Texas & Pacific Railway Co. v. Marlor

Citations

• 123 U.S. 687
• 8 S. Ct. 311
• 31 L. Ed. 303
• 1887 U.S. LEXIS 2207

Syllabus

<p>ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK.</p> <p>A railroad company, in a bond issued by it, promised to pay the principal at a specified time and place, “ with interest thereon at the rate of seven per cent per annum, payable annually on the 1st day of July in each year, as provided in the mortgage hereinafter mentioned.” The bond also set forth, that the interest was secured by a mortgage lien on the net income of certain specified lines of road; and that, ‘ ‘ in case such net earnings shall not in any one year be sufticient to enable the company to pay seven per cent interest on the outstanding bonds, then scrip may, at the option of . the company, be issued for the interest.” A certificate on the bond, by the mortgage trustees, stated that the bond bore “ seven per cent interest per annum, payable yearly.” Tito mortgage stated that it was given to secure the payment of the principal and interest of the bonds “ according to the tenor thereof.” On July 1st, 1882 and 1883, the company neither paid the interest in money nor declared its election to issue scrip for the interest. Shortly after each of those days it notified the bondholders that it was not prepared to pay interest, as the earnings of the railway were not sufficient. It took no action in reference to the issue of scrip until October, 1883. In a suit by a bondholder who refused to receive the scrip, to recover the interest in money : Held,</p> <p>(1) If the company did not pay the interest in money by the interest day, it was bound to exercise, by that day, its option to pay it in scrip, and, if it did not, it became liable to the bondholders to pay the interest in money;</p> <p>(2) No demand by a bondholder was necessary, in order to entitle him to the payment of the interest in money, on the failure of the company so to exercise such option.</p>