Flagg v. Manhattan Ry. Co.

• Decision Date: 21 December 1881
• Citation: 10 F. 413
• Parties: FLAGG and others v. MANHATTAN RY. CO. and others. [1]
• Court: U.S. District Court — Southern District of New York

10 F. 413

FLAGG and others v. MANHATTAN RY. CO. and others. ^[1]

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

December 21, 1881

S. P Nash, for plaintiffs.

D. D Field, for defendants.

BLATCHFORD C.J.

This suit is brought by three persons as individuals and two persons as copartners, who claim to be owners of shares of the capital stock of the Metropolitan Elevated Railway Company, 155, 10, 150, and 75 in number, of the par value of $100 each, there being 65,000 shares in all. The three companies defendants are railroad corporations organized under the laws of the state of New York, and will be called the Manhattan, the Metropolitan, and the New York. The first company had no lines of railway. The second and third companies had elevated railways in the city of New York. On the twentieth of May, 1879, the three companies entered into a written agreement known as the 'tripartite' agreement. It recites that the agreement is made 'for the purpose of avoiding the danger of crossing elevated railway tracks upon the same level, and otherwise securing to the people of New York the advantages of safer and more rapid transit through the action of one directing body. ' It provides for the execution of the leases hereinafter mentioned, and contains other provisions which it is not important at this point to notice. On the same day the Metropolitan and the Manhattan executed an agreement of lease in writing. I recites that the Metropolitan is authorized to construct and operate a line of elevated railway in the city of New York, a portion of which, specifying it, is completed and in operation by it, and is engaged in constructing other parts; that the New York is the owner of and engaged in operating certain lines of elevated railway in said city over routes heretofore established by law for it, 'which railways and routes at various places unite with the railways and routes' of the Metropolitan, 'and cross and connect and unite therewith at the same level;' that 'the development of the business of passenger traffic on elevated railways in said city has made it necessary for each of said companies to run trains in such manner and with such speed and frequency that the crossing of the trains of one company over and upon the tracks of the other company, and the running of the trains of both companies upon the portions of the track and route jointly owned or used by them, is deemed impracticable except at the risk of inconvenience and delay to the public and danger to human life;' that, 'after protracted efforts to devise plans for operating all said lines so as to afford to the public perfect fullness of accommodation and safety, it is the opinion of both companies that such management cannot be assured while the trains of the two companies are run under the control of differing managing officers, or otherwise than by placing the lines of both companies under one sole control, with power to change from time to time the termini of routes, to regulate and limit the passage of trains from the tracks of one company upon the tracks of the other at the connecting and crossing points, and to do such other things and make such other changes, from time to time in the entire management of traffic upon the lines of both railways, as experience may show to be necessary or desirable;' that the Manhattan 'is by law authorized to construct and operate elevated railroads in the city of New York, whether owned or leased by it, and is willing and desirous to accept,' and the Metropolitan and the New York 'have agreed to execute and deliver to it leases of all their respective railways and properties as described in this instrument, and in a similar instrument of even date herewith to be executed by the New York,' 'as lessor to the Manhattan,' 'upon all and singular the terms, agreements, and conditions herein and therein mentioned and set forth;' that the Metropolitan 'has heretofore executed to the Central Trust Company of New York its first mortgage, bearing date July 10, 1878,' 'securing the bonds therein provided for, the total amount thereof now issued and agreed to be issued being $8,500,000 of principal; that the Metropolitan 'may be hereafter required' by the Manhattan 'to issue further amounts of the said bonds secured by the said mortgage in excess of said $8,500,000,' for the purpose of constructing and equipping extensions of the line of the Metropolitan, 'payment of all which bonds, principal and interest, is to be assumed by the Manhattan;' and that the Metropolitan 'has issued and agreed to issue its capital stock to the amount, at its par value,' of $6,500,000, upon which stock the Manhattan 'has agreed to guaranty the payment of a dividend of 10 per cent. per annum as hereinafter provided.'

Then, by the agreement, the Metropolitan, 'in consideration of the rents, covenants, and agreements hereinafter mentioned, reserved, and contained, on the part of the Manhattan,' 'to be paid, kept, and performed,' leases to the Manhattan 'all and singular the railroad, or railway, now owned, operated, or constructed by it in the city of New York, as above described, and all and singular the unfinished portions thereof now under construction, together with all its franchises, rights, and privileges relating thereto, or to the construction and operation of its entire railway as authorized, subject to the said mortgage, and to the terms and conditions under which said franchises are held by the company, with all and singular the right, title, estate, and interest which the Metropolitan Company has in any real estate in the city of New York heretofore acquired by it, or which it may hereafter acquire under contracts already made therefor, being all and singular the entire property and estate of said Metropolitan Company, except such of its franchises, rights, and privileges as are or may be necessary to preserve its corporate existence or organization, and its interest in the covenants and conditions of this indenture. ' The lease is for 999 years from November 1, 1875, or so long as the Manhattan 'shall continue to exist as a corporation, and be capable of exercising all the functions herein stipulated on its behalf;' the Manhattan paying to the Metropolitan the yearly rent of $10,000, payable semi-annually on the first days of January and July, the first payment of $5,000 to be made July 1, 1879, 'and keeping and performing all and singular the covenants and agreements hereinafter set forth to be by the Manhattan' 'kept and performed.' The Manhattan assumes and agrees to pay, as they respectively become due, the principal and interest of the said recited first-mortgage bonds of the Metropolitan, and keep it harmless from all claims against it arising from all or any of said bonds. Then follows this article:

'Art. 2. The Manhattan Company guaranties to the Metropolitan Company an annual dividend of 10 per cent. on the capital stock of the Metropolitan Company, to the amount of $6,500,000; that is to say, the Manhattan Company will, each and every year during the term hereby granted, beginning with the first day of October, 1879, pay to the Metropolitan Company $650,000, free of all taxes, in equal quarterly payments of $162,500 each, on the first days of January, April, July, and October, in each year, the first of such payments to be made on the first day of January, 1880, and the Manhattan Company will, from time to time, execute in proper form a guaranty to the above effect, printed or engraved upon the certificates of stock of the Metropolitan Company, and, as such stock certificates are surrendered for cancellation and reissue, will, from time to time, at the request of the holder, renew such guaranty upon all reissued certificates.'

It is then provided that the portions of the railway of the Metropolitan which were completed on the thirty-first of January, 1879, shall be deemed to have been operated from the close of business hours on that day by the Manhattan, and all such operation from and after that time shall be for the account of the Manhattan; that the Manhattan shall run the railways, and keep them in repair and working order, and supplied with rolling stock and equipment; that, 'in addition to the rental hereinabove provided,' it shall pay all taxes, assessments, duties, imposts, dues, and charges which shall become payable by the Metropolitan against all expenses of operating the railways, and all claims and suits for injuries to persons and property, or for causing the death of any person, or for any other thing in the operation or management of the leased property, or for any breach of contract by the Manhattan in carrying on the business, and will defend all suits and claims arising out of the management or operation of said railways since January 31, 1879, and that, in case the Manhattan shall at any time fail to pay in full said cash rental, 'or the guarantied dividend aforesaid, as the same shall become payable, or fail or omit to keep and perform the covenants and agreements herein contained, or any of them, and continue in default in respect to the performance of such covenant or agreement, or payments, for the period of 90 days,' the Metropolitan may enter on the leased railways and premises, and thenceforth hold, possess, and enjoy them as of its former estate, and, upon such entry, the interest of the Manhattan therein shall cease. The Manhattan then agrees with the Metropolitan that it will execute, acknowledge, and deliver 'any and all instruments for the more effectually assuring unto the Metropolitan' 'the payment of the cash rental and dividends hereinbefore reserved or agreed to be paid. ' On the same twentieth of May, 1879, an agreement of lease, in writing, was executed by the Manhattan and the New York, in...