Central Trust Co. of New York v. Marietta & N.G. Ry. Co.

• Citation: 48 F. 850
• Parties: CENTRAL TRUST CO. OF NEW YORK v. MARIETTA & N.G. RY. CO., (HIAWASSEE CO., Intervener.)
• Decision Date: 07 December 1891
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

48 F. 850

CENTRAL TRUST CO. OF NEW YORK v. MARIETTA & N.G. RY. CO., (HIAWASSEE CO., Intervener.)

United States Court of Appeals, Fifth Circuit.

December 7, 1891

STATEMENT BY PARDEE, J.

On the 17th March, 1891, the Hiawassee Company filed a petition, as an intervention, in the suit of Central Trust Company of New York v. Marietta & North Georgia Railway Company, for the foreclosure of mortgage, pending in the circuit court of the United States for the northern district of Georgia, wherein a receiver had been appointed and put in possession of the railway property. Intervener claimed certain railway equipment, then in possession of J. B. Glover, receiver of the Marietta & North Georgia Railway, as follows: One Brooks locomotive, shop No. 5, railroad No. 13; four Baldwin locomotives, Nos. 11, 12, 14, and 15; two combination mail baggage, and express cars, Nos. 11 and 12; two first-class passenger-cars, Nos. 13 and 14. This petition was demurred to by Central Trust Company of New York, and thereupon was amended on 28th March, 1891, making the claim as follows:

'The property described and claimed by it was purchased by the North Georgia Improvement Company from original owners. It was placed upon the line of the M. & N.G.R.R. Company by the North Georgia Improvement Company, through the instrumentality of Geo. R. Eager, who was largely interested in both companies, but without any contract of purchase of lease by the M. & N.G.R.R. Company, and nothing has been paid on the same by said railroad company, nor has it any claim of any kind on said property. The right of possession to all of said property is in the Hiawassee Company, and the title to all of said property has vested in it, except the title to engines Nos. 14 and 15. These engines were bought from Burnham, Parry, Williams & Co. All of the purchase money has been paid on the same except six notes dated May 30, '89 for $818.00 each, due, respectively, 17, 20, 21, 22, 23, and 24 months from date. Upon the payment of these notes the title to said engines also will vest in the Hiawassee Company.'

It is to be noted that the intervener, in its amended petition alleges the title to two of the locomotives, Nos. 14 and 15 is in Burnham, Parry, Williams & Co. The intervention, without being put in issue, having been referred to a special master in chancery, the testimony of George R. Eager and J. B. Glover, receiver, was taken. This testimony, together with exhibits introduced by intervener, shows substantially the following facts: That George R. Eager was the contractor to build the Marietta & North Georgia Railway; that he was also the president and a large stockholder in a company organized under the laws of New Hampshire, known as the North Georgia Improvement Company, with its headquarters in Boston, Mass.; that said Eager, as contractor, was to receive stock and bonds of the Marietta & North Georgia Railway for its construction; that said Eager procured the North Georgia Improvement Company to purchase and pay for the whole equipment hereinbefore stated, except the sum of $4,908, the balance due Burnham, Parry, Williams & Co., of Philadelphia, for engines Nos. 14 and 15, which amount was evidenced by six notes outstanding, not produced at the hearing of the cause, presumably in the hands of the payees; and that the Hiawassee Company was organized under the laws of Maine, and was, among other things, authorized to invest in stocks, bonds, and real estate; that the said equipment was purchased from various original vendors, was marked in name of said Marietta & North Georgia Railway Company, and put in the possession, custody, and control of said company, the Marietta & North Georgia Railway Company, by said Eager, contractor and president, as aforesaid; that by the writings executed by Burnham, Parry, Williams & Co. and the North Georgia Improvement Company, the title was reserved until full payment, and the locomotives are stated to be loaned to the lessees, to be used 'upon their railroad,' etc.; that by writing executed between Jackson & Sharp Company and North Georgia Improvement Company, it is stated that the cars are to be used on the Marietta & North Georgia Railway Company; that for the engine bought from S.W. Groome there was no written agreement; that the Marietta & North Georgia Railway had been in possession of locomotive engines 14 and 15 since about May, 1889, upon which was still due the sum of $4,908 to Burnham, Parry, Williams & Co., represented by six notes still held and owned by them; that the railway company had been in possession of the two first-class passenger-cars, 14 and 15, one combination mail, baggage, and express car, numbered 11, and one combination mail, baggage, and express car, numbered 12, since April 17, 1889, and that said company had been in possession of locomotive engines Nos. 11 and 12 since about 20th day of December, 1888.

George R. Eager testified, as is shown on pages 17 and 18 of the transcript of the record, as follows:

'Question. What was your plan, Mr. Eager, in regard to the purchase of this rolling stock? Did you control a majority of the stock of the M. & N.G. Ry.? Answer. Yes; I and my friends controlled three-fourths of it. Q. What was your plan with regard to this rolling stock,-- in regard to the future? A. Our plan was, when we got the road fully completed, it would improve our mines, and we bought as much rolling stock as we should want for the immediate present; that we would endeavor to arrange equipment, and issue equipment bonds for sufficient amount to cover all the rolling stock, and to secure all the rolling stock we thought it would be necessary to have. Q. Up to this time no contract between the M. & N.G. Ry. and the North Georgia Improvement Company was made? A. No, sir; none whatever. Q. Was there any agreement, verbal or otherwise, between the improvement company and the railway company as to the improvement company furnishing stock to the railway company? A. No, sir; no agreement in any shape.

The rolling stock was down there with the idea that the railway company very soon would be done, and would make a car trust,--get somebody to let them have money, and make a car trust.'

It further appeared from the exhibits introduced-- First, that Burnham, Parry, Williams & Co., of Philadelphia, had contracted with the North Georgia Improvement Company concerning the two locomotives, 14 and 15, whereby the title was reserved until they were paid for; but this contract, although dated 13th May, 1889, was not proved until the 19th January, 1891, and was never recorded at all; second, that on the 27th day of January, 1891, more than a week after the Marietta & North Georgia Railway was placed in the hands of the receiver, the North Georgia Improvement Company executed a paper purporting to be an absolute sale to the Hiawassee Company of all the railway equipment hereinbefore set forth.

On this testimony the special master found in favor of the interveners, as follows:

'I do therefore respectfully report that the intervener, the Hiawassee Company, has a valid claim and title to all of said property, except to Nos. 14 and 15 Baldwin locomotives, and upon payment of the balance due on said two locomotives will have a valid title to them; and that the present value of all said rolling stock, including interest at six per cent., calculated up to April 7, 1891, is $64,653.03. I further report that said rolling stock is absolutely necessary to the operation of the said Marietta & North Georgia Railway, and that it is advisable that the receiver be allowed to purchase all of said rolling stock at the sum of $64,653.03; that the said outstanding notes for Baldwin locomotives Nos. 14 and 15 be paid out of this amount.'

To this report exceptions were duly filed, which, on hearing, the court ordered--

'(1) That the case be resubmitted to the master, to take evidence and report upon the question of the value of the equipment mentioned in said intervention on the 19th of January, 1891, when the receiver was appointed. (2) To take evidence and report upon the relations existing between the Marietta and North Georgia Railway Company and the North Georgia Improvement Company, by contract or otherwise, and the relations existing between said two companies and George R. Eager, and the relations existing between said two companies and said Eager and the Hiawassee Company, so far as they throw light upon or affect this case.'

After the first hearing before the master, and prior to a second hearing, the Central Trust Company filed in the court certain answers, setting up defense substantially as follows: (1) A general denial of the statements made in the original and amended intervention. (2) Averment as to the appointment of receiver on 19th January, 1891, and that Burnham, Parry Williams & Co. were still due the sum of $4,908, balance upon two locomotives, Nos. 14 and 15, and that the North Georgia Improvement Company had paid in full to parties from whom it was purchased for all the other equipment mentioned in said petitions. That upon such payment full right and title to said equipment vested in said Marietta & North Georgia Railway Company, without any lien or reservation of title on the part of the North Georgia Improvement Company; and that, if any sum was due for such equipment, so paid for by said North Georgia Improvement Company, it was only an open account debt, and that said equipment was purchased by said North Georgia Improvement Company, and placed in the possession and control of said Marietta & North Georgia Railway Company for its special use and benefit, and became and was subject to the lien of the mortgage now being foreclosed. (3) Setting forth that the North Georgia Improvement Company on...