Sidebilder
PDF
ePub

deem a mortgage, where the interests of third persons had not intervened. Baggarly v. Gaither, 2 Jones, Eq. 80; Carroll v. Johnston, Id. 120; Chase v. McDonald, 7 Har. & J. 196, 197; Coombs v. Jordan, 3 Bland, 284; Lee v. Stone, 5 Gill & J. 22; Downing v. Palmateer, 1 T. B. Mon. 70; Hughes v. Worley, 1 Bibb, 200; Colquhoun v. Atkinsons, 6 Munf. 550; Siter v. McClanachan, 2 Grat. 299; Walling V. Aiken, 1 McMul. Eq. 2; Chamberlain v. Thompson, 10 Conn. 251; Phelps v. Ellsworth, 3 Day, 397; Rowan v. Rifle Co., 29 Conn. 324; Scripture v. Johnson, 3 Conn. 211; Bank v. Rose, 1 Strob. Eq. 257; Anthony v. Anthony, 23 Ark. 479; Williams v. Love, 2 Head, 80; McGoldrick v. McGoldrick, 2 Coop. Ch. 543; Evans v. Land Co., 92 Tenn. 348, 21 S. W. 670. I am quite aware that some of the state courts have abandoned every vestige of the doctrine concerning even this species of tacking. In some this has been attributable to the abandonment of equity procedure altogether. In others, like New York and Michigan, where the courts hold that the mortgagor retains the legal title, the mortgagee being a mere lienor, there was, as a consequence, no necessity for equitable aid in recovering the legal title. In courts of the United States the holding, where, by the local law of the state, a different ruling has not been required, has consistently been in accord with the English common-law and equity cases as to the title of the mortgagor. When the jurisdiction of the United States courts is invoked by a mortgagor or a junior lienor, to allow equitable redemption, it seems to me that we are not warranted in according it without annexing those equitable conditions which have been announced by the courts whose decisions lie at the very foundation of our jurisdiction, and which accord with justice and conscience. So far as the American system of registration conflicts with these rules, they are no longer entitled to our allegiance; but, so far as that system of statutes has left play for the fundamental condition that "he who seeks equity must do equity,” we should accord to the old cases full weight.

My conclusion is that the Toledo, Wabash & Western Railway Company, having assumed both sets of mortgage debts at the time it acquired the mortgaged estate, could not redeem one part of the estate without redeeming the other, the mortgagees being the

Does Compton occupy any better position? Clearly not. He is not an incumbrancer by a single instrument on one of the mortgaged estates. Neither is he a purchaser for value of the mortgagor's interest in one or both. By force of the Ohio statute the debts due from his debtor became, under the Ohio construction of that statute, an equitable charge on all the property of the Toledo & Wabash Railway Company in the hands of the Toledo, Wabash & Western. This general unit lien is the one asserted now by Compton, as affording him a right, in equity, to redeem a part of the property embraced by the lien. The very least that can be said is that he can stand, with respect to redemption, in no better situation than did the Toledo, Wabash & Western Railway Company. If that company, as a principal obligor, had a right, as their mortgaged debts matured, to pay them off, that right terminated when the pay day passed, and nothing remained but an equitable right to be

relieved from the forfeiture by resort to the equitable right of redemption. But payment would have extinguished the debts and the mortgage, and he does not propose to pay off these mortgage debts. He wishes, on the contrary, to redeem and keep them alive for his own benefit, and will seek, in turn, to be redeemed by subsequent lienors. His extreme right is to exercise the right of redemption which the Toledo, Wabash & Western Railway Company might do if it were seeking redemption. That right, in its most favorable statement for him, was to pay and extinguish these mortgages on the pay day, or, in default, pray to have accorded him that equity of redemption which, under the facts, might be exercised by the Toledo, Wabash & Western. There is nothing in the Ohio consolidating statute which indicates any purpose to in any way impair or affect any right, in law or equity, which any creditor of a constituent company had. Upon the contrary, the act expressly provides “that all rights of creditors, and all liens upon the property of either of said corporations, shall be preserved unimpaired, and the respective corporations may be deemed to be in existence to preserve the same.” But it is said that the mortgagees are not the same, and that this doctrine has, therefore, no application. The trustee in each of the two first mortgages was the same corporation, and the trustee in the two second mortgages was the same person. What is meant by this objection is that the present holders of the bonds are not, or may not be, the same persons, and that the doctrine applies only where the beneficiaries in the consolidated mortgages are the same persons. That the beneficiaries are not the same persons under each mortgage is an assumption. The only information which the court has about the subject is that the bonds secured by each mortgage were made payable to the mortgagee named therein, or bearer, and that S. Fisher, Edmond Pepper, and J. H. Purdy were made defendants, “as a committee representing certain holders of first mortgage bonds of the Toledo & Illinois Railway Company, and Lake Erie, Wabash & St. Louis Railroad Company,” these being the original mortgagor companies. But it seems to me that it is not essential to the application of this doctrine that the beneficiaries under such mortgages as these—mortgages intended to secure negotiable bonds-should be identically the same persons. Such mortgages are in many respects peculiar, and are quite modern in development. The legal title is in the trustee. He alone can sue and be sued in a court of law. He must perform all the duties of the holder of a legal estate, and is bound to protect, defend, and enforce the trust. His negligence or laches affects the beneficiary. He may enforce the trust without the presence of any beneficiary. So a bill to redeem will lie against the trustee alone, or he may redeem a senior lien on his own suit. It seems to me that, under such peculiar trusts, the union of the securities in the same trustee gives operation to the equity arising from consolidation. If this be not so, then the doctrine can never be applicable to such mortgagees, for the beneficiaries are never likely to be the same persons on any two days of the life of the bonds.

6. Another objection to separate redemption, applicable if the court has any discretion, lies in the injurious consequences resulting from the unnecessary severing of a line of railway. The property on which he has a lien is a railroad lying partly in two states. From its construction, in 1852, by two independent companies, it has been managed and operated as a unit, and since 1858 has been owned as one property, and run by one corporation. If it cannot be owned, held, and operated as an entirety, it will manifestly be most disastrous to all persons concerned. As observed in Muller v. Dows, 94 U. S. 449, "a part of a railroad may be of little value when its ownership is severed from the ownership of another part, and the franchise is incapable of division.” It has been the settled policy of courts to treat a railroad as an entirety, and to prevent its severance, even though subject to partial mortgages. Muller v. Dows, 94 U. S. 449; Union Trust Co. v. Illinois M. R. Co.,117 U. S. 466, 6 Sup. Ct. 809; Bank v. Shedd, 121 U. S. 87, 7 Sup. Ct. 807. No court has expressed more decided views on this subject than the supreme court of Ohio.

Railroad Co. v. Lewton, 20 Ohio St. 401. In Columbia Finance & Trust Co. v. Kentucky Union Ry. Co., 9 C. C. A. 265, 60 Fed. 794, this court held that a railroad was not subject to redemption after foreclosure sale under a statute of Kentucky which provided that all real estate sold under any order or judgment of a court should be appraised, and subject to redemption after the sale if sold for less than two-thirds of its appraised value. This decision was in accord with that of Hammock v. Trust Co., 105 U. S. 77, and both proceeded upon the idea that a railroad was an entire thing, incapable of severance without great destruction in its value, which consisted, in a large degree, in its maintenance as a unit. To allow the separate redemption of the Ohio part of the line is to sever ownership and management, and destroy the unity of the line. It is idle to say that this will not affect the holders of the Indiana mortgage debts. A road thus severed into two independent portions may be of little value to the owners of either. The state of Ohio encouraged the consolidation of connecting lines by very liberal statutory provisions. The same statute the Ohio court has construed as conferring a unit lien on the whole of said road, in favor of Compton. Now, should that statute be construed so as to permit Compton to ignore the unit character of his lien, and thus bring about a severance of the roads which were united by the same act which conferred the lien ? Under such a lien, upon property of the description of that involved, the lienor should be held to an entire redemption of all the property on which his lien rests.

7. But it may finally be said that the same act of consolidation which gave rise to the lien asserted by Compton gave to the Indiana divisional bondholders a similar lien on the entire property of the Toledo & Wabash Railway Company which had been transferred by the consolidation to the Toledo, Wabash & Western Railway Company, and that, therefore, they have the right to object to any redemption which does not provide for their payment, or does not admit them to a participation in the benefits of the lien. This has not been answered, except by an insistence that the purchaser cannot on this appeal represent those bondholders, and is not the equitable assignee of the rights of the Indiana bondholders by virtue of the Ohio decree of foreclosure; and by the further suggestion that, if the Indiana mortgagees were parties at all to the Ohio foreclosure suit, they are estopped to set up any such lien, having neglected to assert it in the foreclosure case. It is a mistake to say that the Indiana mortgagees were not parties to this cause. The amended and supplemental bill filed by Jesup and Knox set out each of the four prior mortgages, and made the trustees parties thereto, "in order that a decree might be made herein settling the rights and equities of the said several classes of bondholders, and ordering a sale of said property and equipments free and clear of all liens of said underlying mortgages.” The property covered by the Knox and Jesup mortgage included the entire line in the three states of Ohio, Indiana, and Illinois; and the sale sought was a unit sale of the entire line, and such was the final decree of foreclosure. Like bills were filed in each jurisdiction, and the Ohio decree is identical with the Indiana decree. That bill also made S. Fisher, Edmond Pepper, and J. H. Purdy defendants, "as a committee representing certain holders of first mortgage bonds of the Toledo & Illinois Railway Company and Lake Erie, Wabash & St. Louis Railroad Company,” these being the original mortgagor companies. The cross bill of Humphreys and Lindley, trustees under a blanket mortgage subsequent to that of Jesup and Knox, likewise made the Farmers' Loan & Trust Company and James F. Joy, as trustees under both the Ohio and Indiana mortgages, defendants. It is true that neither of the trustees under the Indiana mortgages filed original or cross bills praying foreclosure of the Indiana mortgage by the Ohio court. That is immaterial, for the other complainants and cross complainants did bring them before the court, in their character as trustees under both sets of mortgages, and did obtain a decree foreclosing both the Indiana and Ohio mortgages, as well as every other mortgage on the entire line, extending through three states. That decree of the circuit court of the United States for the Northern district of Ohio was executed, and the entire line of railroad then owned by the Wabash, St. Louis & Pacific Railway Company was sold as a unit, and the commissioner directed to make a conveyance accordingly. It is said that this Ohio decree, selling the road as a unit, is valid only to the extent of the property within the jurisdiction. In other words, the insistence is that the decree of foreclosure, although confirmed by being subsequently entered within every other jurisdiction, was valid in each only so far as the mortgaged property was within the jurisdiction. Having thus divided and distributed the decree, it is said that it must follow that the purchaser's title involved on this appeal is the title which he obtained under the Ohio decree to the Ohio Division, and nothing in this controversy involves its title to the Indiana bonds, as equitable assignee. If this be so, with all of its inferences, it would seem that the court had been engaged in a wholly fictitious controversy. How is the court to determine the extent to which Compton must redeem, if that is his only remedy, unless the parties interested in that question are before the court in propria persona, or by representation? The Wabash Railway Company was not the purchaser at foreclosure sale, but is the assignee of the purchasers. It was regularly admitted, on its own application, as a defendant, with leave “to take advantage of, and use as its own, all the allegations in the original, amended, or supplemental pleadings of complainants filed in this cause, or in the pleadings of the Farmers' Loan & Trust Company and James F. Joy, relating to or bearing on the claims of said Compton.” Thus, it is before the court, not by reason alone of its attitude as assignee of the purchasers, but as a full and formal party, admitted for the express purpose of contesting the relief sought by Compton. It is true that he sought for a sale of the Ohio Division only, and had no prayer for redemption, entire or partial. The court, however, construed its power, under the saving clause in the decree of foreclosure, as reserving jurisdiction over him and his lien, so that it might give him such relief as he should show himself equitably entitled to. His prayer for general relief has also been construed as including redemption, and to this I agree. Being a formal defendant, the Wabash Railway Company may rely upon any defense which goes to Compton's right to a separate redemption. As the owner of the Indiana Division under an imperfect foreclosure, only because Compton's lien is unforeclosed, it is the equitable assignee of the Indiana mortgage debts.

Whether it became so under the Ohio decree, or under the Indiana foreclosure only, is absolutely immaterial. If, for any of the reasons which I have before stated, Compton should not be accorded separate redemption of the Ohio mortgages, it, as the owner of the Indiana Division under such defective foreclosure, and of the Indiana bonds, as a consequence, is entitled to resist a partial redemption, both as successor to the successive mortgagor corporations, and equitable assignee of the Indiana bonds. But I utterly dissent from the conclusion of Judge TAFT that the foreclosure sale was in form a unit sale, but in fact a sale by fragments. The bids on separate divisions were never accepted, and the bid reported and confirmed was one for the line as an entirety. By what authority were the fragmentary bids rejected, and the bid for the property as a unit accepted, if the decree of sale was invalid, except so far as the property was within the territorial jurisdiction of the Ohio court? If that theory be sound, there has been no sale at all of any part of the road. On that theory, what has become of the franchise? That was a unit, incapable of being split up and distributed among the fragments. Who has obtained the rolling stock and personal property,—the purchaser of the Indiana Division, or the purchaser of the Ohio Division ? Under which decree did it pass? Or if it, too, was transferred in fragments, on what basis was the division made? The doctrine of Muller v. Dows, 94 U. S. 444-449, lends no support to the idea of distributing the decree of sale. The Ohio court had before it the mortgagor corporations, or those who had succeeded to their title and rights of redemption, as well as every trustee under both divisional and blanket mortgages. It could have required all the parties to join in a conveyance of the entire line, and thus confirm its decree for a unit sale; and this would, confessedly, have

« ForrigeFortsett »