Galena & Southern Wisconsin Railroad v. Barrett

Per Cueiam: The grounds upon which the judgment of the Appellate Court is sought to be reversed, are: 1. There can be no recoupment on account of the failure to pay the interest due upon the bonds paid for by appellee and delivered to him on the contract upon which suit is brought. 2. The plea of recoupment is not a sufficient answer to the declaration. 3. Assuming the plea to be a sufficient answer to the declaration, the replications are a sufficient answer to it. The first and second of these grounds will, for convenience, be considered together. The contract declared upon is: “We, the undersigned, hereby agree to take the number of first mortgage bonds and shares of stock of the Galena and Southern Wisconsin Bail-road Company set opposite our names, and to pay for the same at the rate of $650 in cash for each $1000 bond and five shares of stock, on demand being made by the secretary of the company, the money to be deposited in one of the banks of Galena as collected, and kept as a special fund, to be used for building and equipping an extension of the Galena and Southern Wisconsin railroad to Wingville. This subscription not to be binding unless one hundred of the said bonds shall be subscribed for.” The first mortgage'bonds of the Galena and Southern Wisconsin Bailroad Company, which the subscribers thus agree to take, bind appellants to pay the amount thereof in gold coin of the United States to bearer, in twenty years from date, with interest thereon at the rate of seven per cent per annum, payable semi-annually, in gold coin of the United States, on the first days of April and October of each and every year, upon the presentation of the coupons annexed thereto as they severally become due. And they are affected by the further agreement on the part of appellants, set forth in the mortgage, that if they should fail to pay any of said interest, when the same becomes due and payable according to the / tenor and effect of the bond, and should remain in default for the space of ninety days, then and in that case, the principal of said bonds should become immediately due and payable and collectable, as is shown by the plea. And it is alleged in the plea that, “in compliance with said supposed subscription- (the contract) the said defendant, (appellee) on the 15th day of June, 1877, paid to said plaintiffs (appellants) the sum of $650 in cash, and received therefor from said plaintiffs (appellants) five shares of their stock and one of their said first mortgage bonds, Eo. 352, pursuant to said supposed subscription (the contract), bearing date the day and year last aforesaid, with interest coupons annexed thereto as aforesaid, the first thereof becoming due on the first day of April, 1878; and in the further part compliance with said supposed subscription (the contract) the said defendant (appellee), on the 15th day of June, 1877, paid said plaintiffs (appellants) a further sum of $650 in cash, and received therefor from said plaintiffs (appellants), pursuant to said supposed subscription (the contract), another five shares of their stock and another of their said first mortgage bonds, Eo. 395, bearing date the day and year last aforesaid, with interest coupons annexed thereto as aforesaid, the first thereof becoming due on the first day of April, 1878, which said two bonds, and the interest coupons thereto respectively annexed, the said defendant (appellee) owned "and possessed from the day of the date thereof ever since; and said defendant (appellee) avers that the said plaintiffs (appellants) did not pay said interest on either of said bonds, or any part thereof, when the same became due and payable, or at any other time whatever, according to the tenor and effect thereof, or in any other manner whatever, but wholly failed therein, and was in default in the payment of said interest on each one of said bonds for more than ninety days before the commencement of this suit, whereby the whole principal sum of each of said bonds became and was due and payable to said defendant (appellee), as was also the interest thereon, as thereon promised, before the day of the commencement of said suit, * * and said plaintiffs (appellants) have not paid said two bonds, nor either one of them, nor any part thereof, to said defendant (appellee), or otherwise howsoever, nor performed in any manner their said part of said supposed contract of subscription (the contract), but have wholly failed, neglected and refused so to do, to the great damage of said defendant (appellee), to-wit, in the sum of $3000, which sum exceeds the said damages sustained by said plaintiffs (appellants), by reason of the non-performance by said defendant (appellee) of the other part of said supposed contract of subscription in said first count mentioned, and the said defendant (appellee) is entitled, and hereby offers to recoup so much of the said damages sustained by the said plaintiffs (appellants), by reason,” etc., etc. In giving a construction to the contract, it should be read as if the bonds and mortgage were set out therein at length, and thus reading the contract, it is manifest that the undertaking, on the part of appellee, is in the nature of a promise to make a loan to appellants of the amount indicated by the subscription, for the length of time, and upon the terms specified in the bonds and mortgage, for the bonus of the stock. The payment of interest, in this view, is a vital part of the consideration, and affects the entire contract. By the terms of the bonds the failure to pay interest for the prescribed ninety days, made the bonds become due and payable, and on the principle of Christy v. Ogle’s Exrs. 33 Ill. 295, and Streeter v. Streeter, 43 Ill. 155, appellee has the right to recoup the amount. In the present suit no other parties than the appellants and the appellee have any interests that ean be regarded. Eor do we conceive that there is anything in the character of the contract between appellants and appellee that exempts it from the application of the doctrine of recoupment. The contract was directly between appellants and appellee, and not between different stockholders, and the mere promise that the money should be used in á particular way did not create a trust devoting it to that particular use and no other. There is no undertaking that the money should be used for no other purpose than that specified, and the implication is that it should be used for that purpose only if deemed necessary. It does not appear here that any others than appellants have claims upon this fund, for we can not regard the mere statement in the declaration, that the suit is for the use of a particular person, evidence upon which to base a decision. We' are of opinion that there can be a recoupment on0 account of the failure to pay the interest due upon the bonds paid for by appellee and delivered to him, and that the fourth plea is a sufficient answer to the declaration. The first replication to the fourth plea neither traverses nor confesses and avoids it, and for this reason was obnoxious to a general demurrer. The second replication attempts to set up matters in avoidance of the fourth plea. It does not show payment in whole or in part of the bonds nor any tender thereof, nor any proceeding in regard to such bonds by which appellee is bound and concluded. The demurrer was properly sustained to both replications. We see no cause to disturb the judgment of the Appellate Court. Judgment affirmed.