American Waterworks Co. v. Farmers' Loan & Trust Co.

THAYER, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

When the present appeal first made its appearance upon the docket of this court, at the December term, A. D. 1897, we were of the opinion, which we still entertain, that the master’s report of July 16, 1896, wherein he merely stated that the Farmers’ Loan & Trust Company “has in all things complied with its bid, and the orders of the court in respect thereto,” was too general and indefinite to afford a proper basis for judicial action, in that it did not state any of the facts or evidence upon which the conclusion of the master was based. At the same time, as it seemed obvious that the sale of the mortgaged property’ had been regularly conducted, that no reasons existed for setting the sale aside, and that it could probably be made to appear that no harm had been done to any party in interest which would justify a reversal, we resorted to the expedient of retaining the case, and entering an order requiring the master to make a detailed report, showing in what manner the purchaser at the foreclosure sale had answered its bid, with directions that such amended report should be certified to this court for its consideration. The amended report thus called for was filed in this court on March 5, 1898, and in connection therewith, certain exceptions thereto which had been taken by the appellant. An examination of the amended report, which was very voluminous, disclosed that there were some errors or discrepancies therein which could probably be corrected or explained by a further revision of the accounts, whereupon, at the May term, A. D. 1898, another order was entered, requiring the master to make an additional or supplemental report. Such a report has now been filed. The same has been carefully examined and considered, and the case has been reargued in the light of the original and supplementary reports.

The foregoing- proceedings have only had the effect of giving some color to a claim now mada by the appellant, that the Farmers’ Loan '& Trust Company has not as yet fully complied with its bid, and that by reason of its failure to do so certain mortgage bondholders of the American Waterworks Company of Illinois, who did not put their securities into the reorganization scheme prior to the foreclosure sale, but elected to take cash for their pro rata proportion of the purchase price bid at the sale, have not received as much money as they were justly entitled to. The decree of foreclosure contained a provision, in substance, which authorized any bidder at the foreclosure sale to answer his bid in bonds, which were to be received in payment of the bid, for an amount equal to the sum that the holder would be entitled to receive therefor out of the proceeds of the foreclosure sale after all expenses and costs of the litigation had been paid. A very large proportion of the bondholders (those representing bonds to the amount of $3,554,000) requested the Farmers’ Loan & Trust Company to purchase the mortgaged property as trustee for their benefit, and consented to the use of their bonds to make v. the purchase price which might be bid. The remaining bondholders elected to receive payment in cash, and, as the property was bought by the trust company, the master subsequently ascertained and reported that each bond for $1,000 was entitled to be paid $862.38, or to be received for that sum in making v. the purchase price. All the bondholders who did not become parties to the reorganization scheme have either been paid_ at that rate, or are willing to accept payment, and have taken no exceptions to the master’s computation, and have failed to join in the present appeal. There are only five bonds outstanding which have not already been paid at the rate prescribed by the master, and it was stated on the argument, without contradiction, that the holders of these bonds are willing to accept payment at the prescribed rate, and that there is money in the registry of the lower court which is more than adequate to satisfy their demands.

In view of the premises, it is clear, we think, that no occasion exists for disturbing any of the orders made by the lower court on account of which the present appeal is prosecuted. Even if there were errors or irregularities in some of the master’s proceedings, by virtue of which the amount payable on the mortgage bonds was slightly underestimated, yet the bondholders are not complaining, and it is not perceived that the mortgagor company is entitled to make a complaint in their behalf. The price bid at the foreclosure sale was less than the mortgage indebtedness as fixed by the final decree, to the amount of $140,554.18. Besides, the last report of the master discloses that an allowance has been made to the Farmers’ Loan & Trust Company in the sum of $41,500 for its counsel fees, and compensation for its services, for which sum it should receive a credit upon its bid which it has not as yet received. This allowance would reduce to some extent the distributive share payable on each bond, as heretofore reported by the master. It is obvious, therefore, that there is no surplus fund to which the mortgagor can lay claim, however the price that was bid for the property may be administered as among the bondholders.

When the present appeal was taken, it was not without merit, in view of the fact that the master’s report of July 16, 1896, did not show in detail, as it should have done, how the purchaser at the foreclosure sale had responded to its bid. The mortgagor company was entitled to know how the purchaser’s bid had been paid, and an appeal would seem to have been its only remedy. Subsequent reports made by the master pursuant to the order of this court have remedied this defect, and rendered it certain that no wrong has been done which entitles the appellants to complain. Moreover, since the master’s report of March o, 1896, was filed, the appellants have been unduly persistent in insisting that the sale should be set aside, and have enhanced the cost of the litigation to some extent without adequate cause. For these reasons, it seems just to tax the appellants with one-third of the costs of the appeal. It is accordingly adjudged that the order of the circuit court of May 28, 1896, overruling the exceptions to the master’s report of sale, and the order of July 18, 1896, refusing to vacate the order for the delivery of a deed to the purchaser at the foreclosure sale, and the order of August 8, 1896, directing the delivery of 'the mortgaged property to the purchaser thereof at the foreclosure sale, be, and the same are hereby, approved and confirmed, and that one-third of the cost of this appeal be paid by the appellants, and the residue thereof by the appellee.