Crosby v. Morristown & C. G. R. Co.

• Decision Date: 07 July 1897
• Citation: 42 S.W. 507
• Parties: CROSBY et al. v. MORRISTOWN & C. G. R. CO. et al.
• Court: Tennessee Supreme Court

42 S.W. 507

CROSBY et al. v. MORRISTOWN & C. G. R. CO. et al.

Court of Chancery Appeals of Tennessee.

July 7, 1897.

Appeal from chancery court, Hamblen county; Hugh G. Kyle, Chancellor.

Bill by Thomas B. Crosby and others against the Morristown & Cumberland Gap Railroad Company and others, to establish claims against defendant railroad company and liens on its property, for a receiver, etc. A receiver was appointed, and from a decree allowing and disallowing claims, and determining the priority of claims allowed, numerous parties appeal. Modified.

Tully R. Cornick, for T. Mellon & Sons. John K. Shields, for right of way claimants. Webb & McClung and J. G. Rose, for holders of receiver's certificates. Helm & Bruce, for Morristown & C. G. R. Co. Lucky & Sanford, Washburn, Pickle & Turner, Holloway & Essory, G. McHenderson, W. B. Hodges, Ingersoll & Peyton, A. S. Tate, Wm. McFarland, A. F. Bryan, and Green & Shields, for construction lienors and general creditors. Tully R. Cornick and Shields & Mountcastle, for receiver James T. Shields.

NEIL, J.

The controversies in this case arise under a general creditors' bill filed in the chancery court at Morristown, to wind up the affairs of the defendant railroad company. The questions in dispute are between the different classes of creditors. The chief controversy is between the holders of receiver's certificates and claimants of damages for rights of way taken. There are minor controversies, which need not now be specially mentioned, but will be adverted to in the course of the opinion. In order to a proper understanding of the main controversy, it will be necessary to give a brief history of the case.

The original bill in this case was brought October 28, 1892, in the chancery court at Morristown, as a general creditors' bill, to have the affairs of the Morristown & Cumberland Gap Railroad Company, an insolvent corporation, administered, its liabilities ascertained, the priorities and liens of the creditors adjusted, and the property sold and proceeds distributed. The cause was heard February 12, 1896, and a final decree pronounced February 20, 1896, adjudging all these matters; and, from certain of the adjudications then made, certain of the parties complainants, defendants, and interveners have prosecuted appeals, the chancellor, in his discretion, allowing the appeals at this stage of the case. The creditors claiming priorities are chiefly claimants for the value of the land taken for right of way for the railroad, subcontractors claiming mechanics' liens, mortgage bond holders, and those holding contested receiver's certificates. The railroad company took its right of way in many instances without previous contract, and condemnation proceedings were brought by it, and the lands condemned, and damages assessed; and it was adjudged in each case that only upon the payment of the judgment and costs should the title to the right of way vest in the railroad company. This was true of all of the right of way claimants before the court, except the following (the sum due to each of which, omitting interest, is annexed to the name of each), viz.: George B. Crosby, $150; R. C. Bunch, $345; George A. Shirley, $230; A. H. Foster, $150.21; T. B. Fisher, $55; Thomas B. Carmichael, $230.88; Thomas Baylor, $404.04; H. W. Perrow, $346.32; G. W. Livingston, $115.44; Y. Franklin Long, $349.93; J. H. Wester, $693; James E. Hammers, $288.25; George W. Renfro, $403.40; Marion and Nancy and Mary E. Davis, $138.10; J. H. Renfro. $528.40; J. H. Cannady, $259.53; H. T. Cannady, $201.86; Leander and Amanda Dalton, $57.62; James H. Peck, $230.98; Marion P. Maples and wife, $316.25; John P. Brown, $179.40; William Harrell and wife, $90.15; R. S. Dodson, $288.60; E. T. Sanford, $572.50; L. C. Bryan, $100; John Lowe, $220; S. F. Brabson, $117.07, — all of which parties hold notes which were given them by the Morristown & Cumberland Gap Railroad Company for the rights of way taken through their lands, under contract that the title should not vest until the notes were paid; and except the following: W. Z. Hammers, $109.55 and costs, $11.50; Enos Hammers, $54.95 and costs, $11.50; Brown & Stubblefield, $825. All of these last-named persons, beginning with the name of W. Z. Hammers, made deeds to the company, merely retaining liens, except Brown & Stubblefield, and they accepted receiver's certificates for the above-mentioned amount. But with regard to W. Z. Hammers and Enos Hammers it should be stated that they made conveyances to the company, and received its notes, and the company had already, in assertion of the right of eminent domain, entered upon their land, and constructed its road. There are also some persons who have separate cost claims put down on the master's report, and allowed in the decree as right of way claims, as follows: John Harris, $11.28; Mary Harris, $22.10; James T. Shields, $146.30; C. Y. Crawford, $10.30; G. B. Mitchell, $25.75; J. T. Rutherford, $211.20; J. C. Brown, $16.70; and George Carter, $34.72.

The chief question submitted involves the rights and priorities of that class of creditors to which the railroad is indebted for rights of way, and the validity and classification of certain receiver's certificates issued by Jackson Smith, receiver of said railroad company, under an order of the United States circuit court, when that court was withholding the possession of the property of the defendant company from the receiver of the state court. The record discloses these facts:

The Morristown & Cumberland Gap Railroad Company contracted with Allisons, Shafer & Co. to build and equip its entire line, agreeing to pay them therefor $1,000,000 of its bonds, and to secure which it executed to the Atlantic Trust Company a blanket mortgage upon its property. On May 26, 1892, John Coleman, a subcontractor, filed his bill in the circuit court of the United States, at Knoxville, against Allisons, Shafer & Co. and the railroad company to recover judgment against the former for the debt due him, and to enforce his subcontractor's lien against the property of the latter. Frank J. Hoyle was appointed receiver of the railroad company, by order made in the cause on June 6, 1892, but was discharged two days later, and the property restored to the railroad company, it having given bond for the payment of such recovery as the complainant might obtain. On October 28, 1892, as above stated, the present bill was filed in the chancery court at Morristown, against the railroad company and others, alleged to be creditors of the corporation, praying, among other things, for the appointment of a receiver of the property of the defendant debtor, the property then being in possession of the company. The chancellor took jurisdiction of the cause, and, upon the same day the bill was filed, granted the usual restraining order against other suits, and appointed James T. Shields, Jr., temporary receiver, and he was placed in the immediate possession and control of all the property. The United States circuit court, by order in the case of John Coleman against the Morristown & Cumberland Gap Railroad Company et al., made November 9, 1892, appointed W. S. Whitney temporary receiver of the railroad company, took the property from the possession of the state court receiver, and subsequently appointed Jackson Smith permanent receiver, who controlled the property for some two years. James T. Shields, Jr., receiver, etc., under the directions of the chancellor, filed his petition in the case of Coleman against the railroad company, January 23, 1893, contesting the jurisdiction of the United States circuit court over the property of the railroad company, and to recover its possession. This petition was heard by Hon. D. M. Key, January 30, 1893, and was dismissed by him, on the ground that the United States circuit court had jurisdiction. The chancellor directed his receiver to prosecute an appeal to the supreme court of the United States, and stayed further proceedings in the present case on account of the aforesaid contest. An amended bill was filed in the cause of John Coleman against the Morristown & Cumberland Gap Railroad Company and others, a decree pronounced sustaining the bill as a general creditors' bill, and all creditors ordered to intervene by petition, and present and prove their claims within a limited time, and the cause proceeded with to a final hearing, when all the liabilities were classified and adjudged, and a sale of the property ordered. At this stage of the cause, James T. Shields, Jr., the state court receiver, was granted an appeal from the decree dismissing his petition, to the supreme court of the United States, which court, upon a hearing of the cause, held that the state court had exclusive jurisdiction of the property of the railroad company, and reversed the decree of the United States circuit court appointing a receiver and assuming jurisdiction over it. This case, under the style of Shields v. Coleman, is reported in 157 U. S., at page 168, 15 Sup. Ct. 570.

Upon the filing of the mandate of the supreme court of the United States in the circuit court, Judge Clark pronounced a decree vacating those pronounced by Judge Key, appointing W. S. Whitney temporary receiver, and Jackson Smith permanent receiver, of the railroad company, and modifying all others so as "to allow all parties to said suit in the chancery court to proceed therewith according to the objects and purposes and jurisdiction of that court, unaffected and without restraint by an order of that court"; directing a surrender of the property to James T. Shields, receiver of the state court. This order was entered on May 15, 1895, and concluded with the following: "It is further ordered that this judgment shall not in any manner affect the validity of the acts of said receiver Smith while under the orders of this court, and shall not be so construed. Any question in respect to the validity of all the...