Pennsylvania Steel Co. v. New York City Ry. Co.

190 F. 609 | U.S. Circuit Court for the District of Southern New York | 1911

LACOMBIÍ, Circuit Judge.

The special master held that the lease of February 14, 1902, between the Metropolitan and the New York City Companies should be deemed to have been no longer in effect after September 24, 1907. He also held several other propositions as to accounting which followed as the necessary consequence of such decision. Exceptions were reserved to his findings by Metropolitan interests, and the whole subject has been argued fully before the court.

The special master filed with his report a very careful opinion, which sets forth exhaustively all the facts bearing upon the question presented, and renders it unnecessary to restate them here. A fundamental and controlling circumstance of 'the situation is the fact that almost at the outset this court was applied to, to appoint receivers of the lessor company under circumstances which the Supreme Court has held warranted such relief. “Having'jurisdiction over the New York City Railway Company, and receivers having been appointed for it, there was every reason for extending the receivership to the Metropolitan Railway Company. The facts showed that it was so tied up with the New York Company that a receivership for the latter ought to be extended to the former. The circuit judge so held, and we think very properly upon the peculiar facts of the case.” In re Konrad, 208 U. S. 90, 28 Sup. Ct. 219, 52 L. Ed. 403. When this decision was handed down (January 25, 1908), the same individuals were receivers of both roads “as holders of the interests of both lessor and lessee,” and this court liad stated why at that stage it seemed practical to adjust all questions in a single receivership. Penn. Steel Co. v. New York City R. Co. (C. C.) 157 Fed. 442. Of which disposition of the case the Supreme Court said that it was “well calculated to bring about the earliest possible conditions when those who may be the owners of the property shall be in possession of and operate it.” In re Konrad, supra.

This dual receivership, however, did not exist on September 24, 1907. It began only when the application of the Metropolitan road was granted, October 1, 1907. It is thought, therefore, that the special piaster erred in finding that the lease should be deemed to have been no longer in effect after September 24, 1907. The date should have been October 1, 1907, and the special master’s report should be corrected accordingly.

•With this exception, the reasoning and conclusions of the special master are fully concurred in. They are in accord with the court’s understanding of the effect of the dual receivership created October 1, 1907. It is not surprising that among the many deliverances upon various questions which have been presented during the past four years there are to be found expressions which would seem to indicate art understanding that the roads were being operated under the lease. But the language of the first opinion (157 Fed. 442) indicates the intention of the court, and passages from many other opinions cited b)r the special master or the appellees show quite clearly that the theory was to have receivers manage the property merely as operating conservators, leaving all questions, including the important one — whether or not the lease should be nonadopted and the public service which the property was obligated to perform rendered by the owner of the corpus — to be decided later.

Suggestion is made in the brief of the Farmers’ Roan & Trust Company to the effect that at the time receivers were appointed it was supposed the lease might turn out to he profitable. It must be remembered that receivership followed an investigation of the affairs of both companies conducted by the public service commission, the details of which were published from day , to day. It would seem that there could be few illusions left as to the situation and prospects. When the question arose, as it did at once, whether or not the interest on this mortgage due October 1st, should be paid, the court was strong!)' convinced that it should be defaulted, and expressed that conviction more than once at the conferences, where several interests were represented, and the question discussed. Such action would have at once settled the question of the lease, but it was not taken because, while the subject was under advisement, the lessor (owner of the corpus) petitioned to have the receivership extended to cover its property. It was thought that this made possible the creation of a receivership which would for the immediate present concern itself solely with the operation of the road and its restoration to a condition of efficiency, without undertaking to reach any conclusions as to who should receive the surplus over operating expenses, if there were any, or who should bear the burden of making the system perform its public duties with reasonable efficiency, if its income was insufficient so to do. It was certainly supposed by the court that, when the question came up for decision whether equity required that the estate of the New York Company should be relieved from the burden of an onerous and unprofitable contract, the question would not be embarrassed because in the meantime the receivers had used any money they could lay hold of, whether taken front the treasury or supply shops of the New York company, or received from insurance, or borrowed on pledge of the corpus. Practically the road could not have been run without the additional money, which no one.would loan until the owner had put the corpus in receivers’ hands, and which they could borrow only because of the action taken October 1, 1907.

With the change of date indicated, supra, the exceptions are overruled, and the report of the special master is affirmed.