Washington County Railroad v. Canadian Colored Cotton Mills Co.

Savage, J.

Writ of entry to recover so much of lots one to ten inclusive according to the B. R. Jones survey and plan of Calais •as lies between the St. Croix river and a line drawn eight feet from the shore rail of the plaintiff company-; also certain flowage rights. The plea is the general issue. The case comes up on report. The following facts appear. In 1852, the Calais & Baring R. R. Co. was the owner of a railroad in Calais and Baring, and of said lots 1, 5, 6, 9 and 10 and of an undivided half of lots 3, 7 and 8. In that year, by corporate vote, the directors of the Calais & Baring R. R. Co. were authorized and directed to execute a mortgage of the franchise of the company and all the property personal and real, and all the rights and privileges held by said company to trustees, to secure an issue of $100,000 of bonds. Under this vote the directors later in the year executed a mortgage deed of trust to certain trustees of the railroad and franchise of the company in Calais and Baring "as the same is now legally established, constructed and improved, or, as the same may be at any time hereafter legally established, constructed and improved within those places . . . . with all lands, buildings and fixtures of every kind thereto belonging, together with all real estate to said company belonging, also all locomotives .... and all the personal property of the said company as the same is in use now, or'as the same may be hereafter changed or renewed by said company.” And in this mortgage it was provided that "in case the said company shall fail for six months to pay the interest and principal of said bonds as the same become due it shall be the duty of the trustees or their successors on the written application of the lawful holders of a majority in amount of said bonds then outstanding to take actual possession of said property-and make sale of the same at public auction,” and so forth. Provision was made for filling vacancies among the trustees. This mortgage covered the lots of the demanded premises which the company then owned, if no more.

In 1854, under a similar corporate vote, the directors executed a second mortgage deed of trust to trustees of the same property and with the same terms and conditions as expressed in the first mortgage, to secure an issue of $50,000 of bonds. It does not appear whether any of these have been paid or not.

In 1856 the Lewy’s Island R. R. Có., owning a railroad running through Baileyville, Maine, and St. Stephen, New Brunswick, mortgaged all the property and franchises which it then held, or which it might thereafter acquire, to the city of Calais, to secure the city for financial aid advanced. In 1870, the Lewy’s Island railroad having been acquired by the St. Croix & Penobscot R. R. Co., which was the Calais & Baring R. R. Co. under a new name, Calais conveyed all its interest in the Lewy’s Island railroad property for $135,000 to the St. Croix & Penobscot R. R. Co., which on the same day mortgaged it back to Calais to secure the payment of the purchase price, and the performance of certain agreements. In 1875 the St. Croix & Penobscot R. R. Co. made a second mortgage to Calais, covering not only the Lewy’s Island R. R. property but its other railroad property formerly known as the Calais & Baring l’ailroad, "together with all and singular the real estate .... and all property and privileges appurtenant to said St. Croix & Penobscot R. R. Co.” This mortgage seems to have been given as additional security for a part at least of the liability secured by the mortgage of 1870, between the same parties.

In the meantime the Calais & Baring R. R. Co. in 1862 had acquired the title, it seems, of lot 4, an undivided half of lot 7 and 8, and a part, limited by bounds, of lots 2 and 3 of the demanded premises, and in 1874, the St. Croix & Penobscot R. R. Co. took a release deed of lots 3, 4, 5, 7 and 8. These lots, therefore, as well as the lots originally owned by the Calais & Baring R. R. Co. were covered by the last mortgage to Calais. In this connection it is to be remembered that the Calais and Baring R. R. Co. and the St. Croix & Penobscot R. R. Co. were one and the same corporation, the name of the former having been changed by the legislature in 1870.

In 1881, the St. Croix & Penobscot R. R. Co. which owned an equity óf redemption in all these lots, the trustees of the first and second mortgages given in 1852 and 1854, respectively, and the city of Calais, which was thé mortgagee in the 1875 mortgage covering these lots, all joined in a quitclaim deed of them to the St. Croix Cotton Mill, the predecessor in title of-the defendant.

But it further appears that in May, 1898, Moore & Schley claiming to be "the holders of $43,000 of the first and second mortgage bonds of the Calais & Baring road” made written application to the persons who had then become trustees under the 1852 mortgage requesting them to institute proceedings for the foreclosure of the mortgage and the sale of the property. Accordingly the trustees gave notice, July 6, 1898, as provided in the mortgage, of their intention to sell the mortgaged property, and did sell it at public auction, August 1', 1898, to one Frank E. Randall. In the deed of the trustees to Randall it is stated that default for more than six months had been made in the payment of the principal of the bonds secured, that the applicants for the foreclosure and sale were the lawful holders and owners of all the bonds then outstanding, and that they, the trustees, took actual possession of the mortgaged property August 1, 1898. On August 15, 1898, Randall gave a deed of the same property to the plaintiff.

It further appears that on June 2, 1898, the city of Calais assigned to the J. P. McDonald Company its two mortgages from the St. Croix and Penobscot R. R. Co., given as already stated in 1870 and 1875 respectively. The McDonald Company assigned them to the plaintiff in 1899, and they have been foreclosed' by proceedings in court. But it should be said that these assignments and this foreclosure do not affect the title to the lots in question. These assignments may have been effective as to the other mortgaged property, but, the city of Calais by joining in the deed of 1881 to the St. Croix Cotton Mill had released all its title to these lots. That was a quitclaim deed. But a quitclaim deed by a mortgagee may even convey his interest, if so intended, Johnson v. Leonards, 68 Maine, 237. Much more will a quitclaim deed by a mortgagee release or extinguish his interest when so intended. Such was the undoubted purpose of the mortgagee in this instance, and such was the effect of its deed. These lots were no longer under the mortgage.

Upon the whole case, then, the plaintiff’s title depends in the first place upon the validity and effect of the sale by the trustees in 1898, while the defendant rests on the title conveyed by the deed of 1881 to the St. Croix Cotton Mill. By that deed, it should be observed, the Cotton Mill acquired, at least, the title to the equity of redemption under the mortgage of 1852.

In order to prevail the plaintiff must show a better title than that of the defendant, and it can do this only by sustaining the sale by the trustees to Randall under the 1852 mortgage, for, so far as this case is concerned, the defendant’s title is good against all persons except those claiming under that mortgage. Several objections are urged against the validity of the trustees’ sale in 1898. First, that it does not appear that the interest on the bonds was six months overdue at the time application for a sale was made; secondly that it does not appear that the written application for sale was made by holders of a majority of the bonds then outstanding; 'and lastly, that the trustees did not take actual possession before sale, as directed in the trust deed. As to the first objection, it may be said in passing that the trust deed authorized a sale, when the principal should be six months in default, whether the interest was in default or not. . But we do not think any of these objections are tenable.

It is a general rule, as stated in 2 Perry on Trusts, 2nd Ed. sect. 602, that "the power of sale given in the deed or mortgage must be strictly followed in all its details. The power of transferring the property of one man to another must be followed strictly, literally and precisely. If the power Contains the details, the parties have made them important.....If the power is not executed as it is given in all particulars, it is not executed at all, and the mortgagor still has his equity of redemption.” And again in section 783, — "A power of sale, like all other powers, can be exercised only in the mode, and upon the exact conditions, terms and occasions prescribed in the instrument of trust.

But there are recitals in the trust deed which state in effect that all of the essential conditions prerequisite to a sale, existed at the ■time of the sale, namely, that the principal of the bonds was six months in default, that the application for sale was made by the holders of all the outstanding bonds, and that the trustees took actual possession before sale. We think these recitals are to be taken as prima facie proof of the facts. The rule is stated in 4 Ency. of Evidence, 183, as follows: "The recitals contained in a deed executed by virtue of a power of sale contained in a trust deed or mortgage that proper notice of the sale was given, and that other steps preliminary to a valid sale were complied with, are prima facie evidence against parties and privies to the instrument containing the power.” The learned editor of the American State Reports closes a long note to Tyler v. Herring, 19 Am. St. Rep. 263, by saying: "The recitals made by a trustee surely must be taken as at least prima facie evidence of the matters therein stated:” If such is not the rule, the title of purchasers would be exceedingly unstable, and purchasers or their grantees would be in an unfortunate predicament if compelled to make proof of title, after all means of proof outside the deed have disappeared. There is no such method of perpetuating proof of the facts as exists in case of official or statutory sales, where the officer making the sale is required to make some return or record of .his doings aliunde his deed. In such case the recitals in the deed are not evidence, since the law has provided other means of proof.

But the recitals are only prima facie proof. They may be rebutted. In this case, the testimony of one of the trustees is reported on the question whether the trustees took actual possession before they made sale. The defendant contends that this'testimony shows that they did not take actual possession of the demanded premises. We need not decide whether this is so or not. The case shows that the trustees at the time were in actual possession of the railroad and were running it. The distinctively railroad property of which they were in possession constituted apparently by far the larger and more important part of the mortgaged property, and covered some part of the lots in question. We think that that possession was sufficient. The trustees being in possession of the railroad, it was not necessary for them to enter upon and take possession of the separate parcels of land, outside of the railroad location, but contiguous to, and connected with it. We hold, therefore, that the sale by the trustees in 1898 was regular and valid, and conveyed such title as the trustees then held.

Hereupon the defendant claims that by the deed of 1881, in which the then trustees joined, the entire legal title passed to the defendant; that the trustees thereby divested themselves and their successors of the power to make any future sale of the legal title ; and, therefore, that the trustees’ deed in 1898, if it had any effect, conveyed at the most only an equitable interest, and not a title which will sustain this action at law. We think this contention cannot be sustained. It is true that a conveyance of a trust estate by a trustee may pass the legal title to the grantee, even though the conveyance is not made in execution of the trust, and is made in violation of its purpose. Such a result will generally follow when the instrument creating the trust contains no restrictions either upon the power of sale, or upon the manner of exercising the power. But here the case is different. While the trust deed of 1852 conferred an express power of sale upon the trustees, it precisely limited the occasions and conditions under which the power could be exercised,, and prescribed the essential prerequisites of a valid sale. Unless there was a default in payment of principal or interest of the bonds secured, and an application for sale by holders of a majority of the outstanding bonds, the trustees had no power to sell. Their want of power appeared upon the face of the instrument. Unless the trustees in making sale followed the requirements of the trust deed as to taking possession, giving notice and so forth, their deed was ipso facto void, and conveyed no title whatever. "The powers of trustees .... depend, entirely upon the terms of the deeds. Such powers are created by and exist in the deeds, and, of course, they exist in the terms in which they are created, and in no others.....They are wholly' matters of convention and contract between the parties, and not of law or jurisdiction. . . . . It follows that the purchaser must look carefully to the intention and purpose of the power as well as to its extent, for if it is.executed . . . not in the manner in which it is provided that it should be executed, the purchaser will take no title.” Perry on Trusts, sects. 602, g. and 602, t. "When a power has not been executed in accordance with essential conditions, the sale and deed will be held entirely void, both at law and in equity.” See note to Tyler v. Herring, 19 Am. St. Rep. 263. It follows that the attempted conveyance by the trustees in 1881 was ineffectual to. pass the title to the trust estate. The conditions necessary to authorize a sale did not exist, and the steps necessary to make a sale valid were not taken. Through the 1898 deed, then, the plaintiff has obtained title to all the land covered by the trust deed of 1852, notwithstanding the 1881 deed to the defendant.

The last question to be decided is whether any, and if any, how much, of the demanded premises were subject to the trust deed of 1852. That lots. 1, 5, 6, 9 and 10, and an undivided half of lots 3, 7 .and 8 according to the Jones survey were covered- by the 1852 deed is not in dispute. The railroad company owned these lots in 1852. They were a part of "the real estate to the company belonging,” all-of which was covered by the deed. But . the remainder of the demanded premises was not then owned by the company and was not covered by the deed and has not come to the plaintiff, unless it was such after acquired property as the 1852 deed purported to convey. It is contended, indeed, that ■ the directors had no authority to mortgage after acquired property. The directors of the railroad company were, authorized by a corporate vote to mortgage the franchise and property "held by said company.” This vote clearly related to property then held by the company, and not to after acquired property. And without considering at all whether the directors had independent power to mortgage, when it appears, as in this case, that the directors act under the special authority of a corporate vote, and the terms and limitations of that authority are disclosed in the mortgage itself, we think it may well be doubted whether their mortgage of property not included in the vote has any effect whatever as to that property.

But we think that the trust deed properly construed does not purport to include any after acquired land which might lie. outside the railroad location, or which was not used or available for use, for the operation of the railroad. The words of such a deed "are to be strictly construed, and no land or property is included unless clearly within the meaning of the words of the instrument.” 3 Cook on Corporations, sect. 85G. The deed speaks of two classes of real estate, that appertaining to the "railroad,” and that belonging to the company. It uses different language as to each. In one case, it is the "railroad and franchise .• . as the same is now established, constructed or improved, or as the same may be at any time hereafter legally established, constructed and improved . . . . with all lands, buildings and fixtures of every kind thereto belonging.” The other description is "all real estate to said company belonging.” We think we should not disregard this difference. The provision relating to after acquired property is in terms confined to the "railroad” and franchise, and the lands belonging "thereto,” "that is, to the "railroad.” The words "established, constructed and improved,” seem clearly to apply to the railroad itself, as distinguished from other land of the company. They are not appropriate to real estate owned by the company, but not a part of the "railroad” itself. Besides, unless it was intended by the deed to make a distinction between lands belonging to the "railroad,” and other real estate belonging to the company, there was no occasion for inserting the clause "all real estate to said company belonging.” We conclude that this latter clause related only to real estate then held or owned by the company, which was not a part of the railroad itself, and that no after acquired property was intended to pass-, or did pass, by the 1852 deed, except such as appertained to the "railroad” itself. See Eldridge v. Smith, 34 Vt. 484; Walsh v. Barton, 24 Ohio St. 28; Boston &c. R. R. v. Coffin, 50 Conn. 150; Morgan v. Donavon, 58 Ala. 241; Randolph v. New Jersey &c. R. R., 28 N. J. Eg. 49; Dinsmore v. Racine &c. R. R., 12 Wis. 649; Shamokin Valley R. R. v. Livermore, 47 Pa. St. 465.

It follows that of the demanded premises the plaintiff has title to lots 1, 5, 6, 9 and 10, and an undivided half of lots 3, 7 and 8, and only to so much of the after acquired lots, if any, as lies within the railroad location, or as was acquired for and was used in connection with the operation of the railroad. But the case fails to show that any part of these latter lots, within the limits of the premises demanded in the writ, were a part of the "railroad,” as hereinbefore defined. The plaintiff therefore is entitled to judgment for so much of lots 1, 5, 6, 9 and 10, and of an undivided half of lots 3, 7 and 8, as lies between the St. Croix River and a line drawn eight feet from the shore rail of the plaintiff’s railroad, and no more; and also for the flowage rights appurtenant thereto.

Judgment accordingly-