Real Estate Trust Company of Philadelphia v. Wilmington & New Castle Electric Railway Company
| Decision Date | 29 September 1910 |
| Citation | 9 Del.Ch. 99,77 A. 756 |
| Court | Court of Chancery of Delaware |
| Parties | THE REAL ESTATE TRUST COMPANY OF PHILADELPHIA, Trustee, v. WILMINGTON AND NEW CASTLE ELECTRIC RAILWAY COMPANY, WILMINGTON, NEW CASTLE AND SOUTHERN RAILWAY COMPANY, SECURITY TRUST AND SAFE DEPOSIT COMPANY, Trustee, AND THE NATIONAL BANK of WILMINGTON AND BRANDYWINE |
BILL TO FORECLOSE CORPORATE MORTGAGE. On May 23rd, 1907, receivers were appointed for the Wilmington, New Castle and Southern Railway Company, and thereafter, by leave of the Chancellor the complainant filed this bill to foreclose a certain mortgage executed by the Wilmington and New Castle Electric Railway Company prior to its consolidation with the New Castle and Delaware City Railway Company into the Wilmington New Castle and Southern Railway Company. The allegations of the bill and answer and the contentions of counsel are sufficiently stated in the opinion of the Chief Justice before whom the cause was argued on bill, answer, testimony and exhibits; the Chancellor having been disqualified to hear the same by reason of his interest therein as counsel for one of the defendants prior to his appointment as Chancellor.
Decree changed or modified as to conform.
Herbert H. Ward and Joseph deF. Junkin (the latter of the Philadelphia Bar), solicitors for the complainant.
T Bayard Heisel, solicitor for Wilmington, New Castle and Southern Railway Company.
Benjamin Nields, solicitor for Security Trust and Safe Deposit Company.
William T. Lynam, solicitor for The National Bank of Wilmington and Brandywine.
2. Upon April 2nd, 1904, under proceedings duly had according to the laws of the State of Delaware, and in pursuance of an agreement of merger, dated February 15th, 1904, the said The Wilmington & New Castle Electric Railway Company' and a corporation known as New Castle & Delaware City Railway Company' became merged as one corporation under the name of Wilmington, New Castle & Southern Railway Company'; such agreement, and the proceedings effecting such merger, however, expressly preserving unimpaired all liens on the properties of either of said corporations, and providing that the component corporations should be deemed as continued in existence to preserve the same, and which proceedings preserved unimpaired the lien of the mortgage aforesaid, of which your petitioner is the trustee.
3. Upon May 23rd, 1907, in the above entitled cause, on application of a general creditor of the said Wilmington, New Castle & Southern Railway Company,' your Honorable Court appointed Wilmer Palmer and J. Chester Gibson receivers of the said Wilmington, New Castle & Southern Railway Company'; and such receivers are now in possession of said property of the said railway companies, which so became merged as aforesaid.
4. On August 1st, 1901, default was made by the Wilmington & New Castle Electric Railway Company' in making payment to petitioner of the two thousand dollars ($ 2,000) covenanted to be paid by it to the sinking fund, as provided by the said mortgage, and since said date, on each successive August, 1st, 1902, 1903, 1904, 1905 and 1906, similar default was made, and which has been persisted in until the present time.
5. On August 1st, 1906, default was made in the payment of all the coupons which matured upon such bonds on that date, and such default has been persisted in until the present time.
6. By a paper writing, dated November, 1906, and duly delivered to petitioner, the holders of more than 25 per cent. of all of the said bonds then outstanding notified petitioner of these defaults, and requested it, as provided by said mortgage, to notify the railway company by written notice that the sinking fund payments and overdue interest must be paid within thirty days succeeding the date of notice, otherwise the trustee would proceed to institute the proper proceedings at law or in equity for the protection and enforcement of the rights and remedies of the holders of the bonds secured by said mortgage, and requesting petitioner, if such notice was not complied with, to proceed to enforce the proper proceedings at law or in equity for their protection. Due written notice of this request was served upon the officers of both the Wilmington & New Castle Electric Railway Company' and the Wilmington, New Castle & Southern Railway Company,' on the 5th, 6th, 7th and 8th days of March, 1907, demanding and requiring from said companies that, unless said sinking fund payments and interest so overdue were paid within thirty days from the date of the said notice, petitioner would proceed to institute proper proceedings at law or in equity for the protection and enforcement of the rights and remedies of the holders of the bonds secured by the said mortgage.
7. Said payments were not made within thirty days from the dates of the service of the notices, and more than ninety days have expired since the dates of the service of the aforesaid notices upon the defendant corporations as aforesaid, and by the terms of the said mortgage, under the aforesaid request to it by the said bondholders, your petitioner has now the right and it has become its duty to proceed to protect and enforce the rights of the holders of the said bonds, and to proceed to collect the same with interest accrued thereon out of the said property, in accordance with the request made to it by the said bondholders under the terms of the said mortgage."
Upon such showing the petitioner claimed it to be its duty as trustee to proceed to comply with the request to take proceedings to foreclose the said mortgage, and collect from the property embraced therein the amounts due upon the said bonds; and inasmuch as the possession of the mortgaged property was in the hands of receivers appointed by the Court, the trustee prayed leave to file its bill of foreclosure in the cause. Leave was granted the trustee to file its bill of foreclosure which embraced the foregoing averments taken from the petition, and the case is now before the Court for determination upon bill, answers and the proofs taken.
The foreclosure of said mortgage is opposed on two grounds:
(1) Because the trustee did not, before instituting suit to foreclose the mortgage, notify the said Wilmington & New Castle Electric Railway Company, by written notice delivered to the president, secretary and treasurer thereof, at the principal office of said company, to pay the sinking fund payments and overdue interest within thirty days, as required by the terms and provisions of said mortgage as a condition precedent to the foreclosure of the same.
(2) Because the bonds issued, to secure which the mortgage in suit was executed, were and are usurious and void, and a court of equity will not enforce their collection by directing a foreclosure of the mortgage.
With respect to the first ground it is contended by the respondents that the trustee failed to give the notice required (a) in that it was not delivered to the president, secretary and treasurer at the principal office of the company, and (b) in that it is not shown by competent evidence that it was delivered to the secretary of the company at any place or time; it being insisted that the testimony of H. H. Ward, Esq., who testified that he served the notice, should be stricken out and disregarded.
I do not think very much insistence was placed upon the point that the notice was not served or delivered at the principal office of the company. The important thing, of course, was that the three officers named should have the notice required by the mortgage to be given; and it is a fair construction of such provisions to hold that if it is shown that the president, secretary and treasurer of the company did in fact receive such notice, even though it was not delivered to them at the principal office of the company, the requirement of the mortgage has been substantially complied with. To hold otherwise would be unreasonable and entirely too technical. As a matter of fact there was no such office after the consolidation of the two companies above mentioned, at which it was at all practicable to make the service. It appears from the evidence before me, and is in fact admitted, that the required notice was served upon the president and treasurer, although not at...
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