People v. Northern Railroad (42 N.Y. 217, 1870)

Lott, J.

Assuming that a denial by the defendants, in their answer, of each and every allegation and averment in the complaint in this action contained, not therein before specifically admitted, is sufficient to controvert the matters, if any, not so admitted, and put them in issue, it appears by an examination of its contents that no material fact is denied.

■ It is true, that there is no admission in express terms, as alleged in the complaint “ that ever since October, 1854, the said corporation has remained insolvent and neglected to pay its notes and other evidences of debt and entirely suspended the ordinary and lawful business of such corporationbut the statements and admission of the defendants in controvertibly concede and prove each of those facts. They admit the execution of certain mortgages by the corporation on its property as stated in the complaint, that certain persons were elected directors thereof on the 26th day of July, 1854, and that they on the 6th day of October, 1854, surrendered the possession of its property to the second mortgagees, who took possession thereof and its franchise, and ran and operated the road until on or about the 1st day of August, 1865; that it was then transferred to the Ogdensburgh and Lake Champlain Railroad Company, and that it had possession thereof at the time of the commencement of this action, that prior to such transfer, and on or about the 20th day of February, 1856, proceedings were instituted in the Supreme Court of this State against the said corporation for the foreclosure of the mortgages given by them, that a judgment decreeing such foreclosure and directing the sale of the corporate property and the franchise of the company was, after an appearance by attorneys for the company, made and entered on the 8th day of April, 1856, that such sale was thereafter and on or about the 23d day of October, 1856, made to the said second mortgagees, and that a deed of the property was subsequently executed to them; that the proceeds of sale were insufficient to satisfy the amount adjudged to be due, and that a deficiency amounting to upwards of a million of dollars, on the 19tli day of December, 1865, remained unsatis fied. They also state, that by an act of the legislature of this State passed on the 31st day of March, 1857, the holders of the. second issue of bonds were authorized to form a corporation under the general railroad act and the several acts amendatory thereof, and that one was on or about the 1st day of December thereafter so formed by and under the name and style of the Ogdensburgh Railroad Company, and that directors thereof .were duly elected, that by a subsequent act of the legislature duly passed on or about the 15th day of April, 1858, the said Ogdensburgh Railroad Company was declared a duly incorporated company in pursuance of the said act of 1857, and they aver that the said company has never been dissolved, and that it is entitled to all the property and privileges given to it by said act or belonging to it as a corporation, and to all the property in the hands of the said trustees, if any corporation could be authorized by law to receive said property, that, the said trustees continued in the actual and continued possession of said property after the organization of the said company, and that the owners of the said second issue of bonds claiming to act under the said act of 1857, and an act amendatory thereof, passed on the 8th day of April, 1864, proceeded to form and did on or about the 1st day of August, 1865, organize the said Ogdensburgh and Lake Champlain Railroad Company, and that the said company since that time have been, and were, at the time of putting in the said answer “ in the actual possession, use and occupation of all of the corporate property and franchises of the said ¡Northern Railroad Company,” on a transfer thereof from the said mortgagees by the permission and in pursuance of an order of the Supreme Court. It is then stated that upon proceedings instituted by the holders of the first two mortgages for the foreclosure thereof, a judgment on or about the 12th day of December, 1859, was entered in the Supreme Court declaring the same to be valid and existing mortgages for the amount thereof, which by the terms thereof had become due on the 1st day of July, 1859.

After some further allegations not necessary to be noticed here, the following statement is made:

“ And these defendants further aver, that on or about the 7th day of March, 1866, the stockholders of said Rorthern Railroad Company, in pursuance of a call for that purpose, met at- Ogdensburgh in the county of St. Lawrence, for the purpose of electing directors of said company, said company not having elected directors for several years prior thereto, their property having been in the hands of the mortgagees as aforesaid, and thereupon proceeded to the election of, and did elect thirteen directors in pursuance of the charter and by-laws of the company; that they elected the defendant, Lovering, president, and also elected a treasurer and secretary.”

These statements fully establish the allegations in the complaint, that the said Rorthern Railroad Company has ever since October, 1854-, remained insolvent, and neglected toj>ay its evidences of debt, and been actually insolvent, and entirely suspended the ordinary and lawful business of such corporation; and the counsel of the appellants, in his points, states that the complaint and the answer both expressly allege, that the defendant’s road was operated by trustees from 1854, to August 1st, 1865 ; the complaint and answer both also allege, that ever since August 1, 1865, the Ogdensburgh and Lake Champlain Railroad Company have carried on all the business of the said railroad, and the defendant’s property and franchises have been in use by that company.

There can be no question upon those facts, that the plaintiff was entitled to a judgment declaring that the Rorthern Railroad Company had forfeited its charter, and that it should be dissolved.

It then remains to be considered, whether the answer of the defendant sets up any fact to prevent such a judgment. The principal and controlling ground relied on is, that the persons elected directors of the company, at the election held on the 26th day of July, 1854, were not eligible, because they did not own any of the capital stock of the said company, and none of its stock was standing on its books in the names of said persons, or in the names of any or either of them, and that therefore they were not in fact, or in law, a legally elected board of directors of said company, and could not bind it; that the summons and complaint in the action commenced in February, 1856, for the foreclosure of the second mortgages above referred to, were served upon one Samuel C. F. Thorndike, who it is alleged “ was • the pretended treasurer of the said company in 1854, elected by said illegal directors as aforesaid, and who was not in 1856, and had not been for a long time prior thereto, an officer of said' company, and who was, on the 27th day of February, 1856, the day upon which he was served with said summons and-complaint, as appears from the judgment roll in said foreclosure suit, in the actual employ of the plaintiff in said action -to foreclose said mortgages; ” that neither of the defendants, nor any of the other stockholders of the company, nor any director or officer of the company “ was served with, or notified of the commencement of said action; ” and that the attorneys who appeared for and represented the company were employed by the said Thorndike at the instance, and on the employment in fact of the said plaintiff, and claim that-such appearance “ could not, and ought not to be allowed to prejudice or foreclose the rights of said company, or the stockholders thereof.” And if is also alleged, that the refe-' ree who made the sale was the law partner of the attorneys of record for the plaintiffs and son of one of them j and some other acts tending to show irregular and improper action in the conduct of the proceedings and' sale.

It is a sufficient and perfect answer to these objections and grounds of defence, that there is nothing in the charter of the company requiring the directors to be stockholders; that the person appointed treasurer was an officer defacto, and that the judgment after an appearance assuming it to have-been procured as stated, was at most voidable, and not having been set aside or reversed, but remaining in full force and effect,it is conclusive, and cuts off all right of redemption by the company, and the title acquired under it is good in the parties claiming under it.

The facts stated by the defendants preclude an assumption or inference that those proceedings were unknown to any of them. The allegation that a meeting for the purpose of electing directors was held on or about the 7th day of March, 1866, “ said company not having elected directors for several years prior thereto, their property having been in the hands of the mortgagees as aforesaid,” is an admission of the knowledge of the fact of such possession, and that the stockholders had for that reason not even elected directors to take charge or protect the interests of the company, and must be held chargeable with notice of their acts. It is, in any aspect of the case, an admission that the company had for more than one year, prior to that election, suspended the ordinary and lawful business of the company, and that the Ogdensburg and Lake Champlain Railroad Company had been, during that time, holding adversely to them.

There are several charges of fraud alleged against the second mortgagees, which, if true, are.immaterial and irrelevant in this action.

Assuming that there might have been grounds of relief against the judgment and proceedings in the foreclosure suit, which would have warranted a judgment restoring the property to the company, they were not available in this action.. The parties to be affected thereby are not defendants in this action, and consequently no judgment can be made therein impairing their rights. These considerations show that there was no issue of fact to be tried either by the court or by a jury, and judgment could therefore be properly rendered on the complaint and answer. .

The judgment rendered thereon, declaring a forfeiture by the company of its rights and franchises, and its dissolution, ■ was proper, and as the defendants, other than the company, have admitted the exercise of such rights, after a knowledge of the facts above referred to, the fines imposed on them were legally adjudged, and the views presented in the opinion '.delivered at General Term, in which I concur, show that a receiver was properly appointed.

I may add, that the refusal to stay proceedings in this action was discretionary, and is not reviewable in this court.

It follows that the judgment appealed from must be affirmed with costs.

Foster, J. (dissenting.)

The order of the Special Term, denying the motion to stay the proceedings in this action until the determination of the one previously commenced by the defendants against the persons for whose benefit, and for whom, this suit was brought, was one resting largely in the discretion of the court. It did not “ involve the merits and necessarily affect the judgment,” and whether we think that discretion was well exercised or not, wre should not interfere. Such orders are not appealable, and the appeal from it should. be dismissed.

The main question in the case, arises out of the direct proceedings therein, and judgment which was rendered.

There are but two kinds of issues in civil actions. Issues of law, which can only be raised by demurrer (Code, § 249), and issues of fact, where a fact or facts are maintained by the one party, and controverted by the other. And unless there is a demurrer to the answer, or it be of such character as to call for a reply, an issue of fact is joined. When a material fact, or facts, alleged in the complaint, is controverted by the answer (Code, § 250), and in such case, where the plaintiff does not by demurrer question its materiality, and makes no motion to strike it out, or to make it more definite and certain, it continues to be an issue of fact, until a trial takes place thereon pursuant to law. And, except upon such demurrer, or motion to strike out the answer, the court has no power to determine the issue or to pass upon the materiality of it, until it is regularly called for trial as an issue of fact. If the plaintiff’s attorney thinks an answer interposed “ does not, upon its face, constitute a counter-claim or defence,” it is his • duty to demur, and thus present the question of law arising upon the allegations of the pleadings, in the only manner prescribed by law; and he has no right to call upon the court by a non-enumerated motion to pass upon such question, and there is no authority given by the Code, or by the practice of the court, for a decision of the question in that manner.

It is doubtless true, that where an issue of fact has been regularly brought on for trial, in a case where a trial by jury is not a constitutional right, the court can determine the action upon the pleadings ; but that does not furnish any good reason or authority for doing so, on motion merely, any more than it does for deciding it ex parte.

It is claimed, that the motion for judgment made in this case was in accordance with the practice in the Court of Chancery. This is evidently a mistake; no such proceeding was authorized or had in that court, in cases even where a jury trial was not necessary. The practice in chancery was very plain and well settled; that after an answer, and after the regular time for demurring or replying had passed, without the service of such a pleading, either party was at liberty to notice the cause for a hearing on the MU and answer, but not as a non-enmnerated motion. It was a notice of hearing equivalent to a notice of trial; and the practice and rules required that a notice of issue should be served on the clerk; that the cause should be placed upon the calendar; and the rule prescribed that cases for hearing on bill and answer, should be placed in the third class of preference thereon. (1 Barbour’s Ch. Pr., 312, 313 ; Chancery Court Rules, ed. 1857, Rules 65, 88, 89, 91.) In any aspect of the case, the notice and hearing were clearly irregular and contrary to the practice prescribed by the Code, as well as to the former practice in chancery. Still, unless there was an issue which should have been tried by a jury, it is but an irregularity, and it will not avail the defendants on an appeal from the judgment.

The issue was clearly an issue of fact, and not of law ; and if it arose in an action or proceeding in which the constitution secured to the defendants the trial of an issue of fact by jury, the plaintiff not having moved to strike out for any of the reasons provided for in the Code, and not having demurred, there was no power or authority vested in the court, either to try the issue or determine its materiality (which is substantially the same thing), until a jury had been impanneled for the trial of it. The judge could no more order a judgment for the plaintiff upon the ground that he did not deem that the answer controverted the allegations of the complaint, or that it confessed them, than he could do sq after the trial had commenced before the jury; and surely he could not do that. In cases where a jury trial is necessary, and after the jury is imjpanneled, the judge can doubtless order a nonsuit, where the proof of the plaintiff is not sufficient to support the action, or he may dismiss the complaint, where it does not state facts sufficient to constitute a cause of action pursuant to the Code. Or he may rule that the defence interposed is not sufficient, or that, upon the undisputed testimony the plaintiff is entitled to recover, and in such case he may, direct the jury to find a verdict for the plaintiff; for such was his undoubted authority at common law, but he cannot order a judgment against the defendant in mvy other way. The jury must pass upon the question jgro forma at least, and a judgment ordered directly by the court in such case, would be clearly erroneous, and from it an appeal would lie. And the appellate court would, for that reason, reverse it without looking to see whether, if constitutionally tried, tile result, could have been different. Any other course than this would allow the constitutional right of trial by jury to be subverted at the whim, caprice, or by the mistake of the judge.

Was this action, then, brought for an alleged wrong, for which, by the common law, or by the statute, previous to the adoption of our State constitutions of 1846, or of 1821, quo warranto was the appropriate and only rpmedy; and in proceedings in the nature of a quo warranto, were the parties entitled to have all issues of fapt tried by a jury ? That issues of fact, in proceedings by qy,o warranto, were triable .only by a jury (except by consent of the parties), is top pjain a propor sition to require the citation of authority to support it, and it is not controverted before us. Nor can it be claimed that, independent of some statute, such a proceeding has ever been entertained in a court of equity. It is a common law proceeding ; and it has been engrafted into the statutes as such.

That it was a proceeding as upon a writ of quo warranto, though in the form of an action, under the Code, is perfectly apparent, and was for causes which were among those for which, the Attorney-General, in pursuance of article second, of title 2, of chapter 9, of part 3d of the Revised Statutes, was authorized to institute the proceeding. It authorized him to file the information with or without leave, whenever “ any person should usurp or intrude into any office in any corporation created by the authority of this State ” (section 28). And on leave, “ whenever any corporation shall offend against any of the provisions of the act or acts, creating, altering or renewing such corporationor “ violate the provisions of any law by which such corporation shall have forfeited its charter by misuseror “ whenever it shall have forfeited its privileges and franchises by non-user;” or “ whenever it shall have done, or omitted, any acts which amount to a surrender of its corporate rights, privileges and franchises/” or “ whenever it shall exercise any franchise or privilege not conferred upon it by law” (section 39). And the same section made it his duty to file it in all cases of public interest; and in any other ease where satisfactory security should be given to indemnify the State.

The 48th section provided that, when the defendant should be found or adjudged guilty of usurping or intruding into, or unlawfully holding or exercising such office or franchise, judgment should be rendered ousting and excluding him; and that the Attorney:General recover his costs; and that the court in its discretion might fine the defendant in a sum not exceeding $2,000 to be paid to the State; and the 51st section declared that “ whenever any such judgment shall be rendered, the Court of Chaneery shall have the same powers to restrain the corporation; to appoint a receiver of its property and effects, to take an account, and make distribution among the creditors, as are given in the third article of the 4th title of the 8th chapter of part 3d of the Eevised Statutes.” And a reference to those provisions will show, that snch proceeding has to he taken upon an application founded on a petition, and was necessarily (as it was to he addressed to another court) a subsequent and separate proceeding from that in which the judgment of surrender, or usurpation, was rendered.

Now, chapter 2, of title 12 of the Code, under which this action was brought, contains, among others, every provision of the Eevised Statutes, which are hereinbefore set forth, and in almost the identical words used there, except that the application, which by the 51st section, referred to, was to be made to the Court of Chancery, is to be made to the same court, which renders the judgment. So also chapter 2, of title 12 of the Code professes to he a substitution of the action in the place of quo