Vila v. Grand Island Electric Light, Ice & Cold Storage Company

• Citation: 97 N.W. 613,68 Neb. 233
• Parties: WALTER K. F. VILA ET AL., APPELLEES, v. GRAND ISLAND ELECTRIC LIGHT, ICE & COLD STORAGE COMPANY, IMPLEADED WITH REXFORD E. HULETT ET AL., INTERVENERS, APPELLANTS
• Decision Date: 02 December 1903
• Court: Supreme Court of Nebraska

97 N.W. 613

68 Neb. 233

WALTER K. F. VILA ET AL., APPELLEES, v. GRAND ISLAND ELECTRIC LIGHT, ICE & COLD STORAGE COMPANY, IMPLEADED WITH REXFORD E. HULETT ET AL., INTERVENERS, APPELLANTS

Supreme Court of Nebraska

December 2, 1903

OPINION

HOLCOMB, J.

A rehearing having been granted, this cause has been submitted on oral arguments and printed briefs for further consideration. The opinion heretofore formulated, prepared by one of the commissioners, is found under the title Vila v. Grand Island Electric Light, Ice & Cold Storage Co. and others, as interveners, ante, p. 222. The case is there quite fully stated and a repetition will here be avoided as far as is consistent with a proper discussion of the subject in the present opinion. Gauged by the pleadings, and the proceedings had and done thereunder the suit appears to have been instituted by a mortgagee of the plant and property of the defendant corporation for the purpose of having its property sequestrated, and, through the aid of a receiver, its affairs wound up by a sale of the property and a division of the assets among those entitled thereto. The suit in its practical workings has many of the earmarks of a proceeding had under our statute for the appointment of a receiver and the winding up of the business of an insolvent banking corporation incorporated under the laws of this state. The plaintiffs, as trustee and cestui que trust, were the owners and holders of certain bonds executed and delivered by the defendant company, and secured by a mortgage on its plant, consisting of both real and personal property. The defendant company at the time of the institution of the suit filed its answer, admitting the truth of the allegations of the petition and consenting to the appointment of a receiver as therein prayed for. The essential averments of the petition which it seems advisable here to state for the purpose of the further discussion of the case are in substance as follows: That it was agreed by the defendant when the loan was made, evidenced by the bonds executed at the time and described in the petition, that the proceeds should be used to pay off a prior mortgage, and the balance for the completion of the plant that prior to the inception of the litigation, the plaintiff learned for the first time that a large proportion of the proceeds of the loan so made had been misappropriated and used for other purposes, and that the plant remained in an unfinished and incomplete condition; that the defendant was at the time, and would be, wholly unable to pay the interest or any part thereof thereafter and within a short time to become due on the mortgaged indebtedness, and was wholly without ability to pay any part of its floating indebtedness amounting to a large sum, and that its creditors were threatening to attach the mortgaged property; that the defendant was entirely without credit, unable to purchase supplies needed in its business, was without money, and that its business was likely to be stopped either by attachment suits or because of its inability to procure the necessary materials and appliances; and that should the business be discontinued, the value of the property would be greatly diminished, the public put to great inconvenience and great financial loss ensue. The mortgage, it was averred, contained the following provisions: That the defendant agreed to keep all the buildings, machinery, engines, etc., in good repair and condition, and that such agreement had not been kept; that the mortgage also provided that in case of default in the payment of the bonds or interest, or failure to comply with any of its terms, the trustee should thereupon become entitled to the appointment of a receiver to take possession of the property, manage and operate the business, collect the income and profits, apply the same on the expenses and charges for maintaining the plant and business, and paying the obligations secured by such mortgage. Wherefore it is prayed that a receiver be appointed and given authority to do each and all of the things mentioned in the mortgage, to wit, to take possession of the property covered by the mortgage and manage and operate the business, collect its income and profits, and apply the same upon expenses and charges for maintaining and operating the business, and in paying the obligations secured by plaintiff's mortgage, and for such other and further relief as to the court may seem meet and proper. Upon the filing of the petition and the answer of the defendant company, a receiver was appointed, who qualified, took possession of the property of the defendant corporation and managed its business until it was sold at receiver's sale under order of court, which sale was afterward confirmed, and from which orders and decrees an appeal is prosecuted by the interveners, one a stockholder of the corporation, and the others general creditors who had reduced their demands to judgment before intervening in the action. To the report of the receiver advising a sale of the property and the order of the court directing the sale and the confirmation thereof when made, the interveners objected, protested, and excepted, but without avail.

Counsel for appellee devote a portion of their argument to the question of whether these intervening parties can be heard to complain on appeal after going into court and asking to have their judgments satisfied out of the corporate property, and after, as is claimed, the stockholder had assisted in and consented to the appointment of a receiver. This phase of the case may, we think, be properly disposed of by the suggestion that in our judgment the pivotal point of the whole controversy and the chief inquiry to be made are with relation to the sufficiency of the petition filed in the case, and whether or not it states a cause of action or discloses equitable grounds for the granting of the relief prayed for or granted to the plaintiffs.

It has frequently been held that the question of the sufficiency of a petition, and whether it states a cause of action, may be raised at any step of the proceedings, even in the supreme court on an appeal, and is open for consideration in the appellate court at any time until and including the filing of a motion for a rehearing. Kemper v. Renshaw, 58 Neb. 513; State v. Moores, 58 Neb. 285, 78 N.W. 529. If the petition filed in this case does not state a cause of action, if it is defective in substance, if its allegations do not warrant the granting of any equitable relief, then such defect is open for consideration, and the participation of the interveners and appellants in the proceedings had in the court below can in no wise preclude them from urging the insufficiency of the petition to support the orders, decrees and judgment of the court entertaining jurisdiction and trying the cause below. While the prayer to the petition contains a request for general equitable relief, it must, we think, be admitted that it can not be extended so as to warrant the granting of relief not embraced within or comprehended by the allegations of the pleading. To be sure, the prayer for relief is a part of the petition, but it is no portion of the statement of facts required to constitute a cause of action. Consequently, while it may be broader than the allegations of the petition, the cause of action pleaded can not be enlarged or made the basis for the granting of relief other than that warranted by the allegations of facts. Fox v. Graves, 46 Neb. 812, 816, 65 N.W. 887, and authorities cited therein.

An examination of the petition in the case at bar renders it obvious that no cause of action is stated therein disclosing a right to the recovery of a money judgment for the amount called for by the bonds, or any portion thereof, or for a foreclosure of the mortgage in satisfaction of any sum which might be found to be due; in other words, none of the debt secured by the mortgage had at the time matured, and there was no breach nor default in the conditions of the mortgage disclosed by the pleadings warranting a foreclosure of the title to and equity of redemption of the property mortgaged owned and held by the defendant company. This, manifestly, is the view taken by the parties to the suit and the trial court, since no attempt was made to enforce the obligation secured by the mortgage, or for the sale of the property of the defendant company and the application of its proceeds in...