Attorney-General v. Navigation Co.

Full title: ATTORNEY-GENERAL v. THE CAPE FEAR NAVIGATION COMPANY

Court: Supreme Court of North Carolina

Date published: Jun 1, 1843

37 N.C. 444 (N.C. 1843)

Opinion

(June Term, 1843.)

1. Under the Acts of Assembly relative to the Cape Fear Navigation Company and to the Board of Internal Improvements, the board had a right, under the act of 1823, 2 Rev. Stat., 272, to direct the application of the money subscribed as stock by that act, according to their discretion.

2. The State is not bound to pay interest, unless it specially contracts to do so.

3. There was no time specified in the act of 1823 within which the installments of the stock were to be paid, and, in the absence of any agreement, even if it were a case between private individuals, interest would not accrue until a demand was made.

4. Such a company has no right to retain dividends due to the State on stock subscribed, to answer a supposed and independent claim of theirs against the State, not acknowledged by her and not provided for by an appropriation.

5. Under the act of 1823, above referred to, the Board of Internal Improvements had a right to charge the salary and expenses of an engineer, employed in the improvement of the Cape Fear River, as a part of the sum to be advanced in stock by the State to the Cape Fear Navigation Company.

THIS case was removed from the Court of Equity of WAKE, at Spring Term, 1843, to this Court for hearing. It was an information filed by the Attorney-General in behalf of the State, in pursuance of an act passed in 1837, against the Cape Fear Navigation Company.

The facts, as disclosed by the pleadings, the proofs and the admissions of the parties, are set forth in the opinion delivered in this Court.

Attorney-General for plaintiff.

W. H. Haywood, Jr., for defendant.

RUFFIN, C. J.

By several acts of the General Assembly, (445) prior to 1823, the Cape Fear Navigation Company was incorporated for the purpose of improving the navigation of the Cape Fear River. Its capital stock was created by subscriptions by the State and individuals, and was divided into shares of $100 each, and the capital had been subscribed and all expended in works on the river, which, though they had improved the navigation to a considerable extent, yet left it imperfect in many places, so much so that the tolls paid but small dividends to the stockholders, and the value of the stock in the market fell one-half or more. In that state of things the company applied to the Legislature for assistance by a further advance of money, to be applied to the improvement of the navigation, and thereupon the act of 1823, 2 Rev. St., 272, was passed. That act directs that for the purpose of completing the navigation of the river Cape Fear from the town of Wilmington upwards, the president and directors of the Board of Internal Improvements should, on behalf of the State, subscribe to the stock of this company the sum of $25,000, to be paid in installments, not exceeding $10,000 in any one year, out of the fund set apart for internal improvements. But the subscription was to be made on certain conditions, as follows : First, that before it should be made the stockholders should, within a certain time, give their assent to a reduction of the capital stock from its nominal amount of $100 to the share to a sum to be fixed by them, not exceeding $50 to the share. Second, that the stock which the State then owned in the company should be reduced in the proportion of the stock of individuals; that the property then belonging to the company and the subscription thereby authorized should, respectively, constitute parts of the capital stock of the company, and the State should have and own as many shares as the subscription there authorized should amount to, according to such reduced capital. Third, that the president and directors of the company should consent in writing that the Board of Internal Improvements should have the sole and exclusive direction of the operation of the works, the making (446) of contracts for the same, and all the improvements to be made on the river. Then are added these words : "The improvements in the navigation shall commence at Wilmington and regularly proceed up the river as far as the capital stock of the company shall admit." In March, 1824, the stockholders assented to the act, and sunk the stock one-half by reducing the share of stock from $100 to $50, and the president and directors gave their consent in writing, as required in the act. Thereupon the Board of Internal Improvements subscribed, on behalf of the State, for five hundred shares of the reduced stock, amounting in value to $25,000, and proceeded soon afterwards to expend for work on the river between Wilmington and Fayetteville the sum of $12,143.13, to which expenditures no objection is raised by the president and directors of the navigation company. When the subscription was made no certificate of stock was issued to the State nor any evidence given of the stock to which the State became entitled thereby, except the books of the company themselves. But for some years the State was treated as a corporation in the premises, and dividends declared and paid into the Public Treasury as upon the five hundred shares of stock thus subscribed. At the passing of the act of 1823 the Board of Internal Improvements was organized under the act of 1819, ch. 2, and consisted of the Governor, as president ex officio, and six commissioners to be chosen annually by the Legislature, one from each of the then judicial circuits. It was constituted a corporation for the purpose of preserving and improving the fund for internal improvement thereby created, and disbursing such portions thereof as the Legislature might from time to time direct to be applied to any such purpose, and had authority to appoint a principal and assistant engineers, as, in their opinion the public service might require, who should direct and superintend all the public works which the Assembly had or should authorize, and should receive such compensation as the board might allow, to be paid out of the revenue of the fund for internal improvements when adequate thereto. In 1831, by an act, chapter 21, it was provided that thereafter the (447) said board and corporation should consist of the Governor for the time being, the Public Treasurer, and one other person to be chosen annually by the Legislature, and this last-named person, whom the act calls superintendent, was required to investigate the condition of all the incorporated navigation companies, and the liability to the State of each, in which the State was a stockholder, and the board was to represent the State at meetings of the stockholders in all such companies.

In 1831, the residue of the State's said subscription, namely, the sum of $12,856.87, not having been expended or called for by the company, remained in the Public Treasury. In April, 1833, the president and directors of the navigation company communicated to the Board of Internal Improvements a resolution passed by them, that, in their opinion, the interest of the company required that the residue of that fund should be expended on the river below Fayetteville, and requested the attendance of the superintendent at the next general meeting of the stockholders on the first of June following, and pointed out certain improvements below Fayetteville which they desired to be made, and requested that one A. G. Keen, who had been in the service of the company, should be employed to direct and carry them on, as he was an energetic man and a good practical engineer. The Board of Internal Improvements accordingly employed Mr. Keen as engineer to conduct the works. But being of opinion that a competent navigation had been made between Wilmington and Fayetteville, and that the interest of the company and the State required that the remaining fund should be laid out in works above Fayetteville, or such part of it as might be necessary to effect certain improvements upon that part of the river, the board did not accord with the resolution of the president and directors, that the money ought to be spent below, but undertook and carried on the works above Fayetteville, and expended in that manner, as is alleged, the residue of the State's subscription. In 1833 the board rendered to the company an account of those expenditures, to part whereof, viz., the sum of $1,375.53, the company objected, because it (448) was the salary of Keen and another engineer, which it was insisted was a charge that ought not to be thrown on the company, but should be defrayed by the State. The point of difference not being adjusted between the Board of Internal Improvements and the company, the latter withheld the dividends on the stock of the State for the purpose of making that sum of $1,375.53 whole to the company, and in 1837 the Legislature gave directions to the Attorney-General to file an information against the company for settling the question. Accordingly the present information was filed, in which the various acts of incorporation and others amending them are set forth, and particularly that of 1823, and also the several proceedings had under the same, as hereinbefore stated, and it prays that the State may be declared to be a stockholder in the premises to the extent of five hundred shares for the said subscription of $25,000, as from the day the same was made, and that a certificate or proper evidence of stock may be issued to her therefor, and that the dividends declared to her, and not paid to her, or that ought to have been declared, in respect to the said stock, and have not been, but have been withheld, be paid to the State by the said company. The answer of the company admits that the certificate and dividends were withheld as alleged in the information, upon the ground that the sum of $1,375.53 for salaries to engineers ought not to be charged to the company, and it insists still upon that objection. And, besides, while it admits that at that time no other objection was made to those expenditures, and that the company offered to settle the accounts as stated by the Board of Internal Improvements, if the State would pay that sum of $1,375.53 out of her own funds, yet the answer now insists further that the whole expenditure above Fayetteville was improper and unlawful and not binding on the company, and therefore ought not to be charged or allowed against the company. It states that the offer to settle on the part of the company was made both in ignorance of its rights and by way of compromise, and therefore, ought not to conclude the company, unless in fact and law that be the proper mode (449) of settlement. That the charges were proper, that answer states, the company cannot admit, because the detailed accounts and the vouchers for the sums stated to have been paid are in the possession of the Board of Internal Improvements and have not been accessible to the company's officers. But if those payments were actually made, the answer states they ought not to be allowed in payment of the State's stock, for the several reasons following: That it was greatly to the advantage of the company that the lower portion of the river, between Wilmington and Fayetteville, should be improved, so as to have an easy and safe navigation throughout the year, and that until that was effected none of the funds of the company should have been diverted therefrom or laid out about Fayetteville; that the act of 1823 stipulates, and it was one of the terms on which the act was accepted by the company, that the navigation should be completed from Wilmington upwards, by commencing the improvements at Wilmington, and regularly proceeding up the river, as far as the capital would admit; that the navigation between Wilmington and Fayetteville was not completed, but might in many places have been yet further improved, and that the whole sum of $25,000 might judiciously have been expended below, and that therefore none of it should have been expended above Fayetteville; that in 1823 there were competent engineers appointed by the Board of Internal Improvements and in the public service whose duty it was to superintend these improvements, and upon whose agency and assistance, in advising, laying out and directing the operations on the river, the company relied, when it agreed that the Board of Internal Improvements should have the exclusive direction of the works; that before 1831 the public engineers had been discharged and the board had no skillful assistant, and in the operations of 1832, above Fayetteville, that the board disregarded the plans and recommendations which had been proposed by an able civil engineer, and employed as their agent A. G. Keen, who was an uninstructed and unpracticed engineer, and expended the large sums before mentioned without effecting any useful end, (450) and to the injury of works previously erected; and, finally, that against the expenditures above Fayetteville for any purpose, and especially against those actually made, and against the employment of Keen as agent, the president and directors contended and protested before the expenditures were incurred. The answer further insists that the State's subscription was payable within two and a half years after it was made, and that for such parts as were not thus paid interest may be charged as a just set-off against the dividends claimed. As the amount of expenditures above Fayetteville, though not denied, are not admitted in the answer, the cause necessarily goes before the master for an inquiry on that head. But as there can be hardly a doubt that the accounts rendered by this public board were right, so far as to be founded on actual expenditures, and the navigation company is not disposed to contest that point, the cause has been argued on the latter points with the view of obtaining instructions to the master as to the principles of taking the accounts, or probably to enable the officers of the State and company to terminate the controversy without going before the master. In the argument those questions above were discussed which are raised in the answer, and upon each of them the opinion of the Court is in favor of the State.

Upon the original matter of difference, that is to say, to which of the parties the salaries of engineers and agents, employed in laying out or conducting the works, should be charged, the Court entertains no doubt. Like every other disbursement out of the subscription of $25,000 before the money was actually paid into the treasury of the company, it was, in the first instance, to be defrayed by the State, and then allowed as a credit in account with the company in part payment of the subscription.

The argument for the defendant, indeed, was not placed on any express provision of the act of 1823. But inasmuch as that act puts the work under the direction of the Board of Internal Improvements, and inasmuch as the act of 1819 gives the board the power of appointing engineers, whose duty it was to (451) superintend all the public works, and inasmuch as the compensation of those persons was to be paid out of a public fund, it was inferred that engineers employed by the board upon this work were to be paid out of that fund also. But the Court cannot yield to that interpretation of either of those acts. By the act of 1819 the Legislature did not mean to provide an engineer for every navigation, canal, or turnpike company, and relieve them from all or any expense in procuring the services of such a person. The language of the act limits its operations to public works, that is, to such as had been or might be authorized by the Legislature for and on account of the State. We know that about that period many experimental surveys were directed, so many and so extensive as to occupy the engineers employed for a long time. We believe it true that, at the solicitations of companies and of their respective local engineers, the Board of Internal Improvements often sent their engineers to view or review particular works or parts of works. But the State's engineer acted in such cases only as a consulting engineer and for the greater satisfaction of the company and its immediate officers, and without authority to direct or control. And we believe, too, that those services were gratuitously rendered or not, according to the importance attached to the work by the board, as one of public utility, and, if not gratuitous, they were compensated as might be stipulated in each case between the company and the board. It certainly was never thought that the public had undertaken to superintend all the enterprises of the numerous companies formed to effect some work of this character. Each company was left to its own direction, and to select engineers and agents for itself, and to choose between their plans, and they cannot, therefore, lay to the State the failure of their undertakings. The salary of the engineers employed in the case before us is as proper a charge against the company as the wages of any hireling or day laborers employed under him.

Upon the next point we do not stop to inquire into the purpose or conditions of the offer of the company to allow all the expenditures, except the engineer's salary, as concluding (452) the company, because, in the opinion of the Court, the objections to the expenditures are untenable, and the State is entitled to credit for them, such as may appear to have been made, independent of any such consent of the company. The franchise is granted to the company for the whole river, to its source, and the grant must be taken to have been founded upon considerations of general utility as well as the emolument of the private adventurers. It is obvious that the public interest must be promoted by making a navigation as high up the river as possible, at least as high as would, upon the whole river, return tolls that would adequately remunerate for the outlay. And it is also obvious that there might be a difference of opinion, probably founded on a difference of interests, between the community and the stockholders as to the point up the river to which the improvements should be carried, inasmuch as the difficulties of the improvements increase and the profits to be derived from those particular improvements decrease with the ascent up the stream. Indeed, as works of this character are generally of peculiar interest to persons residing on the projected line of navigation, the stock is often taken for the most part by those who are thus interested, among whom there may be a similar contrariety of views, or their interests may lie higher or lower on the stream. When, therefore, in this case, there were works, taking Fayetteville as the mean point, above and below, in an unfinished condition after the expenditure of a large capital, and application was made to the Legislature to enable the company to complete those works by the further subscription of capital, it cannot surprise if that body should take the occasion to promote that interest which is peculiarly public, as far as might be compatible with justice to the private stockholders, and to provide as far as possible against the waste of the funds either by extravagance of expenditure or losses through undertakings injudiciously begun without funds for their completion; and to those ends should consent to subscribe, only on condition, that the money should be laid out, either in a manner specially (453) set forth in the act or generally under the directions of the Legislature or other agents of the State. Such appear to have been the motives for the act of 1823, and such, it seems to us, are its provisions. By it the sole and exclusive direction as to the improvements to be made and the contracts for affecting them is conferred on the Board of Internal Improvements, and that merely by force of the enacting words; but to render it yet more exclusive of the interference of the officers of the company the latter are required to renounce in writing any powers upon those points. But it is said that the act itself confines the board to a particular method of working, by requiring the improvements to commence at Wilmington and regularly proceed up the river, and that no money ought to be laid out above until the navigation be completed below; and that here the river is yet susceptible of improvement below Fayetteville. If the act gave any specifications of the improvements which the Legislature contemplated as completing the navigation, if it referred to any surveys or plans as guides to the board to which the execution was confided, we should hold that a departure therefrom was injurious to the company. But there are no such specifications or references, but only a general direction that the board should begin at Wilmington. It is, necessarily, then, left to the judgment and discretion of the board what improvements were necessary at the different points below and to what extent they must be carried to be complete before the field of operation above was entered upon. It was considered safe to leave this discretion to the board. It must necessarily reside somewhere. It had before been in the officers of the company, under the supervision of the stockholders, but had been transferred by them to the agents of the State. It is absurd to understand that the works were to be completed below in the sense that they should be perfect before there should be any progress up the river. We understand the provision as directory to the board to finish what it might deem it necessary to begin lower down before anything above was undertaken. In other words, the work and mode of conducting it, as it had before been in the discretion of the directors of the corporation, was then to be in the (454) discretion of the Board of Internal Improvements, acting on behalf of the public, subject only to the general direction to commence below. If that board should abuse its powers injudiciously or wantonly or corruptly, it was open to the company to apply to the Legislature to restrain or remove them, reverse their decisions, or afford any other measure of redress. For, in truth, the board is a mere political agent, the creature of the Legislature, and subject in all points to its control, and confiding this matter to the discretion of that body was much the same, only more convenient, as retaining it in the discretion of the Legislature itself. Upon the last point the general rule is that the State never pays interest unless she expressly engages to do so. But it does not in this case appear that the money was due, or, consequently, that interest could accrue. By the subscription the State became a stockholder, inasmuch as no other period is fixed for her becoming so. It is not stated when the money was payable, according to the actual terms of subscription, and it is probable there were no installments designated otherwise than is mentioned in the act. According to that, the money was to be paid in sums " not exceeding $10,000 in any one year." Now, as this money was to be laid out on the river, and could not be applied to any other use, and as it was to be laid out under the direction and in the discretion of the Board of Internal Improvements, it would seem naturally to follow that it should be paid at such times and for such purposes as to the board itself seemed meet, with the limitation that not more than certain installments should be paid. As a bargain this would seem a hard one, with the advantage greatly preponderating on one side, and so it would be were the parties private persons only. But it is to be remembered that the State is the contracting party, and the board an impartial arbiter, having no interest except so far as the members were citizens, and, at all events, that if the board erred the Legislature would always be ready to correct the error and do justice to the citizen. Had the board unreasonably delayed the work or withheld the payment (455) of the subscription, that the proper measure of redress would, upon application of the company, have been promptly supplied, cannot be doubted. But the company cannot assume the power of self-redress by withholding the State's dividends for a supposed and independent demand against her, not acknowledged by her and not provided for by an appropriation. But here it does not, in truth, appear that the company applied to the board, even, for an earlier expenditure or payment of the money, much less that such an application was made known to the Legislature; and, certainly, the State cannot be charged with interest not promised, before a specific demand. Having thus disposed of the questions made in the pleadings and at the bar, the Court has only to say further, that if the defendant wishes the inquiry as to the sums actually laid out by the board, it must be ordered, with instructions in conformity with the opinions here given.

PER CURIAM. Decreed accordingly.

Cited: Bledsoe v. State, 64 N.C. 397.

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