Farmers' Loan & Trust Co. v. Lake St. El. R. Co.

Decision Date18 June 1898
Citation173 Ill. 439,51 N.E. 55
PartiesFARMERS' LOAN & TRUST CO. v. LAKE ST. EL. R. CO. et al.
CourtIllinois Supreme Court

OPINION TEXT STARTS HERE

Appeal from appellate court, First district.

Bill by the Lake Street Elevated Railroad Company against the Farmers' Loan & Trust Company and others for the appointment of a trustee and an injunction. From the affirmance of a decree for complainant by the appellate court (68 Ill. App. 666), the defendant the Farmers' Loan & Trust Company appeals. Affirmed.Runnells & Burry and Herrick, Allen, Boyesen & Martin, for appellant.

Knight & Brown, for appellee Lake Street El. R. Co.

Moran, Kraus & Mayer, for appellee American Trust & Savings Bank.

Dupee, Judah, Willard & Wolf, for appellee Northern Trust Co.

This is an appeal from a judgment of the appellate court affirming a decree of the superior court of Cook county removing appellant as trustee under a deed of trust made by the appellee the Lake Street Elevated Railroad Company to appellant, the Farmers' Loan & Trust Company, and to appellee the American Trust & Savings Bank, as trustees, and enjoining appellant from taking any steps to foreclose, or otherwise act as trustee under, the trust deed. The bill was filed by the appellee the Lake Street Elevated Railroad Company on January 30, 1896, and made appellant, the Farmers' Loan & Trust Company, and the appellees the American Trust & Savings Bank and the Northern Trust Company, defendants. The bill alleges that on the 7th day of April, 1893, the complainant therein, the Lake Street Elevated Railroad Company, made a mortgage or trust deed to the defendants the American Trust & Savings Bank and the Farmers' Loan & Trust Company, as trustees, that the trust was accepted in writing by the trustees, and that the mortgage or deed of trust was duly recorded on May 16, 1893. A copy of the mortgage was made an exhibit to the bill. The bill further sets forth the incorporation of the railroad company under the laws of Illinois for the purpose of constructing railways, etc., with a capital stock of $5,000,000, divided into 50,000 shares of $100 each; that in April, 1893, its capital stock was duly increased to $10,000,000, and consisted of 100,000 shares of $100 each; that the Farmers' Loan & Trust Company was a corporation organized under the laws of New York, and had not, prior to the making of the trust deed, nor since, complied with the laws of Illinois, requiring a deposit with the auditor of public accounts of $200,000 in stocks of the United States, or municipal bonds of this state, or in mortgages on improved or productive real estate in Illinois, being first liens thereon, and the real estate being worth at least twice the amount loaned thereon; that the railroad company did not know that the Farmers' Company had not complied with the laws of Illinois as to making said deposit, and that the Farmers' Company was doing business in Illinois without having made the deposit; that the Farmers' Company had appointed an agent to represent the company, to enforce, on the part of the railroad company, a compliance with the trust reposed in the Farmers' Company under the trust deed; that under the trust deed there were certified and delivered by the trust companies the 6,500 bonds referred to therein; that, after the 6,500 bonds had been certified to, additional bonds were issued, which were also certified to by the trust companies, and disposed of under the direction of the agent for the Farmers' Company; that since the acceptance of the trust the Farmers' Company has transacted and done business through its said agent in connection with the trust under the trust deed, and was still claiming the right to do business by the execution of the trust assumed by it; that since the making of the trust deed the railroad company had built, and was then operating, a railroad in the city of Chicago for the carrying of passengers within said city; that it had been unable to earn sufficient money to pay the interest on its bonded indebtedness; that one William Ziegler, of New York City, conspiring with persons representing 610 bonds of the total issue of 7,574 bonds of $1,000 each, had made a demand upon the trust companies that they proceed to foreclose and take possession of the railroad under the power in the trust deed; that a bill was filed in the circuit court of Cook county against Ziegler et al., in which an injunction was issued, enjoining them and the trustees from foreclosing the mortgage upon the demand of Ziegler et al., representing 605 of the 610 bonds; that the railroad company was informed by said agent of the Farmers' Company on January 28, 1896, that no other demand had been made upon the trustees, except that made by Ziegler and his associates, but that, although no other person was asking the Farmers' Company to take any action, they filed a bill to foreclose the mortgage for failure to pay the interest upon the bonded indebtedness; that said interest was paid up to January 1, 1895; that the Farmers' Company, in violation of its duty, and in order to injure and destroy the property and assets of the railroad company, intended to take possession of the property of the railroad company, or attempt to foreclose the trust deed, for a failure to pay the interest falling due on July 1, 1895, and January 1, 1896; that the holders of 6,574 of the bonds had requested the trustees to take no action with reference to the failure of the company to pay the coupons due July 1, 1895, and January 1, 1896; that the American Trust & Savings Bank on January 28, 1896, refused to join the Farmers' Company to enforce the trust deed on account of such failure; that the holders of over [173 Ill. 443]6,500 of the bonds issued under the trust deed desired that the Farmers' Company should be removed from its position as trustee for failure to comply with the law of Illinois requiring said deposit with the auditor of public accounts, and for assuming to take proceedings under the trust deed contrary to the request of the holders of a majority of the bonds issued under the trust deed. The bill prays that a new trustee may be appointed by the court under the trust deed in place of the Farmers' Company, that an injunction be issued enjoining the Farmers' Company from taking any proceedings under the deed of trust, and for such other and different relief as equity may require.

An injunction was granted and served on the agent of the Farmers' Company at 11:10 a. m. January 30, 1896. Summons was served on said agent on February 6, 1896. On January 31, 1896, the Farmers' Company filed a petition and bond in the superior court for the removal of the cause to the United States court. The petition was signed by the Farmers' Loan & Trust Company, by its solicitors. The bond, filed with the petition for removal, was executed only by William Burry and Rockwell King, as obligors, and was in the penal sum of $500. On February 3, 1896, the superior court denied the motion to remove the cause to the federal court, and exception was taken thereto by the Farmers' Company. On March 17, 1896, the Northern Trust Company filed its answer, stating that it was informed that the Farmers' Company had not complied with the laws of Illinois in relation to trust companies, and that in its belief the Farmers' Company had been doing business in Illinois, without having made the deposits aforesaid. The answer admits substantially the allegations of the bill as made therein, and also sets forth that the Northern Trust Company is the holder of 6,592 of said bonds, and has not made any demand on either of said trustees to foreclose said trust deed. On March 18, 1896, the American Trust & Savings Bank filed its answer. On March 25, 1896, the Farmers' Loan & Trust Company filed its answer, denying substantially all the material allegations of the bill. On June 4, 1896, a final decree was entered by the superior court, finding that the allegations of the bill, as herein set forth, were true; further finding that the bill in the foreclosure case was filed at 10:35 o'clock on January 30, 1896, and that within 10 minutes after said filing a subpoena was issued and delivered to the solicitor of the Farmers' Company, and by him delivered to the United States marshal on February 18, 1896, and served on that date; further finding that the holders of 6,574 of the bonds specially requested the American Trust & Savings Bank and the Farmers' Loan & Trust Company to take no action whatever under the trust deed. The decree also ordered that the Farmers' Company should be removed as trustee or co-trustee under the deed of trust, and be enjoined from prosecuting any suit to foreclose said trust deed, and that the American Trust & Savings Bank should, by an instrument in writing, appoint a cotrustee in place of the Farmers' Company, and that the Farmers' Company should execute an instrument of transfer to such new trustee of all its rights and powers, etc., and, in case of failure of the Farmers' Company to execute such instrument, that a master in chancery should do so, and that, upon the failure of the American Trust & Savings Bank to make the appointment within 30 days, the court therby reserved the power to appoint a co-trustee.

MAGRUDER, J. (after stating the facts).

1. It is claimed on the part of the appellant that the trial court erred in retaining jurisdiction of the cause after the filing of the petition and bond for its removal to the United States court. There was no error in this action of the trial court. The petition for the removal was signed by the appellant, the Farmers' Loan & Trust Company, one of the defendants in the court below, but the bond filed with such petition for removal was not signed by the appellant. This condition of the bond justified the court in denying the motion for the removal of the cause. In Machine Co. v. Smith, 71 Ill. 204, we said (page 207): We think it a reasonable construction of the act [of congress] to hold...

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