68 F. 24 | 8th Cir. | 1895
This is an appeal from a decree dismissing a bill brought in September, 1887, by the appellants, the • Peninsular Iron Company, a corporation, and others, to set aside the decree of foreclosure of a mortgage for $2,700,000 on the St. Louis, Keokuk & Northwestern Railway Company, rendered in the circuit court for the Southern district of Iowa on July 7, 1887, and to establish and foreclose a superior lien to that of the $2,700,000 mortgage upon the property of this railroad company. The facts out of which this controversy arises are substantially these:
On January 27, 1875, in the circuit court for the Eastern district of Missouri, a decree of foreclosure of two mortgages on the Mississippi Valley & Western Railway Company was rendered, which directed the sale of the property of that corporation to be made by a master on April 14, 1875. This railway company had constructed a railroad from Keokuk, Iowa, to Hannibal, Mo., and had expended a large amount of money towards its extension from Hannibal to Louisiana, a distance of 26 miles. This extension was, after the mastex^s sale, completed by the Keokuk Company, which was formed by the purchasers, and the railroad was extended from Louisiana to Clarksville, 10 miles, and afterwards from thence to St. Peters, a distance of 43 miles, so that it ultimately became about 134 miles in length. On March 27, 1875, certain of the lienholders and bondholders of the Mississippi Valley Railway Company appointed one A. B. Stone their agent and trustee to purchase the property of the company at the foreclosur-e sale, and to hold or dispose of it as a majority in interest of those who made this appointment, and joined in ‘the purchase through him, should direct. Those who joined in this purchase agreed with each other and with their agent, Stone,
Differences had arisen between the parties interested in the original purchase, as to their respective interests, and thereupon Stone brought a suit in the district court of Lee county, in the state of Iowa, against all the parties interested in the original purchase, including the appellants in this suit, and against all the parties to whom the Keokuk Company had become indebted, to determine the respective interests of these parties in the property, and to obtain his discharge as their trustee. In his petition he pleaded all the facts to which we have referred, except his agreement with the Adrian parties, of June 8, 1875, that such an amount of the notes secured by. the mortgage for $600,000 as would equal the money they furnished towards the purchase should be held by Eells as collateral security for the repayment of the money to them. He expressly stated in his petition, however, that the notes and mortgage for $600,000 had been made; that they had not been used, and that the notes had been canceled; and that the mortgage had been discharged. He set forth in detail the amount of cash and the amount of bonds and liens which each of the purchasers had furnished to him to make the purchase, and the amount of expense incurred by him for the Keokuk Company in equipping and extending the railroad. He pleaded that, of the $2,700,000 of bonds, bonds to the
On August 21,1877, the appellant Wilcox verified an answer made by the assignees, of the Adrian Car Company in tha t suit, which ad-mi (ted the truth of all the allegations of this petition that are material to the issues now under consideration, and claimed a preference in the fiayment of $22,830.66 due from the old Mississippi Valley Railway Company to the car company. One of the defendants in that suit brought a suit against Stone in the state of New York, and obtained an injunction which prohibited him from proceeding with the suit in Lee county, Iowa. Thereupon, on June 9, 1878, the assignees of the car company, one of whom was the appellant Wilcox, filed a cross bill in the court in Lee county, in which they set forth the amounts, in cash, bonds, and liens, paid by each of the original purchasers; alleged that each of them was entitled to share in the property of the Keokuk Company in the same proportion that the value of their securities and cash furnished bore to the whole purchase price; that their attorneys had charged them '$0,000 for sendees in maintaining their lien against the old Mississippi Valley Railway Company, and that their fees should be paid out of the assets of the Keokuk Company before division; and prayed that the court “decree a division among the several claimants of the bonds, stocks, assets, and property of the railroad company in 1he hands of said railroad company [the Keokuk Company], or in the hands of Daniel P. Eells, trustee, as they severally may be found entitled; that they may be found to be the owners of the undivided one-ninth of all said property; and that the other claimants’may be decreed their respective interests, so that the title and ownership of said property between the said parties may be found and settled by said decree.” All the appellants in (his ease received and accepted service of a notice of the filing of this cross bill, and be
After the decree was rendered, Stone was still unable to sell the bonds, and the road to Clarksville was unable to earn much more than its operating expenses; and thereupon, as the agent of the railroad company, he proceeded to extend it to St. Peters, so that it might have a connection with St. Louis. In January, 1879, it was estimated that money to the amount of 50 per cent, of the face of the bonds would pay the debts of the company, and complete the road to St. Peters. For this purjiose, pursuant to a resolution of the board of directors of the railroad company, Stone offered to each of the appellants and to each of the other stockholders of the company, at 50 per cent, of their face value, such a proportion of the bonds of the company as their stock respectively bore to the entire capital stock of the company, on condition that, if any of them failed to purchase within 30 days, their shares of these bonds would be offered to other stockholders at the same rate, and, if not at the time bought, they would be sold at not less than that rate to any purchasers that could be found. The appellants declined to purchase any of the bonds, and Stone and others of the stockholders did purchase all of them but about 125, which the company had previously disposed of in the settlement of a claim of one Fallon. They paid for these bonds an amount sufficient to pay the debts of the company and to complete the road to St. Peters, and this amount was more than 50 per cent, of the face value of the bonds. On December 14, 1880, the appellee Perkins made a contract to purchase
The history of these railroad companies and their obligations has been long and tedious, but its review was necessary to a proper appreciation of the charneler of this suit. It is an application lo a court of equity'by a. part of the purchasers of the property of the old .Mississippi Valley & Western Railway Company at the master’s sale in 1875, who furnished about 4 per cent, of the purchase price; who have never furnished a dollar to improve the property thus purchased; who. under the decree of the district court of Lee county, received the same proportionate share of die property purchased and improved that their copurchasers in like situation received; who were offered in 1879, and who refused to buy, the bonds of die purchasing- company that extended the railroad, at a price less than their copurchasers were obliged to pay for them in order to defray the necessary expenses of completing and equipping die railroad, — ■ to obtain a decree that they have a lien for the share of the purchase price fhey furnished in 1875, on the finished railroad, which was completed and equipped, at an expense exceeding $1,300,000, after
The appellants seek to escape from this conclusion by allegations that are denied, and testimony that is contradicted. They claim that under the agreement of June 8, 1875, in which Stone promised them that Eells should hold a part of the $600,000 in notes as collateral security for the purchase money they supplied, under the terms of the sale by Stone to the Keokuk Company, which provided that the bonds and mortgage for $2,700,000 should be first used to pay and satisfy the $600,000 mortgage, and under the execution of the two mortgages, they acquired a first lien upon all the property of the Keokuk Company for the value of all the bonds, liens, and money they furnished to make the purchase, and that the holders of the bonds secured by the mortgage for $2,700,-000 took their’ rights subject to this lien, because Eells discharged the $600,000 mortgage without payment and without authority, and because the mortgage for $2,700,000 was, by the terms of the sale to the Keokuk Company, to be first used to pay the $600,000 mortgage. Their witnesses testified that £>tone and Edmunds, his attorney,
A more conclusive answer to the claim of the appellants, if that were possible, is found in the decree of the district court of Lee county rendered in 1878. Stone brought that suit to settle all questions relating to the liens and interests of all parties interested under the original purchase, and of all who had furnished money or materials on pledges of the bonds of the Keokuk Company. All of the appellants in this suit were parties to that suit. The appellant Wilcox verified one of the answers to the bill, was one of the complainants in the cross bill, and with Angel, the other active representative of the appellants,'attended and testified at the trial. Stone’s petition contained an allegation that the mortgage for $600,-000 had been made, that it had not been used, and that it had been discharged. It set forth all the debts of the Keokuk Company, and stated what bonds were pledged to secure them. It stated in detail the value of the liens and bonds and the amount of the money furnished by each of the purchasers to buy the property at the master’s sale. It prayed that'the interests of all the parties to the suit, in the property of the company might be determined; that all of is assets might be distributed among them according to their re