Black v. Elkhorn Coal Corp.

• Decision Date: 25 March 1930
• Citation: 26 S.W.2d 481,233 Ky. 588
• Parties: BLACK et al. v. ELKHORN COAL CORPORATION et al.
• Court: Kentucky Court of Appeals

26 S.W.2d 481

233 Ky. 588

BLACK et al. v. ELKHORN COAL CORPORATION et al.

Court of Appeals of Kentucky

March 25, 1930

Appeal from Circuit Court, Franklin County.

Action by Harry C. Black and others against the Elkhorn Coal Corporation and another. Judgment for defendants, and plaintiffs appeal.

Affirmed.

W. E Darragh, of Lexington, William Marshall Bullitt, Bruce &amp Bullitt, and Leo T. Wolford, all of Louisville, for appellants.

E. C O'Rear, of Frankfort, Shackelford Miller, Jr., of Louisville, and Allen Prewitt, of Frankfort, for appellees.

WILLIS J.

The Elkhorn Coal Corporation owns a large acreage of coal lands in Kentucky and has in operation thereon several large mining plants. On December 1, 1925, it executed to the Mercantile Trust Company of Baltimore, trustee, a mortgage on all of its property in Kentucky to secure an issue of 5,500 bonds of the par value of $1,000 each, of which issue 3,800 bonds are outstanding. The bonds are payable to bearer and for the most part are in the hands of unknown owners. They mature in 1931 on the sixth anniversary of the issue, and may be called prior to maturity on any interest payment date, which is the first of June and December of each year. A large and well-equipped mining plant is located at Wheelwright on the left fork of Beaver creek in Floyd county, Ky. Entirely without fault on the part of the management, but on account of economic conditions confronting the industry, and peculiar circumstances affecting coal mining in that particular locality, the Wheelwright plant has been operated without profit, perhaps at a loss. The bondholders, as well as the owners of the plant, have ample reason for desiring a change in the existing arrangement. A contract for a transfer of the Wheelwright property, on condition that a good title free of the mortgage lien can be made, has been negotiated with the Inland Steel Company. The contract contemplates the execution of a mining lease on 11,400 acres of coal land in the vicinity of the town of Wheelwright, and a sale in fee of the mining plant. The parties are agreed that the proposed contract is a prudent one that would augment materially the security of the bondholders. The trustee is advised that it has power to join in the conveyance and lease, relinquishing the lien on the property, the proceeds to be applied according to the terms of the mortgage, and it proposes to do so, provided it has the power. Harry C. Black and associates in this suit own 78 of the bonds of the par value of $78,000. Acting for themselves, and assuming to act for all other bondholders, they instituted an action in the Franklin circuit court against the Elkhorn Coal Corporation and the Mercantile Trust Company, trustee, under the Declaratory Judgment Act (Civ. Code Prac. §§ 639a--1 to 639a--12) to obtain an injunction, a declaration of rights, and all appropriate relief. The defendants filed separate answers. The circuit court entered a judgment disposing of the action and declaring that the trustee and coal corporation had the power to carry out the contract with the Inland Steel Company and to convey a clear and unincumbered title. The bondholders appeal.

The several points presented for decision and debated by the various parties are: (1) The venue of the action; (2) the validity of the Declaratory Judgment Act; (3) the right of the appellants to represent effectually the other bondholders not parties to the case or consenting to the action; (4) whether the admitted fact that the transaction will redound to the great benefit of the bondholders is material in determining the power of the appellees to transfer the property free of lien; and (5) whether the Elkhorn Coal Corporation, with the consent of the trustee, has adequate and absolute power to convey the mortgaged premises free of lien. We address ourselves to these questions in the order stated.

1. Section 62 of the Civil Code of Practice localizes actions for the recovery, partition, or sale of real property, or for an injury thereto; but the present action does not fall within that provision. Section 78 of the Civil Code of Practice provides that an action which is not required by the Code to be brought in some other county, may be brought in any county in which the defendant, or one of several defendants properly joined, resides or is summoned. The action in this case was for injunctive relief and could be maintained in the circuit court of any county where the defendants could be served with summons, or where their appearance was entered. De Charette v. St. Matthews B. & T. Co., 214 Ky. 400, 283 S.W. 410, 50 A. L. R. 34; Fidelity Trust Co. v. National Coal & Iron Co., 89 S.W. 718, 28 Ky. Law Rep. 578. In the case last cited the land was situated in Bell county, and the action was instituted in Jefferson county. The principle has been applied in actions for the specific performance of contracts, although respecting real estate (McQuerry v. Gilliland, 89 Ky. 434, 12 S.W. 1037, 11 Ky. Law Rep. 656, 7 L. R. A. 454; Henderson v. Perkins, 94 Ky. 207, 21 S.W. 1035, 14 Ky. Law Rep. 782; Campbell v. Ritter Lumber Co., 140 Ky. 314, 131 S.W. 20, 140 Am. St. Rep. 385), to perfect title to land (Page v. McKee, 3 Bush, 135, 96 Am. Dec. 201), and to rescind a contract concerning land (Thompson v. Elmore, 18 S.W. 235, 13 Ky. Law Rep. 692). A valid personal judgment may be rendered against a party who files a pleading in a transitory action without objecting to the jurisdiction. Baker v. L. & N. R. Co., 4 Bush, 619; McDowell v. Chesapeake, Ohio & S.W. R. Co., 90 Ky. 346, 14 S.W. 338, 12 Ky. Law Rep. 331; Underwood v. Wood, 93 Ky. 177, 19 S.W. 405, 14 Ky. Law Rep. 129, 15 L. R. A. 825. The fact that the action was predicated on the Declaratory Judgment Act does not alter or affect the rule since that act has no provision concerning venue and does not abrogate other relevant provisions of the Code of Civil Practice. Savin v. Delaney, 229 Ky. 226, 16 S.W.2d 1039; Edwards v. Bernstein, 231 Ky. 100, 21 S.W.2d 133; Lyons' Adm'r v. Greenblatt, 213 Ky. 567, 281 S.W. 487.

2. The constitutionality of the Declaratory Judgment Act of Kentucky is questioned. Although not heretofore raised or expressly determined, the validity of the act has been assumed and jurisdiction under it frequently exercised. Livingston County v. Adams, 199 Ky. 127, 250 S.W. 811; Foreman Automobile Co. v. Morris, 198 Ky. 1, 248 S.W. 486; Shearer, etc., v. Backer, 207 Ky. 455, 269 S.W. 543; Proctor v. Avondale Heights Co., 200 Ky. 447, 255 S.W. 81; Cavin v. Little, 213 Ky. 482, 281 S.W. 480; Kelly v. Jackson, 206 Ky. 815, 268 S.W. 539; Grooms v. Grooms, 225 Ky. 228, 7 S.W.2d 863; Adams, Judge, v. Slavin, 225 Ky. 135, 7 S.W.2d 836. In Anway v. Grand Rapids R. R. Co., 211 Mich. 592, 179 N.W. 350, 12 A. L. R. 26, it was held that a statute purporting to authorize courts to make binding declarations of rights when no justiciable controversy was involved conferred nonjudicial powers, contemplated acts of a nonjudicial character, and was in conflict with the Constitution of the State, which vested only judicial power in the courts. The Kentucky act does not confer, or purport to confer, nonjudicial power. The existence of an actual controversy respecting justiciable questions is a condition precedent to an action under the act. Revis v. Daugherty, 215 Ky. 823, 287 S.W. 28; Axton v. Goodman, Clerk, 205 Ky. 382, 265 S.W. 806. The court will not decide speculative rights or duties which may or may not arise in the future, but only rights and duties about which there is a present actual controversy presented by adversary parties, and in which a binding judgment concluding the controversy may be entered. Shearer v. Backer, 207 Ky. 455, 269 S.W. 543; Dietz v. Zimmer, 231 Ky. 546, 21 S.W.2d 999. Such legislation is clearly constitutional when it confers purely judicial functions and powers. 33 C.J. p. 1097-1102; State of Kansas v. Grove, 109 Kan. 619, 201 P. 82, 19 A. L. R. 1116. Cf. Muskrat v. U. S., 219 U.S. 346, 31 S.Ct. 250, 55 L.Ed. 246. The present case involves judicial direction to a trustee and a definition of its powers, as well as the construction and operation of a mortgage. All of these matters are proper subjects for the exercise of judicial power. 21 C.J. pp. 115-119. In view of the fact that the Kentucky acts vests nothing but judicial powers, to be exercised in actual controversies, it is not necessary to consider the extent of the power to vest jurisdiction in courts where no actual controversy is present. All doubt concerning the validity of the Kentucky act vanishes in view of its express terms and the construction consistently put upon it. If it should be assumed, however, that the Declaratory Judgment Act is invalid, it would not affect the jurisdiction in the instant case, since it was vested in courts of equity before the act was passed, and has not been diminished. Fidelity Trust Co. v. National Coal & Iron Co., 89 S.W. 718, 28 Ky. Law Rep. 578; Cf. City of Earlington v. Powell, 226 Ky. 353-359, 10 S.W.2d 1060.

3. The Kentucky Civil Code of Practice, § 25, provides: "If the question involve a common or general interest of many persons, or if the parties be numerous and it is impracticable to bring all of them before the court within a reasonable time, one or more may sue or defend for the benefit of all." The bondholders have a common interest in the property pledged for the security of the bonds. They constitute a numerous class, constantly changing, and it is a practical impossibility to bring all of them before the court. The case comes clearly within both conditions upon which the right of members of a class to represent others of the class may be maintained. 34 C.J. p. 1002, § 1422. Where the interest of the parties in a common...