Henderson v. Carbondale Coal Coke Company

HITCHCOCK

v.

SAME.

No. 248.

April 20, 1891.

On the 1st day of February, 1878, there was existing under the laws of the state of Illinois a corporation known as the Carbondale Coal & Coke Company. It then executed a mortgage on its properties to secure the sum of $50,000. On the 1st day of January, 1881, it consolidated with the St. Louis Coal & Coke Company, under which consolidation the new company assumed the liabilities of the constituent companies, but retained the name of the Carbondale Coal & Coke Company. Prior to the consolidation, the St. Louis Coal & Coke Company had also executed a mortgage to secure the sum of $75,000. The business of the corporation was that of mining coal in the counties of Williamson and Jackson, Ill. For this business it bought some lands and leased others. Its mortgages covered both the property owned andthe property leased. In October, 1884, a suit was commenced in the circuit court of the United States for the southern district of Illinois by certain stockholders and creditors, making the company and the trustees in the two mortgages defendants, and John W. Harrison was on the same day appointed receiver. Subsequently Harrison resigned his trust, and Howard A. Blossom was by order of the court named as his successor. Among the leases which the Carbondale Coal & Coke Company had were the following: One executed March 28, 1871, by G. T. Johnson and wife, of 120 acres; one April 5, 1873, by Nancy Priddy, widow of Peters Priddy, and guardian of the minor heirs of Peters Priddy, to-wit, Belinda, Rodey, Henry, Martha, and Susan Priddy, of 80 acres; one March 25, 1871, by Thomas Waldron and wife, of 40 acres; one March 18, 1871, by Mary Waldron, and Catharine Waldron, widow of Henry Waldron, and guardian of the minor heirs of Henry Waldron, to-wit, Jacob, David, Martha, Henry, and Catharine Waldron, of 105 acres; and one March 18, 1871, by Tinsley Priddy and wife, of 140 acres. The consideration of these leases was one dollar per acre each year until such time as the lessee should commence mining and then a royalty of five cents per ton for all coal mined. None of the leases were of the surface ground, but simply of so much thereof as should be necessary for the mining of coal thereunder, the sale and mining of coal being the substantial matter of transfer. These leases also contained this stipulation in respect to forfeiture: 'And it is furthermore agreed that if at any time said party of the second part, its successors or assigns, shall be in default and fail to pay any sum due for rent or royalty as aforesaid for the term of ten days after written demand therefore by the party legally entitled to demand and receive the same, the party of the second part, its successors and assigns, shall forfeit all right to mine in, or otherwise hold or enjoy, the tract or surveyed subdivision of land for and on account of which said unpaid sum shall have become due; and, after such default and demand as aforesaid, the party legally entitled to the life-estate or fee-simple ownership of said land may at once, or at any time thereafter, enter into the exclusive possession thereof the mines, and all the appurtenances thereto belonging, and hold the same free and discharged of every and all claims of the party of the second part, its successors, assigns, or other legal representatives.' Under these leases, prior to the appointment of the receiver, the lessee had paid to these various lessors many thousand dollars, and yet had never mined a ton of coal, or disturbed the surface of the soil; so that this money had been paid by the lessee without receiving any present equivalent, and solely in anticipation of future profit from the mining of coal therein. The time of payment of these rentals had been a matter of convenience between the lessors and lessee. The former had purchased goods at the store of the latter, and at the end of the respective years a settlement of accounts had generally been made. No stress had been laid by either party upon the exact date, the 1st of January, at which the rents were due. The rents due the 1st of January after the appointment of the receiver, to-wit, January 1, 1885, were not paid, and as to some of the leases there was still other rent due. More than six months thereafter, and on the 17th day of July, 1885, an intervening petition was filed on behalf of all these lessors or their successors in interest. The purpose of this petition was not the collection of rent, but the forfeiture of the leases. Before the final decree in the circuit court, Johnson settled with the receiver, and dropped out of the litigation, leaving it to proceed in respect to the four other leases, the amount of land included therein being 365 acres. For this land, as heretofore stated, annually for more than a dozen years one dollar an acre had been paid by the lessee to the lessors, withoutthe slightest return to the lessee,-no occupation of the surface of the land, no mining of any coal. These lands were patented by the United States to the original patentees between 1850 and 1860. The purchase price of government lands was then $1.25 per acre. As a matter of general history, it is well known that land wartants with which government lands could be located were on the market at prices ranging from fifty cents to a dollar an acre. So that we start into this investigation with the fact that these lands were bought from the government, title in fee-simple being acquired, not to exceed 20 years before these leases, at not more than $1.25 per acre; and that for more than a dozen vears before the appointment of a receiver and the commencement of this litigation, the owners of these lands had received each year a dollar an acre rental, without ever surrendering the possession of the surface, or losing a pound of coal beneath. In other words, that amount paid was clear gain and with no loss.

It also appears that the mortgages were executed and the bonds of the coal and coke company negotiated on the security of these leases, as well as of the fee-simple property; so that while the lessors were receiving rent other parties were loaning money to the lessee on the strength of its title to the properties. Further, while in the order appointing the receiver the coal and coke company was directed to assign and transfer over to the receiver all its property, including these leases, it does not appear that any actual assignment or transfer was made by the coal company; and the receiver apparently took possession only by virtue of the order of appointment. No notice of non-payment, no claim of forfeiture, was given to the trustees in the mortgages; none to the company mortgagor. The sole basis of forfeiture is in alleged notices to the receiver, after the non-payment of the rent due on January 1, 1885. No application was made to the court for an order on the receiver for the payment of the rent, of, in the alternative, a surrender of the leased property. In fact, all parties were ignored in the proceedings by which the forfeiture is claimed, except the receiver, and he was dealt with as having such absolute own ership and entirety of control as to justify parties claiming a forfeiture of leasehold property in his possession in ignoring the court which appointed him, the trustees of the mortgages which were being foreclosed, and who represented the beneficial ownership of the property, and the mortgagor which had taken the leases, given the mortgages, and had an equity of redemption in the mortgaged property. It further appears that the title to these properties had changed since the execution of the leases. These changes resulted from death and succession of interest as well as from conveyances; so that there was, at the time the receiver took possession, some doubt as to who were entitled to the rentals, or at least a portion of them. In view of this fact, the receiver had been advised by his counsel not to pay them until an order had been made by the court for their payment, which would be protection to him in so doing. In consequence of this advice no payment was made. It does not appear that any effort was made to satisfy the receiver as to the title to this leased property, or as to the parties to whom the rent was due; nor that there was any purchase of goods from the company's store, as theretofore, with the view of having the amounts thereof applied on the rent. It does appear that there was some talk among the lessors of the existence of a rival corporation ready to rent these lands. Under these circumstances, the claimants, as heretofore stated, on July 17, 1885, filed their petition. The receiver answered, and on September 15, 1885, an order was entered forfeiting the leases. An application for rehearing was made at the same term, and on the 25th of September, which was immediately sustained. Thereafter, and on the 23d of February, 1886, Wiliam E. Burr, the trustee in the mortgage of the Carbondale Coal & Coke Company, filed an answer to the intervening petition; and an amount of money necessary to cover all these rentals was deposited in the office of the clerk of the circuit court, to be paid to such parties as should show themselves entitled thereto. Testimony was taken, and on the 6th of November, 1886, upon the petition, answers of the receiver and trustee, and the testimony, a decree was entered dismissing the petition, adjudging the leases to be in full force, and directing all persons claiming an interest in the rental fund to present their claims. From this the intervenors have appealed, and their appeal is the first of the two cases before us for consideration. The other arises in this way: Between the 15th of September, 1885, on which day the order was entered forfeiting the leases, and the 25th of September, 1885, on which day the rehearing was granted, Hitchcock, this appellant, leased from the intervenors the lands whose leases had thus been forfeited. After the rehearing had been granted, the court ordered that he be made a party to the proceedings, in response to which order he appeared, and filed an answer, setting up his claims. At the same time, and as a part of the decree against the lessors, one was entered against him, decreeing that the leases made by the intervenors to him be set aside, and that he be restrained from interfering with the rights of the Carbondale Coal & Coke Company and the receiver to carry on mining operations in these premises. From such decree he has taken this appeal.

James McCartney and M. F. Gilbert, for appellants.

A. H. Garland, H. J. May, and ''Jas. Taussig'', for appellees.

BREWER, J.