Summary
*In February, 18S4, the General Assembly of Virginia passed an act to incorporate the Alexandria and Washington Railroad Company, with authority to construct a railroad from Alexandria to the city of Washington, with a capital of three hundred thousand dollars, subject to all the provisions of the Code of Virginia applicable thereto. And it was provided in this act, that the said company should not permit the said road to pass into the exclusive possession' of any corporation without the limits of the Commonwealth of Virginia.
In February, 1856, the General Assembly passed another act authorizing the Alexandria and Washington Railroad Company, for the purpose of completing their road, to sell their bonds, with coupons attached, to the amount of one hundred thousand dollars, at a rate of interest not exceeding seven per centum per annum, to be paid semi-annually. In pursuance of this act, the said railroad company sold $30,000 of their bonds, and to secure the same, executed a deed by which they conveyed to Walter Lennox, of the city of Washington, all the property and franchises of the company, in trust to be sold for the payment of the said bonds upon the failure of the company to pay the interest or the principal for six months after it fell due. This deed, however, recognized the existence of another deed, which had been executed in April, 18SS, to secure the payment of the principal and interest of sixty thousand dollars of the bonds of the company, guarantied by the city of Washington.
In February, 1862, the County Court of Alexandria, in pursuance of a provision in the deed to Lennox, on the motion of Joseph Davison, the attorney in fact of the holders of all the bonds in said deed of trust mentioned, reciting that.Lennox was incapacitated for executing the trust, appointed Joseph B. Stuart, of Washington city, trustee in the place of said Lennox. And there having *been a failure by the company to pay the interest upon the bonds, at the request of Davison, the attorney in fact of the holders of the bonds, Stuart, in April, 1862, made a sale of all the property and franchises of the company, when Alexander Hay and Joseph Thornton became the purchasers at the price of $12,500.
A few days after the sale another company was formed under the original charter, with a capital of $300,000, which was after-wards increased to $500,000; and in the name of the Alexandria, Washington and Georgetown Railroad Company. The bylaws adopted by this new company provide that it shall be managed by a board of five directors, to be annually elected from among the stockholders; and to hold their offices until their successors are elected; and that the board of directors shall elect from among their number a president, secretary and treasurer, no two of which offices shall be filled by the same person. The sixth by-law provides, “that the president shall make all contracts of purchase or sale, by and with the advice of the directors, or a majority of the same; but no contract shall be made involving the franchise of said road, except the same be approved by a general meeting representing a majority of the stock, after being recommended by a majority of the stockholders.” The eighteenth by-law provides, that these bylaws and regulations may be altered or amended by an affirmative vote at any regular meeting of directors, and the approval of the board at the next regular meeting.
From the time of the organization of the new company Joseph B. Stewart was a stockholder, director, and the secretary of the company. It does not appear when Leonard Huyck became a stockholder of the company, but some time previous to May 5th, 1866, he was a director and the treasurer of the company; and he and Stuart had issued stock of the corn-pany, in excess of the amount of *the capital, to the extent of seven thousand three hundred and eightj’-four shares. Of this over-issue of stock there were eight hundred and seven shares standing in the name of O. A. Stevens, who was the recording secretary of the company. He says in his answer in this case, that the certificates were filled up in his name in his absence, by Huyck, or under his direction, without the knowledge of himself, and that on the same day, in said office, as soon as he returned, and before the certificates were taken from the office, the same were endorsed by him, under the direction and instruction of Huyck, who thereupon took the same into his possession; and that he, Stevens, received no benefit from the same of any kind.
On the 5th of May, 1866, there was the annual meeting of the directors of the company. This was the day for the annual meeting of the stockholders; but the directors, whose duty it was, had failed to call the meeting. At the meeting of the directors, there were present R. W. Latham, President; F. P. Stanton, Leonard Huyck, and Joseph B. Stuart. The President stated to the meeting, that after mature deliberation, he was confident it would be to the best interests of the company to lease the road for ten years to Oscar A. Stevens and W. Jackson Phelps, one the superintendent, and the other the general manager of the company; and that after a consultation with a majority of the stockholders, representing nearly the whole of the capital stock of the company, he had concluded to lay before the board of directors a lease prepared for that purpose. This lease was approved and ratified by the directors, and the President was directed to execute it;' which was done on the same day.
Bjr this lease the said company, by its directors, leased to Oscar A. Stevens and W. Jackson Phelps the road of the said company, and all its property and rights of every kind, both real and personal, except as thereinafter ^excepted, for the term of ten years, commencing on the Sth day of May, 1866, and ending on the Sth day of May, 1876, upon considerations set out at length therein. These considerations were: 1st. That the lessees should pay the interest on the bonded debt of the company, that debt being $300,000, and the annual interest thereon being $21,000, payable semi-annually. 2d. That they should pay further, $7,500 annually, which was to be invested as a sinking fund, to be applied to the payment of said bonded debt. 3d. That they should pay to the company fifty per cent, of the earnings or gross receipts, payable annually at the end of each year, after deducting therefrom the two sums before mentioned. 4th. That they might make all necessary repairs and improvements, for the better practical working operations of said railroad or its branches, either by the use or the sale, with the consent of the directors, of any of the property leased. And they were to keep the road and its branches and all the property leased in good repair. Sth. That they were to furnish and pay for all future rolling stock which they might' require in working the road, after the company had paid for and completed the contract for that theretofore purchased and contracted for with Messrs. Grice & Cong, of Philadelphia, which was to be paid for by the company, ■and to belong to the lessees for the purposes of the lease. 6th. They were to keep good, competent men in the management and working of the road; and they were to pay all damages arising from accidents by and through the negligence of their employees, and save the company harmless in this respect. 7th. They were to build certain depots in the manner directed by the company, the cost of which was to be charged to the company, to be deducted from the per centum to be paid by the lessees. 8th. They were to pay all Government, State or city taxes of a general nature, required to be paid by the company. 9th. *They were to observe and fulfill the contracts theretofore made by the company with the Adams Express Company, and with the Alexandria and Fredericksburg, and the Richmond, Fredericksburg and Potomac railroad companies, the company reserving the right to modify these contracts according to the true intent and spirit of the same. And whatever was received under the contract with the Adams Express Company, was to be charged against the company and deducted from the annual per centum to be paid by the lessees, up to $7,000 per year during the lease, which was to be paid by the express company to the lessees. All over this sum to be treated as earnings of the road and disposed of as such.
The company was to construct the extension of their road from the intersection of Maryland avenue and Sixth street across the canal, or if constructed by the lessees, it was to be deducted from the annual per centum payable to the company. And all improvements of a permanent character, which might be deemed necessary, and become the permanent property of the company, constructed by the lessees, were to be charged to the company ; but after being constructed, they were to be kept in repair by the lessees; but the lessees were not bound to expend in improvements in any year more than the per centum payable to the company. And the company was to pay for all rights of way which might be deemed necessarv for the better practicable working of the road. And the company reserved the right to sell and dispose of any real estate that might not be necessary to the working operations of the road. And any additional real estate which might be necessary was to be purchased and paid for by the company. And the company was to take from the lessees, at valuation, all rolling stock and other materials and fixtures acquired by them for the road during the term of its lease, at its termination; and to pay the instalment *of interest which would fall due on the first of June, 1866. And if the lessees failed to pay the interest on the bonded debt for thirty days after it was due, or the $7,500 for thirty days after the first of June of each year, commencing with June, 1867, or should fail for sixty days after the first of June of each year of the lease, to pay the per centum agreed to be paid after deducting such portion as was properly chargeable to the company, then the lease to be void.
At the meeting of the directors of the company before mentioned, F. P. Stanton resigned his office of director, the resignation to take effect on the adjournment of the meeting; and the lease aforesaid having been executed and delivered during a recess of the meeting, after this was done, at the afternoon session, Stevens was appointed a director in his place.-
The company not being able to comply with its contract with Grice & Eong, Steven & Phelps were authorized to carry it out on their own account; and having agreed with Grice & Eong upon the terms for the purchase of the rolling stock and motive power, they transferred this contract to Adams Express Company, who advanced the money to pay for it, and it was to be held by the lessees as the property of the Adams Express Company, for which they were to pay a rent to Adams Express Company.
In November, 1866, Joseph Davison, one' of the stockholders in said railroad company, after notice to the parties, filed in open court, on behalf of himself and such other stockholders as would join him, his original and amended bill, against Stevens and Phelps, the railroad company, and the directors of the company, in which he charged that the lease made by the directors to Stevens and Phelps was null and -void, and should be set aside on various grounus. 1st. That the 1 directors had no author.ity, *under the charter and laws óf the, land, to make the lease. 2d. That they were forbidden by the sixth by-law of the company to make such a lease. 3d. That the directors and lessees were both acting in a fiduciary character to the company when it was made; and that, under all the circumstances, it was invalid and should be set aside; and that at a full meeting of the stockholders of the company held in October, the said lease was repudiated and -annulled by a unanimous vote. The prayer of the bill was for an injunction, for the appointment of a receiver, that the lease might be annulled, for an account, and for general-relief.
The parties answered at great length, contesting all the grounds stated in- the bill for avoiding the lease. The cause being heard upon the bill, the answers and exhibits filed by both parties, the court being of opinion that the lease was made illegally and improperly, and without lawful authority, and that the same should be declared void and be annulled upon a final hearing of the cause, awarded an injunction against Stevens and Phelps, restraining- them from the further working of the road by virtue of the said lease; and the directors were enjoined and restrained from acting as officers and directors of the company. And a receiver was appointed to take possession of and-control and operate the road, under certain directions stated in the decree.
Prom this decree Stevens and Phelps obtained an appeal to .the District Court of Appeals at Fredericksburg, where it was affirmed; and they then obtained an appeal to this court.
Syllabus and headnotes are prepared by the reporter or publisher, not the court, and are not part of the opinion.
