Central Trust Co. of N. Y. v. Wabash, St. L. & P. Ry. Co.

36 F. 622, 1888 U.S. App. LEXIS 2659

• Court: U.S. Circuit Court for the District of Eastern Missouri
• Decided: November 13, 1888
• Status: Published

Opinion

Thayer, J.

1. The master, in his report filed June 11, 1887, bases his right to report upon the claims for compensation made by trustees under senior mortgages upon the eleventh paragraph of the order of November 9,1885, and not upon the seventh paragraph. His right to investigate and report on claims of trustees in underlying mortgages under the eleventh paragraph of that order has been heretofore recognized by the court by making numerous allowances on such claims in accordance with the master’s recommendation. I must accordingly overrule the point now made that the master liad no authority under the order of reference to consider the claims of the United States Trust Company, and Messrs. E. W. and Theodore Sheldon, its solicitors. That question cannot be treated as now open for consideration. The master’s power to report on those claims is derived from the eleventh paragraph of the order of November 9,1885.

2. The question whether trustees under senior mortgages, and their solicitors, ought to be allowed compensation-out of the funds realized from the foreclosure sale under the general mortgage, is a question which the master has examined at some length in his report. His conclusion is that, inasmuch as this proceeding was originally brought by an insolvent corporation to obtain administration of its affairs, and might have resulted in a sale of all of its assets free from all incumbrances, that all of the trustees in underlying mortgages who were made parties to the proceeding, rightfully employed counsel to guard their several interests, and are entitled to compensation out of the fund realized from the foreclosure sale. It is unnecessary to re-examine the master’s conclusion on that point, at this stage-of the ease. With the consent of the purchasing committee,, the court has already made numerous allowances ■ to the trustees of underlying mortgages, and to their solicitors, in accordance with the master’s views. That settles the rule for the taxation of costs, so far as the present case is concerned, and it should be applied to the claim preferred by the United States Trust Company, unless it differs essentially from claims in favor of other trustees that have heretofore been allowed.

3. I cannot regard the fact that the United States Trust Company began proceedings to foreclose its mortgage on the Omaha Division, and at a certain time ,withdrew.that division of the road from the custody of the receivers appointed in this case, as of sufficient importance to distinguish its claim from those of other trustees in underlying mortgages whose claims have heen recognized. It may be assumed that the trustees in all of the underlying mortgages were entitled to compensation out of the property covered by their respective mortgages, for all of the services by them rendered, or'expenses incurred, while they were parties to this suit, in guarding their respective interests in the property then in the custody of the court. That being so, those trustees of underlying mortgages who did not begin foreclosure proceedings, or withdraw the property in which they were concerned from the court’s custody, appear to me to have no greater right to have the expenses by them incurred in this proceeding taxed as a part of the costs of this suit, than a trustee who did at a certain time withdraw property in which he was concerned, and begin foreclosure proceedings against it. The distinction which the master made as against the United States Trust Company appears to me to be purely arbitrary. Such allowances as have heretofore been made in favor of trustees in underlying mortgages and their solicitors, can only he sustained on the ground that, having been made parties to a proceeding which might have resulted in a sale of all the property of the Wahash system free from all incumbrances, and having been forced to employ counsel to guard their several interests, they are entitled to reimbursement out of the fund realized in this case for the trouble and expense so incurred. The same reasons, in my opinion, necessitate an allowance to the United States Trust Company for all expenses by it incurred, at least up to the date of its withdrawal. If the allowance is righ't in one instance, it is in the other. .

4. According to the view I have taken it is unnecessary to recommit the matter to the master. I have therefore examined the testimony before-the master with respect to the amount of compensation that should be allowed the United States Trust Company and its solicitors, and I conclude that an allowance of $500 to the former and $1,500 to the latter will be adequate, considering the allowances that have already been made to other trustees and solicitors for similar services and expenses.

The fifth paragraph of the order made herein on April 14,1888, (overruling the exception to the master’s report, filed June 11, 1887, on the claim, of the United States Trust Company and Messrs. E. W. and Theor dore Sheldon) is rescinded, and claimants’ exceptions, filed June 29,188.7, are sustained, and an allowance is hereby made as above indicated of $500 to the United St*>+"s Trust Company, and $1,500 to Messrs. E. W. and Theodore Sheldon.