Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1877-08-17
The Vermont Central and Vermont aI 4 Csnads
Raads.

Judge PrOut spoke against the .'rtltinn,
IN behalf of the Rutland Railrp d. He
argued that if the Supreme Court ;raDted
this petition, it would turn the Rutland
Company over to an entirely irrespoLs.s
party to get its rent-to an extinguished
party and to exhausted funds. No inquiry
Is proposed under this petition as to the
value of the property which the receivers
are to take and sell. They are to take it at
their own price. He argued that the re-
ceiyers have no right to go to Court of
Chancery ana ask directions any further
than as TO their management of the Yer
mont and Canada.
Hon. E. j. Phelps next spoke against the
petition, his argument occupying most of
Thursday. lie said that be appeared for
certain first mortgage bondholders, and
should eonfne himself to these rights, with
out allusion to the second mortgage, al
though much of what he might say was un-
doubtedly applicable to the latter. The
validity OF tine first mortgage has never been
questioned. 1t had its origin long before
this litigation, and when the litigation COM
menced the first mortgages were found not
only with valid lien under the law of the
land, by virtue of their mortgage, for the
security OF the debt Of three millions Of dol
lars, the principal Of their debt, but with
| an estate IN the property absolute at law
| because breach Of the condition of their
mortgage had occurred, and they had been
placed in possession by the mortgagor by
deed of surrender.
1t is now proposed to sell this property
under the direction of the Court Of Chan
Gerry, and to apply the proceeds to the pay
ment OF a great mass of Indebtedness, long
subsequently aceruing.
All parties concede that in doing so the
court absolutely extinguish the first mort
| gage. No man pretends that this property
can be sold for enough to discharge This
| vast amount of Indebtedness, and leave any,
thing for the original security. The three
millions OF principal, and the semi-annual
accruing interest at seven per cent, since
July, 1879, will be absolutely wiped out,
and the estate of these parties extinguished,
Mr.. Phelps contended that the trust debt
is not, either in whole or part, lien on the
Vermont Central in priority to this first
| mortgage, first because it is not a lien upon
that road at all !; and second that if it is, it
Is subordinate to that of the first mortgage.
lie further considered the final decree of
1861, claiming that under it no receiyership
existed except Oh the income of the property.
In the compromise of 1864, they put the
| agreement into decree and made the courta
| partner with those in the agreement-got
it into labyrinth. That decree was extra
Judicial. 1t was rendered without any case.
1t is meant that the court of Chancery
shall stand perpetuallv as the nominal
owner OF the property. Who invested
your Honors with powor to lease the Rut-
land. Ogdensburg, Vermont and Canada
railroads? Did the Legislature ever give
any such power? Then where do they get
the power to do this? lie argued that
courts OF justice cannot make title to prop
erty. Mr.. Fifeld says: 1--WE may as well
admit that this suit is brought to make
title" Whoever heard of court of jus-
tice making title? Is there any action of
court that can create a title In anybody
Courts of justice are called on to find out in
whom titles belong, and to give parties
remedies or the strength of their title, but
who ever heard of courts of justice being
called on to make title in receivers, which |
they do not possess, by extinguishing the
prior mortgages that stand in the way Let
me commend to my learned friend the con-
sideration that when he undertakes to make |
title which does not exist, by a judicial |
operation, it will stand him in hand to make |
one that will be good anywhere. and that |
will not need to be asserted IN the court |
that made it, in order to prevail. Most of |
these bondholders live in the State of Massa-
chusetts. The Constitution opens to them |
another tribunal. And any of these
bondholders, at any time, until titles
have lapse by the statute of iimita-
tiOn, may resort to that Tor redress.
Mr.. Phelps proceeded to argue That the
trust bondholders are barred by their own
contract; that the floating debt is no in
cumbrance; that they never applied to the |
Chancellor about it, or got any order for
its security. If not judicially binding,
there is no receivers debt at all /; but bind |
ing or not, no other debt is so binding as
the mortgages. lie ridiculed the idea of |
bringing forward this Ss,OOO.OOO of
bankruptcy as administration expen-
ses. 1t was preposterous. They say
this is the Courts debt. In this
connection, Mr.. Phelps charged the
receivers with expending millions OF money
wastefully, beggaring widows and children.
They might as well ask the Chancellor to
pay the expence of setting up a theatre,
and first pay the expenses of ballet dancers
in priority to the mortgages. He also read
numerous authorities to show that no debt
Of any description, contracted by a receiver,
can ever be allowed to take precedence over
a valid lien on the property existing before
the receiyership. unless by an order OF the
court made under the consent of those hold
ing the previous lien that without such
such previous lien; that all cases to be
found in which priority over previous lien
has been given to receivers debt are cases
in which such consent has been had,
the parties interested in the previous lien
being before the court, and the priority
being created for their benefit and the ne
cessary preservation of the property. lie
argued that the petition was without pre-
cedent. 1t is said that the first mortgage
bondholders assented to this decree. and
this proceeding, and as these expenses re-
suited out of that suit and proceeding
they will be taken to have assented to
the expenses becoming prior lien.
There are TWO satisfactory answers TO this.
First, if every bondholder had come forward
and declared his assent to the entering of
this decree. it would not have the effect to
bind these bondhoders to the result now
claimed. Second, it is not true that these
bondholders, as a matter Of fact. except to
a limited extent land to limited extent it
probably is true) ever did give their con-
sent to the entering of the decree, or to
any of these subsequent proceedings. A
Judgment binds only the parties before the
court in legal sense, and their privies in
estate and in law. Ii binds nobody else.
And though all the world stand on the out
skirts of the court and clap their hands at
what is going forward; though all Boston
should repeat the loud amen, there Is no.
body that is bound by it as record of the
court, unless he is before the court as
party to the cause. Were these bond
holders parties. and to what extent? ? lie
argued that the court could not make man
in Massachusetts,, with promissory note
in his pocket, il he stays at home and at
tends to his business, and does not come
within its jurisdiction, a party. They have
not come TO ask you to do anything. But
suddenly somebody rushes into court and
asks that your Honors shall decree that
these men shall extend their notes for
twenty years. There is no suit before you
these parties cannot be served with process.
But you make decree accordingly, upon
1.-THE consent" of those not before you, eyi-
denced by certain representative" who
show no authority. The whole proceeding
is void for want OF jurisdiction of the parties.
lie further argued that the court had no
power to order sale. The receivers are
paupers and can only pay IL paupers' notes.
Finally, Mr.. Phelps argued that the sale
can only be decreei by bill. If there is,
as claimed, scandal in this litigation to be
got rid of, it will consist in turning over
this property for the receivers "a walk oil
with, and pay for IN this way. The plain
and simple way out of this, Mr. Phelps
said, was to discharge the recelyership
Let the Court of Chancery cut off this
where it STANDS. There Is not single
possible apology for keeping it on foot
another day 1t has no legal foundation.
Ii is sort of trust which the parties have
created for themselves. And it will be time
enough for the court to administer when
some party brings it before the court in
regular suit. Discharge rccelyership of
the road that has never had any validity as
a receiyershp. and that has led to this in
finite mischief and confusion and scandal.
Return the property, or leave the property
in the hands where the court found it. And
then. like every other transaction. whether
great or small. that takes place in which
legal rights accrue and legal remedies be
come appropriate, leave 1t to any party or
parties, who have any claims to instituts a
proper suit and have their rights adjudi-
Gated in the regular way.