Chickering v. Rutland Railroad

The opinion of the court was delivered by Ross, J. This is a petition to the Court of Chancery for the county of Rutland, by Caroline E. Ohickering, alleging that she is the owner of two of the bonds of the late Rutland & Burlington R. R. Company, and asking to be allowed to come as party oratrix into the suit, R. D. Smith and others v. the Rutland Railroad Company and others, to enforce against the defendants, who have succeeded to the possession and property of the late Rutland & Burlington Railroad Company, the mortgage covering such property given by the last named railroad company to trustees, to secure the bonds held by her in common with those held by the orators in that suit. In its answer the defendant, Rutland Railroad Company, urges, in substance, that the petitioner’s rights under the mortgage had — 88 — become barred by the Statute of Limitations before she hied the petition; and that the suit, R. L>. Smith and others, against them, although brought for the orators named therein, and all others holding bonds secured by the same mortgage, had reached that stage in prosecution and adjustment, that it was not in the right nor discretion of the Court of Chancery to permit her to become a prosecuting party to that suit, and partake of the fruits thereof. I. The validity of these defences is dependent upon many facts found in the voluminous files in the former suits relative to this security, and its legal status and enforcement, called the Ellis-Gray-Loring suit, which terminated in a decree in 1855 ; the Cheever and Hart suit, who were the trustees in the mortgage securing the petitioner’s bonds, and who were seeking to enforce that mortgage under the decree in the Ellis-Gray-Loring suit, for the common benefit of all the bondholders whose bonds were secured by that mortgage, and which, by mandate from this court to the Court of Chancery in 1810, established the mortgage as a valid existing security for all the bonds secured thereby, and the right of the trustees, both under the mortgage and the decree in the Ellis-Gray-Loring suit, to the immediate possession of the property, but advised a delay in placing the trustees in possession, if the defendants in that suit should in a short day pay all the bonds secured by the mortgage “so far as accessible,” and “ then in that case to further delay the order for a transfer of possession for the time being, to enable the defendants to discover the remaining unconverted bonds and make complete payment and obviate the need of such transfer; ” the R. I). Smith and others suit, brought to enforce the mortgage under the decrees in the former suits, for the payment of such of the bonds as still remained unpaid, which also resulted in a mandate from this court to the Court of Chancery in J 878 according- to the orators the relief prayed for; and upon certain additional facts established by the testimony taken on the petition and answer. It will not be necessary -to rehearse and set in order all the facts shown by the files, concessions and evidence in the former cases. I shall only state a few of the more material and determinative facts — 89 — bearing upon the issues raised by the defendant’s answers. The petitioner’s bonds are dated February 1st, 1851, and matured February 1st, 1863. The bill R. D. Smith and others was brought to the September Term of the Court of Chancery for the county of Rutland, 1875. This petition was filed in this suit September 7, 1881. None of the interest or principal of the bonds has been paid since the bonds fell due February 1, 1863. If this action was a suit at law against the Rutland & Burlington Railroad Company for the collection of the bonds, the action would be barred by the Statute of Limitations, notwithstanding all that has been done for the enforcement of the mortgage securing the bonds, and notwithstanding the payments made by that company, and those 'who have succeeded to its rights and property, of bonds secured by the mortgage, which secures the petitioner’s bonds, down to as late as October, 1880. In such an action the petitioner would stand alone upon her bonds, as independent obligations of the Rutland & Burlington Company, and her right of action upon the bonds would be barred by the lapse of six years from the time they matured. But this is not the position of the petitioner in this case. She is here seeking to enforce the security furnished by the mortgage given for the common benefit of all holders of bonds secured thereby. The mortgage was given to trustees for the common benefit of all of the bondholders. Upon the default of the Rutland & Burlington Railroad Company in making payment of-the bonds at maturity, the legal title to the property covered by the mortgage vested in the trustees for the benefit of all the bondholders, the petitioner as well as the others. Whatever the trustees did to establish and enforce the mortgage, they did as well for the benefit of the petitioner as the other bondholders. Upon 'default in the payment of the bonds secured by the mortgage, the right of the trustees to enter upon and take possession of the mortgage premises for the common benefit of all the bondholders at once accrued. This right under the mortgage if suiferred to lie dormant for fifteen years by the trustees and bondholders, and if in that time there was no recognition of the existence of the — 90 — mortgage by the mortgagor or those standing in the mortgagor’s right to the mortgage property, by payment on the principal or interest of the debt secured by the mortgage or otherwise, became barred by the Statute of Limitations, or rather in equity, by lapse of time in analogy to the Statute of Limitations. With the mortgagor in possession, such silence and want of recognition of the mortgage and of the mortgagee’s rights under it, by both the mortgagee and mortgagor, for fifteen consecutive years, would afford a conclusive presumption of payment of the debt secured by the mortgage, and consequently of the extinguishment of all rights of the mortgagee under the mortgage. R. L., ss, 951, 952; Ang. Lim., c. 34; Wood Lim., c. 18; Whitney v. French, 25 Vt. 663; Richmond v. Aiken, 25 Vt. 324. The Cheever and Hart suit was brought by them as trustees of the mortgage in contention, in 1864, prosecuted vigorously and with great activity on both sides until the mandate sent from this court to. the Court of Chancery in 1870; and., more or less so, until the suit was discontinued in 1873. During all that period the mortgage and the rights secured thereby were far from a sleeping security and sleeping rights, as all who were at all conversant with that controversy can well recall, and none with more distinctness than the defendant, the Rutland Railroad Company, which came into existence during and partly as the result of that suit, and its present solicitor, as is fully shown by the files in that suit. In that suit the mortgage as a security for the payment of all the bonds named therein, including those owned by the petitioner, was established, and the right of the trustees to take immediate possession of the property covered by the mortgage to secure and enforce the payment of all the bonds named therein. The defendants in that suit, to whose rights in the mortgage property the defendants in this suit have succeeded, recognized and yielded to the mortgage now under consideration, and the rights of the trustees and the bondholders thereunder, by the payment of a large sum on the mortgage debt to prevent the trustees taking possession of the mortgage property under the mortgage. This enforced recognition of the mortgage was none — 91 — the less effectual to prevent the mortgage and the rights of the bondholders under it from lapsing by lapse of time, because the suit was allowed to be discontinued without a decree being drawn up and enrolled, and without the payment of all the bonds secured by the mortgage. This enforced recognition of the .mortgage enured to the benefit of all the bondholders. If that suit had resulted in a decree adverse to the trustees, the petitioner, though not a party thereto except as represented by the trastees, would have been bound thereby, and her rights under the mortgage conclusively adjudicated against her. Mit. & Ty. Eq. PI. 265. If the suit had not been discontinued the petitioner and the orators in the suit, B. I). Smith and others, could have come in and taken the benefit of that adjudication. By the discontinuance of that suit without decree; by the blotting out of existence of the Butlánd & Burlington Bailroad Company; by the foreclosure of a subsequent mortgage, and the organization of the Butland Bailroad Company, under the foreclosure and a special charter, as the successor of the Butland & Burlington Bailroad Company, to the mortgage property; by the new trustees of the mortgage becoming interested and officers in the Butland Bailroad Company, so that their interest and duties were antagonistic to the rights of the bondholders, for whom they were trustees; and by the other defendants having become interested in the mortgage property., a new bill was rendered necessary to enforce the rights of the unpaid bondholders. Such suit was brought by B. D. Smith and others in 1875, in behalf of themselves and all others the owners and holders of bonds who might choose to come into the suit. That suit was in active prosecution until 1878, when the right of the orators under the mortgage, and the adjudications before had thereon, was established by this court and the suit remanded to the Court of Chancery to have a decree therein perfected. That suit remained on the docket of the Court of Chancery until this petition was filed therein. The bonds held by the orators, Smith and others, were recognized by the defendants as secured by the mortgage, but not paid by the — 92 — Rutland Railroad Company until October, 1880. In the charter of the Rutland Railroad Company — which alone defends against bliis petition — granted in 1867, the existence of this mortgage as a subsisting security for the bonds named in it, was indirectly recognized ; and power was given to that company to issue preferred guaranteed stock to take up the bonds secured by this mortgage, either by exchanging such stock for such bonds, or by raising money for the payment of the bonds by a sale of the stock. The petitioner, within less than fifteen years before filing her petition, was offered this stock in exchange for her bonds. These facts furnish a most emphatic denial of the contention that the mortgage and the rights of the holders of the unpaid bonds secured thereby have lapsed, by the trustees and bondholders allowing the mortgage and the rights secured to them under it to lie dormant and unrecognized by the mortgagor and its successors for fifteen consecutive years. It is not the laW that each individual bondholder must institute a suit in his own name to enforce the mortgage to prevent the effect of the lapse of time on his right to enforce it. Such practice would not be tolerated in chancery proceedings. The pendency of a suit brought by the trustees, or when they improperly refuse or neglect to sue, by one or more of the bondholders, for themselves and all the other bondholders, for the enforcement of the mortgage would abate subsequent suits by individual bondholders for the same purpose. The prevention of a multiplicity of suits is one of the grounds of equity jurisdiction. Ordinarily, bondholders are allowed to bring a suit in equity for the enforcement of such a mortgage only in casethe trustees improperly refuse or neglect to sue upon request, and then they must bring the suit as well for all the other bondholders as themselves. "While the bonds are the separate property of each bondholder, and when he seeks to enforce the obligation arising from the bond alone, he stands by himself unaffected by what the other bondholders may have done or omitted to do, the mortgage securing the bonds is common to all the bondholders, given to trustees for their common benefit; and whatever is done by the — 93 — trustees, or by one or more of the bondholders in behalf of all for the enforcement of the common security, enures to the benefit of all, and keeps the security alive for all the bondholders, unless some of them by an affirmative act renounce the right and act of the trustees or other bondholders to enforce it in their behalf. Hence, the petitioner’s right to have the mortgage enforced as security for the payment of her bonds was not barred by the lapse of time when she filed her petition. There was no period of fifteen years between the maturity of her bonds and the filing of her petition, during which either the mortgagees allowed the mortgage to lie dormant, or the mortgagor or those standing upon its rights, sufferred it to remain unrecognized as the security for the bonds therein named. II. It is conceded by the defendants that the bill in the suit, E. E>. Smith and others, is broad enough to allow the petitioner to become a prosecuting party thereto; but it is contended that the decretal order of the chancellor excluded from tire benefits to be derived therefrom all who had not then become orators in the suit. The appeal to the Supreme Court from that order opened it, and took the whole case to the Supreme Court and vacated the decree of the Court of Chancery. Gale v. Butler, 35 Vt. 449. The Supreme Court found no error in the action of the Court of Chancery and affirmed the decree, and sent the case back to the Court of Chancery with a mandate to enter up such a decree. The Court of Chancery have never done so. At the first term of the Court of Chancery, after the case was remanded from the Supreme Court, the cause was entered with the court for hearing. Subsequently a decretal order was filed, tire death of one of the orators suggested, and then an order filed vacating the decretal order. The three following terms the case was entered with the court for hearing, and then continued. Between that term and the following March Term, 1881, in October, 1880, the Eutland Eailroad Company paid the bonds held by the orators named in the cause. At the March Term, 1881, the Eutland Eailroad Company filed an answer in the cause for some undisclosed purpose. At the September Ternq 1881, this petition — 94 — was filed in the cause, and has been proceeded with in said court. It will be observed from the foregoing statement that no final decree has ever been made in said cause; nor has the cause ever been discontinued or dismissed from the docket. It was a cause pending in the Court of Chancery when the petitioner filed her petition. It appears that tlie officers of the Rutland Railroad Company purchased the bonds held by the orators named in the bill, soon after the case was remanded from the Supreme Court, and took control of the suit. So far as the original orators were concerned the bill had served its purpose when the defendant railroad took up and paid in October, 1880, the bonds which they held when they brought the bill. The case might have been entered as settled, discontinued or dismissed at the March Term, 1881; but for some undisclosed purpose the defendant, the Rutland Railroad Company, kept it on foot and filed an answer therein. This left the case pending in the Court of Chancery when the petitioner asked to be allowed to become a party. The bill was brought for her benefit, if she should see fit to become a party, and was appropriate to furnish her the requisite remedy. Her rights under the mortgage, as we have seen, were not barred by lapse of time. The objections which the defendants have or can have to the enforcement of the mortgage security in favor of the petitioner wore equally available to them against the orators. They claim no defence against her which they did not claim against R. D. Smith and others, except lapse of time. The facts brought into contention by the bill show that she could not be barred by lapse of time from enforcing the mortgage more than the orators named in the bill. Under these circumstances, it was within the discretion of the Court of Chancery to allow her to become a party at any time before the final decree in the cause should be signed and enrolled. Even if the decretal order which was affirmed by the Supreme Court was so drawn that it would exclude the petitioner, the Court of Chancery, when the cause was remanded to have a final decree drawn, had the right in the exercise of sound discretion to allow the petitioner to become a party. That was not a matter — 95 — upon which the Supreme Court had adjudged, or given the Court of Chancery any directions. The question did not arise in the case until after it had been remanded from the Supreme Court. Matters arising in a cause upon which the Supreme Court has not adjudicated nor made a mandate, are as fully within the control of the Court of Chancery after the mandate as before. Barker v. Belknap, 27 Vt. 700; Gale v. Butler, 35 Vt. 449. The usual method, by which a person having a common right and entitled to a common remedy with the orators applies tobe let into a pending suit, brought by the orators for themselves and all others having such right,'is by petition. In practice, however, such persons are often allowed to prove their claims before the master, withont becoming actual parties to the suit. The better practice is to have them become, parties. 1 Dan. Ch. Pl. & Pr. 286, n. 1; 2 Ib. 1014, 1200 to 1209 ; Mit. & Ty. Eq. Pl. 474. The result is, no error is found in the decree, and the same is affirmed and the cause remanded.