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: 5
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$ULSI'roN BELT & TERMINAL RY. CO. V. UNITED STATES
ties. It seems clear that payments of interest made under such an ar-
rangement were made in lieu of compensation for the enjoyment of
the property used and were in the nature of rent received by the termi-
nal company and to be accounted for as part of its income, as rent
would be. The fact that the payments were to be made directly to the
Central 'rust Company by the tenant companies is not important, if
there existed an obligation on the part of the tenant companies to the
terminal company to make them for its benefit, and if the consideration
of such obligation was the privilege accorded the tenant companies to
use the property of the terminal company.
The effect of the arrangement was the same as if the tenant compa-
nies had expressly agreed to pay rental for the use of the premises in
the amount of the interest and sinking fund payments, and, to avoid
circuity, the payments by mutual consent were made direct to the mort-
gagee. If the owner of a building, as a condition of securing a loan on
it, should consent that the mortgagee might collect the rents and apply
them in reduction of the mortgage debt, the owner would still be re-
quired to report them as income, though they were never, in fact, paid
to him. He would benefit from their payments, as much as if they had
been paid to him direct. The case is similar to that of Blalock v.
Georgia Ry. & Electric Co., 246 Fed. 387, - C. C. A. -, recently
decided by this court, and is not distinguishable from it in principle in
this respect. Nor is it important to determine whether the tenant com-
panies were guarantors of the loan of the terminal company or princi-
pal debtors with it, in their relations to the Central Trust Company.
As between the terminal company and the tenant companies, there
was an independent enforceable covenant on the part of the tenant
companies in favor of the terminal company to pay the installments of
interest and sinking fund, for the terminal company, as they fell due-
a covenant, upon a continued performance of which the right of the
tenant companies to use the property of the terminal company depend-
ed. There was also a primary and direct obligation on the part of the
terminal company to pay the interest and sinking fund installments to
the Central Trust Company, which obligation the tenant companies, as
a consideration for their enjoyment of the terminal company's prop-
erty, agreed to perform. We think it clear that the payment of such
sums, in pursuance of their covenant, was but a payment of rent by the
tenant companies to the terminal company for the use of the premises
occupied by them, and was properly treated as if it had been paid to
the terminal company, and by it paid to the Central Trust Company.
The iudgment of the District. Court is affirmed.
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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. (digital.library.unt.edu/ark:/67531/metadc38821/m1/20/: accessed March 26, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.