133 Mass. 315 | Mass. | 1882
Whether a secured creditor of the Eastern Railroad Company had the right, under the St. of 1876, c. 236, to surrender his security, and receive certificates of indebtedness issued under that act for the full amount of his debt made up as cash to the first day of September 1876, was not decided in Merchants' National Bank v. Eastern Railroad, 124 Mass. 518. In that case, the prayer of the bill was “that the plaintiff might receive certificates of indebtedness for its whole debt and retain such collateral security; or might be allowed to sell the collateral security and receive certificates for the balance; ” and the defendant demurred on this ground, among others, that “ the plaintiff was entitled to receive certificates of indebtedness only upon the surrender of the collateral security.” The demurrer was overruled, and it was said in the opinion that the amount for which creditors partly secured may receive certificates “ must be limited to the remainder of the debt, after the value of the securities, ascertained as authorized by the original contract, or
In the case at bar, the creditor desires to surrender his security and receive certificates for his whole debt; and one of the contentions of the defendant is that he cannot be permitted to do this, but must deduct the value of his security, and is only entitled to receive certificates for the amount of the indebtedness reduced by this value. We have not found it necessary to decide this question. The certificates of indebtedness which the corporation was authorized to issue by the St. of 1876, c. 236, were “ payable in thirty years ending the first day of September, nineteen hundred and six,” “ with coupons for the payment of semiannual interest thereon,” and “ the interest on said certificates of indebtedness for the first three years after the first day of September, eighteen hundred and seventy-six, shall be at the rate of three and one half per centum per annum in gold, and for the next three years, at the rate of four and one half per centum per annum in gold, and after six years from said first day of September, at the rate of six per centum per annum in gold.” §3.
The bill alleges that the mortgage authorized by said act was duly executed and delivered to the trustees on June 22, 1876, and that the indebtedness to the plaintiffs’ testator “ was duly set forth in the schedule made up and deposited with said trustees by said Eastern Railroad, in accordance with the provisions of the fifth section of said act; and that the validity and amount of the plaintiff’s claim in respect thereof is admitted as well by said Eastern Railroad Company as by said trustees.” It is not alleged in terms that the trustees have “ adjusted ” the amount of this indebtedness. The fifth section of the act provides that the. “said trustees shall forthwith, from time to time, adjust with the several creditors of said corporation the amount of their
The bill, which was filed March 5, 1881, alleges that “ at the time of the passing of the act hereinafter mentioned, the said Eastern Railroad Company was indebted to the estate of said Tobias Roberts in the sum of |8500, and interest thereon at the rate of six per cent from October 1, 1875; that said indebtedness was and still is secured by a mortgage of certain real estate in East Eden; that the said Eastern Railroad Company has paid no part of the principal of said indebtedness, but has from time to time paid the interest thereon, and that said interest has been paid up to the first day of October 1880; that said real estate thus mortgaged does not form an integral part of said Eastern Railroad, and is not required for railroad purposes.” It does not appear when the principal sum of the indebtedness becomes or became payable.
The answer admits the allegations of the bill, and, among other things, avers that “ the said plaintiffs have either waived and lost their right to claim certificates of indebtedness altogether, or are now entitled to claim them only upon condition of refunding the interest so as aforesaid received by them.”
The mortgage of its property, which the Eastern Railroad Company was by the St. of '1876, c. 236, authorized to execute, was necessarily subject to all liens and incumbrances then existing. That act did not impair the obligation of contracts, or affect the rights of any creditor who did not choose to avail himself of its provisions. If any creditor chose to receive certificates for his debt in accordance with the terms of the act, the certificates were received as payment of the debt. The value of the certificates in the market must necessarily vary from time to time, as well as the value of the original security which any creditor
The trust created under this act is not like an ordinary trust for creditors, which contemplates only payment in money to the creditors, under which it is impossible that any creditor should receive more than the full amount of his debt. In this case, the payments are in certificates of indebtedness, payable on long time with specific rates of interest, which certificates in form, as set out in the bill, are negotiable instruments. Such certificates may at any time be of greater value in the market than the indebtedness for which they are issued. The obligation of the corporation, under the certificates issued to any creditor, may be
It is manifest that, under such a trust, one secured creditor cannot lie by indefinitely, and insist on the corporation performing its original obligation to him, leaving to other creditors the risk of extricating from its embarrassments, by the scheme provided by the act, a corporation possibly insolvent, and, when success seems assured and the risk of loss has vanished, have the right to be admitted to the benefits which, without his aid, other creditors have secured. It is true there is no time expressed in the act within which creditors must present their claims for adjustment and elect to receive the certificates, if such claim be included in the schedule deposited with the trustees by the corporation and admitted by the trustees; and the corporation by the execution of the mortgage as authorized by the act must be held to have accepted the act, and to have intended that all its creditors, if they chose, might come in under the act and receive
The provision of the statute, that “ the debts so adjusted shall be made up as cash, with addition or rebate of interest, as the case may be, to the first day of September, in the year of our Lord one thousand eight hundred and seventy-six,” is merely an adoption of the ordinary provision for making up the amount of claims found in statutes relating to bankruptcy or insolvency, and has no tendency to show that the corporation might, after that time, go on paying interest, and the creditor receiving it, according to the original contract of indebtedness, and yet the creditor retain the right at any time to receive certificates as of September 1, 1876, by deducting or paying back the interest received after that date. A rebate of interest is a discount or abatement of interest on sums of money not yet due and payable, not a payment back of interest due and paid.
If any implication at all is to be drawn from this provision, it is that the act was not intended to apply to claims in which the creditor, relying on the original obligation of the corporation, had deliberately chosen to receive interest thereon after September 1, 1876. But it is not necessary to give any such construction to the act; it is enough to hold, as we do, that the right of a creditor to elect to come in under the act, and receive certificates in payment of his debt, is one that must be exercised within a reasonable time, under the circumstances of the particular case, and that the plaintiffs have not stated such a case as entitles them to compel the trustees now to accept a surrender of their securities and to issue to them certificates of indebtedness..
Bill dismissed.