United States Mortgage Company v. Sperry/Opinion of the Court

[Statement of Case from pages 313-315 intentionally omitted]

The circumstances under which the bonds, coupons, and mortgages were executed are as follows:

On the 5th of July, 1872, Anson Sperry, guardian of Kingsbury, presented his petition, properly verified, to the county court of Cook county, showing that the real property of the minor was subject to incumbrance by mortgages to the amount of about $78,500; that the debts secured by some of them were due, and the holders demanding payment; that the holders of other mortgage debts, soon to mature, were willing to accept payment and to assign or cancel their mortgages; that upon all of the mortgages considerable accumulations of interest were due and unpaid; that a portion of the real estate belonging to the minor consisted of lot 6 and a part of lot 5, in block 25 of the original town of Chicago, and that the buildings formerly thereon were destroyed by fire, October 9, 1871; that the premises constituted a very large part of his estate in point of productive value, were centrally located in Chicago, and, before the destruction of the buildings thereon, yielded large rents; that, in the judgment of all persons interested in the estate and in its proper management, the buildings should be restored, and the property made productive; that no money had come to the guardian's hands with which to liquidate the existing mortgage debts or the accumulated interest thereon; that, the rents from the estate being insufficientfor that purpose, it was necessary that provision be made to prevent the foreclosure of the mortgages; that there was no money of the estate to be applied in restoring the buildings; that the cost of constructing suitable buildings upon the premises would be about $100,000; and that for the purpose of funding, consolidating, and paying off the mortgage debts and constructing proper buildings, it would be necessary to borrow about $200,000.

The prayer of the guardian was that he be authorized to negotiate, for the purposes stated, a loan of not exceeding $200,000, and to pay usual and reasonable commissions and brokerage therefor, upon such terms and for such time as shall be approved by the court and allowed by law; the mortgage to rest upon certain premises belonging to the minor, the metes and bounds of which are given in the petition of the guardian. The authority asked for was given, and a loan in gold for $175,000 was negotiated with the appellant. The bonds given therefor were made payable, in gold, May 1, 1882, with interest (evidenced by coupons signed by the guardian) in like coin at the rate of 9 per cent., payable semi-annually, until the principal was paid; and the mortgage to secure the payment of principal and interest was submitted to and approved by the county court. The order of approval was made August 6, 1872.

Subsequently, on the 4th of September, 1872, the guardian filed in the county court an inventory of the real and personal estate of the minor which recited all the mortgages upon his property, including those executed before he inherited it, and the above mortgage for $175,000. This inventory was examined, approved, and ordered to be recorded. A subsequent inventory filed by him December 26, 1872, showed a balance of receipts in his hands of $496.98, and a cash balance of $30,026.71 unexpended from the loan that had been authorized by the court. In that report he said 'that upon consultation with all parties interested, and with persons of sound discretion and without interest, it is thought best to construct on the north one hundred feet of lot six, fronting on the alley north of Randolph street, and being the north end of Randolph street lot, a public hall. There are no halls of the character intended to be built north of 22d street and east of the south branch of the Chicago river, and the large number of conventions, meeting, concerts, readings, and other assemblages of a like character requires proper accommodations. The ground proposed to be used is useless for almost any other purpose, but is a source of large expense. The ground is eighty feet wide by one hundred feet deep, and a hall with seating room for fifteen to eighteen hundred people can be built at a cost of about $50,000, from which an annual income of $10,000, at least, can be realized. An entrance can be made through the Clark street building, and the basement thereunder will rent for the purposes of an eating-house at a fair rent. All the property belonging to said estate is liable to the dower right of Mrs, Jane C. Kingsbury, of one-third of the net income thereof, and to the dower right of Mrs. Eva Lawrence, of two-ninths of said net income.' This report was examined, approved, and recorded.

On the 3d of March, 1873, the guardian presented another petition to the county court, showing that he had used $68,643.80 out of the above loan in paying off old mortgages on the minor's estate, leaving a balance of $126,002.58, which he estimated would all or nearly all be required in the construction of buildings then being erected on the Randolph-Street front of lot 6 in block 35, and the building on that part of lot 5, in the same block, owned by the minor. His petition also showed that the rear part of lot 6 had upon it, before the fire of 1871, a public hall or theater; and that upon careful consideration, and after consultation with judicious, competent persons, it was best for the estate to erect a public hall upon the rear of that lot, having its front on Clark street, an to be used for concerts, lectures, readings, etc. It further appeared that, in addition to the old mortgages previously described, there were two other incumbrances that were either in whole or in part charges upon the estate of the infant, and which amounted to $15,000 and interest; and that the money in his hands, of the former loan, would be needed for the buildings on lot 6, and more was needed to erect the building on the rear of that lot and to pay off said incumbrances. His petition showed 'that the entire estate of the said Henry W. Kingsbury consists of real estate, nearly all situate in the city of Chicago, and the only revenue and income of said estate to meet the various charges and incumbrances upon it and its expenses and taxation must be derived from the rental of said real estate; that no revenue can, in his judgment, and that of judicious persons with whom he has consulted, be derived from the said rear portion of said lot 6 unless the same be improved; that the said premises have heretofore, as thus improved, been largely productive and profitable until the said improvements were destroyed by fire, and it is believed that, if judiciously built upon, as proposed, they would be again equally productive and profitable, if not more so.' He therefore asked authority to negotiate an additional loan of $75,000 in gold coin or the equivalent thereof in paper currency of the United States, paying usual and reasonable commissions and brokerage therefor, upon such terms and for such time as the court would approve and the law allowed, and to secure the same by mortgage upon certain described premises.

The prayer of that petition was also granted, and an order was made authorizing a further loan of $75,000 in gold coin, or its equivalent in paper currency, upon the terms stated in the petition. Under this order the mortgage of April 1, 1873, was executed to secure the payment of $70,000 in gold coin borrowed by the guardian from the mortgage company, and for which amount the guardian gave his bond maturing April 1, 1883, payable with interest (evidenced by coupons signed by him as guardian) at the rate of 9 per cent. per annum, payable half-yearly in like coin, until the principal sum was fully paid. This mortgage does not seem to have been formally presented to the court for examination, but the fact of its execution was brought to its attention in the guardian's reports from time to time of the condition of the estate, and was recognized.

On the 12th of October, 1876, the guardian, who at that time was Herman G. Powers, presented to the county court a petition showing a large indebtedness against the minor's estate, arising in part from the erection of buildings upon the lots before referred to, and including $51,987.04 in gold, which he stated was due the United States Mortgage Company for unpaid interest up to August 15, 1876. For the purpose of discharging said indebtedness, he asked authority to make an additional loan in gold of a sum not exceeding $95,000, or its equivalent in paper currency of the United States, paying interest thereon at the rate of 9 per cent. per annum in gold. The authority asked was granted, and the amount above named having been negotiated with the appellant he executed a mortgage, December 1, 1876, to secure the payment of that sum in gold coin on the 1st of December, 1883, with interest (evidenced by coupons signed by him as guardian) payable half-yearly in like coin, at the rate of 9 per cent, per annum until the principal sum was paid; the guardian giving his bond for the principal sum, and coupons for the interest. The mortgage, bonds, and coupons, having been submitted to the court, were examined and approved.

Upon the basis of the master's report, the aggregate amount due on the 15th day of December, 1885, was $343,399.96. This amount was reduced by the final decree to the sum of $221,727.64, making a difference against the company at that date of $121,672.32.

The following extract from the finl d ecree shows how this result was reached:

'And the court finds that there was due the complainant, October 15, 1884, of principal and interest on the loans made by said Anson Sperry as suardian, calculating interest at nine per cent. per annum from the time to which the interest on said loans had been paid or funded and secured by the mortgage executed by the said Powers, the following sums, to-wit:

Principal of first loan........... $175,000

1, 1876, to October 15, 1884...... 125,343

Principal of second loan............ 70,000

Interest at nine per cent. from April 1,

Total payments................... $302,938

two loans at that date........... $126,983

interest due on said mortgage of.. $94,743