Farmers' Loan Co. v. Oregon Pacific Railroad

40 P. 1089 | Or. | 1895

Opinion by

Mr. Justice Moore.

The respondents contend that because the defendant companies have admitted in their answers that they were insolvent, and that the value of their property and. franchises was insufficient to meet the payment of the bonds and overdue interest. coupons secured by the mortgage, and because no decree has been rendered against them for any deficiency after the sale of their property, and because they have not made any objections to the confirmation of the sale, they have no appealable interest, and are estopped by the order of confirmation; that none of the other appellants ever intervened in the court below, or became parties to the record; that Sanford Bennett, 3. C. Me-Shane, and Bronaugh, McArthur, Fenton, and Bronaugh are the only persons or firms who filed any objections to the confirmation of this sale within the time prescribed by law; that the appellants have no unity of interest, and that Bronaugh, McArthur, Fen-ton, and Bronaugh have not taken a cross-appeal. Without considering the respondents’ objections, but assuming that the appellants are parties to the record and properly before the court, we will examine the case upon the merits as presented by the record.

1. The appellants contend that the amount bid for the property and franchises was so grossly disproportionate to its value as to render the order of confirmation an abuse of discretion, and, while not expecting the court to set the sale aside on account of inadequacy of the price alone, they insist that some excuse should be found for avoiding the effect of the bid in such cases, and suggest as an additional reason therefor that the court had no jurisdiction or authority at a subsequent term to modify or vary the provisions of the original decree; while the respondents, admitting the legal proposition contended for, insist that the subsequent orders of the court did not modify or vary the original decree, but only prescribed the terms of its enforcement, and that the right to do so is inherent in.the court, and was specially reserved in the decree. Assuming, for the sake of argument, that the amount bid was inadequate, we will examine the original decree and the order of the court of October twentieth, eighteen hundred and ninety-four, with reference to the right of a purchaser to tender in part payment of the purchase price receivers’ certificates as cash, this being the particular modification of which the appellants complain. The original decree, after providing that the mortgaged property should be sold as an entirety for cash and without appraisement or right of redemption, further directs that “so much of the purchase price as is not required to be paid in cash may be paid in receivers’ certificates, and in bonds, overdue interest coupon bonds, at such rate and percentage as the holder would be entitled to receive in respect of such bonds and coupons out of the purchase money and proceeds of sale, as the same may be ascertained. If any question should arise as to the sale and amount of such dividend and percentage, or as to the proportion to be paid in cash and the proportion that may be paid in such bonds and coupons, application (for that purpose) may be made to the court from time to time.” The sentence last quoted makes no provision for ascertaining what proportion of the purchase price may be paid in receivers’ certificates, but the preceding sentence, having provided that so much of it as is not required to be paid in cash may be paid in certificates, bonds, and coupons, places the certificates in the same class with the other evidence of indebtedness, and limits the right of a bidder to tender them in payment of that part of the purchase price not required by the court to be paid in cash. It also required a bidder to deposit the sum of five thousand dollars as an earnest of his good faith and ability to comply with the terms of his offer to purchase, but it did not prescribe what sum should be paid in cash, and hence, in the absence of such a provision, the whole purchase price could be paid only in that manner. If the sale had been made under the original decree, without any application to the court to prescribe what amount of the purchase price should be paid in cash, can it be successfully contended that the purchaser could have tendered either receivers’ certificates, bonds, or interest coupons in payment of any part of it? Had the court, on the application of the parties, fixed the amount of the purchase price, less than the whole, which was to have been paid in cash, then the certificates would have been receivable at their face value in liquidation of that part of it not so payable, for the decree made provision for receiving the bonds and coupons only at such rate and percentage as the holders thereof might be entitled to out of the purchase price, and made no reference to the certificates. The order of October twentieth, eighteen hundred and ninety-four, provided that such sale should be made for cash in United States gold coin; and it was contended at the argument that, since the receivers’ certificates were not payable in like coin, they could not be received in payment of any part of the purchase price, and hence this order substantially modified the original decree. It is sufficient to say that, had they been payable in United States gold coin, they would not have been receivable in payment of any part of the purchase price until the court had prescribed what part, less than the whole, should be paid in coin.

2. The order of October twentieth, eighteen hundred and ninety-four, also provided that “All taxes legally due and owing by the defendant companies up to the thirty-first day of March, eighteen hundred and ninety-four, shall be paid out of the purchase money realized from such sale, by and under the order of this court, and all taxes levied against such properties and franchises after the thirty-first day of March, eighteen hundred and ninety-four, shall be borne and paid by the purchaser or purchasers at such sale.” It is contended that the order providing for the payment of the taxes levied on the property of the defendant companies prior to March thirty-first, eighteen hundred and ninety-four, substantially modified the original decree, and prejudged the rights of the lien-holders without having given them an opportunity t© question the validity of such taxes; and that the portion thereof requiring the purchaser to pay the taxes levied after that date was invalid, and. tended to reduce the amount of the purchaser’s bid to the extent of the unascertained tax. We cannot think, from an examination of the order, that the court intended thereby to determine the question of priority of right to the fund which was to be realized from the sale of the property. The record shows that the counties of Benton, Lincoln, Linn, and Marion, upon their petitions to the court, obtained an order directing the receiver to pay the taxes due them from the defendant companies, which, in effect, transferred the rights which the said counties had in the property situated within their respective limits to the fund to be realized from its sale, which fund was to be applied to the payment of these taxes '"‘by and under the order of the court.” The court, in the order complained of, did not find what amount of tax, if any, was due either county, or attempt to establish a prior or any lien in favor of the said counties. It, in effect, provided that the fund realized from the sale should stand in the place of the property, and, upon settlement, be distributed among those having a prior right to it. If the counties had no prior lien on the property for the payment of the delinquent taxes, they could have no prior claim on the fund to be realized from its sale. How could the appellants be injured by this order? If any one had cause to complain, it would be the said counties, and particularly so if the fund was insufficient to pay the delinquent taxes, but they have made no objection to the provisions imposed, with which they are presumably satisfied. While the requirement that the purchaser should pay all taxes levied on the property after March thirty-first, eighteen hundred and ninety-four, may have had the effect to reduce the amount of his bid, it was not in our judgment invalid, for if the sale had been consummated prior to the issue of the warrant for the collection of the taxes of that year, and no agreement had been entered into in reference to their payment, it would have been the duty of the purchaser to pay them: Hill’s Code, § 2846. The trial court, in fixing the day of sale not later than December twenty-second, was doubtless aware that it would be impossible for the state board of equalization to complete its examination of the county assessment rolls, and certify the result to the several county clerks, in time to have the tax rolls completed and warrants issued for the collection of the taxes until after that date, and we can see no injury resulting from the court’s order calling the purchaser’s attention to the provisions of the statute in relation to his duty to pay the taxes of eighteen hundred and ninety-four.

3. The court acquired jurisdiction of the subject matter of the suit by virtue of the constitution and statutes of the state, and of the persons of the defendant companies by their several answers admitting the allegations of the original and supplemental complaints; and the court, having found the amount due from the defendants to the plaintiff, and that this sum was secured by a deed of trust, foreclosed the same, and ordered a sale of the mortgaged property, and, having had jurisdiction of the subject matter and persons of the defendant companies, its decree was final and fully supports the sale of the defendants’ property, unless it has been modified by the subsequent orders of the court. Mr. Beach, in his valuable work on Modern Equity Practice, (section 905,) in speaking of the power of a court to control the execution of its decree, says: “Notwithstanding the general rule that the court has no power whatever, after final decree, to amend, modify, or alter the proofs of the decree, it retains and possesses the power of controlling the time of its execution.” The authorities cited in support-of the text are: Bound v. South Carolina Railway Company, 55 Fed. 186; Monkhouse v. Corporation, 17 Ves. 380; Edwards v. Cunliffe, 1 Madd. 287; Spann v. Spann, 2 Hill’s Ch. Pr. 122. In the Bound Case, 55 Fed. 186, the decree ordered the sale of a railroad to be made on April eleventh, eighteen hundred and ninety-three, and, an appeal having been taken in which no supersedeas bond was given, the court, on motion, after adopting the language quoted in the text, postponed the sale to December twelfth of that year. In Monkhouse v. Corporation, 17 Ves. 380, the plaintiff having obtained a decree foreclosing a mortgage, the defendant moved the court to suspend its execution until six months after an appeal could be heard, which motion was allowed upon condition that the defendant pay the interest and costs, upon plaintiff’s undertaking to repay the same, if the decree should be reversed. In Edwards v. Cunliffe, 1 Madd. 287, the decree provided that unless the amount due was paid on December twenty-third, eighteen hundred and fourteen, the mortgage foreclosure should become absolute, but the mortgagor, being unable to comply with the terms, the date of payment was, upon motion, extended four times. So, too, in Spann v. Spann, 2 Hill’s Ch. Pr. 122, Johnson, J. in delivering the opinion of the court upon this question, said: “But it is equally clear that the courts, both of law and equity, or a judge or chancellor at chambers, have the power, and daily exercise it, of suspending the execution of even final process on account of subsequent matter which would render the execution of it oppressive or iniquitous.” These authorities clearly support the text of the learned author, and conclusively show that, while a court cannot, by a subsequent order, modify the essential features of a final decree, it does possess the inherent right of ■ changing the time of its execution. This right being granted, it must, upon principle, be conceded that a court possesses an equal right to modify by a subsequent order the manner of the enforcement of its decrees, for it requires no more power to modify the manner than it does to change the time of executing them. In Turner v. Indianapolis, Bloomington, and Western Railway Company, 8 Bissell, 380, (Fed. Cas. 14259,) Mr. Justice Drummond, in comment ing on the modification of a decree by a subsequent order, said: ‘ ‘ The facts were that the original decree was entered on the eighteenth of July, eighteen hundred and seventy-seven, and the amendment was made in May, eighteen hundred and seventy-eight. I admit the rule which denies the power of the court over a decree after the term when it was rendered. It can not change or alter the essential parts of the decreé. But what was the order made by the court in May, eighteen hundred and seventy - eight ? It is termed a further direction for the execution of the decree theretofore entered. The original decree provided that the property should be sold on a certain number of days’ publication. That was changed by the amendment. The original decree provided for the distribution of the funds arising from the sale in a particular manner. That was changed by the amendment of May, eighteen hundred and seventy-eight. But these things did not affect the substance ■ of the decree. Of the right of the court to make that order, I cannot doubt.” This case was appealed to the Supreme Court of the United States, where Mr. Justice Harlan, in rendering the decision upon review of the foregoing objection, with others, said: “We do not stop to consider whether these objections find any support in the record, since it is sufficient to say that, if any such errors exist, they necessarily inhere, some in -the final decree of foreclosure and sale, and others in the order which preceded it. They cannot be examined upon an appeal merely from the order confirming the report of sale. Our authority extends, as we have shown, no further than to an examination of the exceptions filed by appellants to the report of sale, from the order confirming which this appeal is taken. And some of these exceptions plainly have reference, not to the sale itself, but to the final decree of foreclosure; such, for instance, as that the terms of sale were too onerous; that the property was sold subject to various claims, the amount of which was wholly uncertain; and that the court had no jurisdiction in the case”: Turner v. Farmers’ Loan and Trust Company, 106 U. S. 522 (1 Sup. Ct. 519). The modifications complained of do not, in our judgment, alter or vary the essential parts of the original decree, and were such as the court had authority to make in carrying it into execution.

4. We will now examine the objections to the confirmation. It is contended that the court having instructed the sheriff to sell the property between the fifteenth and twenty-second days of December, eighteen hundred and ninety-four, that officer had no license to sell on either of said days, and hence a sale by him on the twenty-second of that month was void. However this may be, the court has ratified the acts of its agent, and confirmed the sale. “The court,” says Mr. Freeman in his work on Void Judicial Bales, (section 42,) “may, if it deems best, ratify various irregularities in the proceedings. If the officer changed the terms of the sale, the court may ratify his action, provided the terms, as changed, are such as the court had power to impose in the first instance.” The court in such cases may do by indirection what it could do directly, and, since it could have ordered the sale on the day it occurred, it had power to ratify the act of the officer, if it be conceded that he exceeded his authority by selling the property on the day named: Jacobs’ Appeal, 23 Pa. St. 477; Emeroy v. Vroman, 19 Wis. *689 (88 Am. Dec. 726); Thorn v. Ingram, 25 Ark. 58.

5. The most important contention is that the property and franchises offered for sale were of the value of three million dollars; that the rails, rolling stock, and miscellaneous property alone, — not including the land or buildings, — were worth four hundred and fifty thousand dollars; and that the bid of one hundred thousand dollars is so grossly inadequate as to shock the conscience, and raise the inference of unfairness, fraud, mistake, or surprise. “The uniform current of the authorities,” says the court in Marlatt v. Warwick, 18 N. J. Eq. 108, “settles that mere inadequacy of price, where parties stand on an equal footing, and there are no confidential relations between them, is not of itself sufficient to set aside a sale, unless the inadequacy is so gross as to be proof of fraud, or to shock the judgment and the conscience.” In the case at bar it is not claimed that the parties did not stand on an equal footing, that there were any confidential relations existing between them, or that there is any proof of fraud, and hence the inadequacy sufficient to set aside the sale must be so gross as to shock the conscience. We have examined the transcript before us in vain to find any evidence of the value of the said property and franchises. The receiver, upon his appointment, made an inventory of all that came to his possession, but he does not appraise a single article, or give the value in gross, except of some unused material on hand. There was no evidence before the trial court of the value, and it would be extremely difficult for us to conclude that the bid was inadequate until we have some evidence upon which the conclusion can be based. It is said that some experts were appointed by a committee of the bondholders to examine the property and appraise its value, but we cannot find that they were ever appointed by or made a report to the court upon this important subject. It does appear, however, from the report of J. W. Whalley, Esq., who was appointed referee to take an account of the receipts and expenses of the defendant companies under the receivers’ management, that for a period of about fourteen months prior to January first, eighteen hundred and ninety-two, the lines of railroad and the river and ocean steamers connected therewith had been operated at a total loss of eighty-seven thousand nine hundred and eighty-three dollars and seventy-five cents, or six thousand two hundred and eighty-four dollars and fifty-five cents per month; that the receiver had prior to said date issued certificates amounting to six hundred and thirty-eight thousand and forty-one dollars and twenty-nine cents, and that the total liabilities on June thirtieth, eighteen hundred and ninety-two, were nine hundred and five thousand four hundred and fourteen dollars and forty cents, less thirty-seven thousand eight hundred and thirty-six dollars and eighty-six cents, which was available in part payment of that amount, thus showing a total indebtedness at that date of eight hundred and sixty-seven thousand five hundred and seventy-eight dollars and fifty-four cents beyond the bonded indebtedness of fifteen million dollars and interest which were secured by the mortgage. How much this debt was increased from June thirtieth, eighteen hundred and ninety-two, at which time the referee made his supplemental report, to December twenty-second, eighteen hundred and ninety-four, when the sale occurred, the record does not show, but it was admitted in argument that an indebtedness of more than one million dollars had been incurred by the receiver since his appointment on October twenty-eighth, eighteen hundred and ninety. Viewed in the light of a business venture, and not considering the amount necessary to be expended for betterments, a property which was operated as a “going concern” at a total loss of more than.six thousand dollars per month, does not, it must be conceded, present a very inviting field to capitalists, and while the amount bid for the property may be grossly inadequate, we cannot say that it is so, in the absence of any evidence of its value, and considering that no sum in excess of that amount has been offered by any one. It is indeed unfortunate that the expenses of the management of the property can not be realized from its sale. No one can examine the record before us without being impressed with the conviction that the trial court has labored long and earnestly to accomplish this result, but without success, and to continue the operation of the road under the management of a receiver would result in further expense which must be borne by those who can ill afford to add it to their present losses. • The court, hoping the bondholders would by reorganization buy the property and pay off the expense of the receiver’s management, fixed a minimum price of one million dollars, and at another time one million two hundred and fifty thousand dollars, but was unable to effect a sale on these terms, and after waiting more than four years for the consummation of its hopes found the illusion dispelled, and the only remedy remaining was to sell the property for what it would bring, which, having been done, amd the sale confirmed by a court that was acquainted with the property and must have known its value, we can, in the absence of any evidence of the value, do nothing more than affirm the decree, which is so ordered. Affirmed.