245 Pa. 589 | Pa. | 1914
Opinion by
This was a bill in equity, filed by Samuel Eea, trustee for bondholders, under a mortgage executed by the Pennsylvania Canal Company. The bill prayed for foreclosure, and for instructions as to the distribution of the proceeds of sales of the mortgaged premises. The defendant, the Pennsylvania Canal Company, in its answer admitted all the allegations of the plaintiff’s bill, and submitted itself to the decree of the court. Mr. John Cadwalader and others, intervened as defendants to protect themselves as the owners of certain bonds of the Pennsylvania Canal Company. Certain pertinent findings of fact by the court below, may be stated as follows: The Pennsylvania Canal Company being empowered to issue bonds under its charter to the amount of $5,000,000 duly issued bonds to the amount of $3,000,-000. These bonds were endorsed, in pursuance of a resolution adopted by the Board of Directors of the Pennsylvania Eailroad Company, which reads as follows: (June 30, 1870) “Eesolved, that the Pennsylvania Eailroad Company will agree to purchase the interest coupons of $3,000,000 of the general mortgage bonds of the Pennsylvania Canal Company — said bonds being intended to retire the $2,367,000 existing debt of the Canal Company; to pay $103,000 for the Hazard Coal Property, as contracted to be paid by the Canal Company; to pay $200,-000 for the contemplated enlargement of the canal this year; and the balance of said $3,000,000 to be used for future enlargement; Provided, the Pennsylvania Canal Company transfer to the Pennsylvania Eailroad Company, as collateral security, all their rights and interest, directly or indirectly, in their coal properties, and all stock of coal companies owned by them, all of which shall be held as indemnity against loss under the guarantee above provided for. This being done, then the following endorsement to be placed on the said$3,000,000 of bonds: ‘For a valuable consideration the Pennsylvania Eailroad Company by resolution of the Board of Directors
The plaintiff as trustee has a fund of $433,014.74 in his hands, for distribution, and has also the property of the canal company, which remains unsold. The holders of
The question therefore, which is here presented to us for consideration, is not what the railroad company under the circumstances ought to have done with the coupons, but it is, what did it agree to do, and what as a matter of fact, did it do in taking the coupons over? Did it on behalf of the canal company pay the coupons, with a view to their extinguishment, as a claim under the mortgage, or did it purchase them, with the right to hold them under the continued security of the mortgage, with the same right to priority of payment, which the coupons would have had in the hands of the bondholders? It is clear that the railroad company did not take over the coupons without having an agreement or stipulation as to the nature of the transaction. And this stipulation was expressed in very definite language, in which we can discover no ambiguity. The obligation which the railroad company intended to assume, and which it did assume, appears first, in the resolution of its board of directors, in which it is distinctly set forth, that the railroad company will purchase the interest coupons, upon certain conditions. The squarely defined intention to purchase, again appears in the endorsement upon the back of the bonds, in which is reiterated the statement, “in case the said Pennsylvania Canal Com
In the argument of counsel for appellees, some stress is laid upon the language of the proviso, in the resolution of the railroad company, in which reference is made to the transfer of collateral security, “all of which shall be held as indemnity against loss under the guarantee above provided for.” The transaction to which reference was thus made, was . the agreement to purchase the interest coupons. It was this agreement, to which the board referred as “the guarantee above provided for.” This reference can have no effect whatever upon the terms of the agreement. These terms were in no way enlarged by the use of the word “guarantee” in referring to them in this matter. The use of this word “guarantee” in this connection, did not have, and could not have, the effect of turning an agreement to “purchase” coupons, into an agreement to “pay” them, for the purpose of extinguishment, or cancellation. Counsel for appellees have not cited to us, nor have , we been able to discover any decision, in which a court has ever undertaken to construe a plain agreement to purchase coupons, as being the equivalent of a contract to pay them, for the purpose of extinguishment.
It appears also, that it was contemplated in the resolution, that collateral to protect it from loss in the purchase of the coupons, should be transferred to the railroad company. If this had been done, the collateral should have been accounted for, and the proceeds of anything so received should have been applied to the claim upon the. coupons. But this feature disappears from the case, under the stipulation of counsel, by which it was agreed that no transfer of coal properties, or stock of coal companies, owned by the canal company, was made to the railroad company as collateral security, as was contemplated in the resolution. Under the plain terms of the agreement, and under the undisputed facts of the transaction, we cannot regard it as anything else than a purchase of, the interest coupons. It follows that the coupons so purchased, were entitled under the terms of the mortgage to priority of lien over the bonds, and to prior recognition in the distribution of the funds arising from the sale of the mortgaged premises.
The first, second, third, fourth, fifth, sixth, seventh, ninth,- tenth, and eleventh assignments of error are sustained; The decree of the court below is reversed, and-the record is remitted for further proceedings in accordance with this opinion.