Opinion
September 27, 1944.
September 29, 1944.
Bonds — Actions — Bearer of interest coupons — Parties plaintiff — Trust mortgages — Provisions — Agreement of bond holders to reduce interest — Demand — Right of action — Execution.
1. In an action in assumpsit to recover upon interest coupons attached to bearer bonds of the defendant company, secured by a trust mortgage on defendant's real estate, it was Held that it was not a defense that plaintiff was not the real owner of the bonds but that they were owned by her husband.
2. The fact that a majority of the bondholders had entered into an agreement reducing the amount of interest and that an amount sufficient to cover this reduced interest had been deposited with the trustee was Held not to constitute a defense, in the absence of a provision in the mortgage making such an agreement binding upon anyone except those who were parties to it.
3. In such case, a demand before suit was Held not to have been necessary, especially where defendant admitted that demand would have been futile because the trustee did not have sufficient funds to pay the coupons in full.
4. Putnam v. Pittsburgh Railways Co., 330 Pa. 210, Held controlling.
5. Where a trust mortgage securing the issue of bonds is made for the protection of all the bondholders ratably, and provides that no one or more holders of the bonds or coupons shall have the right to affect or prejudice the lien of the mortgage by action, except in the manner therein provided, the judgment to which a bondholder is entitled should contain an express restriction of the right to issue execution thereon against the mortgaged property so long as other bonds entitled to the benefit of the security are unpaid.
Before KELLER, P.J., BALDRIGE, RHODES, HIRT, RENO and JAMES, JJ.
Appeal, No. 19, Feb. T., 1945, from judgment of C.P., Luzerne Co., Jan. T., 1944, No. 426, in case of Gertrude Q. Slattery v. The Sterling Hotel Company. Judgment affirmed.
Assumpsit.
The facts are stated in the opinion by APONICK, J., of the court below, as follows:
This is an action in assumpsit brought to recover upon interest coupons attached to bearer bonds of the defendant company. The principal and interest on those bonds is secured by a trust mortgage on the real estate of the defendant. The statement of claim alleges that the plaintiff is the bearer of eighteen of such coupons which were not paid after demand. The defendant filed an affidavit of defense raising questions of law in which it contended that the plaintiff was barred from bringing the action by the terms of the trust mortgage. The matter came on before President Judge VALENTINE and Judges FARRELL and FLANNERY, and in an opinion written by Judge FARRELL, it was held that the question of law should be decided in favor of the plaintiff and the defendant was given leave to file an affidavit of defense. The defendant filed such affidavit and the plaintiff has moved for judgment for want of a sufficient affidavit of defense. That motion is now before us.
The plaintiff alleges in the statement of claim that she is the bearer of the interest coupons upon which the suit is brought. The answer of the defendant to this allegation, as contained in the original and supplemental affidavits of defense, is, in substance, that the plaintiff is not the real owner of the bonds but that they are owned by her husband, Frank P. Slattery, Esq., attorney for the plaintiff. These allegations raise no triable issue. The fact that the plaintiff is the bearer of the coupons gives her a right of action.
Defendant also alleges that a majority of the bondholders entered into an agreement reducing the amount of interest and that an amount sufficient to cover this reduced interest has been deposited with the trustee. Such action is not binding on the plaintiff and constitutes no defense to the cause of action. There is no provision in the mortgage making such an agreement binding upon anyone except those who are parties to it.
It is also denied that a demand was made before suit was brought. No such demand was necessary, particularly when the defendant admits in the affidavit of defense that such demand would have been futile because the trustee did not have sufficient funds in its possession to pay the coupons in full.
Under the heading of new matter, the defendant has pleaded that the terms of the mortgage are a bar to the present suit. That question is no longer open. The prior decision of the court has become the law of the case and is binding on us on this motion. In view of this, the additional allegations to the effect that Frank P. Slattery, the alleged real owner of the bonds, knew of the terms of the mortgage, is insufficient to prevent judgment.
There being no issue of fact raised by the pleadings, the plaintiff is entitled to judgment upon the cause of action set forth in the statement of claim. However, plaintiff must be prohibited from issuing an execution thereon against the mortgaged property so long as other bonds entitled to the benefit of the security are unpaid (Putnam v. Pittsburgh Railways Co., 330 Pa. 210, 213; Livingston v. Blue Creek Coal Land Co., 338 Pa. 473, 475).
Defendant appealed.
Robert J. Doran, with him Reynolds Reynolds, for appellant.
Frank P. Slattery, for appellees.
Argued September 27, 1944.
There is no substantial difference between the clause in the mortgage given by the defendant corporation, and relied on by it in this appeal, and the corresponding clause in the mortgage passed upon by the Supreme Court in Putnam v. Pittsburgh Railways Co., 330 Pa. 210, 199 A. 211. That decision justifies the action of the court below.
The judgment is affirmed on the opinion of Judge APONICK.