Wagner v. Philadelphia, Bristol & Trenton Street Railway Co.

Opinion by

Mr. Justice Brown,

On September 1, 1908, the Philadelphia, Bristol & Trenton Street Railway Company defaulted in the payment of interest due on its bonds, secured by a mortgage on all of its property, rights arid franchises. The bonds so secured and issued amounted to $650,000 and were of the denomination of $1,000 each. On September 5— *118four days after the default — Charles F. Wagner, Jr., who was the holder and owner of ten of these bonds, filed a' bill for the appointment of a receiver, with authority, inter alia, to sell, if necessary, all of the mortgaged property, real and personal, and to apply the funds realized from a sale to the payment of the bondholders, creditors and stockholders of the company. A further prayer of the bill was for an injunction to restrain the trustee in the mortgage from instituting foreclosure proceedings. The bill was filed without notice to either of the defendants named in it, and temporary receivers were at once appointed on the application of the complainant. On September 18 — thirteen days after they were appointed— their appointment was vacated upon the petition of the street railway company, the court holding that the appointment had been “ill advised and improvidently made.” There is no assignment of error to this, and we must, therefore, assume that the complainant concedes it to have been right. Subsequently the street railway company answered and the trust company demurred to the bill. The demurrer was sustained, and, in sustaining it, the court directed the complainant to pay the costs and expenses of the temporary receivership.

The first question to be passed upon on this appeal is as to the sufficiency of the bill. Several reasons were given by the court below for sustaining the demurrer to it. The complainant’s averments, upon which he based his right to file it, were that he was a bondholder of the railway company and his bonds were secured by a mortgage of that company; but his bill neither contained nor had appended to it a copy of one of the bonds or of the mortgage, nor was there any reference to the place where the latter was recorded. The court was, therefore, in ignorance of the complainant’s rights under his bonds and the mortgage when called upon to pass on the sufficiency of the bill, which, in effect, is one for foreclosure, no matter how strenuously it is now repudiated as such by the learned counsel who filed it. It is not one of a *119common creditor asking for the appointment of a receiver for the conservation of the assets of an alleged insolvent corporation, but is that of a bondholder averring a right under his bonds and the mortgage securing them to ask for the appointment of a receiver and for a sale of all of the corporate property. The complainant avers no other interest than that of a bondholder, and relief is claimed under the mortgage. That instrument is referred to in the bill as the foundation of the right to file it, but with no copy of the same appended to or made part of the bill, and with no reference to the place where it is recorded, the learned chancellor below properly held' that he was “utterly at a loss” to determine what plaintiff’s rights were under the bonds and mortgage upon which he relied. Though the mortgage is not a part of the record and cannot be regarded as having been before the court below in passing upon the demurrer, it is printed as an appendix to appellant’s paper-book, and we are referred to certain portions of it as showing the right of complainant to file his bill. This we cannot understand. In passing upon the sufficiency of the bill on the demurrer to it, nothing was before the court below but the bill itself, and, on this appeal from the decree sustaining the demurrer, we can consider nothing that does not appear upon the face of the bill. No better reason could be given why the mortgage should have been made a part of the bill than the references now made to certain clauses in it as establishing the right of the complainant to file his bill. If his right to file the same was under the mortgage — and the bill substantially so avers— such right ought to have appeared affirmatively to the court below by submitting the mortgage as a part of the bill, and the references to it now by counsel for appellant and the printing of it as an appendix to their argument must be regarded as a concession by them that it ought to have been before the court below as a part of the pleadings in the case. Through failure to make it a part of them, the court was unable to pass upon the plaintiff’s *120right to file his bill, which was the fundamental question in the case, and the demurrer was properly sustained for this reason alone.

After the appointment of the receivers had been vacated they filed their account, charging themselves with the receipts of the road during their management of it and taking credit for certain disbursements. The credits taken for moneys paid out for the operation of the road were not objected to, but exceptions were filed and sustained to the items making up the legal expenses of the receivership. These items were for counsel fees, receivers’ compensation, etc., amounting to $1,561.57, and the second complaint on this appeal is that Wagner, the appellant, was directed to pay them. When the court below passed upon the petition to impose the expenses of the receivership upon him there was before it a clause in the mortgage providing that no holder of any of the bonds secured by it should have the right to institute any proceedings for the appointment of a receiver until certain conditions had existed, no one of which existed when the bill was filed. Among these conditions precedent to the right to file a bill for the appointment of a receiver was one providing that default in payment of interest on the bonds should have continued for six months, that written notice of such default should have been given to the trustee named in the mortgage, and holders of twenty-five per cent in amount of the bonds secured by it, and then outstanding, should have made written request upon the trustee to proceed to exercise the powers granted to it by the- mortgage. This bill was filed four days after default in the payment of interest, and, on the ex parte application of the complainant, without notice to any one, the temporary receivers were appointed. In view of the plain and unambiguous terms of the mortgage, with which the complainant is conclusively presumed to have been familiar, and which he deliberately disregarded in filing his bill, there is no conceivable reason why the costs and expenses of the receivership should be borne by the *121railway company. On the contrary, costs in equity being always in the sound discretion of the court, there is every equitable reason why the complainant should pay the costs and expenses that resulted from the filing of his bill, which he ought to have known from the terms of the mortgage he had no right to file. If the court below had been informed of the terms of the mortgage at the time the bill was filed, the receivers would not have been appointed. Among the many authorities which sustain the decree imposing the costs and expenses of the receivership upon the complainant are: High on Receivers (4th ed.), sec. 796; Cassidy v. Harrelson, 1 Colo. App. 458; Myres v. Frankenthal, 55 Ill. App. 390; Couper v. Shirley, 75 Fed. Repr. 168; Hickey v. Parrot Silver and Copper Co., 32 Mont. 143.

The assignments of error are overruled and the decree is affirmed at appellant’s costs.