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
Page 69 U. S. 511
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
Page 69 U. S. 512
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
Page 69 U. S. 513
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
Page 69 U. S. 514
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.
Page 69 U. S. 515
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.
image:a
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
Page 69 U. S. 516
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.
Page 69 U. S. 519
MR. JUSTICE MILLER delivered the opinion of the Court.
The first ground assigned for the appeal is that the decree is a
departure from the mandate of the court because it 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 coupons.
This construction of the mandate cannot be sustained. The
receiver is the office of the court, and neither party is
responsible for his misfeasance or malfeasance, if any such exists,
and it was not, therefore, reasonable that complainants should be
delayed in the collection of their debts until the close of a
litigation over the receiver's accounts, which might occupy several
years. The suit had already been pending four years, and the
mandate required the circuit court, in its decree
nisi, to
give another year for the payment of the sum found due. To suppose
that this Court
Page 69 U. S. 520
intended, in addition to these five years, to withhold the
recovery of complainants for the additional uncertain period which
might be necessary to litigate the receiver's accounts, is to
impute to it a manifest injustice. The language of the mandate had
reference to the sum actually the receiver's hands, properly
applicable to the payment of this debt, and not to what it might
turn out on full investigation ought to be there for that purpose.
This Court had no reason to suppose that there would be any
controversy with the receiver on the subject, and framed its
mandate on the supposition that all the money for which he would be
responsible, would be at once forthcoming. If such is not the case,
neither the loss nor the delay of ascertaining the fact was
intended by this Court to be imposed on the complainants. The
decree of the court is therefore AFFIRMED.
But another order was made by the circuit court, of a very
important nature, after the return of the case from this Court, and
before the decree just affirmed, which appellants seek to have
reversed.
At the first term of that court after the mandate was filed, the
appellant proposed to pay all the money due on complainants'
mortgage on condition that an order should be made discharging the
receiver and placing the road and its appurtenances in the
possession of appellants. Upon the hearing of this petition of
appellant, the judges of the circuit court were divided in opinion,
and the application was thereupon refused, as it was not a division
upon a subject which is authorized to be certified to this Court
for its action.
The appellant insists that this Court shall now review the order
of the circuit court on this subject, and while conceding that it
is not such an order as standing alone could be the subject of an
appeal, contends that as the record is properly here on appeal from
the final decree which we have just considered, the whole record is
open for our inspection, and that it is our duty to correct the
error of which he complains in this particular.
Page 69 U. S. 521
There is no question but that many orders or decrees affecting
materially the rights of the parties are made in the progress of a
chancery suit which are not final in the sense of that word in its
relation to appeals. The order of the court affirming or annulling
a patent and referring the case to a master for an account is an
instance. The adjudications which the court makes on exception to
reports of masters, often involving the whole matter in litigation,
are not final decrees, and in these and numerous other cases, if
the court can only, on appeal, examine the final or last order or
decree which gives the right of appeal, it is obvious that the
entire benefit of an appeal must in many cases be lost.
The order complained of in this case seems to be one of this
class. The complainants are seeking a foreclosure of a mortgage
with a view to make their debt. The owner of the equity of
redemption in the mortgaged premises comes forward and offers to
pay this debt, or all of it that is due, provided his property,
which is in the custody of the court, shall then be restored to his
possession. The right of the owner to this order is, under ordinary
circumstances, very clear, and a refusal by the court to give him
this right would seem to call for the revisory power of this Court,
when the whole case is before it, on the record brought here by
appeal from a final decree.
The only doubt which the court could have on the question arises
from the principle that the appointment and discharge of a receiver
are ordinarily matters of discretion in the circuit court with
which this Court will not interfere.
As a general rule, this proposition is not denied. But we do not
think it applicable to the case before us. While the parties to
this suit were fiercely litigating the amount of the mortgage debt,
and questions of fraud in the origin of that debt, the appointment,
or the discharge of a receiver for the mortgaged property, very
properly belonged to the discretion of the court in which the
litigation was pending. But when those questions had been passed
upon by the circuit court and by this Court also on appeal, and the
amount of the debt definitely fixed by this Court, the right of the
defendant
Page 69 U. S. 522
to pay that sum and have a restoration of his property by
discharge of the receiver is clear, and does not depend on the
discretion of the circuit court. It is a right which the party can
claim, and if he shows himself entitled to it on the facts in the
record, there is no discretion in the court to withhold it. A
refusal is error -- judicial error -- which this Court is bound to
correct when the matter, as in this instance is fairly before it.
That the order asked for by appellants should have been granted
seems to us very clear.
It was objected by the complainants that the receiver should not
be discharged, because the security of the road and its
appurtenances was not sufficient to ensure the payment of their
debt, and therefore its receipts should be applied to that purpose
through the agency of a receiver.
The amount of complainants' debt, exclusive of the interest
(which appellants proposed to pay), was one million of dollars,
which, added to twelve hundred thousand dollars of prior mortgages,
made the sum of two millions two hundred thousand dollars which the
road and its appurtenances should be worth to secure complainants'
debt. The roadbed on which complainants' mortgage is a lien is
ninety-five miles from Milwaukee to Portage, besides the depots,
rolling stock, and other appurtenances belonging to it. It
constitutes a part of the direct line from the former city to the
Mississippi River, which is one of the most valuable routes in the
United States, both present and prospective. 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, and although these reports show a
great falling off in the receiver's receipts since that time, the
circumstances which have produced it are not of a character to
incline us to continue the road in the possession of a receiver.
The road was also in good repair. The decree which we have just
affirmed authorizes the complainants, upon default in payment of
any future installment of interest, to apply for and have an order
of sale of the road under that decree. Under these circumstances,
when appellants propose to pay to me $300,000 or
Page 69 U. S. 523
$400,000 of complainants' debt before possession is given, it is
idle to say that the security of their debt requires the road still
to be detained from its lawful owner.
Sebre Howard objects to the discharge of a receiver, because he
has a judgment of $16,000 against the La Crosse & Milwaukee
Railroad Company, which he claims to be a lien on the road, and as
the present receiver has also been appointed receiver in his suit,
he claims that his debt must first be paid before he can be
discharged.
The idea of appointing or continuing a receiver for the purpose
of taking ninety-five miles of railroad from its lawful owners,
which is earning a gross revenue of $800,000 per annum, to enforce
the payment of a judgment of $16,000, the lien of which is
seriously controverted, is so repugnant to all our ideas of
judicial proceedings that we cannot argue the question. If Mr.
Howard has a valid judgment, the usual modes of enforcing that
judgment are open to him, both at law and in chancery; but the
extraordinary proceeding of taking millions of dollars worth of
property -- of such peculiar character as railroad property is --
from its rightful possessors, as one of the usual means of
collecting such a comparatively small debt, can find no countenance
in this Court.
Selah Chamberlain objects to the discharge of the receiver, and
particularly to delivering the property into possession of
appellants, because he says he has a lien of over $700,000 on the
road, and because that lien is secured by a lease which entitles
him to the possession of the road.
Mr. Chamberlain had been in possession under his lease for some
time prior to the appointment of a 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 this suit is brought. This he had
failed to do, and had actually abandoned the possession to the
complainants in this suit, who were in possession at the time the
receiver was appointed. His judgment was assailed and declared to
be fraudulent and void by a decree of the district court of the
United States. There is a question whether that decree
Page 69 U. S. 524
is binding as between him and the present appellants, which we
do not intend to decide here; but we refer to this fact as having
strong influence on the question of the propriety of keeping the
road in the hands of a receiver for his benefit, or delivering it
to him if the receiver is discharged. We shall endeavor to protect
his interest, whatever it may be, in any order that shall be made
on the subject.
As to the Milwaukee & St. Paul Railway Company, who also
resisted this application, we do not see that they have any legal
interest in the matter, and the interest which prompts their
interference is not such as the court can consider on an
application of this kind.
In reference to all these parties, we remark again that the
court deprives them of none of their rights to proceed in the
courts in the ordinary mode to collect their debts, and that the
appointment of receivers by a court to manage the affairs of a long
line of railroad, continued through five or six years, is one of
those judicial powers, the exercise of which can only be justified
by the pressure of an absolute necessity. Such a necessity does not
exist here, and the fact that so many years of the exercise of this
power has not produced payment of any part of the debts which the
receiver was appointed to secure is an irresistible argument
against his longer continuance.
The order of the court dismissing this application is therefore,
REVERSED, and the case remanded to the circuit court with
instructions to ascertain the amount due to complainants within
some reasonable time to be fixed by said court and to make an order
that on the payment of that sum, with the costs of complainants,
into court, the receiver shall be discharged, and the railroad from
Milwaukee to Portage City, with all the appurtenances, rolling
stock, and other property, real and personal, belonging to said
division of road, be delivered by said receiver to the Milwaukee
& Minnesota Railroad Company; but that no such discharge of the
receiver or delivery of the road and its appurtenances shall be
made until said company shall first enter into bond
Page 69 U. S. 525
with sufficient surety to pay to Sebre Howard and Selah
Chamberlain all such sums as may come into the hands of said
company, which shall hereafter be found to be rightfully applicable
to the payment of their claims if they shall be established as
liens on said road. And the appellants to recover their costs in
this Court.
Action accordingly.
[
Footnote 1]
See supra, page <|69 U.S. 283|>283.
[
Footnote 2]
See supra, page <|69 U.S. 312|>312.
[
Footnote 3]
Bronson v. La Crosse Railroad
Company, 1 Wall. 405.
