Majority
p. 577PRONICK v. METROPOLITAN TRUST CO. (Supreme Court, Appellate Division, First Department. December 6, 1901.) The following is the opinion of the court below (LBVENTRITT, J.): “The plaintiff rests his cause of action on the terms of the eighth clause of the mortgage, and his right to an inspection of the statements of other years is dependent on the language of that clause, together with its reasonable implication. Relief is demanded against the trustee under the terms of the instrument creating the trust, and not by virtue of any inherent relation existing between a trustee and the cestui. The mortgage, which, for the purposes of this case, is the final measure of the trustee’s duties (Hollister v. Stewart, 111 N. Y. 644 , 651, 19 N. E. 782 ; 19 Am. & Eng. Enc. Law, 732), contains no express provision granting an inspection of the interst statements to the bondholders, but surely an implied one, authorizing it between the 1st and 30th days of September of each year, as that is the period during which the requisite number of bondholders may, through the defendant, object, in the manner prescribed by the mortgage, to the interest rate, and after which the rate becomes final and unassailable except for fraud. It is clear to me, however, that, under the terms of the instrument, the implied right to inspect is limited to the statement for the current year, inasmuch as the object contemplated by filing the statement with the trustee is to permit an objection to the interest rate for that year only. In the absence of a provision of the mortgage by which the railway company is to file with the trustee this annual statement, no right to an inspection could arise in the bondholders, and the right, therefore, that has arisen by virtue of the presence of a provision, is to be measured by its reasonable intent. The plaintiff, who has been a bondholder since 1897, should have protected himself by demanding an inspection for each year during the month of September. Even had he become a bondholder only during the year in which he
Headnote
1. Mortgages—Bonds—Interest—Statement op Interest — Inspection by Bondholders.Where the mortgage securing bonds of a railroad company provides that between the 1st and 30th of September in each year the railroad company shall file with the trustee for the bondholders a statement of earnings, etc., and the rate of interest to be paid on the bonds, and that during that period a certain number of bondholders may object, in a manner prescribed by the mortgage, to the interest and rate, there is an implied grant of a right on the part of the bondholders to an inspection of the interest statement between the 1st and 30th of September.
2. Same—Time for Inspection.
The right to inspect the statement is limited to the statement for the current year, and a bondholder cannot compel the trustee to exhibit statements for prior years.
Appeal from special term, New York county.
Suit by Joseph Pronick against the Metropolitan Trust Company to compel defendant, as trustee for the holders of bonds of the Central of Georgia Railway Company, to exhibit to plaintiff the interest statements made by the railroad company to the bondholders for the years 1898 and 1899. A clause of the mortgage securing the bonds provided that the railroad company should before the 1st of September of each year furnish the trustee with a statement showing the amount of the earnings and income of the previous fiscal year, and of the rate of interest to be determined to be payable on such bonds, and provided for the publication of the rate of interest determined, and that the ascertainment and declaration by the railroad company should be final as between the parties, but that between the 1st and 30th of September a certain number of bondholders might object, in a manner prescribed by the mortgage, to the interest rate. Suit dismissed, and complainant appeals.
Affirmed.
p. 578demanded the inspection of prior statements, nevertheless he would be deemed charged with the knowledge of his predecessor in interest. In this case the plaintiff presents nothing to the court as a court of equity to call for an exercise of its inherent power to compel disclosure between trustee and cestui. Without showing any reason or object, he demands relief based solely on the implied terms of the mortgage. These do not warrant it. Complaint dismissed.” Argued before VAN BRUNT, P. J., and McLAUGHEIN, PATTERSON, O’BRIEN, and LAUGHLIN, JJ.
N. Bijur, for appellant.
H. Parsons, for respondent.
Judgment affirmed, with costs, on opinion of court below.
Cases cited
- Hollister v. Stewart 111 N. Y. 644 at 651, 19 p. 577