Stearns Lighting & Power Co. v. Central Trust Co.

• Citation: 223 F. 962
• Decision Date: 08 June 1915
• Docket Number: 2618.
• Parties: STEARNS LIGHTING & POWER CO. et al. v. CENTRAL TRUST CO. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

223 F. 962

STEARNS LIGHTING & POWER CO. et al. v. CENTRAL TRUST CO. et al.

No. 2618.

United States Court of Appeals, Sixth Circuit.

June 8, 1915

On Petition for Rehearing, June 30, 1915.

The appellants were two of the defendants below; the appellees were complainants. We adopt the statement of facts made by the District Judge, as follows:

'Except as hereinafter noted, the material and essential facts of this case have been stipulated and those which are necessary to the determination of the legal questions involved may be stated as follows: Each of the defendants Interurban Electric Light & Power Company (hereinafter called the Interurban Company) and Stearns Lighting & Power Company (hereinafter called the Stearns Company) was incorporated under the laws of the state of Michigan to carry on the business of conveying electricity for supplying electric light and power. On the 1st day of June, 1909, the Interurban Company, for the purpose, among other things, of raising money to carry on, extend, improve, and develop its business, and for the purchase of the property involved in this controversy, authorized the issue of 'first mortgage 6 per cent. gold bonds' aggregating $25,000 and bearing interest at the rate of 6 per cent. per annum, payable semiannually. On the same day, and in order to secure the payment of the bonds, the Interurban Company executed and delivered to complainants, as trustees, a mortgage or deed of trust covering all property of every kind and nature which it then owned, including its real estate, leasehold interests, power plants, buildings, machinery, right of way, easements, franchises, contracts for supplying electricity, revenues, accounts, demands, etc., and also 'all of the property, real, personal, and mixed, of all kinds whatsoever, * * * which the company may hereafter acquire, or to which it may hereafter become entitled, and which may be appurtenant to the business now or hereafter conducted by the said company.' On June 2, 1909, this mortgage was filed for record and recorded in the office of the register of deeds of Mason county, and on January 20, 1910, in the office of the register of deeds of Oceana county. No other or separate copy of the mortgage was filed in either of these offices and no affidavit showing the good faith of the parties and the adequacy of the consideration was attached to the mortgage so filed for record.

'After the making of the mortgage and before December 1, 1909, the bonds secured by it were issued by the Interurban Company. These bonds were dated June 1, 1909, and were numbered consecutively from 1 to 50, both inclusive, and were duly certified by the Western Trust & Savings Bank as trustee. Each of the bonds was payable to bearer and was in the sum of $500. Five bonds matured on June 1st of each year, beginning June 1, 1910. Interest coupons were attached. After the making of the mortgage, the Interurban Company, largely from the proceeds of the sale of the bonds, purchased and erected a line of poles and towers, upon which were strung and attached lines of copper wires, together with the cross-arms and insulators suitable for a complete electrical transmission line, extending from the power station of the company at Hamlin Dam over and along a right of way procured by the company in and along the public highways to and through the city of Ludington, in Mason county; thence southerly in Oceana county to and through the village of Pentwater; and thence south to within about three miles of the village of Hart. Poles were set nearly to the village of Hart. On December 31, 1909, Harry V. Huston was, by the order of the Circuit Court of Mason county, in chancery, appointed receiver of the Interurban Company and qualified and took possession of its assets. On August 25, 1910, pursuant to the order of the court, the receiver sold all the right, title, and interest of the receiver in the assets and property of said company to one W. F. Mayhon for $3,500. By order of the court, the property was sold subject to the lien of complainants' mortgage, and also subject to the lien of receiver's certificates which had been issued to the amount of $5,500. On January 3, 1911, the receiver executed a deed to Mayhon. In this deed the property was described as in complainants' mortgage, and was conveyed subject to the lien of complainants' mortgage and the receiver's certificates.

'On May 12, 1911, W. F. Mayhon entered into a contract to sell and convey to the defendant Stearns Company the property in controversy in this suit. The description of the property to be so sold and conveyed, the consideration to be paid therefor, and the covenants of the parties were set forth in the contract as follows: 'Now, therefore, in consideration of the sum of one dollar to him in hand paid by the Stearns Lighting & Power Company, the receipt whereof is hereby confessed and acknowledged, and of other available considerations, the said party of the first part, W. F. Mayhon, hereby agrees to sell to the said party of the second part, the Stearns Lighting & Power Company, the entire lighting and power plant at Pentwater, Mich., including all real estate, franchises, and contracts, the line of poles, towers, wires, cross-arms, and insulators extending from the Hamlin Dam, through Ludington and Pentwater, to the village of Hart, Mich., all rights of way and franchises granted by all cities, villages, and townships or municipalities through which the said line extends or is proposed to extend, granted to said W. F. Mayhon or to the Interurban Electric Light & Power Company, all tools of every description, wherever located, forming any part of the assets of the Interurban Electric Light & Power Company, including three step-up transformers located at Hamlin, and thirteen bundles of wire, twenty barrels of insulators, and all cross-arms estimated to be sufficient to complete the line to the village of Hart, and specifically including all of the property of the Interurban Electric Light & Power Company, except the water wheels, generators, and switchboard at the power house at Hamlin Dam, the buildings at Hamlin Dam, the rights in said dam, and five acres of land adjacent thereto, for the consideration and price following, that is to say: first mortgage 6 per cent. bonds, dated and maturing as follows: Ten thousand dollars of said bonds to be dated July 1, 1911, and to mature July 1, 1916; six thousand dollars of said bonds to be dated July 1, 1911, and to mature July 1, 1917; interest on said bonds to be payable according to the coupons attached thereto. It is understood and agreed that the above bonds are not to be delivered to said Mayhon until the date specified for their issue. It is further specifically agreed and provided that upon the delivery to the said W. F. Mayhon of the bonds as above specified at the First National Bank in Ludington, Mich., said Mayhon will execute and deliver to said Stearns Lighting & Power Company at said bank good and sufficient conveyances of both the real estate and personal property, and due assignments of all contracts, franchises, etc., free of and from all liens and incumbrances; and said W. F. Mayhon hereby, in consideration of the purchase price aforesaid, agrees to warrant and defend the title to the property above contracted to be conveyed against all liens and incumbrances, and agrees to defray the expenses of all litigation arising concerning any contest of the title to said property.'

'On June 27, 1911, to secure the issue of $100,000 of 'first mortgage 6 per cent. refunding gold bonds,' the Stearns Company executed and delivered to the First National Bank of Ludington, Mich., as trustee, a deed of trust covering all of its property, including 'the transmission line of the Interurban Electric Lighting & Power Company, extending from Hamlin Dam, in Mason county, Mich., to Pentwater, and thence toward Hart, Oceana county, Mich.' A corrected draft or redraft of this deed of trust was executed by the Stearns Company to the First National Bank of Ludington, Mich., dated July 1, 1911, and was filed in the office of the city clerk of Ludington on August 29, 1911, and was recorded in the office of the register of deeds of Mason county on October 18, 1911. Thereafter the First National Bank of Ludington resigned as trustee, and upon the nomination of certain holders of the bonds secured by the trust deed the defendant William L. Hammond was appointed successor trustee.

'After the execution of the contract of sale dated May 12, 1911, the Stearns Company entered upon the rights of way and premises where the electrical transmission line of the Interurban Company was located and tore down and removed and dismantled certain portions thereof. The line running south from Ludington was...