Berthold-Jennings Lumber Co. v. St. Louis, IM & S. Ry. Co.

• Decision Date: 07 November 1935
• Docket Number: No. 9945.,9945.
• Citation: 80 F.2d 32,102 ALR 688
• Parties: BERTHOLD-JENNINGS LUMBER CO. et al. v. ST. LOUIS, I. M. & S. RY. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

102 ALR 688, 80 F.2d 32 (1935)

BERTHOLD-JENNINGS LUMBER CO. et al. v. ST. LOUIS, I. M. & S. RY. CO. et al.^*

No. 9945.

Circuit Court of Appeals, Eighth Circuit.

November 7, 1935.

Lee B. Ewing, of Nevada, Mo., and Clifford B. Allen, of St. Louis, Mo., for appellants.

Thomas T. Railey and Edward J. White, both of St. Louis, Mo., for appellees.

Before STONE, GARDNER, and VAN VALKENBURGH, Circuit Judges.

GARDNER, Circuit Judge.

This is an appeal from a decree entered after hearing on certain exceptions to a report of a special master, which denied preferential payment to certain claims of appellants for overcharges made by a carrier in intrastate commerce, but which allowed them as general claims. The issues require a somewhat extended statement of the history of the litigation and the facts in connection with which the claims of appellants arose.

In 1905 (Laws 1905, p. 102), the Legislature of Missouri passed the so-called `Maximum Freight Acts," which were amended in 1907 (Laws 1907, p. 171). These acts fixed the maximum freight rates to be charged by railroads in Missouri for the transportation of certain commodities. The validity of the acts are not here in question. Numerous railroads, including the appellee St. Louis, Iron Mountain & Southern Railway, commenced actions to enjoin the enforcement of these rates on the ground that they were confiscatory and discriminatory. These actions were begun June 16, 1905, prior to the effective date of the 1905 amendment, and on June 17, 1907 a temporary injunction was granted which enjoined the enforcement of the Maximum Freight Rate Acts. The order contained provision that, "pending the further hearing and determination of this case, the complainant shall preserve and keep in existence its way bills for state freight."

On April 17, 1909, a final decree was entered permanently enjoining the enforcement of the rates. On June 16, 1913, the Supreme Court reversed the decision of the lower court. Knott et al. v. Ry. Co., 230 U.S. 474, 33 S.Ct. 975, 57 L.Ed. 1571. On February 6, 1914, the court, then the United States District Court for the Western District of Missouri, dismissed the bill of complaint of the carriers, dissolved the injunction, and provided: "But with the right of any party seeking to proceed in this court will have the right to do so. And for that purpose a master will be appointed. But those claimants who do not thus elect to come into this court will not be bound so to do by any order of this court. They are left free to go to such courts as they may select."

Nothing in the decree of 1909, nor this decree, required preservation of waybills.

During the entire period that the injunction was in force, the St. Louis, Iron Mountain & Southern Railway Company charged and collected rates for the transportation of intrastate freight pursuant to its own tariffs, which rates were higher than those permitted by the Missouri Maximum Freight Rate Acts.

On August 19, 1915, the Commonwealth Steel Company filed a creditor's bill against the St. Louis, Iron Mountain & Southern Railway Company, alleging insolvency and seeking the appointment of a receiver. On the same day a receiver was appointed. The order appointing the receiver also appointed a special master, and provided, among other things, that: "All petitions, intervening petitions and other demands against the Receiver herein, or against the property in his possession, shall, when filed with the Clerk of this Court, stand referred to this Special Master. Said Special Master shall, from time to time, after giving reasonable notice to the parties in interest, hear such proofs and arguments as the parties may desire to submit; make report to this Court of the facts and of his conclusions of law in each case, and file the same with the Clerk of this Court."

On July 3, 1916, an order was entered providing that: "Holders of unsecured claims or demands against said defendant are hereby required to file statements of the nature, dates of accrual and amounts of their respective claims and demands, duly verified by the oath of the president or by any officer of the corporation making such claims with the Special Master."

Following the appointment of the receiver, the creditor's suit was consolidated with a suit commenced by the Union Trust Company of New York and Benjamin F. Edwards, as trustees, against the St. Louis, Iron Mountain & Southern Railway Company, which sought a decree of foreclosure of a mortgage on property of the railway company. In this consolidated suit the receivership was continued. There was certain property not subject to this mortgage. A final decree was entered, adjudging that the mortgage was a valid and subsisting lien upon the properties therein described "to the extent and for the amount found in this decree to be due and payable upon the outstanding bonds and coupons secured thereby, said lien being superior and senior to any and every estate, right, title, interest, claim or lien in or to the same, or any part thereof, of any person whomsoever. * * *"

The court found that there was property not subject to the lien of this mortgage and decreed a sale of all the property mortgaged and unmortgaged, and provided that the net proceeds of the sale be distributed among creditors "in accordance with their respective priorities and rights." The proceeds of the sale of the mortgaged property were directed to be applied, after the payment of costs, to the payment of the mortgage debt, while the net proceeds of the sale of the unmortgaged property, after the payment of certain costs, were directed to be applied to the payment of unsecured claims. No priority was adjudicated among the various general claims, and the decree contains the following provision: "Payments of the claims * * * shall be made ratably and proportionately to the persons whose claims shall have been so allowed and established, or shall hereafter, pursuant to the provisions of this decree, be so allowed and established."

The court, however, reserved jurisdiction to pass upon questions of priority by provision in the decree.

The decree provided that the purchasers of any of the mortgaged property should take the same upon the express condition that they would pay, satisfy, and discharge "any unpaid claims of creditors of the Railway Company * * * which have been or shall be admitted by the parties in interest or adjudged by this court to be prior in lien or superior in equity to the mortgage." Creditors secured by the mortgage were excepted from the provision.

The property was sold under a plan of reorganization May 12, 1917, the details of which do not seem to be pertinent to the issues here present.

The deed to the purchaser of the railroad properties shows that the Missouri Pacific Railway Company, the reorganizing corporation which ultimately secured title to the property, agreed to pay "any unpaid claims of creditors * * * which have been or shall be admitted by the parties in interest or adjudged by said court to be prior in lien or superior in equity" to the mortgage "to the extent that they shall not have been paid out of moneys in the possession of the receiver." Secured claims were excepted from this agreement.

The plan of reorganization as approved by the court gave appellants and other unsecured creditors the right to establish their claims against the receiver as preferred and prior to the mortgage, and to assign them to the reorganization managers so that if denied preference and priority, they could obtain preferred stock in settlement as other general unsecured creditors. Appellants have made no such assignments, and the time for such assignment has long since expired.

Appellants' claims are all based on overcharges made on intrastate shipments in Missouri, while the injunctions against enforcement of the Missouri Maximum Freight Rate Acts were in force. None of the claims were filed in the rate injunction suit, but in 1916 they were filed with the special master in the receivership suit. The claims filed in 1916 are general in nature, the claim of the Berthold & Jennings Lumber Company being typical of them all. It was filed as an intervening petition, and alleges that the shipments on which the overcharges were made were made by it over the line of the St. Louis, Iron Mountain & Southern Railway Company wholly within the state of Missouri. It is alleged: "That the commodity or commodities, the point or points of origin, the point or points of destination, the approximate number of cars, and the approximate amount of the overcharge, were as follows: Commodity: Lumber and other commodities named in said maximum rate laws; Point of Origin; Ferguson, Williamsville, Bailey, Cornwall, and other stations all in Missouri; Point of destination: St. Louis and other stations all in Missouri; Approximate number of cars: 225; Approximate overcharge: $4,000.00."

There are other allegations not here material. An accounting was demanded for the ascertainment and determination of the exact amount of the excess charges; that in aid thereof a discovery be had of the books, papers and memoranda of the railway; and "that the amount of your intervener's said claim so ascertained and determined to be declared and decreed preferred to all other claims to the extent of the portion thereof which passed into the possession or custody of said receiver, either in cash or its equivalent, or in the form of some other asset into which the same has been converted; that the same be impressed with an equitable lien in favor of your intervener; that your intervener's claim, when so allowed, be ordered paid, with interest, in due course."

Some nine years later, on January 10, 1925, an order was entered which permitted any intervener within ninety days of the order to file with the special master application for leave to file an amended itemized petition, to be supported by the amended petition attempted to be filed. This order...