 Henry, J. 20. Railroad contract: bribery of director. I concur in the foregoing opinion, except that portion relating to the Seelye bonds. By section 58 of the corporation act, (R. S. 1855, p. 438,) -if any officer or agent, employee or servant of a railroad, company shall, directly or indirectly, be a. contractor, or shall receive any profits or proceeds, of- any contractor, on account of any contract for the grading or repairing of any railroad belonging to such corporation, he is declared guilty of a felony, and punishable by imprisonment in the penitentiary. Section 59 declares every person having a contract, or any interest in a contract, as specified in the preceding section, to be ipso facto ineligible to be a director or engineer, or to fill any other office or place of trust and profit in the employ of or for any company or corporation, owning or having supervision. of such road; and also provides that all contracts made by the directors of any such company or corporation, containing any such person in its board as a director, and all contracts of any kind, or for any purpose whatever, made and entered into in violation of any provision of the act, shall be absolutely null and void, and incapable of enforcement in any court of this State. Section 58 denounces no contract, but one by which an officer or employee of the company becomes a party to or a participant in the profits or proceeds of a contract for the construction, building, grading or repairing of the road. Here Hamilton was the contractor. Sexton and Brayman were not parties to Hamilton’s contract with the company. The agreement by which they were to have an-interest in that contract was collateral to it; and while they might *349have been prosecuted for a felony, and were incapable of enforcing their agreement, the fact that such a contract •was entered into by Hamilton with them, did not invalidate his construction contract with tire company. It will not be denied that Hamilton’s contract with the company would have -been valid if he had not made the alleged contract with Sexton and Brayman. There is nothing in the statute expressly declaring that Hamilton shall forfeit all rights under that contract if he make an agreement by which a director, or other officer of the company, shall become interested with him. Admitting that before he made the contract with the company to build the road, he had agreed with Sexton and Brayman that they should participate in the profits of the contract which he might make with the company, it is the same as if the contract with Sexton and Brayman had been made'after the construction contract had been entered into, so far as the validity of the latter is concerned. The statute does not declare that a director, or other officer, who contracts for a portion of the profits, shall be guilty of a felony ; but it is the making of a contract with the company or the receipt of profits, portions, proceeds, commissions or charges from a contractor which constitutes the offense. Section 58 defines a criminal offense, nothing more. If an officer or employee be a party to a contract with the company, he violates that section, but if he only enters into a contract for the receipt of profits, portions, proceeds, &c., of a construction contract made by another party, he is guilty of no crime, unless, under this contract, he actually receives profits, &c. .An indictment under that section against Sexton or Brayman would allege the contract between Hamilton and the company merely as inducement, and that-the accused feloniously received profits, &c., of the contractor, or in the other aspect of the case, that Sexton and Braymay were parties to the contract made by Hamilton with the company. The first clause of section 59 declares ineligible as a *350director, engineer, &c., any one having a contract or interest in a contract, as specified in section 58 ;• and the second clause makes null and void all contracts made by the directory of any such company or corporation containing any such person in the hoard as a director. The .contracts mentioned in that portion of the second clause, are other contracts than those forbidden in section 58, which make the person ineligible to be a director. By said second clause, also, all contracts of any kind, made in violation of any provision of the act, are declared null and void. The contracts for which an officer of the road is made guilty of a felony, if he be a party to them, would have been void without the 59th section, as would any contract entered into by an officer for the' receipt of moneys which he is forbidden to receive by that section, and declared a felon if he do receive them. These two are the only sections of the act having any bearing on the questions we are considering. The 58th section uses phraseology which'obscures the sense of the section. It prohibits the person therein named from becoming “ directly or indirectly ”• contractors, or from, directly or indirectly, receiving any profits, proceeds, &c., of any contract for the construction, building, grading or repairing, &c. We cannot comprehend how one can be indirectly a contractor, except by directly orindirectly sharing in the profits, &c., with a party or parties who are contractors. But that the General Assembly did not understand that a mere participation in the profits would make a lesson either directly or indirectly a contractor, is evident from an obvious recognition .in the section of a distinction. A person could not, at the same time, be a contractor and subject to indictment for so being, and by the very same contract or agreement a mere recipient of profits. & under the second clause of section 58. The contract between Hamilton and the company cannot be void, as mode by the company while a member or members of the directory were concerned in that contract, because it had to be made before Sexton and Bray-*351man could receive any money under it. When Hamilton’s contract was made, these directors had no interest in a contract which Hamilton had with the company. A contract before that time between them and Hamilton, by which they were to have a share of the profits, &c., of the contract he might make with the company, if it did not make them co-contractors, could have had no effect whatever upon Hamilton’s contract with the company. It is a collateral contract to Hamilton’s construction contract, and its validity is determined by section 58. The construction of section 59, contended for by defendant’s counsel, makes all contracts entered into with the directory containing a member who had violated section 58, null and .void, although the other members were ignorant of the violation, of that contract by such director, and although the subsequent contracts have no connection whatever with that to which such director’s contract may relate. If such a construction is to prevail, no one would be safe in making a contract with a railroad company, for the most diligent inquiry to ascertain if any director had been guilty of a violation of section 58 would most probably be unavailing, as a director concerned in a contract in disregard of that section, would be interested and anxious to conceal it to avoid a criminal prosecution. So if the construction of the two sections prevails, which our associates favor, then not only is Hamilton’s contract void, but all sub-contracts made by him, and all contracts made by such sub-contractors with teamsters and day-laborers are also null and void. A construction of these sections which would work such manifest injustice in hundreds of eases which might be supposed, in addition to those already suggested, should not be adopted, unless it be clearly indicated by their phraseology. The express terms of the statute, as we have seen, do not declare, nor is it a necessary implication from any words employed in either section, or demanded by the spirit and purpose of the act, that any contract shall be affected by the provisions of those see-*352tions, except the very contract named therein, and for.entering into which the officer or employee is indictable for a felony. • It forbids an officer from being a contractor with the company, or receiving any proceeds of a contract of another, and avoids all .such contracts made by the officer. This is the scope and meaning of the two sections, we think; and as a contract to share in the profits of another who has a construction contract, docs not make the officer a contractor with the company, it is only null and void under other provisions of the sections, and would have been if not declared so by the statute, because a contract to' receive what the officer would have been guilty of a felony for receiving; but it has no effect upon that other contract. 21. Bonds ; illegal contract. But conceding that Hamilton’s construction contract was tainted with illegality and void, because Sexton and Bray man had an interest, yet these bonds were not made in- furtherance of that contract, or in compliance with any of its provisions, but were made to be used by the company as occasion might require, and after the completion of the work by Hamilton, under his contract, were delivered to him in payment therefor. The consideration for this transfer was neither immoral nor illegal. As the work done by Hamilton could not be returned to him, and was valuable to the company, there was a moral obligation resting upon it to pay Hamilton its value, notwithstanding the original contract under which that work was done could not be enforced. There being a valid consideration to support the promise contained in the bonds, and it being unnecessary for Seelye, in making out his case, to rely upon the illegal contract with Hamilton, his right to recover cannot be successfully questioned. Gwinn v. Simes, 61 Mo. 335; Buck v. Albee, 26 Vt. 184; Thomas v. Brady, 10 Barr 164; Scott v. Duffey, 14 Pa. St. 18; Lestapies v. Ingraham, 5 Pa. St. 81. The judgment of the circuit court is reversed and the cause remanded, to be proceded with as heretofore directed. Napton and Hough, JJ., concur. 
Henry, Hough, Napton, Sherwood
Chouteau v. Allen
Chouteau v. Allen
<p>Appeal from Mississippi Circuit Court. — Hon. D. L. Hawkins, Judge.</p> <p>This is a suit commenced in the circuit court of Mississippi county on December 16th, 1871, by Charles P. Chouteau, praying judgment upon certain alleged bonds and coupons of the Cairo & Fulton Railroad Company of Missouri, claimed to be owned by the plaintiff, and for foreclosure'of a certain deed of -trust alleged to have been executed by said company to secure said bonds and coupons, and covering lands in the counties of Stoddard, Scott, Dunklin and Butler. The defendants .are Thomas Allen,' Henry H.Bedford, John Wilson, Mason Brayman, William H. Bailhache, Henry J. Deal, James H. Bethune, E. W. Hill, George Whitcomb, Joseph O. Moore, James M. Patterson, Green L. Poplin, Samuel Montgomery, James G. Nalle, Rudolph E. E. W. Webber, T. W. Johnson, James Clarkson and Henry E. Seelye.</p> <p>Petition. The petition states in substance that the Cairo & Pulton Railroad Company, being engaged in the work of con-, structing their road through the counties of Stoddard, Scott, Dunklin and Butler, in order to raise funds for that purpose, issued 1600 bonds of $1,000 each, bearing date the 23rd of May, 1857,having twenty-live years to run, and having semi-annual interest coupons attached, and to secure the same executed the deed of trust sought to be foreclosed whereby 400,000 acres of land in said counties wore conveyed to defendant Wilson and one John Moore and one Albert G. Waterman, as trustees; that this deed contained, among others, a provision which authorized the trustees, upon the surrender of any bonds for cancellation, to convey to the bondholder their value in land; that Moore and Waterman died, and in March, 1866, defendants Brayman, and H. H. Bedford were substituted as trustees in their places, and acted as such; that plaintiff is the owner of 706 of said bonds, (setting forth a list of them by their numbers;) that he had purchased them in good faith and for value in the mai’ket without notice of any defect in any of them and without any knowledge that said company deified their liability on any of them; that on the contrary, he fully believed that each and every one of said bonds and coupons was free of any defect, dispute or question : that he was induced to purchase them with a view and for the purpose of devising a plan for combining capital and personal influence in order to build-and operate the railroad which had been commenced and was important to the peo-, pie of southeast Missouri; that of the said bonds and coupons so owned by plaint tiff he could only produce 125, of which he made brofert; that plaintiff had placed the remaining 581 of his bonds in the hands of the board of laud trustees to De converted into and, as provided in the deed of trust; that the said trustees had failed to convey any 1 and to him, and the bonds were still in their hands, or if not, that they had been destroyed by them ; that the company refused to pay any of the bonds or coupons or to make plaintiff any conveyance of land; that said railroad track, road-bed, rails, ties, depots, stations and all other fixtures and appurtenances of the railroad of said Cairo & Fulton Railroad Company, of Missouri, were sold by the State under the lien mentioned in said deed of trust; said sale was made October 1st, 1866,and said corporation was thereby dissolved; that Green L. Poplin, Samuel Montgomery, James G. Nalle, Rudolph F. E.W. Webber and T.W. Johnr son were, at the time of said sale, the only directors and managers of said corporation, and said Poplin was president, and said directors are now trustees in law to wind up the affairs of said corporation; (1 R. -S. 1855, p. 375, § 24;) that said company and said trustees made default in payment of interest upon said bonds so that said lands are subject to sale; that the defendants Deal and Bethune, by proceeding under certain judgments which were void, and others which were satisfied, caused executions to be issued in 1867 against said company, then dissolved, and levies to be made on the lands in said deed of trust, and purchased said lands at sheriff’s sale and took sheriff’s deeds therefor; that all said judgments, executions, levies, sales and sheriff’s deeds were illegal, irregular, fraudulent and void; •that said Deal and Bethune conveyed by quit-claim to Thomas Allen, who claims some interest in said lands under said sheriff’s sales; that the defendants E W. Hill, Henry Al Seelyo, James M. Patterson, Joseph C. Moore, James Clarkson and George Whitcomb claim to own some of the bonds secured by said deed of trust; that said Montgomery, Nalle, Johnson, Webber and Poplin refuse to act as trustees for said dissolved corporation and deny it is their duty so to act. The plaintiff prayed that an account be taken of the bonds and coupons belonging to the plaintiff, and of any bonds, coupons or claims of any other person secured by said deed of trust; that plaintiff have judgment for his debt, the trust be foreclosed, lands sold to pay plaintiff, the pretended rights of Deal, Bethune and Allen be declared null, and for general relief.</p> <p>Answers. The defendants Poplin, Montgomery, Nalle, Webber and Johnson answered, denying that they were directors of the company at its dissolution by the sale to the State on October 1st, 1866. Moore and Patterson answered setting forth their claim to ten bonds which they alleged were secured by said deed of trust and prayed judgment therefor. Deal and Bethune answered, admitting that they purchased the lands mentioned in the deed of trust and sold them to Allen; but averring that the judgments, executions, levies and sales were fair and valid. Hill and Clarkson answered, each claiming to be the owner of certain bonds and coupons, for which they prayed judgment and foreclosure. Seelye answered, claiming fifty-one bonds with their coupons, for which he prayed judgment and foreclosure.</p> <p>Allen’s answer. Defendant Allen answered separately. His answer denies that said corporation at and prior to the time of execution of said alleged deed of trust, was the owner of the lands mentioned, save and excepting that portion thereof the title whereto was derived by said corporation under and by virtue of' the act of Congress entitled “An act granting the right of way and making a grant of lands to the States of Arkansas and Missouri to aid in the construction of a railroad,” &c. Approved February 9th, 1853; and the acts and joint resolutions of Congress amending and extending the provisions of said act, and the acts of the General Assembly of the State of Missouri, accepting and passed in pursuance of the same. Alleges that the defendant is the owner of all said lands described in said original and supplemental deeds of trust, under and by virtue of said act of Congress and acts of the General Assembly, before mentioned, and of conveyances from the counties respectively; that be is the owner of 11,520 shares of the capital stock of said company, and that only about 1,200 shares are owned by all other persons; that he also owns all the stock, property and interest ever held by the counties of Butler, Dunklin, Scott and Stoddard; and also all the claim, interest" and estate which Henry J. Deal and James H. Bethune ever had in said property. Denies the execution and delivery of the bonds and deed of trust.</p> <p>The answer further alleges that after the sale by the State to this defendant in 1866, the plaintiff combined and confederated with Bedford, Brayman, Bailhache and Webber to defraud the stockholders of said company, and this defendant, who was the owner of said lands and property, by corruptly, wrongfully and without the assent of said corporation, or of this defendant, procuring possession of said 581 bonds, and obtaining deeds of lands therefor, without any adequate consideration therefor to the company or to this defendant, from Bedford, Brayman and Wilson, who then assumed and pretended to be trustees of the lands under the deed of trust; that, in pursuance of such corrupt and fraudulent combination and purpose, the plaintiff paid to Bedford and Brayman $10,000 in cash, and thereafter he delivered to Brayman, who pretended to be and act as president of the board of land trustees, the 581 bonds mentioned in the petition as being in the possession of the trustees, and received five conveyances of lands in exchange for and in full payment, satisfaction and redemption of said bonds; that plaintiff had no right to said bonds, and said trustees no power or authority to execute said pretended conveyances; that each party to said fraudulent acts well knew of the wrongful and iniquitous conduct and purposes of all the others, and all equally participated in it.</p> <p>As to the remaining 125 bonds, the answer alleges that they were never made nor issued by the company; that they wore wrongfully pledged by Brayman to Schuschardt & Gebhardt, of New "York, to secure a note of Brayman for $12,000, given for money borrowed by him, individually ; that the money for which the note was given and the pledge was made, was borrowed and used by Brayman personally, and not by or for the use-and benefit of the company, and that the company never received any benefit from nor used any of said money, and did not in any manner authorize or ratify said pledging of said bonds, or any of them; that Schuschardt & Gebhardt, at the time of receiving said bonds knew that Brayman had no right to pledge the same; that afterwards the plaintiff bought said note of Brayman from Schuschardt & Gebhardt, and therewith received from them the 125 bonds, as collateral for the same, and not otherwise; that they never became the property of said origin pledgees nor of plaintiff; that plaintiff’ well knew all of said facts when he bought said note and received said bonds, and now holds the note in his possession in full force against Brayman, and the bonds as collateral thereto.</p> <p>Plaintiff’s reply denies all the new matter set up in this answer.</p> <p>The deed of trust. On the 22nd day of September, 1857, the board of directors of the Cairo & Fulton Railroad Company, passed a resolution authorizing the issuing of bonds to the amount of $1,600,000, and the execution of a deed of trust upon 400,000 acres of land to secure them, the bonds and deed to bear date May 23rd, 1857. Acting under this resolution the president and secretary of the company, on the 30th day of April, 1858, executed the deed of trust sought to be foreclosed. It is dated as directed, and purports to convey to Moore, Wilson and Waterman, as trustees, several hundred parcels of land, all described m a schedule attached to the deed. At the foot is the following declaration : “ The foregoing schedule contains, according to estimate, 405,000 acres of land. The deed of trust, which is made to secure the payment of the bonds therein referred to, requiring a schedule of 400,000 acres only, the surplus of 5000 acres is added to convey any deficiencies which may occur from errors of description, conflicting claims or other causes,” The Cairo & Fulton Railroad Company is named in the body of the deed as grantor. The signature is as follows: “M. Brayman, President Cairo & Fulton Railroad Company, of Missouri; Q. R. Teasdale, Secretary Cairo & Fulton Railroad Company, of Missouri.”</p> <p>Certificate of acknowledgment. The certificate of acknowledgment is as follows : “ I. George W. Lowry, clerk of the circuit court of the United States for the southern district of Illinois, do hereby certify that on the 80th day of April, A. D. 1858, before me, at my office in the city of Springfield, in said State, came Mason Brayman, the president of the Cairo & Fulton Railroad Company, of Missouri, who is personally known to me to be the same person whose name is subscribed to the foregoing instrument as a party thereto, and who being by me duly sworn, deposes and says that he resides in the city of Springfield, in said State; that he is the president of the said Cairo & Fulton Railroad Company, of Missouri; that the seal affixed to the said instrument is the corporate seal of said company, and was affixed to the said instrument by authority of the board of directors of said company for the uses and purposes therein expressed, and that he by like authority did subscribe his name as president of said Cairo & Fulton Railroad Company, of Missouri. In witness whereof,” &c.</p> <p>The deed was duly recorded in the counties where the lands lie during the years 1858 and 1859. It recites that said corporation proposed to issue and deliver, from time to time, as might be necessary for construction, furnishing and completion of the railroad, their bonds or obligations of even date therewith, and thereby to become indebted to divers persons, bodies politic or corporate, who should become holders of the same, in the sum of $1,600,000, secured to be paid by their sixteen hundred bonds of $1,000 each, to be paid on October 1st, 1882, and also interest for the same at the rate of seven per cent, per annum, payable semi-annually, on April 1st and October 1st; and declares that it is executed to secure the payment of said bonds, and contains, among others, the following resolution: “ Subject, however, with respect to said railroad, and every part and section thereof, and its appurtenances, to the prior, first and only present lien in the nature of .a mortgage in favor of the State of Missouri, made to secure and indemnify said State against the payment of such bonds or obligations as said State may, from time to time, issue and deliver to the parties of the first part to aid in the construction of said road, under and by virtue of the provisions of two several acts of the General Assembly of said State of Missouri, entitled and approved as follows: “ An act to expedite the construction of the Cairo & Fulton Railroad, of Missouri,” passed December 11th, 1855 ; and also “ An act to amend an act to secure the completion of certain railroads in this State, and for other purposes, approved December 10th, 1855;” approved March 3rd, 1857.</p> <p>The bonds. The bonds are in the following form: “ This certifies that the Cairo & Fulton Railroad Company, of Missouri, are indebted to-for money advanced for the construction of their railroad with its appurtenances, and that m consideration thereof, the said company do hereby promise to pay to-, or assigns, the sum of one thousand dollars, in the city of New York, on the 1st day of October, 1882, and also interest for the same from the 1st day of October, 1857, at the rate of seven per cent, per annum, payable on the 1st days of October and April in each and every year ensuing the date thereof, until said .principal sum shall be paid, upon presentation of the annexed warrants as they severally become due; but the company reserve the right to pay the same at any time to be named by them by-adding to the principal a sum equal to twenty per cent, thereof. * * The lien upon said road is subject, however, to a first lien in favor of the State of Missouri, to secure the payment of $>650,000; being for bonds of said State loaned to said company to aid in the construction of said road.” * * '</p> <p>There was also introduced by the plaintiff a supplemental deed of. trust, purporting.to’have been executed by .the same corporation to the same grantees, as trustees, dated October 6th, 1858, conveying all lands of said company not included in the former instrument, for the purpose of securing payment of the interest of said sixteen hundred bonds. It was executed, acknowledged and recorded in the same manner an the first.</p> <p>The Congresslands. The Swamp lands. The lands conveyed by these deeds were of two classes s 1st, lands granted by the United States to the State of Missouri for railroad purposes, by an act of Con» gross entitled “ An act granting the right o£ way,” &Co, approved February 9th, 1853, (10 U. S. St. at Large, p. 155). These lands were granted by the State to the company by act of the Legislature approved February 20th, 1855, (Sess. Acts 1855, pi 314;) 2nd, Swamp or overflowed lands. The act of Congress of September 28th, 1850, granted these last named lands to the State, (9 U. S. St., p. 915,) for the purpose of being reclaimed. By an act approved March 3rd, 1851, (Sess. Acts 1851, p. 239,) the State donated them to the several counties in which they lie. By an act approved December 7th, 1855, the Legislature authorized the county courts of Scott, Dunklin, Stoddard and Butler, among others named, to transfer alternate tracts of swamp lands to the Cairo & Fulton Railroad Company, at not less than $1 for acre, payable in the stock of the company, "whenever a majority of voters petition them respectively to that effect.” (Sess. Acto 1855, Adj. Sess., p. 353.) By an act approved December 10th, 1855, 477, § 16,) the Legislature authorized the county court of any county in the State having swamp lands to subscribe the same as stock to any railroad' which might pass • through such county, upon such terms as might be agreed upon between the court and the company.</p> <p>Patents and orders of the county court county At various -times subsequent to the 10th day of December, 1855, and prior to the 20th day of April, 1857, each of these counties made subscriptions to -thee capital stock of the Cairo & Fulton Railroad. Company payable in those lauds, and on the latter tiro governor of the State, in accordance with the several orders of subscription, executed and issued patents direct to tho company, as follows: For 47,084 acres in Scott county , for 95,595 acres in Dunklin county; for 100,868 acres in .Butler county; for 127,277 acres in Stoddard county. The order of subscription by the Stoddard county court declared that there bad been “ a satisfactory showing that the citizens of this county are in'favor of the subscription.” This •was the only evidence to show that a majority of the voters of Stoddard county had petitioned the court to make the subscription. The orders in the other counties contained no recital, and there was no evidence that any expression of the sentiments of the citizens of these counties had been taken. In every case the order of the court referred to the act of December 7th, 1855, above mentioned as the authority under which the subscription was made, as did the several patents issued by the governor.</p> <p>Company's Reports. The railroad company, in several of its annual reports, admitted the execution of these deeds of trust. Thus in report of December 1st, 1858, to the State Board of Public Works, it is said, “400,-'000 acres of land are held in trust to secure'$1,600,000 of Bonds of the Company, John Moore, John "Wilson and Albert G-. "Waterman, trustees, and by a second deed, 170,-000 acres stand to meet accumulating interest,” &c. Again, in said report, occurs the following: '“Bonds authorized to be issued, $1,600,000; principal secured by deed of trust on 400,000 acres of land, dated May 23rd, 1857. Interest provided for by similar deed on 170,507 93-100 acres, dated October 6th, 1858.” Again, the report of November 19th, 1859, to the State Board of Public Works, states that lands have been sold by the trustees. No act was done or step taken by the company or its stockholders looking to the disavowal of the deeds of trust and bonds until 1870, when Alien, having become the owner of the road and its appurtenances as well as a majority of the stock, brought a suit to settle the affairs of the company and have tho floods of trust set aside.</p> <p>The state’s sale. Prior to the execution of the deeds of trust, State aid had been granted to the company under two acts of tho Legislature: 1st, “An act to expedito the construction of tho Cairo & Fulton Railroad Company, of Missouri,” approved December 10th, 1855 ; 2nd, “An act to amend an act to secure tho completion of certain railroads,” &c., approved March 3rd, 1857, (Sess. Acts 1857, p. 472). Under the first act $250,000, of State bonds, and under the second $400,000 additional were issued to the company. Section 17 of the latter act provides that “ all bonds issued under the provisions of this act shall constitute a first lien or mortgage upon the road and property of the several companies receiving them.” This is the lien in favor of the State which is referred to in the deed cf trust.</p> <p>The company having failed to comply with the terms of these acts, the “sell-out” act approved February 19th, 1866, directed sale of the road and “property of every description,” &c., belonging to the company. The 8th section contained the following proviso: “ Provided,, That nothing in this act shall be so construed as to convey, or to authorize the commissioners to convey to the purchasers of the Cairo & Fulton Railroad, any of tho lands subscribed by counties to the stock of said road.” Under this act the governor advertised for sale at public auction the railroad and its appurtenmices, and “ all lands except the lands subscribed by counties to the stock of said road,” and “ all property and privilege which has been otherwise acquired by said company.” Tho commissioners appointed by the act attended this sale on October 1st, 1866, and on behalf of the State became purchasers of the entire property at the fall amount of the State’s claim. The governor, thereupon, by deed dated October 12th, 1860, conveyed to the State of Missouri the railroad, “together with the appurtenances, rolling stock and property of every description, and all rights and franchises thereunto belonging.” Under the supplementary act of March 19th, 1386, the commissioners re-advertised the road and property, and on the 8th day of November, 1866, sold the same to Joseph 0. Reed and others. The governor, thereupon, conveyed to them the “road and all other property, real and personal, of every description, belonging or in any wise appertaining thereto, subject to all the conditions of the act of February 19th, 1866, and to the exception above referred to.” The exception referred to is “excepting so much of the lands thereof as were exempted from sale by the terms of the act of the General Assembly of said State of Missouri, approved February 1.9th, 18661’ The grantees in this deed conveyed to defendant Allen al‘ the property conveyed to them by the State, by their deed dated January 12th, 1867.</p> <p>The Schuschardt & Gebhardt ponds Of the bonds claimed by plaintiff and alleged to be secured by the deed of trust, 125 were purchased by him fr°m Schuschardt & Gebhardt, bankers of New York. The history of these bonds is as follows: On the 10th of March, 1858, the board of directors gave to Brayman, as president of the board, power to institute negotiations for funds, for carrying on the operations of the company, based on the security of its property or otherwise, also to execute and deliver bonds of the company in accordance with his iron contract. In April, 1858, the hoard gave Brayman, as president, general supersintendence and control over the affairs of the company, including its landed and financial interests. April 12, 1860, Brayman borrowed for the company from Schuschardt & Gebhardt, $12,000, payable six months from date, and executed a note to Schuschardt & Gebhardt in the words and figures following: “ Six months after date, I promise to pay to Mr. M. Brayman, or order, twelve thous and dollars, for. value received, at the Bank of New York, having deposited with Messrs. Schuschardt & Gebhardt as collateral security to sell the sanic at the brokers' board or at public or private sale or otherwise, a~ their option on the non-performance of this promise, and without notice, 125 mortgage bonds of $1,000 each, of the Cairo & Eulton Railroad Company, and hereby authorize' and empower said Messrs. Schuschardt & Gebhardt to become the purchasers of said bonds in the case of default, to protect their interest. M. Brayman, president Cairo & Pulton Railroad Company, of Missouri.”</p> <p>The 125 bouds were deposited with Schuschardt & Gebhardt on the same day. The note was duly presented tor payment, and protested for non-payment October 15th, 1860. April 20th, 1860, Brayman made another instrument of writing in the words and figures following :</p> <p>GENTLEMEN: I acknowledge to have received your letter of credit dated April 20th, 1860, for $12 000, say twelve thousand dollars, to be availed of in my drafts on you at six months after sight, to be issued and presented prior to 1st of May proximo. I accept this credit and bind myself to place funds in your hands at least eight days prior to the maturity of any acceptance made by you in virtue of said credit, and as security I hereby hand you a stock, note of the Cairo & Fulton Railroad Company, of Missouri, for $12,000, say twelve thousand dollars, dated April 12th, 1860, sigued by me as president of the Cairo & Fulton Railroad Company, of Missouri, to my individual order, duly indorsed by me. As security attached to said note are $125,000 first mortgage land grant bonds of the Cairo & Fulton Railroad. Company, of Missouri, with full and; complete power to sell the same in any manner yon deem fit, without notice, and to'purchase them yourselves to protect your own interest, said credit being for account of the Cairo & Fulton Railroad Company, of Missouri. . I further agree to pay over into your bauds, in monthly installments, the net earnings of the Cairo & Fulton Railroad Company, which are to be credited on the note, of said railroad company of $12,000 lodged in your bauds as collateral security for this credit. I further agree to have a resolution of the board passed to the above effect, and to transmit you a certified copy of the same. I agree to pay you a commission of $2,000 on receiving your acceptance in virtue of this credit. M. Brayman, president Cairo & Fulton Railroad Company, of Missouri.</p> <p>The company drew two drafts, one for $7,000, the other for $5,000, on Schuschardt & Gebhardt, which were accepted and paid by them. No part of the earnings of the company, nor any other funds; were ever placed with Schuschardt & Gebhardt to meet these, which matured and were paid October 24th, 1860. May 15th, 1867, the 125 bonds, after being duly advertised, were sold at public auction in the city of New York, at the usual place for such sales, for $7 per bond, Schuschardt & Gebhardt being the purchasers. On the 14th day of October, 1868, they sold the said bonds and the $12,000 note to plaintiff Chouteau for $12,000.</p> <p>Ratification of pledge to Schuschardt & Gebhardt. In a report made by the company December 1st, 1858, to the State Board of Public "Works, it was stated that “ the company lias issued bonds to the amount of $500,000, $847,000 of which are hypothe-cated and delivered on contracts,and $153,000 at par value are placed in the hands of agents for the use of the company.” In the same report it was said that $191,000 company’s bonds have been hypothecated for materials and rolling stock. Again, in .the same report it wap said: “ There have been delivered on contract for iron $1.56,000/ hypothecated for various purposes, $191,000.” In the report of November 19th, 1859, occurs the following :</p> <p>‘,‘LAND GRANT BOND ACGOUNT.”</p> <p>Authorized t o be issued based'upon 570,507xw</p> <p>acres of land, ----- $1.600,000.00</p> <p>Amount executed, - - 1,300,000.00</p> <p>Delivered on contract for iron, - 162,000.00</p> <p>In hands of agents for negotiation, 838,000.00</p> <p>Sold for cash and sundry payments, 150,000.00</p> <p>On hand, ----- 150,000.00</p> <p>

</p> <p>Total issued, - $1,300,000.00</p> <p>In a report made January 11th, 1861, it was stated that lands had been put in trust and builds to the amount of 1600 had been issued upon them and 330 of these had been hypothecated to secure the following debts, viz :</p> <p>Springfield Eire & Marine Insurance Company, $12,000.00</p> <p>Schuschardt & Gebhardt, New York, - - 12,000.00</p> <p>M. K. Jessup & Co., New, York, - 2,800.00</p> <p>Humphreyville Manufacturing Company, Conn., 2,300.00</p> <p>Harland & Hollingsworth, Del., - - - 2,400.00</p> <p>And also hypothecated to George Whitcomb and J. L. Moore ten bonds to secure - - 1,500.00</p> <p>Resolutions of the Board. On Marcn 5th, 1861, a meeting of the board of directors was held in Bloomfield, and Kitchen, II. H. Bedford, A. M. Bedford, Green L. Poplin and D. B. Miller, directors, were present; and it was then and there “ordered that $20,000 be raised.upon personal responsibility,for the purpose of paying the expenses necessary for paying the iron from Sikeston to Little river; and as an indemnity to the parties who raise the money, $900,000 of the land bonds of said company are hereby set aside and appropriated for that purpose, which indemnity is to be held sacred, to be applied to the payment of any and all sums that said parties may have to pay of the said $20,000, each party to receive the said bonds in proportion to the amount of money he may have to pay.”</p> <p>June 13th, 1861, at a directors’ meeting in Bloomfield, Kitchen, A. M. Bedford, Miller, H. H. Bedford and Poplin, were present. It was ordered that “whereas S. G. Kitchen, A. M. Bedford, D. B. Miller, H. H. Bedford and Groen L.,Poplin borrowed of the Union bank of Missouri, $20,000, and expended the same in the construction of said road and the purchase of materials for said construction, it is, therefore, ordered and resolved by the "board that- 912 of the land bonds of the company of the denomination of $1,000 each, together with three large iron safes, are hereby pledged and placed in the possession- of S. G. Kitchen, A. M. Bedford and H. H. Bedford, to secure all the said obligors in the amounts they each may have to pay of said $20,000 so borrowed, as before stated; and, whereas, said company is indebted to all of said parties above named in the amount of their accounts for services rendered, moneys expended and 'materials furnished for said road;" it is, therefore, ordered that to secure the payment of all the above named accounts and amounts, the said above named, bonds be turned over to them and applied sacredly and specially to that purpose.” And all work on' the road was discontinued that day by order of the hoard.</p> <p>At a directors’ meeting at the same place, June 17th, 1861, Kitchen, A. M. Bedford, H. H. Bedford and Miller, were present. The following claims were allowed by the board: To A. M. Bedford, $1,268.43; to S. G. Kitchen, $1,850 and $2,450; to H. H. Bedford, $2,828; to A. M. Bedford, $1,633 ; to Green L. Poplin, $1,200; and to' D. B. Miller, $120. September 14th, 1866, at a meeting of the directors in Bloomfield, it was ordered that the following accounts be allowed : H. II. Bedford, $12,099.80; T. "W. Johnson, $1,000-; Green L. Poplin, $4,760; A. M. Bedford and George Whitcomb, $15,000; D. B. Miller, $2,100; S. G. Kitchen, $8,000; E. W. Hill, $3,000; C. B. Crumb, $4,388. A resolution was then and there passed by the board reciting the order of June 13th, 1861, to secure certain parties for 'moneys advanced, and that the debts had increased and other debts existed, and the creditors were willing' to receive' bonds.in. payment at $100 a bond, and’ there being no other means of payment, it was then and there ordered that bonds be sold and transferred to parties as follows, at the rate mentioned above: To A. M. Redford and Geo. Whitcomb, 150 bonds; to H. H. Bedford, 120 bonds; to Green L. Poplin, 47 bonds; to Daniel B. Miller, 21 bonds; to E.’ W. Hill, 30 bonds ; to C. B. Crumb, 44 bonds; to T. W. Johnson, 10 bonds; to Solomon G. Kitchen, 80 bonds.</p> <p>The 581 Bonds. Webber's Agency. There was evidence from which the court found that the 581 bonds claimed by Chouteau wore part of the 912 issued to the parties named in the foregoing orders. They were purchased, with eight years past due coupons attached, by plaintiff, through defendant Webber, at a total cost of about §145,000. As to the connection of Webber with the transaction, plaintiff testified that about the 7th or 8th day of December, 1866, Webber came to him and proposed to him to absorb the outstanding bonds of the Cairo & Fulton Railroad Company, and stated that if plaintiff would do so all the southeast counties would subscribe their surplus lands and create ail organization for constructing a road from Belmont, by Bloomfield, to Indian Ford; that Webber said he was owner of some bonds and bad contracted for others; that he (Chouteau) agreed to take these bonds at their cost to Webber; that he took Webber to his clerk, Belin, informed him of his agreement and directed Belin when Webber brought the bonds to purchase and pay for them; that on the 8th day of December, 1866, plaintiff wrote to Webber the following letter:</p> <p>" Dear Sir: My sole object in purchasing the bonds of the Cairo & Fulton Railroad, of Missouri, is for no other purpose than to assist in creating a money fund in connection with the counties and land owners of southeast Missouri to construct a railroad from Belmont to Bloomfield; thence to a point connecting with the extension of the Iron Mountain Railroad. Should this project fall through, for any cause, under my contract, I will agree to surrender all of said bonds to the parties from whom they may be purchased, or to the several counties in interest, at their cost, with interest at the rate of ten per cent. per annum."</p> <p>Plaintiff stated that on the 12th day of December, 1866, he left St. Louis for New York, and did not return till January 3rd, 1867; that in his absence Belin purchased for him from Webber 301 bonds; that prior to January 3rd, 1867, he had no knowledge of any defect in any of said 301 bonds; that after the purchase of the 301 bonds by Belin, he (Chouteau) purchased from Webber 280 more bonds; that when he purchased said 280 bonds he had no knowledge of any defect in them, but prior to the purchase of them he did have some suspicion of them inasmuch as -the number exceeded the amount of bonds he had been induced to believe were in circulation. Immediately upon his return to St. Louis plaintiff wrote to Webber, calling his attention to the fact that the number of outstanding bonds seemed to be greatly in excess of a memorandum furnished plaintiff by Webber, and expressing a suspicion that the “stolen or illegal bonds were being shoved in.” This letter led to an interview,in which Webber explained that he had been misinformed as to the number of the bonds, and . stated that he had been assured by the president and directors of the board that they were legal bonds, and he would produce a certificate to that effect from the president and board. September 16th, 1867, Green L. Poplin, president of the company, wrote to plaintiff that he was instructed by the directors to say they recognized and vouched for the validity of the 581 bonds sold to him by Webber. Per contra, there was evidence from which the court found that the 581 bonds were all fraudulently issued. Of 119 of them it was shown that they came into the hands of S. G. Kitchen, under the order of the board of June 13th, 1861, as part of the 912 bonds pledged by that order, and remained in his hands until March, 1866, when he delivered them to one Rayburn, either in payment or as security for a debt due from him to Rayburn. December 20th, 1866, Rayburn sold them to H. H. Bedford, who sold them to Webber, from whom plaintiff obtained them.</p> <p>Allen’s Purchases of stock. Stoddard countv was the owner of 6000 shares of stock in the Cairo & Fulton Railroad Company. The defendant, Allen, in December, 1870, purchased these shares and took a transfer of them. Dunklin county owned 4480 shares. In November, 1860, one Miller having obtained a judgment against the county, caused this stock to be sold under execution, and himself became the purchaser. In 1869 his legal representatives sold to Kitchen, who, in 1871, sold to Allen. The validity of the conveyances by which Allen acquired the stock of these two counties, was denied by plaintiff on grounds which need not be stated. Scott county owned 1250 shares. In August, 1870, Allen bought them, together with all the swamp lands which had been subscribed by the county to the railroad company. The conveyance was made on certain conditions to be performed by the grantee. No evidence was offered to show that the conditions had been complied with.</p> <p>Allen's Purchases of Lands. The General Assembly, by an “act in relation to swamp and overflowed lands,” approved March 10th, 1869, in order to convey to the different counties a complete title to the swamp lands, directed patents to be issued embracing all the swamp or overflowed lands lying within the limits of the several counties, “conveying thereby all the title and interest of the State, in and to such lands, to the counties in which such lands may lie.” In pursuance of this act the governor, on the 29th day of April, 1870, issued patents to the counties of Scott, Stoddard, Butler and Dunklin, embracing all the swamp lands included in the deeds of trust. On the 18th day of August, 1870, the county of Scott conveyed to Allen all of its swamp lands, being those conveyed by the deeds of trust. On the 28th day of July, 1869, the county of Stoddard sold and conveyed all of its swamp lands, including those conveyed by the deeds of trust, to Geo. W. Kitchen and others, who conveyed to Allen. The defendant, Allen, to show title in himself to tue swamp lands, introduced in evidence the following deeds; A deed dated September 15th, 1866, from the sheriff of Stoddard county to Banke. of'the lands in that county, contained in the deeds of trust, upon a sale made September 11th, 1866, under an execution issued on a judgment in favor of Banke against the railroad company, rendered November 21st, 1863. A deed dated April 15th, 1867, from Banke, of the same lands, to Beal. Also a deed dated September 14th, 1867, from the sheriff- of Stoddard county to Bethune and Beal, of parts of the same lands in that county, upon an execution sale, September 11th, 1867, under a judgment in favor of Crocker against the railroad company, rendered January 7th, 1867. A deed dated April 5th, 1867, from the sheriff" of Scott county to Beal and Bethune, of the-lands in that county described in the deeds of trust, upon execution sale made under a judgment rendered on January 13th, 1864, in favor of Cashman against the railroad company. A deed from the sheriff of Bunklin county to Beal and Bethune, dated September 6th, 1867, of the lands of that county embraced in the trust deeds, upon execution sale made under a judgment in favor of Stratton against the railroad company, rendered November 20th, 1862. A deed from the sheriff" of Butler county to Bethune and Emerson, dated September 26th, 1867, of the lands in that county described in the trust deeds, upon execution sale under a judgment, rendered November 21st, 1863, in favor of Stratton against the railroad company. A deed of the same lands from Emerson to Beal, dated January 18th, 1871. A deed from the sheriff of Butler county to McWilliams, dated September 26th, 1867, of the lauds in that county described in the trust deeds, upon execution sale made under a judgment rendered November 21st, 1863, in favor of Stratton against the railroad company. A deed of the same lands from McWilliams to Allen, dated June 14th, 1871. Beeds from Beal and Bethune to Allen for all the lands included in the foregoing conveyances to them.</p> <p>The Seelve Bonds. The history of the 5.1 bonds .claimed by defendant Seelye, is as follows: In March, 1859, a construction contract was made between the railroad company and Hiram S. Hamilton. Sylvester Sexton was then, and during its continuance remained, a director and vice-president and superintendent of construction of the company — charged with general superintendence, and with the duty of certifying for payment all claims against the company for construction. In this contract Sexton was, if not the sole contractor in fact, interested with Hamilton, and paid Hamilton a salary of $2,500 per annum for the use of his name in the contract, and as a cover for his interest. The contract specified $25,000 per mile as the amount to be paid for building and equipping the road, but the actual amount to be paid for the work was $20,000, it being agreed that the remaining $5,000 per mile should be divided between them. Under this contract the bonds now presented by Seelve were delivered to Hamilton, and by Charles S. Hamilton delivered to Sexton, except, perhaps, one, which the court’ below found came from another source. The bonds were sold by Hamilton, in 1861, to Stevens, who, in 1872, sold them to Seelve.</p> <p>The cause was tried before the court, beginning July 24th, and the evidence was concluded August 12th, 1873.</p> <p>The Decree Below. On June 8th, 1875, the court rendered a decree, and found the issues as to the 581 bonds, against the plaintiff, and as to said bonds dismissed the petition. As to the 125 bonds, the court found that plaintiff is the holder and owner of the $12,000 note made by the Cairo & Pulton Railroad Company payable to Schuschardt & Gebhardt, dated April 12th, 1860, and that plaintiff' holds possession of said 125 bonds as pledgee thereof, and has an equitable lien thereon to secure payment of said note, for the amount of which, with the interest, amounting to $22,552, judgment was entered to be levied of the swamp lands. As to fifty of the bonds, claimed by defendant Seelve, designated by their numbers, his claim was dismissed, and judgment was rendered in his' favor upon the remaining bond and eleven coupons claimed by him, amounting to $3,380. As to the ten bonds claimed by Moore and Patterson’s administrator, the court decreed a lien in their favor as pledgees to secure a balance of indebtedness amounting to $2,070.30 ; and found all other issues against said defendants. As to the 120 coupons claimed by defendant Hill, the court found against said claim, and dismissed the same. The court found against defendant Clarkson upon his claim to bond No. 512, and dismissed the same.</p> <p>The plaintiff and defendants Seelye, Moore, Bridges and Allen, severally filed motions for a new trial, all of which were overruled, exceptions were duly saved, and said parties respectively appealed. On June 18th, 1875, defendant Hill filed his motion for a new trial, which was overruled. In addition to the foregoing, other facts necessary to a complete understanding of the case, will be found stated in the opinion of the court.</p> <p>Plaintiff’s bonds may he divided into two classes; 1st, those, the title to which is supported by evidence of possession under the orders of the board of March and June, 1861; 2nd, those which do not appear to have been issued under those orders. As to the former, of which plaintiff owns 320, no question of notice can arise. These' 320 include the 125 Gebhardt & Schuschardt bonds. As to the remaining 388 we insist the evidence shows plaintiff' had no notice of anything to invalidate them.</p> <p>1. There is nothing in the objection that the sale to Gebhardt & Schuschardt was void, because neither the $12,000 note nor the pledge was the act of the company. Newport Man. Co. v. Starbid, 10 N. H. 123; Witte v. Derby Fishing Co., 2 Conn. 260; Stafford v. Wyckoff, 1 Hill 11; Farmers Bank v. Troy Bank, 1 Douglas (Mich.) 457; Moss v. Livingston, 4 Comst. 208 ; White v. Bond, 16 Mass. 401; McClellan v. Reynolds, 49 Mo. 312; Abbott on Corp., p. 13, $ 108; Lazarus v. Shearer, 2 Ala. (N. S.) 718; Drake v. Flewellen, 33 Ala. (N. S.) 106; Musser v. Johnson, 42 Mo. 78; Smith v. Alexander, 31 Mo. 193; Shuetzc v. Bailey, 40 Mo. 69; Koehler v. Black, 2 Black, 715.</p> <p>2. There is nothing in the objection that the sale of 125 bonds by Schuschardt & Gebhardt was invalid without a personal demand .on, the company to pay the debt and a personal, notice of the time and place of sale. By the ancient common law when a simple'naked pledge of chattels was made without an express agreement for a sale, and the time for redeeming was indefinite, a demand of the money secured or notice to redeem, had to be made, and such notice or demand was .to be reasonable; and in case of sale the pledger was entitled also to notice of time and place of the intended sale. - But when on the contrary the time for paying or redeeming, and the right to sell was fixed by the contract of pledge, so that the parties were distinctly informed by mutual stipulations of their several rights and duties, no demand or notice were required. The contract of pledge waived them in advance. Genet v. Howland, 45 Barb. 565 ; 2 Hilliard on Mortg., (4 Ed.) § 38, top p. 609; 2 Kent Comm., (12 Ed.) 581; 2 Story on Contr., (5 Ed.) 33; Ratcliff v. Davis, Yelverton 178; 3 Salkeld 267; Pothonier v. Dawson, Holt, N. P. 383; 1 Smith Lead. Cases (4 Am. Ed.) 258; Johnson v. Stear, 15 Com. B. (N. S.) 330; Bigot v. Cubley, 15 Com. B. (N. S.) 701; Delisle v. Priestman, 1 Brown (Pa.) 186; Cortelyou v Lansing, 2 Caines’ Cas. 200; Garlick v. James, 12 John. 149; Castello v. City Bank, 1 N. Y. Leg. Observer 25; Vest v. Green, 3 Mo. 219; Perry v. Craig, 3 Mo. 516; Hendricks v. Robinson, 2 John. Ch. 283; Brown v. Ward, 3 Duer 660; Allen v. Dyhers, 3 Hill 594; Dykers v. Allen, 7 Hill 498; Wilson v. Little, 1 Sandf. Sup. Ct. 358; Hyatt v. Argenti, 3 Cal. 157; Robinson v. Hurley, 11 Iowa 410; Ogden v. Lathrop, 1 Sweeny (N. Y. Sup. Ct.) 650; Milliken v. Dehon, 27 N. Y. 372 ; Davis v. Funk, 39 Pa. St. 250; Diller v. Brubaker, 52 Pa. St. 502; Bryson v. Rayner, 25 Md. 424; Md. Fire Ins. Co. v. Dalrymple, 25 Me. 242; Bryan v. Baldwin, 7 Lansing 174 ; Beatty v. Sylvester, 3 Nev. 228; Wheeler v. Newbould, 16 N. Y. 392.</p> <p>3. The sale of the 125 bonds by Gebhardt & Schuschardt to themselves, is not void. Milliken v. Dehon, 27 N. Y. 364; Diller v. Brubaker, 52 Pa. St. 498; Foster v. Goree, 5 Ala. 428; Hill Trustees, p. 159 ; Downes v. Grasebrooh, 3 Meriv. 208; Elliott v. Wood, 53 Barb. 285; Saunderson v. Walker, 13 Ves. 601; Coles v. Trecothick, 9 Yes. 234; Hamilton v. State Bank, 22 Iowa 306; Hyatt v. Argenti, 3 Cal. 151; Bobson v. Racey, 4 Selden 216; Olcott v. Tioga B. B., 40 Barb. 179; Bryan v. Baldwin, 7 Lansing 174; Brightman v. Beeves, 21 Texas 70; Wright v. Whitehead, 14 Vt. 268; Wright o. Smith, 23 N. J. Eq. 106; Medsher v. Swaney, 45 Mo. 273; Baltimore Ins. Co. v. Dalrymple, 25 Md. 302; Blood o. Hayman, 13 Met. 231; Pitt v. Petway, 12 Iredell 69 ; Bobbins v. Bates, 4 Cush. 104; Edmondson v. Welsh, 27 Ala. 578; Scott v. Freeland, 7 S. & M. 409 ; Johnsot v. Bennett, 39 Barb. 237; Hayioard v. Ellis, 13 Pick. 276; Worthy v. Johnson, 8 Geo. 236; McConnel v. Gibson, 2 Ill. 128; Yeackel v. Litchfield, 13 Allen 419.</p> <p>4. The company’s equity of redemption to the 119 Kitchen bonds has been extinguished by force of the statute of fraudulent conveyances. The record shows that these bonds were pledged to Kitchen, by the company, June 13th, 1861, and immediately went into his possession and remained there till he put them in Rayburn’s possession. The use reserved by the company was the right to redeem from Kitchen, but there was no recording of any instrument reserving this use. Either Kitchen or Rayburn could, therefore, sell the bonds and pass the title. Cook v. Clippard, 12 Mo. 379 ; Layson v. Rogers, 24 Mo. 192; Balke v. Swift, 53 Mo. 85 ; Travis v. Bishop, 13 Met. 304; Bryson v. Penix, 18 Mo. 13; Boe v. Allsop, 5 Barn. & Al. 142.</p> <p>5. If the company had any right to these bonds after the pledge was made to Gebhardt & Schuschardt in April, 1860, and to -Kitchen in June, 1861, it was a right to redeem, a right to tender the money owing by the company, and demand return of the property pledged. The right of action was open to the company as soon as the debts were due, that is October 15th, 1860, and June 17th, 1861. The company had no other right. An action for detaining or injuring any goods or chattels, including actions for specific personal property, is barred in five years. 2 Wag. Stat., pp. 917, 918. It is true there is'no claim to redeem in the pleadings — of course there is no plea of limitation to such a claim. The effect of the time which has passed can only be considered by supposing defendant had filed a cross bill to redeem. If that should now be done, defendants would be barred by lapse of time. Lockwood v. Ewer, 2 Atk. 303; Aggas v. Pickerell, 3 Atk. 225; McNair v. Lott, 25 Mo. 182; Keeton v. Keeton, 20 Mo. 530; Kane v. Bloodgood, 7 John. Ch. 90; Roberts v. Sykes, 30 Barb. 173; Waterman v. Brown, 31 Pa. St. 161; Perry v. Craig, 3 Mo. 516; 2 Wag. Stat., 920, 921. August 26th, 1866, more than five years before the bringing of this suit, Kitchen came to a settlement with the company, and took 168 bonds, including the 119, in payment of his debt, the company having the right to redeem the same by paying the debt in thirty days.</p> <p>6. The bonds sued on are negotiable instruments. Morris Canal Co. v. Fisher, 9 N. J. Eq. 667; Mercer Co. v. Macket, 1 Wall. 83; Chapin v. Vermont & C. R. R. Co., 8 Gray 575; Bronson v. La Crosse It. R. Co., 2 Wall. 283; Conn. Ins. Co. v. Cleveland R. R. Co., 41 Barb. 9; Brainerd v. New York, &c., 26 N. Y. 496 ; 12 Redf. Railways, p. 531, § 6; Ide v. Conn., &c., R. R. Co., 32 Vt. 297.</p> <p>7. To defeat the title of Chouteau to the 386 bonds not issued under the order of June 13th, 1861, it must be shown that he either knew or believed they were bad when he bought them. Being a purchaser for value, the law only requires of him that he shall have acted in good faith. Goodman v. Simonds, 20 How. 364; May v. Chapman, 16 Mess & W. 355. Murray v. Lardner, 2 Wall. 110; Raphael v. Bank of England, 33 Eng. Law & Eq. 279; Magee v. Badger, 30 Barb. 264; Potter v. McDowell, 43 Mo. 97; Flagg v. Palmyra, S3 Mo. 450. Tho fact that Chouteau gave fur the bonds but a small part of their face value, does not make him any the less a bona fide holder. .King vi Thompson, 9 Pet. 204; Emerson v. Slater, 22 How. 28; Sturlyn v. Albany, Langdell’s’ Sel. Cas. Contr. 185; Brooks r. Ball, Langdell’s Sel. Gas. Contr. 194; Wilkinson v. Oliviera, Langdell’s Sel. Cas. Contr. 202 ; Cadwallader v. West, 48 Mo. 483; Brown v. Penfield, 36 N. Y. 473; Bank v. McLeod, 7 Moore 35; Brooks v. Haigh, 10 Ad. & Ell. 323. The bonds were sold for all that could be got for them, as the evidence shows. The sale was, therefore, not fraudulent. Mercer Co. v, Hackett, 1 Wall. 83; Woods v. Lawrence Co., 1 Black 886 ; Baily v. Smith, 14 Ohio St. 396; Bay v. Coddington, 5 John. Ch. 58. Whatever was the character of the sale, by the board, September 14th, 1866, Chouteau had no knowledge of it when he purchased the bonds. The evidence puts this beyond question.</p> <p>8. The deed of trust, May 23rd, 1867, is a genuine and legal act of the corporation. It was duly and legally acknowledged and . certified and recorded. The execution of it was further proved by witnesses. It was repeatedly ratified and approved by the board and by the stockholders.</p> <p>9. The sale under the State lien did not affect the lands granted by the State to the company.</p> <p>10. The lands donated by the counties were not sold under the State lien. The governor undertook to convey them, but without authority of the act of 1866 under which the sale was made, and his act is, therefore, void. State v. McKay, 43 Mo. 594.</p> <p>11. The sheriff’s deeds to Deal and Bethune are void. The sales were all made on executions issued against the corporation in 1867, after it had ceased to exist.</p> <p>12. It is too late, for the stockholders now to deny the validity of the bonds. All the acts complained of as fraudulent or illegal, were done by the board of directors. They pledged the bonds in 1861, delivered part to Kitchen and sold another part in October, 1866. These directors had power to bind the stockholders as their agents. A fraudulent act, supposing all these acts fraudulent, is good enough between the parties, and will stand forever, unless objected to. A man may assent to a fraud if he chooses. It is voidable, not void, and must be objected to in reasonable time. Peabody v. Flint, 6 Allen 52; H. St. Jo. R. R. Co. v. Marion Co., 36 Mo. 294; Willoughby v. Comstock, 3 Hill 389; Barrett v. Schuyler Co. Ct., 44 Mo. 197; Rogers v. Burlington, 3 Wall. 667; Buell v. Buckingham, 16 Iowa 284; Bank v. Dandridge, 12 Wheat. 68; Moran v. Miami, 2 Black 724; Bissell v. Jeffersonville, 24 How. 287; Supervisors v. Schenk, 5 Wall. 772 ; Zabriskie v. Cleveland, 23 How. 400. Allen, as assignee of the stock of Scott county, is bound by the acquiescence of his assignor. James v. Woodruff, 10 Paige 541; McCready v. Rumsey, 21 How. Pr. 271; Ang. & Ames Corp., (9 Ed.) top p. 811; Abbott on Corp., p. 753.</p> <p>1. The certificates of acknowledgment are insufficient. Wag. Stat., § 14, p. 275; Cabell v. Grubbs, 48 Mo. 353. Equity will not supply the deficiency. Story Eq. Jur., § 174; Chauvin v. Wagner, 18 Mo. 531; Wannall v. Kem, 51 Mo. 150.</p> <p>2. The deeds are signed and acknowledged by “ M.' Brayman, president, &c., and not by or in the name of the corporation, and are not, upon the face, the deeds of the company. Hatch v. Barr, 1 Ohio 181; 1 Parsons on Contracts, 140; Abbott Dig. Law of Corp., p. 271, §§ 23, 24, 25, 26; Brinley v. Mann, 2 Cush. 337.</p> <p>3. The resolution of September 22nd, 1857, only authorized the conveyance of 400,000 acres of land, while the deeds of trust purport to convey 405,000 acres. It is imnossible to eliminate this excess. No means exist by which it can be determined what particular tract described was authorized and what was unauthorized; hence the instrument is absolutely void as a conveyance. Story on Agency, p. 106; Liverm. on Agency, p. 101, § 1; Sugden on Powers, (3 Ed.) Ch. 5 ;Com. Dig. Att’y, Ch. 5.</p> <p>4. The whole evidence shows beyond question that the order of September 14th was an endeavor to divide up and. dispose of the 912 bonds turned over by Brayman, in anticipation of the sale of the road on the approaching October 1st.</p> <p>5. The order of June 13th, 1861, was actually and constructively a fraud upon the company. The pledgees named in it, even if there had existed the indebtedness in their favor, were the very persons who made the order, officers, agents and trustees of the company. They could derive no personal and exclusive benefits from their official positions, and the attempt to do so was void. Story’s Eq. Jur., § 322; Jeremy Eq. Jur. pt. 2, p. 395; Richards v. N. H. Ins. Co.,43 N. H. 263 ; T. & U. M. R. R. Co. v. Hudson, 19 L. & E. R. 361; Bedford. R. R. Co. v. Bowser, 48 Pa. St. 29.</p> <p>6. Brayman had no authority from the company to make the $12,000 note, nor to hypothecate the bonds. lie did not represent himself as having the power to make the arrangement, and they were informed that he did not have it, for in the letter accompanying the promissory note, he says: “ I further agree to have a resolution of the board to the above effect, and to transmit you a certified copy of the same.”</p> <p>7. The sale by Schuschardt & Gebhardt was void for want of personal notice to the alleged pledger to redeem before the sale. Edwards on Bailments, pp. 250 251; Wilson v. Little, 2 Comst. 443; Stearns v. Marsh, 4 Denio 230; Brown v. Ward, 3 Duer 660 ; Milliken v. Dehon, 10 Bosw. 325; 2 Kent Com., 583 ; Story on Bailments, §§ 318, 845; Markham v. Jaudon, 41 N. Y. 235; Luckett v. Townsend, 3 Texas 119; Tyler on Usury, Pawns and Loans, 581, 594, 595, 596, 597. The fact that the note was payable at a fixed date did not dispense with this notice or demand. It is held that personal notice to the pledger to redeem must be given in such cases as well as where the debt secured is payable immediately, and if the pledger cannot be found, and notice cannot be given him, judicial proceedings to authorize a sale must be resorted to. The waiver contained in the note itself was of notice of sale, not of notice to redeem.</p> <p>8.- In all the eases cited for the plaintiff the pledge was of property to secure payment of a. note made by the pledger to the pledgee directly as payee. In this ease the pledger does not deliver the note as evidence of the debt to the pledgee, but as collateral security, accompanied by the attached bonds to indemnify him against acceptances. The reason, no doubt, was because the contract of April 20th contemplated the payment of the net earnings of the railroad to the pledgees, in monthly installments, which would largely reduce if not fully pay the acceptances before maturity, and the amount so paid was to be credited on the note so “lodged as collateral security for the credit.” At the time of the delivery of the note and bonds to S. & G., there was in fact no debt of any kind due to them; there was only a contingent liability, dependent upon failure of the company to meet such drafts as it might draw, and S. & G. accept out of the net earnings or otherwise. Hence the note was merely pledged — pot delivered to them as payees.</p> <p>9. Plaintiff claims ownership of the bonds, not a lien as bailee or pledgee. He must recover on the case ho makes in his pleadings, or not at all. The decree allowing him to come in as pledgee of the 125 bonds is, therefore, erroneous.</p> <p>10. The bonds are not negotiable in form. Wag. Stat., § 15, p. 215 ; Edwards on Rills, pp. 60, 61, 126, 155. 164, 165; Story Prom. Notes, p., 10 ; Byles on Bills, p. 182; Chitty on Bills, p. 108.; Goodman v. Simonds, 20 How. 359 ; 2 Rodfiekl on Railways, p. 604; White Vt. & Mass. R. R. Co., 21 How. 575 ; Morris Canal Go. v. Fisher, 9 N. J. Eq. (1 Stockton) 667; Chapin, v. V. & M. R. R. Co., 8 Gray 575 ; Delafield v. Illinois, 2 Hill (N. Y.) 177; Carr v. Le Fevre, 27 Pa. St. 418; Craig v. Vicksburg, 31 Miss. 216 ; Brainard v. N. Y. H. R. R. Co., 25 N. Y. 496, (10 Bos. 332); Bronson v. La Crosse B. B. Co., 2 Wall. 283; Ide v. Conn. § Bass. B. B. Co., 32 Vt. 298; Hubbard v. R. R. Co., 36 Barb. 286; 1 Daniel on Negotiable Insts., p. 41; Way v. Smith, 111 Mass. 523; Hubbard v. Mosely, 11 Gray 170.</p> <p>11. Chouteau’s means of information as to the history of the bonds and his knowledge of the facts, are such as to destroy his claim to be considered an innocent holder. Story on Bills, §§ 194, 216; Chitty on Bills, (11 Ed.) p. 256 et seq; Bayley on Bills, (5 Ed.) p. 548; Story on Prom. Notes, § 197; Goodman v. Simonds, 20 How. 343; Cass Co. v. Green, 66 Mo. 500 ; Moore v: Moore, 39 Iowa 461; Wade on Notice, § 88, p. 44; Horton v. Bayne, 52 Mo. 531; Hamilton v. Marks 52 Mo. 78; Hamilton v. Marks, 63 Mo. 167.</p> <p>12. Coupons for interest, eight years over due, were attached to each and every bond, which was thus dishonored on its face. First National Bank v. Scott Co., 14 Minn. 77; Arents v. Commonwealth, 18 Grattan 750; Newell v. Gregg, 51 Barb. 263; Vinton v. King, 4 Allen 562.</p> <p>13. Plaintiff does not come with clean hands, and equity will leave him in the situation in which he placed himself, with his bonds, whatever their character, surrendered, canceled and annulled. 1 Story Eq. Jur., § 298, et seq; § 322; Campbell v. Walker, 5 Yes. 678, 680; Hamilton v. Wright, 9 0. & E. 111, 123.</p> <p>14. The statute of fraudulent conveyances is inapplicable to the Rayburn bonds. The first clause, section it. S. 1855, p. 803, relates to possession of personal property under a pretended loan for a longer period than five years. These bonds were not borrowed by Kitchen or Rayburn. The second clause relates to possession as owner of personal property, where there is a reservation or condition in favor of another, which is not of record. The bonds were held under the order of Juno 13th, 1861, by Kitchen in pledge, not as owner. Cook v. Clippard, 12 Mo. 379; Layson v. Rogers, 24 Mo. 192; Balke v. Swift, 53 Mo. 85; Bryson v. Penix, 18 Mo. 13 ; Travis v. Bishop, 13 Met. 30; Doe v. Allsop, 5 Barn. & Ad. 142.</p> <p>15. The statute of limitations does not give plaintiff title to either the 119 Kitchen bonds or the 125 S. & G-. bonds. 1st, Because it is not pleaded. Benoist v. Darby, 12 Mo. 196; 1 Chitty Ph, p. 472. 2nd, Because the statute does not run against an express trust, such as a pledge. Angell on Lim., (5th Ed.) p. 164; Slaymaker v. Wilson, 1 Pa. 216. If a stipulated time is fixed for the payment of the debt, and the debt is not paid at the time, the absolute property does not pass to the pledgee. If the pledgee does not sell,he still retains the property as a pledge,and upon a tender of the debt, ho may at any time be compelled to restore it, for proscription or the statute of limitation does not run against it. The pawner has his whole life to redeem. 1 Story on Bails., 235; Edwards on Bails., 268, 222; Angell on Lim., 164; Cortelyou v. Lansing, 2 Caine’s Cas., 200; 2 Kent’s Comm., (3 Ed.) 583.</p> <p>16. The construction' contract of Hamilton with the -company was void, both at common law and under sections 58 and 59 of the railroad law, (R. S. 1855, p. 438). It is, therefore, no legal consideration for the bonds, which are, therefore, void. Story on Prom. Notes, § 189.</p> <p>It is claimed that although the contract was void, the company received work under it, and were bound in law to pay for it, and that the company waived any objections to the contract and settled with Hamilton. The attempt is to confound the right of Sexton or Hamilton to recover on a quantum meruit for work done, with the right of recovery on the bonds, which were issued under the contract. The contract provided for the issue of these bonds, and they were issued under it by Brayman, who was a party to it; their delivery was not only a fraud at common law, but in violation of the statute, and the company had no power to waive objections to such violation, if it had ever done so, which i.s untrue. The delivery of the bonds was not a settlement of the claim; they were promises-to pay money, the consideration of which was the void contract m pursuance of which they were issued, and of which they formed a part.</p> <p>1. If sections 58 and 59 were applicable to this corporation, they could not affect these bonds. This claim is not based upon the construction contract, but upon bonds of the company dated nearly two years before that contract was made or thought of. They-are not the contract prohibited and denounced by the statute. That statute at most could only be used to show that the construction -contract was void. Independent of this statute there is no -objection to a director or officer of a corporation contracting with it. 1 Speers Eq., 562; 1 Pick. 297; 5 How. 665 ; R. M. Charl. 260.</p> <p>2. The 51 bonds if given to Hamilton in settlement ■of the work and labor done upon the company’s road would not be void. There was nothing illegal in the building of the road. If the construction contract could not be enforced, nevertheless the company received his work, and were bound in law to pay for it; and the company waived any objections to the contract, and settled with Hamilton, paying him in their general securities, and thus changing their status with him from what it was on the construction contract into the bonds; and they cannot now go back of this adjustment and waiver and plead that the original ■contract was illegal. A contract illegally entered into may be so far executed by the parties, that it is considered purged of .its illegality. It is well settled that if the matter has.been so adjusted that the plaintiff can make hut his case without being compelled to refer to or prove the illegal contract, he can recover. Roby v. West, 4 N. H. 290; Thomas v. Brady, 10 Barr 164; Scott v. Duffy, 14 Pa. St. 18; Lestapies v. Ingraham, 5 Pa. St. 81; Casady v. Woodbury Co., 13 Iowa 121; Fisher v. Bridges, 2 Ellis & Black. 126; Buck v. Albce, 26 Yt. 184; Gwinn v. Simes, 61 Mo.' 335.</p>
<p>1. Deed. A deed running in the name of the C. & F. R. R. Co., a .corporation) as grantor and signed “ M. Brayman, president C. & F. R. R. Co.; G. R. Teasdale, secretary C. & F. R. R. Co.,” is the deed of the corporation.</p> <p>2. A Certificate of Acknowledgment may he good without using the word “acknowledge.” Words of equivalent import will be ' sufficient.</p> <p>3. Corporation: defective execution of rower. validated by acquiescence. It the officers of a corporation in undertaking to carry out a resolution of the board of directors requiring them to . execute a conveyance of lands, convey a quantity in excess of that, specified by the resolution, and there is no way of determining what lands are rightfully conveyed, and what wrongfully, the conveyance will, for this reason, be held fatally defective, but long acquiescence of the corporation, accompanied by acts of recognition on its part, will cure the defect.</p> <p>4 Misrecital of Statutory Authority. Where two statutes authorized the county courts of certain counties to make certain subscriptions and to cause certain patents to he issued, one upon •condition and the other without condition, and orders of subscription were made and patents were issued reciting the former act as the authority for making them, but it did not appear that the condition had been complied with ; Held, that the orders and patents were, nevertheless, as valid as if they had recited the latter act.</p> <p>5. Title to Cairo & Fulton Railroad. Lands: foreclosure of state’s lien. The lands granted to the State of Missouri by the United States by the act of Congress of February 9th, 1853, (10 U. S. Stat., 155,) and by the State appropriated to the construction of the O. & F. R. R. by the act of the Legislature of February 20th, 1855, (Acts 1855, p. 314,) were subject to'the lien reserved by the State in her own favor to secure the payment of the bonds issued by her for the benefit of that company, and passed to the purchaser .at the foreclosure sale made in pursuance of the acts of February 19th and March 19th, 1866, (Acts 1866, pp. 107, 115).</p> <p>The swamp lands which had been conveyed by the counties in payment of subscriptions to said company did not pass by said sale.</p> <p>6. Corporation: notice of unauthorized acts of officers : effect of acquiescence. Notice to the officers ,of a corporation of, the unauthorized acts of their predecessors in office is notice to the corporation, and if no dissent is expressed, ratification will be presumed, and the acts will become binding upon the corporation and its stockholders. .</p> <p>7. Pledge: notice of sale: waiver. It is the general rule that the pledgee of personal property, before selling, must demand payment of the pledger or give him notice of the time and place of the intended sale, but this rule may be waived by agreement between the parties, and it has no application in cases where by the contract a definite time is fixed for the payment of the debt. Tn either of these cases sale may lie made without notice or demand.</p> <p>8. Pledge. Where bonds are pledged as security tor the payment of a note which is in turn pledged as security for the payment of acceptances, the time when the pledgee may sell the bonds is determined by the maturity of the note and not of the acceptances.</p> <p>9. --— ¡ sale by pledgee to himself. It is (ho general rule that a pledgee cannot buy at his own sale of the pledged property, but this rule may be waived by express agreement of the parties.</p> <p>10. Fraud. Certain bonds claimed by the plaintiff in this case; Reid, to have been fraudulently issued.</p> <p>11. Pledge OF CORPORATE ASSETS BY DIRECTORS TO THEMSELVES. Any attempt by the directors of a corporation to make a pledge of the assets of the corporation in favor of themselves, will be scrutinized by a court of equity’with the most rigorous and jealous observation.</p> <p>12. Bonds, when Won-negotiable. A bond which, by its terms, is payable at a time certain, but contains a clause reserving to the makers “the right to pay the same at any time to Do named'by them, by adding to the principal a sum equal lo twenty per cent, thereof,” is non-negotiable for uncertainty as to the time of payment.</p> <p>13. -. Bonds with past due coupons attached are to be treated as dishonored paper.</p> <p>14. Principal and Agent: agent’s knowledge. The rule that the knowledge of the agent affects the principal, is applicable not only to knowledge acquired during the continuance of the agency, but to such as was acquired so shortly before it began as necessarily to give rise to the inference that it remained fixed in the mind of the agent during his employment.</p> <p>15. Statute of Limitations: fraud: pleading: pledge. The statute of limitations cannot he invoked in behalf of .a title fraudulently acquired in violation, of a trust, nor will it be allowed if it is not pleaded, nor does it run against a pledger as long as the pledge continues.</p> <p>16. Pledge: assignment by pledgee. A pledgee can ordinarily convey no greater right to the pledged property than h.e himself possesses. If it is non-negotiable paper, it will be subject to the same defenses in the hands of the assignee as in his own.</p> <p>17. Parties: corporation: mortgage. A stockholder of a defunct corporation has such an interest as entitles him to defend a suit brought to foreclose a mortgage -alleged to have been executed by the corporation in its life-time. So has one who has acquired an independent title to part of the lands embraced in the mortgage.</p> <p>18. Ho Laches nor Acquiescence. Under the circumstances of the present case, no laches can be imputed'to the Cairo & Fulton R. R. Co. or its stockholders, nor such acquiescence as will preclude them from defending against -certain bonds issued in the name of that company.</p> <p>19. Foreclosure of Mortgage: practice and pleadings. If a party to a foreclosure proceeding in his pleadings claims the ownership of bonds secured by the mortgage, it is error to enter up a decree in his favor as pledgee.</p> <p>20. Railroad Construction Contract: bribery of director. A construction contract is not void under sections 58 and 59 of the railroad law, (R. S. 1855, p. 438,) because the contractor has an agreement with-a director of the railroad company to divide the profits of the contract with him. Sherwood, C. J., and Norton, J., dissenting.</p> <p>21. Bonds: illegal contract. Bonds issued in payment for work done under an illegal contract are not tainted with the illegality. Sherwood, C. J., and Norton, J., dissenting.</p> <p>21 Foreclosure of Mortgage: jurisdiction. Since the circuit court has general jurisdiction over the foreclosure of mortgages, objection to the jurisdiction, based upon the fact that the' mortgaged premises are not situate in the county where the suit is brought, must be taken'by a proper plea, and will be waived by pleading to the merits.</p>
Supreme Court of Missouri
Supreme Court of Missouri