Case ID: va_65/html/0107-01.html
Source: Caselaw Access Project
Author: {"author": "Anderson, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Stuart v. James River & Kan. Co.
    January Term, 1874,
    Richmond.
    Absent—Bouldin, J.
    1. Act of 1867—Contract—Beneficiaries.—The act of March 1st 1867 entitled ‘'An act to authorize the James River & Kanawha Company to borrow money;’' though when accepted "by the Company it creates a contract between the Company and the State, does not create a contract between the Company and the holders of the $180,000 of State bonds therein mentioned; and a holder of one of these bonds cannot maintain an action thereon against the Company.
    2. Same — Same—Same.—Though the Company has executed a mortgage on its property to secure the money authorized to be borrowed by said act, yet if the Company has not borrowed the money or made use of the bonds intended to be secured by the mortgage, it cannot be held to have accepted the terms of the act or become liable under its proviso, in relation to said $180,000 of State bonds.
    This was an action of debt in the circuit court of the city of Richmond, brought in April 1869 by W. A. Stuart against the Jamás River & Kanawha Company, to recover the sum of $15,000, the amount of a certain bond of the State of Virginia, which was issued to the James River & Kanawha Company; and the interest thereon. The declaration sets out that heretofore to wit on or about the 1st of March 1867, the general assembly of Virginia did pass an act, the title whereof is “An act to authorize the James River & Kanawha Company to borrow money, ’ ’ and did in and by said act authorize the said company *to borrow the sum of $750,000, to be applied to paying off the floating debt of the company, and to putting and keeping its present works in repair; and to the end of making sure the repayment of the sum of money to be borrowed, the said general assembly did, in and by said act, authorize the defendants to grant and convey in mortgage their property, franchises and net revenues. And it was further set out, that the said act was made on several conditions, one of which was that the defendants should recognize as a part of their floating debt, $180,000 of State bonds, received by the defendants under the act of the 18th of March 1862, and the same should discharge and satisfy by payment, or by delivery to the holders of said bonds, an equal amount of the registered stock of the Commonwealth of Virginia issued prior to the 17th of April 1861, for the full amount of the principal and interest of the said bonds. And it is further set out, that on or about the 20th day of March 1867, the defendants did, in pursuance of said act first aforesaid, make and execute a mortgage of all their property and franchises and net revenues, to render sure the repayment of the money thereafter to be borrowed as aforesaid. And it was averred that the plaintiff is the owner and the holder of one of the said bonds which were issued by the State and received and sold by the defendants, under the said act of the 18th of March 1862, but that the said bond does not purport to have been issued under this last act, or contain any reference to it; but on the contrary, contains the recital that it is stock issued in pursuance of an act passed on the 23d of March 1860; and the plaintiff did buy the said bond in the belief that the same was authorized by and issued under the act of the 23d of March 1860; and that the said bond, held by the plaintiff, is for the payment of the sum of $15,000 with interest. And the plaintiff further says that the defendants under and by virtue of the said act of 1st of March 1867 and their acceptance of the franchise granted in the same, became .liable to pay the said sum of money in the said bond named; and that afterwards, to wit on the 10th of March 1869, he made a demand on the defendants for the payment of the same; but that the defendants wholly refused to pay the same, &c., &c.
    It was agreed of record by counsel, that the court may treat the declaration as if it contained a separate count for interest on the State bond mentioned in the said first count.
    The defendants demurred to the declaration, and to each count thereof, and also pleaded “nil debit,” and there was a joinder in the demurrer and issue on the plea. The court sustained the demurrers, and rendered a judgment for the defendants: whereupon Stuart applied to this court for a writ of error and supersedeas; which was awarded.
    Page & Maury, for the appellant.
    Ould & Carrington, for the appellees.
    
      
      Contracts —Suits by Beneficiaries.—See Ross v. Milne, 12 Leigh 204, 37 Am. Dec. 646. See also, Clemmitt v. Life Ins. Co., 76 Va. 355; Jones v. Thomas, 21 Gratt. 96; Willard v. Worsham, 76 Va. 392 and Newberry Land Co. v. Newberry, 95 Va. 120, 27 S. E. Rep. 899, citing the principal case. See Code Va. 1887, § 2415. See Johnson v. McClung, 26 W. Va. 659, construing the West Virginia statute on this subject.
    
   Anderson, J.,

delivered the opinion of the court.

This is an action of debt to recover fifteen thousand dollars, alleged to be due and owing the plaintiff, by the defendant. The first count in the declaration demands the debt of $15,000, in the gold currency of the United States of America, with interest thereon from the first day of January 1864. The second count is for the interest. It is not written out; but it is agreed by the counsel of both parties, that the court may treat the declaration as if it contained a separate count for the interest; which agreement was entered on the record.

The action is founded upon an act of assembly, passed *the first of March 1867, which is entitled “An act to authorize the James River and Kanawha Company to borrow money. ’ ’ The defendant demurred generally to the declaration, and to each count thereof, and the plaintiff joined in the demurrer. The defendant then pleaded nil debit; and the plaintiff took .issue thereon.

“At common law an indenture, or deed inter partes, is only available between the parties to it, and their privies; and third parties can maintain no action thereon, though made for their benefit.” Though this rule does not apply to deeds poll, it must manifestly appear that the covenants were made for the benefit of the parties suing thereon. Jones v. Thomas, 21 Gratt. 96. In Fellows v. Gilman, 4 Wend. R. 414, cited by J. Staples, in the above case, it was held that it must undoubtedly appear that the covenant, alleged to have been broken, was made for the benefit of the person bringing the action. This was an established rule at common law; and it is not changed by section 2 of chap. 116, of the Code of 1860. In the cases coming within its purview, it only gives the right of action to the person to whom the promise or covenant is not made, when it is made “for the sole benefit” of such person.

It is necessary, then, to enquire: Does the act of March 1st, 1867, upon which this action is founded, create a contract or liability on the part of the Company, for the benefit of the plaintiff? The court is of opinion that it does not. The act of 1862, to which this act refers, authorized the issue to the President and Directors of the J. R. & K. Company, registered stock of the commonwealth, not exceeding $200,000 in amount, when the said company shall execute their bond in the penalty of $400,000, with condition to return, in like registered stock of this commonwealth, such amount of said stock as may be applied under this act to the purposes therein *designated, with interest thereon, within six years after the date of such bond. Under this act, registered stock of the commonwealth was issued to the Canal Company to the amount of $180,000: One of which bonds, to the amount of $15,000, is the subject of this suit. But the Company has not fulfilled the condition of its obligation to the State.

When, in 1867, the Company was again an applicant for an extension of its franchises, the legislature was unwilling to grant its prayer, except with the condition that it would fulfill this obligation; and they passed the said act of March 1st, 1867, authorizing the Company to borrow $750,000 upon the faith of its own credit, and to execute a mortgage upon its own property and franchises, to secure its payment; but with the proviso, that the Company should recognize the $180,000 of State bonds received by it under the said act of 1862, as a part of its floating debt; which it may discharge by paying it, or delivering to the holders of said bonds an equal amount of the registered stock of the commonwealth, issued prior to the 17th of April 1861, for the full amount of the principal and interest.

Was this provision made for the benefit of the bond-holder? And was it designed to fix a direct liability on the Company to him, which could be enforced by suit in his own name against the Company, with whom and himself there was no privity of contract? Or was it designed to benefit the State, by calling in her bonds for $180,000, and extinguishing her liabilities to that amount? A compliance by the Company with the terms proposed would give the holder of these bonds of the State an equal amount of other State bonds in their stead.

If the Company borrowed the money authorized by the act, it must be held to have consented to the terms *upon which the act proposed to bestow that privilege ; which was substantially to relieve the State from her liability for said debt. But it was a contract between the Company and the State, to which the bond-holders were not parties, and by which they were not bound. The State, by making such a contract with the Company, could not release herself from her liability, if any, to the bond-holders: That could only be done by the bond-holders consenting thereto. There is nothing in the act showing their consent, or binding them thereto. And there is nothing in the record, which shows that they have by any act of theirs, consented to release the commonwealth, and look alone to the Company for the payment of bonds of the State which they hold. And the court is of opinion, that whilst the borrowing of the money by the Company, as authorized by the act, would evidence its assent to the terms proposed by the act, and would complete the contract, it only evidences a contract between the commonwealth and the Company, to which the bond-holders are strangers. And if the Company has failed to comply with its terms, it is amenable only to the commonwealth.

There was no liability of the company to the holders of the bonds. They were purchased, undoubtedly, upon the faith of the commonwealth, and not upon that of the Canal company. The holders when they purchased, looked alone to the commonwealth for payment, and not to the Company. The credit of the Company could not have entered into the consideration of the purchaser, and the holder had no right to look to the Company for payment. There was no relation of debtor and creditor between the Company and the bond-holder. And the court is of opinion, that the act aforesaid, prescribing terms to the Company for the benefit of the State, upon which they could exercise a privilege, did not create *the relation of debtor and creditor between the Company and the bond-holders, who were not parties to the transactions. The non-compliance of the Company with the terms, could hardly extinguish the relation of debtor and creditor between the Company and the State, and create such relation between the Company, and the holder of the State bonds. The Company having failed to fulfill the condition on which the privilege was granted, is amenable to the State, and not to strangers to the contract.

If the Company was guilty of a fraud, or deceit, in the sale of the bonds in question, as bonds issued under the act of March 1860, as they purport on their face, when in fact they were issued under the act of March 1862, the holder of the bond is not entitled to redress the wrong in an action of debt against the Company. Nor does it appear by any averment in the act which is the foundation of this action, or from anything therein contained, that there is any ground for such an allegation against the Company; or that such alleged fraud or deceit of the Company, formed any part of the consideration suggesting, or moving to, the condition or proviso in the said act in relation to the said Company. If there was any liability to the bondholders on part of the Company, upon which no opinion is indicated, it could only be enforced in a different form of action.

It is not averred in the declaration, nor does it appear any where in the record, that the Company ever borrowed any money under the said act of 1867. It is averred in the declaration, that it executed the mortgage to secure its bonds to be executed for money thereafter to be borrowed, but it is not averred that any use was made of said bonds, or that the Company ever raised any money upon them. And it is the opinion of the court, that the Company could not be held to have accepted *the terms of the act, and become liable under its proviso merely by executing a mortgage, to secure its bonds to be executed for money thereafter to be borrowed, which were never issued nor made available for the borrowing of money, which was the leading object and purpose of the act, and that for want of such averment the declaration is defective and demurrable.

Various other and intensely interesting and important questions were argued with marked learning and ability by the counsel; but the court considering that the points which we have commented on and very imperfectly presented in this opinion were decisive of the case, have deemed it unnecessary to consider and decide the other questions. Upon the grounds stated, the court' is of opinion that the demurrer was well taken to both counts in the declaration, and that there is no error in the judgment of the court below in sustaining it, and that the same must be affirmed.

Judgment affirmed.