Court Opinion

ID: 6674707
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:14:51.796043+00
Date Added: 2024-06-11T16:00:39.333481
License: Public Domain

Simpson, C. J.,
dissenting. The majority of the court has reached the conclusion, in this case, that the bonds in question, upon their re-issue, retained the security of the mortgage by which they were secured in their first issue, and, this being the first mortgage, that therefore these bonds should rank as first mortgage bonds in the distribution of the assets of the company.
Being unable to concur in this opinion, I have dissented, and now propose to state briefly the reasons of my dissent.
The argument of the majority is, that the president and directors of the road became receivers under the order of Judge Melton, of June, 1872; that, as such receivers, they had the legal right to invest their receipts from the income of the road, in such securities as they saw proper; that these bonds were taken in by them as such investment; and being investments, *319the receivers had the right to re-issue them afterward without disturbing the security of the first mortgage. This conclusion is based upon the position that these officers were receivers. Even if this was so, I do not see that it follows, necessarily, that they had the power to re-issue these bonds, with all their original incidents and surroundings, after once called in. But I am not satisfied that Judge Melton’s order constituted these officers receivers in the strict sense of that term.
It is true that Judge Pressley thus construed this order upon the Circuit, and so has Judge Mackey; and now a majority of the court has so construed it. In the face of the concurring opinion of so many eminent jurists, of course I differ with great hesitation and, doubt; but still I do differ, and I must follow my own judgment.
The question at issue is as to the intent of the ordér. Did Judge Melton intend to make these officers receivers ?
The term “receiver” is a technical term, and has a well-defined legal meaning, and, when used in an order, carries with it a plain and well-understood signification. Besides this, the duties belonging to the office, which the term imports, are also well understood, so much so that thé mere appointment of a party as receiver, when the term itself is used in the appointment, at once defines his duties without more. Such being the fact, it seems probable that had Judge Melton intended to divest the president and directors of this company of their powers as officials of the road' and invest them with the new power of a receiver, he would have so ordered, in plain and unambiguous terms; he would not have left the matter to construction, but would have used the precise and apt words to that end. This seems so reasonable that his failure to do so can hardly be accounted for on the ground that it was accidental, or that it occurred from inadvertence. It is more reasonable to suppose that it was intentional.
I venture the assertion that no order can be found in the history of judicial proceedings in which a receiver has been appointed where this term has been omitted. No such term is used in this order, nor has there been employed any term equivalent to this. And, although the prominent prayer of the complaint was for the appointment of a receiver, this term seems to have *320been carefully avoided in the order. Besides, the order is defective in other particulars as an order constituting a receiver in a large and extensive insolvent corporation with millions of assets. No bond is demanded; no inventory of the property and assets required, and no assignment by the company of this property to these receivers is directed.
The order was a consent order, and my construction of it is that the parties agreed that the property, as a temporary arrangement, should be left under the control and management of the present officers of the company until the further hearing of the cause. In the meantime the creditors to be restrained from interfering with the running of the road — the appointing of a receiver to be left to some future stage of the proceedings. And this order was intended to carry out this assent and understanding of the parties.
This construction is sustained by the further fact that it is very unusual for the president and directors, as president and directors of an insolvent company, to be appointed receivers of the property and assets of the company pending the litigation. In fact, I doubt whether a case can be found where such officers, as individuals and by name, much less as company officials, have been appointed. Mr. High is emphatic in his condemnation of such a practice. The president and directors of a company are officers of the company, elected or appointed by the company, and under its control. The appointment of such officials, in their official character, would be the same as appointing the defendant company itself. And I do not suppose that there ever has been an instance, unless this be one, where the defendant has been appointed the receiver of the property in litigation. High on Receivers, § 72.
But, admitting that this order of Judge Melton did constitute these company officials in their official capacity receivers, does it follow that they have the power to buy up the bonds of the company with company funds, and subsequently put them out again subject to the protection and security of such mortgage, if any, by which they were secured in their first issue ?
It will be admitted, I suppose, without question, that no *321debtor could do this, whether he be an individual or a corporation, where the rights of other creditors are involved.
The application by a debtor of his own funds to his own debts, whether evidenced by notes or bonds, will inevitably extinguish the debt. There can be no such thing as a debtor being the assignee of his own indebtedness in such way as to keep his debt alive to himself against 'himself. In every contract there must be, at least, two parties.
True, either an individual or a corporation might re-issue his negotiable notes or his bonds, although once taken up and extinguished, but this would be done, not by virtue of any life still existing in such instruments, but by virtue of a new vitality imparted by the new contract of re-issue, and the paper would go forth the second time not as the old paper, but as an original instrument, discharged from all of its former incidents and accompanied with such only as the new contract might attach to it. No authority is needed to support this proposition; it springs from well-known elementary principles.
Now, apply this doctrine to the case at bar.
It is not claimed that the receivers used any other funds in the purchase of these bonds except company funds. Here, then, is the application of the debtor’s monéy to the debtor’s debts, not by the debtor’s own act in person, it is true, but by the hands of another. This, however, can make no difference, as it is not the medium through which the application of the funds of the debtor is made which extinguishes the debt, but it is the' fact that his money has been used.
Besides, could these receivers, had they kept possession of these bonds until final settlement, have presented them against this insolvent company as subsisting obligations and claimed the amount which their assignees are now doing, the full amount due thereon ? Could they have instituted action against themselves to enforce payment? They might have held them and obtained, on final settlement of their accounts, credit for the sum paid out by them, but no more. The bonds, while in their hands, were certainly extinct as against the company.
If this was so, even for a moment, was not the mortgage dis*322charged to that extent? and, if discharged, who had the power of re-opening this mortgage and of reinstating these bonds at their full value to the prejudice of other creditors ?
My opinion is that when these bonds were taken up by the funds of the debtor they were extinguished, and the mortgage was discharged to that extent.
And this, whether the order of 1872, constituted the president and directors receivers or not.
Decree reversed.