Guaranty Trust Co. v. Minneapolis & St. LR Co.

• Decision Date: 08 January 1929
• Docket Number: 368,No. 299,290,367,455,456,460.,299
• Parties: GUARANTY TRUST CO. OF NEW YORK v. MINNEAPOLIS & ST. L. R. CO. et al., and six other cases.
• Court: U.S. District Court — District of Minnesota

33 F.2d 512 (1928)

GUARANTY TRUST CO. OF NEW YORK

v.

MINNEAPOLIS & ST. L. R. CO. et al., and six other cases.

Nos. 299, 290, 367, 368, 455, 456, 460.

District Court, D. Minnesota, Fourth Division.

November 10, 1928.

On Settlement of Final Decree, January 8, 1929.

COPYRIGHT MATERIAL OMITTED

Davis, Polk, Wardwell, Gardiner & Reed, Edwin S. S. Sunderland, and Thos. O'Gorman FitzGibbon, all of New York City, and Kellogg, Morgan, Chase, Carter & Headley and Warren S. Carter, all of St. Paul, Minn., for complainant Guaranty Trust Co.

Cobb, Hoke, Benson, Krause & Faegre, of Minneapolis, Minn., for complainant Minneapolis Steel & Machinery Co.

Washburn, Bailey & Mitchell, of Duluth, Minn., for Intervener Duluth Boiler Works et al.

Fowler, Carlson, Furber & Johnson, of Minneapolis, Minn., for Intervener H. H. Sheriff et al.

Mortimer H. Boutelle, of Minneapolis, Minn., for Intervener Webster Lumber Co.

White & Case and Jesse E. Waid, all of New York City and Kingman, Cross, Morley & Cant, and Kenneth Taylor, all of Minneapolis, Minn., for New York Trust Co. and Bennett Committee.

Larkin, Rathbone & Perry, Henry V. Poor and James L. Banks, Jr., all of New York City, and F. G. Ingersoll, of St. Paul, Minn., for Central Union Trust Co.

Alexander & Green and James H. McIntosh, all of New York City, and Doherty, Rumble, Bunn & Butler, of St. Paul, Minn., for Bankers' Trust Co.

Taylor, Blanc, Capron & Marsh, of New York City, and Boyesen, Otis & Faricy, of St. Paul, Minn., for Farmers' Loan & Trust Co. Charles W. Bunn and D. F. Lyons, both of St. Paul, Minn., for Northern Pac. Ry. Co.

Cadwalader, Wickersham & Taft, William Lloyd Kitchel and Paxton Blair, all of New York City, and Sanborn, Graves & Andre, William G. Graves, and J. Neil Morton, all of St. Paul, Minn., for Perkins Committee.

Cook, Nathan & Lehman and Frederick F. Greenman, all of New York City, and O'Brien, Horn & Stringer, of St. Paul, Minn., for Bache Committee.

Donald Evans, of Des Moines, Iowa, for Minneapolis & St. L. R. Co.

M. M. Joyce, of Minneapolis, Minn., for Receiver of Minneapolis & St. L. R. Co.

BOOTH, Circuit Judge.

This is a hearing on exceptions to the report of the special master covering six mortgage foreclosure cases, to wit: In Equity No. 299, Guaranty Trust Company of New York, as Trustee under the Refunding and Extension Mortgage of the Minneapolis & St. Louis Railroad Company, dated January 1, 1912, v. Minneapolis & St. Louis Railroad Company et al.; In Equity No. 367, Central Union Trust Company of New York, as Trustee under the First and Refunding Mortgage of the Iowa Central Railway Company, dated March 1, 1901, v. Minneapolis & St. Louis Railroad Company et al.; In Equity No. 368, Central Union Trust Company of New York, as Trustee under the First and Refunding Mortgage of the Minneapolis & St. Louis Railroad Company, dated March 1, 1899, v. Minneapolis & St. Louis Railroad Company et al.; In Equity No. 455, Bankers' Trust Company, as Trustee under the First Mortgage of the Iowa Central Railway Company, dated August 1, 1888, v. Minneapolis & St. Louis Railroad Company et al.; In Equity No. 456, New York Trust Company, as Trustee under the First Consolidated Mortgage of the Minneapolis & St. Louis Railroad Company, dated November 2, 1894, v. Minneapolis & St. Louis Railroad Company, et al.; In Equity No. 460, Central Union Trust Company of New York, as Trustee under the First Mortgage of Des Moines & Fort Dodge Railroad Company, dated January 1, 1905, v. Minneapolis & St. Louis Railroad Company, et al.

The mortgages in foreclosure all cover some portion of the railroad system of the Minneapolis & St. Louis Railroad Company.

The special master was appointed in each of the several causes, but, inasmuch as the evidence in the cases was largely interwoven, a consolidated report was made with the consent and for the convenience of all parties interested.

The findings of the special master touching the validity of each of the six mortgages in question, the particular line or lines of railway, and other real estate covered by each, the defaults occurring under each mortgage, the amounts due upon each, and the conclusion that there should be sales of the mortgaged property under each of the mortgage foreclosures respectively, are all practically assented to by the several parties. The disposition made by the special master of the Keithsburg bridge near Keithsburg, Ill., on the line of the Iowa Central, and the disposition of the White Bear Branch of about 13 miles of railway extending from White Bear to East Minneapolis, is questioned by the parties immediately interested in those properties respectively. But the main controversy is between the various mortgagees relative to the allocation of the equipment made by the special master to the several mortgages. To the special master's findings in respect to this matter more than 100 exceptions have been taken. These numerous exceptions may, however, be grouped around a comparatively few questions.

A bare outline of the history of the railroad system, together with a few of the more important dates, will tend to clarify the discussion of the questions involved. The original company was incorporated under a special act of the Legislature of the Territory of Minnesota, dated March 3, 1853, under the name Minnesota Western Railroad Company. The name was changed in 1870 by authority of the Legislature to Minneapolis & St. Louis Railway Company. In the present litigation this company is called Minneapolis Company No. 1. By February 1, 1877, it had acquired a line of road extending from Minneapolis, Minn., to Albert Lea, Minn., and thence to the state line between Minnesota and Iowa, a distance of approximately 121 miles. On that day the company made a mortgage to the Farmers' Loan & Trust Company to secure bonds amounting to $1,100,000, of which $950,000 are outstanding. This mortgage is called in the present litigation the Merriam Junction-Albert Lea mortgage. It is the only one of the seven mortgages now on parts or on the whole of the system which is not now in foreclosure. This mortgage covered the line of railroad running from Minneapolis to Albert Lea, and thence to the Iowa-Minnesota state line; also the line of railroad running from White Bear Lake Junction to East Minneapolis; also other property.

In April, 1881, Minneapolis & St. Louis Railway Company No. 1 and three other railroad companies, viz.: Minnesota & Iowa Southern, Minneapolis & Duluth, Ft. Dodge & Ft. Ridgely, consolidated their properties, stock, and franchises by authority of the Legislature, forming a new company under the laws of Minnesota and Iowa, but still under the name Minneapolis & St. Louis Railway Company. This company is called in the present litigation Minneapolis Company No. 2.

June 28, 1888, a receiver was appointed of the properties of Minneapolis Company No. 2 by the state district courts of Hennepin county, Minn., and of Webster county, Iowa, in the foreclosure suits brought by Seibert, trustee of the Improvement and Equipment mortgage which had been executed by said company October 12, 1882. The property was sold October 11, 1894, under foreclosure decree and purchased by F. P. Olcott for a committee. Final decree was entered October 31, 1894. The assignees of Olcott organized a new corporation under the laws of Minnesota, with the name of Minneapolis & St. Louis Railroad Company. This is called in the present litigation Minneapolis Company No. 3.

Under date of November 2, 1894, Minneapolis Company No. 3 executed what is known as the First Consolidated mortgage. This mortgage covered as a first lien lines of railroad then owned by the company, approximately 245 miles in length; and, as a subordinate lien, the remaining lines of railroad and other property owned by the company, but subject to the Merriam Junction-Albert Lea mortgage as to the property covered by the latter. The First Consolidated mortgage authorized bonds to the amount of $10,000,000, but only $5,282,000 were issued, and are now outstanding. This is one of the six mortgages now in foreclosure.

January 19, 1895, Minneapolis Company No. 3 conveyed so much of its line of railway and property as was located in Iowa to the Minneapolis & St. Louis Railroad & Telegraph Company, a newly formed corporation of Iowa.

February 1, 1895, the two last named companies by articles of consolidation conveyed all their respective lines of railway, franchises, and properties to a new company formed under the laws of the states of Minnesota and Iowa, and named the Minneapolis & St. Louis Railroad Company. This company is called in the present litigation Minneapolis Company No. 4.

March 1, 1899, Minneapolis Company No. 4 executed its mortgage known as the Minneapolis & St. Louis First and Refunding mortgage. Of the $25,000,000 bonds authorized, $13,244,000 were issued and are outstanding. This mortgage covered as a first lien a line of railway running from Morton in the state of Minnesota to Watertown in the state of South Dakota, a distance of about 123 miles; also a line of railway running from Winthrop in the state of Minnesota to Storm Lake in the state of Iowa, a distance of about 153 miles. It also covered as a subordinate lien the remaining lines of railway owned by the company. This is also one of the six mortgages in foreclosure.

January 1, 1912, Minneapolis Company No. 4 acquired by purchase the lines of railway of the Iowa Central Railway Company, together with its franchises, equipment, and other property. The principal lines of railway thus acquired extended from the state line between Minnesota and Iowa to Oskaloosa, and thence to Albia, in Iowa; also from Oskaloosa to Iowa Junction near Peoria, Ill. There were also numerous branches. The total mileage was approximately 503 miles. These lines of railway of the Iowa Central Railway Company were subject to two mortgages: The Iowa Central First, dated August 1, 1888, under...