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Central Trust Co. of New York v. Manhattan Trust Co.

Supreme Court of New York, Appellate Division

May 19, 1911

CENTRAL TRUST COMPANY OF NEW YORK, as Trustee, Appellant,
v.
WEST INDIA IMPROVEMENT COMPANY and Others, Defendants, Impleaded with MANHATTAN TRUST COMPANY, Respondent.

Page 561

APPEAL by the plaintiff, the Central Trust Company of New York, as trustee, from so much of a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 7th day of February, 1910, upon the report of a referee, as awards to the plaintiff nominal damages only, and also from an order entered in said clerk's office on the 29th day of June, 1909, denying the plaintiff's motion for an extra allowance.

COUNSEL

William D. Guthrie, for the appellant.

Alfred B. Thacher, for the respondent.

SCOTT, J.:

This action, which has now been at issue for many years, involves primarily the conflicting claims of plaintiff, as trustee, and the defendant Manhattan Trust Company to certain securities pledged with both by the West India Improvement Company. The principal issue, as to the right to the possession of the securities, having finally been determined in plaintiff's favor, there remains only to be considered the amount of damages,

Page 562

if any, to which plaintiff is entitled, for having been kept out of possession. Incidentally there is also the question whether or not plaintiff is entitled to an extra allowance.

In order to adequately comprehend the questions involved in this appeal it is necessary to refer, as briefly as possible, to the facts found by this referee. On August 28, 1889, the West India Improvement Company succeeded to all the rights and took the place of one Frederick Wesson and his associates under an agreement between said Wesson and the government of the British Colony of Jamaica, embodied in a law passed by the Governor and Legislative Council of said colony, known as the 'Jamaica Railway Company's Law, 1889.' The West India Improvement Company thereby became the 'promoter' under said law, and as such undertook to buy an existing government railway in the island of Jamaica and to build and equip certain extensions thereto, and to transfer both the existing railway and the extensions to a Jamaica corporation to be known as 'Jamaica Railway Company.' The improvement company was to pay to the Jamaica government for the existing railway a sum in cash and £700,000, out of a total issue of £800,000 of the second mortgage bonds of the proposed Jamaica Railway Company. It was to receive in return for the cash payment and for its efforts as 'promoter' the four following items of property, viz.: 1. The remaining £100,000 of second mortgage bonds, which were to be held, however, by the Jamaica government, as security for the performance of the 'promoter's' undertaking, and were to be transferred to said promoter only upon the completion and acceptance of all the extensions and their equipment.

2. Thirty thousand pounds of the first mortgage bonds of the new Jamaica Railway Company. These were to be issued to the improvement company only after the expiration of twelve months from the date of the completion and acceptance of the extensions, and then only in case they had not been sold within that time to defray the cost of repairs and replacements which the improvement company might be under obligation to make.

3. The entire issue of the common stock of the new Jamaica Railway Company to be delivered in installments as the work progressed.

Page 563

4. One square mile of land for every mile of extension completed, to be held free from taxation for a term of years.

The improvement company's right to the second mortgage bonds and to the stock was subject to forfeiture under certain conditions which did not arise and need not be considered. The stock was also subject to repudiation by a decree of court upon a petition of the Jamaica government for the winding up of the railway company. Such a decree was actually entered on April 11, 1900. The improvement company was to be reimbursed from time to time for the expense of building the extensions out of the proceeds of the first mortgage bonds of the new railway company. In order to raise money to start work and to make the cash payment to the Jamaica government the improvement company, on September 1, 1889, executed a mortgage to plaintiff, as trustee, to secure the payment of first mortgage bonds to the amount of $1,000,000, which were duly issued and negotiated. This mortgage covered all of the rights of the improvement company under its agreement with Wesson and the government of Jamaica and all the property which it had acquired, or at any time in the future might acquire, thereunder, including the right to receive, under the prescribed conditions, the £100,000 of second mortgage bonds, the £> 30,000 of first mortgage bonds, and the capital stock of the new Jamaica Railway Company. This mortgage also contained a clause forbidding the improvement company to sell, convey or dispose of any of the property covered by said mortgage, 'without the express written assent thereto of the trustee [the plaintiff herein] evidenced by said trustee joining in every such sale, conveyance or transfer.' The improvement company proceeded with the work it had undertaken so far as to make the cash payment to the Jamaica government, and to complete the extensions it had agreed to build and on ...


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