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Opinion of the Court.

be its rights by remedies appropriate to that purpose, and against all parties infringing them. The fact that the Supreme Court of Louisiana had spoken first gave no additional weight to its decision. Whatever deference may be due to the decisions of the state court of final resort in every case in which it has spoken, and whatever may be the respect to which its decisions upon questions of purely local law established as rules of property may be entitled, they are not authority binding upon the courts of the United States, sitting even in the same state, where the questions involved and decided relate to rights arising under the Constitution and laws of the United States.

But the rule in question, which declares that the judgment or decree of a court having jurisdiction of the parties and of the subject-matter, in favor of the plaintiff, is sufficient evidence of probable cause for its institution, although subscquently reversed by an appellate tribunal, was not established out of any special regard to the person of the party. As we have already seen, it will avail him as a complete defence in an action for a malicious prosecution, although it may appear that he brought his suit maliciously for the mere purpose of vexing, harassing, and injuring his adversary. The rule is founded on deeper grounds of public policy in vindication of the dignity and authority of judicial tribunals constituted for the purpose of administering justice according to law, and in order that their judgments and decrees may be invested with that force and sanctity which shall be a shield and protection to all parties and persons in privity with them. The rule, therefore, has respect to the court and to its judgment, and not to the parties, and no misconduct or demerit on their part, except fraud in procuring the judgment itself, can be permitted to detract from its force. It is equally true and equally well settled in the foundations of the law that neither misconduct nor demerit can be imputed to the court itself. It is an invincible presumption of the law that the judicial tribunal, acting within its jurisdiction, has acted impartially and honestly. The record of its proceedings imports verity; its judgments cannot be impugned except by direct process from

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superior authority. The integrity and value of the judicial system, as an institution for the administration of public and private justice, rests largely upon this wholesome principle.

That principle has been disregarded in the present case by the Supreme Court of Louisiana in failing to give due effect to the decree of the Circuit Court of the United States as sufficient evidence in support of the defence of the plaintiff in error in this action, so far as it is an action for the recovery of damages for a malicious prosecution.

The judgment of the Supreme Court of Louisiana on the bond itself, for damages occasioned by its breach, against the principal and surety, is not attacked in this proceeding. It is so far affirmed. But that part which constitutes a judgment against the Crescent City Live-Stock Landing and Slaughter-House Company solely, for damages for the malicious prosecution, is reversed, and the cause is remanded for further proceedings therein not inconsistent with this opinion; and it is so ordered.



Submitted January 6, 1887. - Decided January 24, 1887.

A mortgage of a railroad and of lands granted by Congress to aid in its construction to trustees, which directs the trustees to apply moneys arising from the sale of the lands to the payment of the coupons attached to the bonds secured by the mortgage, also authorizes them to purchase therewith over-due coupons which have been cut from those bonds and have been deposited with the trustees of the mortgage for the purpose of securing scrip issued to the holders of those coupons, with the object of extending the payment of the amount due on them beyond the time of payment named in them.

BILL in equity. The case is stated in the opinion of the


Mr. William S. Rogers for appellant.

Mr. C. W. Huntington for appellees.

Opinion of the Court.

MR. JUSTICE FIELD delivered the opinion of the court.

The Little Rock and Fort Smith Railway is a corporation organized under the laws of Arkansas, and the defendants are citizens of Massachusetts, and trustees under a mortgage or deed of trust executed to them by the corporation on the 19th of December, 1874. The bill is filed to enforce the performance of certain trusts devolving upon the defendants under that instrument.

By the act of Congress of July 28, 1866, a grant of land was made to the State of Arkansas, to aid in the construction of a railroad from Little Rock to Fort Smith. The grant was of ten alternate sections of land on each side of the road, with a right of way over land of the United States to the width of two hundred feet.

By legislation of Arkansas, in 1869, the right to the lands thus granted by Congress became vested in the Little Rock and Fort Smith Railway Company. In December following, that corporation executed a mortgage upon its road, equipments, franchises, and property to secure its bonds to be issued thereunder to the amount of $3,500,000, and in June, 1870, it executed a second mortgage upon the same property to secure its bonds to be issued to the amount of five millions of dollars. The bonds were issued, but the company defaulted in their payment, and both mortgages were foreclosed, and the property was sold under a decree of the Circuit Court of the United States for the Eastern District of Arkansas.

The purchasers at such sale, under a statute of Arkansas, organized themselves into a corporation, and adopted as their corporate name that of the Little Rock and Fort Smith Railway, and became vested with all the rights, privileges, powers, and franchises of the former corporation, together with the lands granted to that company by the acts of Congress and of the legislature of Arkansas.

This new company, the plaintiff herein, in order to provide means for the completion and equipment of its road, and for other purposes, issued and negotiated a series of bonds, amounting in the aggregate to three millions of dollars,


Opinion of the Court.

payable to bearer at the end of thirty years from January 1, 1874, with interest coupons payable semi-annually at the rate of seven per cent. per annum, free from any United States tax. The bonds were issued in denominations of one thousand dollars each, from No. 1 to 2000 inclusive, and in denominations of five hundred dollars each, from numbers 2001 to 4000 inclusive. To secure their payment, principal and interest, the company executed a mortgage, or deed of trust, bearing date December 19, 1874, upon its road, franchises, rights, and lands, to the defendants, Huntington and Ripley, in trust, among other things, to apply the moneys arising from the lands of the company, after deducting the expenses of executing the trust, as follows:

1st, to the payment of the coupons or interest warrants attached to the bonds, as fast as they shall become due and payable, to the extent that the net earnings from the business of the road shall be insufficient for that purpose.

2d, to the purchasing and cancelling of such outstanding bonds as can be obtained, at their market value, not exceeding, however, a premium of ten per cent.; and

3d, to the payment of such of the bonds as shall not have been purchased in accordance with these provisions, when the same shall become due and payable.

All the trust moneys coming to the trustees, not applied or used in accordance with the above provisions, were to be invested in United States securities, or lent from time to time in such manner as by the law of Massachusetts is permitted to savings banks. The interest derived from such investments or loans was to be applied by the trustees to the payment of the bonds or coupons.

The bill alleges that, after the execution of this mortgage, the company completed its railroad from Little Rock to Fort Smith, within the time, and in the manner required by the acts of Congress and of Arkansas, and thereby became the owner of 1,057,000 acres of land, as certified by the Secretary of the Interior to the state, all of which, and the proceeds of sales, were subject to the trusts and charges imposed by the mortgage or deed of trust; that the corporation has disposed of all

Opinion of the Court.

the bonds authorized to be issued under the mortgage, but that of the lands there still remain unsold 623,000 acres; that during the years 1877, 1878, and 1879, and the first six months of the year 1880, the net earnings derived from the operation of the road, even when united with the proceeds of the sales of lands, were insufficient to meet the coupons or interest warrants attached to the bonds maturing on January 1, 1878, July 1, 1878, January 1, 1879, July 1, 1879, and January 1, 1880; and thereupon an agreement was made between the corporation and the holders of the bonds and coupons payable on those dates, by which the holders surrendered to the defendants, trustees, the coupons, and the corporation issued to them negotiable scrip or certificates by which it promised to pay the trustees, or bearer, the amount of the coupons surrendered, in ten years from their maturity, with interest at the rate of seven per cent. per annum, payable semi-annually, the corporation reserving the right to pay the scrip and interest at any time previous to its maturity.

The scrip or certificate also provided that the trustees should hold the coupons surrendered, as collateral security for the payment of the scrip thus issued therefor, and that the coupons should not be surrendered or cancelled until the scrip should be paid.. The coupons maturing on July 1, 1883, and January 1, 1884, were also unpaid, and a similar arrangement was made with the holders of these coupons by the issue of scrip for them; so that the whole amount of scrip issued for coupons thus unpaid was $636,000.

The bill also alleges that out of the moneys received from the sale of the lands since the execution of the mortgage, the trustees have bought and cancelled bonds amounting to $536,500, besides appropriating moneys to aid the corporation in paying the interest coupons attached to the bonds; that since the year 1881 the trustees have applied the net proceeds of the sales to the purchase and cancellation of the bonds, and no part thereof to the purchase and cancellation of the said scrip, or the coupons held by them as collateral security for the payment of that scrip; that for several years, the net earnings of the road have been more than sufficient to enable the corpo

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