St Joseph St Co v. Humphreys

Decision Date25 April 1892
Citation12 S.Ct. 795,145 U.S. 105,36 L.Ed. 690
PartiesST. JOSEPH & ST. L. R. CO. v. HUMPHREYS et al
CourtU.S. Supreme Court

STATEMENT BY MR. CHIEF JUSTICE FULLER.

June 1, 1874, the St. Joseph & St. Louis Railroad Company leased its road to the St. Louis, Kansas City & Northern Railroad Company for the full term of 99 years. The lessee agreed to pay the lessor on the 1st days of March and September in each year, as a rental, 30 per cent. of the gross earnings of said line, and it also agreed that such perentage should not be in any one year less than $20,000; and agreed to pay all taxes, and put the road in good running order, and keep it in good condition during the whole of said term. The lease also contained the following provision:

'But, in case default shall be made by the party of the second part in the payment of the rents herein reserved, and the same or any part thereof shall remain unpaid for the space of thirty days from and after the day when the same shall become due and payable, or if said party of the second part shall fail to comply with its covenants to pay taxes aforesaid, or in all things keep and observe all and every the covenants, stipulations, and agreements herein contained and on its part to be observed and kept, then it shall be lawful for the said party of the first part to enter upon and take possession of all the property hereby leased, together with all the improvements thereon constructed, and to have again, repossess, and enjoy the same as in the first instance; and upon such default in the payments of rent or taxes or the breach of any such covenants as aforesaid this lease shall cease, terminate, and be forfeited, at the option of the party of the first part.'

The St. Louis Company took possession of the leased line, and operated it until November, 1879, at which time that company consolidated with the Wabash Railway Company, the consolidated company taking the name of the Wabash, St. Louis & Pacific Railway Company. On the 1st of June, 1880, the Wabash Company executed to the Central Trust Company of New York and James Cheney a mortgage on its entire system, to secure what were known as its 'general mortgage bonds,' of which $17,000,000 were issued; and subsequently a mortgage to the Iron Mountain Company to indemnify that company for certain advances; and also a collateral trust mortgage. On May 27, 1884, the Wabash Company filed in the circuit court of the United States for the eastern district of Missouri its bill of complaint, which has already been sufficiently set forth in the preceding case, (No. 223,) Railroad Co. v. Humphreys, 12 Sup. Ct. Rep. 787, and upon the filing of which receivers were appointed as therein detailed.

On June 15, 1884, the Wabash Company filed by leave of court an amended bill of complaint, setting forth with greater particularity the various lines of railway belonging to its system, the liens and incumbrances thereon, and the financial condition of the company, and stating the lease between the St. Joseph Company and the St. Louis, Kansas City & Northern Railway Company, and the consolidation between the latter company and the Wabash Company.

On June 26, 1884, the receivers asked instructions from the court, but the St. Joseph Company is not mentioned in their petition of that date, nor in the master's report thereon. The petition states, however that the Wabash Railway Company and the St. Louis, Kansas City & Northern were possessed of certain valuable lines of railroad, which were subject to mortgages and deeds of trust, and gives a list of them, not including the St. Joseph; and, after excluding certain lines or divisions whose earnings had not theretofore been sufficient to pay operating expenses, cost of maintenance, and interest, says that from the incoming rents and profits of the property now in their possession under the court's former order they believe they can, until otherwise directed, pay the expenses, cost, and interest on bonds or other obligations secured by mortgages or deeds of trust on the lines or divisions that were owned or possessed either by the Wabash or by the St. Louis, Kansas City & Northern before their consolidation, which lines they thought would continue to yield sufficient to make such payments.

The order of appointment directed, among other things, that the receivers should pay rental on all leased lines 'out of the income that shall come into their hands from the operation of said railroad or otherwise,' and 'keep such accounts as may be necessary to show the source from which all such income and revenues shall be derived, with reference to the interests of all parties herein and the expenditures by them made.' By its confirmation of the master's report, June 28, 1884, the court ordered the receivers to keep the accounts of the earnings and incomes from, as well as the accounts of, all the operating expenses, cost of maintennance, and taxes of certain enumerated lines, not including the St. Joseph Company, separately, and report quarterly in respect thereto. On Sep- tember 20, 1884, the court announced, upon an application for instructions with respect to payment of interest on that branch line of the Wabash system known as the 'Havana Division,' that the earnings belonging to other branches in the consolidated system would not be taken to support concerns that did not pay running expenses.

November 25, 1884, the St. Joseph Company filed its intervening petition, asking for the payment to it of rentals claimed to be due from the receivers from March 1, 1884, to August 31, 1884, together with a penalty of one tenth of 1 per cent. a day as provided by the terms of the lease, and on January 2, 1885, filed its amended intervening petition, setting up the lease, the general mortgage, and the indemnity mortgage, and charging violations by the Wabash Company of its covenants in respect of payment of taxes, keeping up repairs, etc.

The petition further averred the filing of the bill the the appointment of the receivers, and that 'said receivers are now using and operating said road, and have recognized and adopted said lease, and have elected to enter thereunder upon the premises therein demised, and to avail themselves of the powers, privileges, and rights therein conferred on said lessee.'

Petitioner further stated that on the 1st day of September, 1884, there was due to it for rent $27,420.79, of which $11,441.14 had accrued during the time the receivers had been operating the road; and that the taxes for 1884 were unpaid. It was alleged upon belief that its road was 'absolutely necessary to the proper and profitable operation of the said Wabash, St. Louis & Pacific Railway,' and that it was 'a most valuable feeder to the main line of the Wabash Company.'

And, after various other averments, petitioner prayed that the court direct the receivers to pay the rent then accrued and unpaid forthwith, together with the penalty, and the taxes for 1884; and that they immediately proceed to put the leased property in thorough repair; and for general relief.

On the 11th of February, 1885, the receivers filed a demur- rer and amended answer to the intervening petition, and, the demurrer being overruled, further answered February 21st, denying that they had recognized or adopted the lease or elected to enter thereunder upon the demised property. They denied that the St. Joseph road was in any wise necessary to the profitable operation of the Wabash Railway, or was a valuable feeder to its main line. They asserted that from May 29, 1884, to November 30, 1884, inclusive, the deficit and loss occasioned by the operation of the St. Joseph road amounted to $51,180.09, and averred that it would be manifestly unjust and inequitable to require them to take the earnings and profits of other branches of the system, and pay the same in discharge of the rents accruing to petitioner. They further alleged that the net benefit from the business derived from petitioner's road accruing to the other lines operated by the receivers was far less than the outlay, and prayed the advice of the court whether they should any longer continue in the occupation and operation of the road, or adopt the lease, or deliver the road over to the petitioner, and, in the event that the petitioner should refuse to receive it, whether they should abandon the road. On March 20, 1885, the receivers applied to the court for instructions with respect to the cancellation of the St. Joseph lease,...

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