APPEAL from the Circuit Court of the United States for the District of Maine. The facts are stated in the opinion of the court. Submitted on printed arguments by Mr. A. G. Stinchfield for the appellant, and by Mr. James W. Bradbury for the appellee.
The opinion of the court was delivered by: Mr. Justice Swayne delivered the opinion of the court.
The Kennebec and Portland Railroad Company was authorized to build a railroad from Portland to Augusta, both in the State of Maine.
On the 30th of April, 1850, that portion of the road between North Yarmouth and Portland, about twelve miles in length, was mortgaged to Ruel Williams, John Patten, and J. B. Carroll, trustees, to secure the payment of $202,400 advanced to the company by the cestuis que trust. The debt was represented by certificates bearing interest at the rate of ten per cent per annum.
On the 1st of November, 1850, the company mortgaged the whole line of the road to the commissioners of the sinking fund to secure $800,000 lent to the company by other parties.
On the 17th of October, 1851, the road and franchises were mortgaged to John Patten, Joseph McKeen, and M. S. Hagar, in trust to secure bonds issued by the company to the amount of $230,000, known as first mortgage bonds.
On the 15th of October, 1852, the road and franchises were mortgaged to the same trustees to secure the payment of a further issue of bonds to the amount of $250,000, known as the second mortgage bonds.
In the progress of the work on the road, the company issued certificates of preferred stock, known as old preferred stock, to the amount of $240,000. On this stock dividends of ten per cent per annum were to be paid. Two hundred thousand dollars of it in amount is averred to be still outstanding.
On the 7th of October, 1852, a proposition was made by the company to the following effect:––
The company was to waive its existing right to redeem at pleasure its road from North Yam outh to Portland, and to make it irredeemable until Nov. 1, 1870, provided the holders of the certificates of indebtedness would, by indorsement thereon, authorize the trustees, after paying the holders three per cent semiannually upon the amounts severally represented by such certificates, 'to pay over semiannually to the treasurer of the company, for the use and benefit of the company, the balance of the income (for interest) which the stockholders are now entitled to receive (viz., two per cent), to be held by him and appropriated, as far as may be required, or as the same may go, to the payment of interest to such preferred stockholders as shall surrender their old certificates of stock and receive new certificates of preferred stock bearing three per cent interest or income semiannually, in lieu of five per cent, as now stipulated; said payment of three per cent to the holders of said certificates and of the balance aforesaid to the treasurer by said trustees semiannually, to be in full of the annual income of ten per cent to which said certificate holders are now entitled.'
It was ordered by the company, that if the proposed arrangement should be made with the North Yarmouth certificate holders, the fund thereby saved should be applied in payment of the dividends accruing on the new certificates of preferred stock, as also proposed.
Authority was given to the president of the company to issue such new certificates of preferred stock, and to waive the right to redeem the North Yarmouth road until Nov. 1, 1870, the time named in the proposition.
None of the holders of the preferred stock accepted this proposition until Sept. 1, 1853. The first new certificate bears date on that day. The other certificates were issued subsequently.
On the 16th of December, 1853, the company ordered three per cent to be paid on the 1st of January then next to all the holders of the new certificates for the preferred stock.
The company became hopelessly insolvent. The trustees of the second mortgage foreclosed that mortgage. The foreclosure was perfected and became absolute in May, 1862. In November, 1862, the bondholders under that mortgage formed a new corporation, by the name of the Portland and Kennebec Company. The trustees conveyed to this company. The company went into ...