The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-04-09
THE COURT DEFERS ACTION.
Judge Gresham's Decision in the Suit
Against the Chicago & Atlantic.
He Decides an Indiana Statute Unconstitu-
tional, and for the Present Refuses to APP
point Receiver for the Road.

from Marion, o.. to Chicago. In June, 1881, g.
zoo bonds for 900 each were issued, and second
issue was made in September, 1883, of an addi-
tional series of 5000 bonds Of 81, 900 each, paya-
BILE in August, 1923, with interest at the rate of
per cent. The suit was instituted by the
Farmers Loan and Trust Company, of New
York, against the Chicago 6 Atlantic Railroad
Company and George J. Bippus, as trustee.
It was claimed in the trial that under Section
1888 of the Indiana Revised Statutes, prohibiting
citizen from another State from acting as a.
trustee in mortgage to trustee in this
State, the Farmers Loan and Trust Company
being New York corporation, is not capable of
acting as trustee, and could not, therefore.
maintain the suit The court holds that Conrad
Baker. an ex-trustee, who died before the suit
was brought, and whose successor in the trust
was not appointed. was resident of the State.
ard this satisfied the requirements of the Indiana
statute. The constitutionality of the statute
is discussed in the decision at considerable
length, and in the course of his comments,
Judge Gresham says:
'If the Chicago & Atlantic company be not
eStopped from denying that the Farmers Loan
and Trust Company was capable of acting as
trustee, and the court is not authorized to allow
the holders at whose request the suit
was brought to be substituted as compliments,
made eo-complalnants with the Farmers
Loan and Trust Company. the bill must be dis
missed, unless the statute relied on Is Invalid.
This statute does not prohibit foreign corporations
from doing business in this State. Obviously that
was not the design of the Legislature. 1t is
statute which denies to citizens or residents of
other States the right to take and hold in trust
otherwise than by last will and testament, real
I'D I,,1sA fhA WtUht IA
asserted to deny to persons associations or cor
porations, within or without the State to convey
to any person in trust not resident OF Indiana,
real or personal property within the State. This
is plain discrimination in favor OF the
citizens or residents Of Indiana against the citi-
zens or residents of other States. II Indiana
may disqualify citizen or resident OF another
State from acting as trustee in a trust deed or
mortgage which conveys real or personal prop
erty as security for debt due to himself alone,
as security for debts due himself and other
creditors, it would seem that the State might
prohibit citizens of other States from holding
property within the State, and, to that extent,
from doing business within the State. No State
can do the latter
I'm the resolution of the board of directors
that authorized the issuance of the bonds and
the execution Of the trust deed, or mortgage, to
secure them, it was declared that the security
should be for the payment OF both principal and
interest 1t was declared that the trust deed. or
of the bonds with the maturing interest. rata
bly, and without discrimination, according to
their tenor and effect; that until default should
be made in any portion of the interest or prln-
cipal of the bonds, the Railroad Company should
continue in possession and control of the
mortgaged property; that upon default In
the payment of the interest or principal
of any of the bonds, and such default
continuing for six months after demand OF
payment, at the request Of a majority of the
hapdholdarc the fruStQaq might take DOSsASsIOQ
of the mortgaged property and operate 1t until
the net receipts or earnings should enable them
to pay the overdue interest, after which the
property should be restored to the railroad COM
pany. The Chicago & Atlantic company has
paid no interest on either class of bonds The
Erie company paid out $5S4. $50 in taking
up first mortgage coupons which became
due prior to Nov. l, 1884. All the interest that
became due under the first mortgage, or any
subsequent to the lastnamed date, remains I'M
paid. Including the coupons taken up by the
Erie COMPANY the interest due on the first-mort-
gage bonds is 81. 669. $50. This suit was brought
at the request of the owners of past-due coupons
after payment had been demanded and refused,
and against the wish and protest of q majority
of the bondhoders. who, in open court, moved
that the suit be dismissed. It was contended
that no action could be taken by the trustees
looking to the foreclosure of the mortgage or the
appointment of receiver, without the written
request of majority of the bondhoders, and
that no right of action could exist in favor of
anyone to enforce the lien of the mortgage for
interest only
1.-The court decided that the Farmers Loan
and Trust Company was authorized to main
tain the suit, and the demurrer ia overruled.
The complainant is entitled to decree nisi, as
certaining the amount due upon the coupons that
are not held by the resisting bondholders. and If
the amount is not paid within a reasonable
period, to be fixed by the court, the complainant
will be entitled to decree for the sale of the
mortgaged property, barring all rights subordi-
nate to the mortgage If the amount of interest
found to be due in the decree nisi is paid.
further proceedings under the foreclosure de-
cree will be suspended until default again &C.
ours"
In considering the motion for the appointment
of receiver, the Court, reviewing the evidence,
says that since Mr. Jewett ceased to be presi-
dent of the Erie he has claimed that the stock of
the Chicago & Atlantic company was deposited
with him not as president of the Erie, but as a
personal trust. and he now insists that he has
the irrevocable right, such trustee to vote the
stock and thereby maintain control of the Chi
cago Atlantic company, without regard to
the wishes of the Erie company. The holders of
the first mortgage bonds, who claim the right to
control the proceedings in this case, acting
in concert with Mr.. Jewett. The court thinks
the facts abundantly show that he was made
trustee to hold the stock of the Chicago q At
iantic because he president of the Erie
company, and could be relied to control the
Chicago q Atlantic as the western terminus of
the Erie line. The decision states that
the court cannot be expected at this stage of the
litigation, to PASS upon the validity of the con-
tracts between the two companies, or determine
the rights, duties and liabilities of the parties
| thereto. Although the two companies are nat
ural allies, and their roads should be operated
as a single line, there is little hope of harmoni-
GUS action until change occurs in the manage
ment of one or both. Mr.. Jewett
controls the action Of the Chicago e
Atlantic, and that he is unfriendly and even hos
tile to the Erie company under its present man
agement admits of no doubt It is claimed by
him and the holders of large majority of the
bonds, who are acting in concert with him. that.
without any change in the Chicago & Atantic's
management the Erie should be required to pay
the interest accrued and to accrue on