Hamilton v. Wheeling Public Service Co.

• Decision Date: 03 May 1921
• Citation: 107 S.E. 401,88 W.Va. 573
• Parties: HAMILTON v. WHEELING PUBLIC SERVICE CO. ET AL. CALDWELL v. WHEELING PUBLIC SERVICE CO.
• Court: West Virginia Supreme Court

107 S.E. 401

88 W.Va. 573

HAMILTON v. WHEELING PUBLIC SERVICE CO. ET AL.

CALDWELL v. WHEELING PUBLIC SERVICE CO.

Supreme Court of Appeals of West Virginia.

May 3, 1921

Submitted April 19, 1921.

Syllabus by the Court.

A holder of coupon bonds, secured by a mortgage, ordinarily must, in order to enforce payment of past-due interest coupons, sue the obligor who issued them, and cannot, at law maintain an action against a subsequent purchaser, who has acquired the property mortgaged, and as a part of the consideration assumed the obligations and liabilities of the mortgagor. Nor can such purchaser be joined as party defendant with the original obligor in the same action.

Section 2, chapter 71, Code 1913 (sec. 3740), does not authorize one not a party to a contract made for his benefit to sue thereon in a court of law, unless such contract was made for his sole benefit.

The general rule is that negotiable interest coupons, attached to or detached from bonds, bear interest from and after their respective maturity dates.

When the interest evidenced by such a coupon has become due and payable, the demand based upon the promise contained therein is no longer a mere incident of the principal indebtedness represented by the bond, but itself becomes a principal obligation.

But the obligor may defeat recovery of the interest so compounded by showing his continued readiness and willingness to pay the sums specified in the coupons from the date of their maturity.

Case certified from Circuit Court, Ohio County.

Separate actions by A. M. Hamilton and by William G. Caldwell against the Wheeling Public Service Company and others. Motions to quash notices of motions for judgment were overruled, and cases certified. Reversed in each case.

Hubbard & Hubbard and Caldwell & Caldwell, all of Wheeling, for plaintiffs.

John J Coniff, of Wheeling, for defendants.

LYNCH J.

The notices prepared at the instance and on behalf of A. M. Hamilton, plaintiff in the first-styled action, and served on Wheeling Public Service Company and City & Elm Grove Railroad Company, corporations, joint defendants therein, and at the instance and on behalf of William G. Caldwell, plaintiff in the second, on Wheeling Public Service Company, sole defendant therein, were preliminary processes or warnings of intended motions for judgments against defendants in each of the actions so begun in favor of the respective plaintiffs. They were given pursuant to the provisions of section 6, chapter 121, Code (sec. 4726). Their sufficiency for the purposes of the recovery of the judgments contemplated were questioned by defendants and each of them for reasons by the trial court deemed insufficient upon motions to quash. They did not demur. The rulings that court certified here for re-examination and approval or disapproval.

But two questions arise, and the trial court perhaps considered these only and no others. The first challenges the right of Caldwell to sue and recover a judgment against Wheeling Public Service Company in an action at law and the right of Hamilton to sue and recover a joint judgment against the same company and City & Elm Grove Railroad Company. The actions rest upon overdue interest coupons theretofore attached to and as parts of bond issues authorized and sold by City & Elm Grove Railroad Company, secured by a mortgage binding its property for their payment both as to principal and interest, payable semiannually on the 1st days of January and July of each succeeding year until the maturity of the bonds. The date of the issuance is not disclosed in the notices or elsewhere in the proceedings. The coupons, the par value of which together with interest thereon from the date of their maturity for payment form the basis of the actions, were, as to those owned by Hamilton, due and payable January 1, 1920, and as to those owned by Caldwell, on July 1st of the same year.

Some time after the date of the mortgage Wheeling Public Service Company acquired the title to the mortgaged property, and, as may be inferred, now is the owner and operator of the utility incumbered, as well as every other species of property of the mortgagor used in connection with such operation. As part of the consideration for the transfer from one corporation to the other, Wheeling Public Service Company assumed liability for the corporate indebtedness of its grantor, including the outstanding and unliquidated bonds and the coupons annexed to them, and thereby bound itself to be prompt in the discharge of these and other obligations, pursuant to the terms and conditions of the conveyance.

It is not material, according to our view, whether, at the time the notices were given, plaintiffs did or did not then own the bonds, or whether the coupons were or were not detached, although in at least one jurisdiction this difference seems to have some weight upon the second phase of this review. What is being considered now is the right of the plaintiffs to proceed to judgment in the Caldwell action against Wheeling Public Service Company, and in the Hamilton action against the same defendant and the mortgagor, City & Elm Grove Railroad Company, jointly.

There can be no question as to the primary liability of the mortgagor. The property formerly owned by City & Elm Grove Railroad Company that company incumbered to insure and protect prospective or probable purchasers in the payment of the bonds issued by it, including the semiannual payments of the interest provided for in the mortgage and evidenced by the coupons thereto attached. Upon the faith of the solvency of the security and the payability of the indebtedness secured, plaintiffs, and doubtless others seeking sources of investment, purchased the bonds in reliance upon the prompt payment of the coupons. The issuance of the bonds and the execution of the mortgage fixed the status of the mortgagor as the debtor pledged to protect investors in the securities placed by it upon the market. That it contracted to do when the bonds were sold and the proceeds received by the mortgagor, although the purchasers were unknown on the date of the contract. Within the terms of that instrument were included the coupons as well as the bonds themselves. There was therefore in law and fact such privity between the mortgagor and the investors in the bonds as warrants the proceeding by Hamilton against City & Elm Grove Railroad Company. But it does not follow as a matter of course that there is such warrant for suing it jointly with the present owner of the property so pledged, notwithstanding assumption by the latter of the liabilities of the former in consideration of the property conveyed. If the two corporations cannot be joined in one action in a court of law, may Wheeling Public Service Company be sued alone by Caldwell? Between it and plaintiffs there is no privity of contract, at least the notices disclose none. The mere fact that it has assumed to pay the indebtedness created by its grantor is not sufficient to show such privity as a court can and will recognize and act upon.

Section 2, chapter 71, Code (sec. 3740), does not sanction or authorize such procedure. In so far as its provisions are applicable to the question now being considered, it says:

"If a covenant or promise be made for the sole benefit of a person with whom it is not made, or with whom it is made jointly with others, such person may maintain, in his own name, any action thereon which he might maintain in case it had been made with him only, and the consideration had moved from him to the party making such covenant or promise."

In Johnson v. McClung, 26 W.Va. 659, and King v. Scott, 76 W.Va. 58, 84 S.E. 954, this statute is construed. In the latter case cited the plaintiff predicated his right to a judgment against the defendant on a deed whereby Mrs. Reed and her husband conveyed real estate owned by one of them to Scott, part of the consideration for the conveyance being his assumption of the indebtedness decreed to be liens upon the real estate conveyed. The points of the syllabus, two in number, are these:

"Section 2 of chapter 71 of the Code does not authorize one not a party to a contract made for his benefit to sue thereon in a court of law, unless such contract was made for his sole benefit. A lien creditor of the grantor in a deed by which the land subject to the lien has been conveyed to a third person, in consideration of a certain sum in cash and his assumption of the valid liens thereon and agreement with the vendor to settle the same, cannot maintain an action at law against the grantee on such deed for recovery of the amount of his lien on the land."

Although each of the plaintiffs has a lien on the land and other property of the mortgagor as security for the prompt payment of the bonds and coupons, they are without right to recover in the first instance against the grantee of the mortgagor of the property incumbered. In this respect the court erred in its ruling on the motion to quash the notice in the Caldwell action, as it did also in the Hamilton Case, with this difference in the result, that in the latter it is within the power of the plaintiff to amend the notice or to prepare and serve another, as the necessities of the case may require while the notice in the former case apparently is not so amendable. Though somewhat technical, the rule laid down is of ancient origin, and prevails in this state. But the parties are not remediless save in a court of law in circumstances such as these records present. It is the province of the Legislature, not of the courts, to alter, change, or abrogate common-law procedure or regulations relating to parties necessary or proper to be joined in such actions. Section 7, c. 121, Code (sec. 4727), does not make...