Case ID: misc_90/html/0388-01.html
Source: Caselaw Access Project
Author: {"author": "Guy, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Marie Louise H. Watson, Respondent, v. Chicago, Rock Island and Pacific Railroad Company, Appellant.
    (Supreme Court, Appellate Term, First Department,
    May, 1915.)
    Bonds —when issued by railway company under trust agreement — default in interest.
    Where a bond of a series issued by a railway company under a trust agreement between it and a trust company as trustee contains no provision that upon default of interest the principal shall become due at the election of the holder, but does provide that for the rights of the bondholders reference is made to the trust agreement which provides that the trustee on default of interest may declare all outstanding bonds due and payable, the holder of one of the bonds on default in payment of interest has no cause of action to recover the principal before the date fixed for the payment thereof.
    Appeal by the defendant from a judgment of the City Court of the city of New York in favor of the plaintiff entered upon the direction of a verdict.
    White & Case (Gervase Green, of counsel), for appellant.
    Roger Foster, for respondent.
   Guy, J.

This action was brought by the plaintiff in the City Court of the city of New York to recover a judgment on a $1,000 bond. The bond sued upon was one of' a series of $71,353,000 issued under a trust agreement dated August 1, 1902, between the defendant, Chicago, Bock Island and Pacific Railroad Company, and Central Trust Company, as trustee. Defaults in the payment of interest on the bonds having occurred, the Central Trust Company, as trustee, declared all of the outstanding bonds due and payable, and, as provided by the terms and provisions of said agreement, brought an action of foreclosure in the United States District Court for the Southern District of New York. Proper proceedings having been had in said action, a decree of foreclosure was entered in said court on the 10th day of October, 1914. The decree declared all of the $71,353,000 outstanding bonds due and payable, and directed payment into court of said amount, and, in default of such payment within ten days from the entry of said decree, directed that the collateral pledged under said trust agreement should be gold; and that in case of a deficiency after such sale a judgment should be entered for such deficiency and execution had therefor.

After all of the foregoing proceedings had been had in the said action, the plaintiff herein commenced her action in the City Court to recover judgment upon the one bond in issue in this action. After trial of the issues, the court directed a verdict for the plaintiff, subject to the opinion of the court, afterwards rendered.

While unquestionably the holder of one of the bonds would have a right to bring action to recover past due interest, the bond containing an absolute promise to pay interest on dates specifically stated therein (10 Cyc. 1179; Marlor v. Texas & C. R. Co., 19 Fed. Repr. 867, 868), no provision is made in the bond that upon default of interest the principal shall become due at the election of the holder of the bond. On the contrary the bond provides that “For. the * * * rights of .the holders of said bonds * * * reference is to be made to said trust agreement; ” and the right to elect that the principal shall become due before November 1, 2002, the stipulated due date, is, by the trust agreement, limited to the trustee.

Plaintiff has, therefore, no cause of action, as an individual holder, to recover the principal of the bond before the year 2002, the date fixed by the terms of the bond for the payment thereof.

Judgment must be reversed and complaint dis= missed, with costs to appellant in this court and the court below.

Bijur, concurs; Pendleton, J., not siting.

Judgment reversed, with costs to appellant.