
    Beattys v. Town of Solon.
    
      (Supreme Court, General Term, Fourth Department.
    
    April, 1892.)
    1. Railroad Companies—Incorporation—Cash Payment on Stock.
    Laws 1850, c. 140, § 2, providing that the articles of incorporation of a railroad, company shall not be filed until $1,000 of stock for every mile of proposed road has been subscribed, and 10 per cent, thereof has been paid in cash, in good faith, does not require such payment on each subscription, but it is sufficient if the aggregate cash payments equal the amount required by the statute.
    
      3. Same—Agreement between Subscriber and Solicitor.
    An agreement between a person soliciting subscriptions to the stock of a proposed railroad and the subscribers that the cash payment required by Laws 1850, c. 140, § 3, need not be made, is void, and does not affect the validity of the incorporation, where the company was not a party to the agreement.
    8. Interest—Allowance on Interest Coupons.
    Interest coupons bear interest from maturity of the coupons. Hardin, P. J., dissenting. Town o/Solonv. WilUamsbwrgh, Sav. Bank, 31N. E. Rep. 168,114 S. Y. 133, followed.
    Appeal from circuit court, Cortland county.
    Action by George II. Beattys against the town of Solon on coupons representing interest payable on bonds issued by defendant in aid of the construction of the Utica, Chenango & Cortland Railroad Company to recover damages with compound interest for refusal to pay the same. From a judgment entered for plaintiff on a decision of the circuit court, a jury having been waived, defendant appeals.
    Affirmed.
    Argued before Hardin, P. J., and Martin and Merwin, JJ.
    
      Bouton & Qhamplln and Louis Marshall, for appellant. Edward P. Thomas and E. D. .Wewton, for respondent.
   Hardin, Pi 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, and the town of Otselic, in the county of Chenango, in the state of Hew 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 one thousand dollars of stock for every mile of railroad .proposed to be made, to wit, 32 miles, had been subscribed thereto, and ten per cent, paid thereon in good faith; and there was indorsed 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 was called as witnesses, who gave evidence tending to show they paid nothing on their subscription, and some of them “that they had an agreement with the individuals 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 not connected with the alleged agreement, and that it had twice made calls for the payment upon the stock. There is no proof that 10 per cent, on the $32,000 subscription had not actually been paid. On the contrary, it appeared in the affidavit of the three directors attached to the articles in accordance with the requirements o£ the act of 1850 that 10 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, 10 per cent, upon their subscriptions. Plank Road Co. v. Vaughan, 14 N. Y. 546. In Railroad 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 payment, by whomsoever made, amount in the aggregate to ten per cent, upon one thousand dollars for each mile of road proposed to be constructed.” In Farnham v. Benedict, 107 N. Y. 159, 13 N. E. Rep. 784, the subscriptions were less than the amounts required, and no part thereof was 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 $1,000 of stock for every mile of railroad proposed to be made by the terms of said articles of association lias 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 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 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 appeared here that by chapter 351, Laws 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 El. R. Co., 70 N. Y. 327, 336. In Railroad 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 lawmaking power of the state as a corporation, it becomes by such recognition ipso facto a legal corporation.” People v. Manhattan Co., 9 Wend. 380; Trust Co. v. Clowes, 3 N. Y. 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 fact 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 percent, 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 “the $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 fixes the term of payment of these bonds at 30 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 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 Town of Solon v. Williamsburgh Sav. Bank, reported in 35 Hun, 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, 21 N. E. Rep. 168. See, also, Insurance Co. v. Bender, 124 N. Y. 47, 26 N. E. Rep. 345.

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 the 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 indorsed 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 h undredths dollars on the 1st day of-, 187—,
being six months’ interest on said bond.
“‘No.--. Lyman Peck, Jr.
“ ‘ Oerin Randall.
“ ‘ John T. Butman.
“‘ Commissioners.’”

In the body of the bonds it was stated, viz.: "The interest and principal of this bond are payable to 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 $44,800, issued by the said town of Sólon under and 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 principal 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 indorsed 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 indorsement, viz.:
“State of New York. Town of Solon. Bond No.-.
“$500.00. Interest payable March 1st and September 1st, at National Park 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 44 cents for each day’s interest from said October 31, 1889, up to the entry of judgment therein.” It was also found “that none of the .aforesaid coupons were signed by the said commissioners, but their names were lithographed upon said coupons.” It was found as a matter of law that the plaintiff is entitled to judgment against the defendant for $2,681 of the principal, “ with interest thereon from the date of maturity of the several coupons comprising such principal, which amounted to $963.35 on the 31st •day of October, 1889; to which sum of $963.35 there should be added 44 ■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 to 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 Osgood, 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 semiannual interest accruing thereon, the purchaser of them is charged with notice of all which the bonds contain.” In City of Kenosha v. Lamson, 9 Wall. 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 Wall. 296, it was said: “As the coupon, if in the usu.al 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 t.he 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 installment of interest falls due. ” Beading 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 semiannual payment of interest should be made upon the bond. If the bond had provided that 30 years from their date the principal was to be paid, and the interest was due and payable every six months, at the rate of 7 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 Co., 115 N. Y. 297, 22 N. E. Rep. 155. Bo 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. Bor was there any new consideration passed between the lenderand 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 finding 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. Petree, 55 N. Y. 621; Young v. Hill, 67 N. Y. 162. Such interest, so improperly allowed, should" be eliminated from the judgment. Interest is allowable from the date of the decision, to wit, October 31, 1889, according to the provisions found in section 1235, Code Civil Proe. However, as a majority of the court are of the opinion that interest was allowable, the judgment will therefore be affirmed, with costs.

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 supreme court. See, also, *2 Daniel, Yeg. Inst. (4th Ed.) § 1513, and cases cited. This rule was distinctly laid down by the general term of the first district in 1863, in Connecticut Mut. Life Ins. Co. v. Cleveland, etc., 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. Buchanan Co., 115 N. Y. 301, 22 N. E. Rep. 155, it is said by Judge Earl: “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. Bank, 6 Hill, 443; Pennington v. Baehr, 48 Cal. 565; McKee v. Vernon, 3 Dill. 210; Schneider v. Norris, 2 Maule & S. 286; Daniel, Neg. Inst. § 74; 4 Amer. & Eng. Enc. Law, 431. Under the authorities, I think the judgment as it stands is correct, and should be affirmed.

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 Connecticut Mut. Life Ins. Co. v. Cleveland, etc., 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 nonpayment. It is said in Sedgwick on Damages, (8tli 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: Gelpeke v. Dubuque, 1 Wall. 175; Aurora v. West, 7 Wall. 82; Town of Genoa v. Woodruff, 92 U. S. 502; Koshkonong v. Burton, 104 U. S. 668; Pana v. Bowler, 107 U. S. 529, 2 Sup. Ct. Rep. 704; Scotland Co. v. Hill, 132 U. S. 117, 10 Sup. Ct. Rep. 26; Rich v. Seneca Falls, 19 Blatchf. 558, 8 Fed. Rep. 852; Fauntleroy v. Hannibal, 5 Dill. 219; Huey v. Macon Co., 35 Fed. Rep. 481; Harper v. Ely, 70 Ill. 581; Humphreys v. Morton, 100 Ill. 592; Jeffersonville v. Patterson, 26 Ind. 15; Forstall v. Association, 34 La. Ann. 770; Virginia v. Canal Co., 32 Md. 501; Welsh v. Railroad Co., 25 Minn. 314; McLendon v. Anson Co., 71 N. C. 38; Railway Co. v. Adams, 54 Pa. St. 94; Langston v. Railway Co., 2 S. C. 248; Nashville v. Bank, 1 Baxt. 402; San Antonio v. Lane, 32 Tex. 405; Arents v. Com., 18 Grat. 776; Gibert v. Railroad Co., 33 Grat. 598; Mills v. Jefferson, 20 Wis. 50. These cases seem to bold 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. 
      
       The statute referred to Is Laws 1850, c. 140, § 8, which reads as follows: “Such articles of association shall not he filed and recorded in the office of the secretary of state until at least one thousand dollars of stock for every mile of railroad proposed to be made is subscribed thereto, and ten per cent, paid thereon in good faith, and in cash, to the directors named in said articles of association; nor until there is indorsed thereon, or annexed thereto, an affidavit made by at least three of the directors named in said articles that the amount of stock required by this section has been in good faith subscribed, and ten per cent, paid in cash thereon as aforesaid, and that it is intended in good faith to construct or to maintain and .operate the road mentioned in such articles of association; which affidavit shall be recorded with the articles of association aforesaid. ”
     