Ballew Lumber & Hardware Company v. Missouri Pacific Railway Company
| Decision Date | 23 June 1921 |
| Parties | BALLEW LUMBER & HARDWARE COMPANY et al., Appellants, v. MISSOURI PACIFIC RAILWAY COMPANY et al |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Karl Kimmel Judge.
Affirmed.
T. L Philips and E. T. & C. B. Allen for appellants.
(1) The sale of the property of the insolvent Missouri Pacific Railway Company under a consent decree, in pursuance of a plan and agreement of reorganization of said company, in which there was reserved for the stockholders of the old company a stock interest in the new company, was and is in law a fraud upon the rights of the appellants, and as to them is void. Mumma v. Potomac Co., 8 Pet. 281; Railroad Co. v. Howard, 7 Wall. 392; Scammon v Kimball, 92 U.S. 367; Wabash v. Ham, 114 U.S. 594; Louisville Tr. Co. v. Railroad, 174 U.S. 674; Northern Pacific v. Boyd, 228 U.S. 482; Kansas City Southern v. Trust Co., 240 U.S. 166; Central Impr. Co. v. Cambria, 210 F. 696, 201 F. 822; Western Union v. Trust Co., 221 F. 549. (2) That shippers are entitled to recover in equity overcharges exacted under duress and in violation of a valid statute has been unanimously held. Barker v. Railroad Co., 265 Mo. 682; White v. Delano, 270 Mo. 16; Bellamy v. Railroad, 220 F. 878; Love v. North American Co., 229 F. 103; Railroad v. McKnight, 244 U.S. 368; Arkadelphia Milling Co. v. Railroad, 249 U.S. 134. (3) Where it is alleged that a judgment and execution would be fruitless and involve useless and unnecessary expense, a creditor may maintain a bill to impress an equitable trust upon the assets of the insolvent company without first obtaining a judgment at law. 12 Cyc. 711; Goldman Comn. Co. v. Williams, 211 F. 537; Johnson v. Powers, 139 U.S. 156; Sage v. Railroad, 125 U.S. 361; Tally v. Curtain, 54 F. 4; Schofield v. Ute Coal Co., 92 F. 269; Burnham Co., v. Smith, 82 Mo.App. 35. (b) Where the fund sought to be subjected to the payment of the owners' debts is a trust fund for the payment of debts, or the complainant has a lien on the fund or property, the defendant creditor need not first establish his claim by judgment at law. 12 Cyc. 12; Woolen Mfg. Co. v. Kampe, 38 Mo.App. 229; Goldman v. Williams Co., 211 F. 530; Coleman v. Hagey, 252 Mo. 127.
Edward J. White, James F. Green and H. H. Larimore for respondents.
(1) It appears on the face of the petition that the Circuit Court of the City of St. Louis was and is without jurisdiction of the subject of the action. Smith v. Mo. Pac. Railroad Co., 266 F. 653; State ex rel. v. Davis, 190 S.W. 966; State ex rel. v. Williams, 221 Mo. 258; Miller v. Assurance Co., 196 S.W. 449; Farmers' Loan Co. v. Lake Street Railroad, 177 U.S. 61; Stewart v. Wisconsin Central Railroad, 117 F. 782; Julian v. Central Trust Co., 193 U.S. 112; Lang v. Ry. Co., 160 F. 355. (2) It is apparent on the face of the petition that there is a defect of parties plaintiff and that several distinct and separate causes of action have been improperly united in one petition. State ex rel. v. C. & A. R. R. Co., 265 Mo. 671; Ry. Co. v. McKnight, 244 U.S. 368. (3) The petition does not state facts sufficient to constitute a cause of action. First. Because it is not alleged that plaintiffs are judgment creditors and have exhausted their remedies at law. Public Works v. Columbia College, 17 Wall. 530; Case v. Beauregard, 99 U.S. 125; Straight v. Junk, 59 F. 321; Terry v. Anderson, 95 U.S. 636; Scott v. Neely, 140 U.S. 106; National Tube Works v. Ballou, 146 U.S. 523; Walser v. Seligman, 13 F. 415; Guardian Trust Co. v. Cambria Steel Co., 210 F. 696; Atlas Nat. Bank v. Packing Co., 138 Mo. 59; Ready v. Smith, 170 Mo. 163; Coleman v. Hagey, 252 Mo. 102. Second. Because it appears from such petition that plaintiffs are guilty of laches. State Trust Co. v. Kans. Cy. P. & G. Railroad, 120 F. 398; Western N.Y. & P. Railroad v. Penn Refining Co., 137 F. 343. Third. Because it is not alleged that general creditors were not permitted to participate in the plan of reorganization attendant upon the receivership of the Railway Company, or that a fair and timely offer of participation was not made to such general creditors, but only that these plaintiffs did not participate therein. Boyd v. Northern Pac. Ry., 228 U.S. 482; K. C. So. Ry. v. Guardian Trust Co., 240 U.S. 166; Stewart v. Wisconsin Cent. Ry. Co., 117 F. 782; State ex rel. v. Reynolds, 209 Mo. 161. Fourth. Because it appears from the allegations of the petition that the alleged overcharges, if any, do not constitute a trust fund for the benefit of these overcharges paid by plaintiffs in the ordinary course of business as shippers over the defendant railway, and that such alleged overcharges when paid went into a common fund made up in part from other sources, the whole of which went to pay operating expenses, interest on bonds, taxes, repairs, betterments and improvements; and it does not appear from the petition that such overcharges, if any, were ever required to be kept in any separate fund or accounted for in any way, but became at the moment of payment the property of the Railway Company; was commingled with other property, and plaintiffs do not attempt in their petition to specify into what specific property such alleged overcharges went, and consequently there can be no tracing of these alleged overcharges because they never in law became trust funds. Schuyler v. Littlefield, 232 U.S. 710; Brennan v. Tillinghast, 201 F. 641; United States v. Bitter Root Co., 200 U.S. 474; Litchfield v. Ballou, 114 U.S. 195; State Bank v. Security Bank, 232 F. 849; In re See, 209 F. 174; In re Larkin and Metcalf, 202 F. 578; Gregg v. Trust Co., 197 U.S. 183; So. Ry. Co. v. Steel Co., 176 U.S. 257; Thomas v. Western Car Co., 149 U.S. 95; Crane Co. v. Trust Co., 238 F. 693; C. & A. R. R. Co. v. Trust Co., 225 F. 940; Martin Metal Co. v. Trust Co., 225 F. 961; High on Receivers (3 Ed.) sec. 394-a; Smith on Receiverships (2 Ed.), sec. 342.
This is a suit in equity to have the transfer of the assets of the Missouri Pacific Railway Company to the Missouri Pacific Railroad Company declared a fraud upon the plaintiffs, who allege that they are overcharge claimants of the Railway Company, and for an accounting, and to impress upon the assets and capital stock of the Railway Company in the possession of the Railroad Company an equitable lien until the amount found to be due plaintiffs and all intervenors upon an accounting, shall have been paid, and for a receiver. The petition is based upon the theory that overcharges by a carrier belong in equity to the shipper, and that the assets of an insolvent carrier constitute a trust fund for the benefit of its creditors, although they have been diverted to a reorganization company in which the stockholders of the insolvent carrier have their rights preserved. The defendants demurred on the ground of (1) a lack of jurisdiction; (2) incapacity of the plaintiffs to sue; (3) pendency of a like suit in a Federal court; (4) defect of parties; (5) improper joinder of causes of action; (6) no cause of action stated. The trial court sustained the demurrer, the plaintiffs declined to plead further, whereupon their petition was dismissed and there was a judgment for the defendants, from which an appeal was perfected to this court.
I. In support of the demurrer, it is averred among other things that the court was without jurisdiction. To render this contention tenable it is necessary that the petition disclose the defect which precludes the court's action. We may concede that the obligations of the contracts made by the Railway Company with the plaintiffs survive and that they may in appropriate actions, based upon their respective claims, enforce same against any property belonging to the Railway Company which it may be shown has passed into the hands of another than a bona-fide purchaser for value, and is, therefore, held in trust for the company and its stockholders. [K. C. So. Ry. Co. v. Guardian Tr. Co., 240 U.S. 166; Northern Pac. Ry. Co. v. Boyd, 228 U.S. 482, 57 L.Ed. 931, 33 S.Ct. 554; Louisville Tr. Co. v. Railway, 174 U.S. 674; Railroad Co. v. Howard, 74 U.S. 392, 7 Wall. 392, 19 L.Ed. 117; Mumma v. Potomac Company, 8 Pet. 281.]
The general jurisdiction of the circuit court in cases presenting the facts stated, is, as shown by the authorities cited, well established. But more than a general jurisdiction of a class is necessary to authorize the court to hear and determine the case. By this we mean that while a court may have jurisdiction of the subject-matter of a class of suits, it does not necessarily follow that it may hear and determine the particular case submitted for its consideration. This right may be and is oftentimes dependent upon other matters, the determination of which is necessary before the court's right to adjudicate the issues involved can be definitely ascertained. [St. Louis v. Waterman, 277 Mo. 221, 209 S.W. 905.] Conceding, therefore, the court's general authority to entertain and adjudicate cases belonging to the class of that at bar, it is pertinent to consider whether any other facts disclosed by the allegations of the petition preclude the court from hearing and disposing of the case, or in short, if the allegations made impose that duty.
II. This is an equitable proceeding and the general rule applicable thereto as concerns the parties, is that all persons materially interested, whether legally or beneficially, in the outcome of the action, should be joined therein in that all those necessary to a final determination of the issues should be before the court. [Norton v. Reed, 253 Mo. 236, 161 S.W. 842; Breimeyer v. Bottling Co., 136 Mo.App. 84, 117 S.W. 119; S.W. Bell Tel. Co. v. State, 75 Okla. 42, 181 P. 487; ...
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