79 F. 471 | 8th Cir. | 1897
This is an appeal from an order sustaining a demurrer to an intervening petition in an equity suit, and directing a dismissal of the same, on the ground that the averments thereof did not entitle the interveners to the relief prayed for. The facts disclosed by the intervening petition (hereafter termed the "complaint”) are substantially these: Addie Veatch and Emma Henderson, who are the appellants and interveners, respectively recovered judgments against the Union Pacific, Denver & Gulf Railway Company (hereafter termed the ^Denver & Gulf Company”), on June 1, 1895, each judgment being for the sum of $5,000. The suits in which the judgments were obtained were brought to recover the damages sustained on account of the death of two persons, to wit, William E. Nye, who was the son of Addie Yeatch, and Harry Henderson, who was the husband of Emma Henderson, both of whom were employés of the Denver & Gulf Company, the one being a fireman, and the other an engineer, and both of whom were killed on or about July 27, 1893, in a railroad accident which occurred on the railroad of said Denver & Gulf Company, through its fault and negligence, by reason of the fall of a defective railroad bridge or trestle. The railroad of the Denver & Gulf Company was controlled'by the Union Pacific Railway Company, under a contract with the former company, the terms of which are not shown. On or about October 12, 1893, succeeding the accident, receivers were appointed for the Union Pacific Railway Company, who forthwith assumed charge of the Denver & Gulf Railroad, as a part of the Union Pacific System, and operated it until December 18, 1893. At the latter date, in a suit which had been brought by John Evans, a stockholder of the Denver & Gulf Company, against said company, in the circuit court of the United States for the district of Colorado, Prank Trumbull was appointed receiver of the latter company, and forthwith took possession of all its property, and thereafter operated its road under said appointment until October 31, 1894, when he was further appointed receiver of the same property in a suit brought by the American Loan & Trust Company, as trustee of certain mortgage bondholders, against the Denver & Gulf Company, to foreclose the consolidated mortgage on its road. After the latter suit was brought, and on October 31, 1894, an order was entered in said suit consolidating it with the previous suit which had been brought by John Evans, as a .stockholder of the Denver & Gulf Company.
The interveners based their right to an order directing Prank Trumbull, the receiver, to pay their judgments out of the funds in his hands, on five different grounds, which were stated in detail in the complaint. The first was, in substance, that, as the claims on which the judgments were founded accrued within a period of 90 days before the Denver & Gulf Railway first passed into the hands of a receiver, the claims should be treated as ordinary operating expenses, and paid in preference to the mortgage bonds, which the
In so far as the interveners’ claims for allowances against funds in the hands of the receiver are based on the first ground above stated, they are concluded by the decision of this court in Trust Co. v. Riley, 36 U. S. App. 100, 16 C. C. A. 610, and 70 Fed. 32, and the order applied for must be refused. We held in that case, after a review of all the decisions, that a claim for damages for personal injuries which were the result of a negligent act of the mortgagor company, committed before the appointnient of a receiver in a suit brought to foreclose a mortgage, is not a preferential claim, which is entitled to be paid out of the income or the corpus of the mortgaged property, to the exclusion of the mortgage debt. We are satisfied that the views expressed in that decision are sound, and fully sustained by the authorities cited. Without indulging in further discussion of the subject, therefore, we shall content ourselves with what was said in that case.
Neither are we able to decide that the interveners showed that they were entitled to the relief prayed for by reason of the alleged diversion of income, described in the fourth and fifth paragraphs of the complaint. It appears from the allegations of the complaint that under the provisions of the consolidated mortgage, in which the American Loan & Trust Company was named as trustee, the trustee was authorized, in case of a default occurring under the mortgage, to take possession of the mortgaged property; and, in the event of so doing, it was empowered, among other things, “to make
There is e;ven less reason, we think, for holding that the alleged e*xpe;nditures of income; by 1 lie; TJniem Paedfic Railway Company prior to October 12, 1893, constitute a diversion of funds, which would have authorized the; edreuit cemrt to direct the; payment f: of the interveners’ judginemts out of current income, "if no contract had existeei between the Union Pacific Railway Company and the* Denver & Gulf Company relative to the operation of the roael of the; latter company, it is obvious that the Denver & Gulf Company weiuld have been at liberty to expend its inceune in improving and exteneiing its roadbed, pure.hasing rolling stoe:k, and paying its fixed charges. It: e*ould not have; been said that it was guilty of any wrong in making such use of its income, in place of using it: to discharge* liabilities for injuries to persons or property. The Denver & Gulf Company is not here complaining that the Union Paedfic Railway Company has violated that: provisiem of its contract for the operation, of the Denver & Gulf Railroad whiedi requireei the appropriation of the* gross income*, first, te> (he* payment of operating e*xpenses; and we* think that it only lies in the mouth of that cennpany to make such a complaint. We are unable* to hold, therefore;, that: the breach of the provision of the alleged agreement in the respects stated in the complaint constitutes a diversion of funds, which entitle's the inter vemers to relief in this proceeding.
The seconel greiund of re;e;em*ry slated in the* complaint, as heretofore explahmel; seems to be* that, whe*n the injurie*» we;re sustained on whie-h the* inte*r renews" e-laims are founeled, the; Demver & Gulf Railroad was being ope*rate*d by the Union Pacific Railway Company as the agent of the bondhe>lele*rs, who are represented in this proceeding by the American Loan & Trust. Company. It: is charged, in effect, that, because of such operation of the road by an
While we entertain the views heretofore expressed concerning the first, second, fourth, and fifth grounds of recovery or causes of action stated in the intervening complaint, yet we have not been able