Court Opinion

ID: 5214028
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:18:59.277468+00
Date Added: 2024-06-11T08:27:24.684877
License: Public Domain

Smith, P. J.:
The first question that arises is as to the duty of the defendant to bid at the resale under' the judgment of the Knickerbocker Trust Company. The only bid there made Was by Starrett who bid the minimum sum of $200,000. The plaintiffs contend that under the 7th clause of this agreement the trust company undertook to become a bidder at any sale of the property that should be made. But that agreement was qualified by the- provision “ if the same can be purchased at a reasonable figure,” and in that clause it was provided that the trust company reserved “ to itself the unrestricted right to determine the amount of the maximum bid to be made by it.” I *75have no doubt that this reservation read in connection with the agreement to bid makes the defendant the absolute judge of what should be “ a reasonable figure.” If the first bid upon the sale should be equal to or in excess of what the defendant deemed the reasonable value of the property, the defendant would not be required to raise the bid, because the contract gave to the defendant the right to determine what should be the maximum bid or what was the reasonable value of the property. It is undoubtedly true that this determination cannot be made by the defendant capriciously-or in bad faith. . I. find no facts, however, recited sufficient to overcome the presumed finding of the Special Term of-the defendant’s good faith in making its determination. The property was sold subject to the lien of the Rochester Trust Company judgment, upon which there was due upwards of $325,000. There was reserved from the sale about $200,000 worth of projierty which had been added to the road by the Oneonta and Mohawk Valley Railroad Company, and which it was claimed was not subject to the lien of the Knickerbocker Trust Company mortgage. The defendant itself was largely interested in' the sale as it had already $1,000,000 of advancements in that property and in the Hydro-Electric plant, which furnished the power to run the road. We are of opinion, therefore, that the defendant did not violate its agreement in failing to become a bidder at the resale, whereupon the property was bought by Starrett.
With the property of the Oneonta, Cooperstown and Richfield Springs Railway Company in the hands of Starrett, a third party, all that remained which would give value to ,tlie stock and bonds of the Oneonta and Mohawk Valley Railroad Company was this $200,000 worth of property which had been added to the original railroad property and which was claimed not to have been covered by the lien of the Knickerbocker Trust Company mortgage. In addition to that the defendant had about $31,000 of preferred claims and the stock of the Susquehanna River Power Company to cover advances of about $700,000. While it had purchased the Rochester Trust Company judgment that judgment was still a lien upon the railroad property in the hands of Starrett. The defendant, therefore, could have carried out its plan of reorganization ■ by another sale under the Rochester Trust Company judgment. This *76it is claimed it was its duty to do under the agreement. Instead of so doing the defendant chose under the 13th provision of the contract in its unrestricted discretion to abandon the scheme of reorganization, which it had the clear- right to do. It is contended-by the plaintiffs that this plan of reorganization could not be abandoned without a restitution to the ^plaintiffs of all-property that had been handed over at the time of the making of. the contract." I cannot so read the contract. At the time the contract was signed, or soon thereafter- and pursuant thereto, there was transferred as further security for the moneys theretofore advanced and thereafter to be advanced, about $31,000 in preferred claims against the railroad company, and also all the capital stock of the Susquehanna River Power Company. But these preferred claims had been purchased and the Susquehanna River Power Company had been constituted and developed by moneys advanced by the defendant. The defendant was threatening a sale of the securities for the moneys already advanced and which the plaintiffs could not pay.Part of the consideration of the contract was the agreement by the defendant to withhold a sale- of those securities. There is nothing, therefore, in the nature of the consideration given for the making of this contract which would lead the court to infer that upon the exercise of the right of abandonment given by the 13th provision thereof the- defendant was required to return any of this property, to the plaintiffs. It is true that the appeal taken in the Rochester Trust Company judgment was withdrawn. Whatever certainty or doubt there may have been attached to that judgment, the right of appeal was a substantial right, and -there was, therefore, substantial value surrendered by the plaintiffs in their agreement- to withdraw that appeal. As to this, however, it is iznpossible for the defendant to put the plaintiffs in statu quo upon the abandonment of the plan of reorganization, and it could not have been so contemplated by the parties in the making of .the contract. - To hold that such was necessary to the light of abandonment would practically defeat the right of abandonment expressly stipulated for in the contract. The agreement of the defendant to withhold from sale the secimties then held was a sufficient consideration for whatever contract the plaintiffs might choose to enter upon. If the cozitzact be a, favorable one to the defendant, it was nevertheless understandingly.made *77by the plaintiffs, who apparently were helpless to extricate themselves from their dilemma and trusted to the defendant’s good faith.
It is undoubtedly true that under this agreement of April seventh the defendant assumed toward the- plaintiffs a trust relation. . In the execution of that trust the utmost good faith was required on its part. If we assume for the argument that the defendant could not refrain from bidding upon this resale without giving notice to the plaintiffs that they might bid, and that the defendant was guilty of a breach of faith in allowing Starrett to become a purchaser thereupon, the defendant has clearly atoned for its wrong by procuring from Starrett an option upon the property, and by offering that option and all the security held by the defendant upon payment of the amount bid by Starrett, together with the advances theretofore made by the defendant. With the right of abandonment stipulated in the contract, they clearly could have purchased the property and then have-abandoned the scheme of reorganization. If they had sought to purchase the property, the price would have been run up by Starrett, and the offer of the option, therefore, at the minimum price bid by Starrett is certainly as favorable a proposition as the plaintiffs could ask. The plaintiffs can ask nothing more except upon the theory of an implied agreement on the part of the trust company to make sufficient advances to perfect some plan.of reorganization. This the defendant has nowhere agreed to do, but has carefully stipulated that it should be left free to exercise its judgment and discretion as to how far it would go looking to a reorganization of the properties. The plaintiffs were given ninety days in which to accept the defendant’s proposition. Their failure to accept the same relieves the defendant from further obligation under the agreement, and leaves the defendant free to sell the collateral which it held pledged for advances made. We find no reason, therefore, for interfering with the discretion of the learned judge in modifying the injunction, and the order should be affirmed, with ten dollars costs and disbursements.
All concurred.
Order affirmed, with ten dollars costs and disbursements.