Central Trust Co. of New York v. Marietta & N. G. R.

PARDEE, Circuit Judge, after stating the facts as above, delivered the opinion of the court. This appeal is from the supplemental decree of June 8, 1895, although taken and perfected after the decree of October 13, 1895, which last-mentioned decree is not complained of, although it fully recognizes and determines the priority of the lien for the bridge . certificates over the lien .of the bonds represented by the Boston Safe-Deposit & Trust Company. Moreover, the said decree of October 13,1895, is now final and conclusive on all the parties thereto, and beyond the power of this court to review, because not appealed from, and more than six months have elapsed since its rendition. It is dehors the record, but admitted by counsel, that a sale has been made under the said decree of the property of the railway as an entirety. In this state of the case it w;ould seem to be of little use to review the rulings of the circuit court in the supplemental” decree of June 8th in relation to the priority of lien of the bridge certificates over the first and second mortgage bonds, particularly as the reversal of said decree will avail nothing to the appellant, since, under the terms of the decree of October 13, 1895, the purchaser is allowed to turn in the bridge certificates as cash in payment of the price; and, if not so turned in, the said certificates are to be paid and extinguished out of proceeds of the sale before the bonds represfented by the appellant can be paid. The appellant contends that the decree of May 13, 1893, was a final decree, and that, by the provisions in the. order of reference, it was adjudicated finally and conclusively between the parties that the bridge certificates were to be a charge solely on the line of railway in the state of Tennessee. We do not agree that, in relation to the payment and priority of the bridge certificates, the decree of May 13, 1893, was a final decree. To give it such effect would be to go contrary to the general terms and purport of the .decree, and particularly, to the express declaration, therein contained, that such question was reserved for future adjudication. That the decree was not intended to be final in respect to the bridge certificates appears from the fact that the judge who rendered it thereafter took up, considered, and adjudged the matter, as fully shown in the foregoing statement. If the decree of May 13, 1893, did not finally and conclusively. [201] establish the equities between the holders oí the bridge certificates and the holders of the first mortgage bonds, the question arises whether the decree of June 8, 1895, is open to the complaints set forth in the assignments of error. The substance oí the assignments is that the court erred in giving priority to the certificates over the lien of the first and second mortgage bondholders on that part of the railway property situated in Georgia, to which part of the railway property the mortgage to secure the first and second bonds was limited.' The record shows that, at the filing of the suit by the Central Trust Company of Yew York and the appointment of a receiver, the Railroad Company and the Railway Company were in default in the payment of interest upon the first and second mortgage bonds and generally insolvent. It further shows that 297 out of 680 of the first mortgage bonds and 480 out of 486 of the second mortgage bonds were at that time, and during the proceedings in the case, actually held and represented by the Central Trust Company of Yew York, the complainant in the suit charged with actual notice, if not invoking, the action of the court in respect to the very issue of certificates in question; and, further, that 28 other bonds were represented by the committee of bondholders who from the beginning of the litigation took an active part and interest therein. From these facts it appears that the holders of the first and second mortgage bonds were charged with full notice that the court was in possession of the property and dealing with the same as a whole. The order of court authorizing the issuance of the certificates in question declared that, when issued, they should be and become a first lien on the whole of the Marietta & Yorth Georgia Railway property, extending from Marietta, in the state of Georgia, to Knoxville, in the state of Tennessee, and all other property, rights, and appurtenances to the Marietta & Yorth Georgia System then belonging or thereafter to be acquired. The issue was intended for and resulted in an improvement of the whole property. When the Boston Safe-Deposit & Trust Company filed its bill, it impliedly, if not expressly, ratified all the orders of court previously made as to the administration of the property. At that time, while the order authorizing the issuance of certificates for the building of the bridge had been passed, and the contract for the building of the bridge had been authorized by the court, yet the certificates had not been issued, nor were they issued until after the Boston Safe-Deposit & Trust Company had made itself a party to the receivership. If the said trust company objected, or proposed to object, to the improvement of the whole system under the terms of the previous orders of the court, the duty devolved upon it to make seasonable objection to the proposed work and to the promised lien on the entire system. Instead of objecting, the trust company obtained an order directing the receiver to carry out and comply with all orders and requirements imposed on him in the case of the Central Trust Company v. Marietta & North Georgia Railway Company. As the Boston Safe-Deposit & Trust Company was charged with notice of the litigation prior to the filing of its bill for foreclosure, and did not make seasonable objection after filing the said [202] bill, but, ofi the contrary, ratified the order, we think both the appellant and the court were bound by the terms of the original order, and that good faith required a decree substantially as passed by the circuit court: The following cases furnish full support to this view: Miltenberger v. Railway Co., 106 U. S. 286, 1 Sup. Ct. 140; Union Trust Co. v. Illinois M. Ry. Co., 117 U. S. 434, 6 Sup. Ct. 809; Kneeland v. Luce, 141 U. S. 491, 12 Sup. Ct. 32. Many other adjudications could be cited if it were worth while to cumber the record. The decree appealed from is affirmed.