Gay v. Hudson River Electric Power Co.
| Decision Date | 16 September 1911 |
| Citation | 190 F. 812 |
| Parties | GAY et al. v. HUDSON RIVER ELECTRIC POWER CO. et al. |
| Court | U.S. District Court — Northern District of New York |
Davies, Stone & Auerbach (Charles E. Hotchkiss, of counsel) for Knickerbocker Trust Company, and Winthrop & Stimson (Franklin H. Mills, of counsel), for Guaranty Trust Company of New York, and John G. Boston, for Trust Company of America, for the motion.
L Laflin Kellogg (Alfred C. Pette, of counsel), for National Contracting Company, opposed.
On or about November 1, 1908, this court in the above-entitled action appointed George W. Dunn, Milton De Lano, and Charles W. Andrews, receivers of the properties of the eight defendant corporations, same being then under one management and control, with directions to keep the properties accounts, etc., of such corporations separate so far as possible. The said receivers qualified and have been in the possession, control, and management of such corporate properties since. On application to the court, permission was granted to foreclose certain mortgages on such properties; it appearing that such a course was absolutely necessary to protect and preserve the rights of the parties.
It has always been evident that to keep the properties together and sell them at one time would realize more money and be more beneficial to the bondholders and general creditors, as well as the general public interested in having the business of these corporations kept alive and continued. For good and sufficient reasons, no foreclosure as to the defendant Ballston Spa Light & Power Company was permitted, and under a decision of the Circuit Court of Appeals the trustee for the bondholders of the Empire State Power Company was permitted to foreclose by advertisement-- strict foreclosure-- under a clause in the trust mortgage. The sale of that property has not been had. All are what are known as public service, or utilities, corporations.
The properties referred to, aside from those of the Empire State Power Company and the Ballston Spa Light & Power Company, were sold August 29 and August 31, 1911, on four weeks legal notice and other notice directed by the decree deemed proper for the purpose of giving wide notice. They brought about $7,500,000, and, subject to certain prior liens, the purchase price was equivalent to a sale for about $8,500,000. No question is raised as to the adequacy of the price paid or as to the sale having been fairly conducted. The contention is that the court, by its special master appointed for the purpose of executing the consolidated decree of sale, was without power to make the sale on the days named, the sale having been in legal effect stayed by an appeal from the consolidated decree taken by the National Contracting Company, defendant, duly allowed, and on the taking of which appeal it is claimed a supersedeas was duly granted, not only by order, but by the fixing by order of the amount of the bond to be given to operate under the statute as a supersedeas on he appeal, and which orders, it is claimed, were fully executed and complied with by the said appellant before any modification or vacation thereof, and that therefore the appeal was perfected, the supersedeas operative, the cause and jurisdiction over it transferred to the Circuit Court of Appeals, and that no circuit judge could thereafter in any way limit, modify, or vacate the order of supersedeas above referred to or the order fixing the bond to be given and operate as a supersedeas. It is also insisted that the right to a supersedeas is statutory, and that all the court or judge allowing the appeal has to do is to fix the amount of the supersedeas bond by order, and that when such bond is given pursuant thereto the supersedeas is operative and cannot be limited or vacated by the Circuit Court or a judge thereof, as supersedeas on giving the bond, once fixed, is a matter of statutory right.
The National Contracting Company, one of the defendants, is a judgment creditor to the amount of $326,387.55 by virtue of a judgment obtained and duly entered against the Hudson River Water Power Company on or about December 23, 1909. The National Contracting Company defended against the validity of two of the mortgages foreclosed given by the Hudson River Water Power Company aggregating some $8,000,000, but did not attach the first mortgage of some $2,000,000. If its appeal shall be sustained and the said mortgages, too, held invalid, there can be no question that its judgment is good in part, at least, and to a large amount.
The questions involved are substantial, and the defense presents questions of law on which judges may well differ.
The National Contracting Company also claims an equitable lien on the properties so sold for the satisfaction of its judgment based on grounds and facts not necessary to recite. Nothing should be done by this court or a judge thereof which will operate to place the property of the Hudson River Water Power Company (or of any of the other companies) or its proceeds beyond the reach of the National Contracting Company to the extent of its priority, if its appeal is sustained.
The facts upon which the National Contracting Company bases its opposition to the confirmation of the said sale are as follows: The Honorable E. Henry Lacombe is the senior circuit judge of the Second circuit and the presiding judge of the Circuit Court of Appeals, Second Circuit. The decree of sale in the consolidated foreclosure was granted by Judge Ray, district judge of the Northern district of New York, and acting circuit judge in said district, on the 13th day of July, 1911, and same was entered July 14, 1911. August 19, 1911, the National Contracting Company, ex parte, presented to Judge Lacombe at chambers in the Southern district a petition praying that it alone be allowed to appeal from the decree and that its appeal be allowed, also assignments of errors, and asked that the judge direct the appeal to stand as a supersedeas on giving the required bond to be fixed by the judge, and that the judge fix a supersedeas bond accordingly. The petition set forth that the other parties defendant had been requested to join in the appeal but had failed and refused so to do, and also that the properties directed to be sold were in the hands of receivers duly appointed by the court and being operated by them for the benefit of the mortgagees or mortgage bondholders. Judge Lacombe allowed the appeal and signed the citation returnable September 16, 1911, and made and signed an order fixing the bond to be given at the sum of $5,000, conditioned to pay all damages and costs if the said appellant should fail to make its appeal good, etc., and ordered that on giving such bond to be approved by 'this court' the decree stand superseded pending the appeal.
No bond in accordance with the order and direction of the judge was presented to or approved by Judge Lacombe, nor has it been. The petition, assignment of errors, and allowance of the appeal and said order were duly filed in the office of the clerk of the Circuit Court of the Northern District of New York. The citation was duly served. On the 22d day of August, 1911, the said appellant, National Contracting Company, presented to the clerk of the said Circuit Court of the Northern District of New York a bond executed pursuant to said order of Judge Lacombe in the sum of $5,000, executed by said National Contracting Company as principal and by the United States Fidelity & Guaranty Company as surety, conditioned to pay 'all damages and costs,' etc., if the National Contracting Company should fail to make its appeal good. This bond was duly approved by the clerk of the court and filed. The next day, August 23, 1911, the question of the power of the clerk to approve the bond having been raised, the clerk (deputy in the absence of the clerk himself) of the Circuit Court, Northern District of New York, presented the said bond to Judge Ray, district judge of the Northern district of New York and acting circuit judge in said Northern district, for approval.
Judge Ray declined to approve said bond on the ground that, Judge Lacombe having allowed the appeal, granted the supersedeas, fixed the amount of the supersedeas bond, and signed the citation, the bond should, under the statute and decision, be approved by him (Judge Lacombe). In June, 1906, Judge Ray and Judge Geo. C. Holt, one of the district judges of the Southern district of New York, exchanged, and Judge Holt was to hold the June term in the Northern district, and Judge Ray was to hold the June term in the Southern district, and Judge William J. Wallace, then presiding judge of the Circuit Court of Appeals, Second Circuit, and the then senior circuit judge of the Second circuit, made an order duly entered and filed as follows:
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