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AMERICAN BRAKE SHOE & FOUNDRY CO. v. INTERBOROUGH

July 31, 1958

AMERICAN BRAKE SHOE & FOUNDRY COMPANY, Plaintiff,
v.
INTERBOROUGH RAPID TRANSIT COMPANY and Manhattan Railway Company, Bankers Trust Company as Trustee Under The Collateral Indenture Dated September 1, 1922, Defendants. APPLICATION OF UNITED STATES of America FOR the PAYMENT of Moneys BY The GUARANTY TRUST COMPANY OF NEW YORK as Agent FOR Addison S. PRATT, Special Master



The opinion of the court was delivered by: LEVET

This is an application made by the United States of America to direct The Guaranty Trust Company of New York (hereinafter called 'Guaranty') to pay certain funds now held by it as agent for Addison S. Pratt, Special Master, in the above-entitled proceeding (originally brought by the American Brake Shoe & Foundry Company) to the United States Treasury in the name and to the credit of the United States pursuant to Sections 2041 and 2042 of Title 28 U.S.C.A.

Guaranty does not oppose this application. The Attorney General of the State of New York seeks to intervene herein on behalf of the State, claiming that these funds should be turned over to the State under the New York Abandoned Property Law, § 300, subd. 1(a)(v).

Title 28 U.S.C.A. § 2041 and 2042 are as follows:

 ' § 2041. Deposit

 'All moneys paid into any court of the United States, or received by the officers thereof, in any case pending or adjudicated in such court, shall be forthwith deposited with the Treasurer of the United States or a designated depositary, in the name and to the credit of such court.

 'This section shall not prevent the delivery of any such money to the rightful owners upon security, according to agreement of parties, under the direction of the court.'

 ' § 2042. Withdrawal

 'No money deposited shall be withdrawn except by order of court.

 'In every case in which the right to withdrawn money deposited in court has been adjudicated or is not in dispute and such money has remained so deposited for at least five years unclaimed by the person entitled thereto, such court shall cause such money to be deposited in the Treasury in the name and to the credit of the United States. Any claimant entitled to any such money may, on petition to the court and upon notice to the United States attorney and full proof of the right thereto, obtain an order directing payment to him.'

 The background as to the facts here involved is set forth by William Stackpole, Assistant United States Attorney, in his affidavit sworn to August 22, 1957. The State does not differ as to facts, but, rather, as to conclusions therefrom. These facts are substantially as follows:

 (1) By an order of this court constituting a final decree of foreclosure and sale of a mortgage indenture held by The American Brake Shoe & Foundry Company, dated February 5, 1940, Addison S. Pratt, Special Master, was directed to sell property of the Interborough Rapid Transit Company (hereinafter called 'interborough') at public auction and to deposit all proceeds received by him with Guaranty, to be held subject to the order of this court. On March 11, 1940 the sale was made to the City of New York.

 (2) On March 13, 1941, funds in the aggregate amount of $ 356,692.62 were deposited with Guaranty, to be held by it for distribution to the holders of the Interborough 5% bonds, 7% notes and 6% notes. (3) The sources of the funds comprising this aggregate are set forth in an order dated March 1, 1941, made by District Judge Hulbert of this court, and are tabulated as follows: 1. Proceeds of the sale of lot 1, described in an earlier decree, paid by New York City to Guaranty "as agent of the Special Master" (see paragraph 2 of order) $190,372.81 2. Proceeds of the sale of lot 2, which had not been covered by the mortgage, paid by New York City to Guaranty "as agent of the Special Master" (see paragraph 7 of order) 48,931.20 3. Cash held by Guaranty as trustee under the First and Refunding Mortgage of Interborough (see paragraph 2 of order) 117,388.61 Total $356,692.62

 (4) Thus, of the aggregate of $ 356,692.62, only $ 239,304.01 was received by Guaranty 'as agent of the Special Master.' Nevertheless, Judge Hulbert specifically provided for the merger of these funds from both sources into one aggregate fund, which was then to be applied to the three mentioned classes of Interborough securities (see paragraph 9 of order), and from this aggregate, treated as a single fund, Guaranty was directed to make case payments of respective distributive shares to these holders.

 (5) Since the deposit of these funds with Guaranty in 1941, the bank has proceeded to make distribution to the holders of the Interborough 5% gold bonds, due January 1, 1966, of the said company's 7% notes, due September 1, 1932, and of the company's 6% notes, due October 1, 1952. (6) By reason of these distributions the balances applicable to each class of securities had diminished as of September 5, 1957 to the following figures: 5% bonds $ 9,356.12 7% ...


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