Farmers' Loan & Trust Co., Petitioner
129 U.S. 206 (1889)

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U.S. Supreme Court

Farmers' Loan & Trust Co., Petitioner, 129 U.S. 206 (1889)

Farmers' Loan and Trust Co., Petitioner

No. 4, Original

Argued December 17-18, 1888

Decided January 21, 1889

129 U.S. 206

Syllabus

An order of a circuit court of the United States in a suit in equity for the foreclosure of a mortgage upon the property of a railroad company that the receiver of the mortgaged property may borrow money and issue certificates therefor to be a first lien upon it, made after final decree of foreclosure and after appeal therefrom to this Court and after the filing of a supersedeas bond, establishes, if unreversed, the right of the holder of the certificates to a priority of payment over the mortgage bondholders, and is a final decree from which an appeal may be taken to this Court.

This was a petition for a writ of mandamus. The motion for leave to file the petition was presented October 22, 1888,

Page 129 U. S. 207

and was granted that day and a rule to show cause issued, returnable on the 3d Monday of the next November. The return was filed on the 26th of November, and argument was had on the 17th and 18th of December. The case is stated as follows by the Court in its opinion.

At the request of the Farmers' Loan & Trust Company, a rule was granted in the early part of the present term of this Court on the judges of the Circuit Court of the United States for the Northern District of Texas to show cause why a mandamus should not issue requiring them to allow an appeal and to approve a bond upon such appeal from an order of that court made in the case of that company against the Texas Central Railway Company.

The litigation to which this matter relates was commenced in that court by a bill filed by Morgan's Louisiana and Texas Railroad and Steamship Company against the Texas Central Railway Company, for the appointment of a receiver and for the sale of the property of the railway company to enforce an alleged lien. The Farmers' Loan and Trust Company afterwards became a party also, and set up, by cross-bill and otherwise, a mortgage against the railway company prior to the lien of the Morgan Company. Receivers were appointed in the progress of that suit, and a final decree rendered by the court in 1887, ordering a sale of the property and recognizing the paramount lien of the trust company to the extent of $4,000,000 and over, and holding that the claim of the original complainant was subordinate to that. Appeals were taken, accompanied by supersedeas, from the decree of foreclosure, both by the original complainant, the Morgan Company, and the railway company, which appeals are now pending in this Court on the docket.

A motion was filed here at the last term to advance the cause, but it was denied. On February 15, 1888, and after said decree of foreclosure and sale was made and after the appeal in the case from that decree was taken to this Court and a supersedeas bond filed, the receivers of the railway company presented their petition to the Circuit Court for an order

Page 129 U. S. 208

authorizing them to borrow the sum of $120,000 on certificates, the same to be a first lien on the property. The making of this order was opposed by the trust company. The matter was referred to a master to report, and on the coming in of his report, which was in favor of the petition of the receivers, their request was granted and an order was made authorizing them to expend that sum on the railway and to borrow money for this purpose, for which they were to issue certificates that should be a first lien on the entire property of the railway company, except as to $20,000 of certificates which had already been issued under another order.

The trust company, believing that this order would work a great injustice to the bondholders whom they represented, and who had the first lien on the property of the railway company, applied successively to the circuit judge and the circuit justice for the allowance of an appeal, and the approval of a bond to operate as a supersedeas which they offered, and the sufficiency of which has not been controverted.

After argument on the subject before both of these judges, they declined to either allow the appeal or approve the bond. Application was then made to this Court for a rule upon them to show cause why this appeal should not be allowed and the bond approved. The rule was granted, and the return thereto made by the circuit judge is now before us, giving the reasons why he does not think the appeal should be allowed. The question now before us is on the sufficiency of this return.

Page 129 U. S. 213

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