Cowell v. City Water Supply Co.

• Decision Date: 07 February 1906
• Citation: 130 Iowa 671,105 N.W. 1016
• Parties: COWELL v. CITY WATER SUPPLY CO. ET AL.
• Court: Iowa Supreme Court

130 Iowa 671

105 N.W. 1016

COWELL

v.CITY WATER SUPPLY CO. ET AL.

Supreme Court of Iowa.

Feb. 7, 1906.

Appeal from District Court, Wapello County; C. W. Vermillion, Judge.

Suit in equity to recover on a bond. A demurrer to the petition was sustained, and the plaintiff appeals. Affirmed.Blake & Wilson, for appellant.

McNett & McNett, for appellees.

SHERWIN, J.

In the abstract and arguments the case is entitled “William F. Cowell and C. H. Venner Company”; but as the C. H. Venner Company is not properly a plaintiff in the case, and does not appeal, we omit its name from the title. The Iowa Water Company, a corporation of this state, issued in 1887 a series of bonds aggregating $400,000, with coupons for semiannual interest. These bonds and coupons were secured by a mortgage to the Farmers' Loan & Trust Company, trustee, on the property of the water company. The company became financially embarrassed, and being unable to meet its interest payment of April 1, 1894, foreclosure was necessary. The bonds were held by many persons, the appellant owning one of them, and to protect their interests a number of the bondholders formulated a written plan or agreement to which the plaintiff became a party. A committee of four bondholders was appointed to carry out the plan. It provided for the transfer of the bonds and coupons to the committee, in trust for the purpose of carrying out the plan, and gave the committee power to take any action under the mortgage that the individual bondholders might have taken. In case a majority of the bonds were deposited with the committee, it had power to purchase the mortgaged property at the foreclosure sale and to apply the bonds and coupons deposited with them towards payment for the property. The agreement further provided that, if the propertywas purchased by the committee, it might convey the same to a new company “incorporated under the laws of such state as the committee may determine or may otherwise dispose of said property.”

Sections 11, 12, and 14 of the plan we set out in full because of their special bearing on some of the propositions urged by the appellant to which we shall later give our attention. They are as follows: “(11) The committee shall, after the payment of the expenses of foreclosure, and all expenses incurred by the committee, and its compensation, allot to the certificate holders their proportionate interests in the new company or their proportionate share in the proceeds of any sale by the Committee. (12) The committee shall, prior to the conveyance of any purchased property to a new company, submit to the certificate holders a detailed plan of re-organization which shall be binding upon all said holders, unless the holders of a majority in interest of the outstanding certificates shall, within thirty days, file with the trust company their written dissent from said plan. * * * (14) The committee may supply any defects or omissions in this plan which it shall deem necessary to be supplied to enable the committee to carry out the general purpose of the plan, and, with the consent of holders of a majority in interest of the outstanding certificates, may take any action other than is provided in this plan which the committee shall unanimously determine to be for the benefit ratably of all the certificate holders.” The certificates referred to therein are the certificates of deposit issued for the bonds deposited. The appellant deposited his bond in accordance with the plan, and took therefor one of these certificates, which recited that his bond was deposited under and in accordance with the plan or agreement and that he was entitled “to recover all the securities, benefits, and advantages coming to the depositors” under said agreement. Acting under this agreement, the committee took charge of the foreclosure proceedings in the federal court, where a decree of foreclosure was entered, under which the property was afterwards sold to the committee subject to some underlying bonds, which are not material to this controversy. The committee bought the property in July, 1897. In June preceding it issued a circular to the depositing bondholders setting forth its doings, the financial condition, and the proposed plan of reorganization, and to this the appellant made no objection. In September, 1897, the defendant, the City Water Supply Company, was organized under the laws of the state of Maine, and to this company the committee conveyed the property in question. This company thereafter issued its bonds and mortgaged the property for $475,000, and distributed some of the bonds so issued among the depositing bondholders heretofore referred to. The appellant does not assail the validity of the original plan under which he deposited his bond with the committee, but he does attack practically all other steps taken by the committee and the defendant corporation and its acts, and asks to recover the value of his bond. The facts which we have stated, and some others to which we shall hereinafter refer, all appear in the petition of the appellant and the exhibits attached thereto, and a demurrer to the petition was sustained. Some of the defendants failed to plead to the petition within the time required by law, and the appellant contends that his ...