9 Abb. N. Cas. 246 | N.Y. Sup. Ct. | 1878
The petitioners reside, two of them in Antwerp and the other in Paris, and are sworn to own in the aggregate $345,000 of the bonds of the Erie Railway Company, secured by its second consolidated mortgage, which was executed and delivered to the plaintiff as trustee for the holders of such bonds. This action has been instituted as it now stands for the
It does appear that the plaintiff has given its friendly co-operation to the success of this plan, and for that reason it may not have scrutinized as closely as it otherwise would, and as it certainly should, the charges made against the mortgaged property. It has been very positively, and certainly with some degree of plausibility, averred that it has been remiss in this respect. \ The plaintiff in its reply to these allegations has affirmed its constant readiness to contest any item to which its attention might have been directed as improper by any one of the bondholders suggesting its interposition. But that was not the full measure of its duty in this respect. It was bound by its relation to the bondholders to see that the property securing their obligations was not improperly burdened by unjust demands or unnecessary expenditures, and from the examination into the accounts, as they have been subjected to the investigation of the learned referee in the case, that may have been already thoroughly accomplished. But still the truth of the matter is very positively affirmed to be the other way, and as this has been done in the interest of parties entitled to the favorable consideration of courts of justice, they ought to be afforded an opportunity for the vindication of their
In no view which can be taken of the case as it has been, now presented on behalf of these applicants, would the court be justified in denying the prayer of their petition. And if their charges are not well founded it is due to the plaintiff, as a trustee, to the receiver, subjected to similar obligations, and to the majority who favor the success of their present plan, that they should be relieved from the aspersions which these charges embody. Beyond that, the court would not be just to itself if it should deny the opportunity claimed for the proposed investigation. As bondholders these persons are entitled to know what charges are to be made against the property incumbered for their security, and under the circumstances that can only be surely done by allowing them to become so far parties to the action as to enable them, by proper exceptions, investigations and proofs, to examine into the charges which they allege to have been improperly included in the accounts and the judgments.:
The practice of the court will allow that to be done (Gould v. Mortimer, 16 Abb. Pr. 448 ; Schenck v. Ingraham, 5 Hun, 397); and the exercise of such a power is a necessity to the complete administration of justice, and its existence has not been questioned by either of the learned counsel engaged in opposing this application. It has, however, been denied, under circumstances of a plausible nature, that the applicants do in fact own the bonds claimed to be held by them, and the affidavit by which their petition has been verified has been objected to as unsatisfactory evidence on this subject. An examination of the affidavit has resulted in the conclusion that this view of it is altogether too critical. For it seems to have been the intention of the person making it to swear directly and positively that these applicants did own the bonds mentioned in their petition. But if the fact be other
The order entered (omitting title and recitals), was as follows :
Ordered, That the prayer of the said petition be and the same is hereby granted so far as to allow the said petitioners, Albert De Betz, Moritz Lewin Borchard, and Jules Levita, to be made parties defendant to this action, and to appear before the referee hereinafter appointed, and, after proving and establishing their title as owners, or the title of either of them as owner, to the bonds mentioned in the said petition, or to some part or portion of such bonds, to present charges and specifications in writing, verified by affidavit, against the said Hugh J. Jewett, receiver, Ms management and accounts, and to surcharge and falsify the same, and subject to the proof of title as aforesaid, to attend by counsel upon the examination hereinafter ordered of the said receiver’s accounts and acts, and to give evidence upon and contest, before the said referee, the spveral items of alleged indebtedness claimed to be proper charges as to the said mortgaged property prior to the lien of the said second consolidated mortgage, and the several executory contracts of the said receiver, claimed to have been lawfully made by him, and to be liens upon the said mortgaged property, and subject to which the same is adjudged by the judgment to be sold;
And also to inquire into and investigate the acts and doings of the receiver, against which the purchaser under such judgment is to indemnify and hold harmless the said receiver, and also to investigate
It is further ordered that William Allen Butler, Esq., counselor-at-law, of the city of Mew York, be and he hereby is appointed referee to take testimony upon, determine and report to this court, with the testimony taken by him upon the following questions, viz.:
1st. The ownership as aforesaid by the said petitioners, of bonds secured by the second consolidated mortgage mentioned in the complaint herein, and the amount of bonds so held.
2d. Upon the facts and circumstances set forth in the said petition of De Betz, Borchard and Levita, so far as they relate to any or either of the matters herein mentioned.
3d. Upon the amount of lawful indebtedness of the receiver, incurred by him in the execution of his trust, properly constituting a lien upon the mortgaged premises prior to the lien of the said second consolidated mortgage.
4th. Upon the contracts lawfully made by the said receiver, executory in their character, chargeable against the mortgaged property.
5th. Upon such charges against the said receiver, his management and accounts, and included in such specifications, as may be presented before the said referee by the said petitioners.
6th. Upon all items of the said receiver’s accounts, which are called in question before said referee by said bondholders, and upon which evidence is given tending to surcharge or falsify.
7th. The amount of indebtedness secured by mortgage or otherwise, chargeable against the said mortgaged premises.
8th. As to the amount of outstanding bonds and coupons upon bonds, secured by the said second consolidated mortgage.
And it is further ordered that each and every of the books, papers, accounts, vouchers, contracts, and other evidences in the possession of the receiver, or of the said The Erie Railway Company, their agents, attorneys, or servants, so far .as the same relate to the accounts, claims, charges or matters so to be examined, shall be open to the full and free inspection and examination of the petitioners and their attorneys, or counsel for the said petitioners, before the said referee, and shall be produced and exhibited to said bondholders or their attorneys and counsel so attending before said referee, as they may require. But neither the same, nor any portion thereof, shall be removed from the proper depositories thereof, as the same are and have been kept and preserved by the Erie Railway Company and its receiver, unless in the judgment of the referee thal> can be done without deranging, interrupting or interfering with the business of the said Erie Railway
And it is further ordered that the attorneys of the said petitioners, and of the said plaintiffs, and of the Erie Railway Company, and the said receiver or Ins attorney, shall have notice of all the proceedings on the said reference and relating thereto, and have notice of all proceedings in this action hereinafter had or taken.
And it is further ordered and directed that the sale of said mortgaged premises be, and the same hereby is postponed for the period of thirty days, and the referee, by whom the sale is to be made, is hereby directed to adjourn said sale accordingly.
And it is further ordered and directed that the said sale be, and it hereby is, further postponed, until the said referee, hereby appointed, shall make his report and the same shall be confirmed, unless the plaintiff and the defendant, the Erie Railway Company, shall, within fifteen days from the service of a copy of this order upon their respective attorneys, stipulate that all such amounts or sums as may appear, by the report of the referee hereby appointed, as the result of his examination of such accounts, charges and specifications, to be contained in or established by said judgment, as liens upon or charges against said mortgaged property, or any portion thereof, which should not have been allowed as such liens or charges, shall be deducted from the said judgment, and that the said judgment shall be corrected as to such amounts, so as to conform to the actual amount or amounts of sueh indebtedness. And unless the said attorneys shall further stipulate that all such sum, or sums, as may by the said referee’s report and the confirmation thereof, appear to have been charged in any form against said property, or any part thereof, or as shall have been in any form allowed to the receiver of the Erie Railway Company, which legally and justly should not have been so charged or allowed, shall be deducted from the sums or amounts allowed as charges against said mortgaged property, or in favor of the said receiver, as the case may .be; but if the plaintiff or any other party in interest shall tender and offer to pay to the petitioners, or their attorneys, such sum or sums as shall be equivalent to their interest, as bondholders, in any overcharges that may be found by the referee, then the foregoing provisions of the stipulation shall be void, z and shall further stipulate that upon the surrender of their bonds and coupons, or those of either of them, within the said period of thirty days, or such other period not exceeding sixty days, as shall be here
And it is further ordered that all the further and other questions arising upon said petition be and they are hereby reserved until the coming in of said report. Ho judgment, order or decree heretofore made in this action is to be deemed as set aside or vacated hereby, but the referee will be at liberty to make such inquiries in the premises upon the specifications herein provided for, as are herein directed or provided for, and notwithstanding such judgment, orders, or decree, or either of them.
Either party to the said proceeding before said referee shall be at liberty to apply from time to time to the court for such further directions as may appear to be necessary; and the said referee, on the application of any party in interest, may issue commissions to take the depositions of witnesses residing ont of the jurisdiction of this court, whose evidence may appear to be material to the consideration of any or either of the charges, matters, or things to be heard, or considered, or investigated by him.
This order, as corrected, is to be entered as of the date of March 25, 1878.