Case Name: Wright and Others v. Bundy
Court: Supreme Court of Indiana
Jurisdiction: Indiana
Decision Date: 1858-12-20
Citations: 11 Ind. 398
Docket Number: 
Parties: Wright and Others v. Bundy.
Judges: 
Reporter: Indiana Reports
Volume: 11
Pages: 398–414

Head Matter:
Wright and Others v. Bundy.
The defendants, in this case, first answered simply in abatement. This answer was disposed of by the Court, and thereupon they answered over to the merits. Held, that this seems to bo the most convenient practice; that, at all events it is not substantially erroneous.
Suit by the trustee against mortgagors and their lessees in possession, to obtain a foreclosure and order of sale upon a trust mortgage. The mortgagors made default. The instrument upon which the suit was brought purported to be executed by the Cincinnati and Chicago Railroad Company, for the consideration, &c., to Marlin L. Bandy, convoying to him lands and rolling stock of the company “in trust for the uses and purposes following, to-wit: Whereas, a large portion of the debts of said railroad company have been secured by the personal indorsements of the present directors, and others who were formerly directors of the company, and for which they arc now responsible, among which is a debt to the Citizen’s Bank, at Richmond, Indiana, amounting to over 50,000 dollars. Now this conveyance is hereby declared to be in trust to secure and indemnify, first, the said persons who are bound for the said debt, &c., or who may at any time hereafter become bound therefor, either as makers, acceptors, or indorsers thereof, &c., and, secondly, to secure all the indorsers of said company against all other debts, &c., for which they are or may become in any manner liable as makers, &c. —the said trustee to hold all of said property until the said debt at the Citizen’s Bank, or some part thereof, shall become due, &c., and then, in ease of the non-payment thereof, he is hereby directed and required to sell the same, or so much thereof as may bo required to pay said debt,” &c. This instrument purports to have been acknowledged before Samuel Stokes, a notary public of Ohio, on, &c., and was recorded in Henry county, Indiana, on, &e., in which county the company had their principal office in this state. Trial upon the general issue, and certain special issues, the matters set up in which could be proved under the general issue. The facts upon which the decision was founded were as follows: I. The mortgage, or deed of trust, was executed November 10, 1854, in Cincinnati, Ohio. It embraces certain land and rolling stock of the company, but not the road bed. It was recorded in Henry and Wayne counties, but not in certain others through which the railroad in question extended, within ten days from its execution; and though it purports to have been, yet there is evidence tending to show that it never was, acknowledged. 2. The rolling stock embraced in it was never actually delivered into the possession of the trustee or mortgagee, but was retained and used by the company, in their lessees. 3. There were prior mortgages and liens upon the property. 4. The beneficiaries of the trust, and prior creditors, were not made parties to the suit; and the debt duo the beneficiaries, was usurious. 5. The company, by their directors, said Martin L. Bundy being one, on the 16tli day of October, 1856, leased the road, rolling stock, &c., to Wright §• Co. for five years, and put them in possession. The lease was executed in Cincinnati Ohio, and is set up by way of estoppel. 7. The debt for which the plaintiff and others are liable, and to secure which the mortgage was executed, was the debt of another company, consolidated with the present, and that the assuming said debt was without authority and void.
Held, 1. That if-the beneficiaries should have been parties at all, they should have been plaintiffs; but it was not necessary that they should be plaintiffs.
2. That the rights of prior incumbrancers could not be prejudiced by this proceeding; that, as a general rule, prior mortgagees are not necessary parties to a junior’s bill of foreclosure, though they may be proper parties.
3. That the defense of usury was no bar; that the debtor does not set it up, and a third person cannot, without the debtor’s consent; that if it were allowed, it would not go to the whole cause of action.
4. That the contract was not void because executed out of this state; that there is nothing in the railroad act requiring the directors of such corporations to transact their business within this state; that though corporations cannot migrate from one sovereignty into another, so as to become legal, local existences within the latter sovereignty, the migration of directors of a corporation does not terminate the existence of the corporation within the sovereignty which created it; that by our statute (1 B. S. p. 409), the stockholders are the corporation, and the directors are its agents; that by courtesy, corporations created in one state, are permitted to contract and sue in others; that if all the directors could so contract as agents, they may authorize one of their number to contract; that the place where the agent of a corporation enters into a contract, is, in general, immaterial — the important question arising being that of p.ower not of place; that the exercise of that power has relation to the place of their legal establishment; that the meetings of the directors of a business corporation are not analogous to the sessions of a judicial tribunal; that the corporation is organized by the election of directors, but the mere organization of the directors into a formal meeting for business afterwards, is a different thing; that it seems that corporations chartered in this state, and local to it, may have offices for business in other states.
5. That the mortgage was not void because not executed directly to the creditors who made the loan to the company; that it was substantially within the power conferred upon the company to raise money by mortgaging their property.
6. That although this railroad company was formed by a consolidation of other companies, and the debts secured by the mortgage wore owed by one of those companies, the consolidated company could, it seems, assume them; but that the transaction in this case did not amount to such assumption; that the directors of the company indebted are still the debtors, and the mortgage simply covers property belonging to them at the time of consolidation; that, in equity, it amounts to no more than if the latter company had mortgaged the property to secure her own debts, before the consolidation, and then entered into the consolidation with property subject to the mortgage.
7. That regarding the instrument as a mortgage of chattels, the recording was sufficient to constitute constructive notice; that the place where the company kept their principal office in this state, must be regarded as the residence of the corporation.
The acknowledgment bears the impress of the notarial seal, and the mortgagor admits it; but a Samuel Stakes testified that he did not, to the best of his recollection, take the acknowledgment, and that he knew of no other notary in Cincinnati of the same name. There was, also, a certificate of tho secretary of state of Ohio, that but one Samuel Stokes had been appointed a notary.
Held, 1. That if the acknowledgment was not given, still, as the mortgagors delivered the mortgage to the mortgagee, and the latter to the recorder, as genuine, and it was regular upon its face, it seems, it ivas the duty of the recorder to place it upon record, and he having done so it was notice to all persons of its existence.
2. That the acknowledgment ivas not disproved.
3. That as no law of Ohio was produced, showing the authority of the secretary of state to certify as to the appointment of notarios, and as there is no deposition of the governor upon the subject, the Court does not know that he can have any official knowledge of tho premises.
4. That an authority to certify copies of documents so that they may be admitted as evidence, would not extend to certifying other facts so that the certificate could have the effect of evidence; that facts which tho officer is not authorized by law to certify, must be proved as other facts.
5. That the question whether the instrument sued on, (which this Court treated as 'a trust mortgage, in the nature of a mortgage), is a deed of trust ' or a mortgage, is immaterial, and could only have been material if the instrument had not been recorded.
6. The mortgage having been duly acknowledged and recorded, no question arises upon the non-delivery of possession under it.
After the execution and recording of the mortgage, the company, Bundy being one of the directors, leased the property embraced by it to Wright and others, for five years. Before tho expiration of the lease, the claims of the beneficiaries of the trust became duo, were not paid, and the trustee, for their benefit, proceeded to obtain an order for the sale of the property. The lessees pleaded the act of the trustee in participating in the lease to them, as an estoppel in pais of his right to foreclose and sell the property. Held, that no estoppel arises upon the facts.
A precedent debt constitutes a valuable consideration for a mortgage.
Monday, December 20.
APPEAL from the Wayne Circuit Court.
This case was twice argued very thoroughly by able counsel, both orally and in printed briefs; but the transcript, briefs, and other papers, being absent from the clerk’s office, no abstract of the argument is given.

Opinion:
Perkins, J.
Suit by Martin L. Bundy, the trustee, to obtain a foreclosure and order of sale upon a trust mortgage, against The Cincinnati and Chicago Railroad Company., the mortgagors, and Wright and others, their lessees, having in possession and use the property covered by the trust mortgage.
The company made default. Trial of issues of law and fact, between the plaintiff and the lessees, the other defendants, and final judgment for the plaintiff.
The case involves a large amount of property, and has been argued upon both sides with unsurpassed ability and thoroughness.
The railroad company, as we have said, made default.
The other defendants first answered simply in abatement. This answer was acted upon and disposed of by the Court, and thereupon the defendants answered over to the merits.
This strikes us as the most convenient practice. At all events, it is not a substantially erroneous one. Newell v. Gatling, 7 Ind. R. 147.
The instrument upon which the suit was brought puported to be executed by The Cincinnati and Chicago Railroad Company, for the consideration of one dol tin L. Bundy, conveying to him lands and rolling the company, "in trust for the uses and purposeWo to-wit: "Whereas, a large portion of the debts of said rail road company have been secured by the personal indorse' ments of the present directors, and others who were formerly directors of the company, and for which they are now responsible, amongst which is a debt due the Citizen's Bank, at Richmond, Indiana, amounting to over. 50,000 dollars. Now this conveyance is hereby declared to be in trust to secure and indemnify, first, the said persons who are bound for the said debt at the Citizen's Bank, or who may, at any time hereafter, become bound therefor, either as makers, acceptors, or indorsers thereof, or any portion of the same; and, secondly, to secure all the indorsers of said company against all other debts and liabilities of said company for which they are or may become in any manner liable as makers, drawers, acceptors, or indorsers, for or on account of said company — the said trustee to hold all of said property until the said debt at the Citizen's Bank, or some part thereof, shall become due and required to be paid; and then, in case of the non-payment thereof, he is hereby directed and required to sell the same, or so much thereof as may be required to pay said debt;" and then he is to hold the residue of said property, to discharge in like manner other secured debts as they become due, and when all are paid the balance, if any, of the property reverts to the company.
This instrument purports to have been acknowledged before Samuel Stokes, a notary public of Ohio, on the 10th of November, 1854, and was recorded in Henry county, Indiana, on the 13th of the same month. It is inferable from the record, that the principal office of the company, in this state, was at Newcastle, in said Henry county.
A demurrer to the complaint for a misjoinder of causes of action was overruled; but no point arises in this Court upon the ruling. Section 52, 2 R. S. p. 38, enacts that " No judgment shall ever be reversed for any error committed in sustaining or overruling a demurrer for misjoinder of causes of action." See also, § 51, on the same page, and § 72, p. 43.
The defendants answered in twenty-eight paragraphs. A demurrer was sustained to most of them. Trial of the general, and certain special issues, by the Court, and final judgment for the plaintiff, and an order for the sale of the property, &c.
Without-reciting the voluminous pleadings at length, we will endeavor to extract from them the facts upon which the decision of the cause must rest.
1. The mortgage, or deed of trust, ujion -which the suit is founded, was executed November 10, 1854, in Cincinnati, Ohio. It embraces certain land and rolling stock of the company, but not the road bed. It was recorded in Henry and Wayne counties, but not in certain others through which the railroad in question extended, within ten days from its execution; and though it purports to have been, yet there is evidence tending to show that it never was acknowledged.
2. The rolling stock embraced in it was never actually delivered into the possession of the trustee or mortgagee, but was retained and used by the company, or their lessees.
3. There were prior mortgages and liens upon the property.
4. The beneficiaries of the trust, and prior creditors, were not made parties to the suit; and the debt due the beneficiaries, Morrison, Blanchard, Sf Co., was usurious.
*6. The company, by her directors, said Martin L. Bundy being one, on the 16th day of October, 1856, leased the road, rolling stock, &c., to Wright and company for five years, and put them in possession. The lease was executed in Cincinnati, Ohio, and is set up by way of estoppel.
7. The debt for which the plaintiff and others are liable, and to secure which the mortgage was executed, was the debt of another company, consolidated with the present, and the assuming said debt was without authority and void.
The point as to parties may be briefly disposed of. If the beneficiaries should have been parties at all, they should have been plaintiffs; but it was not necessary that they should be plaintiffs. 2 R. S. p. 27, § 3, 4.
The rights of prior incumbrancers could not be prejudiced by this proceeding. Their liens upon the property would not be divested by a sale under the judgment in this case. As a general rule, prior mortgagees are not necessary parties to a junior's bill of foreclosure. They may be proper, but are not necessary parties. •
The defense of usury in the debt of Morrison, Blanchard, & Co., is no bar to the suit, according to the decision of this Court in Stephens v. Muir, 8 Ind. R. 352. The debtor does not seek to set up the defense; a third person cannot, without the debtor's consent. If the defense were allowed, so far as the company, the debtor, was concerned, it would not go to the whole cause of action, but only to a part of it, the interest; or, if the entire debt to Morrison, Blanchard, & Co., were void, still the mortgage or deed of trust is for the securing of other debts which are not alleged to be invalid, and to satisfy which, a sale is necessary.
It is said the debt due Morrison, Blanchard & Co. was evidenced by paper payable in New York, and entirely void, because of its being usurious by the law of that state. On this point we need not dwell, as it cannot influence the cause, usury not being an available defense for these lessees who se^ ft Up, See, however, The Madison Ins. Co. v. Mix, at this term
We do not think the contract void because executed out of the state. There is nothing in our railroad act requiring the directors of the corporations to transact their business within the state. It is true that corporations cannot migrate from one sovereignty into another, so as to become legal, local existences within the latter sovereignty; but it is also true that the migration of the directors of a corporation from one sovereignty into another does not terminate the existence of such corporation within the sovereignty which created it; for by our statute, 1 R. S. p. 409, the stockholders are the corporation, the directors its agents; and by interstate and international courtesy, corporations created in one state are permitted to contract and sue in others; and if all the directors could there, as agents of the corporation, make a contract, why can they not there authorize one of their number to make it.
The mere place where the active agents of a corporation enter into a contract must, in general, be immaterial. The important question arising must be one of power, not of place. The exercise of the power has relation to the place of their legal establishment, where the contract may be subsequently acted under. The meetings of the directors of a business corporation are not analogous to the sessions of a judicial tribunal. The corporation is organized by the election of directors; but the mere organization of the directors into a formal meeting for business afterwards, is quite a different thing.
States cannot migrate, but by their agents, they are daily making contracts without their territorial boundaries. Besides, our law seems to contemplate that corporations chartered in this state, and local to it, may have offices for business in other states. 1 R. S. p. 113, § 32.—Acts of 1853, p. 102. Such, also, is the spirit of our legislation, authorizing railroad companies in this state to consolidate with those in other states.
It is further objected to the validity of this mortgage or deed of trust, that it is void because not executed directly to the creditors who made the loan to the company. We do not think this objection valid. We think the instrument executed was substantially within the power conferred upon the company to raise money by mortgaging their property.
The Cincinnati and Chicago Railroad Company was formed by a consolidation of other companies of which the company for building a railroad from Richmond to Logamsport was one. The debts secured by the mortgage or deed of trust, executed by the new company arising out of the consolidation, were owed by the Richmond and Logansport company. And it is contended that the new, consolidated company could not assume the debts of the separate members consolidating. This point seems to be settled the other way (see Redf. on Railways, p. 623); but it is not now necessarily to be decided by this Court. The transaction, in the case at bar, did not amount to such an assumption. The directors of the indebted company are still the debtors, and this deed of trust or mortgage simply covers property belonging to the indebted company at the time of the consolidation. If the debts were those of a single company, so was the property transferred in security. In equity it amounts to no more, than though the Richmond and Logansport company had mortgaged the property to secure their own debts before the consolidation, and then entered into the latter act with their property subject to the mortgage. Not having done this, it was right to provide that their property should stand for their own debts afterwards. Perhaps such would have been the case in point of law. The corporation itself, it will be observed, does not deny the validity of its act, nor seek to avoid it.
A question is made upon the recording of the mortgage or deed of trust.. Treating the instrument as a mortgage and not a deed of trust — it is in fact a trust mortgage — and further regarding it as a mortgage of personal property, we think it was sufficiently recorded to constitute constructive notice. It was recorded in the county where the óompany had its principal office in this state. That must be taken as the residence of the corporation.
The statute requires that chattel mortgages shall be recorded within ten days, &c., in the county where the mortgagor resides, to be valid, &c. It contemplates but one residence and one recording; and, if the statute is applicable to corporations, the residence of any given corporation, must be regarded, with reference to this statute, as being at the place of the principal office in this state. See Chenyworth v. Daily, 7 Ind. R. 284.
The mortgage purports to have been acknowledged before Samuel Stokes, a notary public, and has upon it the impress of his notarial seal, and the mortgagor admits the acknowledgment; but a Samuel Stokes testifies that he did not, to the best of his recollection, take the acknowledgment, and that he knows of no other notary in Cincinnati by the name of Samuel Slokes. There is also a certificate of the secretary of state of Ohio, that but one Samuel Stokes has been appointed a notary.
On this evidence, two questions arise.
Suppose the acknowledgment was not given, still, as the mortgagors delivered the mortgage to the mortgagee as genuine, and the mortgagee delivered it to the recorder as such, and it was regular upon its face, was it not the duty of the recorder to place it upon record? and having done so, was it not legal notice to all persons of its existence ? A notarial seal, prima facie, proves itself, and the acknowledgment of the mortgage upon its face was complete and conformable to law. Had it not been so, or had it been an instrument not within the recording act, it is admitted it would not have been the duty of the recorder to put it upon record, and, hence, could not have operated as notice. As it is, it cannot be said to be entirely clear that it should not thus operate. We do not decide the point, however, as it is not necessary we should, because we do not think the acknowledgment was disproved. How stands the case? Here is a mortgage having upon it a written acknowledgment, with the impress of a notarial seal corres ponding with the signature of the officer before whom the acknowledgment appears to have been taken, and, in addition, the admission of the mortgagor that the acknowledgment is genuine. To answer this, there is the testimony of one Samuel Stokes, that he did not, to the best of his recollection, take the acknowledgment, and that he does not know that there is another notary of that name in Cincinnati, a city of two hundred and fifty thousand inhabitants. There is a certificate of the Ohio secretary of state as above stated. There is no deposition of the governor of Ohio upon the subject, and no law of that state is produced showing the authority of the secretary of state to certify as to appointments of notaries public. We do not know that he can have any official knowledge in the premises. If he can, it must be by virtue of a statute. Such a statute should have been proved, if in existence. The principle is settled by the cases of Doughton v. Tillay, 4 Blackf. 433, and Fellows v. Miller, 8 id. 231, where it is decided that to make an affidavit, sworn to before a justice of the peace of another state, evidence for any purpose in the Courts of this state, it must be shown that the justice was authorized by the law of such other state to administer an oath. See, also, Ind. Dig. p. 424, § 26; Draggoo v. Graham, 9 Ind. R. 212.
Further, the certificate of the officer, as to the question involved in this case, is not to a copy of any paper or document, legally in his custody, but to a negative fact, a denial of the existence of a record or document; and it seems, that an authority to certify copies of documents, so that they may be admitted as evidence, does not extend to certifying other facts, so that the certificate can have the effect of evidence. Facts which the officer is not authorized by law to certify must be proved as other facts.
The question has been elaborately argued as to whether the instrument sued on is a mortgage or deed of trust. We have treated it as a trust mortgage, and in the nature of a mortgage; but the point is not material, in the view we have taken. It could only have been material had the instrument not been recorded. The statute does not re quire deeds of trust to be recorded. See, however, as to the distinction between mortgages and deeds of trust, Burr, on Assignments (2d ed.) p. 691, in addenda.
The mortgage having been duly acknowledged and recorded, no question arises upon the non-delivery of possession under it.
It remains to'examine the question of estoppel. The facts upon which it is claimed to arise are these: The railroad company, by a trust mortgage, conveyed her property to Martin L. Bundy, to be held by him as a security for certain creditors of the company, till their claims should become due, and then to be sold by him for the payment of those claims. He was constituted a trustee, without having himself a beneficial interest in the property, and with specified powers as to the holding and sale of it. The trust mortgage was duly recorded, and the law made the record notice to all the world of its contents. This is the general law; and see 1 R. S. p. 502, § 3.
Subsequently the company, said Bundy being one of the directors, leased the property embraced in the trust mortgage to Wright and others, for five years. Before the expiration of the five years, the claims of the creditors, the beneficiaries in the trust mortgage, become due, are not paid, and the trustee, for their benefit, proceeds to obtain an order for the sale of the property. The lessees plead the act of the trustee in participating in the lease to them, as an estoppel, in pais, of his right to foreclose and sell the property.
We do not think the estoppel arises upon the facts—
1. Our statute enacts that, "every sale, conveyance, or other act of a trustee, in contravention of a trust, shall be void." 1 R. S. p. 503, § 5.
2. His act could not, upon any principle known to the law, operate as an estoppel to the creditors for whose benefit the trust was created, and who had not authorized or consented to his act.
3. The lessees had notice, by the record of the trust mortgage, of the extent of interest possessed by the respective parties, and of the liability to which they might be exposed of having the property taken from them in the contingency that the secured creditors should not be otherwise paid, and should force the collection of their claims.
O. P. Morton, W. A. Bickle, J. F. Kibbey, R. M. Corvine, D. D. Pratt, and W. Z. Stuart, for the appellants.
J. S. Newman, J. P. Siddall, C. B. Smith, M. L. Bundy, and D. P. Lowe, for the appellee.
A precedent debt, according to the line of decision in-this state, constitutes a valuable consideration for a mortgage. Work v. Brayton, 5 Ind. R. 396.
The result at which we have arrived, as to the validity of the plaintiff's claim under the trust mortgage, renders it unnecessary that we should inquire into the validity of the lease to Wright and others.
Per Curiam. — The judgment is affirmed with costs.
(1) Ante, 117.