8
FEDERAL REPORTER, vol. 41.
conduct to allege that the insured did not comply with the requirements' . There must be a decree awarding one-third of the fund to defendant Cappellaiand the residue to the defendant Julius Kratzsch, with costs against Miss Cappella.
of the association.,
TRUST Co.
'II.
MISSOURI, K. & T. Ry. Co. et al,
(Circuit Court, D. Kansas. December 23,lSS9.) 1. RAn,ROAD COMPANIES-MoRTGAGE FORECLOSURE-RECEIVERS-ExTENSION OF PowERa.
Where a railroad is in the hands of receivers pending suits of 10reclosure and settlement of the priority of liens, it is proper, on the application of a lienholder priority, to,extend the receive1'8hip, as to such claim, over the portion of t.he road. on which the priority is claimed. A,motion to consolid.ate three foreclosure suits, where all are not ripe for decree, nothing can be for the purpose of a hearing, will be denied.
2. SAME-MoTION TO CONSOLIDATE SUITS.
3. SAME-LEAVE TO FILE CRoss-BILL.
Leave to file a cross-bill in 8 suit of foreclosure, where it appears that the purpose is to Iljeoure, between an alleged debtor and the mortgagor. an accounting not neeessaITto the determination of the suit, will be denied. Anlorder'may be maae on the receivers for the payment of expenses incurred by a in a suit of foreclosure. where the mortgage makes provision for such expenses. . The, JIl ,ortgaged property ,being insufficient to pay the mortgages, an order cannot be liiy.d,e for allowance of counsel fees of the mortgagor, to be paid out of money in thecharids of the receivers.
4. SAME-,-ALLOWANCE TO MORTGAGEE FOR EXPENSES.
5. SAME.:...A'l'TORNEY'S FEES OF MORTGAGOR·
6.
SA,M&-tLEASE OF ANOTItER: ROAD-NOTICE TO MORTGAGEES.
Tlje courthas power, on consulting the receivers, and without notice to the mortgagees; 'to oi-der the lease of another road which is found necessary to the profitable management of the mortgaged property. In Ii fdreclosure against a corporation, tbe legal title bein.e; in an appl1.catidn to bring in its grantor as a defendant will be denied. mortgagor, '
7. SAME"",pARTIEB.
Simon Sterne, Charles F.. Beach, Jr., aI).dL. B. Wheat, for the Missouri, Kansas & Texa.'l Railway Company. Wheeler H. Peckham and Rossington, Smith &: Dallas, for the Union Trust Company. Alexander &: Green, (William W. Green, of counsel,) for the Mercantile Trust Company. , Dillon &:Swayru, (A. L. Williams, of counsel,) for George J. Gould and Russell Sage,., trustees. Alexander ,G. Cochran, (Winslow S. Pierce, of counsel,) for the Missouri Pacific Railway Company. BREWER, C; J. In these foreclosure cases, during the last sb months, have accumulated several motions and applications, which, by consent
In Equity. Rep. 2210
On: bill for foreclosure.
:D'or former report, see 36 Fed.
MERCANTILE TRUST. co.
".
MISSOURI, K. & T. RY. CO.
9
of counsel, have been passed for hearing lrom time to time, until week before last, when they were all separately argued and presented. I shall notice them one by one, and briefly state my conclusions. In the order appointing receivers, they were directed to keep their accounts so as to show ,the earnings and expenses of the separate divisions, and the auditor was thereafter orally instructed to keep the accounts on a mileage basis. The equity of such a basis, as between the northern and southern divisions, having been challenged, in May last I appointed a committee to report an equitable basis ther.efor. It did make a report, and exceptions thereto were filed by the two trust companies. At the hearing last week DO one seemed inclined to call this matter ulJ. Neithe'r trust company pressed its exceptions. I notified counsel that 1 would make some order. I think the basis reported by the committee just and equitable; and Mon May 22, 1889, in the order appointing the conimittee, I directed that the accounts from and after,April!, 1889, should, upon the final determination by this court of a true and equitable basis between such divisions, be kept and stated upon such basis, and a'8no reasons have been presented that the basis reported by the committee is .not just and equitable, an order will be entered that the exceptions will be overruled, the report approved, and the accounts from April 1, 1889, keptsnd stated oli that basis. Another matter is the application of the Missouri, Kansas' & TexaS Railway Company to bring in as a defendant the Missouri, Kansas & Texas Extension Railway Company. This application will be denied:. The present defendant holds the legal title; and in the foreclosure of mortgage it is generally enough to have the mortgagee and the holder of the legal title parties, without bringing in a grantor of such title. All questions as to the amounts of the various liens, and the portions of the 'road upon which they rest, can be settled without the presence of the extension company; and therefore it were useless to delay fortha sake of bringing it in. Another matter is the application of the Union Trust Company to have the receivership extended in its behalf to 94 miles of road in Texas. The basis of this application is found in the amended bill and exhibits thereto attached. Upon the papers as thus presented, it would seem as though that trust company had a lien upon these miles; and therefore it is fitting that the receivership be extended as applied for, in order that, if the fact and priority of its lien be finally determined,' and there be any surplus earnings derived from this portion of the road, they may be awarded to it. Of course, such an order carries noadjudicatiOll aato . the of the claim; nor, considering the lateness of this application, ' will the receivers make any change in their accounts. Another matter is this: There is a motion to consolidate the three cases pending in this con-rtfor foreclosures of different mortgages given by the railway company. Nothing can be gained by consolidatiOla, for the purposes of hearing. Whether consolidation could be had· for purposes of decree and sale is a matter not necessary now for determination. That the court has power to consolidate cases situated as these are, I have·
10
FEDERAL Rl1JPORTER,
nodotibtj ,and, if all were now ripe' for decree, my impression is that ,equity would require a consolidation. But the cases are not ripe for decree, and there is no certaintyBS to when either one will be. If one bedelll-yed, while anotherisspeededdt maybe that consolidation will neverbe'properj for the mQr-tgagoo, who is promptought not to suffer for the delay Qf one who is a laggard:., ,The motion to consolidate will therefore be denied, with leave to renew the same when either case is ripe for deoree.i ';,Another !matter: Leave is :asked by the Miasouri, Kansas & Texas Railway Company to file a against the Missouri Pacific Railway 'Company and the trust rl'hiscross-bill seeks an accounting with the Missouri Pacific Railway, Company, a decree terminating the lea.sewith;the Missouri Pacific; Railway Company, and an adjustment betweeni thei trUst companies of :their liens. Such a is not necessary fortha ,protection of the rights, of the Missouri, Kansas & Texas Railw.ay:.company; would tend to delay;and:istherefore improper. All ,matters,betweeh,the trust companies, as to the extent Qftheir liens and the portions offoad subject Can be fully, settled without a crossbill. It would, be strange if a'irUortgagor, could delay his mortgagee while he proceeds to' establish: lin"accounting with an alleged debtor. If the Missouri Pacific Railway Company owes the Missouri, Kansas, & Texas ,Railway'JCompany anything, it.shouldbe sought.:by an original 'actionl:\ Andrwhile there is some ::plausibility in the claim that there should be a11' affirmative decree against the Missouri Pacific· Railway Com;pany, lease, yet: that is a matiter of special interest to the mortgagees, and it is safe to"tr1.lst the matter to them. Their mortgages Were prior :in: time to the lease, aoo'jof course, paramount; and'a decree of foreclosure rendered in. theirfavor against the Missouri Pacific Rail way Company will :bar it of any pretense ofright founded thereon. Generally 'speaking, in,reference to this andt.other matters, a court should not, in the foreclosure of a mortgage, unnecessarily incumber the record with parties oT.questions.', .Sofaras.possible:without injustice to any) the simple matter()f the foreclosurEls should be, attended to. ,Other matters and other ,rights shouldibe relegated ,to other·suits, so that the foreclosure can be :had as directly and speedily as :possible. ' . 'Another mattel':is this: Application is made by the Union Trust Com'lpan)" for ,an to it for expenses already made, and services in ,tho.!prosecutioh .of:this suit its trust. The trust;peed ,provides fOI1 ,the payment., of. these expenses, as :welbas compensa..tion for the.meution of the trust. An order will thetefore be entered ,directing 'the; :teceivers, out Jiloneys on hand, to pay over to the' Union Trust Company $5,000 OIl account of expenses and services. :,n .Another! matterds this: Application is made by the Missouri. Kansas ,&Texas Rlillway Company fOT: an,a:llowance out of funds in the hands' 'lOf ,the: rreceivers; f(>r thepaynientlo,f its counsel. TbatJhei'e is much on by the:railwaycompany,and,that the services of counsel iare easily worth the sum that is asked for, I have no doubt; and ·,it'wduld give me great pleasure to! sbstain the application, if lcc:>uld see
MERCANTILE
/rBUBT
,00. ".
:UISSOI!rRl'j It. .\ T. BY: CO.
II
any legal justification therefoT. By a mortgage ,the bOdy of the property is pledged for the payment of the mortgage. When that mortgage i,s being foreclosed and a receiver is appointed, the income of that property becomes also appropriated to the satisfaction of the mortgage. Now, whatever may be done in the way of arrangement and reorganization, it is very clear that upon a sale this property would not bring the mortgage debt. Far from it. to appropriate moneys in the hands of the receivers to the payment of the mortgagor's debts-and his counsel fees are his debts-would be to take money that is legally pledged and appropriated to the satisfaction of the mortgage; and that, too, when it is known that all thus pledged and appropriated is insufficient to pay the mortgage debt. It issuggeeted that certain securities were trans'" ferred, by the :voluntary act of the railway company, to the receivers; and that is urged as a reasou why this appropriation should bama.de. Two answers are obvious:' J!lirst. No funds have been realized from those securities, and it is not certain that any ever Win: be. To take funds out of the hands of the receivers, derived from the earnings of the road, would be a forced loan on account of those securities, with no certainty of rEtpayment. Secondly. It is a disputed question whether those securities are not also subject to the mortgage lien. So, while it would give me great pleasure to make this allowance, and I have thought over the <lues. tion fora long time, it having heensuggested last spring, I cann<>tsatisfy myself that there is any legal justification for making such appropriation out of the·funds in the hands of the receivers, and the application must be denied. A final matter that 1 shall consider is the motion of the trust companies to set aside the order for the leasing of the Kansas City & Pacific Railroad. 'The motion is based solely on the ground of a want of'p61Ver, and the lack of notice to the trust companies; and it is earnestly insisted that a court, in the management of a trust property through rebeivers, has no power to risk that property in new enterprises. and that themortl gagees and owners of the property are entitled to be heard before any such use of -their property is attempted. It is important that the exact situation should be understood, as well as exactly what was done. Prior to the appoiritmentof the receivers, the railway comlJany had been operated by the Miss()uri Pacific Railway Company, for many years, under a lea!le. Its lines did not touch Kansas City, St. Louis, or Chicago, the three great cities of the west, from which its business was to be The St.Louis 'and Kansas City business reached its lines only over the tracks of the Missouri Pacific, the lessee road. A large amount of business came froin Kansas City. It could continue its arrangements with the Missouri Pacific, (ir it could make arrangements with other roads for bringing that business to its lines. It was the duty of thereooivers to seek to do that' bttsiness in the best luannerpossible for the property they had charge of, and to increase that business as much as possible. The Missouri Kansas Oity & Southeri1,,the Fort Scott,:and the Kansas City &:; Pacific. all furnished means of bringing that business onto its linti.· With the first··three· roads ·it could .make ·traffic 'arrange-
P$DERAL REPORTJj:R,
vol.. 41.
could lease, By arrangement with the latter it could ttlso the running of independent trains of its own into Kansas City. After considering the situation for some weeks, the receivers, in.consu.ltation with myself, belillved that the best interests of the property :would be promoted by the lease of the Kansas City & Pacific. Now, this Willi a new business in the sense that it was a new way of reaching the l{ansas Oity business; butitwaa,not new.in the sense of being a distil;lCt alld independent matter. fOl1eign to the work the road. was then doing.It is new, but in a vary different sense from the leasing of a mllDnfacturi,ng establishment i,n an eastern ;city, or the purchase of an hotel at some summer resort.: It was new; but, in a sense, it was also new,to lease.a freight qffice in St.Louis or one in. City. It was nQt a new, "distin9t, and independent enterprise, but simply a new way andlIHiijnS9fdoing that .which already being done; that is,attend., ing to, thecl\rrJn1ng Kansas City, and the south. NoW', :receivers have:hnnore under of tbecourt, sUGll:o,qtion has been approved by the supreme perfectly withf¥}ll.usel that matters of this kind are:to be up()D, rel11ctantJ,y, and olil,ly ran!'!r careful examination and deliberation; ;andYft\sometimes the of the property, indeed almost the ,oU,tEill;>usiness, ;mayt;equire something more than the mere operation trl1St property·. And"if the courts 01,ay build a railrQad, I think they,hll.ye power to lease one already built; not for the sake of entering into new Ilnd indepeQ9.ent enterprises, for the sake of more successfully carrying on the work in hand. Counsel have. not prelilsed, as a. feasorl for settipg the order; the injurious effects upon has<abeady demonstrated that it was most fa.r,f\S want of notice is concerned, the rulings of the llupreme court are, to .the effect that, givep.,the power, the lack of notice does llQtvitiatlil t;be.action.Ofcoprse, as a general thing, notice should be giv.ell; ar+dthe question of giving notice was duly considered. It ",quId fair to give notice toone pa,rty, and not toaII; and toa.ll, it ,was seen, would give knowledge of what posed to cOJIlpeting roads, who might easily, by better offers or otherwise, hav.e prevented the consllmmati\m, Hence, notfrom.a desire to do anyunderhande9.ly, or to take advantll,ge onhe ignorance of the parties but motives of bUlliness prudence" notice was with!leld. :M:y conclusion, is existed; that a lack of notice did not vitiate the action. The motion to set aside the order will be oYerruled. . . . , ,I This all tPe,matters that.were presented; fI-Ild I might, perhaps, pr:operly stop And yet, as. this is about tMJastof my official conof this property, I may be pardoned if I inp.qlge,in a of. what has been done during this reQeivership. ' stated. when the, receivers were, appointed the road had ,b,een operated, for ye.ars by the MiEisouri Pacific RailwayCompany und e.!'. aJe;J.se;ll11d practically !1-S one of the.·divisions of thfl,t system. It had nogen.era.l offic.es Or officerll, no with other roads
'TR'USTCO· .,. MISSOURI, K. & T. BY. CO.
1.8
.or'railwaysystems. The receivers' had to secure a fpllcorps oLgen-eral officers, and initiate the of this road as an independent property; and in so doing my instructions to them were-and I believe they have faithfully carried them out-to operate the road as an independent property, in no antagonism, spirit of revenge, or desire for injury, but with the simple desire to further and preserve the best interests of the property. That their administration has successful, these figures will show: The earnings for the 12 months prior to their appointment were $6,403,562.81; during the first 12 months of their appointment,.now: just finished; $7.319,317.75. Comparing August, September, and October, 1888, with the same months of 1889, we find the fQrmershow, respectively, $572,569.41, $597 ,725.70; and and the latter, $696,395. and With exception, every month in this year has shown an increase in earnings over the prior month. Not only have the earnings increased, but the prices of the bonds, also. When the receivers were appointed the 5's, 6's, and 7's sold at 54, 60, and 92, respectively; now, at 64, 74, and 109. Again, aqhe time of their appoiJ;lttpeI,lt the road-ped "vas in many places in poor condition, and the'supplies on handlimitei1'; indeed, so much so that in the summer before acorpmittee appointed by the comthe property had reported 'the necessity of an pany to expenditure of $3,000,000, to put it good condition. The, have put.up'on the'rond-16,704 tons of 63-pound steel rail, at a cost of 828,810 ne.wcross-ties,at a cost of$398,194.13; have;ballasted with rock and gravel 204 miles of road. at a cost 0[$94,638.44; hav!J C::0Dlpleted. 17huiles6f sidetrack, at a cO$t6[$63,917.09;. haVe purchased 7 passenger engines, at a cost of $62,075;25 freight engines, at of $199,987;35';' 500 coal;'c!trs, at a cost of built 11 station-houses, at a cost 0[,$54,657; have built and rebuilt 45 bridges, at a cost of $36,510; have at cost of $161,682;' hltve completed the road from Dallas toWaxahachie, upon which $144,000 had been spent before their appoint-of $187 ,73EL09j havepl1id all interest on the BooMville bridge bonds, the bonds on the Tebo Neosho and Hannibal Moberly divisions. They have not. issued a. dollar. in receivers' certificates,'l1ild,llave half a million dollars on hand. The mad is no longer II mere suhdi"'il?ion of a system, but an independent road, :with recognized future. Anyone looking on the map ca.n see at a glance that, if running arrangements for its trains out froIn Ghicagollnd .St. Louis to those it.. no" has out ,of Kansas City can be made, it will be the and south., rail.way property .west of the Mississippi;, I feel !!ure tllat the owners, when thefacts are known, will' feEll' debt of gratitude to .the the ability with which th,eyhave this property. . . : . One thing Il,lore: In the early fall the receivers began to con\!ultwith .me as :what was necessal\Y for th!'l betterment of the road dUl'ing,tpe I.directe4 them to. IJ;IaJf.6 e.stimates llnd applj()li.. present them llta time when
a
Topeka.'iThisthey did, and inoorisider-
lng'tlmse a.pplications' I. have made ordetEllooking for many improvements fOr the coIrling:12'months. In sOme of the orders I have inserted
special limitations, and'! have stated' orally to the receivers,' and now repeittin writing; that the authority given to make purchases or immilst in no case be exerCised to stich a degree as subject the prdperty to the risk'of receivers' certificates; :that they must proceed with carJ,tion, and only buy as they have money with. which to pay, or as they sea'Willcertainly be'in their hands by the time payment is due. This is aU than thibk that I need say. I turn the administratioriofthe property 'to'my successor in feelingsul'e that it is in good condition, and, believing that he will have littlework,beyond crowding the parties into a speedy foreolosureand
to
1
U
ST.
I. R. Co.".'P,J1:VEREUX, Sheriff. ' .. , ::11""
p; KanBa8.
.
December 80,1889.), f,
' '
,
, roaa S.
mtlr.oad bridge, not'Qotlll'ructedas general pur.is subjeot tolooal w.xation, and the return to the rail'assessors of the state ail II llart of the road's mileage does not exemlltit from : .IJuob ,taxation as an Ind8})endent struoture. . . .',>iA 8'rA'IlB!I'":"BoUNDARY ¥tNB BBTWBBNKANSAljAND!.:IISSOURI. .'
COMPANIES-TAXATtON-BiIDGES.
f' ,
a.SAMS-A.QT;O, CONGRESS."',
.A. 'L· .'Williams; for complainant. J.:L.G1J},patrick j for defendant.
In' Ektuitt'.
Bill to E'njoin oollection of a taX· . " .
of taxes on- 11, bridge' crossing the Missouri river 'at St., Joseph. The entire- bridge lVRsassessed by the county'll.uthorities of DortitJhan county as being 'an itidepelldent structure, and wholly within the limits of the county.' The: bridge was built under 'lispecial cbarter,"but'Mterwards became the property of the railroad con!pany, the complainant. Complainll.nt:retl :'i:rnedthe bridge'to the-railroad assessors of,the state as a part': oC its mileage, and without: wise specifying· that it was· a bridge; It\oostover half a Inillmn of dollars. is now 'worth and ifl used noHifuply'as a railroad bridge',but also
BREW1£R*: :1'., This is abiH, filed bycomplainant, to 'enjoin the colleo-