Lehigh Valley Coal Co. v. Girard Trust Co. , 231 Pa. 239 ( 1911 )

Opinion by

Mr. Justice Potter,

This appeal brings before us for construction the second clause of the mortgage of the Delano Land Company to the Girard Trust Company, trustee, dated December 1, 1891, to secure the payment of $1,200,000 of bonds, and providing for payments to a sinking fund. The mortgagor is required to pay to the trustee ten cents for each ton of coal shipped during each year from the mortgaged premises, and not less than $30,000 in each year. This obligation of payment to the sinking fund is limited as follows: “And when all said bonds shall have been purchased or when the amount in the hands of the trustee shall be equal to the principal and interest of the bonds then outstanding, the payments into the hands of the' party of the second part for a sinking fund, as aforesaid, shall cease.” The coal has evidently been mined more rapidly than was expected, and the payment of the minimum royalty has created a much larger fund than was anticipated; so large indeed, that an amount more than sufficient to pay off the bonds, principal and interest to date, is now in the hands of the trustee. But the bonds do not mature until 1932.

The question here involved, is whether the language of the agreement requires the payment to the trustee of an amount equal to the principal of the bonds, and the interest accrued thereon to such time; or whether it requires the payment of a sum equal to the principal of the bonds, and all the interest which may accrue thereon until the date of their maturity, r If the interpretation first suggested is correct, then the appellant has already made payments sufficient to meet the conditions. If the other suggestion is to be accepted as the proper meaning of the agreement, then a sum largely in excess of that required to pay the bonds at maturity must be paid by appellant to the trustee. The total amount of bonds now outstanding is stated as $1,082,000. It appears from the record that the amount paid in and held by the trustee in the sinking fund, in securities and cash, is now $1,093,655.08. If appellant is compelled to continue further sinking fund payments until the maturity of the bonds in 1932, the additional amount received by the trustee with the accumulated interest thereon, will be, as is estimated by the trial judge, more than $1,000,000, and the normal accumulations from the sinking fund will reach a further sum of more than $1,500,000; so that in round numbers the trustee will then have a total sum of considerably more than $3,500,000 to meet a demand for the payment at maturity of only $1,082,000 of bonds. The accumulation of such an excessive and unnecessary fund can serve no useful or wise purpose, and could hardly have been within the contemplation of the parties; nor can we see any compelling reason for the adoption of a construction of the wording of the agreement which would lead to such a result. If the plain words of the agreement required this extraordinary course to be pursued, there would be no alternative; but the provision is that payments to the sinking fund shall cease “when the amount in the hands of the trustee shall be equal to the principal and interest of the bonds then outstanding”; and this may fairly be taken to mean, the amount of the principal and interest then due and accrued upon the bonds outstanding. Especially is this true when we remember that the office of the sinking fund is to take the place, as security, of the coal mined and taken away from the mortgaged premises. If a fund sufficient to meet the principal and the accrued interest upon the bonds be always maintained in the hands of the trustee, it is all that the bondholders have any right to require. Such an amount, as above stated, is now in the hands of the trustee. Appellant through its counsel states in the printed brief of argument that it is willing that the accumulation of the income from the securities now in the sinking fund shall be added to that fund; and, if this be done, there should, in 1932, be in the hands of the trustee, a sum vastly in ¡ excess of what will be required to meet maturing bonds amounting to $1,082,000. Surely the margin from that source is quite sufficient to protect the bondholders from any reasonable contingency that may arise. The possibility of any failure to meet the payments of interest is very remote. The bondholders have the obligation of the mortgagor, or its successor, the appellant, and the further guarantee of the Lehigh Valley Railroad Company, and the security of the mortgaged premises, now shown to be worth more than 1900,000. In view of all these circumstances, we do not see that the interests of the bondholders can suffer in any way, if the appellant is relieved from making further payments to the sinking fund, provided that it continues to make payment of the interest which may from time to time become due and payable upon the outstanding bonds.

The decree of the court below dismissing the bill of the plaintiff is reversed; and the bill is reinstated; and it is further ordered and directed that a decree be entered granting to the plaintiff the relief for which it asks in the first and third prayers of the bill, which is in substance, that so long as the trustee has in the sinking fund provided by appellant, securities sufficient to pay all outstanding bonds, and while appellant continues to pay all interest due on such bonds as it accrues, it be relieved from making additional annual payments to the sinking fund; and that so long as these conditions continue, the appellee be enjoined from foreclosing the mortgage for default in the annual sinking fund payments.