15 S.C. 304 | S.C. | 1881
Lead Opinion
The opinion of the court was delivered by
Other branches of these causes have been before this court. I have not had the benefit of the argument therein, but proceed to present the questions submitted as they appear to me at the present hearing.
June 18th, 1872, Judge Melton made an order on a motion to-appoint a receiver.
1. Restraining creditors of the Greenville and Columbia Railroad Company from instituting writs, and judgment creditors from enforcing their judgments.
2. That the president and directors of the company, “ under the order and subject to this court,” continue in possession and conduct and carry on the business of the company, and “ make report to this court at such times as the court may require of the-condition of the property of all kinds of the said company, of its earnings and profits and expenditures, to the end that such orders may, from time to time, be moved for as may be necessary and proper for the protection of the property of the said company and the interest of all parties concerned pending litigation.”
3. That Mr. Green be appointed referee, to call in, by advertisements in the newspapers, the creditors of the company, “to take testimony as to the liens set up against the said company, and the amounts respectively secured by such liens.”
Under this order Mr. Green held references and submitted his report, dated November 15th, 1872. In this report he classifies the priority of liens as follows:
1. First mortgage bonds outstanding, $241,000.
2. Guaranteed bonds outstanding, $1,419,071.55.
3. Second mortgage bonds outstanding, $1,200,000.
June 11th, 1872, Mr. Attorney-General Chamberlain filed a complaint on the part of the state, in which-he prays “that a receiver be appointed of all the property, assets and effects of the defendants, to hold and keep the same subject to the further order of this court.”
May 13th, 1878, Judge Shaw filed an order to amend the-
November 23d, 1878, Judge Pressley, after hearing argument in the cases, as amended, filed a judgment, in which he says: “I consider that the said order of Judge Melton,” (June 18th, 1872,) “ did make the officers of the Greenville and Columbia Railroad Company officers of this court and responsible to it in the character of receivers, but they have not executed the proper bond, nor have they filed their accounts or performed the other duties required by that order. It . is, therefore, incumbent upon me to put an end to that condition of the property, and to place it more substantially in the hands and under the custody and order of this court.” He appoints Mr. Conner receiver.
September 6th, 1879, Judge Pressley filed his decree, holding “ that the statutory liens, under the acts of 1861,1866 and 1869, were securities for the payment of the bonds therein authorized, not mere indemnities to the state, and, therefore, it had no right to waive them in favor of the second mortgage.” From this decree there was an appeal by De Leon, trustee, and Clark, trustee, but no exception was taken to that portion of the order of November 23d, 1878, which adjudged that the order of Judge Melton, June 18th, 1872, “ did make the officers of the Green-ville and Columbia ^Railroad Company officers of this court, and responsible to it in the character of receivers.”
March 24th, 1880, this court, Mr. Justice McGowan delivering the opinion, dismissed the appeal and affirmed the Circuit decree.
November 29th, 1879, Judge Mackey made an order for the sale of the road; and, on the same day, filed another order directing holders of bonds to make proof of the same before the master, who is directed to “ classify the bonds guaranteed by the state.”
December 19th, 1879, Judge Mackey filed his decree, in which he decides: “It is adjudged that the order of Judge Melton, June 18th, 1872, did constitute the officers of the company the receivers of this court for the operation of the road and the protection of the defendant’s property,” &c.
Auditor Manson testifies: “ It was not the intention of Mr.
He also proves that from 1874 to 1878, the $241,000 of first mortgage bonds were reported to the company as “ first mortgage bonds then outstanding.”
The note to Knobeloch for $9000, and the two notes to the National Bank of Greenville for $5000 each, are secured by “ first -mortgage bonds past due.”
Mr. Barnwell, master, reports upon the testimony: “These fifty-four bonds are not entitled to the security of the mortgage to C. M. Furman, and they are not, in the hands of the present holder, first mortgage bonds of the Greenville and Columbia Railroad Company.” He also reports: “These bonds having been proven before John S. Green in 1872, a referee in one of these cases, their validity cannot now be questioned. As to this view, it only applies as a matter of fact to a portion of them; as a matter of law, I feel called upon by the order of this court to treat all bonds as unproved until they are submitted to me and are proved before me, to my satisfaction, to be what they purport to be. I have, therefore, passed on these bonds as I have done on all others, without regard to whether or not they had been passed upon by Referee J. S. Green. It is also claimed for them that in fact a great many of these bonds were not reissued by the company, but by a receiver of this court. As I am fully of the opinion that there was no receiver of this road until the appointment of James Conner as receiver,” &c.
To this report exceptions were filed on the part of Knobeloch, Palmer, Robertson and National Bank of Greenville.
July 27th, 1880, Judge Hudson filed his decree, in which he overrules the exceptions, except those of the National Bank of Greenville. From this decree the cause now comes to this court on appeal.
The railroad interest, although in its infancy, has attained such vast proportions, commercial, financial and, I may add, political,
Two questions arise here:
First. The proper construction of the order of Judge Melton of June 18th, 1872.
Second„ When these fifty-four bonds were taken up by President Magrath, was it with the intent to retire them, or was it for the purpose of an investment, to afford him negotiable securities by which he could hold in hand the current earnings of the road to meet its current expenses ?
Judge Melton’s order was passed on a motion for a receiver. It provides that the president and directors, “ under the order and subject to this court,” shall continue in possesssion of the road; conduct and carry on its business; make a report to the court of its condition, earnings, profits and expenditures. It appoints a referee to report the order and priority of the liens against the company, and restrains judgment and suing creditors. Now if this order did not make the president and directors receivers, for what purpose was it made ?
It will be remembered that on June 11th, 1872, Mr. Chamberlain, then attorney-general, filed his complaint praying: “ That a receiver be appointed of all the property, assets and effects of the defendants, to hold and keep the same subject to the further order of this court.” Seven days after, Judge Melton filed his order of June 18th, 1872. Was not that in response to
Which brings us to the second inquiry. When these fifty-four bonds were “ taken up,” was it payment, and- when re-issued were they deprived of the protection of the original security ? This is a question of right and intent. It may well be questioned, if, under the order of the court appointing the president and directors receivers, they had authority to pay and retire the bonds secured by the first mortgage. They were required to carry on the business of the company — make report of its condition, earnings, profits and expenditures — for what purpose ? That the court may make such orders as may be moved for, to protect the property and the interest of all parties concerned. The court was as anxious to preserve the liens and securities of the bondholders and other creditors as it was to preserve the property of the company which protected them. It was not to create dispute and litigation, for, to prevent this, creditors of all classes were enjoined. The receiver is the officer of the court, as Mr. Justice McGowan emphatically says, “its hand” to manage the property under the direction of the court for the best interest of all concerned. No preferences are to be shown, no practices tolerated that will give advantage to one class of creditors to the detriment of another class, but the whole business is to be managed on the basis of the broadest equity. Hence large discretion is allowed him in the financial manipulation of the assets; he may call in or put out the securities of the company as, in his judgment, will best enable him to secure the property to the stockholders and pay off its creditors, subject always to the check of the court. If, in doing this, he takes up bonds one month and re-issues them the next, to save interest and enable him to meet the current expenses on the most economical scale, I do not see that he thereby destroys the lien of the bond taken up, which made it a secure-investment when originally issued and which is supposed to retain its lien as it passes from hand to hand around the financial
Now let us consider the condition of things when the receiver took charge of the property under the order of Judge Melton in 1872. The referee, Mr. Green, reports $241,000 (of which these fifty-four bonds were a part) as “first mortgage bonds outstanding.” This report is not excepted to and becomes a part of the record. These bonds are annually described, for a series of years, in the reports of the company as bonds thus renewed. Mr. Manson, the auditor, says: “ It was not the intention of Mr. Magrath to pay these bonds ; we were not prepared to retire any bonds; these bonds were entered as an actual investment in company’s books, and were purchased as any other securities were purchased by the company as an investment of company funds ; íhese bonds were used for the purpose of raising money to operate the'road by pledging them as collaterals for loans.” How, then, can it be said this was payment, and debtor and creditor uniting in the same person, the lien of the mortgage was lost ? That is not all. Mr. Magrath was not examined, but his acts speak with great emphasis. He not only published the bonds in his annual reports, which were- distributed, “ as first mortgage bonds then outstanding,” but he actually incorporated in his notes to Knobe-loeh and the National Bank of Greenville a description of them as “ first mortgage bonds past due.” After this there was no use to examine Mr. Magrath to say with what intent he took up and re-issued the bonds. If he did not intend to give them the character of first mortgage bonds, he was practicing a hideous fraud on the men who advanced their money on the faith of that
After all the learning, instructive and interesting, that has been displayed, it does seem to me, from a careful consideration of the several reports, orders, declarations and judgments made herein, that this discussion is more of an intellectual gladiatorial contest on questions of law, arising since the commence
Here is a motion also to dismiss the appeal of Mr. Fisher, receiver, because a copy of the exceptions was not served on the presiding judge within ten days. The points involved in the appeal having been fully argued by counsel, and the case decided, it is a matter of little consequence to the appellant, Fisher, what becomes of this motion. We have no doubt that Mr. Cor-bin, attorney for Mr. Fisher, agreeing to pay, and actually paying his proportion of the expenses in preparing the brief, and the cause being fully settled for argument, supposed he had done all that was necessary. But the rule is finally established in Ex parte Clyde, and cannot be departed from.
The appeal of Fisher, receiver, is dismissed.
Dissenting Opinion
dissenting. The majority of the court has reached the conclusion, in this case, that the bonds in question, upon their re-issue, retained the security of the mortgage by which they were secured in their first issue, and, this being the first mortgage, that therefore these bonds should rank as first mortgage bonds in the distribution of the assets of the company.
Being unable to concur in this opinion, I have dissented, and now propose to state briefly the reasons of my dissent.
The argument of the majority is, that the president and directors of the road became receivers under the order of Judge Melton, of June, 1872; that, as such receivers, they had the legal right to invest their receipts from the income of the road, in such securities as they saw proper; that these bonds were taken in by them as such investment; and being investments,
It is true that Judge Pressley thus construed this order upon the Circuit, and so has Judge Mackey; and now a majority of the court has so construed it. In the face of the concurring opinion of so many eminent jurists, of course I differ with great hesitation and, doubt; but still I do differ, and I must follow my own judgment.
The question at issue is as to the intent of the ordér. Did Judge Melton intend to make these officers receivers ?
The term “receiver” is a technical term, and has a well-defined legal meaning, and, when used in an order, carries with it a plain and well-understood signification. Besides this, the duties belonging to the office, which the term imports, are also well understood, so much so that thé mere appointment of a party as receiver, when the term itself is used in the appointment, at once defines his duties without more. Such being the fact, it seems probable that had Judge Melton intended to divest the president and directors of this company of their powers as officials of the road' and invest them with the new power of a receiver, he would have so ordered, in plain and unambiguous terms; he would not have left the matter to construction, but would have used the precise and apt words to that end. This seems so reasonable that his failure to do so can hardly be accounted for on the ground that it was accidental, or that it occurred from inadvertence. It is more reasonable to suppose that it was intentional.
I venture the assertion that no order can be found in the history of judicial proceedings in which a receiver has been appointed where this term has been omitted. No such term is used in this order, nor has there been employed any term equivalent to this. And, although the prominent prayer of the complaint was for the appointment of a receiver, this term seems to have
The order was a consent order, and my construction of it is that the parties agreed that the property, as a temporary arrangement, should be left under the control and management of the present officers of the company until the further hearing of the cause. In the meantime the creditors to be restrained from interfering with the running of the road — the appointing of a receiver to be left to some future stage of the proceedings. And this order was intended to carry out this assent and understanding of the parties.
This construction is sustained by the further fact that it is very unusual for the president and directors, as president and directors of an insolvent company, to be appointed receivers of the property and assets of the company pending the litigation. In fact, I doubt whether a case can be found where such officers, as individuals and by name, much less as company officials, have been appointed. Mr. High is emphatic in his condemnation of such a practice. The president and directors of a company are officers of the company, elected or appointed by the company, and under its control. The appointment of such officials, in their official character, would be the same as appointing the defendant company itself. And I do not suppose that there ever has been an instance, unless this be one, where the defendant has been appointed the receiver of the property in litigation. High on Receivers, § 72.
But, admitting that this order of Judge Melton did constitute these company officials in their official capacity receivers, does it follow that they have the power to buy up the bonds of the company with company funds, and subsequently put them out again subject to the protection and security of such mortgage, if any, by which they were secured in their first issue ?
It will be admitted, I suppose, without question, that no
The application by a debtor of his own funds to his own debts, whether evidenced by notes or bonds, will inevitably extinguish the debt. There can be no such thing as a debtor being the assignee of his own indebtedness in such way as to keep his debt alive to himself against 'himself. In every contract there must be, at least, two parties.
True, either an individual or a corporation might re-issue his negotiable notes or his bonds, although once taken up and extinguished, but this would be done, not by virtue of any life still existing in such instruments, but by virtue of a new vitality imparted by the new contract of re-issue, and the paper would go forth the second time not as the old paper, but as an original instrument, discharged from all of its former incidents and accompanied with such only as the new contract might attach to it. No authority is needed to support this proposition; it springs from well-known elementary principles.
Now, apply this doctrine to the case at bar.
It is not claimed that the receivers used any other funds in the purchase of these bonds except company funds. Here, then, is the application of the debtor’s monéy to the debtor’s debts, not by the debtor’s own act in person, it is true, but by the hands of another. This, however, can make no difference, as it is not the medium through which the application of the funds of the debtor is made which extinguishes the debt, but it is the' fact that his money has been used.
Besides, could these receivers, had they kept possession of these bonds until final settlement, have presented them against this insolvent company as subsisting obligations and claimed the amount which their assignees are now doing, the full amount due thereon ? Could they have instituted action against themselves to enforce payment? They might have held them and obtained, on final settlement of their accounts, credit for the sum paid out by them, but no more. The bonds, while in their hands, were certainly extinct as against the company.
If this was so, even for a moment, was not the mortgage dis
My opinion is that when these bonds were taken up by the funds of the debtor they were extinguished, and the mortgage was discharged to that extent.
And this, whether the order of 1872, constituted the president and directors receivers or not.
Decree reversed.
