52 Minn. 246 | Minn. | 1893
This is an action to foreclose a mortgage executed by the railway company defendant to the Central Trust Company of New York, as trustee, (in whose place plaintiff has been substituted as trustee,) to secure bonds issued by the company. The mortgage is junior to eight other mortgages, each covering some portion of the line of railroad, and the franchises and movable property belonging thereto, included in the plaintiff’s mortgage. Each of the nine mortgages includes a pledge of the income, rents, issues, and profits of the division or section of railroad and other property mortgaged, and each contains a clause authorizing the trustees named in it, in case of default for four months in the principal or interest of the bonds secured by it, to enter upon the railway and premises thereby mortgaged; to manage and conduct the business of the railway; to collect and receive the tolls, rents, issues, and profits thereof, and -apply the net proceeds in payment, first of the interest, and then of the principal, of such bonds. So that, so far as rights conferred by the mortgages are concerned, they all stand as to the property covered by more than one on the same footing, except as affected by priority of execution. Default having been made in plaintiff’s mortgage, he brought this action to foreclose it, joining as parties defendants the trustees in the eight prior mortgages. The complaint sets forth all the mortgages; advances a claim to priority of lien in respect to rolling stock and equipments purchased and paid for with the proceeds of bonds secured by plaintiff’s mortgage; asks, in effect, for a foreclosure of all the mortgages, and an adjudication as to the order of priorities; and, having alleged that the mortgagor is insolvent, and the plaintiff’s security inadequate, that the provisions of the prior mortgages confer on the respective trustees the right, under certain conditions attending defaults, to take possession of the mortgaged property, and there is reason to believe that attempts to take possession will be made unless the court by its receiver assumes control for the benefit of all the párties; asks for the appointment of a,
The claim of the plaintiff in respect to the earnings of the entire property covered by his mortgage is, in effect, that, notwithstanding his mortgage is junior in date to all the others, and that each of the others contains the same pledge of net income, and the same provision for making the pledge effectual, to wit, that giving the right to take possession, as his mortgage contains, yet because in his action to foreclose, and on his motion, a receiver was appointed, he is entitled to have all the net earnings appropriated to his mortgage, and the other mortgagees excluded from any benefit thereof, unless they shall consent to his demand that their mortgages be foreclosed, and that the court below was in error in recognizing any right of the other mortgagees in respect to such net earnings except they consent to such foreclosure; in other words, that having, in order to afford a remedy to plaintiff, seized upon the mortgagor’s only source of in
The claim Í3 certainly a bold one.
We shall not find it necessary to follow the briefs in the case, nor to discuss all of the many propositions contained in them.
There is no rule or principle in law or equity upon which a court may require a senior mortgagee, against his will, at the instance of a junior mortgagee, to foreclose his mortgage before it is due. The-instances in which a court may “accelerate payments,” to use the terms in appellant’s brief, — that is, may require a creditor, even when unsecured, to receive his debt before it is due, — are few, and they depend on statutes. Such are cases under bankrupt and insolvent laws, and laws for dissolving and closing the affairs of corporations. Cases of junior lienholders upon the foreclosure of a prior lien depend on a different principle.
Conceding that the trustees defendants might, had they so elected, have turned the action into one to foreclose their prior mortgages, they could not be required to do so.
Whether 1878 G. S. ch. 75, § 29, to the effect that “a mortgage of real property is not to be deemed a conveyance, so as to enable the owner of a mortgage to recover possession of the real property without a foreclosure,” applies only to a mortgage of the title, or applies as well to one attempting to mortgage also the income and the-right of possession, — that is, one which, as part of the security, gives-to the mortgagee the right to take possession, and receive and apply the rents, — we need not determine. Nor is it necessary to determine whether a railroad, with all its rolling stock and personal property, when considered as an entirety, is to be regarded as real estate, so that a mortgage of it shall (unless excepted by some other statute) come within that section; for, if that section is to be held as rendering of no effect a stipulation in an ordinary mortgage giving the-mortgagee the right to take possession before foreclosure, a railroad mortgage is clearly excepted from its operation. 1878 G. S. ch. 34,
In thus giving authority to pledge income, the legislature intended something more than authority merely to make a pledge in form and words, which should have no effect. It intended that the mortgage or instrument pledging may contain the stipulations usual in railroad mortgages,.and necessary to make the pledge effectual. It was the rule of law then, as it is now, that such a pledge does not operate upon the income while the mortgagor is permitted to remain in possession of the body of the property, receiving and disbursing its •earnings; and the enactment quoted was made with that rule in view. So that, though there are no express terms authorizing the insertion of a stipulation that the mortgagee may take possession .and receive the earnings, it is to be implied from authority to pledge the income, for without it no such pledge could be of any effect. In these mortgages, therefore, the pledge of income, and the clause authorizing the trustees to take possession, are valid.
It is contended that, even with this clause in a mortgage, a court ■of equity will not take possession and operate a railroad, at the instance of a mortgagee, except in an action to foreclose his mortgage. And that is undoubtedly correct. Courts do not enter upon the conduct of business merely for the purpose of carrying it on and making profits for parties.
In the limited cases in which a court will, through its officers or receivers, manage a business, it is only when necessary for the pres^ •ervation of the interests and rights of the parties before it for adjudication.
But there can be no doubt, in the case of a railroad mortgage with a clause authorizing the mortgagee to take possession, that he may,
But suppose the ease of an action to foreclose by a junior mortgagee, and the appointment, upon his application, of a receiver to take possession of the property and receive the income for his benefit only, while there are senior mortgagees having the right to take and hold possession and receive such income; we can easily conceive that, if they acquiesce in the possession of the property and the receipt of the income by the- receiver for purposes other than their mortgages, making no move towards asserting their claims, they would have no right to any part of the income, any more than had they permitted the mortgagor to remain in possession, and to receive and disburse it for its general purposes. Such was the case of Sage v. Memphis & L.R. R. Co., 125 U. S. 361, (8 Sup. Ct. Rep. 887,) in which the mortgagees had laid by until all the moneys they sought to have paid to them had been earned by the receiver, and he had been discharged. The purpose of that action was only to satisfy the plaintiff’s claim, and for that purpose the receiver was appointed and the income was earned; but the purpose of this action is, in part at least, to adjust the rights of all the parties, as well to the income as to the body of the property. For the purpose of adjusting their rights to the income, it was necessary for the court to lay hold upon, not merely that portion which the plaintiff might be entitled to, but that which all the parties were entitled to. The order appointing the receiver not assuming to appropriate it to plaintiff, the court was to be regarded as taking and holding it for all the parties, as their rights and interests might appear, at least so long
When such mortgagees are in the action, and so in position to make their demand upon the court, it is entirely immaterial in what form it is made, so that it is clearly made, and presents to the court the ground of their claim, if it be not already before it.
And at whose instance the receiver was appointed, and on what ground he was appointed, are wholly immaterial. Their right to demand that the earnings which shall come into the hands of the receiver shall be held for and paid to them does not depend on those things, but on the facts that, by taking the property through its re
It is unnecessary for us to consider, and we will not do so, whether the court, under its general power to preserve securities which it has taken into its possession, might not, out of the income, pay the interest on the prior mortgages, in order to keep down, the incumbrances.
Order affirmed.
(Opinionpublished 53 N. W. Rep. 1151.)