Morgan's Louisiana & T. R. & S. S. Co. v. Texas Cent. Ry. Co.

| U.S. Cir. Ct. | Oct 28, 1887

Mr. Justice Harlan,

after stating the facts as above reported, delivered the following opinion:

It is an established principle that, except upon bills of review in cases in equity, upon writs of error coram vobis in cases at law, or upon motions which, in practice, have been substituted for the latter remedy, no court “can reverse or annul its own final decision or judgment for errors of fact or law, after the term at which they have been rendered, unless for clerical mistakes; from which it follows that no change or modification can be made, which may substantially vary or affect it in any material thing.” Sibbald v. U. S., 12 Pet. 488" court="SCOTUS" date_filed="1838-03-10" href="https://app.midpage.ai/document/ex-parte-sibbald-v-united-states-86058?utm_source=webapp" opinion_id="86058">12 Pet. 488, 492; Bank v. Moss, 6 How. 31" court="SCOTUS" date_filed="1847-12-21" href="https://app.midpage.ai/document/president-of-the-bank-of-the-united-states-v-moss-86435?utm_source=webapp" opinion_id="86435">6 How. 31; Bronson v. Schulten, 104 U. S. 415; Schell v. Dodge, 107 U. S. 630, 2 Sup. Ct. Rep. 830; Phillips v. Negley, 117 U.S. 665" court="SCOTUS" date_filed="1886-04-12" href="https://app.midpage.ai/document/phillips-v-negley-91652?utm_source=webapp" opinion_id="91652">117 U. S. 665, 6 Sup. Ct. Rep. 901; Cannon v. U. S., 118 U.S. 355" court="SCOTUS" date_filed="1886-05-10" href="https://app.midpage.ai/document/cannon-v-united-states-91703?utm_source=webapp" opinion_id="91703">118 U. S. 355, 6 Sup. Ct. Rep. 1064. It is equally well settled that, after the court has allowed an appeal, and a supersedeas bond is taken, either during or after the term, jurisdiction as to all matters — certainly those of substance — determined by the decree is transferred to the court to which the appeal goes. Draper v. Davis, 102 U. S. 371; Goddard v. Ordway, 101 U. S. 752; Hovey v. McDonald, 109 U. S. 157, 3 Sup. Ct. Rep. 136; Roemer v. Simon, 91 U.S. 149" court="SCOTUS" date_filed="1875-12-18" href="https://app.midpage.ai/document/roemer-v-simon-89157?utm_source=webapp" opinion_id="89157">91 U. S. 149; Rubber Co. v. Goodyear, 6 Wall. 156.

Can the order of June 11, 1887, be sustained consistently with these principles?

The Railroad and Steam-Ship company, in its original bill, alleges that the only manner in which it could obtain satisfaction of its claim, and a recognition of its prior lien, was through the interposition of the court, and the appointment of receivers with power to administer the property. The court appointed receivers; and such appointment, as we have seen, was under the prayer of the original bill. The Loan and Trust company, in its cross-bill, sets forth that the mortgagor company was in default as to interest due, under said deeds, on May 1, 1885, and as to all interest due subsequent to that date; that the payment of interest had been duly demanded, and default had continued 60 days after such demand; and consequently the principal of the bonds secured by both deeds had become immediately due and payable. The cross-bill further alleged that the mortgagor company was insolvent; that its indebtedness, bonded or otherwise, was so large that the company and its receivers were utterly unable to pay the floating debt and discharge the interest on mortgage bonds from time to time out of net earnings; that this state of affairs was likely to continue for an indefinite period of time; that, in consequence of the embarrassed condition of the financial affairs of the mortgagor company, it was impossible for the trustee, under the mortgage deeds of trust, to execute said trusts in the manner therein specified, without the aid or interposition of the court; nor could the trusts be executed, and the rights of the parties interested be ascertained and fully protected, otherwise than by a judicial sale of the mortgaged premises and property covered by the mortgage deed of trust. The cross-bill also alleged:

“Until such sale can be had, and the proceeds thereof be distributed, your orator is likewise advised and charges that it is expedient and necessary that the franchises, property, premises, and appurtenances so mortgaged to your orator in trust as aforesaid, and all the rights, franchises, and property of the said defendant, the Texas Central Bail-way Company, of whatever name, nature, and description, including all its moneys on hand and the earnings of the same, continue to remain and be placed in the hands and under the control of a receiver, or receivers, with such proper powers and control over the same as to the court shall seem right and equitable to be conferred.”

While the appointment of receivers was, in the first instance, a matter within the discretion of the court, the order placing the property in the hands of Dillingham and Clarke was a judicial determination that the plaintiff was entitled, under the circumstances disclosed, to have the property, pending the litigation, administered under the supervision and direction of the court, by receivers. So far from that determination being questioned by the Loan and Trust company, its correctness was recognized by the cross-bill, and the court was distinctly informed that it was both expedient and necessary that the property should “continue to remain” in the hands of receivers. The final decree was, in legal effect, a confirmation of the previous order, placing the property in the hands of receivers.

In view of these facts, it is clear that the order of June 11, 1887, does modify the final decree in material respects. It proposes to discharge the receivers appointed under the prayer of the original bill, and to transfer the actual custody and management of the property to one of the parties, who, as the trustee named in the mortgage deeds of trust, holds fiduciary relations to the property, and is hostile to the claim asserted by the original plaintiff to a prior equitable mortgage or lien. Although the order recites that the property is delivered to the Loan and Trust company for “safe-keeping during the pending of the cause,” other recitals plainly show that it was based upon the right given and the duty imposed upon that company by the mortgage deeds of trust to take possession of the property and operate it, when default in the payment of interest or principal continued for 60 days after demand, and when the trustee should be requested to do so by holders of 75 per cent, of outstanding bonds, the railway company first receiving written notice at its New York agency of such request. But the right to such possession, if it was disputed, could have been enforced only in a direct suit for that purpose. Trust Co. v. Railroad Co., 4 Dill. 116, 117.

After the appointment of receivers in the suit instituted by the railroad and steam-ship company, and so long as the receivership continued, this provision could be made available to the trustee only upon application, before final decree, to the court to vacate the order appointing receivers, and return the property to the mortgagor company. Instead of that course being adopted, at the outset, the trustee, by its cross-bill, not only advises the court that the property should continue to remain in the hánds of receivers, but presented such facts as made it the duty of the court to adhere to the purpose of having it administered by one of its own officers. It is true that on the twenty-first of February, 1887— more than a year after this litigation was commenced — the trustee filed a petition, asking that it be put into possession of the property as trustee under the mortgage deeds of trust. It is sufficient, upon this point, to say that if any state of case would have justified the court in granting that request in this suit, after the Loan and Trust company had filed its cross-bill seeking a decree of foreclosure and sale, the fact that such a petition was filed is immaterial here; for no process was issued upon it, and no action was sought or taken upon it before the final decree was passed. If' the attention of the court was called to it at the time the cause was submitted, the final decree must be regarded as confirming its previous action in taking possession of the property by receivers. The term having passed, and if it had not passed, an appeal with supersedeas, from the whole decree having been duly allowed and perfected, the circuit court had no -power to change the status of the property by placing it in the custody of one of the parties, to be managed and operated, not for the benefit of all interested in the result of the suit, but subject to the mortgages under which that party claimed. It had no more power to do that than to set aside the order appointing receivers, and return the property, pending the appeal and after the decree was superseded, to the mortgagor company. This must be the result in every view of the case; for it cannot be said to be a matter of no consequence to the plaintiff in the original suit whether the property on which it claims to have a paramount lion is administered, under the orders of the court, and by a receiver, indifferent between the parties, or administered, under mortgage deeds of trust, by a party to the suit, which, as trustee, disputes its priority of lien. It is plain that the order of June 31, 1887, varied the final decree in a matter of substance.

This view is not affected by the circumstance that che order provided that ‘‘the custody over all said property shall continue subject to the orders of this court, and subject to the terms and conditions” heretofore referred to. If the court below, after the term, and after the decree was superseded, had power, upon grounds involving merely the safety or preservation of the property, to remove the present receivers and substitute others, the fact remains that the Farmers’ Loan & Trust Company did not ask to be put in possession, as receiver of the court; nor did the court intend to substitute it as receiver in place of Dillingham and Clarke. It directed that that company be pul into possession in its capacity as trustee for bondholders, under the mortgage deeds of trust. Its possession was none the less in that capacity, because the court reserved, by its order, a general control of the property, pending the appeal.

The learned counsel for the trustee contends that there is absolutely nothing in the case to sustain the claim of Morgan’s Louisiana & Texas Railroad & Steam-Ship Company to a superior lien, and that the appeals in question have been taken for delay merely. Upon that question I am not at liberty, at this time, to express an opinion. That question is now before the supreme court of the United States for determination. The plaintiff’s claim to priority of lien was denied, and it was allowed and has perfected an appeal from the whole decree. A belief that the appeal is for delay cannot, in law', affect the question whether the circuit court or circuit judge had jurisdiction to make the order of June 11, 1887.

For the reasons stated, I am of opinion that the circuit judge was without jurisdiction to make that order, and it is set aside. It is scarcely necessary to say that, for the same reasons, the application for a resettlement of that order must be denied.

It is proper to say that those applications were ordered by the circuit judge to be heard before me as the justice of the supreme court assigned, for the time, to the Fifth circuit.