Wallace v. Loomis
| Decision Date | 01 October 1877 |
| Citation | 24 L.Ed. 895,97 U.S. 146 |
| Parties | WALLACE v. LOOMIS |
| Court | U.S. Supreme Court |
APPEAL from the Circuit Court of the United States for the Southern District of Alabama.
The facts are stated in the opinion of the court.
Mr. John T. Morgan for the appellant.
Mr. Philip Phillips and Mr. William A. Maury, contra.
This suit was instituted, by a bill in equity filed May 30, 1872, by Francis B. Loomis, John C. Stanton, and Daniel N. Stanton, trustees of what is known as the first mortgage of the Alabama and Chattanooga Railroad Company, for the purpose of procuring a foreclosure and sale of the mortgaged premises, being the railroad of said company, with its appurtenances and rolling-stock, situated in Tennessee, Georgia, Alabama, and Mississippi, but principally in Alabama. A further object of the bill was to remove the cloud from the title caused by the bankruptcy of said company, the seizure of its property by the governor of Alabama, and the sale thereof by the assignees in bankruptcy; also, to protect and preserve the property from waste and dilapidation until it could be applied to the satisfaction of the mortgage.
The bill stated that the mortgage in question was executed and delivered to the trustees, Dec. 19, 1868, and a copy of the same was annexed to the bill as an exhibit. It was further stated that, under the mortgage, the company issued a large number of bonds, each for $1,000, with interest at the rate of eight per cent per annum, payable in gold coin, semi-annually on the 1st of January and July in each year; it being provided in each bond that the amount should not exceed $16,000 per mile. A copy of one of these bonds, and of the indorsements thereon, was also annexed to the bill as an exhibit. The bill stated that the bonds were indorsed by the governor of the State of Alabama with the guaranty of the State; and the same fact is recited in the mortgage, referring to certain acts of the legislature of Alabama, passed in 1867 and 1868, which authorized the governor of the State to indorse and guarantee such bonds to the extent of $16,000 per mile of the road, upon certain conditions being performed by the company. The bond appended to the bill is in the usual form of such instruments, the principal and interest being payable in lawful money of the United States. The coupons are also in the usual form. The first indorsement on the bond is by the governor of Alabama, and recites the acts by virtue of which the indorsement was made, and declares that the State is liable for the payment of the principal and interest of the bond. A further indorsement is also made by the company, agreeing to pay the principal and interest in coined money of the United States; but no such agreement is referred to in the mortgage nor on the face of the bond.
The bill stated that the number of bonds issued and indorsed was five thousand two hundred, amounting to $5,200,000; and that they were all issued and disposed of to various persons, who claimed, by virtue thereof, a first lien on the road and property mortgaged. It then stated that the railroad company failed to pay the instalments of interest which became due on the 1st of January and July, 1871, and the 1st of January, 1872; and that, though the governor of the State had paid a large portion thereof, yet he refused to pay in any thing but currency (which was received by the bondholders under protest); and he also refused to pay the interest on a large number of the bonds, because the holders thereof did not present to him proof that they were bona fide purchasers of the bonds held by them, though in fact they were such purchasers.
The original bill further stated that the governor of Alabama claimed the right, by virtue of the payments made by him, and the delinquency of the company, to seize the road and its appurtenances, and did seize the same, and placed the same in the possession of a receiver by him appointed, who attempted to operate the road in the States of Alabama and Mississippi, but by his neglect and mismanagement the property had become greatly injured and deteriorated.
The bill further stated that the governor of Alabama had also filed bills for the foreclosure and sale of the road and its equipments in the States of Alabama, Mississippi, Georgia, and Tennessee (in all of which States portions of the road were situated), and had procured the appointment of receivers in said States, who took possession of the said several portions of the road; and that the governor had also procured the company to be declared bankrupt in the District Court of the United States for the Middle District of Alabama, which court had appointed assignees in bankruptcy of said company; and that the said assignees had made a pretended sale of the property, at which sale the governor had purchased the same under the pretence of purchasing it for the State of Alabama. The bill charged that this was a mere pretence, and that the purchase was really made for the benefit of other parties. The bill also stated that the company was sued by many persons, and that, by reason of the multiplicity of suits, the property of the company would be greatly deteriorated and wasted, and the possession thereof by those entitled thereto would be greatly interfered with.
The bill further stated, that, by reason of the various conflicting claims set up to said railway and other property by the various receivers and assignees, each denying to the other authority to run, operate, or control the same, the said property was permitted to go to destruction, and was being injured to the amount of $1,000 a day; and that the damage and injury already done to said property by said mismanagement exceeded $1,500,000; that the interest of the bondholders was being greatly impaired, and that the property had ceased to be sufficient security for their payment. Various other statements were made with regard to the rapid deterioration of the property, the clouds cast upon the title thereto by the various legal proceedings, &c., and prayed for the appointment of receivers with power to raise money to make necessary repairs, and to manage the property until it should be sold by order of the court.
The defendants to the original bill were the Alabama and Chattanooga Railroad Company, the trustees of the second mortgage, the receivers appointed by the State courts at the instance of the governor of Alabama, the assignees in bankruptcy, Governor Lindsay in his individual capacity, the receiver appointed by him, and one Caldwell, an officer who had advertised much of the loose property for sale.
The bill was first presented to the justice of the fifth circuit, at Galveston, in May, 1872; and an order was granted to show cause at the next Circuit Court, to be held at Mobile in June, why an injunction should not be granted and a receiver appointed. No hearing was had, however, at that term. Separate answers were filed by R. B. Lindsay, governor of Alabama, in his individual capacity, by Charles Walsh, the receiver appointed at the governor's instance by the State courts of Alabama and Mississippi, and by William T. Wofford, the receiver appointed at the same instance by the State court of Georgia. The governor vindicated the course he had taken, and repelled the charges of collusion made against him in the bill. Walsh did little more than disclaim any interest in the controversy; and Wofford detailed the circumstances of his appointment as receiver, and the manner in which he had endeavored to discharge his duties as such. Numerous affidavits were taken, and documents exhibited on the condition of the road, and on the various points that were made by the parties. Finally, by general agreement, application was again made to the justice of the circuit in August, 1872, for an injunction and the appointment of a receiver, and a large mass of affidavits and documents was produced, showing the necessity of immediate interposition of the court to save the property from absolute destruction. No opposition was now made to the appointment of receivers as asked by the bill, but the appointment was consented to by the governor of Alabama, and acquiesced in by all the parties. The complainants, by an amendment to their bill, withdrew all charges of improper conduct on the part of the governor and his agents. Arrangements had been made with him, by which all objections arising from the claims of the State to the possession of the road, to the proceedings in bankruptcy, and to the appointment of receivers by the State courts, were obviated,—it being agreed that the proceedings by which the latter had been appointed should be discontinued. Under these circumstances, an order for an injunction and the appointment of receivers was made on the twenty-sixth day of August, 1872. This order, amongst other things, recited as follows:——
'It appears, by the affidavits and proofs duly submitted and filed in this cause, that the property in question, to wit, the railroad and connecting works, and other property late of the Alabama and Chattanooga Railroad Company, which are embraced in and covered by the mortgage known as the first mortgage of said company, are rapidly deteriorating in value, and being wasted, scattered, and destroyed, whereby the security of the first-mortgage bondholders, and the interest of all other persons concerned in said property, are subject...
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