Louisville Trust Co. v. Louisville, N.A. & C. Ry. Co.

• Decision Date: 05 February 1898
• Docket Number: 420.
• Citation: 84 F. 539
• Parties: LOUISVILLE TRUST CO. v. LOUISVILLE N. A. & C. RY. CO. et al.
• Court: U.S. Court of Appeals — Seventh Circuit

84 F. 539

LOUISVILLE TRUST CO. v. LOUISVILLE N. A. & C. RY. CO. et al.

No. 420.

United States Court of Appeals, Seventh Circuit.

February 5, 1898

On August 24, 1896, John T. Mills, Jr., filed a judgment creditors' bill in the circuit court of the United States for the district of Indiana against the Louisville, New Albany & Chicago Railway Company, and procured the appointment of a receiver, who took possession of the property. On November 12, 1896, the Farmers' Loan & Trust Company and John H. Barker, trustees, filed their bill of complaint to foreclose a mortgage upon the property of the railway company, known as the 'consolidated mortgage,' securing $4,700,000 of 6 per cent consolidated bonds. The foreclosure was based upon an allegation that default was made in the payment of the interest upon an allegation that default was made in the payment of the interest upon the bonds secured by said mortgage maturing on October 1, 1896. On the same day the Central Trust Company of New York and John H. Stotsenburg trustees, filed their bill of foreclosure against the railway company to foreclose the mortgage known as the 'general mortgage,' securing an issue of $2,800,000 5 per cent general mortgage bonds. This foreclosure was based upon an allegation of default in the payment of interest on the said bonds maturing November 1, 1896. On November 12, 1896, the two foreclosure bills were, by order of the court consolidated with the creditors' bill in one cause, to proceed under the title of the Farmers' Loan & Trust Company of New York and John H. Barker, complainants, against Louisville, New Albany & Chicago Railway Company. On December 14, 1896, the Central Trust Company of New York and James Murdock, trustees, filed their bill of foreclosure against the railway company to foreclose the mortgage known as the 'equipment mortgage,' securing bonds whereof $709,000 of principal were alleged to be outstanding; the said equipment mortgage being a first lien upon a large amount of equipment, and a subordinate lien upon the property of the railway company covered by its other mortgages. The foreclosure was based upon allegations of default in the payment of the interest maturing on December 1, 1896. On December 21, 1896, the last-mentioned suit was consolidated with the other consolidated suit under the same title. On December 24, 1896, the Farmers' Loan & Trust Company and John H. Barker, as trustees, filed an amended and supplemental bill, which related to the property of the Orleans, West Baden & French Lick Springs Railway Company and the Bedford & Bloomfield Railroad Company, which last-mentioned companies had conveyed their properties, by way of mortgage, to the said trustees, as additional security for the consolidated bonds. On January 13, 1897, the Orleans, West Baden & French Lick Springs and Bedford & Bloomfield Companies were made parties defendant to the bill of the Farmers' Loan & Trust Company and John H. Barker. The defendant railway corporations filed an answer to the several bills of foreclosure, which did not put in issue any of the material allegations of said bills. The Central Trust Company, Stotsenburg, and Murdock, trustees, filed an answer to the bill of the Farmers' Loan & Trust Company and Barker, admitting the allegations of the bill and amended and supplemental bill of those complainants. On January 23d, the pleadings of all the parties defendant to the original bills being upon file, and there being no material allegation of any of the foreclosure bills in issue or denied, and no proofs being necessary in order to render a decree upon the foreclosure bills, application was made to the court for a decree of foreclosure and sale. On the same day, the Louisville Trust Company filed an intervening petition. This petition merely alleged the incorporation of the Louisville Trust Company, the fact that it was the holder of 125 bonds of $1,000 each, made by a corporation known as the Richmond, Nicholasville, Irvine & Beattyville Railroad Company, and alleged to have been guarantied by the Louisville, New Albany & Chicago Railway Company, which remained unpaid, and the interest upon which was in default; that the Louisville, New Albany & Chicago Railway Company was authorized to make the guaranty, and that its right and power to do so had been adjudged in a suit in the circuit court of the United States for the district of Kentucky; that the Louisville, New Albany & Chicago Railway Company was indebted to the petitioner in $125,000 and interest; and it prayed that the petition might be filed, and an order entered authorizing petitioner to appear in its own behalf, and in behalf of all others holding similar claims, and take such steps and proceedings as it might be advised by counsel. This intervening petition did not contain allegations tending to controvert any matters contained in the foreclosure bills, and tendered no issue whatever. Upon said petition, an order was made that the Louisville Trust Company and the Kentucky National Bank be admitted to appear in the proceedings in the cause, each on its own behalf. No answer or other pleading of any kind was tendered to the court or was ever suggested. On the same day, the court made and entered the decree of foreclosure and sale. The decree directed foreclosure of the several mortgages, but reserved full power to adjudge with respect to the income of the receivership and the rights of creditors in and to the same. On February 27, 1897, more than a month after the decree was entered, the appellant filed another petition. In this petition various charges and allegations were made tending to negative the right of the trustee to foreclose their mortgages, and the prayer of the petition was to the effect that the decree of foreclosure and sale should be set aside; that the consolidations by which the mortgagor company was created should be adjudged to be void; that its mortgages would be declared to be invalid; that the assets and liabilities of the railway company should be ascertained; and that the amount of such assets should be declared to be a fraud to be distributed among general and unsecured creditors; and, further, that an order be entered commanding some of the parties to the consolidated cause, but not all, to appear within a time to be fixed by the order of the court, and to plead or make answer to the allegations of the petition. No such order was ever made or applied for. But on March 9, 1897, the day before the day fixed for the sale under the decree, it appears that the petition of February 27, 1897, came on to be heard, and was argued by counsel, and that the court refused to vacate the decree of foreclosure and sale, or to postpone or adjourn the sale. The sale was duly made to F. P. Olcott, Henry W. Poor, and Henry C. Rouse, as a committee for the bondholders. On the day of the sale, viz. March 10, 1897, application was made to confirm the sale and the master's report; and, all the parties to the foreclosure bills appearing and consenting, an order of confirmation was entered. The Louisville Trust Company, on May 1, 1897, filed its petition of...