64 F. 190 | U.S. Circuit Court for the District of Southern New York | 1894
Receivers of the defendant railroad company weré heretofore in this action appointed, and are now administering ‘ their trust. The defendant trust company is the mortgagee in trust under various mortgages covering property of the defendant railroa'd company. Among these mortgages is one known as the “New Second Consolidated Mortgage,” dated October 5,1878, under which bonds to the amount of $30,097,400 are outstanding. The coupons falling due on this mortgage since receivers have been appointed have not been paid, the receivers not being in
No. 1. Collateral trust bonds of defendant railroad, $3,344,000, (i%. Mortgage dated November 1, 1882. Coupons due November 1st and May 1st.
Ño. 2. First mortgage bonds, Chicago & Brie Railroad Company, $12,000,-000, 5%. Mortgage dated August 21, 1890. and guarantied by defendant railroad. Coupons due November 1st and May 1st.
No. 3. First mortgage bonds, New York, Lake Erie & Western Coal & Railroad Company. $3,000,000, 0%. Mortgage dated May 15, 1882, and guarantied by defendant railroad. Coupons due November 1st and May 1st.
No, 4. Income bonds of defendant railroad, $508,008, (>%. Coupons due December 1st and June 1st.
No. 5. Funded coupons bonds of 1885, 84,031,000. of defendant railroad, 6%. Mortgage dated November, 1885. Coupons due December 1st and «Tune 1st.
As to No. 4, — the income bonds, — it appears that no interest upon them has been earned, and that none is to be paid. They are therefore withdrawn from further consideration. The coupons on Nos. 1, 2, and 3 fall due November 1st, and the court intimated upon the argument that it might not be possible, within the brief time remaining before that day, to examine and dispose of all the points raised with regard to them. Upon investigation, however, it appears that the questions now presented for determination are not at all as comprehensive as was then supposed, and there is no reason why the answers to them should be further delayed.
No. 1. The Collateral Trust Bonds. In 1882 the defendant railroad, being the owner of stocks and bonds of various corporations,, pledged them to the United states Trust Company as security for a series of bonds issued by defendant The various stocks and bonds thus pledged were specifically enumerated in the indenture of mort
' No. 2. .First Mortgage Bonds Chicago & Erie Bailroad. This road is part of the Erie system. It appears from the reports that it is not being operated at a profit. A statement submitted by the receivers seems to indicate that, were it not for the fact that ihis subsidiary road is charged with a disproportionate share of certain expenditures, that result would not appear. All such questions of bookkeeping, however, may be disregarded. The road in question is 2(5!) miles in length, extending from Marion to Chicago. It is an integral part of the main line of the Erie Bailway, and is the line by which it enters Chicago and secures the terminal facilities of that great railroad center. It must be assumed (hat, in the event of default upon these first mortgage bonds, foreclosure would ensue, and the Chicago & Erie Bailroad be sold out to the highest bidder. To allow this to happen, if they have money in hand to prevent it, would be most reprehensible improvidence on the part of the receivers, unless it can be shown that the depreciation in the value of the whole property consequent upon discarding its present communication with Chicago may be made good in some other way. Upon the argument it was intimated that a reference might be ordered touching these bonds and those of the coal and railroad company, next to be considered, but upon further examination of the papers before the court it seems premature to make any such order. When any facts are presented tending to show that the loss of these 269 miles of road will not impair the value of the property, it will be time enough to send it to a master to take testimony, and report at a hearing where all parties creditor, whether secured or unsecured, may have an opportunity to discuss the question.
Ño. 3. New York, Lake Erie & Western Coal & Railroad Company
No. 5. Funded Coupon Bonds of 1885. In the years 1884 and 1885 the defendant railroad defaulted on the payment of four successive coupons of the second consolidated mortgage bonds. These coupons were deposited by their holders with the Farmers’ Loan & Trust Company, as a trustee, to be held, “with all the rights, lien, remedies, and security incident thereto,” in trust for the benefit of, and as collateral security for, a new issue of bonds, known as the “Funded Coupon Bonds of 1885,” and taken by the holders of the coupons in .exchange or substitution therefor. The funding coupon indenture, under which these funded coupon bonds were issued, expressly provides that all the rights, remedies, lien, and security incident to the coupon shall remain in full, force for the purpose of obtaining or enforcing payment of said funded coupon bonds. The same indebtedness is represented both by coupons and bonds. By the terms of the second consolidated mortgage it is expressly provided that each due coupon must be paid in full before part payment of any coupon subsequently maturing. Upon winding up the affairs of the defendant railroad company, therefore, these coupons would have to be paid in full before any subsequent installment of interest or the principal of the second consolidated bonds. The debt, therefore, represented by these coupons and by the funded coupon bonds, is superior in point of lien to that represented by subsequent coupons of the second consolidated bonds, and there is no reason why the receivers should be instructed not to pay them, if there be net income available for that purposé.
NOTE. For prior Fearing on motion of the New York, Pennsylvania & Ohio Railroad Company, as petitioner, to instruct the receivers of the defendant as to the making of certain payments to petitioner, see 57 Fed. 799.