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IN RE RICE, PETITIONER, 155 U. S. 396 (1894)

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U.S. Supreme Court

In re Rice, Petitioner, 155 U.S. 396 (1894)

In re Rice, Petitioner

No number

Submitted December 3, 1894

Decided December 17, 1894

155 U.S. 396


A party is entitled to a writ of prohibition as a matter of right where it appears that the court whose action is sought to be prohibited had clearly no jurisdiction of the cause originally, or of some collateral matter arising therein, and that he objected to the jurisdiction at the outset, and has no other remedy.

But where there is another remedy, by appeal or otherwise, or where the question of the jurisdiction of the court is doubtful or depends on facts which are not made matter of record, or where the application is made by a stranger, the granting or refusal of the writ is discretionary, and it is not obligatory where the case has gone to sentence and the want of jurisdiction does not appear on the face of the proceedings.

A writ of mandamus cannot be issued to compel the court below to decide a matter before it in a particular way or to review its judicial action had in the exercise of legitimate jurisdiction.

A writ of mandamus cannot be used to perform the office of an appeal or writ of error, even if no appeal or writ of error is given by law.

The fact that, in the administration of the assets of an insolvent corporation in the custody of receivers, summary proceedings are resorted to does chanroblesvirtualawlibrary

Page 155 U. S. 397

not in itself affect the jurisdiction of the circuit court as having proceeded in excess of its powers, and where notice has been given and hearing had, the result cannot properly be interfered with by mandamus.

Receivers of the Philadelphia & Reading Railroad and Philadelphia & Reading Coal & Iron Companies were appointed February 20, 1893, by the Circuit Court for the Eastern District of Pennsylvania, upon a bill for foreclosure filed by a holder of third preference income bonds of those companies.

Leave was subsequently granted the receivers to issue certificates for the purpose of paying wages and other preferred claims. The receivers and the railroad company filed a petition September 25, 1894, for authority to enter into an agreement for the partial readjustment of the affairs of the Philadelphia and Reading Railroad and Coal and Iron Companies, and to make the payments therein provided if the plan were carried into effect. The circuit court ordered that the petition should be heard on October 15, 1894 at 10 o'clock a.m., and that notice of the hearing should be given by advertisement in newspapers published in New York, Philadelphia, and in the London Times. At the time appointed the hearing was begun, but could not be completed by reason of the pressure of trial business, and the court suggested that, to avoid delay, and in relief of counsel, some of whom were not residents of Philadelphia, the petition might be referred to a special master, and that the arguments in the master's office might be stenographically reported, and would be considered on the coming in of the master's report as if they had been made in court. This suggestion was accepted, and thereupon the order of reference was made, and the master subsequently filed his report, including the arguments as taken down at length. Application was made for a further hearing, which was denied, the report of the master confirmed, and the order prayed for in the petition entered.

The report of the master stated that the companies

"have outstanding prior general mortgage bonds, amounting to $44,491, 188.77, bearing four percent interest, maturing semiannually, January and July 1st, which for the past eighteen months is in arrears and unpaid. The receivers, under an order

Page 155 U. S. 398

made July 6, 1893, authorizing them to issue receivers' certificates, have issued them to the amount of $3,640,000. The Philadelphia and Reading Railroad Company also owe other general, well secured indebtedness to the amount of $3,843,000, and further indebtedness, with interest, aggregating $7,533,000, for necessary equipment, for which a large part of the value thereof has been paid, leaving a valuable equity of the company therein over the said debt therefor. The receivers, upon the payment of the said secured general indebtedness, will have $10,000,000 of five percent collateral trust gold bonds of the Philadelphia and Reading Railroad Company, secured by stocks and bonds of its associated companies, which are a valuable and necessary part of its system, to dispose of for payment of the said classes of indebtedness, which, by reason of priority of liens, or value of securities pledged therefor, are entitled to a preference in the disposition of the proceeds of the said collateral trust bonds, over other indebtedness of the company. Some of the said general mortgage bondholders have combined to enforce foreclosure of their mortgage under due legal proceedings."

The report then set forth the proposed plan of readjustment, which, in brief, provided for the purchase of the overdue and maturing coupons of the general mortgage bonds of the Philadelphia and Reading Railroad Company and an extension of the time of payment for ten years from the date of each purchase, and for the sale of $10,000,000 five percent collateral trust bonds to the stockholders and junior bondholders of the company at par. Such stockholders and bondholders as were unable or unwilling to purchase the bonds at par were given the privilege of making a cash contribution by way of a gift of $3,000,000, and in that event a syndicate had been formed to take and pay for the bonds the sum of seven million dollars. In case the plan should become effective, and only upon that condition, the receivers were to pay the purchasers of the coupons, who were to extend them for ten years, a commission of two and one-half, and to the purchasers of the collateral trust bonds a like commission of two and one-half percent. If the plan chanroblesvirtualawlibrary

Page 155 U. S. 399

were carried into effect, the company would obtain an extension upon its general mortgage bonds of ten years, and sell $10,000,000 of its collateral trust bonds at par, for whether the stockholders and junior security holders purchased and paid for the bonds themselves at par, or the syndicate should take them at seventy percent, and the stockholders and junior bondholders paid the remaining thirty percent as a cash donation, the result would be the same.

The plan also provided for the creation of a voting trust, whereby the right of the stockholders to elect six managers and the president under the charter of the company was distributed among the general mortgage bondholders, the income bondholders, and the stockholders, under a system of registration of the bonds.

The readjustment agreement was to be taken in connection with a previous agreement between the general mortgage bondholders in respect of foreclosure, and it is averred that since the order complained of was entered, sufficient of the general mortgage bonds have been deposited to enable foreclosure to go forward if the readjustment plan should fail, and reorganization to be reached in that way.

The master said:

"In any event, whether of success of the scheme or of foreclosure, because of the priority of the lien of the coupons and interest of the general mortgage bonds, and the receivers' cer