Morton Trust Co. v. Metropolitan St. Ry. Co.

• Decision Date: 06 May 1909
• Citation: 170 F. 336
• Parties: MORTON TRUST CO. v. METROPOLITAN ST. RY. CO. et al.
• Court: U.S. District Court — Southern District of New York

170 F. 336

MORTON TRUST CO. v. METROPOLITAN ST. RY. CO. et al.

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

May 6, 1909

Bronson Winthrop, for Morton Trust Co.

Masten & Nichols, for receivers of Metropolitan St. Ry. Co.

LACOMBE Circuit Judge.

This is a motion made by complainant to dismiss the cross-bill of the Guaranty Company for technical reasons, and also on the ground that it has not been supported by proof. In a situation so complicated as this one, with so many conflicting interests and different suits, the court is not inclined to be over technical as to pleading and practice. If some way can be found in which the equities of all may be substantially secured, it will be adopted, although some novel practice may be thereby pursued. It seems to me that the cross-complainant has an equity which should be protected in some way, and which, quite possibly, may be secured in the manner proposed without working inequity to those represented by the complainant.

Briefly stated, the situation since August 1, 1908, is this: The receivers appointed by the court, under both mortgages, held possession of the entire property, managing and operating it as a unitary system devoted to a public service. In order to render that service, and to hold the property together expenditures were incurred in excess of the gross receipts. There resulted a deficit, which no one disputes should be made good out of the corpus of the property which the receivers administered. Had there been but one mortgage, and that one covering the entire property, the matter would be easily disposed of by a clause in the decree of foreclosure and sale, such as will be found in the decree of March 18 1909, in the Guaranty Trust Company suit. 168 F. 937. Under the terms of such a clause, a lien for the deficit would be imposed upon the whole property, and in the redemption of that property from such lien all its parts would ratably contribute. But such is not the situation. The first mortgage does not cover the whole property, and the second mortgage is a second mortgage only as to the property covered by the first, and is a first mortgage on the additional parcels, in which the bondholders secured by the Guaranty mortgage have no interest whatever. If the outcome of all this litigation were to be what it was hoped it would be, namely, a consolidation of both foreclosure actions and a sale of the whole property under both mortgages, there...