Investment Registry v. Chicago & M. Electric R. Co.

Decision Date02 January 1913
Docket Number29,281.
Citation206 F. 488
CourtU.S. District Court — Northern District of Illinois
PartiesINVESTMENT REGISTRY, Limited, v. CHICAGO & M. ELECTRIC R. CO. et al.

[Copyrighted Material Omitted]

Moses Rosenthal & Kennedy, of Chicago, Ill. (Joseph W. Moses, of Chicago, Ill., of counsel), for objector.

Mayer Meyer, Austrian & Platt, of Chicago, Ill., for Smith and Ford and Reorganization Committee.

McCulloch & McCulloch, of Chicago, Ill., for Merchants' Loan & Trust Co.

Rosenthal & Hamill, of Chicago, Ill., for Western Trust & Savings Bank and Willoughby G. Walling.

LANDIS District Judge.

The matter before the court is an application to confirm the sale of the property of the Chicago & Milwaukee Electric Railroad Company. To the entry of this order objections have been filed by a bondholder. The reasons urged by the objector are that the price bid for the property is inadequate, and that the purchaser suppressed competition at the sale. Although a vast amount of contradictory testimony was heard on these issues and certain other matters conceived to have a bearing upon them, the court is of opinion that the real questions presented are rather free from difficulty.

There are two Chicago & Milwaukee Electric Railroad Companies organized under the laws of the states of Illinois and Wisconsin, respectively. Each company constructed an electric interurban railroad in the state of its organization. These two railroads were in reality one continuous line of track, extending from Evanston, Ill., to Milwaukee, Wis., with a branch in Illinois. In 1902, the Illinois company executed a mortgage covering all of its property to secure the payment of $5,000,000 of bonds, of which $4,000,000 were issued and are now outstanding. In 1905, the Wisconsin company executed a mortgage covering all of its property to secure the payment of an issue of $10,000,000 of bonds, all of which were issued and remain unpaid.

In January, 1908, proceedings by creditor's bill were started in the Circuit Court here and at Milwaukee, in the Eastern District of Wisconsin. In these proceedings receivers were appointed here and there. Subsequently bills were filed in the two jurisdictions to foreclose the mortgages mentioned, and these proceedings were consolidated with the original proceedings; the receivership having been continued to the present time. During the year 1912, decrees of sale were rendered here and at Milwaukee covering the property, respectively, of the two companies. The sales took place at Waukegan, Ill., and Racine, Wis., on September 25th, last. For the Illinois property $1,650,000 was offered and for the Wisconsin property $1,600,000. These bids were made by agents representing a Reorganization Committee, with which committee there had been deposited approximately 95 per cent. of each issue of bonds under foreclosure. There being no other bids, the master has recommended their acceptance. The objection comes from a holder of 12 Illinois bonds which the owner refused to deposit under the proposed plan of reorganization, and, of course, attacks here only the Illinois sale.

To get an understanding of the questions presented by the objections, it is necessary to go back to the early days of the receivership.

In 1908, what was called the 'Illinois Committee' was formed. Its declared purpose was the protection of the interests of holders of Illinois bonds. Other committees of Illinois bondholders were also formed for the assertion of the rights of their members. At about the same time there came into existence the Wisconsin committee for the protection of the interests of holders of Wisconsin bonds. With these various committees bonds of the respective issues were deposited. In addition to these committees, there was organized what was called the 'Assisting Syndicate,' which was an association of individuals, banks, and other financial institutions in Canada, where there were heavy holdings of Chicago & Milwaukee Electric stock and bonds. The securities in the hands of the Canadians were in the main the issue of the Wisconsin company, although to a slight extent they held obligations of the Illinois corporation. There was also in Holland what has been referred to in these proceedings as the 'Dutch Syndicate,' which held 1,647 of the Illinois bonds under foreclosure.

After the appointment of the receivers, and in 1908, the local street railway interests in the city of Milwaukee conceived the idea of acquiring the Illinois property. They already owned or controlled an electric road extending from Milwaukee south to Kenosha, and their purpose in seeking the Illinois division of the Chicago & Milwaukee Electric was in furtherance of their plan to acquire a through line from Milwaukee to Chicago. It was their program, if they got the Illinois division, to extend it north to a connection with their road at Kenosha, and to build south from Evanston, which extensions, with trackage rights into Chicago to be negotiated with one of the elevated companies, would accomplish their purpose. As a means to this end, these Milwaukee interests set out to acquire Illinois bonds. The purchases were made through attorneys George P. Miller and Francis Bloodgood, of Milwaukee, and William W. Gurley, of Chicago. They endeavored to acquire the Dutch holdings and sent a representative to Holland for that purpose, but their efforts in that direction were frustrated by the activities of the Canadian Assisting Syndicate, which organization obtained control of those bonds under an agreement with the Dutch, which agreement was followed, in March, 1911, by the purchase by the Canadians of the 1,647 Dutch bonds, at 65 cents on the dollar. Shortly after this purchase, the interest of the Milwaukee street railway people was bought by the Assisting Syndicate and finally, by an agreement entered into in January, 1912, the Reorganization Committee, which was the purchaser at the judicial sale under examination here, succeeded to the rights and liabilities of the Assisting Syndicate. It is these transactions between the Milwaukee street railway interests and the Assisting Syndicate, and between the Assisting Syndicate and the Reorganization Committee, taken in connection with what is claimed to be an inadequate bid for the property, upon which the objector bases the charge of suppression of competition.

The contract between the Milwaukee interests and the Assisting Syndicate was executed April 21, 1911, with the advice and approval of the committee of Wisconsin bondholders. By its terms the syndicate acquired from the Milwaukee interests what those interests had purchased, namely, 530 bonds of an underlying issue of $1,080,000 and 401 bonds of the issue under foreclosure. For these bonds the syndicate agreed to pay $1,122,636.25. Of this amount $300,000 was to be paid not later than June 1, 1911. The remaining $822,636.25 was to be paid within 30 days after the sale of the Illinois property under the decree of this court. The agreement further contained the following provision:

'It is further agreed that the vendors (the Milwaukee interests) and their associates, including George P. Miller and Francis Bloodgood, shall, to the extent of their power and influence and information, in every reasonable way aid and assist the purchasers in becoming the purchasers of the Chicago & Milwaukee Electric Railroad property (both divisions), and in making effective their plan of reorganization thereof.'

This contract, which was executed by Charles F. Pfister and John I. Beggs, as the Milwaukee interests, and H. S. Osler, an attorney of Toronto,...

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5 cases
  • Tibbals v. Graham
    • United States
    • Wyoming Supreme Court
    • October 7, 1936
    ... ... 275; Spokane ... Soc. v. Company, 294 P. 1038; Investment Company v ... Electric Company, 206 F. 488; Company v ... Marple, ... ...
  • Saunders v. Berrong
    • United States
    • Mississippi Supreme Court
    • February 28, 1966
    ...in so doing do not operate to exclude any of the general public from bidding; * * *." In Investment Registry, Limited v. Chicago & M. Electric R. Co. et al., 206 F. 488, 492 (N.D.Ill.1930), the Court 'The general rule is that the public shall be free to bid for property offered at a judicia......
  • Johnson v. Southwestern Surety Ins. Co.
    • United States
    • U.S. District Court — District of Oregon
    • July 21, 1913
    ... ... 13 Cyc. 95; ... O'Keefe v. Dyer, 20 Mont. 477, 52 P. 196; ... Chicago House Wrecking Co. v. U.S., 106 F. 385, 45 ... C.C.A. 343, 53 L.R.A. 122; ... ...
  • Spokane Sav. & Loan Soc. v. Park Vista Imp. Co.
    • United States
    • Washington Supreme Court
    • December 30, 1930
    ... ... also reciting that plaintiff believed the investment of ... such a large sum of money in said property would be ... follows in Investment Registry, Limited, v. Chicago & M ... Electric R. Co. (D. C.) 206 F. 488, ... ...
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