Adams v. Mercantile Trust Co.

• Decision Date: 05 February 1895
• Docket Number: 329.
• Citation: 66 F. 617
• Parties: ADAMS v. MERCANTILE TRUST CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

66 F. 617

ADAMS v. MERCANTILE TRUST CO. et al.

No. 329.

United States Court of Appeals, Fifth Circuit.

February 5, 1895

This is an appeal from an order of the circuit court of the United States for the Northern district of Florida. The facts in this case are substantially as follows:

On the 19th of March, 1894, the Mercantile Trust Company, the appellee in this case, filed its bill in equity in the court below against the Jacksonville, Mayport & Pablo Railway &amp Navigation Company. This bill set forth that the said railroad company had issued 250 bonds, and executed a mortgage to the appellee, to secure the payment of these bonds, upon its entire line of railroad and all of its property, of every nature and kind including the income, tolls, rents, and profits; that 175 of said bonds had been sold, and were in the hands of bona fide purchasers for value; that the said railroad company had made default in the payment of interest, and that, under the terms and conditions of the mortgage or deed of trust, the trustee the appellee here, had the right to take possession of the properties aforesaid, or to have a receiver appointed; that the said railroad company was hopelessly insolvent; that it had never paid any interest on its bonds, and was wholly unable to do so; that suits at law have been brought in the state court, in some of which judgments have been recovered, and that other of said suits are still pending; that the railroad property of the defendant was in a damaged and dilapidated condition; and that the interest of the bondholders required the appointment of a receiver,-- and prayed for a decree for the foreclosure of the mortgage, and sale of the properties of the railroad company. That on the 19th day of March, on notice given to the defendant company, and on appearance by the attorney of that company, and his statement that there was no objection to application for a receiver, and that the best interests of the bondholders, creditors, and stockholders required the appointment of a receiver, and on the affidavit of Archer Harmon, who was then the president of the railroad company, to the same effect, the court appointed John L. Marvin receiver, with the usual powers and instructions. The receiver immediately gave bond, and filed his oath of office, took possession of the properties, and entered upon the discharge of his duties. On May 7th of the year aforesaid a decree pro confesso was entered against the defendant company.

On May 21, 1894, the intervener and appellant, Charles S. Adams, after due notice to counsel for complainant on this suit, and by leave of court duly obtained, filed his petition of intervention in said cause. The said intervener, Charles S. Adams, represented in his said petition that he had been appointed receiver of the railway and other property of the said defendant company by the circuit court for Duval county, state of Florida, in a suit therein pending, in which George F. Broughton had filed a bill in behalf of himself and all of the creditors of the said defendant company against the said company, and against the said Mercantile Trust Company, the complainant in this suit; that the said Broughton claimed to have a first lien upon the property of the said defendant company; that the said company was insolvent, and the president was misappropriating the revenues thereof; that on the 17th of November, 1893, a decree pro confesso had been entered against the said Mercantile Trust Company, and that on the 6th of March, 1894, the said state court had rendered a decree entitling said complainant Broughton to the relief prayed in and by his said bill, and referred the cause to a master to ascertain what amounts were due the creditors and bondholders of the company who might come in and prove their claims, and that a large number of said creditors had proved their claims in said suit; that the solicitors representing the said defendant company in the state court, and the same as those representing the defendant in the federal court, and the counsel representing the Mercantile Trust Company in the federal court also signed the answer of the defendant company in the state court; that no notice was given of the application for appointment of receiver, except to H. H. Buckman, Esq., counsel for the defendant company in the said state court, who filed the consent hereinbefore referred to; that the bill in this cause did not inform the court that a creditor's bill was pending in the state circuit court, to which the Mercantile Trust Company, the complainant in the federal court, was a party defendant, and in which a decree pro confesso had been entered against said Mercantile Trust Company, and final decree entered thereon; that the said circuit court of the state of Florida was duly administering the property of the defendant company for the benefit of all its creditors; that on the 5th of April, 1894, the petitioner, Charles S. Adams, had been appointed receiver of all the properties of the defendant railway company, copy of which order was annexed to and made a part of said petition, as Exhibit A. The petitioner, Charles S. Adams, prayed the United States circuit court for the Northern district of Florida to make an order directing the receiver appointed by that court in the suit of the Mercantile Trust Company to turn over and deliver to said petitioner, as such receiver of the state court, all the properties of the said defendant railway company.

On May 30, 1894, Archer Harmon and others, claiming to be holders of bonds issued by the said railway company, filed an answer for themselves, alleging the said answer to be that of the Mercantile Trust Company, to the petition of Charles S. Adams. The record shows that the complainant the Mercantile Trust Company never did file any answer, over its corporate seal or by its counsel, to the said petition of Charles S. Adams, and that the said alleged bondholders had no authority of right to file their attempted answer to the said petition. The order of the court permitting the petition to be filed required 'that the said Mercantile Trust Company be required to answer the same within ten days from the date of this order,' to wit, on the 21st May, 1894.

On June 5, 1894, Charles S. Adams, intervener, in support of his petition, filed a certified copy of the record from the circuit court for Duval county, Fla., in the said suit of George F. Broughton against the said defendant the Jacksonville, Mayport & Pablo Railway & Navigation Company. This record from the state court shows that the bill was filed by Broughton, for himself and all the other creditors of the defendant company, against the said company and the Mercantile Trust Company. The bill recites the amounts due Broughton for his work and labor performed in the construction of the defendant's railroad on March 31 and October 25, 1892, to wit, $1,846.60, $1,660, and $1,310, respectively, and the history of his claims, and that they constitute a lien upon the property and franchises, under the statutes of Florida; that the defendant company had executed its deed of trust to secure an issue of $250,000 in bonds, and that none of said bonds were placed in the hands of the trustee until March 10, 1893; that a large sum of money was due to other persons for work and labor performed on and materials furnished to the said railway, all of which were a lien upon the property of the defendant company; that a number of suits at law have been commenced against the defendant company, and that the state and county taxes are due, and that the sheriff has levied on the road for the payment of the same; that the earnings and revenues of the company are being misappropriated by the president; that a sale of the road and all of the property of the defendant company would not bring enough to pay its debts; that a receiver be appointed, and an account be had of what is due the complainant and such other creditors as might come in and prove their claims; that the road be sold, and the proceeds be applied to the payment of the taxes and costs of the suit, and the residue to the payment of the claims proved as aforesaid.

The defendant railroad company filed its answer to the last bill denying its indebtedness to the said Broughton, and denying all the other allegations in the bill, and the complainant Broughton filed replication to the said answer. On the 29th of August, 1893, an order was made, directed to the Mercantile Trust Company, requiring it to appear to said bill. On the 8th day of September, 1893, the state court heard the application for a receiver, and, upon consideration, appointed Charles S. Adams receiver, to take into possession said railroad, rolling stock, fixtures, rights of way, moneys, choses in action, books, papers, and terminal facilities, forthwith, and, further, directed said receiver to operate and run said road pending the litigation, and authorized him to borrow the sum of $3,406.50, or so much thereof as might be necessary, to pay taxes due by the said company, for which a levy had been made by the sheriff of Duval county. On the 22d day of September, by consent of parties to the suit, the receiver was discharged, and the railroad property was ordered turned over and delivered to the defendant...