Kerschensteiner v. N. Mich. Land Co.

• Decision Date: 04 October 1928
• Docket Number: No. 1.,1.
• Citation: 221 N.W. 322,244 Mich. 403
• Parties: KERSCHENSTEINER et al. v. NORTHERN MICHIGAN LAND CO. et al.
• Court: Michigan Supreme Court

244 Mich. 403

221 N.W. 322

KERSCHENSTEINER et al.

v.NORTHERN MICHIGAN LAND CO. et al.

No. 1.

Supreme Court of Michigan.

Oct. 4, 1928.

Appeal from Circuit Court, Schoolcraft County, in Chancery; Louis H. Fead, Judge.

Suit by O. J. Kerschensteiner and another, trustees, against the Northern Michigan Land Company and others. From a decree, plaintiffs appeal. Modified and affirmed.

Argued before the Entire Bench except FEAD, C. J.J. J. Herbert, of Manistique, and Rix, Barney & Kuelthau, of Milwaukee, Wis. (Glicksman & Gold, of Milwaukee, Wis., and George E. Nichols, of Detroit, of counsel) for appellants.

Berg, Clancey, & Randall, of Ishpeming, for appellee Munising Paper Co.

Prentiss M. Brown, of St. Ignace, for appellees Herbert Ames, C. Y. Bennett, Charles Connor, Caroline N. Connor, Chambers Brothers, J. J. Derusha, Bridget Derusha, Neil Docherty, Mary Docherty, Goudreau & Grimes, Peter Goudreau, Herbert Grimes, Catherine Chambers Gleason, Patrick W. Murray, Charles J. Mulcrone, Clara Mulcrone, Mackinac Lumber Company, Peter J. Murray, John R. Rhoades, William Schoals, Mattie Schoals, T. W. F. Weldon, and Lavina Weldon.

Brown & Guesmer, of Minneapolis, Minn., for appellees Harry S. Carson, Manistique Pulp & Paper Co., Minnesota Loan & Trust Co., and Charles V. Smith, trustee.

J. F. Carey, of Escanaba, for appellees William Bonifas, Kate Bonifas, Jessie M. Beath, Frances B. Ellsworth, Isobel M. Daley, Nancy B. Thomas, Heirs of James Blake, and J. F. Carey.

Albert B. Davidson, of Davidson & Hudson, of Sault Ste. Marie, for appellees L. Schoenrock, trustee, H. M. Tufvesson, Grant Van Sant, trustee, Samuel R. Van Sant, trustee, Van Sant Trust Co., Thomas H. Richardson, trustee, and Wells-Dickey Trust Co., trustee.

G. R. Empson, of Gladstone, for appellees I. N. Bushong, Grace W. Bushong, National Pole Co., and Northwestern Cooperage & Lumber Co.

Virgil I. Hixson, of Manistique, for appellees M. E. Aldrich, Olive Aldrich, Charles E. Hamiel, J. J. Hruska, K. M. Hyland, John A. Hartigan, M. A. Rector, John Sautter, and White Marble Lime Co.

B. H. Halstead, of Petockey, for appellee Jackson & Tindle, Inc.

Henry Miltner, of Cadillac, for appellee Cadillace Lumber & Chemical Co.Francis T. McDonald, of McDonald & Kaltz, of Sault Ste. Marie, for appellees Jeremiah L. Lynch, Albertha M. Lynch, and Lynch Timber Co.

Arthur H. Ryall, of Ryall & Frost, of Escanaba, for appellees William Bonifas, Kate Bonifas, I. N. Bushong, Grace W. Bushong, William Bonifas Lumber Co., Freeman Lumber Co., Goodman Cedar Co., McGillis & Gibbs Co., National Pole Co., Northwestern Cooperage & Lumber Co., and I. Stephenson Co., trustees.

H. W. Runnels, of Sault Ste. Marie, for appellees W. S. Chapin, A. T. Bound, Lottie M. Bound, H. G. Rath and Lilly C. Rath.

A. L. Sayles, of Newberry, for appellees Carr & Barrett, Hunter & Love Lumber Co., Robert Hunter, Anna Jane Hunter, Rudolph Kuhn, Carlton H. Sweeney, Mary E. Sweeney, H. J. Skinner & Co., Edward C. Underwood, Margaret Underwood, James Watson, Margaret Watson, Harry Young, and Adelaide Young.

Victor D. Sprague, of Sprague & Shepherd, of Cheboygan, for appellee Embury-Martin Lumber Co.

E. S. B. Sutton, of Sault Ste. Marie, for appellee Frank P. Chesbrough.

Frank P. Sullivan, of Warner & Sullivan, of Sault Ste. Marie, for appellees M. E. Atwood, Bankers' Trust & Savings Bank, Donald N. McLeod, and Catherine McLeod.

James C. Wood, of Manistique, for appellees Charles E. Hamiel and John Sautter.

POTTER, J.

Plaintiffs, trustees under two trust mortgages, made and executed by the Northern Michigan Land Company, November 1, 1918, and September 1, 1919, given to secure the payment of $1,500,000 and $900,000, respectively, in par amount of the bonds of the Northern Michigan Land Company, and to perform the covenants contained therein, filed a bill of complaint August 17, 1922, in Schoolcraft county to correct descriptions of real estate covered by the trust mortgages, foreclose the same, determine and preserve the rights of bondholders thereunder, and procure payment of moneys advanced by plaintiffs in carrying out the terms of the trust, and for other relief. Many separate answers and disclaimers were filed. Testimony was taken at different times from June 28, 1923, to June 15, 1925, and December 5, 1925, a decree was rendered by the trial court for plaintiffs and defendants Lynch Timber Company, Cadillac Lumber & Chemical Company, Jackson & Tindle Company, Inc., Embury-Martin Lumber Company, William Bonifas Lumber Company, National Pole Company, and William Bonifas and the estate of James Blake. Plaintiffs appealed from the decree of the trial court allowing the claims of defendants above named; the Cadillac Lumber & Chemical Company has taken a cross-appeal, and the Goodman Cedar Company, William Bonifas Lumber Company, William Bonifas and M. J. Rice, and Jackson & Tindle Company, Inc., have taken appeals from such decree. The case was argued in the June, 1927, term of this court and assigned to the late Justice Bird, who died before submitting an opinion herein. The case has been reargued and reassigned.

November 1, 1918, the Northern Michigan Land Company executed a trust mortgage to Ralph O. Olson and John A. Hartigan, trustees, covering approximately 300,000 acres of land in Northern Michigan to secure the payment of $1,500,000 of its bonds of which issue but $370,000 were issued. September 1, 1919, a second trust mortgage was made by the same mortgagor to the same trustees to secure the payment of $900,000 in par amount of its bonds. The first trust mortgage covered the real estate described therein and several land contracts for lands in Luce, Schoolcraft, Chippewa, and Mackinac counties; 70 or more real estate mortgages given by Samuel R. Loux and Ella M. Loux, his wife, to Interstate Farms Company covering lands in Chippewa county; 20 other real estate mortgages given by Loux and wife to Interstate Farms Company covering lands in Chippewa county; 8 real estate mortgages given by Northern Michigan Land Company to J. B. Sullivan and assigned by Sullivan to mortgagor covering lands in Mackinac county; 30 or more land contracts covering lands in Chippewa county; 1 land contract covering lands in Schoolcraft county; 4 land contracts covering lands in Mackinac county; and 3 land contracts covering lands in Luce county.

The first mortgage of November 1, 1918, provided for the release of lands from the lien of the mortgage, in case of their sale by the mortgagor. The release clause is set forth in Appendix 1. It also provided the trustees might ‘also release portions of the security on different terms than specified in the release clause herein, when in their judgment the remaining security is ample to protect the bondholders, and when, in their discretion, it is to the bondholders' advantage to do so.’ It also provided:

‘The trustees shall be held only to the exercise of reasonable care and diligence in relation to managing and selling the property hereby conveyed, or otherwise carrying out the provisions hereof, and where they act by or through agents, or attorneys, they shall not be responsible for their wrongdoing, but they shall be held to the exercise of reasonable care in selecting and discharging the same.’

The second mortgage recites the giving of the first mortgage November 1, 1918; that there had been released from the lien of the first mortgage all of the lands, mortgages, contracts, and other securities covered thereby, except the lands specified and described in the second mortgage; that out of the $1,500,000 in par amount of the bond issue authorized by the mortgage of November 1, 1918, but $370,000 had been certified and issued; that the balance of the bonds authorized thereby and attached interest coupons secured thereby had been canceled; that the holders of all of the $370,000 in par amount of outstanding bonds had consented in writing to change the terms and conditions of the entire issue of bonds, and the trust deed given to secure the same in accordance with the terms and conditions of the second mortgage; that it was desired by the mortgagor to reduce the amount of bonds to be secured by the mortgage upon the balance of the property referred to in the original mortgage, not released therefrom, to $900,000 in par amount, including the $370,000 first mortgage bonds outstanding, and continue the security of the same by a first mortgage upon the lands described in the original mortgage excepting in so far as the same have been released; to modify the terms, conditions, and maturities of the $900,000 of bonds, and to modify, amend, and supplement the terms and conditions of the original mortgage for the purpose of securing the $900,000 in par amount of bonds; that the $370,000 of bonds issued and outstanding under the first mortgage had been surrendered to the trustees to be canceled upon being replaced by $297,000 of the new bonds. It excepts such reservations as are shown in the schedule of lands attached thereto and such as appear in the mortgagor's chain of title.

The second mortgage of September 1, 1919, contained a release clause as set forth in Appendix 2. It also provided:

‘The trustees may select and employ in and about the execution of the trusts hereby created and the duties hereby imposed, suitable agents and attorneys whose reasonable compensation shall be paid by the company to the trustees, or in default of such payment, shall be a charge upon the property hereby conveyed, and the proceeds thereof, paramount to said bonds and the interest hereon; and the trustees shall in no event be held liable to any neglect, omission or wrongdoing of any such agents, or attorneys, reasonable care being exercised in their selection. The trustees, save for their own gross negligence or willful default, shall not be liable for any loss or damage.’

The dispute here does not concern the execution and delivery of the mortgages, the amount due thereon, default in payment, the...