Colonial Trust Company's

Citations

• 241 Pa. 554
• 88 A. 798
• 1913 Pa. LEXIS 816

Syllabus

<p>Mortgages — Trusts and trustees — Corporation mortgages — Construction — Bonds—Payment pro rata.</p> <p>The trustee under a mortgage given by a corporation to secure an issue of bonds showed by its final account the receipt of certain moneys, proceeds of securities which by the terms of the mortgage were to be held for the equal pro rata benefit of the holders of bonds issued under the mortgage “without preference or priority of one bond over another,” and the payment of these moneys to the mortgagor, to be used for the cancellation of certain bonds unissued and in the latter’s treasury. It appeared upon the audit that the trustee knew that other bonds were outstanding in the hands of third parties, to whom it gave no notice of this transaction. Held, that it was the duty of the trustee to use the fund in its hands for the pro rata protection of all the bondholders who were entitled to the security of the mortgage, and it was bound to ascertain how many of such bonds were issued and outstanding in the hands of the holders for value at the time, and that having made voluntary distribution without application to court, it was properly to be surcharged with the sum so paid, in favor of the holders of outstanding bonds who proved their claim at the audit.</p>