30 F. 86 | U.S. Circuit Court for the District of Southern New York | 1887
The complainants seek an interlocutory injunction to restrain the defendants from prosecuting actions at law. The bill of
The defendants have acquired the bonds and coupons as the executors and legatees under the will of Moses Taylor, deceased. Taylor purchased the bonds after they had been negotiated by the Chicago & Iowa Railroad Company. At the time of the purchase each bond had printed upon it a contract between that company and the Chicago, Burlington & Quincy Railroad Company. Unless this contract authorizes the complainants to discharge and redeem the bonds before maturity, they are not entitled to equitable relief. The bonds are part of an issue of 1,000 for $1,000 each, dated, respectively, November 1, 1869, payable in 80 years from January 1, 1870, with interest semi-annually, on the first days of July and January, at the rate of 8 per cent, per annum, and are scoured by a mortgage executed to the Farmers’ Loan & Trust Company as trustee. The contract, after reciting that the Chicago, Burlington & Quincy Railroad Company has made a contract with the Chicago & Iowa Railroad Company for a joint transportation business, by the terms of which there will accumulate in the hands of the former “a-large amount of money” belonging to the latter, and that the latter is “ desirous of providing a fund to secure the payment and ultimate redemption ” of a certain mortgage, and the bonds issued under it, contains the following conditions:
“Now, therefore, it is hereby mutually agreed by and between the parlies that the said Chicago, Burlington & Quincy Railroad Company are hereby authorized to retain in their hands all the money which may be earned in said joint business, and on the first days of April and October in each year pay over all moneys so accumulated in their hands as belong to said Chicago & Iowa Railroad Company to the Farmers’ Loan & Trust Company of the city of New York as trustee, to bo used by it as provided in said mortgage, for the purpose of providing a sinking fund for the redemption of said mortgage bonds. This contract shall be construed to be not only a contract between the parties, but also a contract between the partios and the holders of said bonds. This contract is to be in force for thirty years, or for so long a time as will be sufficient to provide a fund large enough to redeem all of said bonds, after which time the earnings from the joint business shall be paid over to the said Chicago & Iowa Railroad Company.”
There is no provision in the mortgage respecting a sinking fund, and it is obvious from this circumstance, and from some other reciials in the agreement which have no application to the present mortgage, that the agreement was not originally executed with any reference to the mortgage which secures the bonds in suit, but was intended to carry out some understanding of the parties relative to a different mortgage created or to be created by the Chicago & Iowa Railroad Company. This circumstance is unimportant, however, inasmuch as the agreement was printed
The contract does not contain any express undertaking on the part of the Chicago, Burlington & Quincy Railroad Company. It is silent as to the time when the bonds are to be paid or redeemed, silent as to the ” scheme of the sinking fund, silent as to the duties of the trustee, and silent as to any rights or obligations on the part of the bondholders. Where an instrument is thus inartdficially expressed, or when its terms-are so obscure, imperfect, or ambiguous as to leave its true meaning in doubt, the court must endeavor to ascertain the intention of the parties by a resort to the language employed, the subject-matter, and the surrounding circumstances. Barreda v. Silsbee, 21 How. 161; Nash v. Towne, 5 Wall. 689; Hudson Canal Co. v. Pennsylvania Coal Co., 8 Wall. 276; Moran v. Prather, 23 Wall. 492. But, while previous and contemporary facts may be considered to ascertain the subject-matter of the contract and the meaning of terms, they cannot be given effect to modify the plain language used. Maryland v. Railroad Co., 22 Wall. 105; Brawley v. U. S., 96 U. S. 168. There are no extraneous circumstances alleged in the bill or answer which are of any value to assist the court in placing itself in the .situation of the parties, and the contract must be interpreted, therefore, without any material aid or light from that source.
Although the agreement does not contain any express promise on the-part of the Chicago, Burlington & Quincy Railroad Company to apply the moneys which may arise in its hands to the purposes of the trust, hut by its terms merely authorizes that company to retain and pay over the moneys to the trustee, some reciprocal obligation on the part of that company is to be implied from its signature to the contract. It is plain that both parties intended that a fund should be created and lodged in the hands of the trustee for the payment and redemption of the bonds; that this fund should be kept by the trustee in order that it might be so applied; and that the holders of the bonds should have the benefit of the security of such a fund, and become parties to the contract. The clause by which the Chicago & Iowa Company agrees that the Chicago, Burlington & Quincy Company shall retain and pay over to the trustee the moneys which are thus to constitute the trust fund is of no efficacy, unless the Chicago, Burlington & Quincy Company assumes the obligation of doing so, and should therefore be construed as importing a promise on the part of the latter to retain and appropriate the moneys in the manner specified. Pordage v. Cole, 1 Saund. 319; Barton v. McLean, 5 Hill, 256; Baldwin v. Humphrey, 44 N. Y. 609; McIntyre v. Belcher, 14 C. B. (N. S.) 654; Bealey v. Stuart, 7 Hurl. & N. 753.
It is apparent from the reference in the agreement to the sinking fund that the two railroad companies originally intended to create a sinking fund, and provide thereby for the payment and redemption of the bonds, and they intended to incorporate into the mortgage the scheme and plan
The agreement between the Chicago & Iowa Company and the bondholders is to be collected from the terms of the bond and the provisions of the contract indorsed upon the bonds. Both instruments are to be read together as qualifying and supplementing each other. By the contract the Chicago & Iowa Company offers, and the bondholders (by accepting the bonds) accept, the undertaking of the Chicago, Burlington & Quincy Company to pay a trustee named, at semi-annual periods, such indefinite sums of money as may accrue in the hands of the Chicago, Burlington & Quincy Company belonging to the Chicago & Iowa Company, such sums to be used by the trustee for providing a sinking fund for the payment and ultimate redemption of the bonds, the payments to he made by the Chicago, Burlington & Quincy Company to the trustee until a sufficient sum is created for that purpose. By the lorrns of the bond the Chicago & Iowa Company are to pay interest on the bonds semi-annually until the principal sum matures, and are to pay the principal January 1, 1900. ■ In legal effect this is a provision that the holder shall not be required to accept the principal before January 1, 1900. Brown v. Cole, 14 Sim. 427; Saunders v. Frost, 5 Pick. 259, 266.
The bond further provides that, in case of six months’ continued default in the payment of interest, the principal shall become due, at the option of the trustee named in the mortgage, unless a majority in interest of the bondholders instruct the trustee to waive the default or annul his action. Although the only duty imposed in terms upon the trustee is to use the moneys paid to him as a sinking fund for the payment and ultimate redemption of the bonds, the implied duty is plainly incumbent upon him to exercise the diligence always required of a trustee in the custody and investment of trust funds. He is a trustee for both the Chicago & Iowa Company and the bondholders. Tie is not to pay the interest on the bonds as they mature, but he is to pay and redeem the bonds ultimately. The Chicago áT, Iowa Company is the primary obligor for the payment of both the interest and principal of the bonds. The Chicago, Burlington & Quincy Company is a surety to the extent of the moneys that come to its hands. If the Chicago & Iowa Company pay the bonds, the trust ceases, and the trustee must then pay over the fund
The argument for the complainants is that, when the parties agreed that a fund should be created for the payment and redemption of the bonds, they necessarily contemplated that it should be applied to that purpose as soon as it was of sufficient amount to effect the object in view. This argument overlooks the recital in the contract that the fund is to be provided for the payment and ultimate redemption of the bonds, a recital which is inconsistent with the hypothesis that the parties contemplated a payment before the mortgage should become due. Strictly, there can be no redemption until the mortgage is due, (2 Jones, Mortg. § 1052;) and the use of the word “ultimate” would seem to indicate that the fund was not expected to be available for the strict redemption of the bonds at maturity. But the argument is unsound because the implication suggested is controlled by the express stipulation of the parties, contained in the bonds themselves, that the bondholders are to have their semi-annual interest for 30 years, and by the condition implied by law that they are not to be required to accept the principal sum until January 1, 1900.
If it were necessary, the rule of interpretation might be invoiced that, where doubt exists as to the construction of an instrument prepared by one party, upon the faith of which the other party has parted with his money, that construction shall be adopted which will be favorable to the latter’ Noonan v. Bradley, 9 Wall. 395. But it is not necessary to rely upon this rule of construction of contracts. When the contract was prepared, it was to be indorsed upon bonds about to be offered for negotiation to the public. It is not to be supposed that the Chicago & Iowa Company designed to ingraft conditions upon the bonds which would make them less desirable for the class of investors who purchase such securities, and thus impede their negotiation upon the best terms. Such would indubitably be the effect of the contract if it -wore to be read as is now insisted by the complainants, because it would require the bondholders to accept payment, and surrender their investments, at a time which they could not' foretell, and depending wholly upon the contingencies of the traffic contract between the two railroad companies.
The language of the contract is consistent with a purpose on the part
The motion for an injunction is denied.