Court Opinion

ID: 3597881
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:44:47.594771+00
Date Added: 2024-06-11T14:19:28.888704
License: Public Domain

This action was brought to compel the defendants to execute a proper assignment of a certificate of two *Page 454 
hundred and fifty shares of stock of the Avon, Geneseo  Mt. Morris Railroad Company to the plaintiff, to surrender up such certificate and to account for the dividends received thereon.
The undisputed facts are, in substance, as follows: The Avon, Geneseo  Mt. Morris Railroad Company and the Erie Railway Company were each a railroad corporation engaged in the management of a railroad. The town of Mt. Morris had issued bonds in aid of the construction of the Avon, Geneseo  Mt. Morris railroad to the amount of $25,000, and had received therefor two hundred and fifty shares of the stock of the railroad company of the par value of $25,000. During the fall of 1871 negotiations were pending between the Avon, Geneseo  Mt. Morris Railroad Company and the Erie Railway Company for the lease of the railroad of the former company to the latter. For the purpose of inducing the Erie Railway Company to rent the Avon, Geneseo  Mt. Morris railroad and extend the same so as to connect with the Erie  Genesee Valley railroad in the town of North Dansville, Livingston county, the Avon, Geneseo  Mt. Morris Railroad Company agreed that, upon making the lease, the railroad commissioners of the town of Mt. Morris would transfer to the Erie Railway Company the two hundred and fifty shares of stock owned by them for the town. The agreement was finally consummated on the 27th day of December, 1871, in which the Erie Railway Company, in consideration of the provisions of the lease and of the transfer to Jay Gould, as trustee of the Erie Railway Company, of the stock in question, agreed to pay or cause to be paid yearly, as rental for the premises, the sum of $13,500 payable in half-yearly payments, amounting to six per cent per annum on the capital stock of the Avon, Geneseo  Mt. Morris Railroad Company, such payment to be made to the registered holders of the stock as shown by the stock books of the company; and, in addition, to pay the taxes, ordinary and extraordinary, and in addition thereto to pay the interest on the outstanding mortgage bonds of the company *Page 455 
amounting to $20,000 and the principal of the bonds when they shall become due and payable. With reference to the two hundred and fifty shares of the stock belonging to the town of Mt. Morris, which, by the terms of the agreement, were to be transferred to Jay Gould, as trustee for the Erie Railway Company, the contract provided that such stock "shall be held by the said trustee for the benefit of the party of the second part (which was the Erie Railway Company) so long as the second party shall retain possession of the said demised premises and continue to perform the conditions of this agreement and lease; but in case of the forfeiture of this lease and the repossession of the said demised premises by the party of the first part (the Avon, Geneseo  Mt. Morris Railroad Company), then, and it is hereby mutually agreed that in that case, the said capital stock of said Avon, Geneseo  Mt. Morris Railroad Company held by said trustee shall become forfeited and shall be retransferred to the original holders thereof." Before the transfer of the stock of the town herein provided for was made, a public meeting was held in the town, largely attended, for the purpose of considering the subject of the sale of the stock, and it was there stated and understood by the inhabitants of the town, including the officials of the town, that the stock was to be transferred to the Erie Railway Company as a part consideration to said company for taking the lease and assuming the operation of the Avon, Geneseo  Mt. Morris railroad; and, thereupon, a vote was taken in which the transfer was authorized with but one dissenting vote; that thereafter a petition was presented to the county judge of the county signed by a majority of the taxpayers of the town, representing a majority of the taxable property thereof as shown by the last preceding tax roll, asking for an order permitting the railroad commissioners to sell the stock, and thereupon an order of the county judge was made authorizing the commissioners to sell the stock, as in their judgment might be for the best interests of the town. Upon the receipt of such order by the railroad commissioners they executed a transfer to Jay Gould, as trustee of the Erie *Page 456 
Railway Company, upon the certificate of the stock, absolute in terms, conveying the stock to him as such trustee. The defendant, Eben B. Thomas, is the president of the New York, Lake Erie 
Western Railroad Company, which is the successor in interest to the Erie Railway Company, and is the holder of the stock in the place of Gould. This action was commenced on the 23d day of June, 1892.
Our views differ somewhat from those entertained by the trial court with reference to the conclusions of law. The first conclusion of law found is to the effect that the transfer of the stock to Gould was intended to, and did transfer to him the full title thereof. We think that the transfer, although absolute in terms, was made and accepted under the provisions of the contract between the Avon, Geneseo  Mt. Morris Railroad Co., and the Erie Railway Co.; that under the provisions of that contract the transfer was made for the purpose of enabling the Erie Railway Company to obtain the benefits arising from the dividends, or, in other words, to relieve it from paying the six per cent annually as the rental thereon, which, by the terms of the contract, was payable to the other stockholders of the company, and that, upon the termination of the lease or the forfeiture thereof and the repossession of the railroad by the Avon, Geneseo  Mt. Morris Railroad Co., the stock in question would revert, and under the contract would be required to be retransferred, to the town.
With reference to the other conclusions of law found by the trial court, we prefer to adopt the views entertained by the learned Appellate Division. It is contended on behalf of the appellant that, notwithstanding the order of the county judge, the transfer made by the railroad commissioners of the town was unauthorized. We do not deem it necessary to now discuss or determine this question. For, assuming that the transfer was unauthorized, it appears that more than twenty years had intervened after the transfer before this action was brought; a town meeting had been held which was largely attended by the taxpayers of the town, together with the town *Page 457 
officers, at which a vote had been taken with but one dissenting voice, favoring a transfer of the stock. After this a majority of the taxpayers, representing a majority of the taxable property of the town, petitioned the county judge to authorize the transfer. The order was made and the commissioners made the transfer. The Avon, Geneseo  Mt. Morris railroad was of but a few miles in length, constructed from a point on the Erie railway at Avon to the town of Mt. Morris. The Erie railway was one of the trunk lines extending through the state from New York to Buffalo, having numerous connections with western lines. It is very evident that the people of Mt. Morris were desirous of having their road not only connected with the Erie system, but run and operated by it, and for the purpose of securing this result they were willing to surrender their claim for dividends arising upon the stock held by the town. There was no fraud nor concealment in the transaction. On the contrary, all of the steps taken in the transaction followed the public meeting held in the town, in which the matter was fully discussed. For over twenty years the town acquiesced in the transfer made and took no steps to have it vacated or set aside. Under such circumstances, we think that a court of equity, in the exercise of the judgment and discretion vested in it, properly refused the relief demanded by the plaintiff in its complaint.
It appears that the defendants are still in possession and operating the railroad, and that the Avon, Geneseo  Mt. Morris Railroad Company has not retaken possession thereof. It follows that there can be no recovery upon the ground of a forfeiture of the lease by the defendant, for the reason that, under the contract, the agreement to retransfer the stock to the town was dependent upon a forfeiture of the lease and retaking of possession of the road by the Avon, Geneseo  Mt. Morris Railroad Company.
The judgment should be affirmed, with costs.
All concur (MARTIN, J., in result).
Judgment affirmed. *Page 458