Adelbert College of Western Reserve University v. Toledo, W. & W. Ry. Co.

• Decision Date: 10 September 1891
• Citation: 47 F. 836
• Parties: ADELBERT COLLEGE OF WESTERN RESERVE UNIVERSITY v. TOLEDO, W. & W. RY. CO. et al.
• Court: U.S. District Court — Northern District of Ohio

47 F. 836

ADELBERT COLLEGE OF WESTERN RESERVE UNIVERSITY v. TOLEDO, W. & W. RY. CO. et al.

United States Circuit Court, N.D. Ohio, Western Division.

September 10, 1891

George Hoadly, for plaintiff.

Rush Taggart, for defendant.

JACKSON J.

In April, 1883, the Adelbert College, an Ohio corporation commenced this suit in the court of common pleas of Lucas county, Ohio, against the above-named defendants, upon two bonds of $500 each, with coupons attached, issued in 1862 by the Toledo & Wabash Railway Company, and styled 'Equipment Bonds,' of which there was a total issue of $600,000. The defendant companies are corporations and citizens of Ohio, Indiana, Illinois, and Missouri, which have successively acquired by consolidations and the foreclosure of mortgages the ownership of the properties of said Toledo &amp Wabash Railway Company. The individual defendants are trustees under mortgages executed by the two first-named defendant companies. The plaintiff by its suit seeks to have a lien declared upon the property, etc., that was of the Toledo & Wabash Railway Company, and now owned by its successor in title, and to subject the same to the payment of its said bonds. The succession in title and ownership to the properties sought to be charged, the several mortgages made before and since 1862, by the difference companies, down to the acquisition thereof by the Wabash, St. Louis & Pacific Railway Company, and the relief sought, are the same as set forth in the cases of Compton v. Railway Co., 45 Ohio St. 592, 16 N.E. 110, and 18 N.E. 380, and of Railway Co. v. Ham, 114 U.S. 587-598, 5 S.Ct. 1081. In the latter case the supreme court of the United States held that said equipment bonds constituted no lien upon the property, franchises, etc., which the defendant companies had acquired or derived through or from the Toledo & Wabash Railway Company. In the case of Compton v. Railway Co., the supreme court of Ohio, on precisely the same question and same state of facts, subsequently reached a different conclusion, and sustained the lien which plaintiff is seeking to enforce. Pending this Compton suit, the plaintiff and other holders of equipment bonds sought to have themselves made parties thereto, but this was denied by the state court on the ground that said Compton's action was for his sole benefit. Thereupon the plaintiff instituted the present suit which from the prayer of the original petition seems to have been intended for its sole benefit.

On the 24th November, 1883, the Wabash, St. Louis & Pacific Railway Company answered the petition, setting up various matters of defense, including the judgment of the supreme court of the United States in the Ham Case, and denying the lien claimed for the equipment bonds. On the 21st May, 1888, said Wabash, St. Louis & Pacific Railway Company filed an amended answer, setting up other matters of defense, among which was the fact that, under foreclosure proceedings commenced in 1884 by trustees of mortgages executed by said railway company, the circuit court of the United States for the northern district of Ohio and district of Indiana had appointed receivers of its properties, etc., who were still in possession thereof; that subsequently the trustees of mortgages prior in date and lien to the said equipment bonds had commenced foreclosure proceedings in the circuit courts of the United States for the proper districts, and that said courts were proceeding to foreclose such prior mortgages, having by their receivers and the said suits exclusive jurisdiction over the property which plaintiff sought to have charged; and that plaintiff should be remitted to said circuit courts for the determination and enforcement of its said claim. On December 27, 1888, the plaintiff filed its amended and supplemental petition, making James Compton, who had in the mean time obtained a decree in the supreme court of Ohio establishing the lien of his equipment bonds, a party defendant, and claiming that he had no priority of payment, and asking that the proceeds of the property directed to be sold to satisfy his judgment should be distributed to plaintiff, 'concurrently and co-equally' with said Compton, and, if necessary, to consolidate said causes, and make full inquiry and finding as to any and all liens upon said railway property, and the proceeds to arise from the sale of the same, 'to the end that said railway property, when it shall be sold, shall pass, free and clear of all incumbrances, to the purchasers thereof, with the view of making the same bring the largest possible price at such sale. ' At this stage of the proceedings in the plaintiff's suit, William F. Redmond and various others appeared, and on January 4, 1889, made application to said state court to be made parties defendant therein, with leave to file answer and cross-petition; and, the plaintiff consenting thereto, the court granted their application, ordered said applicants to be admitted as parties defendant, with leave, as such, 'to file answer and cross-petition herein, for the benefit of themselves alone, or also for the benefit of other persons and corporations who may not have joined them in making such application, and to have and enjoy all the rights, privileges, and benefits of parties defendant herein. ' Said Redmond and others accordingly, on January 5, 1889, filed their answer and cross-petition in said cause, setting forth that they were holders of a large number of said equipment bonds, admitting all the allegations of the original and amended petitions, except the admission that certain mortgages, prior in date to said bonds, constituted a superior lien on the property sought to be charged with the payment of their claims.

By their cross-petition, after stating their respective holdings of said equipment bonds, they allege that there are a large number of other bonds of the same class and issue still outstanding in the hands of sundry persons, partnerships, and corporations, unknown to them, in whose behalf, if they will appear and join in the cross-petition, as well as on their own behalf, the petitioners file said cross-petition. They repeat the allegations of the original petition relating to the consolidation in 1865 of the Toledo & Wabash Railway Company with other railroad companies, forming the Toledo, Wabash & Western Railway Company; the mortgages made by the latter in 1867 and 1873 to James R. Jesup and Isaac H. Knox, as trustees, to secure issues of its bonds for $15,000,000 and $5,000,000, respectively; the foreclosure in 1875 of the 1873 mortgage for $5,000,000; the sale of its property, rights, and franchises thereunder, and the purchase thereof by John W. Ellis and others, as a purchasing committee; the formation of the Wabash Railway Company, and the conveyance to it by said purchasing committee of the entire line of railway, with its equipment, rights, properties, and franchises; the execution in 1877 by said Wabash Railway Company of its mortgage upon said properties to George I. Seney, trustee, and in 1879 a further mortgage to Solon Humphreys and Daniel A. Lindley, trustees; the consolidation in October, 1879, of said Wabash Railway Company with the St. Louis, Kansas City & Northern Railway Company, a Missouri corporation, forming the Wabash, St. Louis & Pacific Railway Company; the execution of the latter of its mortgage to the Central Trust Company of New York and James Cheney, of Indiana, to secure a large issue of consolidated bonds; the proceedings instituted by said Wabash, St. Louis & Pacific Railway Company and said trustees in 1884 to foreclose said mortgage in the United States circuit courts of Ohio, Indiana, Illinois, and Missouri; the sale of its road, franchises, etc., in 1886, and the purchase thereof by, and conveyance to, James F. Joy, of Michigan, Ossian D. Ashley and Thomas H. Hubbard, of New York, and Edgar T. Wells, of Connecticut, as a purchasing committee, under certain plan of reorganization entered into by a majority of bondholders of said railway company,-- all which consolidations, mortgages, and foreclosure proceedings it is alleged in no way affected the lien of said equipment bonds upon the properties of the said Toledo & Wabash Railway Company, to which said several companies and their trustees under mortgages succeeded.

It is further shown in said cross-petition that the said Toledo &amp Wabash Railway Company, which issued said equipment bonds, was a consolidated corporation; that its constituent divisions had issued bonds secured by mortgages executed prior to the issuance of said equipment bond, one of said mortgages being made by the Toledo & Illinois Railway Company in 1853 to the Farmers' Loan & Trust Company, a New York corporation, as trustee, to secure bonds of said railway company to the amount of $900,000; that another of said constituent divisions, the old Toledo & Wabash Railway Company, before the consolidation which formed the Toledo & Wabash Railway Company, had, in October, 1858, executed a mortgage upon its line of road, property, franchises, etc., to Edwin D. Morgan as trustee, to secure its mortgage bonds to the amount of $1,000,000; that, said Morgan having died before the execution of said trust, James F. Joy, of Detroit, Mich., was appointed trustee in his place. The cross-petition alleged that said two mortgages were not valid incumbrances upon the property of the Toledo & Wabash Railway Company consolidated, which issued said equipment bonds, and constituted no prior lien to the same. In addition to the parties named as defendants in plaintiff's original and first supplemental and amended petition, the cross-petitioners made the Farmers' Loan & Trust Company, a corporation of New York, as trustee, the Central Trust Company of New York and James Cheney...