Ohio Cent Company v. Central Trust Company/Opinion of the Court

by Melville Fuller

United States Supreme Court

133 U.S. 83

Ohio Cent Company  v.  Central Trust Company

These first mortgage bonds matured January 1, 1920, and there was no provision in them, nor in the mortgage, that they should become due or could be declared due before that date; nor were there any allegations in the bill upon which to predicate a finding or decree to that effect. The mortgage provided that, in case of entry by the trustee for non-payment of interest, or of principal at maturity, the income and revenue should be applied to the payment of such interest, and the residue to the payment of the principal; and that, if the property went to sale, the net proceeds should be applied 'to the ratable payment of principal and the then accrued interest of all the said bonds, whether the principal be then due or not;' but if, in case of entry or of proceedings to sell for default, in payment of interest before the bonds should become due, and before the sale should be made, the interest in arrears should be paid and satisfied, together with all costs, expenses, etc., that then the proceedings should be discontinued, and possession of the mortgaged premises restored, as if default or entry had not occurred. While, therefore, the intention is clear that the bonds were not to become due before the specified date of maturity, the proceeds of sale, after the satisfaction of the accrued amount, were properly applied upon the outstanding liability. Railroad Co. v. Fosdick, 106 U.S. 47, 68, 1 Sup. Ct. Rep. 10. Neither in the pleadings nor in the reports of the special master, nor in any part of the record, can we discover the basis for the statement: 'The court therefore finds that there is due from said defendant, the Ohio Central Railroad Company, to the complainant, as trustee for the holders of said bonds secured by said first main-line mortgage, upon each of said bonds, the sum of eight hundred and two and sixty-eight and one-third one-hundredths dollars, ($802.68 1/3.)' Certainly, as $197.31 2/3 had been realized on each bond, $802.68 1/3 remained to be paid, but only according to the tenor of the bond. There are no allegations in the bill as to when the income bonds matured, nor is a copy of the second mortgage given. The deficiency decree says that 'the court further finds that no fund has come under the control of this court from which any payment can be made upon the three thousand main-line income bonds in the bill of complaint set forth, and that no payments of any kind have been made upon any of said income bonds. Wherefore, the court finds that there is due from the defendant, the Ohio Central Railroad Company, to the complainant, as trustee of the holders of said income bonds, upon each of said bonds, the sum of one thousand dollars, ($1,000.)' But the conclusion does not follow that, because no payment had been made on the income bonds, therefore they had matured; and, unless they had matured by lapse of time, or otherwise, as provided, the amount could not be decreed to be due.

The bill was taken as confessed; but that fact did not, in itself, justify giving complainant more than it claimed. In Thomson v. Wooster, 114 U.S. 104, 5 Sup. Ct. Rep. 788, the general nature and effect of an order taken on a bill pro confesso, and of a decree pro confesso regularly made thereon, and of our rules of practice on the subject, are discussed in the opinion of the court by Mr. Justice BRADLEY: and it is there held that under the rules and practice of this court in equity 'a decree pro confesso is not a decree as of course, according to the prayer of the bill, nor merely such as the complainant chooses to take it; but that it is made, or should be made, by the court, according to what is proper to be decreed upon the statements of the bill, assumed to be true.' If the allegations are distinct and positive, they may be taken as true without proof; but if they are indefinite, or the demand of the complainant is in its nature uncertain, the requisite certainty must be afforded by proof. But in either event, although the defendant may not be allowed, on appeal, to question the want of testimony or the insufficiency or amount of the evidence, he is not precluded from contesting the sufficiency of the bill, orfrom insisting that the averments contained in it do not justify the decree. Under the eighteenth rule in equity, where the bill is taken pro confesso, the cause is proceeded in ex parte, 'and the matter of the bill may be decreed by the court;' and hence, if a decree be passed not confined to the matter of the bill, it may be attacked on appeal for that reason.

By the ninety-second rule it is provided that in suits in equity for the foreclosure of mortgages 'a decree may be rendered for any balance that may be found due to the complainant over and above the proceeds of the sale or sales.' Assuming that a deficiency decree might be rendered, in the absence of a specific prayer for that relief, nevertheless, the case made by the bill must show that the amount is due; for otherwise it cannot properly be found so. This rule does not a thorize the circuit courts to find a balance due because partial extinguishment has been effected by a sale, if, as matter of fact, the indebtedness is not then payable. The bill here did not seek relief as to the second mortgage, which is only referred to as a subordinate lien, nor did it claim that anything except interest was due upon the first mortgage. It sought the establishment and enforcement of the first mortgage lien, and the foreclosure of the equity of redemption. The amount realized paid the outstanding interest, and a part of the principal. Under such circumstances, and upon these pleadings, this deficiency decree, which is a judgment for the recovery of so much money, with execution, was improvidently entered. Without discussing the extent of the franchises authorized to be sold under the mortgage, we are of opinion that this appeal was properly taken in the name of the defendant company. Manufacturing Co. v. Bank, 119 U.S. 191, 197, 7 Sup. Ct. Rep. 187; Railroad Co. v. Commissioners, 112 U.S. 609, 619, 5 Sup. Ct. Rep. 299. The deficiency decree of June 22, 1887, is reversed, at appellee's costs, and the cause remanded, with directions to proceed therein as may be just and equitable.

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