PENNSYLVANtA R. CO'V.
R.
co.
139
jections fall within the adverse rulings in 21 Wall. and 3 Wall., cited abovei) (15) to the depositions of Sarah McClaskey. Sarah King, Mrs. Lobdell, Mrs. Henley, Robert Barr, of.!owa, Samuel Barr,of Pennsylvania, and Mary Brewster, as not competent under the terms of section 5242, Rev. St. Ohio, which does not apply in this cause; the competency of these witnesses being determined by section 858 of the Revised Statutes of the United Statesi and (l6) to two documents offered by counsel for the cross-complainants, Robert Eldridge et al., to-wit, the deed of Robert Bll,rr, of Wood county,and the receipt of Robert Barr, of Westmoreland county, for legaciel'. No rulings of the court were had upon any of these objections, excepting those to the deposition of Maria Bigelow, and to the documents which were produced. from the custody of Thomas Gibson Barr, of Columbus·. The. Jist presented by counsel for the defendants in possession will be rejected, and the court,rejecling aU formal objections, will recognize only the objections to competency specifically made in the brief; it being understood, however, that the objection to the deposition of Maria Bigelow, and to the papers produced by Thomas Gibson Barr, whichwere made at the hearing, will be .recognized. We have mnde such modifications of the draft of the decree presentedbycounsel for thecomplainantl:l as we· deem-necessary, and as so modified it will be entered. All further discussion in this cause will be postponed: until the coming up of thequestionfnvhich have been reserved for further consideration. The circuit judge concurs in this opinion.
PENNSYLVANIA
R. Co.
et
atf'.
ALLEGHENY VAL.
R. Co. et aZ.
(Circuit Court. W. D. Pen7Ul'/lwania. August 81, 1891.)
1.
RAILROAD MORTGAGES-FORECLOSURB-BALE FOB DEBT DUB-PRESERVATION LUNo," UNMATURED PART: . . .
O.
In a proper case, a C)()urt of- equity has '1I0W8/-'1O to mould its decree as to order a sale of mortgaged premises to satisfy tliat part. ofthe mQrtgage debt which l8 due, and the lien upon the mortglloged premises in the hands ot the P\ollchaser as to the unmatured part of the debt. 2. BAME-Bolms--CoLLECTlON OF UOUPllNS--REMEDIE&
matur.ity. the.bond.and each iu.t.er.,st cou.pon,at par, "aud,w.hen sopurcbased, eacb. and all of sllid. bonus and coupons are to be held by the said company. with all th$ rights tbereby given, and with all the benOftt of every security therefor. "Company P., having been obliged to purch:ase coupons, filed a bill before the maturity of .the. :bonds. Held, that the cOntract of purchase is to .be so construed as.to perthe .bondholders their mortgage lieu untU Company P. shall have tulllpelltormed its obligations accordJng to the tenor of its indorsement, and that In the mean' time its remedies upon purchased coUpOns must be kept within sucb limite· uwlll effect that object. S. B:ufll.
etc., eaCh: bond having an indorsement by Company P.,b1nding it to purchase
Company A. negotiated i1lll conpon bonds, secured by a mortgage upon its railroad,
.The eqUities of &11 tbe parties in interest being best subserved bv aule of the railroad,. under and sHbJectto the lien of he. 88i.d m.ortgage!'8 to the pJ;in.cip&1 . .. . · ... oftha bands thereby aeolii-el1, arid the pa¥ableaftoer the making ot tbe·aa1e, i\ was so decreed. .. J . ... . - ... . t.
140 InEquity.
FlllDERAL REPORTER,
vol. 48.
Wayne Ma.c Veagh and James A. Logan, for complainants. John G. JohnSOn, George Shims, Jr;, and D. T. Watson, for income bond holders, complainants in cross-bill. Samuel Dickson, for trustee under mortgage of March 31, 1869. ACHESON, J. At the end of this protracted litigation, the court is called on to decide, notwhether a sale of the lines of railroad , franchises, and property glmerally of the Allegheny Valley Railroad Company should be decreed, but 'upon what terms with respect to the discharge of liens the sale shall he made. The fixed charges are as follows: ,"Fi-tst. 4-n issqe bonds, due March 1, 1896; secured by a mortgage dated Match 1, 1866, on the company's main Itne,' frOID tile icity of Pittsburgh to Oil'City, being the first lien t4eteoit;. . . .., . . ·"SeconrJ,.' .411.}ssl,le of. $10,000,000 ..of. bonds, with illtereB;t Qoupons ble attached, due Apri,l 1910, secured by a mortgage dated March on. the company'sbran6h .line, (the low-gj'ade divi'sipn.) main line to the mouth of Bennett's branch; being the first lien tlieteont: which issue of lbonds' is fUrther secured byamortgage dated September. 4;1874. on the company's main line, being tile second lien thereon I , . . . 4-n issue of bonds to the commonwealth of sY,lvapia, of,whi.qll, according to theal,legations of the biq,abouri $2.600.000 remltinl:ld unpaid, secured by'a mortgage dated April 1. 1869. on said branch line, being the second lien thereon, and further secured by a mortgage dated September 5, 1874, on the company's main line, being the third lien thereon. "Fourth. An issue of $10.000.000 of income bonds, due October I, 1894. secured by a mortgage dated October 1, 1874, which is the fourth lien on the line anp tile third lie!!. on the said ,Qrapch line. 'J'!:)is income boM 'rnortgageof dctober I, 1874, 'is expressly madeundeI' and subject to the lien of the five mortgages prior in date above mentioned. and the terest on the intorne bondsis made payable 'only outof the company's net income, after payment of interest on the bonds secured by prior mortgages."
''rhe'$10,OOO,OOO ot'bonds secured by the mortgage of March 31, 1,86.9, :Whc;lI\. negotiated,etI;chcontainedan indorsement, lawfully made and, duly. eit.ecuted by the Pennsylvania Railroad Company, one of the plaintiffs, as follows: ,"For ,a consideration paid. the Pennsy;lvanili.· Hailroad Company h'erebyoovenailt and agree. to and with the lawful of the within bond. tPl!-t the pennsl.'lvanill RaIlrrad Comp,anyshall and will. UPOl\ the 1st of April. when requested, upon delivery to, theII;l of the within bond. pprchase the same tor cash at par, andshaJl and will, upon the, 1st day of October,ll::l71, and semi-annually therellf!;er,upon surrender and delivery to tJle tn tif'the proper interest, warrants purchase from the lawful holdel! thereof, par, semi-antl.md sum of interest to become due upon the within bond, according to the tenor, and effect of said bond. and the interest warrants thereto attached; and, when so cbased,each and all of said 'bonds ·andcoupons are to beheld by said Comall the .therel:Ji, gi :md'with aU t of every curity therefor. In witness whereof," etc. . .'..
PENNSYLvANiAn; co. ". ALtEGl!ENYVAL. R. co.
141
. And by Ii speciai indorsement on each ioouponthe 'Pennsylvania Railroad Company bound itselfto purchase the same at par at maturity from the holder. . Before the filing of the bill in this case, as therein averred, the Pennsylvania Railroad Company, under its above recited contract, and by reason of the insolvency and default of the Allegheny Valley Railroad Company, had belmobliged to purchase coupons of the bond issue of 1869, to the amount of $4,175,000j lind it would seem that the total of of these coupons up to March 20, 1891iamounts to $6,336,. 245, exclusive of interest theteon. The plaintiffs, as guarantors, having lifted $400,000 of overdue bonds of the Allegheny Valley Railroad Coml'anyto the commonwealth, secured by the mortgages of April 1, 1869, September 5,1874, the now outstanding bonds yet held by the cttmmonwealth, and not due, amount to .These bonds are payable in yearly iristallmentsof $100,000; the next installment on January 1,1892, andtbe last on January 1, 1910. The commonwealth is not a party to this sUit,a:nd never voluntarily appeared in any of the pr6ceedings herein.. The proofs show that the seNes, hOld . and OWIl i$6,087 ,000 of the income bonds aforesaid of the Allegheny Valley Railroad Company.· The bill prays for a sale ofthe (X)rpomte property, franchises, etc., of 'the AlleghenY' Valley Railtoad Bdn1pany, under an'll subject to the lien of the'above-mentioned five 1l10i·tgagesJ ' prior in date to the income bond mortgage of October 1, 1874, "as to the prineipal of the bonds therebysooured, and not there· tOfore matured, and the therea:'fter payable 'after the making of -B,aid' the saletd pass to the purchasers the s!J.me title, excepting 'as to the liens so to be preserved, as ,vellt by a judi,cial sale upon .'a j1!dgment recovered ,on the COll POilS a?d held b:y: the Pennsylvania Rallfoad Company, or upon a decree m a smt procEit!dmg upon Hie mort.gage upon which there was default, and that out of the proceeds <if salethEl Pennsylvania Railroad Company be paid the defaulted coupons, and the ,commollwealth be paid the defaulted installJilentsdue to her, and the distributed l1inong the creditors entitled. . The trustees under the mortgages of March 31,'1869, and September 4, 1874, securing the $10,000,000 bond issue of 186'9, submitted· them-selves to the court, but in their answer prayed" that, in the event Of a sale being decreed, as prayed for in the said bill; such decree maybe formulated and enforced as will leave unaffected the lien of the several mortgages of which they are trustees, except so far as the interest thereon may be payable out of the proceeds df said sale. " The Allegheny Valley Railroad Company, in it.q answer, admitting the truth of the allegations -of the bill, submitted itself to the judgment of the dourt, and has interposed no objection to a decree of sale in conformity with the prayer of the bill. The only opposition to theaale uporithe, terms contemplated by and . prayed for in· the bill comes from· certain of the income bond holders(ti minority who intervened in' the suit, and are 'plaintiffs' in ·the cross-bill, which .contested validity of'th'e claim of the' Pennsylvania' Railroad ·.COmpany,:and went to dafeat a sale :tltogether.
,l.o,ngej.;Al;l;ny" butconceQe; the. .of ,.' the ,M the of. overd:ue. coupons o.f the bond issue of 1869, to a decree ofsalej they now onliinsis}ing that be decreed. sqalt be mad" Up9.n; t.erms. discharging. the lien of all mortgages exceptJhe morctgageJor $4,000,000, the first lien on the'lUa±n line. Under, 1iJ:te, .and proofs, then, what ought the terms of sale to be? ".l (,lar,mot: doubt that,iu. a proper a court of eqlll;ity the power S0 as to order a sale of mortgaged ofth.e mortgage debt which is due, and preserve the lien upon the qwrtgage<l prell;lises in the hands of the purchaser as to the unmatured part, pfthe debt. 2 Jones, Mortg. § 1459; Fleming Wli.11.747.;.,;Thispower has beel,ljudicially recognized and · . Paige, 248; Weiner v. lieintz, 17 Ill. 259; Bu/rrou,gq,a v. Ellis,76 Iowa,649, 38 N. W. Rep. 141j) and C9,\l,ponll, being the ;equivale;nt of bonds f01' separate instalJll1ents of tIle debt, (Olarkv. I01JJa City, 20 Wall. 583,) clearl.},,;corne within theptinciple ,of thelle decisions. . . power of tIle. (,lQqrt to de.creea sale for present realization of the part of a mortgage debt, while' preserving the .of the part nqt Qlle,Js Qot Dlllqhcontrovertedllos is the propriety ofthe exercise this and it may the that such a decree qot to be made .exceptC()r special wllere the equities upon which it is based are J;low, then, stands this. pase? In its circumpl;:culiar. In the tirst place,thebill iRcitrefully framed with a view of preserving the lien of the,qlortgages of March 81, .·, 1874, respects the principal of the bonds thereby It.nd:to acerqe after .the !!lale. and the lien of to as to theit;lstallmentswhich may not at. the time ()f the and the praj·erof the bill il:\ effeot. :'J,'.he.crQss-bill. no for a sale, and reatuppn:jthe forth inthe original bill. Upon the pleadings, thl'ln, it :is yery difficult tO$l'le ,how the court can righHully decree a sale up9n essel.ltially different from those specifie.d . bill.. 2 Jones, Mortg. § 1578. True, under thf/ general fur relief, the courtsometimes may grant .:relief [qr. \>;ut it must be is agreeable to the by the the take the defend;ant by surpr:isl'l' · 1 Cli.,Pr. 386. 'fhat:YE!ry thing would happen !lllou'd' the.<:outt 80 widely rt frvm, the. specific prayer of the bill as ask; for the, trustl;les under the m9r.\gap;es: 31, September 4, ;1&74" ,were not called pnby the bill :to, resist divest!t!;l;e.lien of .the mortthe hael a proper OI>:pcmunity of against a decrl:e:I*Eroped with Sll<;h aresl.}.lt.. ,.. lP next ,DJ/lce" the Ivania has im in might be .seriously affected by such 0. u.s not a party t() be conI
or
PENNSYLVANIA R. CO.
v.
ALLEGHENY VAL. R. CO.
143
c$ded,:upOn theauthorityof:.(}h,ri8tian RailrCladCo.,; 133 U. S. 233, lO Sup. Rep. 260, that this wonld'not'; hinder: 'the sale, still, the qualification with'which'the911preme Coo1't'therespoke is to be heeded: "IT). such a' <lase, the :furtlefosure 'nnd sale of the property will not be pre¥"ented by the interest which the,state has in it, but its right of r&lemption willremairithe'sameas before." Pages,243, 244,133 U · .s., and page 263, 10 Sup. Ct. Rep. Thus, to say the least ont; an element of; uncertainty would':attend such a sale. Againj the ; Mare.b 31" 1869, is the first lien upon the low-grade division,> (the Qett'fl<biranch line,) standing ta it, in that regard, on the same footing,as doos,the mortgage for"M,OOO,OOO with 'respect to the maiilline;,the lien "of which latter' m<7rtgage: agree should be preserved'. . Further.. morei is too plain fot argl1ll)6l'lt that, 'without. the consent of the :bdnd.. holders, the court cannot' 'decree thattliebonds of the issue of March 31, 1869, shall becomEf' presently payable;ll.nd j therefore,1 in the of a' sale d.iscbarging tFui .mortgage lieu,'it would'beincnmbent upon'the oourt to impound :prdtectiOD of the bondholders; arid!eitber reinvest! th-e i ftind, or .otherwise 'secure 'it I lOr tlleir ultima.te benefit.' But, mllnifeistly, 'tbatwould .be'avf!Jt.y undesirable 'result, even were tteleat that the.Pen'iJsylvl1nill.·RaUroad CQmpany has the right toli such .!' , . ,':Butwhen we turn to !the borlsit;leration oUae eqllities of the respective parties:, aQd reflectthatrthe bonds ofthe':issueof March 31, 18&9, bear rate of 7 'perceI!:lt. per annum; and seCuri.. interest ties,',M,-ibg nearly' 19 years to run, and hence possessing, undoubtedl1 j a ma.'iokirt, value much beyond their faoe value, 'we' coine to realize' the and 'certain injury to which the holders would besubjectedbfa 'decreirdesttoying their mortgage lien. Surely a CQurtof equity: ;sb()uld long 'heSitate before inflicting this loss,and· ought.only to yield· to some impeljitive rule of law, or for the ofrightscloorly superior.· No such controllinj::t legal principle is perceived. Are there any predominant equities' on the side of the iricome: borid h'Olders? .To this .question: I am to return a negative' 'No evidence whatever has been submitted t6 the court to show that by aeale discharging ,'the;prior mortgages, as proposed, more ,could be !realized (or the income l)ond holders,than by a sale preserving lienSi Nor is that result'inherently probable in the nature of the case. Indeed,th& ]roosonable presumption is" 1 think, quite the other way, as thesalenpon the lattertertnswould be relieved from the' neaeS$ityol immediately raising very large sums of money, and would have the. benefit Of long 'credits: At any rate, no one canconfi:. deritly say that t.he terrnsofsale speciiied' in the ,bill will provedetn:. rn(jlitaltotha innome bond holdera, ol"'that any substantial advantage would aoortll3'to them by sublltitllting the proposed terms. In this connEletion,; it must be ternembered that the creditors objecting to tlreJsale aSprsyed:fodn the bill co,nstituteaminority oftheiriClass, andthat.the hold 'more· than ·thr*fifths of the issue of. income bonds. Moreover, a foreclosure and sale under the income ,bond :mortd
144
,I" ..
nJDERAL Rli:PQRrrER,
gage itSelf(and it has but three yelirsto run) would necessarily be subject,wthe lien of the prior mortgages not due. JerO'lT/,6 v. McCarter, 94 U. 8.736j 2 Jones, Mortg. '§ 1609.80 that, in this regard, a decree in accordance with the prayer of the <present bill ,will only anticipate by a brief period the unavoidable result awaiting the income bondholders. To the argument based up()n the provision of the mortgage of 1869, which gives, fin distribution, to the .overdue coupons priority over the prindpal of, the :bonds, 'the answer, is stipulation re. lates toa sale by;the trustees underdthe special pdwer conferred by the mortgagej and, 8econdly, of the proceeds ofaale thereby pt0vided .for is simply:tqe appropriation which the law itself makes whetethe fund.is deficient, namely! to the discharge ofaccrued interest first, iaOOt then the balance tOth8 principal of the debt. I fail to see how:this, particular clause.of the, mortgage operates as any obstacle or valid grbund of objectiQJ1I..to the deoree th.e plaintiffs seek. Bllt,i tinally, the caseiU ,tQ!be :cotlsidere<l with l'eference to the con.. tl'aewaJilralations between the Pennsylvania Railroad Company and the holders oftb:e bonds oethe issue of March 31, 1869. In: view of its in. dorsenientlupon those bomds,:can ,the company rightly broader re· lief toaD. what.is :for? A sale in.. the manner, and subject to the conditions, mentioned in the bill, while entirely just to that claSs ()f bondholders, would. yet afford the Pennsylvania RailToad 0()lnpany the .equitable 'relief 'to which it is now fairly entitled. Ought tbe'company ,to demand more? It is a familiar doctl'ine that in enforcing, :the of su;brogation there ClIn be no interference with the creditor's securities until he is fully satisfied. Kyne:r:v. Kyner, 6 Watts, 221j iBan1c,v.,Poti:U8, 1O.Watts, 148,. Now, it is true that the Pennsyl:vania Raikoad. Com pany is not. here technically a surety, simply with the implied rightofsuhrogation, but its contract ;of pUrchase, indorsed on the bonds when put upon the market, and .upon the faith of which they were negotiated, ought to ,receive such an e<:luitable construction as wilL conserve' the interestQlthe Looking at the purpose the parties to the transll,ction :then had in view, can it be for an instant; supposed that they intended that, whenever the Pennsylvani8,. Raiboad Oorilpany was obliged to take up of coupons, it might proceed by astrict foreclosure to sweep away from..,the bondholders their mortgage security? The terms of: the, indorsement do not require that a construction so unreasonable shall be given to it: The parties themselves, it would: seem,'harle not so understood their contract. Why, ian interpretation of thecoutract, upon which the. parties ,{thereto do not insist,:pl'evail? It llather seems to me that the· contract is t<>· be construed so as to preserve to the ibondholders. their mortgageJUln'untilthe 'Pennsylvania Railroad Company shall have fully perform.ed its obligations 'Qeqrdingoothe tenor, ofjts'indorsement, Jl,nd ,{haHn, tbemean time its,remedie2upon purchaaed ,coupons must be ·kepLwithiQ: such a limit, as, willeffeet that object. · Surely, however, the company,isnQt bound to pursue a lcourseneedlesgly prejudicial to those bondholders. 1\ . , "
MASSACHUSETTS &. SOUTlJ. CONST.CO. V. TOWNSHIP OF GILL'S CREEK.
145
, Upon the whole case, I am of opinion that the original bill was framedllPop the true theory of the equitable rights of all the parties in ,that the sale o( the property of the Allegheny Valley RailroadCompany, which ,all now agree must be decreed, should be upon the Wl1J:lS specificallYPfayed for in the bill. ,:1
:ft14.sSACHUSETTS
&
SOUTHERN CONST. Co. 11, TOWNSHIP OF GILL'S CREEK et al.
.
";
,,
I'lI.re (C1:I'euit Cotirt,D. South
HART·
November 11,1891.) ,', "
fruits o,fits for services rendered in the ,state courts :in 'concerning tbe same lIlIDject:-inatter. ,,' , AND ErllBNT'-SERnous RENDERED IN OTII:n BUITS. , !
'. t8lted\, ,and tbetefore a flldeJ:al (lOullt'sitting in that state cann(lt declare s lien:,On
IIi South Carolina an attorney's lien is limited to b18 disbursements andtbe costa
RENDBREDIN !?TATE c'<?UR!S.
AAtorney'elien ,the 1fUit,e of seuit is limited to: render.ed therein; and,li.ltbouj;tb a number of separate suits involve the lIame questions, and 'are .rgued and detal'mined together, the fruits of one are not subject to a lien for , in t.be others. B. , ' ·. Noi"wUrtlielien extend' prospective servicesln the hearing of an appeal. " Wl;1en,sever8.l rellllered sen-lees for, th,e ,complainant in a suit, tbey are eQllally entitled tb a tien for compensation on the"fruits of the judgment, j and,i:fone of, them bas obtained an, assignment of lIuoh, fRits, biB possession candistur;bed ill favor of another. .,0J.' SEVBRALiATT0RN8YB.
"
Construction Company against the township of Gill's Greek, S. C., and the Boston Safe-Deposit & Trust Company; assert a lien for aervice!l the complainant as an att!>mey in t1).at and ot,her cases. DUmiissed. 0: 'E. Spencf(l', for petitioper. Sq:m:uel Lord., opposed. '
Exparl.e Plltition of JamesF. Hart, in the case of the Massachus,etts
'.,,'
,
'
to
J. A railroad company had been incorporated underthe name of the ,Charleston" Cincinnati & Chicago Railroad Company, for the of building a from Charleston, S. C., towards Chi,. cagO,. The. ¥assllc1).usetts & Southern Construction Oompanycontracted to the railroad, j!nd a part ofthe consideration of th,is conti'act.wal;l to of township bonds ,in subscription to the railroad' company under ,the authority of the .general assembly of South' Carol,inll. By the construction compa,ny apd of the several townshIps, these bonds, were placedpndeposit with th'e:,Boston Safe-Deposit &1,'nil;ltCompany, v.48F.no.2-10 ',