Slater Trust Co. v. Randolph-Macon Coal Co.

• Decision Date: 09 June 1908
• Docket Number: 1,213.
• Citation: 166 F. 171
• Parties: SLATER TRUST CO. v. RANDOLPH-MACON COAL CO. et al.
• Court: U.S. District Court — Southern District of New York

166 F. 171

SLATER TRUST CO. v. RANDOLPH-MACON COAL CO. et al.

No. 1,213.

United States Circuit Court, S.D. New York.

June 9, 1908

Delmas Towne & Spellman, for complainant.

Carter Ledyard & Milburn, for defendant Hegeman.

Strong & Cadwalader, for defendant Read.

Joline Larkin & Rathbone, for defendant Central Trust Co.

Rushmore Bisbee, Rogers & Stern, for defendant Gardiner.

MARTIN District Judge.

The defendant Randolph-Macon Company is not in court, the attempted service on that defendant having been set aside by order of court. All the other defendants are in court, and each has demurred. They assert: First. That the complaint fails to state facts sufficient to constitute a cause of action. Second. That the complainant has a plain, adequate, complete, and compensatory remedy at law. Third. That the defendant Randolph-Macon Coal Company is a necessary party for the determination of this controversy.

The allegations of the bill are in brief as follows: That the complainant bought, for a valuable consideration, and is the owner of, five bonds of $1,000 each issued by the Randolph-Macon Coal Company, and brings suit on behalf of itself and 'all other bondholders similarly situated' against said coal company, and against James T. Gardiner, William A. Read, John R. Hegeman, and the Central Trust Company; that in the year 1905 said coal company, in order to issue $3,000,000 of bonds, made a mortgage to the Central Trust Company of over 47,000 acres of land, representing and covenanting that the said coal company was the owner of said property; that the execution of said mortgage, and the statement therein that said coal company was the owner of said lands, and all other statements in said mortgage, was authorized by the defendants Gardiner, Read, and Hegeman, who were members of the board of directors of said coal company; that the representation that said coal company was the owner of said land was false, and known to be false by the said Gardiner, Read, and Hegeman, who authorized it; that it was made fraudulently, for the purpose of inducing innocent parties to purchase said bonds; that various parties, relying upon said representation, did purchase $1,800,000 of the issue of said bonds; that the said coal company was not in fact the owner of 47,000 acres of land, but of only a little over 734 acres; that because the company owns such a small amount of land, its assets and earnings are insufficient to meet its interest obligations, and said bonds have become worthless, which would not have happened if the representation as to ownership of 47,000 acres had been true; that the plaintiff bought these bonds relying upon said representations of the defendants, and is one of the victims of said defendants' deception, and prays that said coal company and the defendants Gardiner, Read, and Hegeman be decreed to make good their representations and covenant by transferring the title of the property to the original trustee, or, if that cannot be done, to pay over to said trustee a sufficient sum of money as a substitute security.

First. All of the defendants, in support of their various demurrers, urge that said complaint is insufficient, in that the facts alleged do not state a cause of action, because the complainant's charge of fraud as to the mortgage, which mortgage is referred to in the complaint, a copy being attached thereto, is disproved by the mortgage itself. Under the pleadings the demurring defendants do not deny that the said coal company in fact owned the fee to only 734.82 acres of land at the time of the execution of said mortgage; that in all above that amount up to the 47,592.34 acres, as set forth in the complaint, the said coal company owned only some rights for mining coal, but they claim that the language of various clauses in the mortgage does not represent that the said company owned the fee in more land than said 734.82 acres; that said mortgage refers to various deeds that the said coal company had received from divers parties, and that the only representation or covenant as to ownership of the property contained in said mortgage is that the coal company owned the property rights, wherever they were, which were conveyed to it by these various deeds; that the mortgage does not set forth any particular number of acres as constituting the holdings of the company; that in the various clauses in said mortgage describing different tracts of land words like the following are used:

'And the lands and premises and rights and interests thereto lately of the Bolen-Darnall Coal Co. more particularly described in a certain deed thereof from said Bolen-Darnall Coal Co. to said Coal Co., which deed is dated February 11, 1905, and recorded in the office of the Recorder of Randolph County in Book 77 of Deeds, page 165'

-- without any representation as to the number of acres, but it will be observed that in the first description given these words are used:

'And the company for itself, its successors and assigns, covenants and agrees to and with the trustees and their successors, and to and with each and every person or persons, firm or firms, corporation or corporations, who or which shall at any time own or hold any of the bonds secured hereby (the expression 'holder of any of the bonds secured hereby' or any like expression whenever hereinafter used is intended to include each and every such person, firm and corporation) that the company is at the time of the execution of these presents the owner of the property hereby mortgaged-- except such of the same as shall * * * be hereafter acquired by the company * * * and that the company has full power and authority to grant, bargain, sell, convey, assign, transfer the same, except as aforesaid, and that the same are free and unincumbered of any claim whatsoever except as aforesaid, and that the company will warrant and forever defend to the trustees and their successors, and to any owner or holder of any of the bonds secured hereby, whether against the company or against any other corporation or person whatsoever claiming or to claim the same, all of the property hereby mortgaged or intended to be.'

The exception above noted only refers to after-acquired property.

This mortgage asserts that the Randolph-Macon Coal Company was the owner of all the property therein described. An owner is one who has domain of a thing which he has a right to enjoy and to do with as he pleases. Bouvier illustrates as follows:

'Thus the absolute owner of an estate, that is, an owner in fee, may cut the wood, demolish the buildings, build new ones, and dig wherever he may deem proper for minerals, stone, plaster, and similar things, which would be considered waste and would not be allowed in a qualified owner of the estate, as a lessee or a tenant for life. The word 'owner,' when used alone, imports an absolute owner.'

As I read this mortgage, there is a covenant of absolute ownership of all the property described. The words 'rights and interests therein and thereto,' so frequently used in the mortgage, read in connection with this covenant of ownership, strengthen rather than weaken the construction of this mortgage that the coal company was the owner in fee of all the land covered by it; or, in other words, it was intended to mean that the said coal company was the owner of said lands and premises, with all the rights and interests thereto belonging. The first indenture provides that said company shall 'thereafter execute and deliver to the trustees a further and supplemental deed conveying all the lands and premises, rights and interests in and by said indenture of February 1, 1905, mortgaged, or intended so to be, by fuller and more specific description thereof,' and said coal company did execute a supplemental mortgage deed, and in it there are specific references to deeds to the coal company, including references to the number of acres conveyed by the various deeds of the coal company, from which may be computed the number of acres set forth in the bill of complaint.

The covenants of the supplemental deed are as follows:

'It being the intention of this instrument to convey to the trustees all the right, title and interest of the company, of whatever nature such interest may be, in, of and to said lands, and each and every parcel thereof, as well as in, of or to any other real estate now belonging to the company, whether the same be specifically described or not, together with all and every the tenements, hereditaments, fixtures, rights, easements, leases, leaseholds, rights of way, licenses and privileges thereto, belonging or in any wise appertaining, as well as all and every authority to enter upon, use and enjoy any lands to the full extent that the company has hitherto used, owned, employed or enjoyed the same, or which it or its grantors has or have heretofore claimed or which it now claims the right to convey, own, use, employ or enjoy.

'To have and to hold, all of the property and rights and interests therein and thereto hereinbefore described together with all the tenements, hereditaments, and appurtenances thereunto belonging, or in any wise appertaining, to the trustees, their successor or successors, and their assigns forever, upon the same trusts, and for the same purposes, as at large set forth in the said indenture dated February 1, 1905, which the company does hereby in all things confirm; this indenture being executed for the purpose of more definitely and precisely describing the premises by said indenture of February 1, 1905, conveyed, and by this indenture conveyed and confirmed.'

This not only refers to the former mortgage deed, but in all things confirmed the same, and is executed for a more definite and precise description of...