Chicago & I.R. Co. v. Pyne

• Decision Date: 22 February 1887
• Citation: 30 F. 86
• Parties: CHICAGO & I.R. CO. and another v. PYNE and others.
• Court: U.S. District Court — Southern District of New York

30 F. 86

CHICAGO & I.R. CO. and another v. PYNE and others.

United States Circuit Court, S.D. New York.

February 22, 1887

B. H Bristow, for complainants.

Joseph H. Choate, for defendants.

WALLACE J.

The complainants seek an interlocutory injunction to restrain the defendants from prosecuting actions at law. The bill of complaint alleges that the complainants are entitled to discharge and redeem certain mortgage bonds, amounting to $600,000, created by the Chicago & Iowa Railroad Company, one of the complainants, and owned by the defendants; that the defendants have brought actions at law against such complainant to recover upon coupons for unpaid interest of said bonds; and that the matters of the bill cannot be interposed by way of defense to the actions at law, but are of equitable cognizance solely.

The defendants have acquired the bonds and coupons as the executors and legatees under the will of Moses Taylor deceased. Taylor purchased the bonds after they had been negotiated by the Chicago & Iowa Railroad Company. At the time of the purchase each bond had printed upon it a contract between that company and the Chicago, Burlington & Quincy Railroad Company. Unless this contract authorizes the complainants to discharge and redeem the bonds before maturity, they are not entitled to equitable relief. The bonds are part of an issue of 1,000 for $1,000 each, dated respectively, November 1, 1869, payable in 30 years from January 1, 1870, with interest semi-annually, on the first days of July and January, at the rate of 8 per cent. per annum, and are secured by a mortgage executed to the Farmers' Loan & Trust Company as trustee. The contract, after reciting that the Chicago, Burlington & Quincy Railroad Company has made a contract with the Chicago & Iowa Railroad Company for a joint transportation business, by the terms of which there will accumulate in the hands of the former 'a large amount of money' belonging to the latter, and that the latter is 'desirous of providing a fund to secure the payment and ultimate redemption' of a certain mortgage, and the bonds issued under it, contains the following conditions:

'Now, therefore, it is hereby mutually agreed by and between the parties that the said Chicago, Burlington & Quincy Railroad Company are hereby authorized to retain in their hands all the money which may be earned in said joint business, and on the first days of April and October in each year pay over all moneys so accumulated in their hands as belong to said Chicago & Iowa Railroad Company to the Farmers' Loan & Trust Company of the city of New York as trustee, to be used by it as provided in said mortgage, for the purpose of providing a sinking fund for the redemption of said mortgage bonds. This contract shall be construed to be not only a contract between the parties, but also a contract between the parties and the holders of said bonds. This contract is to be in force for thirty years, or for so long a time as will be sufficient to provide a fund large enough to redeem all of said bonds, after which time the earnings from the joint business shall be paid over to the said Chicago & Iowa Railroad Company.'

There is no provision in the mortgage respecting a sinking fund, and it is obvious from this circumstance, and from some other recitals in the agreement which have no application to the present mortgage, that the agreement was not originally executed with any reference to the mortgage which secures the bonds in suit, but was intended to carry out some understanding of the parties relative to a different mortgage created or to be created by the Chicago & Iowa Railroad Company. This circumstance is unimportant, however, inasmuch as the agreement was printed upon the bonds in controversy. Being placed there, the inference is irresistable that it was intended by the parties, so far as applicable, to refer to those bonds; and the only question is as to its legal effect as qualifying the contract between the Chicago & Iowa Railroad Company and the bondholders, evidenced by the bonds themselves.

The contract does not contain any express undertaking on the part of the Chicago, Burlington & Quincy Railroad Company. It is silent as to the time when the bonds are to be paid or redeemed, silent as to the scheme of the sinking fund, silent as to the duties of the trustee, and silent as to any rights or obligations on the part of the bondholders. Where an instrument is thus inartificially expressed, or when its terms are so obscure, imperfect, or ambiguous as to leave its true meaning in doubt, the court must endeavor to ascertain the intention of the parties by a resort to the language employed, the subject-matter, and the surrounding circumstances. Barreda v. Silsbee, 21 How. 161; Nash v. Towne, 5 Wall. 689; Hudson Canal Co. v. Pennsylvania Coal Co., 8 Wall. 276; Moran v. Prather, 23 Wall. 492. But, while previous and contemporary facts may be considered to ascertain the subject-matter of the contract and the meaning of terms, they cannot be given effect to modify the plain language used. Maryland v. Railroad Co., 22 Wall. 105; Brawley v. U.S., 96 U.S. 168. There are no extraneous circumstances alleged in the bill or answer which are of any value to assist the court in placing itself in the situation of the parties, and the contract must be interpreted, therefore, without any material aid or light from that source.

Although the agreement does not contain any express promise on the part of the Chicago, Burlington & Quincy Railroad Company to apply the moneys which may arise in its hands to the purposes of the trust, but by its terms merely authorizes that company to retain and pay over the moneys to the trustee, some reciprocal obligation on the part of that company is to be implied from its signature to the contract. It is plain that both parties intended that a fund should be created and lodged in the hands of the trustee for the payment and redemption of the bonds; that this fund should be kept by the trustee in order that it might be so applied; and that the holders of the bonds should have the benefit of the security of such a fund, and become parties to the contract. The clause by which the Chicago &...