
    George H. Beattys, Resp’t, v. The Town of Solon, App’lt.
    
      (Supreme Court, General Term, Fourth Department,
    
    
      Filed May 13, 1892.)
    
    1. Railroad—Organization—Failure to make payment on subscription.
    The mere failure of some of the subscribers to pay the ten per cent, upon their subscriptions before the filing of the articles of association, or the fact that the person soliciting subscriptions agreed that they should not have to do so, is not sufficient to invalidate such articles so long as the cash payments, by whomsoever made, amount in the aggregate to ten per cent, on the entire amount of subscriptior
    2. Town bonds—Coupons—Interest.
    In an action upon town bond coupons interest is allowable.
    Appeal from a judgment entered in Cortland county May 21, 1891, for $3,976.64, damages and costs, on a decision made by the circuit court held in that county, a jury having. been waived. Recovery was upon several coupons appearing in the findings.
    
      Bouton & Ghamplin and Louis Marshall, for app’lt; Edward B. Thomas and E. I). Newton, for resp’t.
   Hardin, P. J.

It is found that “ The Utica, Chenango & Cortland Railroad Company *• * * was a railroad corporation, duly organized under the general railroad act of this state, by the due filing of its articles of association April 9, 1870, and that it thereupon became incorporated for the purpose of constructing a railroad from the town of Cortlandville, through the said town of Solon, and the said town of Taylor, in the county of Cortland, in the town of Otselic, in the county of Chenango, in the state of New York.”

It is also found : Its articles of association were filed in the office of the secretary of state April 9, 1870, and previous thereto $1,000 of stock for every mile of railroad proposed to be made, to wit: thirty-two miles, had been subscribed thereto, and ten per cent paid thereon in good faith; and there was endorsed thereon, or annexed thereto, an affidavit made by three of the directors named in said articles that the said amount of stock as required by law had been in good faith subscribed, and ten per cent, paid thereon in cash and in good faith.”

Upon the trial some of the subscribers for the stock were called as witnesses, who gave evidence tending to show they paid nothing on their subscriptions; and some of them “ that they had an agreement with the individual soliciting or taking their subscriptions that they need not pay their ten per cent,” and some of them testified that they had a like agreement that they need not pay anything ; but they testified “ they knew they were bound by the instrument,” and also “ that they intended to make good articles and they also admitted “ that the agreement was a private affair between them and the persons soliciting their subscriptions,” and that they subscribed, so far as the articles were concerned, in good faith and honestly.

It appeared that the corporation as such was no connected with the alleged agreement, and that it had twice made calls for the payment upon the stock. There is no proof that ten per cent on the $32,000 subscription had not actually been paid; on the contrary, it appears in the affidavit of the three directors attached to the articles, in accordance with the requirements of the act of 1850, that ten per cent had been paid upon the $32,000. It also appeared in the evidence that the corporation had proceeded to grade its road for several miles, building bridges and culverts, and had expended some $200,000, or more, on the same with a view of completing and operating its road. It is contended by the learned counsel for the appellant that “ no valid corporation having been organized, the entire issue of bonds was void.” We think the position’ untenable.

(1) If any such agreement was made prior to the subscription or contemporaneous with the act of subscribing to the articles as mentioned by the witnesses to which reference has been made, the same was a fraud upon the law and one that could have no effect and could receive no force. Tuckerman v. Brown, 33 N. Y., 297. We think the act of 1850 under which the railroad was organized did not require that each subscriber should pay, before the articles could be deemed efficient, ten per cent upon their subscription. The Eastern Plank Road Company v. Vaughan, 14 N. Y., 546.

In Lake Ontario, Auburn & New York R. R. Co. v. Mason, 16 N. Y., 451, it was held, viz.: “ It is not necessary to the incorporation of a railroad company under the general act that ten per cent be paid upon the amount of each subscription at the time of making the same or previous to the filing of the articles of association with the secretary of state. It is sufficient if the cash payments, by whomsoever made, amount in the aggregate to ten per cent upon $1,000 for each mile of road proposed to be constructed.”

In Farnham v. Benedict, 107 N. Y., 159; 11 St. Rep., 450, the subscriptions were less than the amount required, and no part thereof were paid in cash, and there was not a compliance with the act of 1850; the case therefore differs from the one before us. Here the affidavit of three of the directors attached to the articles of association states “ that at least one thousand dollars of stock for every mile of railroad proposed to be made by the terms of said articles of association has been in good faith subscribed thereto, that ten per cent, in cash has been paid thereon in good faith, and that it is intended in good faith to construct, maintain and operate the road mentioned in said articles of association.”

In Schenectady & Saratoga Plank Road Co. v. Thatcher, 11 N. Y., 111, it was held that a similar affidavit for a similar purpose was sufficient, and the objections thereto were overruled.

In Buffalo & Pittsburgh Railroad Co. v. Hatch, 20 N. Y, 161, it was held that such an affidavit “ is sufficient evidence that at least $1,000 of stock for every mile of road proposed is subscribed and paid.” In considering a similar affidavit in that case, Grover, J., stated, “The affidavit in this case proves these facts. Whether the public interest requires further restrictions, is a question for the legislature.” It appears here that by chapter 351, Laws of 1872, the legislature recognized the existence of the Utica, Chenango & Cortland Railroad Company; it is competent for the legislature to recognize the continued existence of the corporation. In re New York Elevated Railroad Co., 70 N. Y., 327 and 336.

In Black River & Utica R. R. Co. v. Barnard, 31 Barb., 260, Pratt, J., observed: “But when the proceedings are-regular upon their face, and the company, while in the actual exercise of all its corporate functions, is recognized by the law making power of the State as a corporation, it becomes by such recognition, ipso facto, a legal corporation. 9 Wend., 380; 3 Comst., 470.”

(2.) Upon the argument of the appeal before us it was insisted in behalf of the appellant, “ The petition presented to the county judge failed to state the jurisdictional facts that the subscribers were a majority of the taxpayers of the town whose names appeared upon its last preceding tax list or assessment roll as owning a majority of the taxable property in the corporate limits of the town; ” also, that “ the bonds issued by the railroad commissioners exceeding twenty per cent of the entire taxable property within the bounds of the town, as shown by the last preceding tax list, was unauthorized and void; ” also, that, “ the bonds having been issued without seals, did not conform to the requirements of the bonding act, and were therefore void; ” also, that “t he $24,000 of bonds issued on October 14, 1872, after the entire authorized issue of $44,800 of bonds had been delivered to the railroad company, was without legal authority and void ; ” and, also, that, “although the statute fixed the term of payment of these bonds at thirty years, the time actually intervening between the date of their issue and the date of payment was twenty-eight years and less, thus violating a material provision of the statute; ” and various considerations and arguments were addressed to us in support of the positions thus taken. We think the questions are not open for further examination in this court; they are all discussed in the opinion of Follett, J., speaking for this court, in the case of the Town of Solon v. Williamsburgh Savings Bank, reported 35 Hun, page 1, and the opinion of Bradley, J., delivered in pronouncing an affirmance of our decision, as appears by the report thereof in 114 N. Y., 122; 23 St. Rep., 138. See, also, Metropolitan Life Insurance Co. v. Bender, 124 N. Y., 47 ; 35 St. Rep., 49.

(3.) It was admitted upon the trial that the plaintiff is the owner of the coupons set forth * * * and that he purchased them in good faith and paid the par value thereof in cash without actual notice of any defect in the bonding of the town or issue of the bonds.” The bonds from which the coupons were cut were put in evidence, and it was conceded that the bonds were made payable to the treasurer of the railroad company, or bearer, and that the same had been endorsed by the treasurer in blank. The seventeenth finding of fact is as follows:

“ That the following is a copy of the coupons or interest warrants annexed to the bonds of plaintiff, except as to number and time of payment, to wit:
“ $17.50. The town of Solon will pay to bearer, at the National Park Bank of New York, seventeen fifty-hundredths dollars on the first day of -, 187—, being six months interest on said bond.
“No. —
“Lyman Peck, Jr.,
“Orrin Randall,
“John T. Butman,
“ Commissioners.”

In the body of the bonds it was stated, viz.: “ The interest and principal of this bond are payable at the--; the interest upon presentation at said bank of the coupons hereto annexed, as they respectively become due, and the principal sum upon presentation at said bank of this bond at its maturity. This bond is one of the series of bonds in all amounting to forty-four thousand eight hundred dollars, issued by the said town of Solon underand by virtue of a law of the state of New York, entitled ‘An act to authorize the formation of railroad corporations and to regulate the same, passed April 2, 1850, so as to permit municipal corporations to aid in the construction of railroads; passed May 18,1869.’ ” The several bonds were registered in the office of the clerk of Cortland county, and had endorsed thereon, viz.:

“Utica, Chenango & Cortland Railroad Company, pay to the order of--the within bond and coupon attached, as they severally become due.
Cortlandville,--, 187—.
(Signed) James S. Squires, Treasurer of the Utica, Chenango & Cortland Railroad Company.”
And the further endorsement, viz. : “ State of New York, Town of Solon, Bond No. -, $500.00. Interest payable March 1st, and September 1st at National Parle Bank in the city of New York. Registered in Cortland county Clerk’s office, Book 1, page-.
Frank Place, Clerk,”

In the twenty-first finding of fact it is stated that the sum of $2,681 was due upon the coupons held by the plaintiff upon a recovery as sought in this action; and it is found as a fact in the twenty-second finding, “ That the interest upon said coupons from their several dates of maturity to the 31st ■ day of October, 1889, the date of the trial of this action, is $963.35, to which sum should be added forty-four cents for each day’s interest from said October 31, 1889, up to the entry of judgment herein.” It was also found “ That none of the aforesaid coupons were signed by the said commissioners, but their names were lithographed upon said1 coupons.” It was found as a matter of law that the plaintiff is entitled to judgment against the defendant for $2,681 of principal “ with interest thereon from the date of maturity of the several coupons comprising such principal, which interest amounted to $963.35 on the 31st day of October, 1889, to which sum of $963.35 there should be added forty-four cents for each day’s interest from said October 31, 1889, to said entry of judgment and for the costs of this action." The defendant took numerous exceptions to the findings of fact and of law, and tó the refusals to find, and among the exceptions is one to the conclusion of law that the plaintiff is entitled to judgment as stated. From the evidence and the findings of fact it is manifest that the several coupons held by the plaintiff were attached to the bonds for the convenience of the parties in the collection and payment of interest upon the bonds. The language found in the bonds read in conjunction with the language found in the coupons indicates that the coupons represent the several installments of interest accruing upon the bonds and to become due at the periods referred to in the coupons.

In McClure v. Township of Oxford, 94 U. S., 429, it was held “ Where, upon their face, the coupons refer to the bonds to which they were attached, and purport to be for the semi-annual interest accruing thereon, the purchaser of them is charged with notice of all which the bonds contain.”

In City v. Lamson, 9 Wallace, 482, it was said: “ Besides, the coupons are given simply as a convenient mode of obtaining payment of the interest as it becomes due upon the bonds. There is no extinguishment till payment.”

In City of Lexington v. Butler, 14 Wallace, 296, it was said “as the coupon, if in the usual form, is but a repetition of the contract in respect to the interest, for the period of time therein mentioned, which the bond makes upon the same subject, being given for interest thereafter to become due upon the bond, which interest is parcel of the bond and partakes of its nature and is not barred "by lapse of time except for the same period as would bar a suit on the bond to which it was attached. Coupons are substantially but copies of the stipulation in the body of the bond in respect to the interest, and are so attached to the bond that they may be cut off by the holder as matter of convenience in collecting the interest, or to enable him to realize the interest due or to become due by negotiating the same to bearer in business transactions without the trouble of presenting the bond every time an instalment of interest falls due.”

Reading the bonds and coupons together, the same force and effect is to be given to the language used as though the parties had provided in the bond that semi-annual payment of interest should be made upon the bonds. If the bonds had provided that thirty years from their date the principal was to be paid, and the interest was due and payable every six months at the rate of seven per cent., the contract in effect would have been the same as the contract between the parties evidenced by the bond and the several coupons. In the case supposed, the language would all have been found in one instrument; the equivalent language is now found in the bonds and in the respective coupons. Bailey v. Buchanan, 115 N. Y., 297 ; 26 St. Rep., 128. No evidence was produced upon the trial of a new promise to pay interest upon the coupons or the sum represented by them; nor is there any finding of fact that there was a new promise or agreement to pay interest upon the interest accruing upon the bonds and represented by the coupons. Nor was there any new consideration passed between the lender and the borrower, to give force and effect to a new agreement if one had been made since the original loan. It seems, then, the plaintiff is not entitled to recover interest on the coupons from the date of their maturity, and so far as the findings and judgment allow interest from the date of the maturity of the several coupons down to the date of the decision, the same is erroneous. Stewart v. Petrie, 55 N. Y., 621; Young v. Hill, 67 id., 162. Such interest, so improperly allowed, should be eliminated from the judgment. See 144 U. S., 610.

Interest is allowable from the date of the decision, to wit: October 31, 1889, according to the provision found in § 1235, Code Civ. Pro.

However, as a majority of tire court are of the opinion that interest was allowable, the judgment will, therefore, be affirmed, with costs.

Martin, J.

The only doubt I have as to the correctness of the presiding justice’s opinion in this case is as to that portion relating to the interest.

While it must be admitted that the general rule in this state is that compound interest can only be recovered upon some new and independent agreement after simple interest has accrued, and upon sufficient consideration, still, even to this rule there are some acknowledged exceptions.

In Conn. Mut. L. Ins. Co. v. C. C. & C. R. R. Co., 41 Barb., 9, it was held that if interest coupons annexed to a bond, issued by a railroad company, are not paid when due, interest should be allowed by way of damages for non-paj^ment. It is said in Sedgwick on Damages (8th ed.), § 345: “ Interest is almost universally allowed on the overdue coupons of a coupon bond, though they are obligations for the payment of interest;’’ citing among other cases the following: Gelpcke v. Dubuque, 1 Wall., 175 ; Aurora v. West, 7 id., 82 ; Genoa v. Woodruff, 92 U. S., 502 ; Koshkonong v.Burton, 104 id., 668; Panav. Bowler, 107 id., 529; Scotland County v. Hill, 132 id., 117; Rich v. Seneca Falls, 19 Blatch., 558; Fauntleroy v. Hannibal, 5 Dill, 219 ; Huey v. Macon County, 35 Fed. Rep., 481; Harper v. Ely, 70 Ill, 581; Humphreys v. Morton, 100 id.. 592; Jeffersonville v. Patterson, 26 Ind., 15; Forstall v. Louisiana Planters’ Ass'n, 34 La. Ann., 770 ; Virginia v. Ches. & Ohio Canal Co., 32 Md., 501; Welsh v. First Div. of St. P. & P. R. R. Co., 25 Minn., 314; McLendon v. Anson County, 71 N. C., 38; North P. R. R. Co. v. Adams, 54 Pa., 94; Langston v. S. C. Ry. Co., 2 S., C., 248 ; Nashville v. First Nat. Bank, 1 Baxt., 402 ; San Antonio v. Lane, 32 Tex., 405; Arents v. Com., 18 Gratt., 776; Gibert v. Washington C.,V. M. & G. S. R. R. Co., 33 id., 598; Mills v. Jefferson, 20 Wis., 50. These cases seem to hold that doctrine, which is directly opposed to the opinion of the presiding justice in the case before us. I am of the opinion that the judgments in that respect were right, and should be affirmed.

Merwin, J.

I concur in the opinion of the presiding justice except on the question of interest. The authorities cited by Justice Martin show conclusively that in a case like the present the rule is settled, so far as it can be without a direct decision from the court of appeals, that interest is allowable. As said in Town of Genoa v. Woodruff 92 U. S., 502, it is in entire accordance with the decisions generally of the state courts and of the United States supremé court. See, also, 2 Daniel on Negotiable Instruments (4th ed.), § 1513, and cases cited. This rule was distinctly laid down by the general term of the first district in 1863 in Conn. Mut. Life Ins. Co. v. Cleveland, etc., R. R. Co., 41 Barb., 9, and does not seem to have been questioned since in any reported case in this state. In Young v. Hill, 67 N. Y., 162, which is relied on by the counsel for the appellant, the question, as it is here presented, was not involved or considered. In Bailey v. County of Buchanan, 115 N. Y., 301; 26 St. Rep., 128, it is said by Judge Bari; “ It is true that past due coupons, payable to bearer, when detached from the bonds, are for many purposes independent separate instruments. They may be negotiated and may be sued upon by the holder without the production of the bonds.” If so, it would seem to follow as a matter of course that they would draw interest like any other written obligation for the payment of money. The present action is not upon the bonds but upon the coupons. It is not alleged in the complaint that the plaintiff is the owner of the bonds. It was conceded at the trial that he was the owner of the coupons set forth in the complaint and had purchased them in good faith and for value.

The statute, under which the bonds were issued, contemplated that the bonds would have attached separate instruments representing the several payments of interest, and I have no doubt the bonds and coupons or interest warrants attached are substantially in the form authorized and contemplated by the statute. The fact that the names of the commissioners, instead of being actually signed to the coupons, “ were lithographed upon said coupons,” does not make the coupons invalid. The commissioners adopted and delivered as their own the signatures in that form. Brown v. Butchers' & D. Bk., 6 Hill, 443; Pennington v. Bachr, 48 Cal., 565; McKee v. Vernon Co., 3 Dill., 210; Schneider v. Norris, 2 Maule & S., 286; Daniel on Neg. Inst, § 74; 4 Am. & Eng. Encyl. of Law., 431.

Under the authorities, I think the judgment as it stands is correct and should be affirmed.  