Fleming v. Fairmont

• Decision Date: 14 October 1913
• Court: West Virginia Supreme Court
• Parties: Fleming v. Fairmont & Mannington Bailroad Co.

72 W.Va. 835

Fleming

v.Fairmont & Mannington Bailroad Co.

Supreme Court of Appeals of West Virginia.

Submitted September 5, 1912.

Decided October 14, 1913.

1. Corporations Bonds Past Due Coupons Right of Holder.

An action at law may be maintained and prosecuted to final judgment, by the owner, on past due coupons, parts of corporate bonds, secured by mortgage, nothing therein expressly restricting such right, notwithstanding the provisions in the mortgage for sale, suit, or entry upon and management of the mortgaged property by the trustee on the request of one-third of the bondholders after default by the company in payment of the coupons, (p. 836).

2. Same Corporate Bonds Right of Action.

The common law right to sue upon a bond is not affected by the remedies provided in the mortgage given for its security, unless the provisions of the mortgage exclude such right in express terms or by necessary implication, (p. 836).

3. Same.

But execution on a judgment obtained in such action is not leviable on property covered by the mortgage, (p. 840).

Error to Circuit Court, Marion County.

Action by A. S. Fleming against the Fairmont & Manningtou Railroad Company and others. Judgment for defendants, and jjlaintiff brings error.

Reversed and Rendered. A. S. Fleming, for plaintiff in error. Shoivalter & Frame, for defendants in error. Lynch, Judge:

The plaintiff brought his action before a justice, and recovered judgment, on overdue coupons detached from defendant's bonds, secured by mortgage on all its property then owned and thereafter acquired by it" On appeal, the Intermediate Court dismissed the action; and, upon further appeal, the Circuit Court affirmed the latter judgment. Hence this writ of error.

It is agreed that, before action, the coupons were due, and, although properly presented for payment, were unpaid. The plaintiff was, therefore, entitled to judgment and execution thereon, unless inhibited by some provision of the mortgage securing the bonds and coupons. The defendant cites sections 1 and 2 of article V of the mortgage, as authority denying plaintiff's right to recover on the coupons.

But from these sections no intention appears, expressly or by implication, to preclude plaintiff from relief by the form of action adopted by him. To have this effect, the restriction must be clear and reasonably free from doubt. "The common law right to sue upon a bond is not affected by the remedies provided in the mortgage given simultaneously and for the better securing of the bond, unless the provisions of the mortgage exclude this right in express terms or by necessary implication." For "the right to sue upon a written obligation admitted to be valid is of too high a character to be taken away by implication, if drawn from an instrument other than that which is given in direct and positive acknowledgment of the debt." Manning v. Railroad Co., 29 Fed. 838; Nute v. Insurance Co., 72 Mass 174, 181; Kimber v. Gunnell, 126 Fed. 137; Jones on Corp. Bonds, § 340.

The purport of the whole article relied upon by defendant is to define the rights, duties and remedies of the trustee and bondholders, should the mortgagor default in the payment of the bonds or interest. It provides what course each shall pursue, for enforcement of the lien, when such default occurs. It provides, first, that, should the mortgagor refuse or fail after demand to perform any of the covenants and stipulations in the mortgage or the bonds secured thereby, the trustee shall, upon the request of the holders of one-third in amount of the bonds and adequate security against costs, expenses and liabilities, enter upon the mortgaged property, manage and operate it, collect the receipts, and apply the income, after deducting current expenses and costs, to the principal and interest of the bonds as the same become due; or, second, upon like default, request and security, he shall sell the property, and make application of the proceeds in the manner stated; or, third, upon like default, request and security, he shall proceed to protect and enforce the rights of the bondholders under the mortgage by suits in law or equity. The instrument fully states the manner in which the trustee shall perform the duties so prescribed, and then concludes immediately thereafter with the general statement: "it being understood, and it is hereby expressly declared, that the rights of entry and sale hereinbefore granted are intended as cumulative remedies allowed by law, and that the same shall not be deemed in any manner whatever to deprive the trustee or the beneficiaries under this trust of any legal or equitable remedy, by judicial proceedings, consistent with the provisions of these presents, according to the true intent and meaning thereof."

The sole and manifest purpose of these provisions is to secure the subject matter of the lien against illegal invasion, the effect of which would be its impairment as ample security for payment of the mortgagor's bonded indebtedness; and, in order to remove any possible excuse for misunderstanding of its terms, and to afford reasonable assurance of the proper interpretation, the concluding clause, in express terms, declares the absence of any intent to deprive the bondholders of any existing legal or equitable remedies not inconsistent with the purposes the subservance of which the section in its entirety comprehends.

The right of the plaintiff to maintain his action is sustained by many authorities. In fact, none are found upon this investigation, denying it. Railroad Co. v. Johnson, 54 Pa. 127; Montgomery v. Francis, 103 Pa. 378; Widener v. Railroad Co., 1 Wkly. Notes Cas. (Pa.) 472; Batchelder v. Water Co., 131 N. Y. 42; Manning v. Railroad Co., 29 Fed. 838; Ilimber v. Gunnell, 126 Fed. 137; Dow v. Railroad Co., 20 Fed. 260; 1 Elliott on Eailroads, §§ 509, 514; 3 Cook on Corp. (6th ed.) § 770; 5 Thomp. on Corp. (1st ed.) §§ 6121-6125, 6210-6213; Jones on Corp. Bonds, §§ 55, 338-340a. See also'Welsh v. Railroad Co., 25 Minn. 314; Guaranty Co. v. Railroad Co., 139 IT. S. 137, 35 L. Ed. 116; Duel v. Railway Co., 53 Y. Y. S. 749. Mr. Jones, in the section of the work cited, says: "The fact that a railroad, mortgage empowers the trustees, on the written request of the holders of bonds of a specified amount, after breach of the condition, to sell the property, is no defense to a suit upon the bonds or coupons after they are payable. The bonds are the principal debt, and the mortgage is only an incidental security. The remedies at law and in equity do not clash and destroy each other, but exist together. The mortgage might positively, or perhaps impliedly, take avar from the bondholder his right of action at law upon the bonds or coupons; but the common law right to enforce these obligations remains if not so taken away." In Kimber v. Gunnell, supra, it is held that a mortgage similar to that under consideration does not "in the absence of an express stipulation or a statute to that effect constitute any defense to any action at law against the mortgagor by each of the creditors upon the bonds or primary obligations thus secured." The court, in its opinion, observes: "The general rule is that, for a default in the payment of money at the time and place agreed upon, or for any...