Ex parte White v. Wilmington & Manchester Railroad

The opinion of the Court was delivered by

The appellant, A. J. White, seeks to reverse an order refusing the prayer of a petitioner, presented to the Circuit Court by way of intervention under a decree in the suit of M. K. Jesup vs. The Wilmington and Manchester Railroad Company and others, pending in that Court. The suit was for the foreclosure of a mortgage made by the company to M. K. Jesup, trustee. Prior to the filing of appellant’s petition the property and franchises mortgaged had been sold under the order of the Court for the sum of $250,000, and a portion of the purchase money remained in Court for distribution. The petitioner set up a claim to part of this purchase money, but did not seek to disturb the decree of sale, nor the sale actually made thereunder.

In 1866, the company being indebted, and its property mortgaged to secure such indebtedness, under an arrangement with the principal part of its creditors, under which a new bonded debt, secured by mortgage to M. K. Jesup, trustee, was to be created and applied, in part, to discharge the then existing indebtedness of the company, *481and, in part, to furnish the means of improving the practical condition of their road. A portion of the old indebtedness was held by the appellant, consisting of bonds — part of two -several issues, having different priorities, that will be noticed hereafter. Appellant alleges that he parted with his securities to an agent of the company upon the agreement that, if the contemplated change of securities was not assented to by all the creditors, they should be returned to him ; that such change did not receive such assent, and that his securities have not been returned. It appears that White received, in exchange for such securities, bonds and scrip, under the Jesup mortgage. He now tenders a return of the last named securities, and demands the restitution of those originally held by him, in order that he may be-let in to share the fund in Court, on the footing of a mortgage creditor holding under a. lien prior to that upon which the foreclosure and sale took place.

Assuming the fact to be as set forth by the appellant, yet he is not-entitled to the relief demanded by his petition, unless it is made to appear that the existence of a state of facts such as he alleges will entitle him to a claim upon the fund in Court, or some portion thereof. This depends upon the question whether, in the event the appellant should succeed in establishing his right to the original securities held by him, he would be permitted to hold these securities as of their original priority, as against other original holders of securities of the same, or a still higher class who have also exchanged them under the Jesup mortgage. In other words, if all the original bondholders who have consented to the exchange are to be held to the strict legal consequences of such exchange, and the appellant’s alone is to be permitted to stand on the rank due to the priority of lien originally enjoyed, then it is probable that he may establish a claim to a portion of the fund in Court; but if, on -tlie other hand, the effect of establishing his petition will be to let in all the original bondholders according to their respective priorities as among themselves, then the whole fund will be absorbed before it can by possibility reach the demand of the appellant.

The original debt consisted of three classes of bonds, secured respectively by first, second and third mortgages. The appellant was originally a holder of bonds belonging to the second and third classes. The proceeds of the sale of the road do not equal the amount embraced in the first class. If, therefore, the original first mortgage bondholders are to be admitted on as good a footing as *482appellant to the benefits of any decretal order that may result from his petition, the fund will be absorbed, and no part of it can, by possibility, reach him.

The appellant seeks the aid of equity. He does not occupy, as to the present question, the position of a judgment or mortgage creditor, having fixed legal right to a fund in the bands of a Court of Equity for distribution, and demanding it on the ground of such legal right. He brings into Court securities which, upon their face, cannot be paid out of the fund, but claims that certain extinguished securities should be set up in their place. He demands that, so far as he is concerned, the fund should be distributed on equitable principles.

The arrangement between the company and the several creditors, for the exchange of their securities, is regarded in equity as a single contract, for the reason that both the relations of all these creditors with the company and their relations with each other entered into its consideration. The equity of the contract is, therefore, commensurate with both of these classes of rights. If, then, the rights of the parties are to be constructed upon the equity of the contract, instead of upon its present legal form, it follows that the equities among creditors must be satisfied to make the remedy perfect.

If the appellant has a right to disturb the arrangement which has received the assent of the great majority of the original bondholders, there is an appropriate remedy; but as his only claim, recognizable here, is to participate in the distribution of the assets, it is an answer to his petition that the question of the right to the assets does not depend on the issue of fact raised by his allegations and the answer thereto. It is the distribution of the fund in Court, and not the settlement of general rights and equities between the parties, that is the only matter in hand in the present stage of this case.

It will he unnecessary to pass upon the other questions that have been raised, as the view taken is decisive of the whole case.

The appeal must be dismissed, and the order affirmed.