In re Philadelphia & R. R.

19 F. Cas. 477, 1881 U.S. App. LEXIS 2680

Opinions

BUTLER. District Judge,

in delivering the opinion of the court, said: Two questions arise in considering the application: First, is the matter contemplated within the scope of the court’s duty and authority, as custodian of the road and other property of the company? Second, if it is, would it be wise to grant the application? As respects the first, it must bo borne in mind that the custody of the court is only temporary, to preserve the property so long as may afford reasonable time to the plaintiffs in the foreclosure bill to prosecute their proceeding to a close, in case the company fails to make satisfactory arrangements to relieve itself from the proceeding. Whether the order asked for by the receivers, or the allowance of it, falls within the proper scope of the court’s authority, under the circumstances, is certainly open to doubt. I will not, however, enlarge upon this subject, for if it were not so open to doubt, I am satisfied that it would not be wise to make the order.

The petitioner’s admit, and the testimony proves, that the net earnings of the road are amply sufficient to make the purchase required; and if necessary these earnings should be so applied. The ground on which the petitioners desire to bond (instead of using such moneys) is that the moneys should be applied to payment of the bonded creditors of the company, in discharge of interest. We esteem it wise, if necessary, to allow such interest to go unpaid, rather than to pay it by means of borrowing money — -which may tend to mislead creditors and others respecting the actual condition of the road and its earnings. It must be borne in mind that the court's custody of this property is not likely to continue much longer. The foreclosure proceeding ha sheen running for eighteen months, and it should reach its close without unnecessary delay; and the court expects it to do so. The modern practice prevailing to some extent, elsewhere, of transferring corporate property to the custody of the courts to be thus held and managed for an indefinite period of years, to suit the convenience of parties, whereby general creditors and stockholders are kept at bay, I regard as a mischievous innovation. I have no doubt, the petitioners are fully satisfied of the wisdom of the measure they suggest, and that they are actuated by a sincere desire to promote the best interests of the road. We do not. however, agree with them in this matter, and must be governed by our own judgment.