American Loan & Trust Co. v. East & West R. Co.

37 F. 242, 1889 U.S. App. LEXIS 2686
CourtU.S. Circuit Court for the District of Northern Alabama
DecidedJanuary 11, 1889
StatusPublished
Cited by4 cases

This text of 37 F. 242 (American Loan & Trust Co. v. East & West R. Co.) is published on Counsel Stack Legal Research, covering U.S. Circuit Court for the District of Northern Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Loan & Trust Co. v. East & West R. Co., 37 F. 242, 1889 U.S. App. LEXIS 2686 (circtndal 1889).

Opinion

Pardee, J.

On the 13th of March, 1888, James W. Schley, a citizen of Georgia, brought his bill against the East & West Railroad Company of Alabama, and the American Loán & Trust Company etal., and therein complained that he had been a contractor for the building of certain portions of the line of the East & West Railroad Company of Alabama, and ■that for the amount due him on the construction of a certain portion of the line he had recovered a judgment against said railroad company in the circuit court of Cherokee county, Ala., for the sum of $13,760 and costs of suit; that said judgment was wholly due and unpaid; that said railroad company was insolvent; and that complainant was unable, by process of execution, to collect his judgment. He further averred that in and about the construction of its line, and the maintenance thereof, the said East & West Railroad Company of Alabama had contracted and issued a bonded indebtedness for about $1,100,000, known as the “First Mortgage Bonds” of said railroad company, which said bonds were se[243]*243cured by a first mortgage or deed of trust on its said road-bed, right of way, franchises, and all other property which belonged to said company, conveying the same to said American Loan & Trust Company, as a trustee for the holders of said bonds, and that the said bonds, so secured, were issued and negotiated in the state of Now York; and that after-wards, for purposes and uses not known to the complainant, the said East & West Railroad Company of Alabama had issued and negotiated about $500,000 of what is known as “Debenture Bonds,” secured by a second mortgage or deed of trust to the same trustee, some of which wore negotiated; and that the entire bonds of the said railroad company, including both the aforesaid issues, on the 19th day of February, 1887, amounted to $1,600,000; that on or about the 19th day of February, 1887, the said railroad company issued its consolidated bonds at the rate of §15,000 a mile, and executed a deed of trust upon all its property to the said American Loan & Trust Company, which said bonds were to be deposited with the said trust company, to be certified and delivered to said railroad company only at the-rate of $15,000 per mile of road, as the same shall be completed and ready for operation. It is further averred in'said bill that, after the issue of the said consolidated bonds as aforesaid, the East & West Railroad Company gave in exchange consolidated bonds for the aforesaid debenture bonds, and that the said debenture bonds, for reasons in said bill stated, were without consideration, illegal and void, and constituted no part of the valid indebtedness of said railroad company, and that the consolidated bonds given in exchange wore also illegal and void. The relief sought by the bill was that an account bo taken by the court of the valid indebtedness of said railroad company on its said bonds and mortgages, and upon complainant’s judgment; that complainant might be decreed to have a first lien upon a certain portion of the railroad line; that said deed of trust, without specifying which one, might be foreclosed for the satisfaction and payment of the debts secured thereby, except such bonds as were illegally issued; for a receiver pending the litigation; and for general relief. To this bill the American Loan & Trust Company, specially appearing for the purpose, filed a demurrer to the jurisdiction of the court. Afterwards, on the 7th day of July, complainant filed an amendment to his bill. This amendment set forth that one Amos G . West, who had been made a party to the original bill as a holder of some of the bonds charged to he illegal, was not a necessary part}7 to the suit; and that, inasmuch as he resided in the state of Georgia, in which state the complainant resided, his presence challenged the jurisdiction, and prayed lor dismissal as to West, Upon ibis the American Loan & Trust Company renewed its demurrer. Afterwards the American Loan & Trust Company brought its bill in this court against the East & West Railroad Company of Alabama for the foreclosure of the first consolidated trust deed and mortgage, granted by the East & West Railroad Company of Alabama, and to this bill James W. Schley, Joel Brown, and S. I. Stevens were joined as parties defendant, on the ground that they claimed an interest in, or liens upon, the railroad company’s property. Complainant alleged default in the pay[244]*244ment of interest, the necessary request of bondholders to bring suit for foreclosure, the insolvency of the company, and also prayed for a receiver. Upon notice, the application for a receiver came on to be heard before the circuit judge. After hearing, all the proper parties being before the court, the court of its own motion directed and ordered “that the suit of James W. Schley against the said East & West Railroad Company of Alabama et al., pending in this court, be, and the same is hereby, consolidated with the suit of the American Loan & Trust Company, complainant, against the East & West Railroad Company of Alabama et al., without prejudice, however, to the rights of the defendants in suit of ■ Schley against the railroad company to raise any jurisdictional questions now present in the record of such suit; that in such consolidated cause the American Loan & Trust Company shall be the complainant, and the said East & West Railroad Company of Alabama, defendant; and the said Schley shall stand therein as an intervenor, and his pleadings heretofore shall be taken as pleadings sufficient for such purpose in said consolidated case.” Thereupon, on leave of the court, defendant Schley filed two pleas,—one of Ks pendens; the other in bar of the suit. By consent of counsel the said two pleas of Schley and the demurrer of the American Loan & Trust Company to Schley’s bill have been submitted to the circuit judge on briefs, and are now for decision.

1. The demurrer of the American Loan & Trust Company to Schley’s bill being on the ground that the court was without jurisdiction of the American Loan & Trust Company at the time of the commencement of the suit, however good when filed, seems now to fall by the order of consolidation, and the fact that the American Loan & Trust Company has voluntarily appeared; in fact, counsel for the trust company take this view of the matter, and ask leave to withdraw the demurrer.

2. The same result seems to follow with regard to the plea of lis pendens filed by Schley to the foreclosure bill. It is doubtful, however, whether this plea would be sufficient if the order of consolidation had not been made. It is true that Schley, in his bill for an .account and marshaling of liens, prays for a foreclosure of some deed of trust after an account shall be taken as to the valid outstanding bonds; but it is difficult to see what right he would have to a foreclosure of a mortgage in which he had no title. Besides this, although the foreclosure was prayed for by Schley, no such foreclosure could be had in his suit, unless the trust company had seen fit to ask it by -way of cross-bill. When a cross-bill is necessary to the defense of a party, he must file it to establish his defense. When a cross-bill is necessary to bring the parties before the court in order that equity may be done, the court may order one filed; but where a party is merely entitled to a cross-bill in order to obtain affirmative relief, he may or may not file it, at his discretion, and without prejudice to his rights.

3. The plea in bar filed by Schley is based on section 4, art. 14, of the constitution of Alabama, as follows:

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Cite This Page — Counsel Stack

Bluebook (online)
37 F. 242, 1889 U.S. App. LEXIS 2686, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-loan-trust-co-v-east-west-r-co-circtndal-1889.