Farmers' Loan & Trust Co. v. Chicago & N.P.R. Co.

• Decision Date: 03 April 1895
• Citation: 68 F. 412
• Court: U.S. District Court — Northern District of Illinois
• Parties: FARMERS' LOAN & TRUST CO. v. CHICAGO & N.P.R. CO. et al.

68 F. 412

FARMERS' LOAN & TRUST CO. v. CHICAGO & N.P.R. CO. et al.

United States Circuit Court, N.D. Illinois.

April 3, 1895

Mr Turner, Mr. Herrick, and Mr. Burry, for complainant

Mr Spooner, Mr. Connell, and Mr. Miller, for defendant companies.

Mr Varnum, for petitioner Louis Daenell.

Mr Maloney, Atty. Gen., for the state of Illinois.

JENKINS Circuit Judge.

The Farmers' Loan & Trust Company, a corporation created by and under the laws of the state of New York, and authorized by the laws of that state to accept the trust hereinafter stated, filed its bill to foreclose a mortgage executed by the Chicago & Northern Pacific Railroad Company to the Farmers' Loan & Trust Company, as trustee. This mortgage is dated the 1st day of April, 1890, and covers all the lines of railway and property owned by the mortgagor company in the state of Illinois, and was given to secure an issue of bonds by said company, aggregating thirty millions of dollars. The mortgage provided, by article 9, that the trustee should have the right to enter and operate the road in case of default; by article 10, that the trustee might enter and sell in case of default. This latter provision is, however, understood to be void under the laws of the state of Illinois. By article 11 the trustee, upon default, and upon requisition and indemnity by the bondholders, should proceed to execute the trusts set forth in the instrument; by article 13 the trustee, at any sale of the mortgaged property, upon request of the holders of three-fourths in amount of the outstanding bonds, may bid for and purchase the property in behalf of the bondholders. These are all the special provisions in the mortgage to which reference is deemed necessary. The mortgagor company, simultaneously with the execution of the mortgage, leased its railway property, corporate rights, and franchises to the Wisconsin Central Company and the Wisconsin Central Railroad Company for a period of 99 years, at a stipulated rental of $350,000 a year, the lessees covenanting to pay such further sum or sums of money as might be necessary to pay the interest upon the mortgage bonds issued under the mortgage referred to. On the same day, the Wisconsin companies executed to the Northern Pacific Railroad Company a lease of all the properties described in their lease from the mortgagor company, and the Northern Pacific Company covenanted to keep and perform all the conditions and obligations of the lease executed by the Wisconsin companies, and among other things, to pay such sums as might be necessary to pay interest on the mortgage bonds of the mortgagor company.

The Chicago & Northern Pacific Company and the Northern Pacific Company now file pleas to the effect that the complainant trustee has never deposited with the auditor of public accounts of the state of Illinois, for the benefit of its creditors, the sum of $200,000 in securities, as provided by law, and has never procured from the auditor of public accounts a certificate of authority stating that the complainant has complied with the requirements of the law of the state of Illinois of 1887, entitled 'An act to provide for and regulate the administration of trusts by trust companies and the act amendatory thereof,' and assert that the complainant is not now and has never been authorized or empowered to hold in trust the property alleged to have been conveyed in the alleged trust deed or mortgage of April 1, 1890, or to accept, enforce, or execute the trust or trusts therein reposed, or to bring any suit or action for the enforcement thereof, or for the foreclosure of the mortgaged property; that neither the defendant companies nor any of their officers knew, at the time of the execution of the trust, or at any time thereafter prior to this suit, that the complainant had failed to comply with the statutes of the state of Illinois above referred to, but believed it had so done. They claim that by reason of the facts alleged the mortgage or trust deed in question is absolutely void. Louis Daenell, a judgment creditor of the mortgagor company, by judgment recovered on the 17th day of February, 1894, and since the institution of the suit, asks leave to intervene, and prays that the trust deed or mortgage may be declared null and void, and to constitute no lien upon the property of the mortgagor company, and that he may be permitted to sell the property now in the hands of the receivers of this court, under execution issued out of a state court of Illinois, under his judgment therein obtained. This petition proceeds upon the same ground as stated in the pleas of the two railroad companies defendant, and upon the further ground that the mortgagor company, prior to the making of the trust deed, did not cause and procure an order or resolution authorizing the mortgage to be passed by the concurrence of the holders of two-thirds of the amount of stock of the mortgagor company at a meeting of the stockholders called by the directors of the corporation for such purpose after notice given as provided by law, and cause such order or resolution for such trust deed to be recorded in the office of the secretary of state of the state of Illinois, or in the office of the recorder of deeds of Cook county, Ill., in which county the mortgagor company was located. Subsequent to the hearing the attorney general of the state of Illinois had leave amicus curiae to submit a brief against the validity of the mortgage and the power of the complainant to accept the trusts therein. Upon such submission, he presents with the brief his petition in behalf of the people of the state of Illinois, asking leave to intervene and to file an intervening bill making the people of the state of Illinois a party to the cause, and that the court will decree that the attempted acceptance by the complainant of the trusts of the mortgage without compliance with the laws of the state of Illinois is unlawful, and ineffective to clothe the complainant with the trusts therein declared, and that the mortgage deed is void for want of a grantee or trustee capable in law of taking or holding thereunder, and that the complainant may be enjoined from interfering with the rights, property, and franchises of the Chicago & Northern Pacific Railroad Company, and from transacting any other business within the state of Illinois.

The statute of Illinois (section 26, c. 32 Rev. St.) provides that, 'foreign corporations, and the officers and agents thereof doing business in this state, shall be subject to all the liabilities, restrictions and duties that are or may be imposed upon corporations of like character organized under the general laws of this state, and shall have no other or greater power, and no foreign or domestic corporation established or maintained in any way for the pecuniary profit of its stockholders or members, shall purchase or hold real estate in this state except as provided for in this act ' The act approved June 15, 1887, as amended by the act approved June 1, 1889, provided as follows: 'Any corporation which is or shall be incorporated under the general incorporation laws of this state, being an act entitled 'An act concerning corporations,' and all amendments thereof, for the purpose of accepting and...