Source: http://supreme.nolo.com/us/139/137/case.html
Timestamp: 2019-04-23 00:58:06+00:00

Document:
A provision in a statute authorizing notice to be given to an absent defendant to appear by publishing the same in a newspaper once a week for four months is not satisfied by a publication once a week for four lunar months, but the word "month," when so used, signifies a calendar month.
To support a decree for foreclosure against an absent defendant brought in by publication, publication for the full period required is necessary.
Cooper v. Reynolds, 10 Wall. 308, distinguished.
"the feeble defense and supineness and indifference to the interests of the said bondholders on the part of the said Green Cove Springs and Melrose Railroad Company, its directors and officers, as shown by the said judicial proceedings in said state court, if the same was intended to affect and destroy the lien of said deed of trust, was and is a fraud upon the rights of the said trustee and said bondholders;"
"that said company, grantor in said deed of trust, in effect consented to a sale of said road to pay simple contract debts and demands, which were not a lien upon its property paramount to said lien created by said deed of trust, and many of which had not been reduced to judgment;"
"a decree of sale was made before the indebtedness claimed to be due was ascertained, whereby no party in interest was given any time or opportunity to redeem or pay said indebtedness."
The bill prayed for a receiver and injunction against the transfer or encumbering of the road; a decree of foreclosure of the deed of trust, and for a decree declaring the sale under the judicial proceedings in the state court to be null and void, as against the plaintiff and the bona fide holders of any of its bonds.
Two answers were filed to the bill, which presented three distinct defenses: first, that the mortgage or deed of trust required that sixty percent in value of the outstanding bondholders should request the trustee in writing to initiate proceedings, and that no such request was alleged in the bill; second, that plaintiff herein, the Guaranty Trust and Safe Deposit Company was a party defendant to the proceedings in the state court, was bound by the decree and sale in that court, and that such sale extinguished the lien of the mortgage sought to be enforced in this suit; third, that there were no bonds of the railroad company which executed the mortgage to the plaintiff legally outstanding, and consequently it had not sufficient interest or title to maintain its suit. A decree was entered in the circuit court dismissing the bill, but no opinion appeared to have been delivered or filed.
"it shall be the duty of the said trustees for the time being, and they shall or will, upon written request of the holders of sixty percentum of the said bonds then outstanding, enter upon and take possession of the said railroad property and estate,"
"or the said trustee shall and will, after or without entering upon or taking such possession, upon the written request of the holders of bonds of a like amount, proceed upon and under this indenture of mortgage to sell the railroad property and estate, . . . at public sale, in the City of Philadelphia, first giving at least four weeks' notice by publication,"
etc., "and grant and convey the same to the purchaser, freed from all and every trust hereby created," etc.
As there is no averment in the bill that sixty percent of the owners of the outstanding bonds had requested action on the part of the trustee, it is insisted that these proceedings were instituted without authority, and the case of Chicago &c. Railroad Co. v. Fosdick, 106 U. S. 47, 106 U. S. 77, is claimed to be decisive of this question. In that case, which was a bill for foreclosure, the proviso was that the trustee, upon the written request of the holders of a majority of the bonds then outstanding, should proceed to collect both principal and interest of all such bonds outstanding by foreclosure and sale of said property or otherwise, as therein provided. It was argued that the office of this clause was merely to make the obligation of the trustees imperative, instead of optional, but the Court held that the whole article must be taken together as a unit, and "the nature of the provision and the character of its object must be taken into consideration as furnishing the rule of its interpretation." It will be observed, however, that the proviso was directed against the very proceeding taken by the trustee in the suit -- namely a foreclosure and sale of the property -- while in the present case it is directed only to a taking possession, or a sale under the deed of trust, without the institution of legal proceedings.
A case nearer in point is that of Morgan's Steamship Co. v. Texas Central Railway, 137 U. S. 171, decided at the present term, in which the condition was that on default continuing for sixty days in the payment of interest, or any part of principal, the principal of the bonds should become immediately due, and that, upon request of seventy-five percent of the holders of bonds, and written notice of the same, the trustee should take possession of the property, and operate it for the benefit of the bondholders, and that upon like request he should proceed to foreclose the mortgage and sell the property to the highest bidder for cash. It was also provided that nothing contained in the instrument should be construed to prevent or interfere with the foreclosure by any court of competent jurisdiction. It was held that the trustee could maintain a bill to foreclose the mortgage upon occurrence of a default, without averring or proving a request of seventy-five percent of the bondholders, as such request was necessary only in case the trustee wished to proceed to foreclose or take possession ex mero motu without the intervention of a court.
We think that such limitations upon the power of the trustee to take legal proceedings to enforce payment of the amount secured should be strictly construed. In this case, the condition only relates to the taking possession of the property under the deed of trust, or to a sale in the City of Philadelphia, under the power of sale contained therein, and we think it should not be held to apply to foreclosure proceedings begun in a court of competent jurisdiction to obtain a judicial sale of the property. This was the ruling in the Eighth Circuit by Judge Dillon in Alexander v. Central Railroad of Iowa, 3 Dillon 487, and by Judge Caldwell in Credit Co. v. Arkansas Central Railroad Company, 15 F. 46, and we think it is sound.
of all others." This clause, however, is open to the objection of attempting to provide against a remedy in the ordinary course of judicial proceedings, and oust the jurisdiction of the courts, which, as is settled by the uniform current of authority, cannot be done. Hope v. International Society, 4 Ch.D. 327; Edwards v. Society, 1 Q.B.D. 563; Horton v. Sayer, 4 H. & N. 643; Scott v. Avery, 8 Exch. 487, 5 H.L.Cas. 811; Thompson v. Charnock, 8 T.R. 139; Mitchell v. Harris, 2 Ves.Jr. 129; Tobey v. County of Bristol, 3 Story 800; Noyes v. Marsh, 123 Mass. 286; King v. Howard, 27 Mo. 21; Conner v. Drake, 1 Ohio St. 166; Trott v. City Ins. Co., 1 Cliff. 439; 2 Story Eq. § 1457.
Again, it is evident that this was a condition for the benefit of the grantor and its assigns, and that intervening lienholders, and those who have purchased the property under decrees in their favor, do not stand in a position to take advantage of this covenant. The sole object of the covenant was to protect the mortgagor against a seizure and sale of its property for nonpayment of interest or principal at the mere caprice of the trustee, or without the consent of a majority of the bondholders, and it has no application to a case where the mortgagors have already lost the property under adverse proceedings instituted by parties having no connection with the mortgage.
defendant in that bill. On the day the bill was filed, the state court appointed a receiver of the property.
In the latter part of July, 1884, Budington, Wilson & Co. filed a bill in the same court against the Green Cove Springs and Melrose Railroad Company, Philip J. Canova, the Chester Construction Company, and the Guaranty Trust and Safe Deposit Company, plaintiff in this suit, to recover for labor in building the road and to enforce the payment of certain of these bonds deposited with it as collateral security. On the 6th of February, 1885, these two suits in the state court were, by order of that court, consolidated, and thereafter proceeded as one suit. Before this consolidation was effected, however, and on July 29, 1884, the court made an order that the Trust and Safe Deposit Company appear and answer the bill of complaint on or before the first Monday of December, 1884, "otherwise the complainants' said bill shall be taken pro confesso." It was further ordered that this order "be published once a week for four months in some paper published in Clay County, Florida." The only evidence of publication appears from the affidavit of H. E. Bemis, the business manager of the Springs, a newspaper published in the Town of Green Cove Springs, that the foregoing notice "was duly published in the said newspaper for nineteen consecutive weeks prior to this date, to the best of his knowledge and belief." This affidavit was made and subscribed the 15th day of December, 1884. The testimony further established that the newspaper was published on Saturday of each week, and, as the manager swears that it was published for nineteen consecutive weeks prior to this date, the last publication must have been upon Saturday, December 13th, and the first publication on the 9th of August. The notice, however, required the absent defendants to appear and answer the bill on or before the first Monday in December, which was the first day of the month; hence there could have been only seventeen publications, including the first on the 9th of August, before the day the defendants were required to answer, and from this day to the first Monday of December would be only 114 days, more than four lunar months, but eight days less than four calendar months, before the first of December.
Avery v. Pixley, 4 Mass. 460, 461. Indeed, the English rule was not adopted without a protest from Lord Kenyon, one of the most eminent of her common law judges, in Lacon v. Hooper, 6 T.R. 226, and was abolished by statute in 1850. 13 & 14 Vict. c. 21.
"We do not deny that there are cases . . . in which the legislature has properly made the jurisdiction to depend on the publication of notice, or on bringing the suit to the notice of the party in some other mode, when he is not within the jurisdiction."
"it is an equally well settled rule in jurisprudence that the jurisdiction of any court exercising authority over a subject may be inquired into in every other court, when the proceedings in the former are relied upon, and brought before the latter, by a party claiming the benefit of such proceedings. The rule prevails whether the decree or judgment has been given in a court of admiralty, chancery, ecclesiastical court, or court of common law."
"could be exercised under the act, it was essential to show that all its requisites had been substantially observed. It was necessary for the plaintiff to prove notice, and negative proof that the notice was not given, under such circumstances, could not be rejected."
"it appears from the inspection of the record of a court of general jurisdiction that the defendant, against whom a personal judgment or decree is rendered was at the time of the alleged service without the territorial limits of the court, and thus beyond the reach of its process, and that he never appeared in the action, the presumption of jurisdiction over his person ceases, and the burden of establishing the jurisdiction is cast upon the party who invokes the benefit or protection of the judgment or decree. . . . When, therefore, by legislation of a state, constructive service of process by publication is substituted in place of personal citation, . . . every principle of justice exacts a strict and literal compliance with the statutory provisions."
Later cases to the same effect are Earle v. McVeigh, 91 U. S. 503; Settlemier v. Sullivan, 97 U. S. 444; Cheely v. Clayton, 110 U. S. 701; Applegate v. Lexington &c. Mining Co., 117 U. S. 255, and there is scarcely a state in the union in which the same principle has not been announced and reaffirmed.
We think the publication of the notice in this case for the full period required by law was necessary to the validity of the decree pronounced upon the basis of such publication, Early v. Doe, 16 How. 610, and, as such publication was not made for that period, the decree based upon such notice was no estoppel of the plaintiff in this case.
them, nor had Walker such knowledge, so far as he knew. He says, "I cannot by any probability imagine that he could have any suspicion of the invalidity of any of the bonds sold to him." Walker, who is also a lawyer at Jacksonville, swears that he was employed by Ambler & Taliaferro to look into the condition of the affairs of the company, with the expectation of their becoming the purchasers if they could do so safely.
"My investigation satisfied me that there were a number of bonds outstanding of this company which were of doubtful validity as liens. . . . With Mr. Marcy's assistance, I ascertained all the facts touching the bona fide holding of the bonds in Philadelphia. The evidence satisfied us that all the bonds were purchased in good faith, and I authorized Mr. Marcy to represent my clients and complete the transactions with these parties, Dunn and Harris, carefully instructing him to avoid the purchase of any bonds of Mr. Shreve Ackley, as to the validity of whose holding I had come to entertain doubts."
of the case to determine as a finality the amount, validity, or ownership of such bonds or the number which were held bona fide by the present holders, but that the case should be reversed and remanded for further proceedings in conformity with this opinion. Should the court proceed to a decree for foreclosure and sale, the holders of the bonds can be notified to appear and file them with the master, and all questions connected with their amount and ownership can be settled upon a final hearing.

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