Court Opinion

ID: 8796589
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:13:33.409759+00
Date Added: 2024-06-11T17:03:39.667632
License: Public Domain

LACOMBF, Circuit Judge.
This is a claim prosecuted by Robinson, surviving receiver, against Robinson, surviving receiver. Why •he thus occupies a position not unlike that of Lord High Chancellor *102in “Iolanthe” will be apparent from the following statement: On September 24, 1907, under creditors’ bill Joline and Robinson were appointed receivers of all the property of the City Railway Company ; within a week, upon application of its codefendant in said suit, the Metropolitan Company, they were appointed receivers of all the latter’s property. One week later they were, upon application of mortgagee, appointed receivers of the property of the Metropolitan covered by its,second mortgage; on March 17, 1908, they were, upon application of mortgagee, appointed receivers of the property of the Metropolitan covered by its first mortgage. On January 3, 1908, the Central Trust Company, as successor trustee under a second mortgage of the Third Avenue Railroad, brought suit to foreclose the same, and on January 6, 1908, the same court appointed Whitridge receiver of all its property covered by said mortgage. Its whole system had been leased to ■the Metropolitan Company in 1900, and on January 12, 1908, this property was turned over by Joline and Robinson, receivers, to Whitridge, receiver.
[ 1 ] The Metropolitan had breached its lease, and the Third Avenue had claims against it for such breaches. By- direction of the court January 15, 1908, had been fixed as the last day for filing claims against the Metropolitan estate. Repeatedly after that, upon proper showing, orders were made allowing various claimants to file their claims nunc pro tunc. On January 15, 1910, Whitridge, receiver, verified a claim against, the Metropolitan estate, enumerating items and giving figures, which upon presentation the court, on January 17, 1910, ordered to be filed nunc pro tunc as of January 15, 1908. It was filed forthwith, being known as “Claim of Third Avenue Railroad Company No. 44 against Metropolitan Street Railway Company,” and claimant began taking testimony thereunder. Subsequently, and shortly after December 29, 1911, this claim, which is the one now under consideration, was assigned by Whitridge, receiver, to Joline and Robinson “as receivers of the property o-f Metropolitan Street Railway Company covered by its said mortgages, dated [first] February 1, 1897, and [second] March 21, 1902.” Of these assignees Robinson is the survivor, and his receivership, under the various decretal orders appointing himself and Joline, has not yet terminated; but on July 27, 1908, Dadd was appointed as receiver of the City Railway Company.
It is the theory of claimant that this assignment transferred this claim No. 44 to Joline and Robinson solely as receivers of the mortgaged property, and for the specific and exclusive interest pf the mortgage creditors. Therefore it is sought to prove this claim, as an independent one,- belonging exclusively to mortgage creditors against the general estate.
Although the mortgage creditors held such security as their mortgages affordéd, and could prove against unmortgaged assets for any deficiency on foreclosure, they could also, if they chose to do so, buy up the claim of any other person against such assets if they could get it cheap enough to make the speculation apparently profitable. If they had thus bought this claim, they could prosecute it exactly as the original claimant could. Apparently that is the position for which the *103present claimant contends, but it is thought that the facts do not support such contention.
The estates of the three railway companies had various claims against each other; it was desirable that these should be adjusted in some way, and Whitridge, receiver, was especially anxious to secure adjustment so that some reorganization of Third Avenue property and interests might be effected. After long negotiations the receivers of the three estates finally entered into an agreement (December 29, 1911) for such adjustment. Whitridge, receiver, agreed to turn over this “claim No. 44” to Metropolitan receivers, executing an assignment of it himself and fortifying such instrument by assignments executed by the old and the new Third Avenue Companies, by the purchasing committee and by the Third Avenue mortgage trustee. Jolitie and Robinson, receivers, agreed to- turn over to Whitridge; receiver, $200,000 in cash and all claims of Metropolitan against Third Avenue. Ladd, receiver, agreed to turn over to Whitridge, receiver, several hundred thousand dollars, face value of notes and open accounts due to it from the various “controlled companies” (i. e., companies of which the Third Avenue owned the stock), for moneys expended before receivership by the City Company in operating, maintaining, and improving the property of those companies. This agreement was approved by the court and fully carried out. The assignments to Joline and Robinson, receivers, described them “as receivers of the property of the Metropolitan Street Railway Company, covered by its said mortgages dated Debruary 1, 1897, and March 21, 1902.” The use of this quoted phraseology is not conclusive as to the rights of the parties; what was actually done is quite as important as what was said or'written. Not infrequently an obligation from a debtor to a creditor is liquidated and discharged by assignment of such obligation to the debtor by the creditor, and it is the opinion of the court that this is what happened when Whitridge, receiver, assigned his “claim No. 44” against the Metropolitan to the Metropolitan receivers. It is apparent from the language used that the parties to the agreement of December 29, 1911, expected that for some purposes the claim should survive; but to the proposition here contended for that it survives as the sole property of the mortgage creditors of the Metropolitan to be proved as a claim against its general estate, thereby reducing the dividend payable to other general creditors, I cannot assent—it seems too inequitable. The mortgage creditors did .not put up the consideration which Whitridge required for his assignment. The $200,000 cash was paid from general funds of the receivership, produced in part by receivers’ operation of the road; cash could come from no other quarter. Whether or not some of the Metropolitan claims against Third Avenue which were turned over to Whitridge, receiver, were covered by the Metropolitan mortgages is not important; manifestly not a dollar of the hundreds of thousands due to the City Company by the controlled companies was covered by any Metropolitan mortgage. It seems equally manifest to one familiar with the situation that the elimination of these claims was an important element of the consideration which- induced the transfer; Whitridge was receiver of the most important of these controlled *104companies, and was desirous to get their affairs wound up. I am not persuaded by the argument that this assignment was paid for out of the funds of the mortgagees, and, that being so, see no reason to hold that they may prove it for their sole benefit as a claim against the general funds of the Metropolitan estate.
The logical conclusion would be to refuse to confirm the report and to enter an order dismissing the claim. To do so, however, would leave other questions undetermined, and, should the Circuit Court of Appeals take a different view of the situation, would probably delay final adjustment. It seems wiser briefly to dispose of the various questions presented here by the exceptions, to modify the report of the special master accordingly, and then to confirm it pro forma. Appeal and cross-appeal will then bring up every question in the case for.final disposition.
[2] The special master limited receivers under the various items to the amounts specified in the filed claim; to this exception is taken. As has been stated, the claim is a detailed one, asserting the right to recover specific sums of money for specific items of alleged damage. Repeated efforts have been made to enlarge this, claim, in part by increasing the amounts of money damage specified, in part by adding new items. Every such effort has been defeated by the special master and the court. The claim is now exactly what it was when the agreement of December 29, 1911, was entered into by the receivers of the th'ree estates. As the claim was the subject-matter of such agreement, it must be presumed that its details were fully understood by all of the parties to the agreement, and that such agreement was entered into on the strength of such understanding. It seems to this court—as it always has seemed—grossly inequitable to allow the assignee of this claim, after the agreement has been carried out, to amend any one of its items so as to increase the amount asserted to be payable therefor. ' The special master was entirely correct in confining his award to the items and amounts demanded in the claim filed iri January, 1910.
[3] The special master correctly held that the installment of rent under the Third Avenue-Metropolitan lease falling due October 13, 1907, belonged to the stockholders; no other conclusion seems possible under the decision of the Circuit Court of Appeals in Metropolitan 'Stockholders’ Appeal, 198 Fed. 761, 117 C. C. A. 503. "Such rental, therefore, was not part of the property covered by the Third Avenue mortgage, did not go to Whitridge, receiver, under foreclosure suit, and did not pass by his assignment of his filed claim. None of the other assignments in evidence were competent to, pass any live claim against the Metropolitan estate, because none of these other assignors filed any claim at all within the time limited; none of them ever subsequently obtained (as did Whitridge, receiver) an order allowing claim to be filed nunc pro tunc; none of them, so far as the court remembers, ever made any application for such an order. I do not see how the circumstance that Whitridge, receiver, took possession of the road one day before the due date of the next installment (January 13, 1908) changes the situation.?,,The exception to the disallowance of the first *105item of rent is overruled, and the exception to his allowance of the second item is sustained.
[4] The next item allowed and excepted to, is the interest on the underljung first mortgage of Third Avenue road, which has always been promptly paid by some one, so as to avoid foreclosure. Presumably the. installment falling due January 1, 1908, was paid by Whitridge, receiver, to jireserve the interests of the second mortgage, in foreclosure of which he was appointed. Under the Third Avenue-Metropolitan lease a failure of the latter to pay interest coming due under the first mortgage would give to the Third Avenue a chose in action which would be covered by the second Third Avenue mortgage. The exception to allowance of this item is overruled. The special master’s disposition of the item of interest on 4 per cent, mortgage bonds is also approved, and exception thereto is overruled.
[Sj The question as to liability for failure to keep the property of the so-called controlled companies in repair and to pay taxes and other liens thereon lias been vigorously disputed. These companies were, no doubt, not only separate legal entities, but were in fact separately operated. Nevertheless, and despite the decision of the Court of Appeals in the Second Avenue Bondholders’ Case, 198 Fed. 747, 117 C. C. A. 503, 1 am inclined to, think that the obligation of the lessee (Metropolitan), which through stock control itself managed these companies, was itself to make good any of their deficiencies which were found existing whenever the lease terminated. The exceptions dealing with this branch of, the case are. overruled.
There are. various exceptions to the special master’s allowance for necessary repairs to cars, trucks, motors, rails, trades, etc.; also to buildings. It is not necessary to go into the details of the controversy as to the degree of repair which the lease requires, nor as to the conflicting testimony as to the cost, nor whether the special master should have adopted the figures in the A or in the C column of estimates. 1 le has limited his allowances to the amounts specifically stated in the filed claim, which generally are less than the sums given in either column of estimates. Since the court is satisfied that he correctly thus restricted the amount of recovery, it will be sufficient to overrule all exceptions to these items. Concurrence may he noted with his con-st ruction of the clauses in the lease relating to buildings; it seems in accord with the decision of the Court of Appeals in the Metropolitan-City breach of lease proceeding.
Exceptions as to disallowance of claims for cash and operating supplies, supplies on hand at the date of the lease, are overruled for the reasons given in the report. A similar disposition is made of exceptions to disallowance of claim for deficiency on foreclosure of Third .Avenue mortgage. The prior decisions of the Court of Appeals in these proceedings seem conclusive on this proposition.
Any other exceptions not specially mentioned are overruled; and, as above indicated, the report as modified by the views expressed supra is confirmed.