The Anderson intelligencer. [volume] (Anderson Court House, S.C.) 1860-1914, 1876-01-06
Blue Ridge Railroad d-Opinion
. Judge Bond.


Bond in the Blue Ridge case, recently
argued before him in Columbia:
It appears from the record in this case
that the Blue Ridge Railroad Company
is corporation under the laws of South
Carolina, and that on the Goth day of
April, 1854, it executed mortgage of all
its property whatsoever to certain par-
sons therein mentioned to secure the pay
f.1ht of certain bonds named in said
mortgage, and the interest thereon to &C.
crue.
And further, it appears that after the
mortgage debt of aforesaid became due
and payable, and was unpaid, certain
creditors of said bankrupt filed a petition
in the District Court asking that the said
corporation might be declared bank
rupt. which was accordingly done, and
asssignees we're duly appointed to take
charge of the bankrupt.
1t appears also that the said corpora
ton, at the time of its adjudication as a
bankrupt, had no other property what
ever than that covered by the said mort
gage, and that the property mortgaged
was totally inadequate, when sold, to pay
the debt for which il was pledged.
It appears further, that on the 10th Of
January, 1873, the assignees of the said
bankrupt filed petition in the Bankrupt
] Court, asking that the property of the
corporation mortgaged as aforesaid might
be sold, and the court directed a sale
thereof. At which said sale one Robert
K. Scott, who was authorized by his fol
low bondholders to purchase the road in
their behalf, became the purchaser there
of, being the highest bidder therefor.
Prior to said sale, the Bankrupt Court
made an order directing James Simons,
ESD. as special master in the case, "to
INQUIRE and report what compensation
the trustees and assignees were entitled
to, by way of commissions, expenses IN
CURED. services rendered and to be rem
dered up to and including the sale pro-
posed, and also to inquire and report
what fees the counsel forthe trustees and
assignees were entitled to, and out of
what fund payment should be made
therefor" Under this order the special
master filed his report on the 18th OF
March, 1874, by which he allowed to the
assignees of the bankrupt certain CON-
missions, fees and expenses for them
selves and their counsel, and to the trus-
tees under the mortgage, another large
sum of money by way of commissions,
counsel fees and expenses, amounting III
all to about 10000, and he directs or
recommends that the larger part of these
payments be made out of the proceeds of
the sale of the mortgaged property, and
bases his estimate upon the supposition
that the road is worth $250,00C.
The property of the railroad sold at
the sale for fifty thousand dollars.
From the order making the reference
to Special Master Simons, and from the
order overruling the exceptions to his re-
port and confirming the same, the peti-
tioners here file their petition, asking the
aid of the supervisory Jurisdiction of the
Circuit Court.
1t is plain from the record in this case
that at the time of the filing Of the peti-
ton in bankruptcy, the bankrupt compa.
ny had no property. the sale OF which
would produce anything Tor its general
or unsecured creditors. All that :: j;
owned was mortgaged greatly beyond itS
value. ....,.....
The only justification of the petition Of
the assignees for the sale of this property
by the bankrupt court is, that they sup.
posed il wonld realize something for the
general creditors. This the sale did not
| do, and every one concerned in the pro-
ceeding had reason to know it would not.
When a bankrupt court, at the suggestion
of the general creditors, authorizes the
sale of property encumbered by liens,
and the proceeds of sale amount to no
more than the claims of the lien creditors,
it has no control over the fund but to pay
it to such lien creditors, and it is not
chargeable with any costs in the bank
rupt preceding except the actual costs
of the sale. The fund is sacred, and is
devoted to the payment of the lien cred,
itors whose property has been sold, and
they are chargeable with no other or fur,
ther costs than they would have incurred
had they sold their property under their
liens. The assignees in this proceeding
were acting not for the benefit of the
| bondholders who were secured by mort
gage, but for the general creditors OF the
| bankrupt. By what rule of equity can
the lien creditors be required, out of their
funds, to pay the expenses of a litigation
which was solely for the benefit of the
general creditors? :? Both they and their
counsel must look to the general assets
of the bankrupt estate for payment of
their claims, if they be entitled'to pay
ment at all. ..!' 'f -. f'r,s
Nor can the allowance by the special
master to the trustees and their counsel,
which was confirmed by the Bankrupt
Court, be permitted. -.
The District Court when it ordered the
sale of the RAILROAD property, was acting
solely for the general creditors. When
the property was sold under its order and
| it was found there was nothing in hand
belonging to them, its sole duty was to-
ascertain who the lien creditors were, the
priority and amount of their claims, and
to pay over to them the proceeds Of. the
sale. ....
It had no authority in this proceeding
to adjust the claims of the trustees under
the mortgage against their cestui que
trustes, nor to ascertain what was due by
trustees to counsel.
The mortgaged property in the hands
of the Bankrupt Court was and is bound
for nothing, but for the lawful charges
for the administration of that property in
that court.
The sale not being objected to, and no
motion being made to set it aside, will be
allowed TO stand, but the Circuit Court
will pass an order reyoking the order of
the District Court referring this cause to
Special Master Simons for report, and
reversing the order of the District Court
confirming the report of said master, and
will direct that this cause be renanded
to the District Court with directions to
ascertain what were the actual costs in
Cured in the sale of said mortgage prop
erty, as determined by the bankrupt law,
and which in accordance with this opin
ion are properly chargeabe to the pro-