Columbia Gas & Electric Co. v. Knickerbocker Trust Co. ( 1912 )

Dowling, J. (dissenting):

As we are concerned solely with the interpretation to be placed upon the provisions for a sinking fund contained in the mortgage itself and cannot construct a new one for them, I am unable to agree with the conclusions reached by the court herein. The sinking fund could be applied at the election of the plaintiff in any one of three ways: (1) By leaving it with the trustee at interest; (2) by using it for the redemption of bonds; (3) by investing it in other securities approved by the trustee, including an investment in bonds issued under the mortgage.

The first and third methods would have produced a sum sufficient to pay off the bonds in full at maturity. The second demonstrably would not if the redemption were made as soon as payments from the fund occurred. But that is a defect in the plan with which we are not concerned. It seems evident to me that the contingency of an inadequate fund was foreseen, for there is a provision that “all sinking fund moneys on hand at the maturity of the bonds issued hereunder shall be applied to the payment thereof at par and accrued interest.”

But what was done when the amount of bonds in question of the issue for gas purposes was redeemed was not to invest the sinking fund therein but to absolutely pay off the bonds, for the agreed statement of facts sets forth that the bonds in question were “purchased, redeemed and canceled,” which leads, it seems to me, to the irresistible conclusion that the bonds were no longer outstanding. A canceled bond ceased to be an obligation of the corporation and is as naught. Therefore, on January 1, 1912, deducting these canceled bonds, there were outstanding bonds to the amount of $1,181,500. Under the provisions of article 3, section 1, the plaintiff was to pay to the trustee on January 1, 1912, an amount equal to four per cent upon the entire amount of bonds which should have been issued and outstanding on that date. While more had been issued as the result of cancellations, the description in the conjunctive was answered by only the amount of $1,181,500 in bonds, for that was the total sum then outstanding, and upon that the percentage should be computed. I believe that judgment should follow so determining, without.costs.

Judgment ordered in accordance with opinion, without costs. Order to be settled on notice.