Stevens v. Cent. Nat. Bank of Boston

Decision Date27 November 1894
PartiesSTEVENS et al. v. CENTRAL NAT. BANK OF BOSTON et al.
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Appeal from supreme court, general term, Third department.

Action by Aaron R. Stevens and others against the Central National Bank of Boston and others, impleaded with the Union Trust Company of New York. From a judgment of the general term (23 N. Y. Supp 1147) affirming the judgment of the special term the said bank and others appeal. Affirmed.

Matthew Hale, for appellants.

Edward Winslow Paige, for respondents.

BARTLETT, J.

This appeal involves a contest between the bondholders and holders of receiver's certificates of the Lebanon Springs Railroad Company and its successor, the Harlem Extension Railroad Company. A recital of the main facts in this litigation is essential, as it will present clearly the questions of law submitted for our determination.

The Lebanon Springs Railroad Company, in 1869, was operating its completed road from Chatham, N. Y., to Bennington, Vt. Prior to that time, in July, 1867, it issued and sold its bonds to the amount of $2,000,000, and secured the same by mortgage to the Union Trust Company of New York, in trust, covering its property, rights, and franchises. Early in the year 1870 the Lebanon Springs Railroad Company consolidated with the Bennington & Rutland Railroad Company of Vermont, and the new corporation took the name of the Harlem Extension Railroad Company. This latter company, in April, 1870, made its mortgage to the Union Trust Company of New York, in trust to secure the payment of $4,000,000 of its bonds, but only $1,400,000 of this issue were negotiated. In February, 1872, the Union Trust Company began the foreclosure of the first-named mortgage in the supreme court of New York, and later in the same year it filed bills in the court of chancery in Vermont to foreclose both mortgages in that jurisdiction. In December, 1872, and while the suits mentioned were pending, the Harlem Extension Railroad Company consolidated with corporations, not material to mention in this connection, and assumed the name of the New York, Boston & Montreal Railway Company. In January, 1873, the property covered by the $2,000,000 mortgage in this state was sold and conveyed, in the Union Trust Company foreclosure suit, to James C. Hull, a clerk in the office of defendant William Butler Duncan, for the nominal sum of $100,000, and about the same time there were sales under the Vermont decrees, and conveyances executed to Charles G. Lincoln, a clerk for one Trenor W. Park, for the nominal sum of $50,000. It is found in this action that the Union Trust Company never did anything to enforce the payment of these bids, and that they were never paid. On the 28th of January, 1873, Hull and Lincoln, without any consideration, executed to the defendant William Butler Duncan and one Trenor W. Park a bond for the payment of $5,000,000, secured by mortgage convering the property conveyed to them under the foreclosure sales in New York and Vermont. It is found in this action that both Duncan and Park knew that the consideration for the deeds to Hull and Lincoln remained unpaid. On the 30th of January, 1873, Hull and Lincoln conveyed the property without consideration, and subject to the Duncan and Park mortgage, to the New York, Boston & Montreal Railway Company. The $5,000,000 mortgage made to Duncan and Park represented substantially the aggregate indebtedness which the New York, Boston & Montreal Railway Company was to assume under the consolidation and other agreements. The latter company paid to Duncan and Park $807,077.05 on account of the money due on said mortgage, but failed to pay the balance, became insolvent, and in April, 1875, Daniel Butterfield was appointed, by the supreme court of the state of New York, receiver of all its property and effects. During the year 1873 the New York, Boston & Montreal Railway Company executed to Seligman, Sherman & Brown a mortgage to secure bonds to the aggregate amount of $12,250,000; also another mortgage to the New York Loan & Indemnity Company to secure the payment of additional bonds to the aggregate amount of $12,750,000. A sufficient amount of these bonds were sold in Europe to realize $6,000,000. In November, 1873, the New York, Boston & Montreal Railway Company leased its road to the Central Vermont Railway Company, which lease was operated until August 20, 1877, when it was abandoned. In the meantime the lessor company had become insolvent, as already stated, and in September, 1877, one Russell C. Root took possession of the property without legal right, and subsequently, on November 27, 1877, delivered possession thereof to a corporation called the Harlem Extension Railroad South Coal Transportation Company. Root, in the name of this company, and as its president, continued to operate the road until possession was taken from him by the court, as will presently appear.

In September, 1880, one Marvin Sackett, a bondholder of the Lebanon Springs Railroad Company, brought an action in the supreme court of New York against Russell C. Root, the Harlem Extension Railroad South Coal Transportation Company, the New York, Boston & Montreal Railway Company, and Daniel Butterfield as its receiver. Sackett alleged in his complaint that he brought the action ‘in behalf of himself and all other bondholders of the Lebanon Springs Railroad Company similarly situated, who hold any of the two millions of dollars of the bonds of the Lebanon Springs Railroad Company, hereinafter referred to, and who shall be entitled to avail themselves of the benefit of this suit.’ The complaint further alleged the mortgage to secure plaintiffs' bonds to the Union Trust Company of New York, the action to foreclose, the sale thereunder, and the nonpayment of the purchase money to the trustee. In brief, the Sackett suit was ostensibly a representative action for the benefit of bondholders, and sought, apparently, to charge Duncan, and his clerk, Hull, who took title at the foreclosure sale in this state, as trustees for the bondholders. The complaint further prayed for a receiver, a sale of the property, that all titles under the foreclosure sale should be declared void, and for such other relief as was just. It will be observed that while the Sackett suit professed to seek the objects indicated, it failed to bring before the court the necessary parties to render such a decree as was prayed for binding, viz. the Union Trust Company of New York, Duncan, Park, Hull, Lincoln, and the trustees under the mortgages. The record in the Sackett suit also discloses some other remarkable features. In October, 1880, John Van Valkenburgh was appointed receiver. Intermediate the appointment of the receiver and February 1, 1881, holders of large amounts of both Lebanon Springs and Harlem Extension bonds petitioned the court in two separate proceedings to be made parties to the action, but both applications were denied. After the denial of these motions, and in February, 1881, the receiver petitioned for instructions, and suggested that he issue certificates to be made a first lien for, among other things, the ‘settlement of unavoidable indebtedness of the company now existing.’ April 2, 1881, after the coming in of the report of an expert to examine the railroad, and no one appearing except the receiver's counsel, the receiver was ordered to issue certificates of indebtedness to the amount of $350,000, and a referee was appointed ‘to hear and determine all existing claims against said Lebanon Springs Railroad Company.’ The receiver had previously borrowed $25,000 without authority of the court. The disposition made of a portion of the proceeds realized by the sale of the receiver's certificates will be considered later. The Sackett suit did not reach final judgment until January, 1885, after a delay of between four and five years. Later in 1885 the referee, under the judgment, sold the property to William Foster, Jr., for $155,000.

The action at bar was begun in the supreme court of New York, April, 1887, by bondholders owning bonds of both and Lebanon Springs Railroad Company and the Harlem Extension Railroad Company. The complaint brings in all the parties in interest. It seeks to enforce the foreclosure judgments and decrees of 1872 in the suits instituted by the Union Trust Company of New York both in Vermont and this state. It is also in the nature of a bill of review of the judgment in the Sackett suit, and a bill for relief against the judgment and proceedings in that suit as fraudulent. It also seeks the foreclosure of all junior liens. The special term, on November 10, 1891, rendered a judgment for the plaintiffs in this action. A sale of the property was made by the referee, and on the 16th of May, 1892, William Foster, Jr., received a deed as purchaser. This judgment was affirmed by the general term of the Third department.

It now becomes necessary to consider the manner in which this appeal is presented. In 1886, and before the case at bar was begun, one of the defendants in this action, the Central National Bank of Boston, on behalf of itself and all other holders of the receiver's certificates issued under the judgment in the Sackett suit, brought an action in the supreme court of New York against Foster and Hazard, the purchasers under the Sackett judgment, and a corporation called the New York, Rutland & Montreal Railway Company, their grantee....

To continue reading

Request your trial
20 cases
  • Shary v. Eszlinger
    • United States
    • United States State Supreme Court of North Dakota
    • March 2, 1920
    ...... the maker of the notes had as against the bank might properly. be shown upon the trial. Bank of Sharron ... Pearce, 12 N.Y. 156, 62 Am. Dec. 152; Stevens v. Central Nat. Bank, 144 N.Y. 50, 39 N.E. 68; Davis v. ... per cent of its price to defendant. Now the plaintiff has his. ......
  • Shary v. Eszlinger
    • United States
    • United States State Supreme Court of North Dakota
    • March 2, 1920
    ...Minn. 78, 165 N. W. 969, 167 N. W. 302; Pearce v. Olney, 20 Conn. 544; Dobson v. Pearce, 12 N. Y. 156, 62 Am. Dec. 152;Stevens v. Bank, 144 N. Y. 50, 39 N. E. 68;Davis v. Cornue et al., 151 N. Y. 172, 45 N. E. 449;Trebilcox v. McAlpine, 62 Hun, 317, 17 N. Y. Supp. 221;White v. Reid, 70 Hun,......
  • Fox v. Robbins
    • United States
    • Court of Appeals of Texas
    • March 27, 1901
    ...263, 23 Am. Dec. 720; Munn v. Worrall, 16 Barb. 221; Corwithe v. Griffing, 21 Barb. 9; Whittlesey v. Delaney; 73 N. Y. 571; Stevens v. Bank, 144 N. Y. 50, 39 N. E. 68; Lockwood v. Mitchell, 19 Ohio, 448, 53 Am. Dec. 438; Greene v. Haskell, 5 R. I. 447; Crank v. Flowers, 4 Heisk. 629; Poinde......
  • Moebius v. McCracken
    • United States
    • Supreme Court of Michigan
    • January 3, 1933
    ...are Pearce v. Olney, 20 Conn. 544;Dehon v. Foster, 4 Allen (86 Mass.) 545;Doughty v. Doughty, 27 N. J. Eq. 315. In Stevens v. Central Nat. Bank, 144 N. Y. 50, 39 N. E. 68, 71, the court cited with approval the following statement in Story on Equity Jurisprudence (13th Ed.) § 899: ‘Although ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT