Court Opinion

ID: 8852997
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:21:24.498033+00
Date Added: 2024-06-11T17:05:34.032063
License: Public Domain

CALDWELL, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
Although some technical objections are taken to intervener’s petition, we think it sufficiently appears from an examination of the whole record that the intervener did set up that his judgment was a lien on certain real estate of the railroad company which was not embraced in any of the mortgages in suit, and that he desired the leave of the court to sue out execution on his judgment, and sell such lands, which were particularly described. As the intervener will be satisfied with this relief, we need not consider the question whether his judgment ought to be paid as a preferential debt. A special prayer for this relief was not necessary. The petition concluded with a general prayer “for all other further and proper relief,” and that was sufficient. It sufficiently appears from the record before us that the intervener’s judgment was and is a lien on the lands of the railroad company described in the petition, and that the lien of the mortgages which the complainant the Farmers’ Loan & Trust Company seeks to foreclose does not extend to or embrace such lands. When a bill is filed to foreclose a mortgage, the court may, upon a proper showing, appoint a receiver to take into his possession and control the mortgaged property. But the jurisdiction possessed by a court of chancery to foreclose a mortgage and to appoint a receiver for the mortgaged property pending the foreclosure gives it no jurisdiction or power to seize or take into its custody or control, through a receiver or otherwise, property of the debtor which is not covered by the mortgage. Nor 'can the court in such a suit rightfully make any order that will prevent, hinder, or delay the other creditors of the mortgagor from subject*21xng tbe property not included in the mortgage to the payment of their debts. A mortgagee lias the undoubted right to subject the mortgaged property to the payment of the mortgage debt, to the exclusion of all general creditors of the mortgagor and persons holding junior liens thereon; but as to all property of the debtor not included in the mortgage the mortgagee is in no better plight than if he had no mortgage. It is clear, therefore, that, so far as relates to, the receivership in the foreclosure suit, the intervener was entitled to an order discharging the land mentioned from the custody of the receivers, and granting him leave to sell the same on execution to satisfy his judgment.
The next inquiry is, was the intervener deprived of his right to collect his judgment by due course of law by reason of the bill filed on the 15th day of August, 1893, and the orders made in that suit? That was not a bill to foreclose a mortgage or enforce any other lien on the property of the company. Though the railroad company was made a defendant to the bill, it is obvious that it was not an adversary proceeding, and that it is to be viewed precisely as if the company itself had filed the bill. The bill did not contemplate the sale of the road or the dissolution of the corporation. Briefly, it alleged the company owed more debts than it was then ready to pay, and that, unless the courts shielded and preserved its proj>erty by taking it into its judicial custody, large sums of money would be lost to its creditors and stockholders, and the public interests injuriously affected; but that, if the court would take the road and its property into its judicial custody, and preserve and manage "the same as a unit,” the same would "be more than sufficient to pay and discharge all the debts and obligations to its creditors, and preserve to its stockholders said railway system freed from debt.” The bill, it is •evident, contemplated the continuance of the- receivership until the court received money enough from the sales of the lands of the company, and fr.om the earnings of the road, to pay all the debts of the company, and, when this had been accomplished, it was to hand the property over to the stockholders fx*eed from debt. It placed the property of the company beyond the reach of its creditors, and put it under the management of the chancellor until the earnings and income therefrom should be sufficient to pay the debts of the company. The bill gave no intimation of the length of time that would be required to enable the chancellor to accomplish this task. The management of the road by its president and board of directors was not assailed; on the contrary, the company was eager to have its president appointed a receiver, and it was done.
It is obvious that if an individual or private business corporation had conveyed its property to another for the same purposes and upon the same trusts that the court was asked to take this property, and did take it, the law would have stamped the conveyance as one made to hinder and delay creditors, and fraudulent and void for that reason. In the case of Glenn v. Biggett, 47 Fed. 472, 474, Judge Thayer said:
“Ordinarily, and in the absence of a statute expressly authorizing such a proceeding, courts of equity have no greater control over the affairs of a private *22corporation when it becomes insolvent than they have over the affairs of an individual. They are not courts of bankruptcy.”
And see, to the same effect, Silver Mines v. Brown, 58 Fed. 644, 7 C. C. A. 412,19 U. S. App. 203; Walters v. Trust Co., 50 Fed. 316.
Assuming, but not deciding, that the bill presented a case of equitable cognizance because the defendant company was a quasi public corporation, nevertheless it w'as clearly one which looked to the payment of all the debts of the company. It did not suggest that any particular creditor or class of creditors was more deserving pf protection than other creditors. Certainly, on such a bill, the court had no authority to bar or exclude from the benefits of the trust it had assumed any class of just and valid debts due and owing from the company. If it could, under such a bill as this, by a stroke of the pen, bar all debts the company owed which were contracted six months before the receivers were appointed, it could bar all the debts it owed down to the day the receivers were appointed. The order limiting the payment of debts to those which accrued within six months preceding the appointment of the receivers conflicted with the declared object of the bill, which averred that by placing the property in “judicial custody” it would, under such management, “be more than sufficient to pay and discharge all the defendant’s obligations to its creditors. * * *” The theory of the bill was that all of the debts of the company were to be paid, and none repudiated. Nor could the court, on such a bill, annul or vacate any valid judgment or other lien on the company’s property. A court of bankruptcy could not exercise such poAvers, and it will not be claimed that under such a bill as this the court possessed larger powers than a court of bankruptcy. Assuming that the bill was one that could be maintained, it was the duty of the court either to order the receivers to pay the intervener’s judgment,, or grant the intervener leave to sue out execution on his judgment, and sell the land upon which it was a lien. The court has no power to hinder and delay a creditor indefinitely in the collection of his debt, or to deny to him the right to enforce any lien he may have upon the property of his debtor for its payment. If such bills are to be maintained, it Avould seem the practice under them ought to conform as near as may be to the practice in bankruptcy. If an assignee in bankruptcy desires to preserve to the estate property upon which a creditor of the bankrupt has a valid lien, he must pay the debt, and, failing to do so, the creditor has a right to have his lien enforced. Kimberling v. Hartly, 1 Fed. 571, 1 McCrary, 136.
The decree of the circuit court is reversed, and the cause remanded, with instructions to enter an order that, unless the receivers shall pay the intervener’s judgment within 60 days after the mandate of this court is filed in the circuit court, the intervener may sue out execution on his judgment, and sell thereon all the lands of the Northern Pacific Bailroad Company in the county of Cass, in the state of North Dakota, upon which his judgment is a lien, and which are not included in the mortgages which are being foreclosed in this suit.