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: 669
xv, 1025 p. ; 23 cm.View a full description of this legislative document.
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NEW YORK TRUST CO. V. CARPENTER
as a subsidiary company and through it had carried on the business of mining
coal. Both properties were in the hands of the same receiver, the receiver of
the Coal Company mining the coal in the Coal Company's lands adjacent to
the railroad which furnished the coal's only outlet. The Railway Company,
on reorganization, became the Wheeling & Lake Erie Railroad Company,
hereinafter called "Wheeling." There were outstanding against the coal
lands a mortgage made by the Coal Company, securing something less than a
million dollars in bonds; and also re'-eiver's certlhcates and other debts prior
to the bonds finally fixed in amount at $200,000. These were known as
"prior lien obligations," of which Hanna & Co. afterwards became the
owner. The bondholders of the Coal Company appointed a reorganization
committee who dealt with the Wheeling in the adoption of a plan devised and
brought about by it through the committee. It was reorganized under the
name of the Wheeling, Lake Erie & Pittsburgh Coal Company (hereinafter
called "Coal Company").
The plan was embodied in a series of agreements to be operative for a period
of ten years: A contract between Hanna & Co.'s Mining Company with the
Coal Company to pay to the Coal Company a royalty on a minimum of coal to
be mined annually; a contract (called contribution contract) between the
Wheeling and a trustee of the Coal Company's bondholders to pay a certain
number of cents to the trustee on every ton of coal mined by the Mining
Company and transported by the Wheeling, less such number of tons as it
might take for its own fuel purposes; a contract between the Mining Com-
pany and the Wheeling for its fuel coal; the issue by the Coal Company of all
of its capital stock to the Wheeling and of $200,000 in prior lien obligations
and $634,500 of 4 per cent. bonds both secured by a mortgage of the Coal
Company, the prior lien obhgations being given priority over the bonds.
The royalties at the minimum and the Wheeling's contribution, if the plan
had been carried out, would have produced during the ten years of its life,
a sum sufficient to have discharged the prior lien obligations, to have paid
taxes and the interest on the bonds, and to have established a sinking fund
applicable to the payment of the bonds on allotment.
The consideration for the delivery of all the stock of the Coal Company to
the Wheeling and the scaling of the bonds of the old Coal Company of 25
per cent. of their face for bonds in the Coal Company was the benefits to the
bondholders to be derived from the operation of the plan, which, it was be-
lieved by them and by the Wheeling, would yield a sum not only sufficient for
the immediate purposes of the plan, but, by reason of much greater produc-
tion than the minimum, to produce a large sum applicable to the payment of
the bonds after the prior lien obligations were discharged.
For the first two years the plan operated reasonably well, although the
operations of the Mining Company were hampered by the failure of the Wheel-
ing to furnish cars sufficient to haul away the coal which the Mining Company
could produce.
Afterwards the lack of equipment became acute. The Mining Company
refused to pay certain back royalties and the Wheeling discharged the Mining
Company from that obligation, and, in the same agreement, reduced the mini-
mum the Mining Company was to mine to an annual production far below
what the necessities of the plan required. The Wabash Railroad Company had
acquired control of the Wheeling and the properties of the Wabash-Pitts-
burgh Terminal and operated them in the interests of the Wabash's purpose
to obtain a seaboard outlet for the Wabash in which the Wheeling and the
Terminal nere connecting links. In furtherance of that purpose a large
part of the equipment of the Wheeling was used in hauling coal originating
on the Terminal through the operation of onerous contracts on interchanged
traffic between the ternunal and the Wheeling. These brought about the col-
lapse of the Wheeling and necessarily the destruction of the Wheeling's plan
of reorganization of the Coal Company for both of which properties the same
receiver was put in charge.
The District Court made an order authorizing the receiver of the Wheeling
to refuse to adopt the contribution contract. There was therefore no source to
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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/m1/684/: accessed March 28, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.