The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-05-30
$2O,OOO,0OO LOAN
TO B. R. 7. APPROVED
Federal Judge Mayer Author
lies Receivers Certificates
as Prior Lien.
MORTGAGES OvERRULED
Status Of the Company as
Operator Of Public Utilities
Not Passed Upon.

Federal Judge Mayer signed q decree
Yesterday authorizing Lindley NJ. Garri-
son. as receiver for the Brooklyn Rapid
Transit Company and its subsidiaries, to
issue receivers certificates in a sum not
to exceed $50, 100000. The certificates
will constitute a first lien against sur
plus income and assets and win suhor-
dinate existing mortgage liens of the q.
X. I. and It's principal subsidiaries ex-
cept the underlying mortgages of the
Kings County Elevated Railroad Com
pany and the Brooklyn Union Elevated
Railroad Company.
Objection was raised to making the
certificates paramount lien by persons
interested In the so-called first refund
ing mortgage Of the b. r. T. which be-
comes subordinate. Henry V. Poor, coun-
sci for the Central Union Trust Com
pany. the trustee. argued that the mort
gage could not be subordinated because
the b. r. T. is a private business cor
poration not subject to the law that per-
mtts first lien receivers certificates
against public utility companies SO that
they may be kept In operation in the
public interest.
In memorandum accompanying the
decree Judge Mayer did not specifically
pass upon the status of the B. r T. as
poration but his findings, in the opinion
OF lawyers, went far TO support the con-
tention that the company comes within
the legal definition of a public utility
company The point Is of Importance
because the =. r. T, like other holding
companies, has been operated without
supervision by the Public Service Com
mission.
NJ
THE subject matter of the decree was
| recently fully discussed at a hearing at
! which those interested presented their
respective views" said Judge Mayer
THE proposed decree discussed at the
hearing has been revised in some mat
tiers OF detail. with the result that ap-
psrently there are remaining but two
objections, as matter OF law, to the
decree.
In the first place. the committee of
tort creditors accident claimants) urges
that provision should be made for the
application OF 30 much of the proceeds
from the receivers certificates as shall
be necessary TO pay tort claims accrulng
prior TO the rece.vership. in view OF
settled and controlling authority in this
circuit this court would not have power
to direct that the proceeds OF these re-
ceiver's certificates should be so applied.
Secondly. 1t Is, In my opinion. as nee
essary for the ultimate benefit OF the
tort creditors as for other interests that
the receivership property should be pre-
served, for by that means It is hoped
that a situation will be ultimately ere
ated for the appropriate recognition OF
all classes of creditors The importance
and desra bility Of providing for the tort
creditors has not been lost sight Of by
the court but the existent financial sit
uation requires. In the first instance
steps necessary to preserve the property
The sole objection in respect of the
subordinate provisions OF the decree Is to
that part OF the decree which subjects to
the lien Of the receivers certificates the
so-oalled first refunding gold mortgage
OF the b. r. r. dated July l, 1902. OF
which the Central Union Trust Company
OF New York is trustee. Under this
mortgage Se7.621.00O face value OK
bonds were authenticated.
Makes Early Appeal Possible.
The noteholders, who hold $4,000, 900
OF these bonds inter ALA as security, do
not object to the subordination of the
mortgage. The objections proceed from
the trustee and from banks who hold
these bonds as collateral security for
bank loans antedatinE the receivership.
studied and carefully considered by me
and on the argument the question OF
the right to subordinate this mortgage
was seriously debated. Consideration of
reported cases and of the paramount
Importance OF the doctrine of preserva-
ton, which I think here controls. leads
me to the conclusion that the court has
power TO make the decree herewith filed
THE decree is signed Rt this time with
this memorandum in order to expedite
an appeal, II such be taken, In view
Of the fact that the situation demands
an early determination OF the scope OF
the receivers certificates"
The receiver is authorized TO issue the
certificates at such times as he deems
best. Their term Is TO be from one to
three years and the interest Is to be
per cent. They were made paramount
liens so as to insure a market
or the total issue authorized 81, 900. 900
will go to the b. r. r. the holding
company. and SIC. 900 TO the New
York Municipal Railway Corporation
and the New York Consolidated Railroad
Company subsidiaries. II Is necessary
for the holding company to finance the
subsidiaries requirements in order to