22 F. 138 | U.S. Cir. Ct. | 1884
The bill of the Wabash, St. Louis & Pacific Railway Company, filed in this court, is ancillary to and in aid of a bill filed by it on the twenty-seventh of May, 1884, in the circuit court of the United States for the Eastern district of Missouri. Erom the allegations thereof it appears that the complainant was, at the commencement of the suit to which this is ancillary, the owner of a number of railroads denominated “The Wabash System,” extending across the states of Missouri, Illinois, and Indiana, and into the states of Ohio, Michigan, and Iowa, constructed by other corporations created for the purpose, and which were, before complainant’s acquisition of title thereto, severally incumbered with one or more mortgages made to secure the payment of large amounts of bonds issued by said respective corporations; and the bonds so issued and secured, or most of them, are now outstanding and unpaid in the hands of bona fide holders. After complainant’s acquisition of title to said roads, to-wit, June 1, 1880, it executed what is termed the “general mortgage,” in and by which it-conveyed its franchise, roads, and other appurtenant property to the Central Trust Company, of New York, and James Clieney, of Indiana, to secure $50,000,000 of bonds which it proposed to issue. But by the express terms of said instrument it was made
On the tenth of April, 1883, this general mortgage was supplemented by a lease of all complainant's roads and property to the St. Louis, Iron Mountain & Southern Railway Company, and, “being greatly in need of money to meet accruing interest and place its lines of roads in good condition, and to pay for a large amount of rolling stock and other necessary equipment, and to complete certain of said lines then being constructed,” the complainant, on May 1, 1883, entered into another indenture with the Mercantile Trust Company, of New York, known as “the collateral mortgage,” by which it “assigned to said trust company a large number of engines and cars; and also a large number of bonds, stocks, and other certificates; and also certain equitable interests in valuable depots, grounds, and other terminal facilities” owned by it in the cities of Chicago and Peoria, Illinois, Detroit, Michigan, and Des Moines, Iowa. Dive million six hundred and seventy-one thousand dollars of the bonds authorized and secured by this mortgage have been issued and negotiated, and are now outstanding valid obligations against the complainant. And on December 21, 1883, the complainant made another mortgage of its said roads and property, rents, issues, and profits, etc., to secure the payment of all advances which the mortgagee therein named had or might thereafter make to it, under and pursuant to the provisions of said lease of April 10, 1883, hereinbefore mentioned.
After thus enumerating the incumbrances resting upon its property, the complainant proceeds with painful minuteness to detail its unavailing struggles with adverse fortune. Dor several successive years it was compelled to expend “vast sums” in repairing injuries inflicted on its lines by extensive freshets. Its tracks, embankments, bridges, and culverts were, in numerous instances, wholly swept away and destroyed. A partial failure of crops along and near its lines for the past two years, and particularly in “those fertile portions of the country from which it derived its largest revenues,” and from which “it had fairly and .reasonably expected a profitable business,” greatly diminished its earnings. To meet the expenses of maintaining and operating its roads, and completing its system and putting it in operation, complainant was compelled to borrow large sums of money. Considerable portions of the sums thus obtained were advanced by the St. Louis, Iron Mountain & Southern Railway Company. But this company is under no obligations to make any further loans, and hp,s
Several of said leasehold interests are of “extreme importance,” as
To this bill the Central Trust Company of New York and James Cheney, trasteos of the general mortgage, have appeared, answered, and filed their original and ancillary cross-bills, — -the first in the United States circuit court for the Eastern district of Missouri, and the latter In this court, — in which, after substantially recapitulating the allegations of the original bill, they allege a default in the pay
Are the complainants, or either of them, entitled to the relief demanded, or any part of it ? Assuming the facts alleged to be true, no relief, other than that which has been already accorded, can be granted on the original bill. This bill has accomplished the objects contemplated by it. It ha3 secured the appointment of a receiver, and kept the way open for the interposition of the cross-complainants; and, having accomplished this much, it is no longer a material factor in the case, and may be hence dismissed from further consideration. But the cross-complainants cannot be so summarily disposed of. As trustees of the general mortgage, it becamo their duty, upon default in the payment of the interest as the same matured thereon, to foreclose it. This is the object of their cross-bill. If this was the whole scope of their demand, there would be no necessity for any action by the court at this time. But these complainants insist that, as an incident to the foreclosure of the general mortgage, they have the right to foreclose the 42 other and prior mortgages referred to in the pleadings. But this, we conceive, is a misconception of the equities and necessities of the case. Cases have and may again arise in which property covered by different incumbrances may be properly sold as an entirety, and the claims of the different beneficiaries thereof thereafter adjusted upon the fund realized from such sale. But this is not such a ease. The rights of the different sets of creditors, secured by said mortgages, are entirely distinct. Those claiming under the mortgage upon the road extending from Toledo to the state of Indiana have no interest in either of the other mortgages sought to be foreclosed by this suit, and vice versa. Their remedies are as distinct as their rights. Each set of beneficiaries is entitled to a separate foreclosure of the security under which they respectively claim, and to separate sale of the jproperty embraced therein. Their right to such separate remedy and separate sale is a vested and valuable right, that can neither be abrogated nor materially impaired without their consent. -When property included in the same mortgage is thus sold,
But this valuable protective power would be practically destroyed by an application of the complainant’s theory to the facts of this case. Their proposition, as we have already seen, is to “pool” the 42 different mortgages mentioned in their bills, and sell the property therein embraced as an entirety. This would be a convenient method of disinoumberiug it, and transferring the title thereof to a purchaser freed from existing liens and complications. But it would effectually forestall everything like co-operative action on the part of the beneficiaries for whom the sale is to be made. Creditors secured by the same mortgage, and placed upon the same footing, have a common interest in the security. Their rights are the same. Whatever benefits one, necessarily inures to the advantage of all the others, and hence combinations for their common protection are easily formed and readily executed. But there is no such community of interest between complainants under different mortgages. On the contrary, their interests are necessarily repugnant to each other. Suppose the court was to adopt complainant’s theory, and enter a decree, either upon the original or upon the cross-bill, foreclosing all the securities involved, and order a sale of the property embraced therein as an entirety; could the beneficiaries of these several securities probably agree upon a basis of co-operation to prevent its being sold for less than its value, or for less than the amounts due them ? The court has no power to fix a basis for their common action and compel them to conform to its dictation; this can only be attained through and by means of a mutual agreement of the parties interested. And is it not obvious that no such amicable agreement could be consummated in this case? The labor of finding all the beneficiaries of all the mortgages, and inducing them to enter into such a negotiation, would he immense, and, if undertaken, would most likely fail of accomplishment. But we will suppose that they were all found, and brought together, either personally or through their authorized representatives. Is it at all probable that a satisfactory agreement could be formulated for adoption? By whom and upon what basis could the interests of each beneficiary be definitely ascertained and authoritatively declared? The relative value of the distinct properties embraced in each mortgage would, of necessity, have to be agreed on,; and yet each set of mortgagees would be interested in enhancing the value of their respective securities and depreciating the others; and when the difficulties incident to such diversity of pecuniary interests is considered in connection with the number of claimants, the acknowledged selfishness of men, and the imperfections of human judg
Other reasons might be urged in support of the decree authorized, but those given will suffice to vindicate the action of the court.