Haven v. Grand Junction Railroad & Depot Co.

A MRS, J.* The mortgage given by the Grand Junction Railroad and Depot Company to the plaintiffs, to secure the payment of three hundred and fifty bonds of that company, of one thousand dollars each, with coupons for the payment of interest semiannually, has been regularly foreclosed; and the mortgaged property, under a decree of this court, has been sold and converted into money. The proceeds of the sale were sufficient to pay the entire debt due at the time of the entry for breach of condition, together with all the coupons -that have become payable since that time, and to leave a considerable surplus in the hands of the plaintiffs, who were the trustees and mortgagees. The claim of David Kimball, to charge the funds in their hands with the payment of certain of the coupons of which he is the holder, has been disallowed by the master, and the case comes before us upon Kimball’s exceptions to that portion of the master’s report. We have no doubt that coupons, such as are described in the report, when detached from the bonds to which they originally belonged, are negotiable by mere delivery, and may be enforced against the corporation by a bond fide holder, who has no interest in, and is not able to produce, the original bonds. Thomson v. Lee County, 3 Wallace, 327. Beaver Co. v. Armstrong, 44 Penn. State, 63. They are still a part of the mortgage debt, and the holder, upon a foreclosure of the mortgage, is entitled to share in the distribution pro rata with the holders of the remainder of the debt. Miller v. Rutland & Washington Railroad Co. 40 Verm. 399. As Kimball is the holder of a large number of the coupons of July 1, 1856, and as the case finds that nothing has been paid to him upon them, he is entitled,to have them considereu [97] and allowed as a part of the mortgage debt, unless the circumstances and manner in which they came to his hands furnish some legal reason to the contrary. The master says in his report, that, in taking up these coupons, it was the design and purpose of Kimball to purchase and hold them as a claim against the corporation, and as secured by the mortgage ; but that he had the further purpose of preserving the credit of the company, and of producing the belief that it was then able to pay, and did pay, its coupons ; the said Kimball being at that time the president and a director of the company, and also a creditor to a large amount. He adds, however, that the transaction was without any design to effect the sale or induce the purchase of any of said bonds or coupons. It is true that the persons who presented the coupons at the counting-room of the company had no intention of assigning them to any party, and understood that they were paid and extinguished in the usual and regular course of business. But as between Kimball and the company itself, it was understood that they were not extinguished, and that he had taken the place of the persons who had presented them for payment. As between him and the company, this was an allowable arrangement, and a legitimate mode of furnishing pecuniary aid to the company, changing the form but not increasing the amount of its actual debt. The only parties who could have any right to object to this proceeding would be the other creditors of the company, to protect whose rights the mortgage was given. If the security had proved ^sufficient to pay the entire debt, the other mortgage creditors might say that, when the coupons of July 1, 1856, were given up, they were understood to be paid and cancelled; that they were presented to the treasurer at the usual place and in the usual manner, for payment and not for assignment; and that Kimball, having taken part in a transaction which appeared and was understood to be a payment, is estopped now to come forward as a purchaser and assignee, and thereby diminish the divi dend which the other creditors, whose claims were covered by the mortgage, were entitled to receive. But this we think is as far as any estoppel in pais can go, as a oar to Kimball’s claim; and [98] we do not see that any of the bondholders or other mortgage creditors is in a position to object to the claim on that ground. The master has reported, it is true, that the belief that the company in July 1856 was able to pay and did pay the coupons that then fell due, was produced and acted upon n the case of the Boston & Worcester Railroad Corporation. Yet it also appears that their purchase of the bonds began at a much later period, namely, March 1, 1865 ; that they had voted to buy the mortgaged property at the price of $350,000; that their purchase of the bonds was with a view of acquiring the title to the lands; and that they bought most of the bonds at or below par without interest. As the security has proved sufficient to pay the entire debt, principal and interest, none of the bondholders can be said to have suffered any loss or inconvenience from the mode in which the coupons of July 1856 were disposed of, or has any reason to object to Kimball’s claim upon those coupons against any balance that may remain after the payment of the other mortgage creditors. He acquired no advantage, and they sustained no injury, from it, that could furnish any ground for an estoppel. Our conclusion therefore is, that the claim of David Kimball for the amount of the coupons ought to be allowed, as a charge against such funds in the hands of the trustees as may remain after the payment of the other mortgage creditors and other claims allowed by the master. We also think, for the reasons given by the master, that the trustees should be charged in the account as if they had collected the whole amount of the purchase money, $521,000, on May 14, 1867, and as having received interest thereon from that date to the date of the decree for final distribution. The Boston and Worcester Railroad Corporation, the purchasers of the mortgaged premises, were put into possession of the premises, and of all the outstanding claims for rents and profits thereof that had accrued while the same were held by the trustees. Upon an equitaow adjustment of the claims of that corporation and the coupon holders, the railroad corporation is properly chargeable with interest upon the amount of the purchase money from the date of the purchase; and the charge of interest can be enforced in set [99] tlement of the trustees’ account, and through the final order for distribution. With regard to the claim on the part of Kimball for interest, we think that it is well founded and should be allowed. He claims it not as an incident of the coupons themselves, and not upon the ground that unpaid coupons are for that reason on interest, but on the ground that they were taken up by him at maturity at the request of the corporation and for its convenience, so that in fact the transaction was a loan of the entire amount from him to the corporation, and should bear interest like any other case of the forbearance of payment. As the fund proves to be sufficient for the payment of this and all previous claims, we see no reason why it should not be so applied. The exceptions filed on the part of Kimball are therefore sustained ; and a Decree is to be entered accordingly. Footnotes [*] Colt, J., did not sit in this case.