Harrison v. Annapolis & Elk Ridge Railroad

Bowie, J., delivered the opinion of the Court. The Annapolis and Elk Ridge Railroad Company, on the 20th June, 1872, made and executed a deed, to William G-. Harrison and Frederick W. Bruñe, of the City of Baltimore, reciting substantially as follows: Whereas, the party of the first part, under an Act of the General Assembly of Maryland, passed on the 21st of March, 1837, has constructed, and is now engaged in operating a railroad from the City of Annapolis to the Annapolis Junction, on the Washington Branch of the Baltimore and Ohio Railroad, in this State, etc., and by an Act amending said charter, authorizing the said company to extend its road to the harbor of the City of Annapolis, etc., approved on the 1st of April, 1872, is authorized and empowered to borrow money for the purposes contemplated by said Acts, and to issue bonds or certificates of indebtedness, under its corporate seal, and for the purpose of securing the same, to execute mortgages- or deeds of trust upon all or any of its property, real and personal, together with its franchises ; and, whereas, the directors of said company had authorized by resolution, its first mortgage bonds amounting to $400,000, for the purposes aforesaid to be ⁵¹¹ issued, for the purpose of securing the payment of the principal of said bonds, and the interest thereon accruing after actual issue; in consideration of the premises, the loan of said money, etc., the party of the first part, granted, transferred and conveyed to the party of the second part, all the franchises, and all the real and personal property of every kind and description of said company, upon trust for the purposes therein expressed, and upon the following conditions, covenants and agreements. Some of these conditions and covenants, are those usually contained in mortgages, viz., that the grantors should remain in possession until default made; that they should manage, operate and enjoy the said railroad, and take and use all the rents, income, profits, tolls and issues, and dispose of the same in any manner not inconsistent with the deed.

In case of default in the payment of interest on any of said bonds, for the period of six months, the principal of all the bonds should become immediately due and payable, and it should he lawful for the trustees, etc., to enter into and upon all and singular the railroads, etc., and exercise and enjoy the franchises and interests thereby conveyed, and after payment of expenses, apply the money arising as aforesaid, to the payment of the interest on the bonds outstanding, according to the tenor of the coupons, and in the order in which said coupons shall become due, and after paying all such past due coupons, to apply the same to the satisfaction of the principal of said outstanding bonds, ratably, and without discrimination, etc. It was further provided by Article fourth of said deed, it should he lawful for said trustees “ to sell and dispose of all and singular the railroad and railroads, and all other the premises, and property, franchises and interests thereby conveyed, at public auction, in the City of New York, or in the City of Baltimore, should said trustees so elect, etc.” The trustees, professing to act under the power contained in the above cited deed, filed their bond in the ⁵¹² Circuit Court for Anne Arundel County, sitting in equity, for the sum of $500,000, payable to the State on the 11th April, 1818, with a condition thereunder written as 'prescribed by Article 64, sec. 6, of the Code of Pub. Gen. Laws. They advertised the property for sale, on the second of July, in the City of Baltimore, as required by the deed, when they were enjoined by a nisi order of said Court, passed upon the petition of the Annapolis & Elk Ridge Railroad Company, the Attorney-General appearing in the case by order of the General Assembly, and the Board of Public Works.

An answer having been filed upon motion to dissolve the interlocutory injunction, the Court below continued the same, so far as it restrained the respondents from selling the property described in the deed in the City of Baltimore, and dissolved it in all other respects, from which decretal order, both the petitioners and respondents appealed. The cross-appeals involve the validity of the deed, as a corporate act, binding the corporation, or the stockholders, and assuming its validity, the legality of the sale proposed to be made in the City of Baltimore by the trustees. The first question, (including the second, and being vital to all further proceedings in the case,) will properly take precedence in our consideration. It is alleged by the petitioners, that the board of directors, by which the resolution was adopted authorizing the loan, and the execution of the deed to secure the same, was not a legally constituted board.

It is not necessary to critically examine the facts alleged in the petition, to sustain this conclusionbecause, the case being heard on bill and answer, and this allegation being denied, it is for the time being, out of the question. Some exception has been taken at the hearing of the cause in this Court, to the form of, and the sufficiency of ⁵¹³ the denial, hut we think the authorities sustain the respondents and the Court below on this point. Vide 45 Md., 453 ; Drury vs. Conner, 6 H. & J., 289 ; Waters vs. Creagh, 4 Stew. & P., 411 ; Hughes vs. Garner, Y. & C., 127 ; Knickerbocker vs. Harris, 1 Paige, 209 . The application for the injunction is made by the Annapolis and Elk Ridge Railroad Company by its solicitors, the Attorney-General appearing as one of them, by order of the General Assembly and the Board of Public Works.

The State does not