Williams v. Morgan

• Decision Date: 05 May 1884
• Parties: WILLIAMS and others v. MORGAN and others
• Court: U.S. Supreme Court

111 U.S. 684

4 S.Ct. 638

28 L.Ed. 559

WILLIAMS and others v. MORGAN and others.

May 5, 1884.

J. Hubley Ashton and James Thomson, for appellants.

John A. Campbell, John E. Parsons, and Geo. De Forest Lord, for appellees.

BRADLEY, J.

In this case, the only question on the merits relates to the compensation which ought to be allowed to the trustees and receivers of a certain railroad mortgage for their services. A preliminary question, however, is raised as to the right of the appellants to bring the case here by appeal.

The New Orleans, Mobile & Chattanooga Railroad Company, on the first of January, 1869, executed a first mortgage on its railroad and franchises to secu e the payment of 4,000 coupon bonds of $1,000 each, with interest at 8 per cent. per annum. Oakes Ames and Edwin D. Morgan were the trustees. The former having died, James A. Raynor was appointed in his stead. A second mortgage was given in March, 1869, but was foreclosed in 1870, and the property was bought in for the second mortgage bondholders, who reorganized under the name of the New Orleans, Mobile & Texas Railroad Company, and gave another mortgage (generally called the second mortgage) to secure $2,000,000, subject to the incumbrance of the first mortgage. Default being made in payment of interest, the trustees, E. D. Morgan and James A. Raynor, in January, 1875, by virtue of a provision in the first mortgage, took possession of the property, but soon found it necessary to secure the sanction and protection of judicial proceedings. On the twelfth of March, 1875, they filed a bill for foreclosure and sale of the mortgaged property in the circuit court of the United States for the district of Louisiana, and were appointed receivers in addition to their character as trustees. The railroad covered by the mortgage was the road running along the gulf between Mobile and New Orleans, and was in a dilapidated condition, needing new bridges, new embankments, and extensive repairs, as well as rolling stock and machinery. The road and property were managed and taken care of by the trustees and receivers for over five years, during which time Raynor had special charge of the road superintending and managing everything in that department, while Morgan looked after the finances of the concern in New York. They brought the road up to an efficient condition, and made it a desirable property. There is no doubt, from the evidence, that their services were of the greatest value. Raynor gave his whole time to the road itself and its practical working, superintended the erection of bridges, the raising of the embankment on the marshes, the procurement of depot and ferry accommodations in New Orleans and Mobile, and whatever related to the actual management and superintendence of the road as an important business thoroughfare of travel and transportation. In November, 1875, the trustees applied to the court to allow a fixed compensation to Raynor for the extra service he was performing. In their petition they say:

'Your petitioners further represent that James A. Raynor has had to perform the duties of general manager of the railroad, in place of the officer of the company, and that, in the course of the year, he has been put to more than the usual labor and care in the management of the administration of the road itself, performing the functions of manager and president and directors, besides the functions of trustees. Your petitioners respectfully submit an application for a salary or allowance to him during their administration, either by the year or otherwise. No application for trustees' allowances will be made, or is designed herein, but only in respect to the salary of this officer, and for a provision for necessary expenses in order that the disbursements for operating expenses and administration shall all appear.'

This application was referred to the master, who reported that, in his opinion, 'an allowance of $10,000 per annum, with necessary expenses, not to exceed $2,500 per annum, should be made to Mr. Raynor;' and this report was confirmed by the court, subject to any exceptions that might be filed within 30 days. No exceptions were filed, and Raynor received this allowance during the period of his administration, and no question has ever been made of its propriety.

In the latter part of 1879 it was deemed advisable that the trust should be brought to a close and the property sold. About that time negotiations were set on foot for a purchase of the road in the interest of the Louisville & Nashville Railroad Company, which was then extending its business ramifications throughout a large portion of the southern states. In December, 1879, a large number (more than a majo ity) of the first mortgage bondholders executed an agreement by which they appointed George Bliss, L. A. Van Hoffman, and Oliver Ames a committee to negotiate and sell either the bonds or the railroad, and, if the latter, to get a decree for foreclosure and sale in the pending proceedings, with power to purchase in the property for the common interest; and they all agreed to deposit their bonds with the Central Trust Company of New York, subject to the disposal of the committee, either for sale, or to be used in paying the purchase money of the road. And the committee was specially authorized, in concert with the trustees and receivers, to make an arrangement with the Louisville & Nashville Railroad Company to transfer the purchase of the road (when made by the committee) to a corporation to be organized in the interest of that company, for its bonds to the amount of $5,000,000, secured by vendor's lien and first mortgage on the railroad purchased; it being, among other things, stipulated as follows: 'The trustees and receivers to be protected against all their obligations from management, bonds, contracts, complete or incomplete, or otherwise, and all the liabilities of the trustees and receivers, including all the expenses and charges of the foreclosure, reorganization, and everything incident thereto, to be paid in cash, to be furnished for the purpose, to the purchasing committee. Four million dollars of such bonds to be disposed of by the purchasing committee in exchanging bond for bond or bonds (and coupons as aforesaid) secured by the said first-mentioned mortgage; the residue of such four millions, and the other one million, of such bonds the Louisville & Nashville Railroad Company to have the right to use in providing the cash for the payment hereinbefore mentioned, and in paying the amount necessary to be paid to bondholders secured by the said first-mentioned mortgage, who shall not become parties to this agreement; the surplus, if any, to belong to the Louisville & Nashville Railroad Company.'

On the tenth of February, 1880, another agreement was entered into, called the purchasing agreement, between the bondholders of the first part, the same purchasing committee of the second part, and David Thomson and William S. Williams, of the third part, by which the authority given to the purchasing committee by the previous instrument was confirmed, including that of taking the bonds of the Louisville & Nashville Railroad Company in exchange for the first mortgage bonds of the New Orleans, Mobile & Texas Railroad Company; and Thomson & Williams, proposing to act as purchasers, engaged to obtain from the Louisville Company an agreement to give its coupon bonds for $5,000,000 to carry out the arrangement substantially as indicated in the former agreement. If such an agreement should be obtained, then the railroad, franchises, equipment, and property should be sold under a decree of foreclosure and sale in the pending cause according to law, and bid in by the committee for the purpose of carrying out the arrangement. It was also agreed that the receivers and trustees should, by the Louisville Company, or in some other satisfactory manner, be protected from all their obligations and liabilities; and it was further agreed as follows: 'That all liens that may be declared to be superior to the first mortgage bonds, and that the certificates and liabilities and lawful fees, charges, and expenses of the receivers and trustees, and the disbursements of the committee, all to be decreed by the court, unless fixed by agreement, including all the expenses and charges of the foreclosure and of the proceedings to carry out this agreement, less amounts which may be available in the receivers' hands for payment upon such certificates, shall be paid in cash at the time to be appointed by the court for taking title under the foreclosure sale, and that all amounts necessary to be paid to bondholders who shall not become parties hereto shall also be paid in cash at the same time, and the purchasers [that is, Thomson & Williams] hereby agree to provide the necessary amounts, and, for the purpose, they will be entitled to such of the said five million dollars of bonds as shall not be exchanged for bonds deposited as above provided. Said bonds to become their absolute property, charged only with the payments herein last above provided for.' It was further agreed that the purchasing committee, in making bids, should act under the direction of the purchasers, (that is, Thomson & Williams,) provided that the price should be sufficient to provide for the payment of all liens prior to the mortgage, and of all charges, expenses, and liabilities; and that they should assign their bid, or take title and convey the same to the purchasers, or make other disposition thereof as requested by the purchasers.

In pursuance of this arrangement, and by consent of Ames and Williams, trustees of the second mortgage, the final decree for foreclosure and sale was made on the fifth day of March, 1880. By the fifth clause of this decree it is declared and decreed that, besides the first mortgage bonds, 4,000 in number, and the coupons for interest thereon, there was due, (in the words of the decree,) 'for...