Union Trust Co. v. Chattanooga Elec. Ry. Co.

• Decision Date: 05 October 1898
• Citation: 47 S.W. 422,101 Tenn. 297
• Parties: UNION TRUST CO. v. CHATTANOOGA ELECTRIC RY. CO. et al. BAYLEY et al. v. SAME.
• Court: Tennessee Supreme Court

47 S.W. 422

101 Tenn. 297

UNION TRUST CO. v. CHATTANOOGA ELECTRIC RY. CO. et al.

BAYLEY et al. v. SAME.

Supreme Court of Tennessee.

October 5, 1898

Appeal from chancery court, Hamilton county; T. M. McConnell Chancellor.

Bills by the Union Trust Company against the Chattanooga Electric Railway Company and others and by N. R. Bayley and others against the same defendants. From a decree, defendants appeal. Dismissed.

Brown & Spurlock, for appellant Chattanooga Electric Ry. Co. Wheeler & McDermott, for appellee Union Trust Co. J. H. Barr, for appellees Bayley and others.

WILKES J.

These two causes are proceedings to foreclose mortgages of the Chattanooga Electric Railway Company because of default in payment of interest coupons. The suits were brought within two months after the coupons matured. Before the lapse of six months after maturity, but after the bills were filed, the defendant company paid all interest in default.

As the cases come to us, two questions only are presented: (1) Whether the bills were prematurely filed; and (2) whether the trustee in the first cause should be allowed compensation for himself and counsel, and in the second case whether the counsel of complainants should be allowed fees, the trustee in the latter case having failed and being unable to act, and the suit being brought by the bondholders who are beneficiaries under the trust.

The first assignment presents a question of difficulty, and its solution depends upon the proper construction of the provisions of the mortgages as to the remedies of the trustee or beneficiaries in case of default in payment of the interest coupons at maturity. The provisions of the mortgage in the first case are substantially, so far as need be stated, "that if default is made in payment of any interest," etc., "the mortgagor covenants and agrees that within six months after such default shall have occurred, the same default still continuing, it will, on demand of the trustee, give possession to him or his agent of all the mortgaged property, and he may operate the same, and receive the income and profits, and, after paying expenses pay the interest in default," etc. It is further provided by the next section that if "default shall be made as aforesaid, and shall continue as aforesaid, the trustee, after entry as aforesaid, or other entry, or without entry," by itself or agent, or by "proceeding in court," may sell the property, etc., and pay the proceeds on said interest, and on the principal of said bonds, whether due or not. The provisions of the mortgage in the second case are that, if default is made in payment of principal or interest, and if such default continue for six months, the mortgagee or trustee may take possession, and proceed to operate, and, after paying expenses, pay the interest and principal, and may sell the property, etc. It further provides: "Upon default and entry as aforesaid or without such entry, the party of the second part may proceed to sell the mortgaged property either by virtue of the power of sale herein contained, or by proceedings in a court of equity, in the manner and for the purposes herein mentioned," etc.

The question of controversy in the case is whether the mortgagor company, under these provisions, has six months after default in which to pay interest before any steps can be taken to foreclose, or whether the right to foreclose by court proceedings is immediate upon the default. The court of chancery appeals held the latter view, and therefore concluded that the suits to foreclose were not premature, and as a result the complainants were allowed counsel fees (and trustee's compensation, in the last case). They base their conclusion on the holding of the court in Railroad Co v. Fosdick, 106 U.S. 47, 1 S.Ct. 10; Guaranty Trust & Safe-Deposit Co. v. Green Cove Springs & M. R. Co., 139 U.S. 137, 11 S.Ct. 512; Farmers' Loan & Trust Co. v. Chicago & N. P. R. Co., 61 F. 543. The identical same cases are relied on by appellant to sustain a contrary view, and are urged by appellees to sustain the court of chancery appeals.

As an original proposition, free from any controlling or persuasive authority, we would hold that a proper construction of each mortgage is that it is not until after default in payment of interest had continued for six months that foreclosure proceedings or other proceedings to take possession could be had, either in or out of court. Upon any other construction we are unable to give any force or effect to the words, "within six months," contained in one mortgage, and "if such default continue for six months," in the other. "Within" a certain time embraces the last day of the time limited, as does the word "after." 29 Am. & Eng. Enc. Law, 524; 26 Am. & Eng. Enc. Law, 4; 1 Am. & Eng. Enc. Law, 323. If the provision that "within six months after default, it still continuing," does not mean that the mortgagor shall have the six months after default for breathing time to make good the default, we can see no rational meaning to attach to it. It could have but one other meaning, and that is that the possession and foreclosure proceedings may commence at once, but must begin within six months, or not at all,--a construction which would lead to absurd consequences. Take the illustration put by counsel for complainant of a note...