1. Where a trial by the court below was not had under the Act of
March 3, 1565, 13 Stat. 501, the rulings excepted to in the
progress of such trial cannot be reviewed here.
2. Where it is clearly implied by the terms of a mortgage
executed by a railroad company that the latter was to hold
possession and receive the earnings of the road until the
mortgagees should take it or the proper judicial authority
intervene, such possession gives the right to the whole fund
derived therefrom and renders it, therefore, liable to the
creditors of the company as if no mortgage existed.
3. A decree, silent as to the profits and possession of the
mortgaged premises from its date until the sale thereby ordered,
does not affect the right to such profits and possession during
that period.
In 1857, the Des Moines Valley Railroad Company, by its then
corporate name, in order to secure the payment of its bonds,
executed to certain trustees a mortgage of its road, property, and
franchises, "together with the tolls, rents, and profits to be had,
gained, or levied therefrom."
Page 91 U. S. 604
One of the provisions of this mortgage was as follows:
"It is hereby further provided that until failure to pay the
interest on said bonds or to pay the principal at maturity or to
apply, appropriate, set apart, and deposit the several sums of
money to be applied, appropriated, set apart, and deposited, as
hereinafter provided, the said party of the first part shall have
the sole right to the possession, use, management, and control of
the said mortgaged property and premises, and of the receipts and
revenues thereof, as if this instrument had not been made, but if
the said party of the first part shall fail to pay or cause to be
paid the principal of the said bonds, or any of them, at the
maturity thereof, or shall fail to pay or cause to be paid the
interest on the said bonds, or any of them, or any part thereof, on
any day whereon the same is made payable by the terms of the said
bond, and the same shall remain unpaid for the space of six months
after having been demanded, whereby at the option of the holders of
one-third in amount of all the outstanding unconverted and
unredeemed bonds the principal sum secured thereby shall become
immediately payable, or shall fail to apply, appropriate, set
apart, and deposit the several moneys required to be applied,
appropriated, set apart, and deposited, as hereinafter provided,
then and in that case it shall be lawful for the said parties of
the second part, their survivor or successor or successors, and it
shall be their duty, to enter upon and take possession of all and
singular the property, premises, and franchises hereby granted and
conveyed, or so expressed or intended to be, and by themselves, or
their agent or agents, substitute or substitutes, duly constituted,
have, use, operate, and employ the same, making from time to time
all needful repairs, alterations, or additions, collect and receive
all the tolls, rents, or profits to be had or gained therefrom, and
apply all the moneys arising therefrom to the payment of the
interest due and to grow due on all the said bonds which may be
outstanding, unconverted, and unredeemed, and to the payment of the
principal of all and each and every of such bonds when such
principal shall become due and payable."
In 1868, the company executed a second mortgage to certain other
trustees, in which was conveyed the road with its appurtenances,
and
"also all rents, issues, income, tolls, profits, currency,
moneys, rights, benefits, and advantages derived or to be derived,
had or received therefrom by said company in any way whatever.
"
Page 91 U. S. 605
"To have and to hold the above granted and bargained premises,
with the appurtenances thereof, unto the said trustees and to the
survivors and survivor of them and to their and his successors and
successor and their and his assigns, in trust and upon the trust,
uses, and purposes hereinafter expressed, of and concerning the
same, for the use and benefit of the person or persons, firm or
firms, bodies politic or corporate, who shall hereafter at any time
become the purchasers of holders, owners or bearers, of any or
either of said bonds, subject to the terms, provisions, and
stipulations in said bonds contained, and also subject to the
possession and management of said railroad and property by said
company, and its successors and assigns, so long as no default
shall be made in the payment of either interest or principal of
said bonds or in any or either of them, or in payment of the amount
of money, as is herein provided for the sinking fund, and so long
as the said company shall well and truly observe, keep, and perform
all and singular the covenants, agreements, conditions, and
stipulations in said bond and in this indenture contained and set
forth, and which are to be observed, kept, and performed by and on
the part of said company."
"And it is agreed, in case of the default of the payment of the
semiannual interest as above provided, that said trustees and the
survivor or successors of them are hereby expressly authorized and
empowered, upon the request in writing of a majority in interest of
the owners or holders of said bonds, to enter into and upon, and to
take actual possession of, all the property, real and personal,
rights, franchises, and privileges, of the premises hereby
conveyed, and each and every part thereof, and by themselves, or by
their attorneys or agents, have, hold, use, and enjoy the same, and
from time to time make all repairs and replacements, and all useful
alterations, additions, and improvements thereto, as fully as the
parties of the first part might have done before such entry, and to
collect and receive all tolls, freight, incomes, rents, issues, and
profits of the same, and of every part thereof."
The trustees never took possession, but, default having been
made in the payment of interest on both mortgages, the trustees in
the second mortgage, in July, 1872, commenced suit to foreclose in
one of the state courts, making the railway company the trustees in
the first mortgage, and various judgment and lien creditors of the
company parties defendant, and, among others, the Illinois and
Mississippi Telegraph Company. No
Page 91 U. S. 606
receiver was applied for or appointed pending the foreclosure
proceedings except as hereinafter stated.
On May 31, 1873, a decree of foreclosure was entered by the
state court, fixing the priorities of the several parties and
holding that the telegraph company's judgment, hereinafter
mentioned, was a lien subject to the mortgage in suit and to other
specified liens.
The decree ordered a sale of the mortgaged property by the
sheriff on special execution, but, as originally entered, made no
provision as to the possession or earnings of the road (which was
still in the possession of the railroad company, and operated by
it) between the date of the decree and the sale which the decree
ordered.
On the thirteenth day of June, 1873, the telegraph company
issued execution on a judgment for $23,734.10, which it had on the
24th of May, 1872, obtained against the railroad company in the
Circuit Court of the United States for the District of Iowa, and
garnished, under the statute of the state, moneys in the hands of
the agents of the railroad company at its various stations,
received by them from the income and earnings of the road.
The trustees in the first and second mortgages filed, June 20,
1873, the present bill in equity against the telegraph company to
enjoin the said proceedings upon the execution under its judgment.
The bill was, the twenty-seventh day of June, 1873, amended so as
to make the Des Moines Valley Railroad Company a defendant; and a
temporary injunction, as prayed for, was allowed.
On Sept. 9, 1873, after a sale had been advertised by the
sheriff, application was informally made to the state court, by the
trustees under the first mortgage, for a modification of the decree
of May 31, 1973; and the same was modified by appointing a "special
receiver of all the income and earnings of the road" between the
date of the decree or sheriff's first publication of notice of sale
and the sale to be made by him. This was done, saving the rights of
the telegraph company.
The special receiver took possession Sept. 15, 1873. The sale by
the sheriff under which the purchasers were let into possession
took place Oct. 17, 1873, and left a large amount of the mortgage
bonds unpaid.
Page 91 U. S. 607
Between the date of the decree of May 31, 1873, and Sept. 15,
1873, when the special receiver took possession, the road was
operated by the railroad company, and during this period the net
earnings were $27,147.96.
Coykendall, who was garnished, had received $27,000; and
judgment in the suit at law was rendered against him for that
amount.
The circuit court dismissed the bill of the complainants.
Page 91 U. S. 613
MR. JUSTICE SWAYNE delivered the opinion of the Court.
These cases have been argued together, and will be decided
together. The case at law will be first considered.
On the 24th of May, 1872, the telegraph company recovered in the
Circuit Court of the United States for the District of Iowa a
judgment for the sum of $23,734.04 and costs. On the 13th of June
following, execution was issued. On the 17th of that month, the
marshal to whom the process was directed served it by attaching as
garnishees several persons, one of whom was Coykendall, the
plaintiff in error. On the 27th of October, 1873, he filed his
answer, and on the 27th of October, 1874, he filed a further
answer.
By the first answer he admitted that since he was garnished, he
had received for and paid over to the railroad company more than
$37,000. In his second answer he set forth that he was the agent of
the railroad company at Des Moines and that his duties were to sell
tickets and receive and ship freight and to receive the charges
upon such freight. For the moneys received both for tickets and
freight a large proportion belonged to other companies, but how
much he did not know. All the moneys he received were regularly
transmitted to the assistant treasurer of the Des Moines
company.
The proper apportionment of the moneys was made by the officers
of that company at Keokuk, and the Des Moines company was
accountable to the other companies for what belonged to them. He
was not in the employment of any other company or person during the
time mentioned, and was not responsible to any other company or
person for the moneys which he received, as before stated.
The gross amount received by him, between the time he was
garnished and the appointment of the receiver who took possession
of the road, was $27,000.
The case was submitted to the court, and argued by the counsel
upon both sides. The next day it was stated to the court by the
counsel for the defendant that proof could be adduced of the
proportion of the moneys in question which belonged to other
companies, and time was asked to procure it. The application was
overruled, and the court gave judgment
Page 91 U. S. 614
for $27,000 and costs. The garnishee thereupon excepted to the
ruling of the court refusing further time.
The case having been submitted to the court and argued by the
counsel of both parties, the garnishee not asking for a jury, the
record in this respect shows no error. It is to be taken that both
parties waived a trial by jury, and they are bound accordingly.
Phillips v.
Preston, 5 How. 278;
Campbell v.
Boyreau, 21 How. 224;
Kelsey
v. Forsythe, 21 How. 86. The proceeding not having
been according to the Act of March 3, 1865, this Court has no power
to examine any ruling of the court below excepted to during the
progress of the trial.
Campbell v. Boyreau, supra; 85 U.
S. Fontin, 18 Wall. 135;
Kearney v.
Case, 12 Wall. 275;
Dickinson
v. Planters' Bank, 16 Wall. 250. The only point
attempted to be presented by the bill of exceptions was the refusal
of the court to give time for the production of further evidence.
If this subject was before us in such a shape that we could
consider it, it would be a conclusive answer that the matter was
one resting in the discretion of the court. Its determination,
therefore, could not be reviewed by this tribunal.
This brings us to the examination of the case in equity.
The bill was filed to prevent by injunction the collection of
the moneys upon which the judgment in favor of the telegraph
companies was founded. There is no controversy between the parties
as to the facts.
On the 16th of February, 1857, the railroad company, by its then
corporate name, executed a mortgage, and on the 1st of October,
1868, by its corporate name as altered, executed another. Both were
given to secure the payment of its bonds as set forth. A part of
the premises described and pledged by both mortgages, besides the
road, was its income.
In case of default in the payment of interest or principal, the
mortgagees were authorized to take possession, and collect and
receive the income and earnings of the road, and apply them to the
debts secured, and, upon the request of one-third of the
bondholders, to sell the mortgaged premises.
The conditions of both mortgages having been broken, the
mortgagees in the second mortgage filed their bill of foreclosure
in the Circuit Court of Polk County, in the State of Iowa.
Page 91 U. S. 615
The mortgagees in the second mortgage -- various judgment and
lien creditors, among the former the telegraph company -- were made
defendants. On the 31st of May, 1873, a decree of foreclosure and
sale was rendered. It fixed the priorities of the several parties,
and held that the judgment of the telegraph company was a lien
subject to the mortgage in suit and other specified liens. It
ordered a sale of the mortgaged property. The road was still in
possession of the company. The decree made no provision for
disturbing their possession, and none whatever as to the income of
the road between the time of the decree and the time of the sale.
The telegraph company proceeded, as we have stated, in disposing of
the case at law. On the 20th of June, 1873, the appellants, who are
the trustees in the two mortgages, filed this bill. On the 9th of
September, 1873, after the sheriff had advertised the mortgaged
premises for sale, the decree in the state court was amended by
providing for the appointment of "a special receiver of all the
income and earnings of the road" between the date of the decree and
the time fixed by the sheriff for the sale to be made by him. This
was done with a saving of the rights of the telegraph company. The
special receiver took possession on the 15th of September, 1873.
The sale by the sheriff was made on the 17th of October, 1873. The
road was operated by the company up to the time when the receiver
took possession.
During this period, the fund was received for which judgment was
given against Coykendall.
The proceedings in the case at law having been held valid, the
telegraph company is entitled to the fund in controversy unless the
appellants have shown a better right to it. The question arises
upon the mortgages. The civil law is the springhead of the English
jurisprudence upon the subject of these securities. Originally,
according to that jurisprudence, mortgages of the class to which
those here in question belong vested the fee, subject to be
divested by the discharge of the debt at the day limited for its
payment. If default was then made, the premises were finally lost
to the debtor. In the progress of time, more liberal views
prevailed, and the debt came to be considered as the principal
thing, and the mortgage only as an
Page 91 U. S. 616
incident and security. In the present state of the law, where
there is no prohibition by statute, it is competent for the
mortgagee to pursue three remedies at the same time. He may sue on
the note or obligation, he may bring an action of ejectment, and he
may file a bill for foreclosure and sale. 1 Hill. on Mort. 9, 62;
id. 104, 111;
Andrews v. Sutton, 2 Bland,
665.
The remedy last mentioned was resorted to in the state court by
the mortgagees in the second mortgage, those in the first having
been made parties, and that mortgage thus brought before the court.
That court therefore had full jurisdiction as to the rights of all
the parties touching both instruments. It would have been competent
for the court
in limine, upon a proper showing, to appoint
a receiver and clothe him with the duty of taking charge of the
road and receiving its earnings, with such limit of time as it
might see fit to prescribe. It might have done the same thing
subsequently, during the progress of the suit. When the final
decree was made, a receiver might have been appointed and required
to receive all the income and earnings until the sale was made and
confirmed and possession delivered over to the vendee.
Nothing of this kind was done. There was simply a decree of
sale. The decree was wholly silent as to the possession and
earnings in the meantime. It follows that neither, during that
period, was in any wise affected by the action of the court.
They were as if the decree were not.
As regards the point under consideration, the decree may
therefore be laid out of view.
The stipulation renders it unnecessary to consider the amendment
to the decree.
Without that stipulation, the result would have been the same.
It could not affect rights which had attached before it was
made.
Nothing was done in the exercise of the right which the
mortgages gave to the mortgagees to intervene and take possession.
We may therefore lay out of view also both these topics.
This leaves nothing to be examined but the effect of the
mortgages, irrespective of any other consideration.
A mortgagor of real estate is not liable for rent while in
Page 91 U. S. 617
possession. 2 Kent's Com. 172. He contracts to pay interest, and
not rent. In
Chinnery v. Black, 3 Doug. 391, the mortgagor
of a ship sued for freight earned after the mortgage was given, but
unpaid. Lord Mansfield said, "Until the mortgagee takes possession,
the mortgagor is owner to all the world, and is entitled to all the
profit made." It is clearly implied in these mortgages that the
railroad company should hold possession and receive the earnings
until the mortgagees should take possession, or the proper judicial
authority should interpose. Possession draws after it the right to
receive and apply the income. Without this, the road could not be
operated and no profit could be made. Mere possession would have
been useless to all concerned. The right to apply enough of the
income to operate the road will not be questioned. The amount to be
so applied was within the discretion of the company. The same
discretion extended to the surplus. It was for the company to
decide what should be done with it. In this condition of things,
the whole fund belonged to the company and was subject to its
control. It was therefore liable to the creditors of the company as
if the mortgages did not exist. They in no wise affected it. If the
mortgagees were not satisfied, they had the remedy in their own
hands, and could at any moment invoke the aid of the law, or
interpose themselves without it. They did neither.
In
Galveston Railroad v.
Cowdrey, 11 Wall. 459, substantially the same
question arose as that we are considering. The mortgage there
contained provisions touching the income of the road similar to
those in the mortgages before us.
This Court held that, at least until after a regular demand was
made, those who received the earnings were not bound to account for
them.
See also City of Bath v. Miller, 51 Me. 341;
Noyes v. Rich, 52
id. 115.
Upon both reason and authority, we think the appellants have no
right to the fund in controversy.
Decree affirmed. Judgment affirmed.
