Vermont watchman and State journal. [volume] (Montpelier, Vt.) 1836-1883, 1880-12-22

in the great case Of James r. Iangdon ct al Us.
The Vermont & Canada Railroad Company ct ais,
heard at the general term in Montpelier in Octo-
Der, 1879 was filed in the Franklin county clerks
office to-day This decision definitely settles the
longdsputed question Of the priorties of the diff
ferent classes of securities upon the Vermont Cen
trail and the Vermont & Canada railroads. in favor
of the holders of the "trust securities" The
opinion, which covers something more than one
hundred pages of legal cap, and is very elab-
crate document was drawn up under the direc-
ton OF the court by the Hon. Homer L. Royce,
first associate Justice and is concurred in by the
full bench. After reviewing in chronological or
der all the proceedings, decrees orders and corp
crate dongs connected with the long litigation in
which the property has been involved, the opinion
proceeds as follows:
THE OPINION.
Upon the facts above stated and the evidence
introduced bearing upon the questions in issue,
the rights of the respective parties are to be de-
termined. And first as to the mortgage bonds,
no question is made as to the validity Of both is
sues of said bonds as to the trust deeds that
were given to secure them. The only question is
what security the holders of said bonds now
have upon which they are entitled to rely for pay
ment. It is claimed for the holders of said bonds
that the securities originally given remain intact;
that they unaffected by anything that has
TRANSFERRED since in the creation of the various
classes of Indebtedness which are represented In
the bill as funded trust and floating debts. 1t is
claimed by the orators that the holders of the
funded trust and floating debts have priority to
the right of the boDdhoders, and that the property
should first be made chargeable for the payment
of those obligations. 1t is admitted that while
the receivers under the decree of 1861, were adj
ministeriDg the property which was the subject
matter of their recevership for the uses and pur-
poses indicated by that decree, all debts prop
erly contracted by them as receivers, or which
were authorized by the court to which they were
accountable, and which appointed them, would
constitute first lien upon the property they were
administering. We have seen that the purpose and
object to be answered by that decree in continu-
ing the management, possession and control Of
said railroads in the receivers was to earn income
with which to pay the rent due and which might
grow due to the Vermont & Canada Railroad
Company. So that until that object was fully ac
complished, or the receivers were discharged by
the parties or order of the court, they would con-
tnue strict receivers and be entitled to the rights
and protection which the law accords to such re-
cevers. The first equipment bonds were issued un-
der the decree of September It'll, 1865 and it is
claimed by the orators that there was S97 900 of
rent then due to the Vermont & Canada Railroad
Company; that the receivers had been ordered
to pay out of net income, and hence that that Sc
ries OF bonds amounting to 100000, was re-
ceive rship debt. 1t Ia claimed by defendants that
the payment of the S97, 600 then due to the Yer
mont & Canada Railroad Company had been
SO provided for by the decree of 1864; that
the receivers were relieved of all duty re-
speeding it, and that after the decree of 1864 there
was no OCCASION or necessity for, the continuance
of the receivership, and that 1t was legally ter
minated; but, in our judgment, the right Of the
holders of those bonds as well as those that were
subsequently issued to the priority of security to
the holders of the first and second mortgage
bonds, does not depend upon the question whether
the bonds so issued were strict receivership debts
or not
THE COMPROMISE DECREE.
In the petition that resulted in the compromise
decree Of 1864 the Vermont Central company the
trustees under both mortgages, the committee of
the first mortgage bondholders and certain mort
gage bondholders were made defendants. Ample
notice was given of the tendency of the petition
In the decree which was signed, provision
made in the eleventh article for the appointment
of the advisory committee before mentioned, to
represent the interests Of the first mortgage bond
holders which article was amended in the decree
of 1866 by providing that two of said committee
should annually be chosen by the first mortgage
bondholders and one by the second. Ample no.
tice was given to the trustees of both mortgages,
and the committee of the first mortgage bond
holders, of the tendency of the petition praying
for authority to issue the first equipment loan
bonds; and no objection was made to the grant
ing of the prayer of the petition, Notice was
given to the trustees of the second mortgage, and
the committee of the first and second mortgage
bondholders, OF the tendency of the petition ask
ing Tor authority to issue the second equipment
loan bonds, and they appeared at the hearing; and
1t does not appear that they, or either of them,
objected to the prayer of the petition being
granted No notice appears to have been given
OF the tendency of the petition under which the
decree was made authorizing the third equipment
loan, but it does appear that the committee of
The flrst and second mortgage bondholders, and
certain other persons largely interested in the
trust property, did appear upon the hearing of
the petition, and made no objection thereto. No
notice was given of the tendency Of the petition
asking for authority to issue the fourth equip
ment bonds but 1t appears that the committee of
second MORTGAGE bOndhOlders
ed at the hearing and assented to the making of a
decree authorizing said loan. The committee Of
the hrst and second mortgage bondholders were
notified and appeared, and either assented or of
fered no objection to the making OF the several
DEGREES under which the bonds were issued that
were negotiated by the receivers and managers.
II the action Of said committee in what was done
by them was binding upon the bondhoders whom
they professed to represent, the receivers and
managers had full authority, far said bond
holders were concerned 10 issue the bonds as au-
thorized by said DEGREES. In examining the ques-
ton as to the power aud authority of said COM
mittee, II is necessary to consider the facts as
developed by the evidence which induced the
parties in interest to require that permanent pro-
vision should be made for their appointment.
Down to the compromise decree Of 1864 the bond
holders were simply creditors of the corporation;
they had no voice in its management, OF right to
influence or control its action. Their right to be
represented and to participate in the management
OF the property which was pledged for the pay
ment OF their bonds recognized, and the
provision in that decree for the appointment of
such committee was to protect the interest of the
first mortgage bondholders They were constituted
an advisory board in respect TO the management
OF said roads and property with the right to ad-
wise the trustees and receivers in respect thereto
They were also constituted auditors Of the ac-
counts of the receivers and trustees and those ac-
counts when approved by them were to be passed
and allowed without further proceedings; but the
right to object to any part of said accounts was
reserved TO the trustees of the second mortgage
and the Vermont & Canada Company. And upon
such objection being filed the accounts objected
TO were to be examined and passed upon accord
ing to the usual course. As long as the mortgage
bondholders awaited themselves Of the provisions
in the DEGREES of 1864 and 1865, and elected and
continued in office, the committee provided for by
them, they were legally and equtably bound by
-. l..Ll LL..ll ~. L.. l.... LIZ. IL.