Union Trust Co of New York v. Illinois Midland Ry Co Borg v. Same Waring v. Union Trust Co of New York Fletcher v. Illinois Midland Ry Co

• Decision Date: 05 April 1886
• Citation: 6 S.Ct. 809,29 L.Ed. 963,117 U.S. 434
• Parties: UNION TRUST CO. OF NEW YORK v. ILLINOIS MIDLAND RY. CO. and others. BORG and others, Partners, etc., v. SAME. WARING and others, Partners, etc., v. UNION TRUST CO. OF NEW YORK and others. FLETCHER and another, Partners, etc., v. ILLINOIS MIDLAND RY. CO. and others. Filed
• Court: U.S. Supreme Court

6 S.Ct. 809

117 U.S. 434

29 L.Ed. 963

UNION TRUST CO. OF NEW YORK v. ILLINOIS MIDLAND RY. CO. and others.

BORG and others, Partners, etc.,

v. SAME.

WARING and others, Partners, etc.,

v. UNION TRUST CO. OF NEW YORK and others.

FLETCHER and another, Partners, etc.,

v. ILLINOIS MIDLAND RY. CO. and others.

Filed April 5, 1886.

[Syllabus from pages 434-437 intentionally omitted] W. H. Peckham, for Union Trust Co. E. S. Isham, for Union Trust Co and Borg and others.

H. Crea and Chas. A. Ewing, for Waring Bros. John M. Butler and John T. Dye, for Fletcher & Churchman.

H. S. Greene, for Wabash, St. L. & P. Ry. Co., intervenor and appellee.

John M. Palmer, for Sylvester and others, appellees.

BLATCHFORD, J.

The Peoria, Atlanta & Decatur Railroad Company was incorporated as an Illinois corporation in 1869, to construct a railroad from Peoria, in Tazewell county, in a general south-easterly direction, through Atlanta, in Logan county, to Decatur, in Macon county. Such of the road as was constructed was built in 1873 and 1874, from a point five miles east of Peoria, on what is now the Wabash, St. Louis & Pacific Railroad, to a place called Maroa, on the Illinois Central Railroad, 13 miles north of Decatur. It did not reach either Peoria or Decatur, and the company owned no station grounds or terminal facilities at either place, but used, by lease, five miles of what is now the Wabash, St. Louis & Pacific Railroad, to reach Peoria, and thirteen miles of the Illinois Central Railroad to reach Decatur. On the twenty-fifth of April, 1872, the company executed a mortgage to James F. Secor, as trustee. The mortgage recited that the company had commenced to construct a railroad to extend from Cunningham's crossing, five miles from the city of Peoria, on the Toledo, Peoria & Warsaw Railway, thence south-east, to a point at or near the city of Decatur,' 'a distance of about sixty-seven miles;' and it covered the company's franchises, and its road and property, as constructed and to be constructed, acquired and to be acquired, 'commencing at Cunningham's crossing, five miles from the city of Peoria, on the Toledo, Peoria & Warsaw Railway, to the city of Decatur,' 'a distance of sixty-seven miles.' It was given to secure 1,300 coupon bonds of the company, of $1,000 each, payable to bearer, amounting to $1,300,000, carrying semi-annual interest at 7 per cent. per annum, and payable May 1, 1902. The mortgage provided that, on default continuing more than 60 days in the payment of any interest on any bond, the trustee, on the request of the holders of a majority of the bonds, might and should take actual possession of the mortgaged property, and operate the road, and receive its income, to pay the bonds, or, on the written request of the holders of at least one-half of the outstanding bonds, cause the mortgaged property to be sold at public auction, and convey it to the purchaser; and 'after deducting from the proceeds of said sale the costs and expenses thereof, and of managing such property,' apply the proceeds to pay the principal and interest of the bonds. The mortgage also provided that the trustee should 'be entitled to have proper compensation for every labor or service performed by him in the discharge of this trust, in case he shall be compelled to take possession of said premises and manage the same.' This mortgage was delivered and duly recorded.

The Paris & Decatur Railroad Company was incorporated as an Illinois corporation in 1861, to construct a railroad from Paris, in Edgar county, westwardly to reach Decatur. This road was constructed in 1871 and 1872, from Paris to a point on the Illinois Central Railroad about two miles south of Decatur, and, although it had its own station and grounds at Decatur, it entered them by using, by lease, about two miles of the track of the Illinois Central Railroad. On the first of July, 1871, the Paris & Decatur Company executed a mortgage to Joseph U. Orvis and William Adams, Sr., covering its franchises, and its line of road and property, constructed and to be constructed, acquired and to be acquired, extending from Paris to Decatur, 'a distance of seventy-five miles,' to secure 800 coupon bonds of $1,000 each, and 800 coupon bonds of $500 each, in all $1,200,000. The mortgage was delivered and recorded, and the bonds were put into the hands of the trustees, and some of them were issued but afterwards retired, and all of them were destroyed, but the mortgage remains on record, not released. On the first of July, 1872, the Paris & Decatur Company executed a mortgage to the Union Trust Company, a New York corporation, covering its franchises, and its road and property, constructed and to be constructed, acquired and to be acquired, extending from Paris to Decatur, 'a distance of seventy-five miles,' to secure 2,400 coupon bonds, of $500 each, payable to bearer, in all $1,200,000, carrying semi-annual interest at 7 per cent. per annum, and payable July 1, 1892. The mortgage provided that, in case default in paying any interest on any bond should continue for six months after demand, the principal of all the bonds should forthwith become due, and the lien might be at once enforced; in which case it should be lawful for the trustee to enter on the mortgaged property, and to use and operate it until it should be sold under the power contained in the mortgage, or under the decree of a competent court, 'and until such time, and from time to time, to make all needful repairs and replacements, and such useful alterations, additions, and improvements, to said railroad as may be necessary for the proper working of the same; and to receive the tolls, freights, incomes, rents, issues, and profits thereof; and, after deducting the expenses of operating and managing the said railroad and other property, and of the said repairs, replacements, additions, and improvements, as well as just compensation for its own services, and for the services and disburse- ments of such attorneys and counsel as it may employ, to apply the moneys accruing as aforesaid to the payment of said bonds pro rata.' The mortgage also provided that, in case default should be made and should continue as aforesaid, the trustee might, and, upon the written request of the holders of at least 1,000 of the bonds outstanding, should, foreclose the mortgage by legal proceedings, or should sell the mortgaged property at public auction at New York or at Paris, and convey it to the purchaser; and that, in case of such sale, the trustee should deduct from the proceeds its just allowances for the expenses thereof, including attorney's and counsel fees and disbursements, 'and all expenses which may be incurred in operating, managing, or maintaining the said railroad, or in managing the business thereof, as well as just compensation for the services of said trustee,' and thereafter apply the proceeds to pay the principal and interest of the bonds pro rata. This mortgage was delivered and duly recorded.

The Paris & Terre Haute Railroad Company was organized as a corporation, under the general railroad laws of Illinois, in 1873, and the road was built in 1873 and 1874. It runs eastwardly from Paris to Farrington, in Illinois, a point on the St. Louis, Vandalia & Terre Haute Railroad, seven miles west of Terre Haute, and the company uses, by lease, the track of the latter road to reach Terre Haute. On the first of April, 1874, the company executed a mortgage to the Union Trust Company, covering its franchises and its road and property, constructed and to be constructed, acquired and to be acquired, extending from Paris to the junction with the St. Louis, Vandalia & Terre Haute railroad, a distance of about 14 miles, to secure 280 coupon bonds, of $1,000 each, payable to bearer, in all $280,000 carrying semi-annual interest at the rate of 7 per cent per annum, and payable April 1, 1894. The mortgage contained provisions with the Paris & Decatur mortgage as to what might be done after six months default in interest, and as to taking possession of the property, and as to the powers of the trustee, and as to foreclosure of sale and disposition of the proceeds. This mortgage was delivered and duly recorded.

On the nineteenth of September, 1874, the Paris & Decatur Company conveyed by deed to the Peoria, Atlanta & Decatur Company, in consideration that the latter company thereby assumed 'all the bonded and floating indebtedness' of the former company, the railroad then in operation, described as extending from Paris to Decatur, 'passing into and through the counties of Edgar, Coles, Douglass, Moultrie, and Mason,' including the franchises of the former company, and all its property acquired and to be acquired. On the same day the Paris & Terre Haute Company conveyed by deed to the Peoria, Atlanta & Decatur Company, in consideration that the latter company thereby assumed the payment of 'all the bonded and floating indebtedness' of the former company, the railroad then in operation, described as extending from Paris to the line between Indiana and Illinois, 'passing into the counties of Edgar and Clark,' including the franchises of the former company, and all its property acquired and to be acquired. These purchases on these terms were authorized by the stockholders and directors of the purchasing company, and by the respective stockholders and directors of the selling companies, and the deeds were delivered and duly recorded.

On November 2, 1874, the Peoria, Atlanta & Decatur Company, under the provisions of the general law of Illinois, changed its name to that of the 'Illinois Midland Railway Company.' On the first of January, 1875, that company executed to the Union Trust Company a mortgage covering all of its property, including that so purchased, to secure 8,350 coupon bonds, of $500 each, in all $4,175,000, bearing semi-annual interest at 7 per cent. per annum, and payable January 1, 1905. This mortgage was delivered and recorded....