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the proceeds of the Union Trust Company foreclosure. No other payment of principal or interest had ever been made. The bill charges, in substance, that Theodore M. Davis, receiver of the Ocean National Bank, being the holder of 910 of the various issues of the bonds of the canal company as security for a debt of the company to the bank of about 50 per cent. of the face of the bonds, J. Boorman Johnston & Co., holding 200 of one of the issues of bonds as security for a debt of the company of about 80 per cent. of the amount of the bonds, and James C. Ayer & Co., of which James C. Ayer was the principal proprietor, holding 760 of the various issues of bonds as security for a debt of the company of about 50 per cent. of the amount of the bonds, formed a syndicate, at the instance of Davis, and "agreed to pool their bonds and debts aforesaid for the common interest of said syndicate, and to run down the value of said bonds upon the market, and to wreck the enterprise aforesaid.” fraud and connivance of the members of this syndicate, as is alleged, "the legal title to the whole of said pledged bonds was procured," before May 27, 1872, "at a mere fraction of their face value." This being done, the syndicate, on the twenty-seventh of May, 1872, caused proceedings to be commenced for the foreclosure of the first of the land-grant mortgages; and on the third of July, 1872, similar proceedings for the foreclosure of the second of that class of mortgages; and on the fifth of the same month for the third. The bill then alleges that before these suits were begun the directors of the canal company had proceeded so far with negotiations for raising money for their enterprise that "a successful conclusion was assured on a basis of satisfactory title of said 600,000 acres of land being found in said ** * canal company, and on the value of said property being verified as represented by report of agents for that purpose, who had been delegated by foreign capitalists to investigate to that end; of which promised success the said syndicate having been advised, they, the said meinbers of said syndicate, set themselves about thwarting the success of said negotiations, and accomplished their purpose" by buying over Anthony from his allegiance to the canal company under his contract with the Averys, Wild, and Conant, furnishing the money necessary to complete the wagon-road contract, and getting the title to the unpatented lands in Ayer. This scheme was accomplished, and lands, amounting in the aggregate to something more than 173,000 acres, were conveyed to Ayer,-153,000 acres in 1873, and the remainder in 1875. To induce Anthony to come into the scheme, he was paid a bonus of $20,000 by Ayer, and furnished the money necessary to complete his contract for building the road. The date of this transaction does not appear, except, generally, that it was in 1872. This, as is alleged, prevented the canal company from raising money, and the syndicate, with the intent to secure to Ayer the title to the "residue of said wagon-road lands," "enlisted the said Union Trust Company of New York in their designs, and procured the said Union Trust Company * * * to allow * * * Alfred Russell, the solicitor of the said syndicate, upon the retainer of said syndicate, to foreclose the said Union Trust mortgage in the interest of said syndicate, but with the understanding that such foreclosure should be conducted * * * for the protection of the aforesaid legal title to the said residue of said wagon-road lands in the said James C. Ayer, as far as practicable and possible under the decree to be obtained therein.

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The bill then alleged, in substance, that the suit for foreclosure was begun and carried on for this purpose, among others, and that Ayer got the mortgage title to the residue of the lands under the decree in that way and pursuant to that understanding. And, finally, it was alleged that the decree rendered in the cases under which the title was got, "was not, in fact, an adjudication of the said court upon consideration of the pleadings and proofs in the said several causes, which, as appears by said decree, were heard and decided together, but was, in fact, a decree drawn by the said Alfred Russell, solicitor of the syndicate aforesaid, and submitted to by compulsion by those

representing collateral interests therein, and assented to by Union Trust Company of New York aforesaid, in collusion with the syndicate aforesaid through their solicitor aforesaid, and by the said George Jerome and Fernando C. Beaman, assignees in bankruptcy of said ship-canal company aforesaid, through ignorance of the rights and equities of the said last-mentioned corporation against the legal title of the said James C. Ayer to the said residue of the said wagon-road lands beyond the 47,000 and odd acres which were actually sold under said decree; and said Jerome and Beaman were actually misled as to the lien of the said Union Trust mortgage upon said residue of said wagonroad lands by the collusion, neglect, and failure of the said Union Trust Company, in its foreclosure bill aforesaid, to make said James C. Ayer a party defendant, charging the legal title to said lands in his hands with a trust for the payment of said mortgage, and by the collusive concession in said foreclosure bill that the title to said residue of said wagon-road lands had been lost to the said ship-canal company, and taken out from under the lien of said mortgage by reason of a grant thereof to third parties by the state of Michigan, whereby the lien of said mortgage had been lost; and hence the said Jerome and Beaman, seeing no interest which they could conserve by opposing said decree as drawn and insisted on by said Russell, consented to said decree as proposed by said Russell, and said decree was entered accordingly by consent as aforesaid, and so it was represented to the judge, who allowed the same to be entered without opposition or argument or consideration, and it was signed accordingly."

The prayer of the bill is "that your orator may be allowed by this court to have the benefit of said decree herein set forth as Schedule D hereto, in behalf of your orator, and any other holders of said 1,300 bonds secured by the said mortgage to the said Union Trust Company of New York, who are bona fide holders of said bonds in said decree mentioned; and that in behalf of your or ator and said bondholders the said residue of 200,000 acres of wagon-road lands so deeded to said Jas. C. Ayer in his life-time, as heretofore stated, may be by the decree of this court charged in the hands of said widow and heirs, or of said trustees, with a trust for the payment of the unpaid portion of said 1,300 bonds and interest thereon; and that the said residue of said land be sold under the decree and direction of this court to pay the moneys remaining due upon said unpaid bonds, or so much thereof as shall be necessary to that end; subject, however, to the lien of the said widow and heirs, or of said trustees under the will of the said James C. Ayer, for all money advanced by said James C. Ayer in completion of said wagon-road land contract, as the same shall be ascertained upon an accounting of the same, with interest, as the same shall appear upon an accounting thereof."

The Union Trust Company failed to appear, and as to it the bill was taken pro confesso. The other defendants demurred to the bill, and upon hearing the demurrer was sustained, and the bill dismissed. From a decree to that effect this appeal was taken.

We are unable to find any authority for granting the relief which is sought in this case. The bill was not filed to set aside the decree in the suit brought by the Union Trust Company to foreclose its mortgage. On the contrary, the complainant asks, in express terms, to have the benefit of that decree, so that, as we suppose, he may keep the money he has got as his share of the proceeds of the sale under it. Neither is it sought to hold the Union Trust Company accountable for its alleged misconduct and breach of faith in the proceedings for the foreclosure of the mortgage. Nor is the suit brought to obtain a specific performance of the contract between Anthony and the Averys, Wild, and Conant, nor to recover back the money paid by the canal company on that contract over and above what was necessary to pay for the lands which had been patented to Anthony, and which were actually sold under the Union Trust Company decree for the benefit of the complainant and the other bond

holders. But it is, if we understand it correctly, a suit to charge the wagon-road lands, now in the hands of the legal representatives of Ayer, with a trust in favor of bondholders as security for the amount due them respectively, subject only to a lien for the moneys actually advanced to enable Anthony to complete his contract for building the road, and thus become entitled to patents. There can be no doubt but the mortgage by the canal company conveyed to the Union Trust Company, as trustee for the bondholders, all the interest in the lands which was conveyed to the canal company by the warranty deed of Perez J. Avery, Wild, and Conant; but that was no more than the interest which those grantors acquired by the contract with Anthony. As their deed was with covenants of warranty, any title which they afterwards acquired under the Anthony contract would inure to the benefit of the bondholders through the trust company as their trustee, holding for their benefit, and as their representative. All the rights the bondholders have or ever had in the mortgage, legal or equitable, they got through the trust company, to which the conveyance was made for their security. As bondholders claiming under the mortgage, they can have no interest in the security except that which the trustee holds and represents. If the trustee acts in good faith, whatever binds it in any legal proceedings it begins and carries on to enforce the trust, to which they are not actual parties, binds them. Kerrison v. Stewart, 93 U S. 155, 160; Corcoran v. Canal Co., 94 U. S. 741, 745; Shaw v. Railroad Co., 100 U. S. 605, 611. Whatever forecloses the trustee, in the absence of fraud or bad faith, forecloses them. This is the undoubted rule.

Here the trust company began its suit for the foreclosure of its mortgage, and has sold under the decree in that suit all the interests, legal and equitable, which it held in the land as trustee for the bondholders, and distributed the proceeds, the complainant receiving his share without complaint and without objection. All the rights which the trust company, as trustee, had in the lands at the time of the mortgage passed to the purchaser at the sale. That sale, it is conceded, binds the trust company as trustee, and therefore it binds the complainant as a bondholder. If the decree or the sale under it was in fraud of the rights of the bondholders, their remedy is by a direct proceeding to set aside the sale or the decree, and to proceed anew with another foreclosure of the mortgage, and not to undertake to reforeclose what had been fully foreclosed before under a decree which remains in force.

But it is said that the original foreclosure was of no effect because neither Anthony nor Ayer was a party to the suit, and the rights of the trust company and its beneficiaries under the mortgage were neither set forth with certainty in the bill nor found in the decree. No relief was sought either against Anthony or Ayer. The sole purpose of the bill was to sell the interest of the mortgagee in the lands, whatever that interest might be. To a suit for that purpose neither Anthony nor Ayer was a necessary party, because it was not important to them who held the rights that were to be sold, and such a sale would not affect them. The canal company, or its assignees in bankruptcy, were parties to the suit; and instead of objecting, as they might, to a sale of the property without a more specific adjudication as to what was to be sold, consented to it. The bondholders were represented in the suit by their trustee, and are bound by the decree so long as it stands unreversed, and is not set aside or vacated.

The argument of counsel for the appellants seems to proceed on the ground that there are two equities growing out of the mortgage to the trust company, which may be dealt with in two separate suits, as they are separate and distinct in their character. One he calls the mortgagor's equity, consisting of the rights of the canal company in the lands growing out of the contract by Anthony for their sale to the Averys, Wild, and Conant. This equity, if we understand counsel correctly, it is conceded was sold under the proceedings for foreclosure, and now belongs to the purchaser. The other he denominates

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the "bondholders' equity," and it arises out of the purchase by Ayer from Anthony of his rights under the contract with the state of Michigan for building the wagon road when he (Ayer) had knowledge of the former contract under which the canal company could have perfected its title to the unpatented lands included in the mortgage, if he had not interfered Under this equity counsel say they now seek to recover for the bondholders "only the profits which Ayer made by stepping into Anthony's shoes in the premises. We are unable to see how these two equities, if there are two, can be separated in the way contemplated. They both grow out of the canal company's rights under the contract between Anthony and the Averys, Wild, and Conant. If the canal company could not recover from Ayer, neither the bondholders nor their trustee in the mortgage can. The title upon which their right of recovery rests, if such a right ever existed at all, was in the trust company, as the trustee of their security, at the time the original foreclosure was had, and it was part of the mortgagor's equity which was sold. It was then what this bill seeks to make it now, part of the security of the bondholders under the trust company mortgage, and, being such, it passed with the rest to the purchaser at that sale.

Something is also said in the argument about the equitable claims of the bondholders upon Ayer as the successor of Anthony, growing out of the false representations made to them as to the title of the lands covered by the mortgage when they paid the money and took their bonds; but all such claims come from the mortgage, as to which, in all proceedings for foreclosure, they are represented by their trustee when its interests are not in conflict with theirs. All the equities now asserted were proper subjects for adjudication in the former suit, if they existed. They formed part and parcel of the security which was then enforced, and, not being excepted from the sale, passed by it.

This makes it unnecessary to consider whether there was such fraud on the part of Anthony as to charge the lands in the hands of Ayer, even if the trust company were now proceeding against him under the mortgage. The decree is affirmed.

SANDS v. MANISTEE RIVER IMP. Co.1
(November 14, 1887.)

1. NAVIGABLE WATERS-EXACTION OF TOLLS-CONSTITUTIONAL LAW.

Under a statute of Michigan for the improvement of the Manistee river, a stream wholly within that state, an improvement company was organized that improved the channel of the river. The company was authorized by the statute to exact tolls for the use of the river thus improved. Held, that such a statute is not in violation of the provisions of the United States constitution embodied in the fourteenth amendment, which declares that no state shall deprive any person of life, liberty, or property without due process of law.

2. SAME.

A statute of Michigan authorized the improvement of a river wholly within that state, and the exaction of tolls for the use of the river so improved. Held, that the statute did not impair the contract contained in the ordinance of 1787 for the government of the territory of the United States north-west of the river Ohio, giving to the people the right to use the waters leading into the St. Lawrence, free of duty, tax, or impost.

In Error to the Supreme Court of the State of Michigan.

The plaintiff below is a corporation organized under a statute of Michigan, for the improvement of Manistee river, a stream wholly within that state. The present action was brought to collect from the defendant the amount of tolls levied for the use, in the years 1878, 1879, 1880, and 1881, of the river

1 Affirming 19 N. W. Rep. 199.

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as improved The improvements consisted in the removal of obstacles to the floating of logs and lumber down the stream, principally by cutting new channels at different points, and by confining the waters at other points by embankments. The statute under which the plaintiff below was organized contains various provisions to secure a careful consideration of the improvements proposed, of their alleged benefit to the public, and, if adopted, of their proper construction, and of the tolls to be charged for their use. The company must first obtain the assent of the governor and of the attorney general to the proposed improvements, and then submit to the board of control designated a map of the sections of the stream which it proposes to improve, and plans showing the nature and character of the improvements. If, in the opinion of the board, the construction of the proposed improvements will be a public benefit, and the company is a proper one to make them, the board is required to indorse its approval upon the map and plans, give the consent of the state to their construction, and fix the time for their completion. Upon such approval, the corporation is authorized to make the improvements; and, whenever they have been completed to the satisfaction of the board of control, and accepted, that body is to fix the rates of toll which the company may charge for running vessels, boats, rafts, timber, logs, or lumber through the improved stream. These rates are to be graduated with reference to the distance run upon the river, and are not to be increased or changed without the consent of the board, and cannot be increased at any time so that they will amount to more than 15 per cent. of the cost of the improvements after deducting necessary expenses and repairs. The collection of tolls is to be confined strictly to that part of the river improved, and to the floatable material benefited by the improvements. The streams improved under the statute are to be open to all persons for the passage of vessels, boats, logs, rafts, timber, and lumber, upon payment of the prescribed tolls; and uniform rates are to be charged.

The declaration alleges a compliance by the plaintiff below with the requirements of the statute in its incorporation; in obtaining the consent of the governor and of the attorney general of the state to its proposed improvement of Manistee river; in submitting to the board of control the maps and plans of the improvements; in obtaining its opinion that their construction, as thus shown, would be a public benefit; that the plaintiff was a proper company to make the improvements; and also its consent to the same on behalf of the state, and its designation of the time within which they were to be constructed. The declaration also sets forth that the improvements were made pursuant to the plans and within the time required, with such changes and exceptions as were authorized by the board under the statute; and that when they were completed and accepted, that body fixed the rates of toll for the use of the river as improved, in running logs and timber for the years 1879 to 1881, inclusive, those rates varying from five to fifteen cents per thousand feet, board measure, according to the distance that the logs were to run through different sections of the improved stream; that, during the years mentioned, the defendant below floated down the river, through the portions improved, 78,711,000 feet of logs, board measure, and became liable for the toils fixed upon them, amounting to $9,253, to recover which the present action was brought.

The defendant pleaded the general issue, and gave notice of several special defenses. On the trial the plaintiff established the matters alleged by him in the declaration, but the evidence offered by the defendant only tended to show that the measurement of the logs was excessive, and that the tolls receivable were less by 10 per cent. than the amount claimed. The defendant, however, contended, and requested the court to instruct the jury, in substance as follows: First. That the statute of the state, under which the plaintiff was organized and the tolls were fixed, is in conflict with the clause of the fourteenth amendment to the constitution of the United States, which declares that no

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