k
Circuit Court of the
0
DISTRICT OF NEW HAMPSHIRE.
mercantile trust company
VS.
m
ie Pimm am
using
(I Willi?«ais,
HEARII& 01 BILL. AISWERS AID PR00ES.
ABSTRACT AND POINTS IN BEHALF OF NATHAN WEBB,
SAMUEL E. SPRING AND WESTON F. MILLIKEN,
Trustees.
H. Thurston & Co., Printers.
Cimtif Court of tin Slniteir States.
u
DISTRICT OF NEW HAMPSHIRE.
Mercantile Trust Company
v.
The Portland & Ogdensburg Railroad Company et als.
> -• ^
Abstract and Points in behalf of Nathan Webb, Samuel
E. Spring and Weston F. Milliken, Trustees.
This bill was filed January 25th, a.d. 1881, in behalf of the
complainant and of other bondholders secured by the mortgage
from the Portland and Ogdensburg Railroad Company to said
Webb, Spring and Milliken, dated November 1st, a.d. 1871.
A supplemental bill was filed April 20, a.d. 1882.
A copy of the mortgage of November 1st, a.d. 1871, is attached
to the original bill, pp. 8 to 12.
Originally George F. Emery was one of the trustees to whom
the mortgage ran; but Nathan Webb was duly appointed and
constituted his successor, as alleged in the supplemental bill, p. 6,
and admitted by all the answers, and as appears by the papers
referred to on p. 172, under paragraphs 2 and 3.
2
i
As incidental to the mortgage of November 1st, a.d. 1871, have
been executed mortgages of all personal property of the Company,
dated February 25th, a.d. 1884, as appears by paragraph 4, on
p. 172, and of certain lands in Portland as appears by the deeds
from the corporation, dated April 1st, a.d. 1882, and May 15th,
a.d. 1882, appearing on pp. 211, 212 and 213.
It appears by testimony of Dana, p. 56, that the whole amount
of bonds issued and outstanding, secured by the mortgage of No¬
vember 1st, a.d. 1871, is two millions, four hundred and ninety-
five thousand, five hundred (2,495,500) dollars of principal, besides
coupons.
Of these the bill alleges, and it is admitted, that the Mercantile
Trust Company holds bonds to the principal sum of eighty
thousand (80,000) dollars; and the petition of the City of Port¬
land for leave to intervene, filed June 3, a.d. 1884, p. 199, alleges
that the City holds bonds to the amount of thirteen hundred
and fifty thousand (1,350,000) dollars of principal, and this is
admitted on p. 174.
Breach of condition of the mortgage is alleged and admitted.
The legislation of the State of Maine is as follows:
The Act to incorporate the Portland & Ogdensburg Railroad
Company, approved Februaiy 11th, a.d. 1867, in its first section
authorizes the location and construction of a railroad "from
some point in the City of Portland, or from some point upon the
line of any railroad in the counties of Cumberland or York, ex¬
tending northerly- or westerly from said city, to such place upon
the west line of the State as may be found expedient for the pur¬
pose of forming a connection with the railroad to be constructed
from such place westerly or northwesterly to the east line of the
State of Vermont,"—thus looking for the inter-state line which was
subsequently constructed by this corporation.
3
The Act additional to the above Act, approved February 28th,
1868, authorized the corporation to " consolidate the management
of, or enter into or execute a contract with" sundry railroad
corporations previously chartered by the States of New Hamp¬
shire and Vermont, and "with any other railroad company or
companies now incorporated, or which may hereafter be incorpor¬
ated within the States of Maine, New Hampshire, Vermont and
New York, between Portland, in the State of Maine, running
northwesterly toward the Niagara River, in the State of New
York;" and the Act proceeds: " Said Portland & Ogdensburg"
Railroad Company may purchase any or all of said railroads or
take a lease or leases of one or more of them," . . "and the said
Portland & Ogdensburg Railroad Company, in order to carry in¬
to effect any contract, purchase or lease that it may become a
party to under the above authority, may issue its bonds or other
securities, or guarantee the payment of the bonds or other secu¬
rities of such railroad company or companies as it may contract
with, may purchase, or lease, under the authority herein contained."
At that time there had been incorporated within the State of
New Hampshire, as a part of this proposed inter-state line, an in¬
dependent corparation known as the Portland, White Mountains
and Ogdensburg Railroad; but this latter corporation was au¬
thorized by the Act of New Hampshire, approved July 7th, a.d.
1869, hereinafter rererred to, to abandon its franchises, and did
so abandon them.
In pursuance of the same general purpose of establishing an
inter-state line, and in order to enable the Portland & Oldens-
burg Railroad Company to avail itself of the rights given it by
the legislature of New Hampshire as hereafter shown, the legis¬
lature of Maine passed another Act additional to the Charter of
the Corporation, approved February 15, a.d. 1871, and therein
provided, that the corporation "is hereby invested with power
and authority to continue and prolong its railroad beyond the
4
line of this State, through the State of New Hampshire to the
eastern line of the State of Vermont, and to purchase, take and
hold lands, or the right of ways over lands for the purposes of
said railroad without the limits of this State, to said line of Ver¬
mont, with the same powers and privileges granted by the Act to
incorporate said company and Acts additional thereto heretofore
enacted, subject to the conditions and regulations that have been
or may be prescribed by the laws of New Hampshire."
There was some subsequent legislation not necessaiy to recite
here.
The route of the corporation extends from the harbor at
Portland, in the state of Maine through the states of Maine and
New Hampshire to the east line of the state of Vermont.
It appears at the bottom of p. 14, that a portion of the road
has been built and is running from Portland, in the state of
Maine westerly to Fabyans, in the state of New Hampshire,
running through the towns of Conway and Bartlett, and the notch
of the White Mountains in New Hampshire, this being a distance
of eighty-eight and 90-100 miles; that from the Fabyan House
to Scott's Mills there is a gap, which Hamilton says, page 81,
is twenty and one-half miles long, and that the road has been con¬
structed and is running from Scott's Mills to the east line of the
state of Vermont, a distance of two and 82-100 miles, making
a total length of road built and in operation, ninety-one and
22-100 miles.
S. J. Anderson, president of the corporation, describes the road
and its history, p. 129, as follows:
"Starting from Portland, it runs up the valley of the Presump-
scot river to Lake Sebago, 17 miles; thence across the divide to
the valley of the Saco river, about 8 miles to Steep Falls; thence
5
up the valley of the Saco to North Conway and to Bartlett line,
comprising what is called here the " A Division," being about 60
miles; thence to Upper Bartlett; thence through the Crawford
Notch of the White Mountains to Fabyan's, a distance of about
29 miles from the end of the "A Division " ; from that point the
road has been located, but not built to Dalton, a place called
Scott's Mills ; thence the road was built two and one-third miles
and across the Connecticut river to the eastern boundry of the
State of Vermont. It was open to Sebago Lake, Sept. 19, 1870 ;
Steep Falls, Nov. 9, 1870; West Baldwin, Dec. 26, 1870; Frye-
burg, June 6, 1871; North Conway, Aug. 10, 1871; Upper Bart¬
lett, Aug. 5, 1873; Bemis Station, Aug. 31, 1873; Fabyan's,
Aug. 7, 1875; and the link between Scott's Mills and Lunen¬
burg, Dec. 22, 1875."
i
The many tables and computations, pp. 147 and 148, show that
the line is doing a large and increasing business, though the par¬
ties are at issue as to which particular portion of the line is prof¬
itable. We cannot state details about this understandingly till
we reach the point for making application of them.
It appears, p. 45, by answer of John F. Anderson, No. 6, that
the distance from the line between Bartlett and Conway to the
Fabyan House is twenty-seven and about 60-100ths miles, making
the portions of the road constructed and in operation in New
Hampshire between the west line of Conway and east line of
Vermont twenty-nine and 92-100 miles.
*
The town of Bartlett lies westerly of Conway, or between it
and Fabyans, and Conway lies between Bartlett and Fryeburg in
the state of Maine, which is the most westerly and last town in
Maine through which the railroad passes in its westerly course.
The length of the line through Conway is eleven miles, Supple¬
mental Bill, p. 4.
6
It also appears by evidence of Mr. Anderson, pp. 45 and 46,
that there is a junction with the Eastern Railroad in the town of
Conway, between the line of the State of Maine and the line of
the town of Bartlett, and that the distance from this junction to
the Bartlett line is 87-100 miles; and from the North Conway
station to Bartlett line is two and 24-100 miles.
And it further appears on p. 46, by the same witness, that it
would cost from ten thousand to fifteen thousand dollars to build
a connection between the junction aforesaid and the Bartlett line.
The bill sets up and on p. 164 appears a mortgage from the
same corporation to Woodbury Davis, Samuel E. Spring and
Weston F. Milliken, dated November 1st, a.d. 1870, on the part
of the road between the harbor at Portland and the line between
Conway and Bartlett, securing bonds to the amount of eight
hundred thousand dollars; and this mortgage is prior in lien to
the mortgage of Nov. 1, a.d. 1871, on this sixty-one miles, in¬
cluding all that portion which traverses the town of Conway.
It appears on pp. 214 and 175 that Woodbury Davis is de¬
ceased, and that Philip Henry Brown has been constituted his
successor under the last-named mortgage.
It is alleged in the original bill, pp. 3 and 4, that the amount of
bonds issued and outstanding under this mortgage is eight hun¬
dred thousand dollars, and that all the coupons secured by this
mortgage have been paid; but it is a fact that the coupons due
January 1st, a.d. 1884, and July 1st, a.d. 1884, remain unpaid.
These coupons amount to forty-eight thousand dollars, beside
interest accumulated on the same since tliev came due.
%/
On p. 219 it is agreed that there is also a mortgage upon the
whole line, dated January 1st, a.d. 1875, executed December 21st,
7
a.d. 1875 to Luke P. Poland, Israel Washburn jr., Philip H.
Brown, this being subject to the mortgage of November 1st, a.d.
1871, that Israel Washburn jr., is deceased, and no person has
been appointed trustee in his place.
The city of Portland has filed a petition to intervene as party
complainant, which appears on page 199; and its petition was
allowed June 4th, a.d. 1884. Upon this intervention it filed a
petition, appearing on pages 192 to 198, asking that Philip Henry
Brown, as trustee under the mortgage dated November 1st, a.d.
1870 and under that dated January 1st, a.d. 1875, Luke P. Poland
as trustee under the last named mortgage, Samuel E. Spring,
Weston F. Milliken and Nathan Webb as trustees under the first
named mortgage, should be made parties respondents in this bill.
An order was granted, appearing on page 208, making them parties
as requested, and providing for the service of the order in the
manner required by the statutes of the United States. Service of
the order is proved on page 210.
Therefore, it seems now that all the parties necessary to a bill
of foreclosure have been brought into this case.
The prayer of the supplemental bill on page 9, contains among
other things, the following, viz : " That said Railroad Company
may be decreed to pay to your orator such sum as may be found
due and owing unto your orator as interest, by a day named, to¬
gether with costs of suit; and in default of such payment, that
said Portland & Ogdensburg Railroad Company may be absolutely
barred and foreclosed of and from all right and equity of redemp¬
tion in and to said mortgaged premises and property lying and
being in the state of New Hampshire ; and that your orator may
be decreed to have possession of the same, and be decreed to en¬
joy and exercise whatever franchise belongs to said company, to
own, maintain and operate the same, so far as it lies in the state
of New Hampshire. And, whenever, by appropriate proceeding,
8
your orator shall have obtained a decree of foreclosure of the
t
property so conveyed by said mortgage deed that lies in the state
of Maine, or shall by any lawful means have obtained possession
of and right to control said road in Maine and New Hampshire,
then that your orator may have right to deal with and control and
possess all of said property in the states of Maine and New Hamp¬
shire, as fully as the said company might, had no default been
made under said trust deed."
It will be noted that this is the proper form of prayer for a
strict foreclosure.
Also that this prays for foreclosure of all and only that portion
of the road lying within the State of New Hampshire, including
the portion through Conway covered by the prior mortgage.
It will further be noted^ -that by applying the figures already
given, that as the mortgage of November 1st, A.D. 1870, extends
from Portland harbor to the Conway line at Bartlett, it covers
sixty-one and 41-100ths miles of the road, which is the trunk,
and includes the valuable terminal facilities at Portland, and
also includes that portion of the road, say 87-100ths miles, be¬
tween the junction of the Eastern Railroad at Conway and the
Bartlett line, and all that portion of road extending through
the town of Conway, being about eleven miles; and that
the mortgage of November 1st, A.D. 1871, is therefore a second
mortgage on the sixty-one and 41-lOOths miles aforesaid with the
said terminal facilities, and is a first mortgage on twenty-seven
and 46-100ths miles of road only, all this being in the State of
New Hampshire, separated from the Eastern Railroad Junction
by the distance of 87-lOOths miles, and broken into two divisions,
the two divisions being united by using the Boston, Concord &
Montreal road-bed, as is stated by Mr. John F. Anderson, on. p.
47), ans. 8.
9
It may be assumed, however, that the mortgage of November
1st, A.D. 1871, is a prior lien upon the right of locating and con¬
structing in New Hampshire between the two divisions named.
Under these circumstances the City of Portland, by its supple¬
mental petition asking a decree different from that asked by the
bill, prays the Court at the bottom of p. 197 to decree k4a fore¬
closure of the whole of said railroad within the states of Maine
and New Hampshire, with all its franchises and appurtenances
and all other property embraced in said mortgages and deeds to
said Spring, Milliken and Webb, as such trustees."
Spring, Milliken and Webb as trustees under the mortgage
of November 1st, A.D. 1871, here ask the Court to grant the re¬
lief as prayed for by the City of Portland, because upo*i full in¬
vestigation they believe the same to be for the interest of the
bond-holders whom they represent; as appears by the statement
of Nathan Webb, p. 190, which it is agreed, p. 174, shall be used
in this case as a deposition.
The points taken by said Spring, Milliken and Webb, to which
they call the attention of the Court are as follows:
1 That the decree of foreclosure shall be as prayed for by the
City of Portland of the whole line and its appurtenant property.
2 That the decree should be for strict foreclosure, giving the
corporation not over six months for redemption after entering the
decree of foreclosure.
8 Inasmuch as the bond-holders after foreclosure may organ¬
ize as a corporation under the laws of Maine as hereafter explain¬
ed, that the bill may be retained until such corporation is formed,
and that then the trustees, upon payment of their expenses and
10
being indemnified against all claims, shall be ordered to convey to
said corporation.
4. That all the acts, accounts and liabilities of the Receiver
appointed in this cause, and his certificates issued in accordance
with the decrees of the Court, all of which appear by the de¬
crees on pp. 203 and 210, shall be fully protected and provided
for in the final decree.
As to the first point, it is stipulated on pp. 174 and 175, that all
statutes passed by the legislatures of Maine and New Hampshire
relative to the Portland and Ogdensburg Railroad Company are
in the case as evidence, but need not be printed.
The fir$t section of the statute of New Hampshire approved
July 7, A.D. 1869, entitled "An act to grant a Right of Way
through this State to the Portland and Ogdensburg Railroad Cor¬
poration," states that " the Portland and Ogdensburg Railroad
Company is hereby made and constituted a corporation within
this state," thereby affording some ground for claiming that there
was a creation of a new corporation.
But by the same section the corporation legislated about is
described as "incorporated by the legislature of Maine."
Moreover the second section says, " said corporation is hereby
authorized to continue and prolong its railroad agreeably to the
provisions of its charter." Now as there was no previous charter
in New Hampshire, the words "said corporation" and "its rail¬
road " and " its charter " necessarily applied to the Maine crea¬
ture; so that the fair construction of the whole taken together, is
that the Maine corporation was "made and constituted," that is,
"recognized" as a corporation in New Hampshire, and was au¬
thorized to prolong its railroad in New Hampshire agreeably to
11
the provisions of the charter which it derived from the state of
Maine.
Moreover this Act not only fails to create a corporation by
naming individuals as corporators, but it fails to provide any offi¬
cers as directors, treasurer, clerk or. other officers, or any capital
stock; consequently if the legislature of New Hampshire created
a new corporation, it was a most singular creation with reference
to these matters.
The proviso at the close of section 8 is noticeable, reading as
follows: "Provided that said Portland & Ogdensburg Railroad
Co. shall by accepting this act," etc. If there was to be a
new corporation in New Hampshire, the natural course would
be that the persons named in it as corporators and their
associates would accept the act; but this provision that the said
Portland & Ogdensburg Railroad Co. (meaning of course the
Portland & Ogdensburg R. R. Co. chartered by Maine, because
there was no other Portland & Ogdensburg R. R. Co.), should
accept the act, indicates beyond question that the act was a mere
appendage to the Maine charter, and this is precisely the same
form of expression which would have been used in an act of the
legislature of Maine additional to the charter of the corporation.
It is true the close of section 5 uses the words " other railroads
incorporated by the legislature of the state." But on the other
hand the whole frame of sections 5 and 6 together indicates, that
this was not a railroad incorporated by the legislature of New
Hampshire technically speaking ; because had it been, said sec¬
tions 5 and 6 would have been surplusage,—see General Laws of
New Hampshire, chapter 160, sections 8 and 28, and chapter 164,
formerly chapter 150 of the General Statutes of New Hampshire.
Also it must have some weight that the title of this act is "an
Act to grant a Right of Way through this State to the Portland
& Ogdensburg Railroad Corporation."
12
Again, the New Hampshire act of a.d. 1871, entitled uan Act
additional," etc., provides that the Portland & Ogdensburg Rail¬
road Company "incorporated by the legislature of the state of
Maine," may issue its bonds, etc. Although in the same sentence it
uses the words u made and constituted a corporation within this
state," yet it clearly recognizes the Portland & Ogdensburg R.
R. Co. of Maine as-the corporation authorized to issue the bonds
and secure them by mortgage; and the bonds and mortgage thus
issued are the same in question in this suit. This act of a.d. 1871
by its terms ratified the mortgage of November 1st, 1870, which
purports upon its face to have been given by a Maine corporation
exclusively.
So there seems to be no way of reconciling the phraseology, ex¬
cept by understanding the words " made and constituted " as hav¬
ing a qualified signification, so as to be equivalent to the words
" recognized and authorized, " the legal effect being the same as
the legal effect in Railroad Co. v. Harris, 12 Wallace, p. 65.
The New Hampshire act of July 10,1877, c. 165, relating to the
same corporation has some weight. It says "the Portland & Og¬
densburg Railroad Co. is authorized to mortgage from time to
time its property and franchises within this State "—the last three
words implying that the same corporation has franchises without
the State. Further on it says " that no statute of this State shall
be construed as applying to any stock issued by said corporation,
with the consent of the legislature of Maine;" which latter words
are only appropriate to a corporation deriving its existence from
the legislature of Maine.
The difference between this form of legislation, which we claim
simply recognizes and authorizes the execution within the state of
New Hampshire of a previous license granted by the State of
Maine and is nothing more than the exercise of express comity by
the legislature of New Hampshire, and legislation which establish-
13
es a corporation with a fictitious double citizenship can be seen by
examining the phraseology of the act of a.d. 1848, chapter 103,
of the state of Maine, authorizing the union of the Great Falls
and South Berwick Branch Railroad Company of Maine, and the
Great Falls and Conway Railroad Company of New Hampshire ;
and can also be seen by examining the statutes organizing the
Boston and Maine Railroad, as explained in the opinion of Judge
Lowell, in Home vs. Boston and Maine Railroad Company, 18
Federal Reporter, p. 50.
In the case of Callahan v. Louisville and Nashville Railroad
Company, Federal Reporter, vol. II, p. 536, the act of Tennessee
was construed as simply giving a right of way, although it was
entitled "An Act to incorporate the Louisville and Nashville
Railroad Company," see page 538; and the Court says on the
same page: " We de not find anywhere in this Act terms confer¬
ring corporate powers upon the Louisville and Nashville Railroad
Company. No one is named as an incorporator, nor 'are there
any of the common words employed by which legislative bodies
are in the habit of creating corporate existence; it is merely the
right of way that is granted a corporation, already in the enjoy¬
ment of full corporate life and power under its charter from Ken¬
tucky, to construct its track from the state line to the city of
Nashville."
In the particulars named by the Court, the act of Tennessee
was exactly like the acts of New Hampshire in this case.
Railroad Co. vs. Vance, 96 U.S. p. 450, is distinguishable. On
p. 457 the court saj^s, " the act gives the style by which the cor¬
poration shall be known." The New Hampshire act gives no
name, but simply distinguishes the company as " the Portland &
Ogdensburg R. R. Co. incorporated by the legislature of the State
of Maine. Again, in Railroad Co. v. Vance the court says, p. 457,
14
" the statute does not authorize the complainant corporation to
exercise in Illinois the corporate powers granted by the laws of
Indiana;" while on the other hand the New Hampshire act of
A.D., 1869, section 2, expressly says, the corporation is authorized
to "prolong its Railroad agreeably to the provisions of its charter,"
—meaning of course, the Maine charter.
Likewise Memphis & Charleston R. R. Co. v. Alabama, 107 U.
S. p. 581, is distinguishable by a great many expressions contained
in the Alabama legislation, not found in the New Hampshire legis¬
lation, beginning even with the title of the act, which in Alabama
is given as "an act to incorporate," while in New Hampshire it is
given as "an act to grant a right of way."
We claim, however, the practical result would not be changed
even if our construction of the statutes of New Hampshire is not
correct. " Whether there are two distinct corporations or only
one undeijthe charters granted bjT the two legislatures, there was
but one mortgage and that embraced the whole railroad."
This is the decided law in Maine.
Wood v. Goodwin, 49 Me., pp. 260 and 267.
In Wilrner v. The Atlanta & C. R. R. Co. 2 Woods, pp. 409,
417, which was the case of two states uniting by concurrent legis¬
lation in creating a consolidated corporation, Judge Woods said:
"It seems to me quite clear, that the purpose of the legislation of
Georgia and South Carolina in reference to this corporation al¬
ready set out in this opinion, was to get a single corporate body,"
and he quotes the language of Railroad Company v. Harris, 12
Wallace, p. 82, already cited, where the Supreme Court says:
"We see no reason why several states cannot by competent, legis¬
lation unite in creating the same corporation, or in combining
several pre-existing corporations into a single one."
15
The next in order of time is the case of Muller v. Dows, 91
U. S., p. 441; which case is also an important authority in
regard to the power of the U. S. Circuit Court, sitting in New
Hampshire, to foreclose the whole mortgage with reference to the
whole line from the Atlantic to the Connecticut river. That was
a case of two different railroads created originally by separate
legislation in Missouri and Iowa; afterward, by concurrent legis¬
lation, the two corporations were consolidated into the Chicago
and Southwestern Railroad Company, constructed the road
through both states, and executed a single mortgage upon the
whole line. %
Upon a bill filed in the Circuit Court of the United States for
the district of Iowa, the Court held, that within the district of
Iowa the corporation should be regarded as a citizen of Iowa, and
in that case the Supreme Court affirmed the decree of the Circuit
Court foreclosing a mortgage over the whole line in both states,
and on p. 447, says: " The two companies became one, but in the
state of Iowa that one was an Iowa corporation, existing under
the laws of that state alone."
The case next in order of time is that of the C. & W. I. Ry.
Co. v. the L. S. & M. S. Ry. Co., 5 Federal Reporter, p. 19, de¬
cided January 6, a d. 1881, a case of Railway corporations con¬
solidated by concurrent legislation, in which Judge Drummond
says, on p. 21: "The corporation of each State became an inte¬
gral part of the consolidated railway company between
Buffalo and Chicago, whose interests were in common, and yet as
regards the respective corporations each was a legal entity exist¬
ing by virtue of the laws in the state of its creation."
In Copeland v. the Railroad Company, 8 Woods, pp. 651, 657
a.d. 1878, Judge Woods says: "If, however, the legislatures of
both states were to make one corporation only, there is no le¬
gal nor constitutional necessity for treating it as two corporations
in suit or proceedings by or against it."
16
We next have the case of Graham v. The Boston, Hartford &
Erie R. R. Co., 14 Federal Reporter, p. 753, a corporation created
by concurrent legislation of several States, in which Judge Nel¬
son, on p. 757, says, "In such cases, the corporation has a com¬
mon stock, the same shareholders and officers, the same propert}7,
and a single organization, and is, for most purposes, one corpora¬
tion." It ought to be said in this connection that it appears in
this case, the mortgage of the whole line running through four
States was foreclosed by the decree of the Supreme Court of
Massachusetts alone; and on p. 760, Judge Nelson says: "The
case thus presented shows that prior to the filing of this bill, un¬
der a decree of a court of equity having jurisdiction of the par¬
ties and of the subject-matter, the mortgage had been completely
foreclosed." The appointment of this receiver was made in Ellis
v. The B., H & E. R. R., 107 Mass. p. 1, cited and approved in
Wilmer v. The Railway Co., ante.
The last case upon this point is Home v. The Boston & Maine
R. R. Co., ante, decided Oct. 1, A.D. 1883, in which Judge Low¬
ell, upon p. 51 and again on p. 52, declares distinctly that such
consolidations create but one corporation, and the theory, that for
the purpose of jurisdiction they constitute several corporations
in the States concurring in their creation, is a "useful fiction."
The cases of Muller v. Dows, ante, and Wilmer v. Railway Co.,
ante, show beyond question, it is within the power of the Circuit
Court of the United States in the district of New Hampshire to
decree a foreclosure of the whole mortgage over the whole line
from the Atlantic to the'Connecticut River.
There can be no question of jurisdiction, either if 1st, this is
strictly a Maine corporation, or 2d, a consolidated corporation,
because :
A It is clear that under the legislation of New Hampshire
jurisdiction is reserved in New Hampshire, even if it were a
Maine corporation.
IT
B Upon the same hypothesis, inasmuch as it exercises
franchises granted by New Hampshire, operates a railroad in
that State and thus transact a permanent business therein, it is
for the purposes of jurisdiction in the United States Courts
" found" in that district, according to the present well settled
views of the Supreme Court.
C The corporation has appeared in the case without objection,
and this becomes subject to the jurisdiction.
D In the case of Ewing v. Ewing, Appeal Cases, v. 9, p. 34,
the House of Lords affirmed the jurisdiction of an English Court
to administer trusts of a will as to a whole estate, both real and
personal, lying partly in England and partly in Scotland, al¬
though the testator was domiciled in Scotland, and only part of
the executors or trustees resided in England, the Courts of Scot¬
land not having moved in the matter ; reserving only the follow¬
ing, as appears in the opinion of Lord Blackburn, on p. 48:
"Quite consistently with this, it may be that the Court of
Chancery may think it a fit direction by the trustees to obey and
follow the judgment given in the Scotch Court on some particu¬
lar question."
E Upon the hypothesis that this is a consolidated corporation,
then by all the cases cited and many others that might be cited,
the courts in either State or either district have complete juris¬
diction over the corporation for all purposes of litigation* in civil
suits.
As already said, these cases are summed up by Judge Lowell
in Home v. The Boston & Maine Railroad, ante, showing that
the only effect of the " useful fiction " is to bar the corporation
from escaping the jurisdiction of the various States to whose con¬
current legislation it owes its existence.
18
It seems to us therefore that the forgoing cases and principles,
in any view of these charters, fully establish the jurisdiction of
this Court over the whole line of this railroad; and our next po¬
sition under this first point is. that the mortgage under considera¬
tion, whatever the nature of the charters, is a single mortgage.
In other words as there is a common jurisdiction, so the mortgage
is common and indivisible both by its terms and inherent nature.
Such the mortgage, p. 9, of the original Bill, clearly purports
to be upon its face. The corporation is described in the mortgage
as a corporation, " duly established, under the laws of the State
of Maine, and authorized and empowered by the legislature of
the State of Maine, to construct and extend its railroad across
the State of New Hampshire, subject to the laws of said State
relating to railroads, and having its principal office for the trans¬
action of business at Portland, County of Cumberland, and
State of Maine;" and throughout the mortgage everything is
described as single, namely, a single railroad and a single fran¬
chise, without any intimation or suggestion whatever that there
was anything of a two-fold character embraced within its terms.
The New Hampshire act of a.d. 1869, seems to us again and
again to recognize this unity, especially in the second section, auth¬
orizing the corporation to " continue and prolong its railroad
agreeably to the provisions of its charterand the Maine statute
of a.d. 1871, already referred to, uses the same language, giving
the corporation " power and authority to continue and prolong
its railroad beyond the line of this State of Vermont," and
recognizes the'concurrent legislation of New Hampshire, by mak¬
ing the prolongation of its railroad "subject to the conditions
and regulations that have been or may be prescribed by the
laws of New Hampshire."
Under the Statutes of Maine, no special authority was required
for the mortgage in question, so that no Statute specifically per-
19
mitted its existence; but the New Hampshire Act of July, 1871,
already referred to, clearly contemplates a single mortgage of the
whole line with its equipment and franchise.
*
This point seems so clear that nothing, except to us the great im¬
portance of the case, would seem to justify us in rehearsing to
the Court these provisions of Statute.
To conclude this part of our Brief, we refer again to the case
of Wood v. Goodwin, ante, where the Supreme Court of the
State of Maine, p. 267, says: "A part of the railroad is within
this State and the other part in New Hampshire. Whether there
were two distinct corporations or only one under the charters
granted by the two legislatures, there was but one mortgage, and
that embraced the whole railroad. . . . The mortgage em¬
bracing the whole railroad, both within this State and New
Hampshire, the plaintiff must redeem the whole if any.
For the mortgagees have a lien upon every part of the railroad to
secure every part of the debt."
These expressions came directly in point in that case, and the
Court directly held that the mortgage upon the whole line of
the road in both states was but one mortgage, and embraced the
whole railroad, so that if the complainant who had acquired the
equity in one state, was entitled and holden to redeem the whole
line in both states.
This case is a significant application of the principle which
we claim determines the nature of the mortgage at bar.
If, then, we are right, that this Court has jurisdiction over the
whole line, and that the mortgage over the whole line is a unit,
there comes a further question under our first point, whether the
Court in foreclosing that mortgage can proceed according to the
general principles of equity jurispudence, or is bound to apply
20
the local discordant laws of the two States through which the road
runs. In other words, the practical question is, whether the
Court can administer relief which shall keep the line as a whole
or is compelled to break into parts; because what the mortgage
unites, the peculiar laws of the States of Maine and New Hamp¬
shire, if applied locally, would inevitably dissever.
There seems to be no middle ground, because the Court cannot
upon general principles apply to the part of the railroad in New
Hampshire the local laws of Maine, nor vice versa; and we have
not been able to find anything in any statute excepting this case
on this point from general principles.
We claim that neither the local legislation of Maine, nor of
New Hampshire is applicable to this case; but that the Court
should apply in foreclosing the line the general principles of
equity.
So far as our claim relates to the part of the line which is with¬
in New Hampshire, we presume this will not be contested; as in
that State there seems to be no statute determining the method
of foreclosing railroad mortgages.
In the absence of such statutes we understand it to be gen¬
erally held that the statutes relative to foreclosing mortgages of
real estate are neither applicable nor adequate.
This precise point seems to have arisen in Dow v. Memphis &
L. R. R. Company, 20 Fed. Reporter, p. 200.
The Court says: "The mortgage embraces real, personal and
mixed property, and the proper remedy is in equity where the
contract rights of the mortgagees can be specifically enforced. . .
Ejectment will not lie for personal property, records and choses
in action. The railroad is in entirety, composed of real estate
and personal property. For railroad purposes, its real estate
21
would be valueless without the rolling stock and other personal
property; and, on the other hand, the rolling stock and personal
property would be of no utility for railroad purposes without the
road-bed, track and stations. The forms and processes of a
Court of law are not flexible enough to transfer the possession of
the mortgaged property as a whole, and the mortgage does not
contemplate its separation."
/
The Supreme Court of Massachusetts evidently considered that
the remedy was by bill, and that there was 110 adequate and com¬
plete remedy at law in such cases.
Shaw v. The Railroad Company, 5 Gray, pp. 162 and 183.
In the State of Maine the mode of foreclosing mortgage^ by
bill of equity has never been known.
Kennebec & Portland Railroad Co. v. The Portland & Kenne¬
bec Railroad Co., 59 Maine, pp. 9 and 81.
It may perhaps be inferred from the same page, that this was in
consequence of the limited jurisdiction in equity in that State.
Since that decision, the legislature has conferred upon the Su¬
preme Court of the State full equity jurisdiction; and it may
be that the Court would now hold, there is equity jurisdiction to
foreclose railroad mortgages.
O11 page 26, the Court stated with reference to railroad
mortgages, " That whatever came under the name of real estate
might be foreclosed under the statute relating to real estate, and
whatever was personal estate would be foreclosed in sixty days,"
in accordance with the statutes relating to personal proporty.
This was a necessity of the law as it then stood; but was, how¬
ever, so inadequate as a remedy that the legislature enacted the
Statute of A.i). 1857, which we will soon explain.
22
We think we might maintain, if the question should come again
before the Supreme Court of Maine, now that it has full equit}^
jurisdiction, the Court could hold, that the remedy given by the
Statute of A.D. 1857, is only cumulative and that there is also a
full relief in equity.
The Statute of Maine providing that the foreclosure of mort¬
gages of real estate referred to in the case last mentioned, is found
in the present Revised Statutes of A.D. 1884, chapter 90. Every
form of foreclosure given in that chapter requires a record in the
Registry of Deeds in the district or county where the railroad is ;
so that it could not possibly have application to foreclosing fran¬
chises which, by the very terms of the grant of the franchises
from the Maine legislature, extend and have locality beyond the
counties and districts contemplated by the Statute in question.
We shall revert to this principle, however, more fully hereafter,—
simply adding further, that although the Supreme Court of the
State of Maine, in the case referred to, finding it had no jurisdic¬
tion in equity to foreclose a railroad mortgage or any other mort¬
gage, and finding no other provision in the laws of Maine for
foreclosing railroad mortgages, under the stress of this necessity
made the ruling cited, yet even at the time of that decision, when
as we have seen, the Court so ruled because it was forced into a
dilemma, it could not be seriously claimed, even in such dilemma,
the Court could possibly have thought the ancient Statutes relat¬
ing to mortgages of real estate had any application to franchises
of an inter-state nature.
By the Act of A.D. 1857, chapter 57, the legislature of Maine
provided a means of foreclosing railroad mortgages ; this Statute
and its amendments are embodied in the present Revised Statutes,
chapter 51, §§ 85 to 112, each inclusive.
It seems to us clear that these provisions were not intended to
reach mortgages like this at bar, because:
23
A Section 91 follows the principle of the ancient Statutes
relative to foreclosing mortgages of real estate, and provides that
the notice of foreclosure shall be published and recorded in
each county in which the road extends, of course having refer¬
ence only to counties in the State of Maine, and therefore limit¬
ing this method of foreclosure to franchises entirely within such
counties.
B Section 107 provides, "The original corporation shall exist
after the foreclosure of the mortgage for the sole purpose of clos¬
ing its unsettled business." This is impossible, as applied to a
corporation owning a railroad extending into another State.
C Section 111 provides, "The capital stock of such new cor¬
poration shall be equal to the amount of unpaid bonds and over¬
due coupons secured by such mortgage, taken at their face at the
time of the organization of the new corporation, together with
the amount required to redeem all prior mortgages " ; so the re¬
sult would be, that under this section unpaid bonds and overdue
coupons would be entirely absorbed and capitalized by that por¬
tion of the railroad which was within the State of Maine, leaving
no claim in the hands of the bond-holders to represent the portion
m the State of New Hampshire; and the bond-holders, by this
section, would have lost their claims to that portion, while the
corporation by section 107 would be incapacitated from operating
it. -
Indeed it seems to us clear beyond question, that the whole
frame of these Statutes show they contemplated only local rail¬
roads ; that they neither have application to nor are adequate for
adjusting the affairs of inter-state railroads; and that the whole
result in Maine leaves us where we find ourselves in New Hamp¬
shire, namely, without any local provisions whatever seeking to
restrain this Court, or which could be set up as restraining this
Court, either by their letter or spirit, from proceeding in this case
according to the general principles of equity jurisprudence.
24
Conceding however, this is not as we claim, the result would be
that we have here an inter-state railway, deriving its existence
from the voluntary concurrent action of the legislatures of the
, two States, which have united in granting common franchises and
in authorizing a common mortgage upon the whole line; but that
each State has different local systems for granting relief to the
holders of bonds issued and accepted upon the faith of this legis¬
lation, so that the application of such legislative relief according
to their terms, would dissever and break up what has been granted
as a unit.
Is the Circuit Court bound to administer these local laws? or,
having jurisdiction of the whole line, may it proceed to adminis¬
ter the whole according to fundamental principles, which would
certainly have existence in each State except for peculiar local
regulations ?
Our position is, that it is not so bound.
A The nature of this property which this Court is called upon to
administer in this suit is well described by Judge Hill in Farmer's
Loan and Trust Co. v. Stone, 20 Fed. Reporter, pp. 270 and 275
as follows : u As already stated the Mobile & Ohio Railroad was
designed to be and was chartered by the legislatures of Alabama,
Mississippi, Tennessee, and Kentucky, all acting separately to be
sure, but with one common purpose, and that was to constitute
one corporate body for the maintenance of a great commercial
highway by communication and transportation from Mobile,
Alabama to Cairo, Illinois, and thus to connect with all the com¬
mercial highways converging at those points. It is not, therefore,
a mere local highway, although as I explained, freight and pas¬
sengers were intended to be and are transported from one place to
another in the same state."
B Being an inter-state railway and a mortgage authorized and
made of an inter-state character, the courts of the United States
25
are not bound to apply local laws; because according to well es¬
tablished rules the questions involved are necessarily questions of
general jurisprudence.
C The Railroad Co. having by authority of law made, and the
bond-holders having by authority of law accepted the mortgage
running into two states, have by implication agreed and bound
themselves to submit to principles of jurisprudence applicable to
a mortgage of that character.
D Therefore, from the nature of the property itself, in conse¬
quence of its inter-state character, and also from the implied con¬
sent of the corporation and its bond-holders given under the au¬
thority of legislation in both states, and also by reason of the in¬
adequacy of local remedies to afford suitable relief, we believe our¬
selves entitled to have this property administered upon general
principles of jurisprudence.
In Hammock v. The Loan and Trust Co., 105 U. S., p. 77, it
was decided that the local laws relating to foreclosure of mort¬
gaged real estate did not apply to railroad mortgages.
The Court says, p. 90, " The laws of the State of Illinois, hav¬
ing permitted the Chester & Temaroa Coal and R. R. Co., to
mortgage its franchise and property as an entirety, it was, we
think, the duty of the Court to decree the sale as an entirety of
the whole property or railroad, without reference to the local
Statutes upon the subject of redemption."
This expression of the Court would fully sustain the most ex¬
treme position we could take in the case at bar. Perhaps, how¬
ever, it goes farther than the Court really intended, as the Court
afterward says that by the law of Illinois, the real estate, fran¬
chise and other property of a railroad corporation mortgage as an
entirety may be sold as an entirety, without any right of redemption
26
of the mortgagor and judgment creditors as to such real estate.
So that, perhaps, the case may not be in point to the extent of the
expression first used ; but it seems to the point that ancient stat¬
utes relative to foreclosing mortgages of lands have no applica¬
tion to railroad mortgages, and also is further in point as to the
necessity and justice of proceeding to foreclose the whole line up¬
on general principles of equity, by reason of the following ex¬
pression of the Court on p. 89: " It is equally true, not only that
the bonds to secure which the mortgage was given, cannot be ne¬
gotiated in the markets of the country, did not the mortgage em¬
brace as an entirety the franchise and all the real and personal
property of the corporation used for railroad purposes, but that
sale of the real estate, franchises and personal property separately,
might in every case prove disastrous to all concerned, and defeat
the ends for which the corporation was created, with the author¬
ity to open up and maintain a public highway."
Any attempt to appljr the local law to this mortgage would
meet with the same difficulties as an attempt to apply the local
law to contracts of carriage over the whole line of the road at
bar, see rulings of the Supreme Court in Myrick v. The Michi¬
gan R. R. Co., 107 U. S., p. 102, where the Court construed an
inter-state contract of carriage differently from the local law of
the state where it was made, and said, p. 109: kt If the doctrine
of the Supreme Court of Illinois as to what constitutes a contract
of carriage over connecting lines of roads is sound, it ought to
govern, not only in Illinois, but in other states. And yet the tri¬
bunals of other states, and a majority of them, hold the reverse of
the Illinois Court, and coincide with the views of this Court.
Such is the case in Massachusetts. If we are to follow on this
subject the ruling of the State Courts, we should be obliged to
give a different interpretation to the same act—the reception of
goods marked for a place beyond the road of the company—in dif¬
ferent states, holding it to imply one thing in Illinois and another
in Massachusetts."
27
We seem to be within the principle of the ruling as laid down
in Swift v. Tyson, 16 Peters, pp. 1-18, where the Court referring
to the 34th section of the judiciary act of a.d. 1789, said: "In
all the various cases which have hitherto come before us for decis¬
ion, this Court have uniformly supposed that the true interpreta¬
tion of the 34th section limited its application to state laws,
strictly local; that is to say, to the positive statutes of the State
and the construction thereof adopted by the local tribunals, and
to rights and titles to things having a permanent locality, such as
the rights and titles to real estate and other matters immovable
and intra-territorial in their nature and character." But this
mortgage and the rights secured by it, although to a certain ex¬
tent they relate to what is immovable, are not intra-territorial, and
this not merely by the consent of the party, but by the concurrent
action of the legislatures of each state.
In Martin v. Waddell, 16 Peters, p. 367, there arose within the
state of New Jersey a question of construction of certain instru¬
ments of grant and surrender from and to the Crown of England,
which the Court held was not a question of local law, saying, p.
417: " The question here depends, not upon the meaning of in¬
struments framed by the people of New Jersey or by their au¬
thority, but upon charters granted by the British Crown under
which certain rights are claimed by the state on the one hand,
and by private individuals on the other." So that although the
matter in dispute was purely local and the controversy only con¬
cerned fixed property within the limits of- New Jersey, as the
grant was not of a strictly local character, the construction put
upon it by the state courts and statutes was not accepted.
Now this resembles the case at bar; because here although the
property involved is in some respects of a local character, yet the
grant and legislation upon which it depends were not strictly lo¬
cal, but were the concurrent action of two states.
28
Marlett v. Silk et ah, 11 Peters, p. 1, where the Court refused
to appty the local construction to a compact between two states,
seems to apply quite directly to the case at bar; because while in
the case at bar, we have not technically what is a compact be¬
tween Maine and New Hampshire, yet we have a compact arising
out of concurrent legislation of the two states contemplating that
compact.
In Marlett v. Silk, on p. 23, the Court says: "The rule of de¬
cision is not to be collected from the decisions of either State,
but is one, if we may so speak, of an international character."
*
We claim therefore, upon both principle and authority, that
this is not a case to which, in accordance with the 34th section of
the Judiciary Act, the Courts of the United States are bound to
attempt the application of local rules; but that with reference
to our first point, the Court may make a decree of foreclosure
of the whole line and its appurtenant property according to the
principles of general equity jurisprudence.
As already said, the intervening petition of the city of Portland
asks for this; but complainant asks foreclosure of only the por¬
tion in New Hampshire,— not merely of what is " called Division
B," meaning those portions covered by the prior mortgage, but
severing the road at the State line.
We will not discuss whether technically this is capable of ac¬
complishment ; but it would seem that the line being an entirety
and the Court having jurisdiction to foreclose the whole by a
single decree, complainants should produce grave and clear rea¬
sons to induce the Court to depart from the uniform practice of
decreeing foreclosure of all the property embraced in the mort¬
gage, and thus further induce the Court to involve the bond-
o O 7
holders in the uncertainties and difficulties which must follow a
departure from that practice.
29
The expressions of the Court already cited from Hammock v.
The Loan and Trust Co., ante, show what importance the Su¬
preme Court attaches to the maintenance of the property in its
entirety, because the reasons underlying those expressions apply
as strongly to severance into parts vertically as to severance
horizontally.
In Wilmer v. The Atlanta Railway Co., ante, the Court says on
p. 453, " As a general rule it must be evident that to cut up a rail¬
road and sell it piecemeal would destroy its value; while a sale
of a particular part might be made in some cases without serious
detriment to the part sold, yet by that fact it would by no means
follow that the residue would remain uninjured."
We observe here that contrary to certain expressions appearing
in Jones on Railroad Securities, section 628, it is held in the case
of Wilmer v. The Atlanta Railroad Co., ante, and also by the
Supreme Court in Howell v. The Western Railroad Co., 94 U. S.,
p. 463, that there should be a foreclosure of the whole property
for default of interest only, and in Atlanta v. The Railway Co.,
ante, the fact that the road cannot profitably be sold in parts is
given as the reason for this rule.
Complainants sa}r that the Maine division is of no value ; but
we think the evidence is clearly otherwise.
See Dana, p. 5T, ans. 91, p. 61, ans. 1, pp. 109 to 114; and note
that Dana is the treasurer and has been with the road since A.D.
1873, p. 46; Foye, pp. 70 and 124, and note that he has charge of
the freight and ticket accounts, is clerk of the corporation and
has been with the road since 1871, pp. 61 and 62 ; Chase, who is
an expert and examined the affairs of the road thoroughly for the
City of Portland, pp. 117 and 118; Jackson, p. 126, and note
that Jackson is president of the Maine Central R. R. Co., and had
occasion, as treasurer of the Portland Rolling Mill, to acquaint
80
himself with the affairs of this corporation; Jose, p. 128, who,
it appears, has long been familiar with the road and has an inter¬
est in these bonds; Webb, one of the trustees, p. 191, and note
that his letter is used as a deposition, p. 174; S. J. Anderson,
president of the road, pp. 132 and 133; and the tables on pp. 147,
148; also S. J. Anderson, president, pp. 130 and 131, shows that
the road is in its present crippled condition, not because there
has not been sufficient net earnings to more than meet the inter¬
est on the prior mortgage, but because the net earnings have
necessarily been used in completing the road. Let it be observed
further that the complainants' table on p. 148, which has been
made according to an extreme view against the "A Division," yet
shows that the "A division " has more than earned the interest
upon the prior mortgage.
However this may be, the bond-holders in case of strict fore¬
closure, or the purchasers in case of a sale of the whole line,
would have the option of dividing up the line and abandoning
the Maine division as complainants propose, or of retaining the
whole as a unit; and as this option carries no burdens with it, it
would have some value, and we submit that the Court should not
cut this off even on complainant's view of values, as the whole
cannot be worth less than a part, and future holders may pay
something for the opportunity of ascertaining for themselves
whether it may not be worth more.
While as we have already stated, we do not undertake to argue
the technical point whether the Court has the power to foreclose
the line in parts, yet in determining the discretion of the Court
whether or not it will so foreclose, something is added by the fact
that there are doubts and difficulties which would hang about an
attempted partial foreclosure.
Spring v. Ilaines, 21 Me., p. 126, and Jones on Mortgages,
§ 1463.
31
Under our second point, the question arises whether the CourV
must decree a sale, or whether we mav have a strict foreclosure
without sale.
There are no provisions in New Hampshire for organizing into
a corporation either the trustees, bond-holders or purchasers at a
sale; therefore if the mortgaged property is decreed to be sold,
it must be sold to some existing corporation, or be run by individ¬
uals so far as the State of New Hampshire is concerned, thus ex¬
cluding bond-holders from competing at the sale ; and yet there is
a sufficient provision by the General Laws of New Hampshire,
chapter 165, for the operation of railroads bjr trustees holding
under the mortgage deed.
Therefore, so far as New Hampshire is concerned, a strict fore¬
closure which would give the bond-holders the property and pre¬
vent its sale at a possible sacrifice is practicable, because it may
be so made that the trustees may remain in possession and operate ;
and as there is ample provision for the operation of the road by
the trustees under the statutes of the State of Maine,—see Re¬
vised Statutes, c. 51, §§ 85 to 90,—it follows therefore that a
strict foreclosure would preserve all the property for the bond¬
holders, and furnish a practical method of operating it until by
concurrent legislation, if any is required, the bond-holders can re¬
organize the property into a corporation or corporations.
This appears to us to have been the course taken, with refer¬
ence to the Boston, Hartford & Erie Railroad, as explained in
Graham v. The Boston, Hartford & Erie Railroad Co., ante, p. 759.
The Revised Statutes of Maine, c. 51, § 109, would enable the
bond-holders with the aid of this Court to organize an incipient
corporation, as a basis of concurrent legislative action by the
two States.
32
Strict foreclosures are in harmony with the habits and usages
of our New England people, while foreclosures by sale are com¬
mon elsewhere in the United States; so that the practice of the
courts in the Western districts of selling railroads 011 foreclos¬
ures, arose out of and suits the general habits of those districts,
but sets no precedent for courts in New England.
The trustees and the mass of the bond-holders prefer strict
foreclosure.
We observe here that the general railroad act of New Hamp¬
shire, c. 100, a.d. 1883, fails to contain any provision which would
enable any individual purchasing this load in New Hampshire, to
organize the property into the hands of a corporation ; so that
at least this part of the line differs in this respect from foreclosed
railroads in the Western States, in nearly all of which there are
provisions for organizing corporations to acquire railroads as well
as to construct them.
This fact should be borne in mind in giving effect to the ex¬
pressions of the Court in Ketchum v. Duncan, 96 U. S., pp. 659
and 6T2, where the Court says: "A strict foreclosure would not
be a winding up of the matter. * It would leave an undivided
beneficial interest in an unmanageable property, in the hands of
a large number of persons, who are very likely to disagree in re¬
gard to its. use. The same observations might be made respect¬
ing a purchase by a trustee for the benefit of all the lien credit¬
ors. Such a purchase would convert them all into tenants in
common, and probably give rise to endless discussion."
Hut in the case at bar, if we have strict foreclosure, the proper¬
ty would not vest either in a large number of persons, or upon
such a trust as to convert all the bond-holders into tenants in
common ; but would remain in the hands of the trustees of the
mortgage, to be operated in accordance with statute provisions of
33
4
Maine and New Hampshire, so far as the same are applicable.
Therefore we cannot see, that in the case at bar the difficulties could
possibly arise as suggested by the Court in Ketchum v. Duncan ;
while, 011 the other hand, in case of a sale, unless the bond-holders
are excluded from purchasing at the sale for reasons already giv¬
en, all the difficulties which are suggested in that case will then
appear.
In Burnham v. Bowen, 111 U. S., p. 776, a case which
came up from Iowa, there was a strict foreclosure in the
Circuit Court, which was certainly not disapproved of in the Su¬
preme Court; and decrees of the Circuit Court made upon the
heel of the decree for strict foreclosure were affirmed by the
Supreme Court.
Therefore with reference to the form of foreclosure, we ask
the Court to follow substantially the practice in the case of the
Boston, Hartford & Erie Railroad already referred to, to decree,
that unless the corporation pays within a reasonable time to be
fixed by the Court, say six months, the amount which a master
shall find in default, the corporation shall be foreclosed and the
trustees directed to take possession as soon as the receiver's lia¬
bilities are satisfied, and to operate the road subject to the orders
and directions of the Court; but that the bill be retained for
further directions, and especially for directions to the trustees
to turn over the mortgaged property to a corporation formed
from /the bond-holders in accordance with statutes now exist¬
ing, or which may hereafter be obtained for that purpose.
If, however, a sale is decreed, it seems to us necessary that the
master should first determine what is to be sold, and make a divis¬
ion of the railroad stock between this and the prior mortgage.
VV1 lat we have already stated substantially covers our third
point, except as to what follows hereafter.
84
As to the fourth point Ave merely call the attention of the
Court to it, as well as to the closing lines of the third point, to
secure certainty, that all decrees may be so shaped that the bill, as
well as the mortgaged property, shall be retained until all claims
and liabilities of the trustees and receivers are satisfied and
protected.
To conclude, Ave therefore ask the Court to decree a strict fore¬
closure of all the mortgaged property in both States as an entire¬
ty, unless the corporation redeems within a reasonable time to be
fixed by the Court, say six months, by payment of the amount
Avhich the master may find in default; that upon satisfaction and
discharge of all the liabilities of the receiver, or upon their being
protected in such way as the Court may deem proper, the
property be turned over to the trustees to be operated by them
under the directions of the Court; and that the bill be retained
for issuing further directions to the trustees, and among other
things for directing them to turn over the property to a corpora¬
tion to be formed from the bond-holders, whenever the Court shall
be satisfied that such corporation is legally formed and can prop¬
erly receive the property, but upon such directions for indemnify¬
ing and protecting the trustees and such other directions as
the Court may then find the case requires.
Not for the purpose of specially informing the Court, but that
counsel may have the matter before them when decrees are
shaped, Ave append to our brief the following cases, shoAving the
practice upon foreclosure, viz.: Ketchum v. Duncan, 96 U. S., p.
673; Sage v. The Railroad Co., 99 U. S., p. 331; Howell v. The
Railroad Co., ante; Railroad Co. v. Fosdick, 106 U. S., pp. 47,
69,70 and 71; and Dunham v. The Railroad Co., 1 Wallace,
p. 254.
We also refer to the authoritative article of Judge McCr^ary, in
the American Law Review of November and December, a.d.
35
1883, pp. 817 ancl 848, to the point that the Court may deliver
up the property to the trustees, retaining the bill sufficiently to
protect the rights of the holders of receiver's certificates is¬
sued by the authority of the Court; although we believe that
when we reached this stage of the case, the receiver's certificates
can be so provided for as to render a resort to this expedient un¬
necessary, if the Court should then deem it problematical or
unwise.
WILLIAM L. PUTNAM,
of Counsel.