DILLON. Circuit Judge.
The consolidation of the four companies into the defendant company took place in May, 1S74. The total mortgage debt of the constituent companies at that time was the sum of $21.089.000, and .the floating debt was over $4,000,000. The [713]*713defendant company came into existence under the weiglit of this heavy indebtedness. To provide for retiring all of the bonds of the several companies and to meet the floating indebtedness, the mortgage in suit, known as the consolidated mortgage, was executed May 6th, lST-i, for the nominal sum of $28,-000,000, at seven per cent interest, payable semi-annually, on the first days of April and October. Twenty-three millions of the consolidated bonds were, by the terms of the mortgage, set apart to exchange for the divisional bonds; but very few were ever exchanged, and the main issue of bonds under the consolidated mortgage were out of the surplus of five millions authorized by that instrument to be used to provide for the general wants of the company.
Baring Brothers & Co., large owners of divisional bonds, in August, 1S74, to aid the company in meeting its floating debt, purchased sixteen hundred and twenty-three of the consolidated bonds, amounting to $1,623.-000, at seventy-one and one-half cents, currency. These bonds are still owned by this firm, of whom the Messrs. Ward, or rather Mr. Samuel G. Ward, is the American agent, with plenary powers.
As a part of the arrangement by which the sixteen hundred and twenty-three consolidated bonds were taken by the Barings, it was required that Messrs. Allen and Marquand and their friends on this side of the Atlantic should provide for an extension of the floating debt. In order to effect this, Allen and Marquand became endorsers for the company in a large amount. The company was not earning enough to extinguish the floating debt and pay all of its interest; and in February. 1870. the company, finding that the floating debt “interfered with the economy of management and depressed its securities," appealed to the bondholders to fund all of the coupons which would mature down to the last day of October. 1870.
The Barings, owners of five millions or more of the securities of the company, aided this funding scheme, on certain conditions not now materia] to notice, and it was acquiesced in and distinctly agreed to by the large mass of the bondholders. Mr. Allen and Mr. Mar-quand, respectively president and vice-president of the company, are also large owners ■of its securities. The Barings were represented in the board of directors of the company by Mr George C. Ward and by Mr. Morison. The rest of the directors seem to have been friendly to the Allen interest. In the funding scheme of February. 1S75. it was promised that on November 1st, 1870, the company would resume the payment in full of interest on all classes of its bonds, divisional and consolidated. The amount of floating liabilities had, by mistake, been under-estimated in the circular of February, 1875. which set forth the funding scheme, and the expected net earnings of the company had fallen short of the estimates.
One of the leading objects of the funding scheme was to extinguish the floating debt, but, owing to the reasons just stated, this expectation had not been realized, for, although this debt had been-reduced, it still amounted, on August 31st. 1876, to the sum of $1,702.-778.70. The efficiency of the road, however, had been well maintained; it had a full equipment, and its earnings, under adverse circumstances of an exceptional or accidental character. had constantly increased. The system of railways in Texas with which the defendant's road connected was being gradually developed, and more than compensated the company for the loss of earnings resfilting from the depression of the iron industry. The net earnings of the company were not sufficient to extinguish the floating debt, to pay' interest in full, and to maintain the road and its equipment in good condition. It was nearly or quite sufficient to pay full interest if it could all be appropriated to that end. The credit of the company was good. About $250,000 of the floating debt was due employes on back pay-rolls; in September, 1876, the men had not been paid for services performed in May. Some of the floating debt bore ten per cent, interest.
Such is a brief outline of the company's condition in the summer of 1876. Up to this time the Barings, represented by the Messrs. Ward, and the management, represented by Mr. Allen, had worked together in harmony. Unfortunately for the great interests here concerned, causes of difference gradually arose, which, in March, 1877, resulted in mutual distrust and alienation. It is not material to any legal question now presented to determine on which side the blame lay.
The duty of the court is to ascertain the legal effect on the rights of the holders of the consolidated bonds of what took place in October, 1876, between the Messrs. Ward, as the representatives of the Barings and certain other bondholders, on the one side, and the defendant company, through its officers, on the other. At this time a radical conflict of views as to the policy to be adopted by the company displayed itself. The parties were still working in concert, and we find no satisfactory proof in this record that nt this time each was not acting from a sense of duty and in entire good faith. In the situation of the company's affairs, there was ample room for difference of judgment respecting the course to be pursued. Which would prove to be the wiser, no sagacity could forecast with certainty, for it would depend upon the amount of future earnings, and upon the disposition and views of a large number of creditors, scattered over the world.
It appears, with clearness, that the purpose of the company’s officers was to commence to .pay interest in full November 1st, 1870, on the expiration of the funding plan. Mr. Allen and several of the directors strongly favored this policy and Mr. Marquand urged it with emphasis. The Messrs. Ward were of a dif[714]*714ferent opinion. They insisted that, as the earnings were not sufficient to pay the floating debt and to pay and continue the payment of interest in full, the true policy was to pay only one-half interest on the great body of the secured indebtedness, and to appropriate the rest of the net earnings to the extinguishment of the floating debt, and to maintaining the efficient condition of the property.
Several hundreds of closely-printed pages of oral evidence touching this difference of opinion, and the views and arguments of the several actors in the transaction, and as to what was intended, have been taken, in portions of which there is considerable conflict. It is not my purpose to refer to this at length, for wha.t was concluded appears in the official records of the company’s action, in the circular of President Allen of the 20th day of October, and in the letter of Mr. Samuel G. Ward of October 21st, accompanied by an abstract of Mr. Morison’s report on the condition and prospects of the road, • of date October 16th, made at the instance of Mr. Ward, and addressed to him. and in the accompanying correspondence. The oral testimony does not vary the legal effect of the record, documentary and written evidence; and it is altogether more satisfactory to make this the basis of judgment than the parol evidence of statements and intentions. To become thoroughly informed concerning the road, its condition, wants, earnings, and prospects, Mr. Samuel G. Ward, for himself, but mainly for the foreign bondholders whose interests he represented, of whom the Barings were the largest, in September, 1S76, procured Mr. Morison, a civil engineer of large experience and a director in the company, to make an examination of the road and report the result. Mr. Morison, who had the confidence of Mr. Ward, made such examination and a report dated October 12th, 187G. This report gives a de-toiled view of the company’s situation; and. after referring to the condition of the floating debt and the probable earnings of the road, says: “Under these circumstances, an attempt to pay these maturing obligations in full would lead to a rapid increase, instead of diminution, in the floating debt, and must early result in disaster. While, however, it would appear very unwise to attempt to pay this interest in full, the revenues of the road are sufficient for the payment of a portion oí if. The wisest course., in my judgment, would be to continue to pay in full the interest upon the St. Louis and Iron Mountain Railroad first mortgage bonds, and upon the funded interest certificates; to pay one-half of the interest coupons of the several other unconsolidated bonds, while action as regards the consolidated mortgage bonds may safely be suspended to abide the developments of this winter’s traffic.” (The earliest interest on the consolidated bonds would not fall due until April 1st, 1S77.1
His report concluded with this recommendation: “Under ihe circumstances, it would appear to me most desirable to pay one-half of each coupon of the divisional bonds in ■gold as they mature, and to issue scrip for the remaining half, such scrip to be redeemed with compound interest at seven per cent before the payment of any dividend upon the stock. The coupons should have the-amount paid stamped upon them, and be placed with a trust company as security for the scrip. I see no advantage to be gained, by asking the formal approval of the bondholders to this plan, as the implied approval which the acceptance of such half payment would give would be all that is necessary. A circular should be prepared stating the circumstances and expectations of the company, and showing plainly the inability to make payment in full; it should also state that it is the belief of the directors that they will be unable to pay more than one-half of each of the four next maturing coupons, but that after that time they confidently hope to be able to resume payment in full, but it should contain no absolute pledge to that effect. as there are many contingencies attending the development of trade with a newly-settled- country, which may vitiate the -most careful calculations and overturn the best grounded hopes.”
These recommendations had the approval of the Messrs. Ward, and the report was read at the meeting of the board of directors held in the city of Kew Tork on the 12th day of October
The Allen party still insisted on the payment of interest in full as the true policy. It seemed to be admitted on all hands that the company could pay interest in full for a few months, but the Wards insisted that it could not continue to do this and do what else ought to be done, while Allen and Mar-quand and their friends in the directory, urged that what the earnings might fall short could be supplemented by the credit of the company, or by a sale of its remaining consolidated bonds, or in some other way. The Messrs. Ward were firm, and afror several meetings of the board and the executive committee, at which the subject was discussed, Mr. Allen finally yielded, and with him the executive committee. Mr. Allen, as president, prepared the circular of October 20th. above referred to, addressed to the bondholders, anil read the same to the executive committee, “who unanimously voted to issue it and to send copies to the bondholders.”
On motion of Mr. George C. Ward (a member of the executive committee), “the treasurer was authorized to prepare the proper stamps and to mark upon the coupons, as they shall be presented, the one-half payment ”
The draft of this circular had been prepared by Mr. Allen on the day before (October. noth'), and was on that day submitted to Mr. Samuel G. Ward. The draft thus submitted contained a clause providing that the [715]*715■ bondholders, on presenting their coupons, would be paid one-half in cash and be given for the unpaid half, at their option, interest-bearing certificates or consolidated mortgage bonds, or the coupons stamped as half paid. Mr. Ward objected to this provision, and it was stricken out from the draft. The draft also stated that the company would follow this course for two years, beginning with November 1st, 1S7G. This clause also was stricken out on Mr. Ward’s objecting to it, so that the draft, as finally amended, simply stated that the company would pay one-half of each coupon as presented, and fixed no time at which the company would pay its coupons in full.
The circular of the president, as thus amended, and as authorized to be issued by the executive committee, is dated October 20th, 1S76, addressed “to the bondholders,” and. after stating in detail the financial condition and prospects of the company, concludes as follows:
“The floating debt of the company on the 1st of January next will amount to about $1,595,000. It is a variable quantity, more or less of which must always remain with a railroad in operation. About $750,000 of it should be paid in 1S77. The interest which will accrue in 1877 upon all kinds of indebtedness, including gold premium, will be about $2,150,000. New constructions, steel rails, and other necessary improvements for the maintenance of the property in good order and efficiency, may require near twelve per cent of the earnings. The operating and general expenses and taxes will consume about fifty per cent. Without a large increase of earnings, therefore, it becomes apparent that the time for the resumption of the payment of the interest in full, with a fair expectation of maintaining it, has not yet arrived. The company will, therefore, pay, on and after November 1st. 1S7G, all the interest, as heretofore, on the first mortgage (St. Louis and Iron Mountain Railroad bonds), and all interest upon all classes of the funded certificates, and half the interest coupons on other classes of bonds as they mature and are presented for payment. The object of this arrangement is to enable the company the more completely to effect the purpose of the circular of February 23d, 1S75, by the continued reduction of debts, and thereby to save a large amount in interest now paid on supply bills, and to effect an important saving in the cost of labor by prompt payment, and to make the renewals, betterments, and constructions which experience may prove to be necessary for the economical and profitable operation of the road.”
This circular, it will be perceived, required no consent of the bondholders, or action on their part; nor did it state how long the plan of half payment would continue.
The Messrs. Ward and the officers of the company were still acting in concert: and it was understood that Mr. Samuel G. Ward, as the main representative of the largest bondholders, would give the plan adopted (which was in reality his own) his public approval, and thus aid in securing the approval of the bondholders at large.
With this view Mr. Ward caused Mr. Morison to make a careful abstract of his report, with some modifications, which was to be sent to the bondholders with a circular-letter of Mr. Ward approving the plan embodied in the above-mentioned circular of President Allen. The portion of the original report of Mr. Morison, above quoted in the abstract prepared to be sent to the bondholders. was changed so as to read as follows:
“This amount of interest will manifestly be materially in excess of any earnings which we can hope for. If the interest on the St. Louis and Iron Mountain Railroad first mortgage bonds and the funded interest certificates were to be paid in full (as had already been done), and one-half of the interest be paid upon the other classes of bonds, the floating debt would be gradually extinguished, and within a reasonable length of time the company might hope to see itself relieved from its embarrassments. Under this course the amount of interest to be paid from this date to and including January 1st, 1877, would be about $330,000; this amount covers the gold premium and the floating debt interest. Should the estimated earnings be realized, there would remain $420,-000, which would suffice to bring up the payroll arrears and leave a surplus to be applied to other items of the extended and current debts. The interest to be paid for 1S77, including gold premium and .floating debt interest, would be about $1,350,000, which would leave a balance of $400,000 from the estimated net revenue, a portion of which would probably be needed for special better-ments to meet the growth of traffic, and the remainder could be applied to the floating debt. Before the close of 1S7S. if the lioped-for growth of business is realized, the full payment of interest could probably be resumed.”
It will be seen that this differs materially from the recommendations of the original report to Mr. Ward. That recommended half interest on the divisional bonds for tlie four next maturing coupons reserving action for the present as respects the consolidated bonds. The original report provided for the issue of scrip for the unpaid half of the four coupons, with a pledge of the coupons in trust as security for the scrip. This provision is omitted from the abstract of the report. The original report expressly named four coupons; this the abstract omits, and in lieu of it contains the vague statement that “before the close of 1S7S * * * full payment of interest can probably be resumed.”
Mr. Ward prefaced this abstract of Mr. Morison’s report with this letter:
“New York, October 21st. 1S7C. The continued depression of the busini ss of the eoun-[716]*716try lias caused sucli a disappointment as to the receipts wiiich it seemed reasonable to anticipate for the St. Louis, Iron Mountain, and Southern Railway Company, at the time when the funding arrangement was adopted, as to make it apparent to the directors that it would be premature at this time to resume payment of interest in full. The plan which has been proposed by them of paying one-half the interest in cash, continuing payment in full on the first mortgage bonds and the funding certificates, and at the same time continuing the reduction of the floating debt, and developing the business of the road, in connection with the newly-finished lines leading to it, has had my careful consideration and approval, as the representative of several of the largest bondholders. Since the circular of February, 1875, I have caused thorough examination of tlte accounts of the road to be made by Mr. William E. Warren; and Mr. George S. Morison has, at my request, made a careful and repeated personal examination of the condition and business of the road; the results of which, up to the latest dates, will be found in his accompanying report to me. With these facts before me, and taking into account the large and growing receipts of the road, at a period of the greatest depression, it has seemed to me that the directors have found the wisest solution of the problem that presents itself, in paying such portion of the interest as can be met consistently with the continued reduction of the floating debt, while keeping up the efficient condition of the property. Samuel G. Ward.”
This letter and the abstract of Mr. Morison’s report were printed and sent by Mr. Ward to his principals and to his personal friends among the bondholders; and President Alien’s circular of October 20th was likewise printed and sent by the company's officers to all of the holder’s of divisional and consolidated bonds.
On November 1st. the semi-annual coupons of thirty-five dollars each of the divisional second mortgage bonds of the St. Louis and Iron Mountain Railroad Company fell due. They were presented by the holders, who were paid one-half thereof, and the following words being stamped on the coupons: “Paid $17.50 on this coupon, November, 1870,” they were returned to the respective holders. The Messrs. Ward presented coupons owned by themselves and others, and received half payment in this manner without objection. Coupons matured December 1st on the divisional mortgage of the Cairo, Arkansas, and Texas Railroad Company, and also on the Arkansas branch, which were presented and one-half paid, and the coupons stamped as above and retu. ned to the holders. On January 1st. 1S77, coupons for interest on the bonds of the Cairo and Fulton divisional mortgage fell due. and on beiug presented one-half was paid and stamped thereon and returned to the holders. In March, 1877, if not before, a misunderstanding arose between Mr. Samuel G. Ward and Mr. Allen, and when the coupons of the con» solidated bonds fell due, April 1st, 1877, Mr. Ward demanded payment in full; the company offered to pay one-half, which was refused, and a bill of foreclosure filed in this court by the trustee, April 6th, 1877, asking for a receiver, which was refused. LCase No. 14,402.]
This bill was afterwards voluntarily dismissed by the trustee, and soon afterwards, viz., August 9th, 1877, the jjreseut bill was filed, based on the defaults above mentioned, in paying only one-half of the amount of the coupons on the divisional mortgages and one-half of the coupons due April 1st on the consolidated mortgage, one-half having subsequently been paid and received by the Messrs. Ward under protest, reserving all rights. Meanwhile, since October, 1876, the company has been acting upon the theory that it was only bound to pay one-half, and has been appropriating the residue of ¡he net income to the reduction of the floating debt, giving preference, as the Messrs. Ward complain, to the extinguishment of debts on which Mr. Allen and Mr. Marquand were in-dorsors, rather than to the payment of ar-roarages on the pay-rolls.
Upon these facts three questions of law arise: 1. Was there a valid agreement, founded upon a sufficient consideration, whereby the payment of one-half interest on the bonds, both divisional and consolidated, 'so far as owned or controlled by the Messrs. Ward, was extended to November 1st. 1878? 2. Whether what was thus said’and done by the Messrs. Ward in October, 1876, created as to them and their principals an equitable estoppel to instigate and maintain a foreclosure bill prior to November 1st, 1878? 3. If there was no such valid agreement or es-toppel. what is the legal effect on the rights of the bondholders of the transactions of October, 1876?
Briefly of these quest’ons in their order: It is to be recollected that the divisional bonds (excluding the Iron Mountain firsts, which were to be paid in full), amounted to about $20,000,00:). in some of which the Barings and Wards had but little interest, and in none of which, perhaps, a controlling interest. They did own and control a majority of the consolidated bonds then outstanding. What was finally concluded put the divisional bonds and the consolidated bonds on the same footing.
The Messrs. Ward refused to make any separate arrangement as respects bonds owned and controlled by’ them different from the other bondholders. There is nothing in the circular of President Allen of October 20th, and nothing in what was done under it, from which it can be claimed that bondholders not represented by the Messrs. Ward had made an agreement to extend the time for the payment of interest. They still hold [717]*717their coupons; they have accepted nothing in the place of them; they have'simply received one-half of the amount due thereon.
When we consider that the circular of the president (the only act of the company from which any agreement on its part is to be deduced) asks for no extension for any specified time, and for uo agreement of any kind from the bondholder, but simply says, “The company will, therefore, pay, on and after November 1st, 187(1, * * *• half the interest coupons on other classes of bonds as they mature and are presented for payment." it is difficult to see any solid foundation for the claim that there was a contract for a definite extension. This is made more evident from the fact that the words in the original draft of the circular looking to- a specific agreement tor two years from November 1st, 1876, were stricken out at the instance of Mr. Ward before the circular was adopted by the executive committee.
The question as to the estoppel upon the Messrs. Ward and those whom they represent. is one of much more difficulty, it is clear that the company adopted the plan of half payment of interest against the judgment of its officers, and upon the urgent requirement oí Mr. Ward; and that it had appropriated, between that time and April 1st, its earnings to the reduct ion of the unsecured debts and purposes otliei than it would have done if it had expected to resume full payment of interest as early as April, 1877.
It is, perhaps, clear enough that it was hoped that the bondholders, at least those represented by the Messrs. Ward, would be content to receive half interest, if tito company should continue to desire the indulgence. for the period of two years; but the difficulty is that the Messrs. Ward made no distinct or specific promise to that effect. The company was free to pay in full at any time it might find itself able to do so.
It is also equally clear that if Mr. Allen and the executive committee had anticipated the trouble that afterwards arose, and that full payment would be demanded on and after April next, they would never have consented to the plan urged by Mr. Ward. Grant all this, and that Mr. Ward’s subsequent course disappoints expectations which his previous course might justly raise, still this falls' short of establishing that he has estopped himself and his principals to enforce the payment of interest on their bonds for two years, when it is evident that such an estoppel would not exist against any other bondholders. All of • the bonds were put upon the same footing, and if there is an estoppel upon the Wards and the Barings as respects the consolidated bonds, it equally applies to the divisional bonds owned by them; the result of which would be that a portion of the bondholders would be disabled during two years from enforcing the payment of interest, and the rest not. This was never intended. It is also true that the changed course of the Messrs. Ward in April, 1877, and subsequently, in demanding full payment of the interest on the consolidated bonds, would, if it had been complied with, have worked injustice to the holders of divisional bonds who had, through the influence of the Messrs. Ward, accepted, in November, December, and January, half payment of their coupons, ■ although these had a prior lien to the consolidated bonds. To pay on the latter interest in full, and only half on the others having a superior lien, would be manifestly inequitable to the holders of the divisional bonds.
The estoppel for the period of two years from November 1st, 1S76, fails, because the time during which the payment of half interest should be made was left indefinite. Although this point was not adjudged in the application for the receiver, yet such seems to have been the impression that the transaction, which was then fully brought to view, made upon Mr. Justice Miller, who says that the plan of the Messrs. Ward contemplated “that half of each coupon represented should be paid, relying upon the leniency of the holders for such extension of time as should be necessary or useful.” LCase No. 14,402.]
In my view, the true legal effect of what was done by the Messrs. Ward in October, 1870, was, as respects bonds owned or controlled by them, to consent to the company's paying only half interest for an indefinite time, supposed not to exceed two £ears. They were not bound to wait two years, because they.did not so agree or promise; but within that time they could not suddenly terminate the plan which had been entered on, without reasonable or fair notice to the compauy; and. therefore, it is doubtful whether the first bill filed could have been maintained. Fears that it could not, led, perhaps, to its voluntary dismissal.
But on April fid, 1S77. and constantly thereafter, the company and other bondholders had notice that, so far as the Messrs. Ward and those whom they represented were concerned, the half payment plan was at an end; that full payment of interest would thereafter be, as in fact it was, demanded, and the present suit was not commenced until August, 1S77.
The principle on which Albert v. Grosvenor Inv. Co., L. R. 3 Q. B. 123, was decided is applicable here. In that case, on the 28th of August, the day on which, by the terms of the mortgage, an installment was due, the wife of the mortgagor asked the mortgagee to wait until the 11th of September, to which he assented. The mortgage provided that on “default"’ of payment at the time covenanted, the mortgagee might take possession and sell. On the 7th of September the mortgagee took forcible possession and sold the property. In an action by the mortgagor against the mortgagee to recover damages, it was held that there was no “default,” and that a default could not be [718]*718predicated of an omission to pay at the covenant day when that “omission was with the concurrence of the other party.” In this view Lord Chief Justice Cockburn, and Lush, J., concurred, the latter observing: “Default must mean something wrongful, some omission to do that which ought to have been done by one of the parties, and this cannot be when the omission to make payment has the concurrence of the other party. It is true that the defendants (mortgagees) were not bound by this license or giving of time, as there was no consideration, and they might have revoked it at any time and demanded payment of the installment, and if it had not been paid there would have been a default.”
The only failure in the payment of interest on the consolidated mortgage which had occurred when the present bill was filed was in respect of the April, 1877, coupons. The defaults in the payment of interest on the divisional bonds, from the very nature of the case, are not available in this suit (which is solely on the consolidated mortgage) as the basis of a decree of foreclosure. The complainant has not paid the divisional bondholders, so as to become subrogated to their rights. And if it had, such rights pertain and are limited to separate divisions of the road, and must be asserted against the specific property mortgaged. We cannot decree to the complainant in this suit any sum in respect of the defaults on the divisional mortgages, since it has no right to receive the money due on those mortgages; and the court on this bill has no authority to order the sale of specific property covered by the several divisional mortgages:
The complainant, as the trustee representing all the bondholders, is only entitled to a decree as respects the non-payment of interest on the consolidated mortgage. There is no provision in the instrument that a default in the payment of interest will cause the principal sum to fall due; and hence, there can in no event be a foreclosure excepi for the interest due and unpaid on the consolidated mortgage. Judge Treat is of the opinion that the transactions of October, 1S76, work an equitable estoppel on the promoters of this suit to maintain it, and, if desired, we will finally certify a division of opinion on this point to the supreme court. Meanwhile, the cause will stand for further hearing as to the contested bonds, or be referred to a master to state an account and report.