First Nat. Bank of Jeffersonville v. Ohio Falls Car & Locomotive Works

20 F. 65 | U.S. Circuit Court for the District of Indiana | 1884

Woods, J.

Objections are made by counsel for the defendant, on account of alleged defects of the record of the procedure, to the jurisdiction of the Louisville chancery court, in the case of the First National Bank of Jeffersonville; but the questions thus presented need not be decided. Treating as valid and effective, between the parties to the respective records, all the judgments of that court with which the parties to this case are concerned, the important fact remains that neither the Ohio Falls Car & Locomotive Company, nor the trustees to whom that company made the assignment of October, 1873, were made party to any of the cases, except that the trustees themselves brought one of the suits, and under the decree which they obtained bought the bonds thereby ordered to be sold.

It has been held In a number of instances, and seems to be well established, that where a mortgage of real estate has been assigned as collateral security for a debt other than the mortgage debt, and the holder of the collateral ford oses the mortgage, without making the assignor party to the purchase, and becomes the purchaser under the decree, the sale extinguishes the mortgagor’s right of redemption only, and does not otherwise affect the relations of the assignor and assignee of the collateral. The property, as well after foreclosure as before, is held for the benefit of both pledgeor and pledgee, and must be disposed of for the benefit of both. The prico bid at such sale does not operate as payment upon the debt for which the mortgage was pledged. Brown v. Tyler, 8 Gray, 135; Montague v. Boston & A. R. Co. 124 Mass. 242; Stevens v. Dedham Inst., etc., 129 Mass. 547; Slee v. Manhattan Co. 1 Paige, 48; Hoyt v. Martense, 16 N. Y. 231; Dalton v. Smith, 86 N. Y. 176; Smith v. Bunting, 86 Pa. St. 116; Jones, Pledges, §§ 659, 683. The evident principle upon which these cases were decided is that the assignor or pledgeor of the collateral in each instance had an interest in the mortgage which could not bo extinguished by a procedure to which he was not a party, and it seems clear that in this respect there can be no distinction between the position of an assignor of notes, secured by a mortgage upon real estate, and that of an assignor of notes secured by the pledge of bonds or other like securities. It follows that the decrees of the Louisville chancery court, however effective to divest the Chesapeake & Ohio Railroad Company of any interest in the pledged bonds, had no such effect on the rights of the Ohio Falls Car & Locomotive Company, or of those claiming under that company. Bach purchaser of the bonds under those decrees still held the same as a pledge or security for the payment of that portion of the notes of the car company executed to or held by such purchaser.

It is perhaps worth while to note that prior to the adjustment of October, 1873, the Jeffersonville National Bank was, as it seems, the owner of the notes of the Chesapeake & Ohio Railroad Company, indorsed to it by the car company, and the car company was liable to the bank only as indorser of those notes; but after and by force of that adjustment the car company became and was the principal debtor, liable to the bank upon its notes then made, and accepted by the bank, to which the notes of the railroad company, themselves secured by the bonds in pledge, became only a collateral. In this way the relation of the bank to the car company, in respect to the notes and bonds of the railroad company, became the same as that of the other holders, and the effect of their several decrees for the sale of their respective bonds the same. They are, therefore, all alike bound, not to give credit for the amount of their respective bids, but to account for the bonds purchased, or for the proceeds or value thereof, in case they have been disposed of.

In respect to the third proposition of the complainants, it is the opinion of the court that it is true, and that distribution should be made accordingly: provided that no one shall receive from the trustees more than enough, after application of the proceeds or value of his collaterals, to pay the remainder of his claim, with interest, as evidenced by the extension notes.