Court Opinion

ID: 8744548
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:02:09.650181+00
Date Added: 2024-06-11T17:00:35.581941
License: Public Domain

On Petitions for Behearing.
(July 2, 1901.)
1. John G-. Carlisle and those associated with him as holders of general mortgage bonds complain because the court has not, in its opinion, specifically dealt with alleged diversions of prior lien bonds, and have affirmed the decree of the circuit court holding that the entire issue of $2,000,000 of prior lien bonds had been negotiated for value to a large number of persons, who ate now the lawful holders of same for value. The decree in that respect was based upon the report of the special master. In the opinion heretofore filed we dealt very fully with the general claim made in behalf of general mortgage bondholders that the reorganization scheme or agreement should be rescinded, and the original mortgagees reinstated in their rights under mortgages made by predecessor companies. We need not repeat what we then said in respect to the general validity of the prior lien mortgage. It is enough to say that we upheld that mortgage as a prior lien. The complaint now is that particular-bonds secured by that mortgage may be held by persons who took them with knowledge that the railroad company was issuing them in violation of the reorganization agreement, and to the injury of general mortgage bondholders, who were interested in having them applied in clearing away liens prior to both mortgages, according to the provisions of the reorganization agreement. The presumption exists that all these prior lien bonds are in the hands of purchasers for value without notice of any violation of the reorganization agreement. The burden of proof was upon those who desire to defeat the lien of any particular bond. Murray v. Lardner, 2 Wall. 110, 17 L. Ed. 857. The master reported that all of said bonds had been regularly and lawfully issued, and were in the hands of bona fide holders.
The petition for rehearing complains of this finding and report, and points out- certain bonds as bonds issued for purposes not contemplated by the reorganization agreement, and refers us to certain portions of the evidence heard by the master bearing upon this subject. It may be that, if the general mortgagees had acted with some vigilance, they might have prevented certain alleged diversions to their detriment. Instead of actively endeavoring to compel the railroad company to use the prior lien bonds for the purposes indicated by the reorganization agreement, the general mortgagees seem to have lain dormant. Indeed, we pointed out in our original opinion that they themselves had received such bonds in payment of interest upon their general mortgage bonds, and hence must have been aware that the railroad company was not strictly using the prior lien bonds as the reorganization agreement contemplated. The findings of fact by a master are supported by a strong presumption of correctness, and will not be set aside or modified in the absence of clear evidence of mistake or error. Camden v. Stuart, 144 U. S. 104, 12 Sup. Ct. 585, 36 L. Ed. 363) Lake Erie & W. R. Co. v. City of Fremont, *21934 C. C. A. 625, 92 Fed. 721. The only exceptions to the report of the special master hearing upon the question as to the bona fide holding of the issue of prior lien bonds, interposed by Carlisle and others, are the tenth and twenty-second exceptions, which are in these words:
“(10) They also except to so much of said report as finds the fact to he that there lias heen no diversion of prior lien bonds, and say that the evidence before the master shows, the contrary to he true, viz.: The statement of application of prior lien bonds furnished by George W. Sinks, trustee, dated August 1, 1808.”
“(22) They also except to so much of said master’s report as finds as mat-' ter of fact that the entire issue of the Mercantile Trust Company bonds has heen duly made for the principal sum of $2,000,000, and that they have been duly delivered, and that there is no opposing evidence, and say that the evidence before Ihe master shows the contrary to he true, viz.: The statement of George W. Sinks, trustee, dated August 1, 1898.”
These exceptions do not point out any particular bonds which have been “diverted,” or which are not now held by purchasers for value without notice. The exceptions are vague, general, and insufficient under the rules of practice, and are insufficient to support the errors assigned thereon. Exceptions to a master’s report must point out •specifically the errors upon which the party relies. The object of such definiteness is to- give the master an opportunity to see wherein his report is subject to objection, and to apprise the opposite party of just what he has to meet. Railway Co. v. Gordon, 151 U. S. 285, 14 Sup. Ct. 348, 38 L. Ed. 164. The exceptions, if good for any purpose, would operate as a denial of the right of each holder of prior lien bonds to share in the security of the prior mortgage, and require the court to hear the whole case upon all the facts affecting each bond and its present holder. The exceptions are manifestly insufficient to raise any question against any particular bondholder.
2. Attention is called to the fact that certain prior lien bonds were placed by the railroad company in the hands of George W. Sinks, as trustee, to be used in paying certain debts mentioned in the agreement under which the bonds were so placed, and that one term of that agreement was that the coupons on such bonds, maturing before the bonds should be disposed of for the purpose of the trust, should be cut off, canceled, and delivered to the railroad company. It does not sufficiently appear how far Sinks has complied with this agreement, nor how far he still holds bonds under said trust. The decree will be modified, so far as it provides for interest upon bonds held by said Sinks as trustee under said agreement, and the matter is remitted to the circuit court, with direction to ascertain what bonds are held by said Sinks under said agreement, and to deal with the matter according to justice and right.
3. The petition of G. W. Sinks, trustee, presents no new question, and the application to rehear is denied.
4. The petition of Carlisle and others for a rehearing is denied. The decree will, however, be modified as above indicated.