In re Chicago, RI & P. Ry. Co., 6000-6004
Decision Date | 18 June 1937 |
Docket Number | 6087-6091.,No. 6000-6004,6000-6004 |
Citation | 90 F.2d 795 |
Parties | In re CHICAGO, R. I. & P. RY. CO. (ten cases). |
Court | U.S. Court of Appeals — Seventh Circuit |
Wright, Gordon, Zachry & Parlin (Cotton, Franklin, Wright & Gordon), of New York City (Edward L. Williams and Samuel A. McCain, both of New York City, of counsel), for appellants Traphagen and others.
Edward K. Hanlon, of New York City (Milton Weiss and Daniel F. Harrington, both of New York City, of counsel), for appellants Blaine and others.
Auchincloss & Duncan, of New York City (J. Donald Duncan and Charles R. Lowther, both of New York City, of counsel), for appellants Griffin and others.
Cyrus H. Adams, of Chicago, Ill., Thomas Epstein and Sullivan & Cromwell, all of New York City, and Ross & Watts, of Chicago, Ill., (Clarence H. Ross, of Chicago, Ill., and Emmet McCaffery and John C. Bruton, Jr., both of New York City, of counsel), for appellant Marine Midland Trust Co. of New York, trustee.
Otis F. Glenn, M. L. Bell, W. F. Dickinson, and W. F. Peter, all of Chicago, Ill., Clifton P. Williams, and Wilkie Bushby, of New York City, for appellees.
Alexander & Green, of New York City, and Winston, Strawn and Shaw, of Chicago, Ill., for appellee Protective Committee for General Mortgage 4% Gold Bonds of Chicago, R. I. & P. Ry. Co.
Root, Clark, Buckner & Ballantine, of New York City, for appellee, Protective Committee for First and Refunding Mortgage 4% Gold Bonds and Secured 4½% Gold Bonds of Chicago, R. I. & P. Ry. Co.
Before EVANS and MAJOR, Circuit Judges, and LINDLEY, District Judge.
The ten appeals which are presented for our determination involve the same order. Five appeals were allowed by the District Court and five appeals were allowed by this court. The ruling attacked was an administrative order made by the trial court in proceedings under section 77, Bankr.Act, 11 U.S.C.A. § 205 note, in the course of the debtor's operation by the trustees. It bears date of July 22, 1936, and protects the debtor whose creation of a lien upon its assets made possible the raising of money to cover necessary expenditures to maintain the properties of the debtor and its subsidiaries.
The court had previously authorized the expenditure of $4,500,000 for maintenance of way and for additions and betterments on the properties of the debtor and its subsidiaries during the calendar year of 1936, and the order appealed from was to create a lien to secure the loan and thereby lessen the rate of interest and insure the negotiation of the loan. The order provides that the trustees of the debtor should have a "first and paramount lien (subject only to the lien of taxes and assessments) upon the franchises, property and assets, whether real, personal or mixed, constituting the estate of each of the said subsidiary debtors."
The various appeals are by trustees named in the mortgages given by certain subsidiaries, the representatives of bondholders, and representatives of interested parties who hold bonds covering the properties of one or more of the subsidiary debtors. The lien draws interest at the rate of 3½ percent.
Paragraphs 4 and 5 of said order are set forth below.*
It may be observed at the outset that the objections to this order are not directed to the authorization of a lien nor to the expenditure of the money nor the use of the borrowed money upon the property of the subsidiaries. The objections are to the supplanting of the mortgage liens in cases where it is alleged the subsidiary is already a creditor of the debtor. It is insisted that the debtor's estate is indebted to at least two subsidiaries in sums exceeding the amount which has been or will be expended upon the property of said subsidiaries. The trustees deny this fact and assert that at the present time it is impossible to state whether there is a credit due the subsidiary from the estate of the debtor or whether the subsidiaries are indebted to the trustees. They further assert that when that fact is ascertained the said subsidiary will be credited with the net income from operation of said subsidiary, if there be any net, and the adjustment will then be made.
Supporting their position the trustees call attention first to the terms of the order above quoted and second to the previously entered order bearing date of June 26, 1934, which reads in part as follows:
"The Court reserves the right, upon application by any of the parties to these...
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