley Atkinson and John B. Bispham, parties to the said covenant, had severally become and were notoriously unable to pay their respective proportions of the said loss and deficiency; and that Philip E. Dakin, Jacob Ridgway, Jos. Burr and Amzi B. Wood and other parties to the said covenant, had died before said 2d of June, and that on that day their respective estates were notoriously unable to pay their respective proportions of said loss and deficiency. That the complainants have been informed and believe, and therefore charge the fact to be, and that the same will appear by a discovery from the defendants hereto, that, on the said 2d of June, James Shreeve, Restore S. Lamb, John Chambers, Richard Jones, Nathan Atkinson and Thos. Black, other parties to the said covenant, and other defendants hereto, and the said Jon. Smith, another party to the said covenant, and whose executors or some of them are parties hereto, remained and were solvent and able to pay their respective proportions of said loss and deficiency, and that the estate of the said James Newbold, deceased, and the said administrators thereof, remained and were able to pay the proportion of the said loss to bo borne by the said James Newbold ; and that, on the said 2d of June, the said James Shreeve, Restore S. Lamb, John Chambers, Richard Jones, Nathan Atkinson, Thos. Black and Jon. Smith, as well as the estate of the said James Newbold, deceased, and the said administrators thereof, remained and wore solvent and able to pay to the complainants such a sum of money as would divide the said loss and deficiency equally between the said parties to the said covenant and said estates remaining solvent and able as aforesaid and the complainants; and that each of them was able to bear an equal part of said loss and deficiency with each of the complainants. And the bill charges that, on the said 2d of June, the said Jas. Shreeve, Restore S. Lamb, John Chambers, Richard Jones, Nathan Atkinson, Thos. Black and Jonathan Smith were the only parties to the said covenant, other than the complainants, then living that remained and were solvent and able as aforesaid, and that the estate of the said James Newbold, deceased, was the only one of the estates of the parties thereto who»were dead that remained and was solvent and able as aforesaid ; and that they, therefore, on the said 2d of June, became and were each liable to pay to the complainants such a sum of money as would divide the said loss and deficiency equally between the last mentioned persons and estate and the complainants. That the whole of said loss and deficiency remains unsatisfied; and, after deducting therefrom the sum of $14,STY 95, the part or proportion thereof to be borne and sustained by the complainants, there remains |>39,6T4 94 which, with the interest thereon from said 2d June, is now due and payable to the complainants from and by the said James Shreeve, Restore S. Lamb, John Chambers, Richard Jones, Nathan Atkinson, Thos. Black and the estate of the said James Newbold and the said administrators thereof, and the estate of the said Jon. Smith and the said executors thereof ; that is to say, an equal proportion from each. That whether the said last mentioned persons and estates were, on the said 2d of June, solvent and able, as aforesaid, are facts exclusively within the knowledge of said persons and of the said representatives of said estates; of which, proof cannot be made by the complainants ; and that they are advised that they can not safely proceed in any action, either at law or in equity, to recover &e. without a discovery from the said last mentioned persons and representatives, respectively, whether, on the said 2d of June, they were able to pay their respective proportions of said loss and deficiency, and such sums as would divide the said loss and deficiency equally between said last mentioned persons and estates and the complainants. That they have frequently and' in a friendly manner applied &c. The bill prays that the defendants, and each of them may set forth and discover whether, on the said 2d of June, the said Jas. Shreeve, Restore S. Lamb, John Chambers, Richard Jones, Nathan Atkinson, Thos. Black and Jon. Smith wore solvent and able to pay their respective proportions of said deficiency, or how much of their said proportions they were able to pay; and the same as to the estate of Newbold; and that each of the said defendants may be decreed to bear and sustain the said loss and deficiency equally with the complainants; and that an account may be taken of what is due and owing to the complainants upon the said covenant; and that the defendants may be decreed to pay &c.; or, if it shall appear by the said discovery, or otherwise, that on the said 2d of June any or either of said defendants James Shreeve &c., or Jon. Smith, since deceased, or the estate of said Jas. Newbold, who was then dead, were unable to pay his or its equal proportion of said deficiency, that then such of said defendants and estates as then were solvent and ablemay be decreed to pay to the complainants the amount due them as aforesaid, each paying an equal proportion ; and for further relief. James Smith, Restore S. Lamb, John Chambers, Richard Jones, Nathan Atkinson, Thos. Black, James Shreeve and Barclay ’White, Executors &c. of Jon. Smith, dec’d, and Caleb Newbold, Jr., and Richard C. Shreeve, Administrators &c. of Jas. Newbold, dec’d, are the persons made defendants. To this bill a demurrer was filed by all the defendants ; and for causes of demurrer they say, \ 1st, That the other parties to the said covenant, naming them, ought to have been made defendants. 2d, That Jas. Smith, one of the Executors of Jon. Smith, ought to have been made a defendant. 3d, That the bill does not state who nor how many of the stockholders or directors of the Company were present at the alleged meetings of said stockholders on the 9th and 23d of Jan’y, 1835, when it was resolved to negotiate said loan; nor what authority those who were present had to resolve to negotiate said loan. 4th, That the bill does not state that the directors and stockholders, or either of them, had notice of said meeting on the 28d Jan’y, 1835. 5th, That the said covenant set out in the bill is only in aid of the mortgage, and the mortgaged premises, which were the primary fund for the payment of the loan; and that it does not appear that the mortgaged property has first been legally and rightfully applied to the payment of said loan. 6th, That the said Company, in and by the mortgage aforesaid, (to which the said covenant was collateral,) covenanted that the proceeds and profits arising from said railroad should be applied, at the end of each half year from the date of the mortgage, to the payment of the interest on said loan, as appears by the bill, and it is not shewn or stated by the bill that such appropriations were made. 7th, That on the matters stated in the bill the complainants had a full and effectual remedy at law. 8th, That the complainants have not in their bill shewn any sufficient matter of equity to entitle them to the relief sought by' the bill against these defendants.