Davidson v. Mexican Nat. R.

58 F. 653 | U.S. Circuit Court for the District of Eastern New York | 1893

WHEELER, District Judge,

(after stating the facts.) This finding of facts has been made pursuant to section 649 of the Revised Statutes of the United States. Upon these facts the defendant is liable for the debts of the Railway Company to the Construction Company, on whose rights the plaintiff stands, by force only of the express provision stated in the Matheson-Palmer agreement. The defendant insists that payments of such debts existing October 1, 1886, made from the current assets of the Railway Company or by the Construction Company, are to be reckoned in diminishing the ¡limit of the provision for such debts. If the provision had been that such debts should be paid to an amount not exceeding $217,-000, this claim might have been well founded; but it was of “a sum not exceeding $217,000, to be applied to liquidate the indebtedness of the existing Railway Company.” This is not a mere provision that not exceeding that amount of debts shall be paid, but a provision of that sum to be applied so far as it will go to the liquidation of such debts. The Railway Company was, in the contemplation of the parties to the agreement, to disappear. The defendant was to become its successor, and its net debts were to be provided for. This fund seems to be such a provision. It was to be added to the assets, not substituted for them; and it is to be resorted to so long as it may last for the payment of such debts not otherwise paid. The defendant has by the finding applied only $26,459.96 of this fund in liquidation of such debts. The balance, of more than $190,000, with interest since it was received, is left to be resorted to.

That the Railway Company correctly stood a debtor to the Construction Company upon the books of both on October 1, 1886, for $104,244.10, is found as a fact. The interest computed to that day, $7,210.18, has not, apart from the principal, been questioned; which makes then due $111,454.28. The identity of stockholders and officers, the relation of the two companies to each other and to the subject-matter, and the means by which the provision came into the agreement, are relied upon to exclude the Construction Company from it.

The identity of stockholders and officers found did not make the corpora,Lions legally identical. They had separate stockholders and officers also, and separate property and dealings. It merely suggested and required more careful scrutiny of their transactions with each other, in which still others became interested, which has been given. They could owe each other. The Railway Company did owe the Construction Company, and what was so owed was an indebtedness. The agreement nowhere expressly, or, as understood, impliedly, distinguishes between the construction company and other creditors in respect to floating or other indebtedness. That this debt was placed, in the statement furnished, among those to individuals and companies, when it might perhaps more appropriately in railroad bookkeeping have been separated, is not found to have deceived any one. The amount, not the form, of the indebtedness was what was important to the business then in hand.

The Matheson-Palmer agreement was not signed till October 18th, although, as to accounts which were dated as of the 1st of each month, the reckoning is by agreement made as of October 1, 1886. Before October 15th the Construction Company had, as accommodation indorser, paid the Hinchman notes, amounting to |40,000, for the Railway Company. The agreement as to dates does not affect this -transaction, whereby the Railway Company was indebted to the Construction Company for so much paid for it, at the time of the execution of the Matheson-Palmer agreement. This indebtedness would come within the provision of $217,000 to liquidate the indebtedness of the Railway Company made in that agreement, and makes the indebtedness of the Railway Company to the Construction Company provided for $151,454.28.

The Railway Company had agreed to deliver to the Construction Company 8,000 shares of stock of the Railway Company to replace that with which the notes were paid, or pay $10 per share therefor. The stock was not demanded till October 22d, after the Matheson-Palmer agreement was signed, and has never been delivered or paid for. The plaintiff claims that the debt of the Railway Company to the Construction Company growing out' of this transaction became $80,000 of indebtedness provided for in the $217,000. The defendant insists that no part of it, and especially that but $40,000, is so provided for. The Railway Company could have extinguished the liability at any time before the holder exercised his option, by paying the notes. This was the situation during a part of the time of the negotiation of the Matheson-Palmer agreement, and the liability did not become $80,000 till after the execution of that agreement. As an indebtedness it was only $40,-000 at the time of that execution, within the terms of the provision for the liquidation of indebtedness. The further liability could be satisfied by the delivery of the stock, which, as the company was insolvent, would have no actual value. Under these circumstances this excess of liability beyond the $40,000 of original indebtedness does not seem to be such an actual indebtedness as to come within the terms of the provision for the liquidation of indebtedness, but rather to be a penalty for nonpayment of the notes. The Matheson-Palmer agreement, when made, became operative upon all the property which it would affect, and those in possession would hold it for those who should ultimately become entitled to it, with no right to incumber it beyond what would be necessary for its preservation and use; and this liability of the Railway Company, accruing after the making of the agreement for not meeting its indebtedness, would not seem capable of being made a charge upon the balance accruing from the assets of the Railway Company against the Construction Company, so as to prevent its going in reduction of the indebtedness to the Construction Company provided for in the agreement.

Whether the payments made by the Construction Company to Mendez for services, for bonds for Mendez, and on the El Salto lien, during the 10-months period, which have been credited to that company in the transactions of that period, should not at all, or only in part, be so credited, is not material as the figures stand. All of such payments that should be disallowed there because they accrued before that period would become a part of the indebtedness existing before; If they should be taken from there, and added to the debts, they would be increased just as much as the balance against the Construction Company during that period to be deducted would be increased. Reckoned either way, the balance left due the Construction Company would be $113,056.16.

The defendant, however, claims that the transaction in respect to the equipment trust certificates created a debt or liability of the Construction Company to the Railway Company, existing both on October 1 and October 15, 1886, and large enough to meet and extinguish the debts and liabilities of the Railway Company to the Construction Company at either of those times, and more. But the Construction Company had not purchased these certificates, nor agreed to pay anything for them; and the transaction did not create any debt either way. The certificates were not to be yielded up to the Railway Company to be used, but to be canceled; and the Railway Company had no right to use them otherwise. If the failure to yield them up created any liability, it would have been for only nominal damages, for the Railway Company had suffered nothing from the failure; and the certificates have since been delivered and canceled under the Matheson-Paliner agreement, to which the Railway Company was a party, which was the same in effect as if they had been delivered to and canceled by the Railway Company itself.

The Matheson-Palmer agreement, when made and executed, began to operate immediately upon the rights of all the parties to it as between each other, and upon the title to property within its reach; but the various proceedings to be taken under it would require considerable time. Still no provision was made for dealing with the property, for compensation about the care of it, or for interest on money, or debts among the parties, which would be in abeyance. The whole related to one object, and in effect would date from the beginning, like a term of court, or a session of parliament, at common law. Therefore no interest would seem to be chargeable meanwhile as between the parties. The period by the receipt of the money for the liquidation of the debts of the Railway Company ended before January 1, 1888, — how long before does not appear. After that the defendant had the money with which to pay these debts, and should be charged with interest on what remained unpaid after deducting what the assets of the Railway Company paid, $113,056.10, which, to November 14, 1893, is $39,814.57, amounting to $152,870.67.

Upon the finding no question seems to be left but that the defendant became liable to the Construction Company for- what the latter laid out and lost by the making and revoking of the arbitration agreement, which was $1,731; and with interest from revocation, $241.77, amounts to $1,972.77.

The $3,600 received by the Construction Company, belonging to the defendant, is understood to have arisen from the same transactions, and to be proper to be deducted. As this amount was much less than the interest then accrued in favor of the Construction Company, no interest is allowed upon it.

These sums of $152,870.67 and $1,972.77, amounting to $154,843.44, less $3,600, leave due $151,243.44.

Let judgment be entered for the plaintiff for $151,243.44.