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PITTSBURGH v. LONG ISLAND LOAN AND TRUST COMPANY.

decided: January 9, 1899.

PITTSBURGH, CINCINNATI, CHICAGO AND ST. LOUIS RAILWAY COMPANY
v.
LONG ISLAND LOAN AND TRUST COMPANY.



ERROR TO THE SUPREME COURT OF THE STATE OF OHIO.

Author: Harlan

[ 172 U.S. Page 494]

 MR. JUSTICE HARLAN delivered the opinion of the court.

This writ of error brings up for review a final judgment of the Supreme Court of Ohio affirming a judgment of the Circuit Court of Franklin County, in that State.

[ 172 U.S. Page 495]

     The general question presented for determination is whether certain railroad property may be sold in satisfaction of a judgment obtained in 1891 by Charles R. Lynde in the Circuit Court of the United States for the Southern District of Ohio for the amount of 36 coupon bonds, part of 1000 bonds issued by the Columbus and Indianapolis Central Railway Company, an Ohio corporation, in the year 1864.

The bonds were secured by a deed of trust, and were made payable to William D. Thompson or bearer, on the 1st day of November, 1904, each bond reciting, among other things, that it was one of an issue of not exceeding $1,000,000, and had a special lien on all of the railway property, equipments and franchises of the company, as mentioned in the above deed of trust, subject to prior mortgage liens of $3,200,000; that it should "be transferable by delivery, or it may be registered as to its ownership on a registry to be kept by the company, and being so registered, it shall then be transferable only on the books of the company until released from such registry on said books by its owner;" also, that it "shall not become obligatory until it shall have been authenticated by a certificate annexed to it, duly signed by the trustee."

To each bond was attached this certificate: "I hereby certify that this bond is one of the series of bonds described in and secured by the deed of trust or mortgage above mentioned. -- A. Parkhurst, Trustee."

The property and rights covered by the above deed of trust, and which were ordered to be sold by the decree in this case if the Columbus, Chicago and Indiana Central Railway Company did not, by a named day, pay the amount found due to the plaintiff, was a line of railroad extending from Columbus, Ohio, to Indianapolis, Indiana, including a branch from Covington to Union, together with the franchises, equipment, property, tolls and interests appertaining thereto.

The case made by the record is set forth in an extended finding of facts covering sixteen pages of the present transcript. Many of the facts so found are not necessary to be here stated. Those which bear more or less upon the present inquiry may be thus summarized:

[ 172 U.S. Page 496]

     The Columbus and Indianapolis Central Railway Company prepared, signed and sealed the 1000 bonds referred to, (part of which were the 36 bonds held by Lynde,) and to secure the same executed and delivered the mortgage or deed of trust to Archibald Parkhurst, as trustee.

The above deed recited the consolidation of the Columbus and Indianapolis Railroad Company and the Indiana Central Railway under the name of the Columbus and Indianapolis Central Railway Company, the consolidated company becoming liable for and assuming all the just debts and liabilities of the respective constituent companies; that, for certain purposes, a new series of bonds, 1000 in number, and each for $1000, should be issued, dated November 1, 1864, to be secured by a deed of conveyance covering the mortgagor company's road, its appurtenances, franchises, equipments, property, tolls, income and interest, to a trustee to secure the payment of said bonds and interest warrants. Such a deed was made, and conveyed to A. Parkhurst, trustee, for the "purpose of assuring the punctual payment of the said 1000 bonds and each of them to each and every person who may become the holder of the same or any of them," the mortgagor company's entire railroad from Columbus to Indianapolis, including the branch from Covington to Union, its franchises, etc., in trust to secure the bonds about to be issued by it. The deed contained all the provisions usually found in such instruments.

Parkhurst accepted the trust, and the mortgage or deed of trust was duly recorded in Ohio and Indiana.

Shortly after the signing and sealing of the 1000 bonds they were all duly certified by the trustee in the form above stated.

Prior to January 1, 1867, of the 1000 bonds 790 had been duly issued in exchange for a like number and amount of the existing second and third mortgage bonds of the Columbus and Indianapolis Railroad Company as provided in said mortgage, and 31 of said bonds had been duly issued and sold by the railway company. The highest serial number of the 821 bonds so exchanged and sold was No. 833. The remaining 179 of the 1000 bonds, including the 36 bonds described in the petition, having been delivered prior to 1870 by the trustee, Parkhurst,

[ 172 U.S. Page 497]

     to Benjamin E. Smith, as president of the company, remained in the latter's possession as president, and the companies into which the same was successively consolidated as hereinafter set forth, until the months of November and December, A.D. 1875, and the happening in those months of the events to be presently stated.

On or about the 11th day of September, 1867, the Columbus and Indianapolis Central Railway Company, which made the above mortgage of 1864, was consolidated with the Union and Logansport Railroad Company and the Toledo, Logansport and Burlington Railroad Company, and became the Columbus and Indiana Central Railway Company; and on or about the 12th day of February, 1868, the latter company and the Chicago and Great Eastern Railroad Company were consolidated and became the Columbus, Chicago and Indiana Central Railway Company, one of the defendants in this action.

No authority or consent was thereafter given by the board of directors of the Columbus, Chicago and Indiana Central Railway Company for the issue or sale of the above 179 bonds or any of them.

The Columbus, Chicago and Indiana Central Railway Company on or about the 20th day of February made and executed its 15,000 bonds of that date, each for the sum of $1000, bearing interest at the rate of seven per cent per annum; and in order to secure their payment executed and delivered its mortgage or deed of trust of that date to James A. Roosevelt and William R. Fosdick, trustees, conveying to them all its property -- such conveyance including the property formerly belonging to the Columbus and Indianapolis Central Railway Company that had been previously conveyed to Parkhurst, trustee. That mortgage was recorded in the States of Ohio, Indiana and Illinois immediately after its execution.

Afterwards, and before Roosevelt and Fosdick, trustees, began the foreclosure suit hereinafter mentioned, the Columbus, Chicago and Indiana Central Railway Company issued and sold of the 15,000 bonds so secured, bonds to the amount of $10,428,000 or more.

On or about the 15th day of December, A.D. 1868, the

[ 172 U.S. Page 498]

     Columbus, Chicago and Indiana Central Railway Company made and executed its 5000 bonds each for the sum of $1000, of that date and due upon the 1st day of February, A.D. 1909, with interest at seven per cent per annum, and for the purpose of securing their payment executed and delivered its second mortgage or deed of trust to Frederick R. Fowler and Joseph T. Thomas, trustees, conveying to them all its property including the property described in the petition; which mortgage was immediately thereafter duly recorded in Ohio, Indiana and Illinois.

It was set forth in the latter instrument that the mortgagor, in addition to $15,000,000 of first mortgage bonds, was then indebted for outstanding bonds as follows, to wit: Second mortgage bonds of the Columbus and Indianapolis Central Railway Company, $821,000; income bonds of the Columbus and Indiana Central Railway Company, $1,243,000, and Chicago and Great Eastern Railway Company construction and equipment bonds, $400,000; total, $2,464,000; and that it was further indebted in other liabilities in the estimated sum of $2,500,000. It was provided in the Fowler-Thomas mortgage that of the issue of $5,000,000 of bonds, the sum of $2,500,000, being bonds numbered 2501 to 5000 inclusive, should be set aside and used only in exchange for and to satisfy the above $2,464,000 of bonds.

The 821 second mortgage bonds of the Columbus and Indianapolis Central Railway Company referred to in said mortgage were part of the bonds secured by the mortgage to Parkhurst, trustee.

On or about the 22d day of January, 1869, the Columbus, Chicago and Indiana Central Railway Company leased to the Pittsburgh, Cincinnati and St. Louis Railway Company its entire railroad and property, including the railroad and property here in question, for the term of ninety-nine years from the 1st day of February, A.D. 1869, renewable forever. And on or about the 1st day of February, 1869, possession of the leased railroad and property was delivered to the Pittsburgh, Cincinnati and St. Louis Railway Company, which continued to hold possession thereof and to operate the same

[ 172 U.S. Page 499]

     as lessee till after the sale to which reference will be presently made.

It was provided in that lease that no bonds beyond the $15,000,000 of first mortgage bonds, secured by the mortgage to Roosevelt and Fosdick, and the $5,000,000 of second mortgage bonds, secured by the mortgage to Fowler and Thomas, and the said $2,000,000 of income bonds, should be issued by the lessor company without the consent of the board of directors of the respective parties to the lease. This lease was duly recorded in the States of Ohio, Indiana and Illinois on or about the 29th day of May, 1873.

On the first and second days of February, 1875, Roosevelt and Fosdick commenced their actions concurrently in the Circuit Courts of the United States for the Southern District of Ohio, the District of Indiana and the Northern District of Illinois for the foreclosure of the mortgage made to them as trustees, and for other purposes, "but," the ...


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