The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918. Page: 380
xv, 1025 p. ; 23 cm.View a full description of this legislative document.
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250 FEDERAL REPORTER
was to be raised in part by the payment by the bondholders of $600 on
each $1,000 bond deposited with the committee, for which payment
they were to receive a new mortgage bond for the amount paid, also
$1,000 of preferred stock, and a like amount of common stock of the
new railroad company; the stocks of both kinds to be held in a voting
trust. The stock and bonds already issued under the authority of the
Commission and pledged for the gold notes were to be replaced by the
new issues of the railroad company upon the retirement of the notes.
Application was made February 8, 1916, by the new company to the
Public Utilities Commission for authority to issue stocks and bonds
as contemplated by the plan. It recited an actual cash investment in
the railroad of $28,159,258. The application does not appear to have
been acted upon. The plan of reorganization failed of adoption by
the old bondholders and no other plan was proposed by the committee.
On July 1, 1916, the trial court allowed as a credit upon the purchase
price of $6,000,000 at the foreclosure sale only items of receivers' cer-
tificates and receivers' other obligations aggregating $2,850,087.15, and
ordered the purchaser (the new company) to pay the balance of $3,149,-
912.85 into court by October 9, 1916. It also ordered that, if the bal-
ance should be credited upon the old outstanding mortgage bonds, the
bonds should be produced in court at that time, so that the credit might
be indorsed. Before this order was complied with the trust company,
as trustee, demanded of the committee the right to substitute counsel
of its own selection in the foreclosure suit, and it and the other appel-
lants also demanded the return of their bonds for failure of the com-
mittee to comply with the deposit agreement. Failing in both endeav-
ors, they applied to the trial court by motion and petitions in the fore-
closure suit for the relief, and also to prevent the apphcation of their
bonds on the purchase price of the railroad. The court sustained the
motion for substitution of counsel, so far as concerned bonds owned
by the trust company or held by it as trustee for others, but denied
it as to its trusteeship in the mortgage and its representation by counsel
in the foreclosure suit. With some exceptions not material here, the
court denied the petitions for the withdrawal of the appellants' bonds,
and ordered that they be applied, with the others, on the purchase of
the railroad. These two orders are the subject of the present appeals.
The new railroad company, being furnished therewith by the com-
mittee, delivered the bonds deposited with the latter under the deposit
agreement, including those of the appellants, to the clerk of the court
for credit of the due percentage of the purchase price of the railroad
at the foreclosure sale. Except what may be imported by this credit,
the bondholders of the old company have never received anything on
their investment. Neither the committee nor the individual members
are parties to this litigation, nor do they appear to have submitted
themselves to the jurisdiction of the trial court. It appeared at the
hearing before us that they had practically abandoned all efforts at re-
organization; also that the new company had defaulted on its gold
notes, that a suit was pending for the foreclosure of the collateral
trust indenture securing the notes, and that appellants and other old
bondholders, except those owning the notes, were in danger of losing
all interest in the railroad.
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The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918., legislative document, 1918; Saint Paul, Minnesota. (https://digital.library.unt.edu/ark:/67531/metadc38821/m1/395/: accessed April 23, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.