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U.S. Supreme Court

Sage v. Central Railroad Company, 99 U.S. 334 (1878)

Sage v. Central Railroad Company

99 U.S. 334


1. In the mortgage of a railroad, it was covenanted and agreed by all the parties thereto that, in case of a foreclosure sale of the mortgaged property under a decree, the trustee named in the mortgage should, on the written request of the holders of a majority of the then outstanding bonds thereby secured, purchase the property at such sale for the use and benefit of the holders of such bonds, and that the right and title thereto should vest in him, no holder to have any claim to the proceeds except his pro rata share thereof as represented in a new company or corporation, to be formed for their use and benefit, and that the trustee might take such lawful measures to organize a new company for their benefit, upon such terms, conditions, and limitations as the holders of a majority of the bonds should in writing request or direct, and he should thereupon reconvey the premises so purchased to such new company; on default of payment, a suit was brought by the trustee against the mortgagor and subsequent mortgagees praying for a foreclosure of the first mortgage, and for general relief. Held: 1. That such an agreement inures equally to the benefit of such bondholders, and that each holds his interest subject to the controlling power given to the majority of them. 2. That the trustee, the cestui que trust, and the trust itself being before the court, and it appearing that the holders of a majority of the bonds had in writing requested and directed the trustee, if he became the purchaser of the property,

Page 99 U. S. 335

to convey it to a new corporation, the court might authorize and direct him to bid at the sale at least the amount of the principal and interest of the first mortgage bonds, and might provide for a complete execution of the trust. 3. That though the specific relief sought was a strict foreclosure, a decree for a sale of the property and for the enforcement of the agreement contained in the deed was, under the prayer for general relief, appropriate. 4. That it was not error for the court to require that if a person other than the trustee became the purchaser at the sale, he should pay at once, in cash, a part of his bid as earnest money. 5. That where some of the first mortgage bondholders were permitted to intervene as parties to prosecute for the protection of their several interests, an appeal from the decree for a sale of the property, and the appeal not having been made a supersedeas, the decree was executed, they cannot object to orders made prior to the decree, nor assign for error any part of it which is not injurious to their interests.

2. Where the decree required notice of the sale of the property to be advertised in certain newspapers, among which was A., printed in a certain city, and it appearing that before such advertisement was made, A. had been merged into B., or that its name had been changed to B., held that the identity of the paper remaining, the advertisement in B. was a substantial compliance with the order.

The facts are stated in the opinion of the Court.

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