Chicago & Vincennes R. Co. v. Fosdick - 106 U.S. 47 (1882)
U.S. Supreme Court
Chicago & Vincennes R. Co. v. Fosdick, 106 U.S. 47 (1882)
Chicago and Vincennes Railroad Company v. Fosdick
Decided October 23, 1882
106 U.S. 47
1. A railroad company executed, March 10, 1869, to a trustee, by way of security for its bonds payable thirty years thereafter, a first mortgage upon its road, and stipulated that if
"default should be made in the payment of any half-year's interest on any of them, and the coupon for such interest be presented and its payment demanded, and such default continue six months after such demand without the consent of the holder of such coupon or bond, then and thereupon the principal of all of the bonds thereby secured should be and become immediately due and payable, anything in the bonds to the contrary notwithstanding, and the trustee might so declare the same, and notify the company thereof, and, upon the written request of the holders of a majority of the bonds then outstanding, should proceed to collect both principal and interest of all such bonds outstanding by foreclosure and Bale of said property, or otherwise, as therein provided."
Claiming that there had been a default for more than six months after a demand for the payment of the coupons due in 1873, the trustee declared the principal of the bonds to be due, and notified the company thereof. He then, without obtaining the written request of a majority of the holders of the bonds outstanding, brought suit praying for a decree for a sum equal to the entire amount of the bonds and interest due thereon, and for the
foreclosure and sale of the mortgaged property. Held that if there had been such default, he was not entitled to the decree.
2. Where by the stipulations of the mortgage it is a security for the payment of the interest as it semi-annually accrues, as well as of the principal, the trustee, on the nonpayment of either, or, on his failure to act, any bondholder, may, to enforce the security, bring suit, and if it results in a sale of the mortgaged premises as an entirety which is confirmed by the court, the purchaser takes an absolute title to them as against the parties to the suit or their privies, and the proceeds of the sale will be applied first to the arrears of interest, then to the mortgage debt, then to the junior encumbrances, according to their respective priority of lien, and the surplus, if any, will be paid to the mortgagor.
3. In such a suit, the decree should declare the fact, nature, and extent of the default which constitutes the breach of the condition of the mortgage, and the amount then due, and a substantial error in that regard will, on appeal, vitiate the subsequent proceedings. A reasonable time for payment should be allowed, and, on such payment within the prescribed period, further proceedings will be suspended until another default occurs. At any time prior to the confirmation of the sale under the decree, the mortgagor, by bringing into court the amount then due, and costs, will be allowed to redeem. Howell v. Western Railroad Company, 94 U. S. 463, touching the form of the decree where moneys payable by installments are secured by mortgage, cited and approved.
4. An appeal may lie from a decree in an equity cause, notwithstanding it is merely in execution of a prior decree in the same suit, for the purpose of correcting errors which originate in it; but when such decrees are dependent upon the decree, to execute which they were rendered, they are vacated by its reversal, in which case, the appeal which brings them into review will be dismissed for want of a subject matter on which to operate.
5. A decree in personam for the amount remaining due upon a mortgage debt, after the execution of a decree of foreclosure and sale, is of this description, but when rendered in favor of other parties than the complainant,
it will be reversed for the same error that required the reversal of the decree of foreclosure and sale.
The facts are stated in the opinion of the Court.