Seibert v. Minneapolis & St. Louis Ry. Co.

58 Minn. 58 | Minn. | 1894

Mitchell, J.

• The facts are sufficiently stated in the order appealed from. See, also, opinion on a former appeal in the .same case. 52 Minn. 246, (53 N. W. 1151.)

This appeal is from an order denying the application of the bondholders under “the Pacific Extension” mortgage, who were allowed to appear as defendants in the action for the purpose of protecting the interests of all the bondholders under that mortgage, for an allowance for attorney’s fees and other disbursements made by them in connection with the action.

The discussion of counsel has taken a wide range, but, in our judgment, the law of the case lies within a very small compass.

It seems to us clear that the services performed and the' disbursements made by these appellants were such that, if performed or made by the trustee, the latter would have been entitled to reimbursement therefor out of the trust fund as services pérformed and disbursements made in the execution of the trust and in protecting the'interests of the bondholders under the mortgage.

It is not material whether or not the action instituted by the plaintiff as trustee under “the equipment” mortgage was authorized under that trust. The fact' was that the action had been commenced, and in it not only was relief asked that would, if granted, be prejudicial to the rights of the bondholders under the Pacific Extension'mortgage, bufa receiver had been appointed, who-had, under the order of the court, taken possession of and was operating the property, and collecting the earnings thereof, which were pledged by the Pacific Extension mortgage, which authorized the trustee, in case of default, to take possession of the road, operate and manage its business, collect and receive the tolls, issues, and profits thereof, and apply the net proceeds to the payment of the interest and principal of the bonds.

There can be no question as to the right as well as the duty of the trustee in such a case to defend the action so far as necessary to protect the interests of the bondholders, and to apply to the court to have a receiver hold for and pay to them so much of the net earnings as is covered by his mortgage. Seibert v. Minneapolis & St. L. Ry. Co., 52 Minn. 246. And there can be no doubt as to the right of the trustee to reimbursement out of the funds, which is the subject of the trust, for all reasonable expenses incurred in the performance of such duty, as being expended in the execution of the trust, and preserving and administering the fund which is the subject of the trust.

And if, for any reason, tbe bondholders are permitted to appear in the action for the purpose of protecting the trust property, and do, in whole or in part, what the trustee might have thus done, it seems to us that there can be no doubt of the power of the court,, upon a proper showing, to make the same reimbursement to them which it might have made to the trustee had he performed the same services and incurred similar expenses. This does not mean that both should be paid for the same thing, but that, after determining the amount which should be allowed for expenses necessarily or reasonably expended in preserving and protecting the trust property, the court may apportion the amount between the trustee and the bondholders, or award it all to one of them, according to the equities of the case.

In this case the court recognized the equities of the appellants, and the value of their services, in the benefits of which all the other bondholders had shared equally with themselves, but refused to exercise any discretion in the matter, holding that it had no power to grant appellants’ application; that is, that it had no authority to allow reimbursements to individual bondholders who appear in a suit of this character. ■ It is elementary that if relief lying within the sound discretion of the trial court is refused on the ground of want of power to grant it, or upon any other ground that proves the nonexercise of that discretion, such decision will be reversed, and the case remanded, with a direction to exercise the discretion. This rule depends upon the right of every suitor to obtain full and fair consideration for all rights that he may properly submit to the decision of the court. The questions whether, in the exercise of a sound discretion, the court ought to make an allowance to appellants, and, if so, how much, are not before us for consideration. The court having refused to exercise its discretion on the ground of a supposed want of power, the order appealed from must be reversed.

(Opinion published 57 N. W. 1068.)