Watson v. Chicago, Rock Island & Pacific Railroad

This action was brought by the plaintiff in the City Court of the City of New York to recover a judgment on a $1,000 bond. The bond sued upon was one of a series of $71,353,000 issued under a trust agreement dated August 1, 1902, between the defendant, Chicago, Rock Island & Pacific Railroad Company, and Central Trust Company, as trustee. Defaults in the payment of interest on the bonds having occurred, the Central Trust Company, as trustee, declared all of the outstanding bonds due and payable, and, as provided by the terms and provisions of said agreement, brought an action of foreclosure in the United States District Court for the Southern District of New York. Proper proceedings having been had in said action, a decree of foreclosure was entered in said court on the 10th day of October, 1914. The decree declared all of the $71,353,000 outstanding bonds due and payable, and directed payment into court of said amount, and in default of such payment within 10 days from the entry of said decree directed that the collateral pledged under said trust agreement should be sold, and that in case of a deficiency after such sale a judgment should be entered for such deficiency and execution had therefor.

After all of the foregoing proceedings had been had in the said action, the plaintiff herein commenced her action in the City Court to recover judgment upon the one bond in issue in this action. After trial of the issues, the court directed a verdict for the plaintiff, subject to the opinion of the court, afterwards rendered. While unquestionably the holder of one of the bonds would have a right to bring action to recover past-due interest, the bond containing an absolute promise to pay interest on dates specifically stated therein (10 Cyc. 1179; Marlor v. Texas & C. R. Co. [C. C.] 19 Fed. 867 , 868), no provision is made in the bond that upon default of interest the principal shall become due at the election of the holder of the bond. On the contrary, the bond provides that “for the * * * rights of the holders of said bonds * * * reference is to be made to said trust agreement,” and the right to elect that the principal shall become due before November 1, 2002, the stipulated due date, is, by the trust agreement, limited to the trustee (sections 9 and 14 of article V of the mortgage). Plaintiff has therefore no cause of action, as an individual holder, to recover the principal of the bond before the year 2002, the' date fixed by the terms of the bond for the payment thereof.

Judgment must be reversed, and complaint dismissed, with costs to appellant in this court and the court below.

BIJUR, J., concurs.