Farmers' Loan & Trust Co. v. Northern Pac. R. Co.

• Decision Date: 21 February 1895
• Citation: 66 F. 169
• Parties: FARMERS' LOAN & TRUST CO. v. NORTHERN PAC. R. CO. et al.
• Court: U.S. District Court — Eastern District of Wisconsin

66 F. 169

FARMERS' LOAN & TRUST CO. v. NORTHERN PAC. R. CO. et al.

United States Circuit Court, E.D. Wisconsin.

February 21, 1895

Turner McClure & Rolston and Winkler, Flanders, Smith, Bottum &amp Vilas, for complainant.

M. H Cardozo, Van Dyke & Van Dyke, and John M. Butler, for Johnston Livingston and others.

Samuel B. Clarke, for Charles B. Van Nostrand.

Quarles Spence & Quarles, for Edward D. Adams and others.

JENKINS Circuit Judge.

A committee, of which Mr. Johnston Livingston is chairman, claiming to represent holders of bonds secured by the general second mortgage of the defendant company, has petitioned the court that all or some one member of the committee be made parties or party defendant to this cause. Charles Van Norstrand, in his own behalf, and at the request and for the benefit of a committee of the holders and owners of upwards of $1,000,000 of the general third mortgage bonds, and in behalf of all others who may join in protecting the interest of the third mortgage bondholders, also presents a petition that he may be made a party to the suit. These petitions are opposed by the trust company, complainant. There is also presented the petition of Edward D. Adams and others, a committee of bondholders representing $6,036,000 of the second mortgage bonds, $6,593,000 of the third mortgage bonds, and $19,880,000 of the consolidated bonds, which in effect sustains the trustee in its objection to the allowance of the petitions of the other committees, and expresses contentment with the action of the trust company in the execution of its trust, but asks the court, if the prayers of the other petitions should be allowed, that they also may be made parties to the suit, as representatives of bondholders.

That the situation may be accurately conceived, a general review of the condition of affairs should be stated. The bonded indebtedness of the Northern Pacific Railroad Company, secured by mortgage or trust deed, is as follows: First. A mortgage dated May 1, 1879, to the Farmers' Loan & Trust Company as trustee, to secure bonds to the amount of $2,500,000, of which there are outstanding bonds to the aggregate amount of $1,904,000. This mortgage is upon the Missouri Division of the road, being that part of its main line extending from the Missouri river, in the state of North Dakota, to the Yellowstone river, in the state of Montana, and upon all the lands granted by congress appertaining thereto, with certain other property. Second. A mortgage to the Farmers' Loan & Trust Company, dated September 1, 1879, to secure bonds to the amount of $4,500,000, of which there are outstanding $455,000 in amount. This mortgage is on the Pend d'Oreille Division, extending from the Snake river, in the state of Washington, to Lake Pend d'Oreille, in the state of Idaho, and all the lands granted by congress appertaining thereto. Third. The general first mortgage to the Central Trust Company, dated January 1, 1881, to secure bonds now outstanding, to the amount of $43,393,000. This mortgage is upon the main line of the road and its Cascade Branch (being a branch over the Cascade Mountains to Puget Sound), and upon all lands granted by congress and upon the rolling stock of the company and other property acquired or to be acquired for use in connection with its railroad. The general second mortgage issued to the Farmers' Loan & Trust Company, November 20, 1883, to secure an issue of bonds to an amount not to exceed in the aggregate $20,000,000, and under which mortgage there are now outstanding bonds to the aggregate amount of $19,216,000. This mortgage is upon the main line, telegraph lines, and upon the land grant, except as to those lands lying east of the Missouri river; also upon the lease of the St. Paul & Northern Pacific Railroad Company, and upon the one undivided half of that part of the St. Paul & Duluth Railroad which extends from its junction with the main line of the railroad of the Northern Pacific Railroad near Thompson to Duluth, Minn.; and also upon lands then owned or thereafter acquired in the city of St. Paul or Duluth for use in connection with or for the purposes of the road, and upon all other property, of every kind and nature, then owned or thereafter to be acquired, wherever situated or however held, for use in connection with or for the purposes of the railroads or any of them, or the business of the Northern Pacific Company. Fifth. The general third mortgage to the Farmers' Loan & Trust Company, dated December 1, 1887, to secure bonds aggregating $12,000,000 principal, of which there are now outstanding $11,461,000. This mortgage covers the main line of the railroad, the Cascade Branch, the land grant, the lease of the St. Paul & Northern Pacific, the undivided half of that part of the St. Paul & Duluth Railroad between Thompson and Duluth, and also all the interest of the Northern Pacific Company in some 20 branch lines of railroads mentioned, and all other branch roads that might thereafter be acquired or constructed and operated as feeders of the main line or of the Cascade Branch. Sixth. The consolidated mortgage to the Farmers' Loan & Trust Company as trustee, dated December 2, 1889, to secure bonds in the aggregate not exceeding $160,000,000, under which there are outstanding bonds to the amount of $62,443,000. This mortgage in general covers all the property and rights included in the previous general mortgages. It recites also that some 21 branch lines have been constructed, naming them, and that the capital stock of all the branch line companies owned by the Northern Pacific Company is of the par value of $37,781,057.50, of which $8,552,600 is owned absolutely by the company, and the remaining stock, amounting at par value to $29,228,457.50, is held in trust for the railroad company to become the absolute property of the company when the mortgage debt of the branch lines is paid. In addition to the indebtedness secured by mortgage upon the railway, there is also a certain collateral trust indenture, dated May 1, 1893, to the Farmers' Loan & Trust Company as trustee, to secure an issue of notes to the amount of $15,000,000, of which there were outstanding at the institution of the suit $10,050,000, secured by certain collateral bonds and stock of the branch lines and other roads controlled by the Northern Pacific Company. The Farmers' Loan & Trust Company is also trustee under various mortgages made by some 17 of the branch lines connected with the Northern Pacific Railroad to secure bonds amounting in the aggregate to some $33,873,000, which bonds bear the guaranty of the Northern Pacific Railroad Company.

This suit was originally brought by the Farmers' Loan & Trust Company as trustee under all the trusts recited, and by certain stockholders and creditors of the railroad company and in behalf of all other stockholders and creditors of the company who might choose to become parties to the suit and contribute to its expense; praying the court to fully administer the trust fund in which the complainants were interested, constituting the entire railroad system, lands, and assets of the defendant corporation, to marshal all its assets, to ascertain the several respective liens and priorities existing upon each and every part of the system of railway and property, the amount due upon each and every part of the mortgages or other liens, and to enforce and decree the rights, liens, and equities of each and all of the preferred and common stockholders and bondholders and creditors of the company as the same may be finally ascertained and decreed upon the respective interventions or applications of each and every such stockholder or lienor in and to not only said lines of railroad, appurtenances, equipment, land, and property, but also to and upon each and every portion of the assets and property of each of the said corporations. Subsequently the Farmers' Loan & Trust Company filed its bill of complaint, setting forth the several mortgages upon the road executed to it as trustee, reciting the proceedings in the suit which it had brought in connection with the stockholders co-complainants, and asking that all the rights and franchises, and all the property, real and personal, of the Northern Pacific Company, may be declared subject to the lien of the consolidated mortgage; that an accounting may be taken of the outstanding bonds under the general second mortgage, and they declared a first lien on the property of the company described in the general second mortgage, subject only to the lien of the general first mortgage and the prior divisional mortgages; that an account be taken of the outstanding bonds under the general third mortgage, and that the amount of them may be found to be the next lien following the lien of the general second mortgage on the property described in the general third mortgage; that an account be taken of the outstanding bonds under the consolidated mortgage, and that the amount thereof may be found to be a lien next following the lien of the general third mortgage on the property of the company, according to the terms of the consolidated mortgage; that, in default of payment of interest due under the general second mortgage, the property and franchises of the company may be sold to satisfy the entire amount of the general second bonds and coupons; and that out of the proceeds the amount due under the general second mortgage may be paid, and the surplus, if any, be applied as the court may direct. Upon the filing of the bill, an order was entered, upon the prayer of the complainant, extending the receivership created under the original bill to the bill of foreclosure filed by the trust company, and directing that the two causes be consolidated, the consolidated cause to proceed...