90 F. 584 | U.S. Circuit Court for the District of Connecticut | 1898
A statement of the facts herein will be found in the opinion of this court in Central Trust Co. v. Worcester Cycle Mfg. Co., 86 Fed. 35. Upon appeal, the circuit court of appeals modified the decree of this court so as to permit the trustee in insolvency to be heard as to the rights of the creditors of the defendant in its property or the proceeds thereof. The parties have since taken testimony, and filed a stipulation, from which it appears that, at the time of‘the commencement of this suit, the defendant was the owner of certain bicycles, stock, supplies, and machinery; that a part thereof was acquired before, and a part after, the making and recording of the mortgage herein; that all of said property was then in the possession of the sheriff, under certain writs of attachment, in suits by the creditors of defendant; that, with their consent, the receiver took, and now holds, possession of the property in dispute; and that, at the commencement of this suit, there were certain choses in action belonging to this defendant, a part of which the receiver has collected. Furthermore, the American Surety Company of New York has appeared by its counsel, who represented that it'held a first mortgage upon that part oi +he property herein sought to be foreclosed, which is situated at Middletown, in the state of Connecticut, and that $85,000 and interest remains unpaid upon said mortgage, and is now due and payable. A suit brought by said American Surety Company to foreclose its said mortgage, returnable to the September rule day, 1898, is now pending in this court, to which suit the complainant and defendant herein are parties defendant. In view of these facts, it is unnecessary to finally determine the right of possession of the property in dispute, as between the receiver and trustee, until the value of said property and the- amount of the claims of the parties have been ascertained. Let
November 23, 1898.
The receiver has now filed his report, showing that there are in his hands assets, aside from machinery, of the value of §85,000, and that the receiver's liabilities aggregate nearly §60,000. In addilion to this amount, there are. first mortgages for §165,000; the mortgage claimed by complainant, made at the time 1he defendant corporation was organized, for §320,000; and about §227,000 of unsecured indebtedness by notes and open accounts, apparently incurred for operating expenses since the defendant corporation was organized. The defendant appears to have carried on business for about one year, and the bonds issued by complainant were apparently turned over to the persons who had formed the defendant corporation. It is evident that said unsecured creditors will receive nothing, if complainant’s mortgage is upheld. In these circumstances, complainant is bound to furnish satisfactory proof ihat the bonds in suit were issued bona fide and for value. The trustee in insolvency, on behalf of the general creditors, lias interposed three defenses, as follows: (1) The mortgage indebtedness is not proved; (2) the suit was prematurely brought; (3) the mortgage is invalid as to all property not particularly described.
As to the first point, the treasurer of the complainant’s corporation testified, on his direct examina! ion, that the whole §320,000 outstanding in mortgage bonds was sold at par and interest to various parties. Afterwards, on cross-examination, he testified that he believed they were all issued in exchange for notes held by a former company. The notes were not produced, nor was any definite statement furnished in regard t.o them. I think the evidence is not sufficient to justify a decree.
As to the second point, I think the suit was not prematurely brought, at least so far as the interest due on the bonds at the time of its commencement is concerned. The case seems to be directly within die rule laid down by Judge, now Mr. Justice, Brewer, in Mercantile Trust Co. v. Missouri, K. & T. Ry. Co., 36 Fed. 221, where the language of t he mortgage was the same as in this case.
As to (lie third point, in my former opinion I stated that I thought the rights of the mortgagee were superior to those of the trustee. Binee that time the question has been more fully argued, additional cases have been cited by counsel, and I have re-examined the whole subject. In view of the case of Ellis v. Railroad Co., 107 Mass. 1, cited by counsel, and especially in view of the decision in Poland v. Railroad Co., 52 Vt. 144, which was not cited by either counsel, I
