Seibert v. Minneapolis & St. Louis Ry. Co.
| Decision Date | 06 January 1893 |
| Citation | 53 N.W. 1134,52 Minn. 148 |
| Parties | Henry Seibert v. Minneapolis & St. Louis Ry. Co. et al. (Griggs, Intervener.) |
| Court | Minnesota Supreme Court |
Appeal by intervener, F. H. Griggs, from an order of the District Court of Hennepin County, Lochren, J., made August 8, 1892 sustaining the demurrers of the defendants, the Central Trust Company of New York, the Fidelity Insurance Trust & Safe-Deposit Company and the Farmers' Loan & Trust Company, to his complaint in intervention.
The Minneapolis & St. Louis Railway Company mortgaged its railroad to the Central Trust Company of New York as trustee to secure the payment of certain bonds issued by it. The plaintiff, Henry Seibert, was afterwards substituted as trustee in its place. He brought this action to foreclose the mortgage, making a great number of parties defendants.
There were several prior mortgages on the railroad made to secure certain other bonds. F. H. Griggs became the owner of a number of the bonds secured by these prior mortgages and filed in the action his complaint in intervention, asking that these prior mortgages be also foreclosed in this action.
The defendants, the Central Trust Company of New York, the Fidelity Insurance Trust & Safe-Deposit Company and the Farmers' Loan & Trust Company, severally demurred to this complaint in intervention on the ground that it did not state facts sufficient to constitute a cause of action, or a ground for intervention in the action. This demurrer was sustained in the trial court and the intervener appeals.
Orders affirmed.
Cook & Dodge and Akers & Lancaster, for appellant.
In the absence of the provisions of Art. IX of the mortgage intervener would have an undoubted right to a foreclosure for his own and others' benefit. Chicago & Vincennes R Co. v. Fosdick, 106 U.S. 47; McFadden v. Mays Landing & E. H. C. R. Co., 49 N.J.Eq. 176; Cleveland v. Booth, 43 Minn. 16; Farmers' L. & T. Co. v Chicago & A. Ry. Co., 27 F. 146; Jones, Corp. Bonds and Mortg. (2d Ed.) § 385. This Art. IX of the mortgage is null and void, and does not in any way affect the rights of the holders of delinquent bonds to a remedy in the laws for the collection and enforcement of their debts. Guaranty Trust Co. v. Green Cove R. Co., 139 U.S. 137; Hope v. International Financial Society, 4 Ch. D. 327; Hollister v. Stewart, 111 N.Y. 644; Nute v. Hamilton Mut. Ins. Co., 6 Gray, 174.
Butler, Stillman & Hubbard and Warner, Richardson & Lawrence, for respondent Central Trust Co. of New York.
Woods & Kingman and Keith, Evans, Thompson & Fairchild, for Fidelity Insurance Trust & Safe-Deposit Co.
Truesdale & Pierce, for Farmers' Loan & Trust Co.
The intervener cannot foreclose the mortgages in this suit because by the mortgage it is agreed that the bondholder shall not proceed independently of his trustee, except under certain circumstances which amount to a condition precedent, and the intervener does not show the performance of that condition nor the existence of any facts which might relieve him from its performance. Intervener seeks to avoid this agreement on the ground that it is an attempt to make a contract to oust the courts of jurisdiction, and is, therefore, contrary to public policy and of no effect whatsoever. He admits that if the contract is valid the demurrer was properly sustained. Courts pronounce contracts void for reasons of public policy only with the greatest hesitation.
In view of the number and character of the persons into whose hands the bonds were likely to go, it was deemed necessary to provide that no individual bondholder should have the power to foreclose the mortgages until twenty-five per centum of the bondholders deemed it best, and the trustees refused to act, after their requisition. Each bondholder was willing to advance his money with the understanding that the arrangement was a kind of partnership, and that an individual bondholder could not act independently for a foreclosure. Shaw v. Railroad Co., 100 U.S. 605; Gilfillan v. Union Canal Co., 109 U.S. 401; Canada Southern Ry. Co. v. Gebhard, 109 U.S. 527; Gates v. Railroad Co., 53 Conn. 333.
The bondholder may obtain a judgment at law upon his bond when his interest is due. The only restriction that is put upon him is, that he must collect that judgment out of property other than that covered by the mortgage. His levy is stopped in one direction only, and that is from the mortgaged property, in which all his cobondholders are equally interested. This clause was inserted for the purpose of protecting that property from the individual attack of wreckers, to the end that the interests of the bondholders as a class might not be wantonly injured. Manning v. Norfolk Southern R. Co., 29 F. 838; Montgomery Co. Agr. Soc. v. Francis, 103 Pa. 378; Guilford v. Minneapolis, S. Ste. M. & A. Ry. Co., 48 Minn. 560; Horton v. Sayer, 4 H. & N. 642; Alexander v. Central R. Co., 3 Dill. 487; Chicago & Vincennes R. Co. v. Fosdick, 106 U.S. 47; Mason v. New York & C. R. Co., 52 Me. 82.
If any bondholder is prevented by the fraud of the trustee, the mortgagor or another bondholder, from obtaining the necessary requisition, or if the trustee is acting fraudulently and to his injury in delaying foreclosure, the court will grant relief, and remedy the evil upon a proper showing. Gasser v. Sun Fire Office, 42 Minn. 315; St. Paul & N. P. Ry. Co. v. Bradbury, 42 Minn. 222; President D. & H. Canal Co. v. Pennsylvania Coal Co., 50 N.Y. 250; Perkins v. United States Electric Light Co., 16 F. 513; Powers Dry Goods Co. v. Imperial Fire Ins. Co., 48 Minn. 380; Pennock v. Coe, 23 How. 117; Fish v. New York Water-Proof Paper Co., 29 N.J.Eq. 16.
In a case where the mortgage does not contain such restricting clauses the bondholder may act when the trustee refuses, and this rule is applicable in all trusts. Coal Co. v. Blatchford, 11 Wall. 172; Davies v. New York Concert Co., 41 Hun 492; Weetjen v. St. Paul & P. R. Co., 4 Hun 529; Memphis City v. Dean, 8 Wall. 64; Greaves v. Gouge, 69 N.Y. 154; Brinckerhoff v. Bostwick, 88 N.Y. 52.
This suit is brought to foreclose a certain mortgage executed by defendant railway company to the Central Trust Company, which Trust Company has been superseded by the appointment of the plaintiff, Henry Seibert, as trustee in its place. The defendants Farmers' Loan & Trust Company and Central Trust Company are named as trustees in other mortgages executed by the railway company.
The intervener, F. H. Griggs, is the owner of bonds secured by the mortgages executed to the last-named trustees in trust to secure the bondholders holding bonds issued thereunder. In the first three paragraphs of the complaint in intervention reference is made to its bonds secured by the mortgage held by the Farmers' Loan & Trust Company as trustee, and therein is set forth the facts upon which the intervener bases his claim for relief, by way of the foreclosure of that mortgage, on his application and for the benefit of himself and other bondholders. The remainder of his complaint presents the facts upon which he bases a similar claim in respect to his bonds secured by other mortgages executed to the Central Trust Company.
1. The defendant Farmers' Loan & Trust Company demurs to that portion of the intervener's complaint included in the three paragraphs referred to, as containing the plaintiff's cause of action against it. As this portion of the complaint embraces a statement of all the facts upon which the intervener claims relief against it, we think that the objection that the demurrer is bad, because taken to a part of the complaint only, is not well taken. The court can determine from the issue thus made whether or not the intervener is entitled to any relief against the defendant upon the facts stated.
The intervener alleges: "That in the mortgage or deed of trust executed by the Minneapolis & St. Louis Railway Company to the Farmers' Loan & Trust Company, bearing date the 1st day of February, 1877, and securing the twenty-one bonds, and the coupons therefrom, held and owned by intervener, as particularly described in the first division of this intervener's complaint, it is provided, among other things, in article six thereof, as follows: 'In case default shall be made in the payment of any of the said coupons, or semiannual interest upon any of the aforesaid bonds, at the time and in the manner in the coupons issued therewith, provided the said coupon has been presented, and the payment of the interest therein specified has been demanded, and in case such default shall continue for the period of four months after the said coupons shall have become due and payable, then and thereupon the principal of all the bonds secured hereby shall become immediately due and payable, anything contained in the said bonds to the contrary notwithstanding.'"
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