| Me. | Aug 13, 1892
This is a proceeding in equity asking the court to appoint trustees under a railroad mortgage to fill vacancies occasioned by the death of two of three trustees originally named in the deed.
July 1st, 1871, the Somerset Railroad Co. duly authorized an issue of bonds to the amount not exceeding $500,000 and made a mortgage to Lewis Pierce, Daniel Holland and Stephen D. Lindsey conveying to them or their successors in joint tenancy "the railroad of said company from its junction with the Maine Central Railroad in Waterville to its terminus in Solon,” .
" with the franchise of said company and all its real estate and all its personal property of every nature used in connection with said railroad now possessed or to be hereafter acquired,” in trust to secure the payments of its bonds and coupons thereunto annexed and for the benefit of all the holders thereof. Thereupon the company actually issued its bonds to the amount of $450,000 payable in twenty years from July 1st, 1871, with interest at the rate of seven per cent per annum payable semi-annually according to the coupons attached to each bond. The larger part of these bonds were sold by the company and the proceeds applied to the construction of its road. The plaintiffs are purchasers and owners of these bonds to an aggregate amount of $78,100, and of coupons annexed in the payment of which the company has made default during the last twelve years amounting to $84,921. It is expressly stipulated in the mortgage that the omission of the company to pay any of the bonds or coupons as they become due shall constitute a breach of the conditions of the deed.
After notice of the pendency of the bill had been given to " all persons and corporations interested,” a new corporation called 'The Somerset Railway” appeared to object to the appointment of such trustees and being admitted as party defendant, demurred specially to the plaintiffs’ bill on the ground, first, that Lewis Pierce, the survivor of the trustees, was not made a party to the bill and, second, because the bondholders did not elect new trustees to fill the vacancies as provided by law. This defendant also filed an answer representing that on the 1st day of April, 1883, the Somerset Railroad Co. the mortgagor named in the deed of July 1st, 1871, was insolvent and unable to meet its indebtedness as it matured and that it was hindered and delayed in the transaction of its business; that the holders of the bonds secured by the mortgage in question on which interest had been due and payable for more than three years prior to that time, to an amount exceeding one half of such bonds, on the 15th day of August, 1883, formed the new corporation called the Somerset Railway, composed of the holders of the bonds, in the manner provided by c. 51, R. S., and acts amendatory thereto ; that the majority of the bonds were surrendered to the Somerset Railway in exchange for the stock of that corporation; that the mortgage described in the plaintiffs’ bill was foreclosed by a decree of the Supreme Judicial Court, April 1, 1887, and the equity of redemption sold on execution and purchased by the defendant; and that the mortgage has therefore become fundus officio and has ceased to be security for said bonds ; that October 1, 1887, the new corporation created another bonded debt and issued its bonds to the amount of $225,000, secured by a mortgage of its road from Oakland to Bingham, the proceeds of which have been applied in constructing the extension of the road
It is admitted that there was a breach of the condition of the mortgage of July 1, 1871, and that it was never foreclosed by the trustees. It is also uncontroverted that the new company was in fact organized under the name of "the Somerset Kail way ” and that since the date of its organization it has been in actual possession and management of the road and its rolling stock, receiving all the income from its operation.
The defendant also interposes the further objection that the plaintiffs are now equitably estopped to maintain this bill because they have been guilty of laches, and because a majority of the bonds owned by these plaintiffs were represented in the organization of the new corporation. But we are not required by the scope and purpose of this proceeding upon the evidence now before us to pass upon the legality of the alleged foreclosure, or to determine this question of estoppel, with respect to the numerous owners of the outstanding bonds. The court is now. asked to appoint trustees for the benefit of all the bondholders, if any, who may be interested in the security promised by the first mortgage. There is no evidence that the holders of these bonds to the amount of $18,000, who are parties to the bill, ever participated in the scheme for reorganization, and no evidence that they had any knowledge of it until after it was consummated. The history of the remaining $40,000 which remain uncancelled in the hands of those not parties to the bill, is not fully disclosed by the evidence. For all that appears they may be still held by those who originally purchased them of the railroad company.
The rights of the different bondholders are not now to be distinguished ; for all the facts which might have a tendency to create differences are not now before us, and any attempt to settle all the conflicting claims, suggested by the history of this enterprise, would be premature. We do not now undertake to declare the relative equities between the outstanding bonds and those which were surrendered and cancelled in exchange for the stock of the
The provisions of the mortgage manifestly contemplated joint action on the part of the trustees. They are expressly constituted the sole judges prima facie of the breach of the conditions of the mortgage. The majority are authorized to take action when it appears that the others had notice and declined to act; but as two of the trustees are dead, it is obvious that no measures can be taken by the board of trustees for the enforcement of this mortgage contract until these vacancies are filled. Shaw v. Norfolk Oo. R. R. 5 Gray, 162.
But the defendant finally contends that, if the situation requires the appointment of trustees to fill these vacancies, the court has no authority to take action in the premises until the trustees have been elected by the bondholders at a meeting for that purpose called by the trustees, as provided by § § 47 and 48, c. 51, R. S., 1871 (§ § 85 and 86, c. 61, R. S., 1883). True, the mortgage itself contains no provision for filling a vacancy and the bondholders have not designated any trustees in the manner specified by this statute. But the pendency of this bill reminds us that the basis for the initial step toward such a meeting of the bondholders is now wanting. There are no trustees to call the meeting ; therefore compliance with this statute is impracticable.
But the equity power of this courtis not thus restricted respecting the appointment of trustees under express trusts. In addition to the general equity jurisdiction over trusts possessed by the court under general statutes existing at the date of the mortgage, § 70, c. 51, R. S., 1871, expressly confers jurisdiction over trustees under railroad mortgages. Still further by the act of 1878,c. 8 (R. S.,c. 68, § 5), it is provided that, if in a deed oftrust no adequate provision is made for supplying the vacancy, the Supreme Court shall appoint a new trustee to act alone or jointly with the others as the case may be. Pillsbury v. E. & N. A. R. R. 69 Maine, 397. It is a familiar principle of equity that an express trust validly created shall not fail for the want of a trustee ; and the power of the court of equity over the removal and appointment of trustees independently of any statute author
The special provisions of our statutes, respecting the election of trustees, must be regarded merely as auxiliary regulations designed to aid the court in the discharge of its duty and to facilitate the action of the bondholders who may desire to co-operate to secure a more efficient execution of the trust. They were not designed to prohibit any bondholder from directly invoking the aid of the court of equity in behalf of himself and others entitled to the protection of the same security. For it is well settled by all the authorities that, under some circumstances, a suit may be instituted by one for himself and others in like condition for an object common to them all. Mason v. York & C. R. R. Co. 52 Maine, 107, and cases cited; March v. Eastern R. R. 40 N. H. 556. And this, although the mortgage in express terms prohibits the trustees from attempting to foreclose except upon the written request of one half in amount of the bondholders. First National Ins. Co. v. Salisbury, 130 Mass. 303" court="Mass." date_filed="1881-02-21" href="https://app.midpage.ai/document/first-national-fire-insurance-v-salisbury-6420206?utm_source=webapp" opinion_id="6420206">130 Mass. 303 ; Alexander v. C. R. R. Co. 3 Dill. 487" court="U.S. Cir. Ct." date_filed="1874-07-01" href="https://app.midpage.ai/document/alexander-v-central-r-r-6642349?utm_source=webapp" opinion_id="6642349">3 Dill. 487 ; Jones on Corp. Bonds and Negó. Secu. § § 389 to 392 and cases cited. See also, Guaranty Co. v. R. R. Co. 139 U.S. 137" court="SCOTUS" date_filed="1891-03-09" href="https://app.midpage.ai/document/guaranty-trust-and-safe-deposit-co-v-green-cove-springs-and-melrose-railroad-93000?utm_source=webapp" opinion_id="93000">139 U. S. 137. The statute invoked by the defendant is cumulative and not prohibitory or restrictive.
It will be remembered that there is no provision in this mortgage which prohibits any bondholder from enforcing his rights according to the usual course of equity proceedings. There is nothing in the mortgage authorizing a majority of the
The plaintiffs are accordingly entitled to the intervention of the equity powers of this court for the appointment of new trustees as prayed for. "But the appointment of a new trustee is not complete till the property is vested in him; therefore a coui’t usually embraces, in the decree appointing a new trustee, a direction for a proper conveyance to be executed to him.” Perry on Trusts, § 284. And § 6, c. 68, R. S., and § 85, c. 51, R. S., expressly authorize the court to make and enforce any decrees necessary for the transfer of the trust property to the new trustee. In view of this duty to execute a proper conveyance to his co-trustee, and to co-operate with him in the performance of the trust, we think it would be more in harmony with the familiar principles of equity pleading if Lewis Pierce, the surviving trustee, should become a party to this bill; jointly with the plaintiffs, if he prefer; otherwise he should be made a party defendant. It is also the opinion of the court that the bill should be amended by making the original mortgagor a party defendant.
Case remanded; bill to be dismissed unless amended in accordance with this opinion.