The sun., 1919-05-23
Central Union Trust Holds Up
Approval of $20,00O,0O0
in Certificates.
OLD LIENS sUPPLANTED
Special Master Rules Against
Present Provision for
Wreck Claimants.

Judge Julius M. Mayer yesterday a
decree which authorizes an issue of
,9o,ooo,ooo OF receivers certificates. The
decree provides that the certificates shall
become the first lien against surplus
revenue and all property, and shall sub
ordinate existing mortgage liens, except
those of the underlying first mortgages
Of the Kings County Elevated Railroad
Company and the Brooklyn Union Ele-
waited Railroad Company.
Judge Mayer held q hearing on the
proposed decree. Numerous representa-
tives OF the interests In the receivership
estate were present. Objection was
made TO a method of financing that
would subordinate existing mortgage
LENA Judge Mayer reserved decision.
The decree was prepared following
hearings before E. Henry Lacombe, spe-
cial master. The decree differs from
the receivers first petition for authority
TO issue certificates in that Il makes
no provision for Sl,1o0.0oo for the pay
nent OF tort claimants, including claims
growing out Of the Malbone street tunnel
wreck.
Former Judge Samuel Seabury, coun-
sci for the tort claimants, called the
attention Of the court to This apparent
change of policy. He said that ne
feared that unless the court acts at
this time there Is danger that ultimately
there will be no source OF funds from
which these claims can be paid
Although the plan provides that Mr..
Garrison, as receiver OF the b, r. T.,
shall issue certificates aggregating $780,
e000 900. he 10 to use but 100000 in
meeting needs Of that holding company.
The remainder, s16. 900 900, - to be used
for the Municipal Company, the subsid-
larry which holds the systemic lease
under the dual subway contract with
the city.
It is provided, however, that all the
certificates to be marketed shall be b.
R T. certificates. Mr.. Garrison, as re-
ceiver Of the B. r. T.. will buy the
N6o0o.oo0 in certificates to be issued
by him as receiver OF the Municipal
Company and deposit chem as security
for an equivalent amount Of B. r. T..
certificates which are to be sold to the
public. The interest ra1a will be per
cent, II is proposed to give the receiv-
er authority to have the sale of all or
part of the issue underw r1tten.
Henry V. Poor. of counsel for the
Central Union Trust Company. which
Is trustee under the first refunding
mortgage OF the B. r. T., objected to
the proposed financing as illegal and
unjust to the bondholders. He argued
that the B. r. T. 70 q private business
corporation not within the jurisdiction
Of the law which permits first mortgage
liens of public service corporations to
be supplanted when the public welfare
makes such a course necessary.
The first refunding mortgage was
e,ecuted In 1909. The mortgage pro-
vided for an aggregate issue OF $780,
100000 In per cent bonds Because
OF the unattractive rate, but $4,000. 900
OF these bonds have been issued. OF
the outstanding bonds. $3,43S,000 are
held by the public. The remainder is
pledged as collateral security or in the
compary's treasury.
Mr.. Poor objected to the proposed
100000 issue in behalf of the Mu-
nicipal company on the ground that It
will involve the sacrifice of tho interest
~ the trustee of the b. r. T. first re-
funling mortgage in that property. He
alleged also that II would AFFECT an in
t"rest Of his client In the New York
Consolidated Company valued at 314,-
500 0Oc
The Consolidated company is the OPP
Grating company for the rapid transit
lines consolidated under the dual subway
contract. Carl NJ. Owen. counsel for the
Receiver. explainc1 that the Consolidated
company was paying its way out Of
earnings, and that the money to be
raised by certificates In the name of both
subsidiaries would 60 to the Municipal
company.
Mr. Poor alleged that the INFESTED
earning capacities of the new subways
and the danger of action by the city to
have the dual contract adjudged in de-
fault created situation in which the
holders OF existing bonds should not be
placed al a disadvantage.
Former Judge Francis M. Scott, coun-
sci for the Corn Exchange Bank. which
is Interested in the first refunding bonds
supported the arguments OF Mr.. Poor
lie said that the mass Of sometimes
overlapping mortgages that has accumu-
lated with the gradual consolidation Of
al OF the Brooklyn traction lines into
me Il. R. T. system offered such great
olfhculties TO reorganization that to bur-
Gen the property with new mortgage
of S2O,000.000 that will subordinate ex-
is'ing liens would be most unwise. He
said that the court was without power
" authorize such a move unless 1t did
50 to the extent OF subordinating mort
cages executed after August /. 1918,
When the B. r. T. took on the character
OF a public utilities corporation through
The merger OF the Transit Development
Company
assistant Corporation Counsel Edgor
j kohler objected to the issue on the
ground that 1t appeared to be the inten-
Con OF the receiver to ignore the Public
service Commission In Issuing $4,000
VOC Of certificates for the b. r. T. He
argued that the b. r. T. was a public
utilities corporation.
The receiver pointed to the conflict in
we POSITIONS taken by Mr.. Poor and
MI kohler. He said that II 1t were
matter OF choice with him he would side
WIN Mr., kohler. Judge Mayer directed
tast briefs be submitted on that point.
Nr' Garrison asked Mr.. Poor and
Sucse Scott II their clients would APP
peal from the decree II II were author
NED by Judge Mayer. Mr.. Poor was
positive that there would be an appeal.
i"e receiver said that the resulting de-
I'd! would embarrass him seriously. The
receiver appeared TO be inclined TO ia
tcrests
Iaul Cravath, counsel for the note
no'9ers who supplied the $4,000 900
WIN Which the b. r. T. financed its
s4'~ay contract to date. was against
mollhcatlon Of the decree He said
ust tho certificates could not be sold
.snlSs they were a first lien and urged
we court To sustain the masters report
me b. r T. has q funded debt Of
,lS5Soo0. The funded debt OF the
S..hi'lpal Company consists OF $50, o00,-
~ IN FIRST mortgage bonds owned by
we Is r. T. The funded debt OF the
consolidated Company Is $4,000, 900,