United States v. Santa Inez Co.

On April 15, 1933, Whitney Estate Company, a corporation, hereafter called Whitney, had outstanding $1,175,000 of bonds secured by a first mortgage on real property owned by Whitney. The mortgage was in favor of American Trust Company, as trustee. Some of the bonds matured on April 15, 1933. On that date Whitney defaulted in the payment of the principal amount of those bonds and in the payment of interest on all the bonds. The default was never cured. On April 15,. 1933, and at all pertinent times thereafter,' the value of the mortgaged property was substantially less than the principal amount of the outstanding bonds.

On or about June 1, 1933, a committee was formed 1 for the purpose of safeguarding the interests of the bondholders. Thereafter, pursuant to a deposit agreement, $1,115,000 of the bonds were deposited with the committee by the holders thereof, and certificates of deposit representing such bonds were issued by the committee to such bondholders. One such bondholder was appellee, Santa Inez Company, a corporation, which owned $136,000 of the deposited bonds, having purchased them for $59,421.25.

In January, 1934, the committee formulated a plan whereby the mortgaged…