Milwaukee & Minnesota R. Co. v. Soutter - 69 U.S. 510 (1864)
U.S. Supreme Court
Milwaukee & Minnesota R. Co. v. Soutter, 69 U.S. 510 (1864)
Milwaukee & Minnesota Railroad Company v. Soutter
69 U.S. (2 Wall.) 510
1. Though a court below is bound to follow the instructions given to it by a mandate from this, yet where a mandate has plainly been framed, as regards a minor point, on a supposition which is proved by the subsequent course of things to be without base, the mandate must not be so followed as to work manifest injustice. On the contrary, it must be construed otherwise, and reasonably.
2. The appointment or discharge of a receiver is ordinarily matter resting wholly within the discretion of the court below. But it is not always and absolutely so.
Thus, where there is a proceeding to foreclose a mortgage given by a railroad corporation on its road &c. -- a long and actively worked road -- a sort of property to a control of which a receiver ought not to be appointed at all, except from necessity, and the amount due on the mortgage is a matter still unsettled and fiercely contested, the appointment
or discharge of a receiver is matter belonging to the discretion of the court in which the litigation is pending.
But when the amount due has been passed on and finally fixed by this Court, and the right of the mortgagor to pay the sum thus settled and fixed is clear, the court below has then no discretion to withhold such restoration, and a refusal to discharge the receiver is judicial error which this Court may correct, supposing the matter (not itself one in the nature of a final decree) to be in any way fairly before it otherwise.
If other parties in the case set up claims on the road, which they look to the receiver to provide for and protect, these other claims being disputed, and, in reference to the main concerns of the road, small, this Court will not the less exercise its power of discharge. It will exercise it, however, under conditions, such as that of the company's giving security to pay those other claims, if established as liens.
Bronson and Soutter had filed a bill in the Circuit Court for Wisconsin, against the La Crosse & Milwaukee Railroad Company, to foreclose a mortgage given by the said company to them to secure bonds to the extent of one million of dollars which that company had put into circulation and the interest to a large amount on which was due and unpaid. To this bill the Milwaukee & Minnesota Railroad Company -- a company which, on a sale under a mortgage junior to that of Bronson and Soutter, was organized and became, under the laws of Wisconsin, successor in title and interest to the La Crosse & Milwaukee Company, and also three other persons, one named Sebre Howard -- were made or became defendants, and opposed the prayer for foreclosure. They alleged that the bonds which the mortgage to Bronson and Soutter had been given to secure had been sold, transferred or negotiated at grossly inadequate prices, fraudulently in fact, and were not held for full value by these persons, who sought by the foreclosure to recover their par. The court below, being of this opinion, gave a decree in that suit to the extent of but fifty cents on the dollar. Coming here by appeal at the last term, [Footnote 1] the decree, after an animated, protracted, and very able argument in support of it by Mr. Carpenter, in behalf of numerous parties interested, was reversed, and a decree ordered to be entered
below for the full amount, cent for cent. [Footnote 2] The suit, at the time of the decree here, had been pending for four years. The mandate from this Court ran thus:
"It is ordered that this cause be remanded to the Circuit Court of the United States for the District of Wisconsin with directions to enter a decree for all the interest due and secured by the mortgage, with costs; that the court ascertain the amount of moneys in the hands of the receiver or receivers from the earnings of the road covered by the mortgage, which may be applicable to the discharge of the interest and apply it to the same, and that if the moneys thus applied are not sufficient to discharge the interest due on the first day of March, 1864, then to ascertain the balance remaining due at that date. And in case such balance is not paid within one year from the date of the order of the court ascertaining it, then an order shall be entered directing a sale of the mortgaged premises."
Upon the filing of this mandate in the court below, the receiver was ordered to make report of the funds in his hands, from which it appeared that he had some $50,000 to $60,000 applicable to the payment of the interest on the bonds in suit.
The Milwaukee & Minnesota Railroad Company, which, as already stated, was an encumbrancer on the road junior to Bronson and Soutter, insisted that instead of this small amount, there was really, or ought to be, in the receiver's hands between $300,000 and $400,000 applicable to the payment of interest, and asked an order of reference to a master, with instructions to hear testimony and ascertain and report on this claim. The court made the order and postponed further action in the case until the succeeding term in September. At that term it was ascertained that the master would be unable to report on the complicated accounts of the receiver, involving several millions of dollars, and the receiver was again ordered to report the funds actually in his hands. From this second report it appeared
that he had no money properly applicable to the payment of the debt of Bronson and Soutter, and thereupon the court proceeded to ascertain the amount of interest due on the bonds secured by their mortgage, and entered a decree accordingly, giving the defendant a year to pay it, before a sale of the mortgaged premises.
From this decree the Milwaukee & Minnesota Railroad Company, the already mentioned successors in title and interest to the La Crosse & Milwaukee Railroad Company, appealed, the first ground assigned for their appeal being that the decree was a departure from the mandate of the court because such decree should not have been rendered until the accounts of the receiver were adjusted, and it was judicially ascertained how much of the millions he had received ought now to be applied to the payment of complainants interest.
But another matter was now presented here.
At the first term of the court below, after the mandate was filed, the Milwaukee & Minnesota Railroad Company proposed to pay all the interest due on the mortgage of Bronson and Soutter on condition that an order should be made discharging the receiver, and placing the road and its appurtenances in the possession of them, the Milwaukee Company, just named. Upon the hearing of this petition, the judges of the circuit court were divided in opinion, and the application so, necessarily, refused.
The amount of Bronson and Soutter's debt, above mentioned, exclusive of interest, which the Milwaukee & Minnesota Railroad Company proposed to pay was one million of dollars, and this, added to twelve hundred thousand dollars of prior mortgages, made two millions two hundred thousand dollars, which the road and its appurtenances would have to be worth in order to secure the debt of Bronson and Soutter. The road on which the mortgage was a lien is ninety-five miles, and runs from Milwaukee to Portage, besides the depots, rolling stock, and other appurtenances belonging to it. It was in good condition. It constitutes a part of the direct line from Milwaukee to the
Mississippi and is one of the valuable railroads of the United States. The gross earnings from this ninety-five miles for the year preceding the application to discharge the receiver, as shown by his reports, were about eight hundred thousand dollars, though the reports showed a large falling off in the receiver's receipts of later time.
In addition to the opposition made to this motion by Bronson and Soutter, it was opposed by one Sebre Howard who, with the Milwaukee & Minnesota Railroad Company, had been a defendant to their bill and on whose motion the receiver had been appointed. Howard objected to the discharge because, as alleged, he had a judgment of $16,000 against the La Crosse & Milwaukee Railroad Company which he asserted to be a lien on the road, though whether it was so or not depended on some questions of fact and law not perhaps quite clear. This Court, assuming a certain state of facts, decided that he had, but it was said that facts had not been well explained to the court.
One Selah Chamberlain, too, opposed it, objecting to the discharge of the receiver and particularly to delivering the property into possession of appellants, because, as he asserted, he himself was holder of a lien of over $700,000 in the road, and because that lien, according to his view, was secured by a lease which entitled him to the possession of the road. This same Chamberlain had been in possession under his lease for some time prior to the appointment of the receiver under a contract with the La Crosse & Milwaukee Railroad Company by which he bound himself to keep down the interest on the various mortgages on the road, including the one on which Bronson and Soutter had filed their bill. This he had failed to do, and he had actually abandoned the possession to the Milwaukee & Minnesota Company, who were in possession at the time the receiver was appointed. His judgment on a suit by the complainants had been assailed, and as it seemed, though counsel denied this view, declared to be fraudulent and void by a decree of the district court of the United States, but that question was not finally determined.
A third railroad company, called the Milwaukee & St. Paul Company, a rival company of the Milwaukee & Minnesota, whose relation to it will appear in the diagram below, also opposed the discharge.
This company was an organization created after the litigation already mentioned, as brought about by the proceedings of Bronson and Soutter to foreclose their mortgage, had commenced. It was no party to preceding suits. It owned the western end of the La Crosse & Milwaukee Railroad -- that is to say, the road from Portage to La Crosse (one hundred and five miles), and was organized for the purpose of working a road, as its name imports, from Milwaukee to St. Paul; of course, the ownership and control of an eastern end was indispensable to the purpose. This company had procured, in June, 1863, an order from the district court that the receiver should deliver to them the eastern end of this road and all its appurtenances, and they had used them from that day. This Court, however, subsequently declared the proceeding of the district court to have been without
jurisdiction, and the order a usurpation of authority. [Footnote 3] The interest of this third company was, of course, of a strong character, for the necessities of their situation required that they should own an eastern end of the road to complete their line from Milwaukee, one great terminus of the road to St. Paul.