Rumsey v. Peoples Railway Co.

• Decision Date: 20 February 1900
• Citation: 55 S.W. 615,154 Mo. 215
• Parties: RUMSEY v. PEOPLES RAILWAY COMPANY, Appellant, and MAFFITT, Trustee. [*]
• Court: Missouri Supreme Court

55 S.W. 615

154 Mo. 215

RUMSEY v. PEOPLES RAILWAY COMPANY, Appellant, and MAFFITT, Trustee. ^[*]

Supreme Court of Missouri

February 20, 1900

Appeal from St. Louis City Circuit Court. -- Hon. Horatio D. Wood Judge.

Affirmed.

M Kinealy, T. J. Rowe and C. H. Krum for appellant.

(1) The final decree is erroneous in foreclosing the third deed of trust and ordering a sale for the full amount of the bonds and interest, secured by the third deed of trust, and actually issued. Rumsey v. Peoples Railway Co., 144 Mo. 189; Lacoss v. Keegan, 2 Ind. 406; King v Longworth, 7 Ohio 231; Union Trust Co. v. Railroad, 5 Dill. 1; Taggart v. San Antonio Ridge D. & M. Co., 18 Cal. 460; Haynes v. Searchrest, 13 Ia. 455; Hunt v. Dohrs, 39 Cal. 304; Railroad v. Fosdick, 106 U.S. 47. (a) No bondholder can declare another's bond due. Mallory v. West Shore H. R. R. Co., 3 Jones & S. 174; Marine Bank v. Internatl. Bk., 9 Wis. 66. (b) The clause in the deed of trust, declaring the bonds due on default of payment of one coupon for thirty days is not self-executing, and does not justify a decree of foreclosure for the full amount of the bonds. Hawes v. Mulholland, 78 Mo.App. 493; Owings v. McKenzie, 133 Mo. 323; Woltz v. Parker, 134 Mo. 458; Philips v. Bailey, 62 Mo. 639; Whelan v. Riley, 61 Mo. 565; Railroad v. Sprague, 103 U.S. 756; Railroad v. Fosdick, 106 U.S. 75. (2) The order appointing the receiver in this case was void, and the decree is erroneous in appropriating the income and earnings of the Peoples Railway Company, collected by the receiver appointed under that order, to the payment of the coupons, bonds or intervening claims. State ex rel. v. Ross, 122 Mo. 435; Whitney v. Bank, 71 Miss. 1017; Railroad v. Jewett, 37 Oh. St. 469; Verplank v. Ins. Co., 2 Paige 438; Turgeau v. Brady, 24 La. Ann. 349; Pacific R. R. Co. v. Mo. P. R. Co., 111 U.S. 505. (a) The appointment of a receiver is not due process of law. Huber v. Riley, 53 Pa. St. 112; Foster v. Goddard, 66 U.S. 518; Lowrey v. Rainwater, 70 Mo. 157; Crockett v. Lee, 20 U.S. 522; Bailey v. Rider, 10 N.Y. 363; Windsor v. McVeigh, 93 U.S. 274; Pennoyer v. Neff, 95 U.S. 714. (b) Without a valid order for the appointment of a receiver, neither the court nor the receiver can take the income or earnings of the company, or appropriate them for the payment of its bonds, coupons or debts. Freedmen's Savings & Trust Co. v. Shepard, 127 U.S. 494; Gillman v. Ill. & M. Tel. Co., 91 U.S. 603; Railroad v. Cowdrey, 78 U.S. 459; American Br. Co. v. Heidebach, 94 U.S. 794; Kountze v. Omaha Hotel Co., 107 U.S. 378; Teal v. Walker, 111 U.S. 242; Grant v. Phoenix L. Ins. Co., 121 U.S. 717; Dow v. Railroad, 124 U.S. 652; Sage v. Railroad, 125 U.S. 361; In re Life Ass'n of America, 96 Mo. 632; Fontaine v. Schulenberg & B. L. Co., 109 Mo. 64; White v. Wear, 4 Mo.App. 341; Armour Packing Co. v. Wols, 59 Mo.App. 665. (c) The entire amount collected by the receiver should be accounted for, without deduction. 3 Southerl. on Damages (2 Ed.), secs. 1105, 1106. (3) Mr. Lewis M. Rumsey is not entitled to have a decree of foreclosure in this suit. He, at least, should first be required to place defendant, Peoples Railway Company, in the condition it was on March 6, 1897, before the filing of the petition in this cause. 1 Pomeroy Eq. Jr. Pru. (2 Ed.), sec. 397; Lewis v. Holdredge, 76 N.E. 890; Angle v. Railroad, 151 U.S. 1; Farmers Loan & Trust Co. v. Railroad, 150 N.Y. 410; Gruhn v. Richardson, 128 Ill. 186; Farrow v. Holland Trust Co., 74 Hun. 600; Cutter v. Babcock, 81 Wis. 195; Bein v. Heath, 6 How. 247; Moore v. Crawford, 130 U.S. 122; Railroad v. City Nat. Bank, 56 Oh. St. 351. (4) The final decree is erroneous in finding and decreeing that any of the so-called interveners, the German-American Bank et al., admitted parties to the suit, was a party plaintiff in this suit, or, as such, was entitled to a decree of foreclosure for the amount of the bonds and the interest thereon held by it or him. 11 Ency. Pl. & Pr., p. 509. (5) The decree in ordering a sale by a special commissioner is erroneous and void. Lord v. Johnson, 102 Mo. 680; Hannah v. Davis, 112 Mo. 608; Rumsey v. Peoples R'y Co., 144 Mo. 189. (6) The decree is erroneous and void, inasmuch as it does not order a sale for cash, and impairs the obligation of the contract in the deed of trust. Wood's Ex. v. Krebs, 33 Grat. (Va.) 694; Const. U.S. art. 1, sec. 10.

Noble & Shields, A. Arnstein and Boyle, Priest & Lehmann for respondent.

(1) This action was in equity for foreclosure and sale, and as such could be prosecuted by one or more bondholders for himself, themselves and others whose bonds were secured by the mortgage deed of trust. (a) It was an action in equity, and as such was not affected by the provisions of the state statute relating to "mortgages and deeds of trust." Rumsey v. Peoples R'y Co., 144 Mo. 188; Riley v. McCord, 24 Mo. 268; Keith, etc. Co. v. Bingham, 97 Mo. 212; Wolff v. Ward, 104 Mo. 127; Hannah v. Davis, 112 Mo. 599; State ex rel. v. Ross, 122 Mo. 435; Brein v. Fleming, 135 Mo. 604; Trust Co. v. McDonald, 146 Mo. 479. (b) A bondholder has the right to bring the action for himself and other bondholders, who might join with him therein, the trustee refusing to sell or sue. Rumsey v. Peoples R'y Co., 144 Mo. 189; State ex rel. v. Ross, 122 Mo. 435; Carter v. City of N. O., 19 F. 659. (c) On application the intervening bondholders were properly admitted and their interests protected. Ins. Co. v. Salisbury, 130 Mass. 303. (d) The interevening bondholders had been admitted and made parties by order of the court below when the defendant company filed its original answer; and their presence was recognized and their rights passed upon when the first appeal was prosecuted. Rumsey v. Peoples R'y Co., 144 Mo. 189. (e) The other bondholders, if any further representation for them was necessary in the action, were represented by the trustee, who had not resigned, held the legal title, was a party defendant, and had their interests fully protected in the decree. Oxley Stave Co. v. Butler Co., 121 Mo. 614; Land Co. v. Peck, 112 Ill. 408; Corcoran v. Chesapeake, etc. Co., 94 U.S. 741; Richter v. Jerome, 123 U.S. 233; Kneeland v. Luce, 141 U.S. 491; Kent v. Lake Superior, etc., Co., 144 U.S. 75; Farmers' Loan & Trust Co. v. Kansas City, etc., 53 F. 182; Elwell v. Fosdick, 134 U.S. 500. (2) The mortgage deed of trust was properly foreclosed and sale of the property decreed for full amount of the bonds actually issued with interest. (a) It was "distinctly understood and agreed" in the mortgage deed of trust that failure to pay any one of said coupons for thirty days, should cause all of said bonds to become immediately due and payable. Also that on a failure to pay taxes and assessments when required by law to be paid, the holders may consider the bonds and each of them due and payable. Also if any of the bonds or coupons become due and remain unpaid for thirty days; or if (mortgagor) fails or neglects to pay taxes or assessments when due upon a request in writing of those holding a majority of the bonds and coupons, the trustee shall proceed to sell. Also if the company failed to set apart 200 of the bonds to retire and cancel the first and second mortgage bonds, there would be a forfeiture. (b) All these provisions were, in the petition, asserted as causes for foreclosure and sale, with appropriate averments, and the failure of the defendant company in each particular was not only proven, but admitted. (3) Mortgages may be foreclosed for whole debt on failure to pay instalments, if it is so agreed. Howell v. Railroad, 94 U.S. 463; Macon, etc. Co. v. Georgia, etc., Co., 63 Ga. 103; Wriner v. Atlantic, etc., Co., 2 Woods (U.S.) 409; Darrow v. Scullin, 19 Kan. 57; 9 Ency. of Plead. and Prac., p. 428; Olcott v. Bynum, 17 Wall. 441; Noonan v. Lee, 2 Black (U.S.) 509; Mallory v. Railroad, 3 Jones & S. (N. Y.) 124; State ex rel. v. Ross, 122 Mo. 435. And this present case on former appeal, Rumsey v. Peoples, etc., Co., 144 Mo. 189. These provisions accelerated the maturity of the debt for the purposes of foreclosure and sale. Morgan v. Martien, 32 Mo. 438; Mason v. Bernard, 36 Mo. 384; Noell v. Gains, 68 Mo. 649; Owens v. McKenzie, 133 Mo. 323; Building & Investment Co. v. Dunworth, 146 Mo. 361. (4) It is a principle in equity that if on sale duly had for even only a portion of the debt that is due, the court acquires a fund as proceeds, it will administer that fund according to the rights of all the holders of the securities, whether for foreclosure or on creditors' bill. Chicago, etc., Co. v. Fosdick, 106 U.S. 47; Olcott v. Bynum, 17 Wall. 44; Noonan v. Lee, 2 Black (U.S.) 509; King v. Longworth, 7 Ohio 251; Hollins v. Briarfield, etc., Co. 150 U.S. 380.

BURGESS J. Sherwood, J., absent.

OPINION

In Banc.

BURGESS, J.

-- This case was before this court on a former occasion, having been brought by writ of error which was sued out by the Peoples Railway Company, and will be found reported in 144 Mo. 175, 46 S.W. 144, where a full and clear statement of the facts up to that time may be found.

It was then reversed and remanded to be tried in accordance with the views expressed in the opinion of the court.

At the time the mandate was received by the clerk of the court below there was pending in the cause and undisposed of a motion to remove the receiver, Charles Green, who had been appointed and took charge of the property in March, 1897, which was sustained on April 27, 1898, and F. B. Brownell appointed in his place.

From the appointment of Charles Green as receiver on March 6 1897, to May 27, 1898, Michael Kinealy appeared and acted as counsel for Mr. Green and Kinealy & Kinealy acted as counsel for the defendant railway company. In the application for...