Page:Federal Reporter, 1st Series, Volume 8.djvu/144

 130 FEDERAL REPORTER. ' �issued, and are entitled to the full benefit of the mortgage security. Twenty-three, equal to $11,500, are now in the Iiands of the receiver, subject to the ordera of the court, and can at any time be cancelled and retired. The rest are disputed, principally on the ground that, instead of being used to extinguish the floating debt and retire the un- secured bonds, they were pledged to the floating-debt holders as collat- eral security, whereby the debt was perpetuated rather than got out of the way, • For this reason it is contended that the bonds so held are not entitled to an equal lien under the mortgage with those issued so as to bring about an actual extinguishment of old debts. �This makes it necessary to determine what bonds the mortgage really does secure. The controversy is between the bondholders, as to the extent of their respective rights, and, for th© purposes of this pai-t of the case, it may be admitted that if bonds in the hands of first takers or their assignees with notice were not regularly issued, their right to the beneats of the mortgage may be disputed by the other parties interested in the security. �The mortgage is not to the unsecured bondholders, or floating-debt holders, or to trustees for their security. It was ruade to secure bonds, the proceeds of which were to be applied to extinguish the one class of debts and retire the other. The mode in which this was to be done is not provided for. AU that is lef t to the discretion of the company or its officers. No crediter can demand the bonds upon such terms as he may dictate. He must submit to what the company requires, or get no advantage from what has been done. His specifie rights under the mortgage all depend on the bargain he inakes with the com- pany in that behalf. He may, if the company consents, exchange his claims for bonds, dollar for dollar, or less, or more ; but until Bome arrangement has been made by which a bond secured by the mortgage becomes in some way connected with the unsecured bonds he owns, or the part of the floating debt he holds, he remains just where he was before the mortgage was made. �The original plan was to dispose of the bonds, to be paid for in part by unsecured bonds and part cash. In this way, unsecured bonds would be actually retired by the transaction, and money obtained which could be used to pay the floating debt. At first the sales were at 80 j)er cent., but afterwards at 75. The original time limited for taking advantage of this offer was one year, but this was extended. This plan was only partially successful. About $670,000 of the unsecured bonds are now out, and but little money was actually realized with which to take up the floating debt. In the then financial condition ��� �