Betts v. Massachusetts Cities Realty Co.

• Decision Date: 24 October 1939
• Citation: 304 Mass. 117,23 N.E.2d 152
• Parties: BETTS v. MASSACHUSETTS CITIES REALTY CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

304 Mass. 117

23 N.E.2d 152

BETTS

v.MASSACHUSETTS CITIES REALTY CO.

Supreme Judicial Court of Massachusetts, Suffolk.

Oct. 24, 1939.

Action by Lois Betts against the Massachusetts Cities Realty Company to recover upon interest coupons originally attached to bonds issued by defendant. From a decision and order of the Appellate Division of the Municipal Court of the City of Boston dismissing a report, defendant appeals.

Order dismissing report affirmed.Appeal from Municipal Court of Boston, Appellate Division; Donovan, judge.

Martin Witte, of Boston, for plaintiff.

A. F. Bickford and Donald P. Donaldson, both of Boston, for defendant.

COX, Justice.

The defendant brings this appeal from the decision and order of the Appellate Division of the Municipal Court of the City of Boston dismissing the report from that court. The plaintiff sued to recover upon twnety coupons originally attached to bonds issued by the defendant. She was the holder in due course of three of these bonds and of the coupons originally attached thereto. The coupons were detached and duly presented for payment, which was refused. Each coupon on its face was an unconditional promise to pay to bearer the amount stated therein ‘being six months interest due on * * * [the defendant's] first and refunding mortgage gold bond * * *’ provided the bond mentioned in the coupon had not been called for previous redemption and payment. Each bond contained a promise to pay the amount stated therein to the bearer or registered owner on January 1, 1953, or earlier (as therein provided) with interest at seven per cent per annum ‘payable semi-annually.’ Each bond also contained four references to the mortgage deed of trust, securing the bond issue, which were, so far as material, as follows: (1) The bonds were secured by a mortgage deed of trust ‘to which Mortgage Deed of Trust reference is hereby made for a description of the nature and extent of the security and the rights and remedies of the holder in regard thereto’; (2) ‘the Mortgage Deed of Trust * * * establishes a Sinking Fund * * * Reference is hereby made to said Mortgage Deed of Trust for a full description of the terms, conditions and benefits of said Sinking Fund’; (3) ‘the Company [the defendant] expressly reserves the right to call for prior payment on any interest date prior to maturity, the entire then outstanding amount of Series A bonds * * * upon such notice as is provided in said Mortgage of Trust’; and (4) ‘it is part of the contract herein contained that each holder hereof by the acceptance hereof waives all right of recourse to any personal, statutory or other liability of any promoter, director, shareholder, officer or agent of the Company, howsoever the same may arise, for the collection of any indebtedness hereunder, and releases from all such liability each such promoter, director, shareholder, officer or agent, all as more particularly provided in said Mortgage Deed of Trust.’ The mortgage indenture contained the following provisions: ‘ARTICLE X ADDITIONAL COVENANTS AND RIGHT OF ACTION SECTION 2. All the bonds issued hereunder are subject to the condition that all rights of action thereon or in respect thereof, or on or in respect of the coupons thereto appertaining, are vested exclusively in the Trustee under this mortgage, and that no holder thereof, or of any coupon appertaining thereto, shall have any right to institute any action at law or in equity upon the said bonds, or any of the coupons, or growing out of any provision thereof, or of this mortgage, or for the enforcement of this indenture, unless and until the Trustee shall refuse and neglect to institute proper proceedings within sixty (60) days after request by the holders of a majority in principal amount of the bonds then outstanding hereunder, other than bonds held by or for the benefit of the Company, filed with the Trustee with satisfactory indemnity and deposit of said bonds with the trustee; provided, however, that if at any time the Company shall pay the interest or coupons with respect to some of the bonds and shall fail to pay the interest or coupons of like date of maturity with respect to other bonds upon presentation thereof, or, except in case of bonds purchased for the sinking fund, or called for prior payment, shall pay the principal of some of said bonds, and shall fail to pay the principal of other bonds of like maturity on presentation thereof, the holders of such bonds with unpaid interest or unpaid coupons or of such unpaid bonds, as the case may be, may sue at law or in equity, anything in this mortgage, or the bonds, to the contrary notwithstanding; provided, further, that nothing in this section or elsewhere in this indenture shall affect or impair the obligation of the Company, which is unconditioned and absolute, to pay, at the date of maturity therein expressed, the principal and interest of the bonds to the respective holders thereof at the time and place in the bonds expressed, or affect or impair the right, which is also absolute and unconditional, of such holders to enforce such payment by legal proceedings or otherwise. Any suit or proceeding instituted by the Trustee shall be brought in its name as Trustee.'

The trial judge found in addition to the facts already stated that the bonds to which the coupons were originally attached have not been called for redemption; that there had been no request upon the trustee to institute proceedings by a majority in principal amount of the bonds outstanding as provided in said article X, section 2; that the trustee has never declared the principal of the bonds to be due; that there has been no payment of interest or coupons with respect to some of the bonds and a failure to pay the interest or coupons of like date of maturity with respect to other bonds; that the plaintiff had no actual knowledge of the provisions of said article X, section 2; that the recording of the indenture in the registry of deeds did not charge the plaintiff with notice of its contents; that the coupons declared upon have matured but the bonds to which they were originally attached have not. The trial judge denied the defendant's request for ruling that ‘On all the law and the evidence the plaintiff is not entitled to recover in this action for the following reasons: 1. By Article 10 of the mortgage indenture Massachusetts Cities Realty Company to Old Colony Trust Company dated January 2, 1923, all rights of action on the coupons sued upon are vested in the trustee exclusively, except upon the happening of a condition, which condition has not come to pass, or upon maturity of the bonds...