Holland v. Lee

McSherry, J., delivered the opinion of the Court. By a decree of the Circuit Court of the City of Richmond, in the State of Virginia, passed on the 23rd day of April, 1880, in a foreclosure proceeding wherein Henry Lewis and others were plaintiffs, and the Washington and Ohio Railroad Company, and others, were defendants, Richard H. Lee, Henry Heaton, Charles E. Stuart and Robert T. Barton were appointed commissioners to make sale of the property and franchises of the Washington and Ohio Railroad Company — a corporation located in the State of Virginia. The terms of sale prescribed were $50,000 cash, and the residue in four equal annual payments, to be evidenced by the bonds of the purchaser, secured by a deed of trust upon the property sold. On the 31st of January, 1882, the commissioners sold the property to Cazenove G-.

Lee for the sum of $592,000. The purchaser having failed to comply, subsequent proceedings were had, whereby the time for the performance by him of the terms of sale was extended till May 26th, 1882. On May 24th, Cazenove Gr. Lee paid the cash payment, and gave his bonds for the deferred payments.

After the sale to Lee, he assigned his purchase to William J. Best, and the Circuit Court on May 25th, 1882, confirmed the sale made on January 31st to Lee; hut as Lee desired “that the sale should be confirmed to the said Best, for himself and such persons as he might thereafter associate with him,” it was, by the said decree confirming said sale, directed that “the aforesaid commissioners shall execute and deliver to William J. Best, and to such persons as may he associated with him, a deed for the property sold, * * * * and that said William J. Best and such persons as may he willing to sign the same, shall execute to the aforesaid commis ³⁴¹ sioners their individual bonds, which shall be secured by a lien reserved in the conveyance.” Best delivered to the commissioners four bonds each for the sum of $135,500, and each executed by himself and eight other persons, of whom the appellant was one, which bonds the commissioners received in exchange for those previously given by Oazenove Gr. Lee. The bonds are in the form following, to wit: “$135,500.00. May 25th, 1882. “On the 31st day of January, 1883, we promise to pay to B. H. Lee, Henry Heaton, C. E. Stuart and B. T. Barton, special commissioners in the cause of Henry Lewis, et als. vs. The Washington and Ohio Railroad Company, the sum of one hundred and thirty-five thousand and five hundred dollars, with interest thereon from the 31st day of January, 1882; a lien for which sum is reserved in a deed of conveyance, this day executed by said commissioners to the obligors hereto.

Witness our signatures and seals, this 25th day of May, 1882.” Signed and sealed by William J. Best and eight others, including the appellant. On the day of the date of these bonds the commissioners conveyed the railroad and its franchises to the said Best, “to hold unto the said William J. Best and such associates as he may associate with him, under the name of the Washington and Western Bailroad Company” subject to a “lien for all of the unpaid purchase money, as represented in the four bonds of the said William J. Best, and others, each for the sum of $135,500 with interest from January 31st, 1882.” When the first of these bonds fell due, default was made, and under further proceedings had in the Circuit Court of the City of Bichmond, the railroad was resold on May 9th, 1883, to Oakman and Bates for $400,000, and on May 23d, was conveyed to them under the name of the Washington, Ohio and Western Bailroad Com ³⁴² pany. Tlie proceeds arising from this resale were applied towards the payment of the four bonds of Best and his associates.’ When these proceeds were credited on the Best bonds a balance was left due thereon, January 31st, 1885, of $203,180. SI.

To recover this balance, together with interest thereon, suit was brought in the Superior Court of Baltimore City, against all the makers of the four bonds. The sheriff returned the writ served upon the appellant, and non sunt as to the others, they being non-residents of this State. The appellant appeared and made defence. Judgment was rendered against him and from that judgment he has taken this appeal.

The grounds upon which he claims a reversal of the judgment are these: First, that the bonds sued on, though signed by Best and eight other obligors, including the appellant, are not the obligations of the persons who signed them, but are the debts of the Washington and Western Railroad Company; and, secondly, that there is no evidence that any part of the consideration for these obligations was ever received by the parties who signed them, and that, therefore, the appellant is not bound upon them. At the moment these four bonds were given they were undeniably the individual obligations of the persons who signed them. By the decree of May 25th, 1882, confirming the sale of January 31st, Best “and such persons as may be willing to sign the same,” were required to execute “their individual bonds” to the commissioners for the deferred payments, and in the conveyance a lien was reserved “for all of the unpaid purchase money, as represented in the four bonds of the said William J. Best and others.” These parties were the purchasers of the railroad, and the bonds were given by them for the unpaid purchase money in conformity with the requirements of the decree. It is manifest they were not, when given, the bonds of the Washington and ³⁴³ Western Railroad Company, because that corporation was not then in existence.

If they ceased at any time to be the obligations of the persons who signed them, and became the obligations of the new company, the corporate liability of a company created after that personal liability had been assumed, and assumed, too, under the decree referred to, must have been substituted, by some process, for the personal liability of the individual obligors. Unless such a substitution has taken place, the bonds, of course, continue to be what they were when executed. Let us see, then, whether such a substitution or exchange did in fact occur. By the statutes of Virginia, ( Va.

Gode, ch. 61, sec. 44,) it is provided, in substance, that where a sale is made of the works and property of a company