Gettysburg Electric Railway v. Electric Light, Heat & Power Co.

Opinion by

Mr. Justice Brown,

The single question before the court below was, the alleged default of the Electric Light, Heat & Power Company of Gettysburg, as lessee in a lease from the Gettysburg Electric Railway Company, executed October 17,1893. If there was default, the appellants were clearly entitled to a decree for the foreclosure of the mortgage of the former company of the same date to the Fidelity Insurance, Trust & Safe Deposit Company of Philadelphia, as trustee, for which company the Harrisburg Trust Company, one of the appellants, has been substituted as trustee. The learned judge below substantially found what he could not have avoided finding, that the lessee was in default on several of its covenants, but refused the decree asked for, because, in his judgment, the defaults were not “ such, ” under the lease, “ as would justify a decree foreclosing thé mortgage.” In this he erred, for it is manifest that there were such defaults as justified the foreclosing of the mortgage, and the decree made was improper.

One of the lessee’s covenants was, that it would “ keep and maintain all of said property hereby leased to it in good repair and at the termination of this lease restore the same to the said party of the first part in good condition.” On September 10, 1894, the power house included in the lease was destroyed by fire, and the duty of the lessee, under the foregoing covenant, was to restore it: Hoy v. Holt, 91 Pa. 88. This seems to have been the view of the court below; but the lessee did not rebuild, and, under the twelfth finding of fact, was held not to have been in default. That finding is: “ The books of the railway company would seem to show the payment by said company of the sum of $981.64 on the power house after the fire. But this payment was voluntarily made by the railway company so as quickly and at once to aid in repairing the loss, with no intention of insisting on the severity of its contract of lease with the light company or of ever claiming their portion of payment toward the rebuilding of the said power house as a forfeiture by the light company under its lease and mortgage. The railway company never made any demand on the light company for the same but it remains for their successors in title to do so. The railway company did pretend at least to keep an account with the light company but the payment for above repairs were never charged against the light company. Their right so to do they intended to and did waive.” The finding should have been not merely that the books “ would seem to show the payment by said company of the sum of $981.64 on the power house after the fire, ” but that this sum had been actually paid by the railway company to do what the light company had failed to do. Failure to perform this covenant was default, the penalty, for which the parties to the mortgage had agreed should be foreclosure. We have searched the evidence in vain to find any warrant for the excuse which the court 'makes for the defaulting lessee in the statement, that “ this payment was voluntarily made by the railway company so as quickly and at once to aid in repairing the loss, with no intention of insisting on the severity of its contract of lease with the light company or of ever claiming their portion of payment toward the rebuilding of the said power house as a forfeiture by the light company under its lease and mortgage.” Nowhere, either in the pleadings or in the testimony of the witnesses, does a word appear about the severity of the terms of the lease. It is not even suggested by the lessee itself, from whom the complaint ought naturally first to come, if it could be heard at all; and, in the face of the itemized statement of the expenditures made by the railway company for the default of its lessee, and with the utter absence of any proof that they were made without any expectation of repayment, the appellants most justly complain of the finding that the railway company intended to, and did, waive its right to insist upon the repayment of the sum so expended for the light company. When this bill was filed, the lessee had all the notice due it, that demand was made upon it for its default in not restoring the power house, and it can turn to nothing in the pleadings or proofs to justify the court’s findings that the right to hold it to its covenant had been waived; If there was no other default charged and proved, this one, clearly established, in connection with the covenant to repair and restore the power house, substantially found by the court below, but excused for no reasons that appear in the record, would be sufficient for a decree of foreclosure; but there are others that were also substantially so found and likewise excused.

In the twenty-first finding of fact, the court found that “ from the books of the Gettysburg Electric Railway Company, in account kept by the said company with the Electric Light,Heat & Power Company of Gettysburg, it would seem upon its face, that the light company was indebted to the railway company September 20,1896, in the sum of $5,672.98. But these books were so carelessly if not fraudulently kept by the railway company as to furnish us with no sufficiently reliable data to determine the real relation between them. The account starts March 1,1894, with a charge against the light company (taken from ledger ‘ A ’ which was destroyed in the fire) of $3,707.68. It also contains a charge against the light cohipany, July 26,1895, of $350, when the evidence shows this money was paid for attorneys’ services rendered the railway company alone. This account also charges the light company, August 1, 1895, cash paid A. Ertter, $500, and also August 3, 1895, with cash paid A. Ertter, $249.99, when the evidence shows this money was never paid. The account also charges the light company, September 20,1896, with $403.35, amount supposed to have been used in payment of accounts of the light company. All the charges in above account except that of $403.35, made September 20,1896, were made when Mr. Hoffer was the president of both companies and previous to the appointment of the receivers of the railway company.” Among the items making up the sum of $5,672.90, there is one of $3,707.68, which appears in the books of the railway company as a charge against the electric light company, and in the books of the latter is entered as a liability to the former. This item is, therefore, not merely a seeming liability, but a manifestly confessed one. Deducting the three items of $350, alleged to have been paid to attorneys for services, and $500 and $249.99, paid to A. Ertter, which were found by the court to be improper charges against the electric light company, there still remains a liability of the latter to the railway company, substantially found by the court, of $4,572.99, but which should have been distinctly found; and there was no excuse for not so finding in the wholly unwarranted statement that the “ books were so carelessly if not fraudulently kept by the railway company as to furnish us with no sufficiently reliable data to determine the real relation between them.” It does not distinctly appear what this liability was for; but it does not seem to be denied that it was for the default of the light company in failing to pay expenses incident to the proper care of the leased property, which the railway company paid for it, and it is clear that the court regarded it as having been offered in evidence for the purpose of showing default. But the learned judge concluded that it had no such effect, as appears in the twenty-second finding, which is as follows: “ By reason of the close relationship of these two companies, Mr. Hoffer being president of both, the practical owner of both, we find as a fact that whatever money was honestly paid by the railway company for the light company during the period covered by the above account, was voluntarily paid by the railway company and with no intention of ever claiming said payments or loan as a default of the light company under the lease and mortgage.” Hoffer may have been the president of both companies, the practical owner of both, and the absolute manager and director of both; but each company had maintained its separate existence and each was a separate and distinct organization. As president of the railway company he had no power to relieve the light company from the obligation of its covenants, and certainly it was not shown that authority had been given him to do so. Without such power or authority, he could not have impaired the bonds of the railway company, secured in part by the light company’s mortgage. As we can discover nothing in the evidence upon which to base this last finding, that “whatever money was honestly paid by the railway company for the light company during the period covered by the above account, was voluntarily paid by the railway company, and with no intention of ever claiming said payments or loan as a default of the light company under the lease and mortgage, ” it is set aside.

Out of its revenues, according to the twenty-third finding, the light company spent $1,000 in betterments and improvements. This was in direct violation of its covenants as to the disposition of its receipts, and even if these improvements were-all reasonable, which is one of the excuses given by this court for this default, it cannot be found in the lease that any such use could be made of the revenue; but, on the contrary, it was a diversion of the money from the specific purposes to which the light company had agreed to apply it. That this diversion was made with “ the approval and assent of the railway company ” we are compelled to again say, cannot be found in the evidence.

The light company was to pay all taxes on the leased property ; but the uncontradicted testimony is that it did not do so. They were paid at times by tbe railway company.

We need not dwell longer on the foregoing defaults, nor consider the others to which appellants call our attention. Such failures on the part of the light company to comply with its covenants were clearly proven as entitled the appellants, now possessing all the rights under the lease and mortgage of October 17,1898, to the decree asked for.

The decree of the court below is reversed, and it is now adjudged and decreed that the Electric Light, Heat & Power Company of Gettysburg, the mortgagee named in the mortgage of October 17, 1893, and'tbe Keystone Electric Light, Heat & Power Company, its successor in title, are in default under the terms and conditions thereof, and the Harrisburg Trust Company, as the substituted trustee in the said mortgage, be and is hereby authorized and directed to make sale of the property, rights, privileges and franchises named and described in said mortgage, at such times and in such manner and upon such terms as the court below may direct and fix, to which the record is remitted for the enforcement of this decree, the costs of this appeal to be paid by the appellees.