Des Moines Terminal Co. v. Des Moines Union Ry. Co.

• Citation: 52 F.2d 616
• Decision Date: 28 October 1931
• Docket Number: No. 8990-8992.,8990-8992.
• Parties: DES MOINES TERMINAL CO. v. DES MOINES UNION RY. CO. et al. CHICAGO GREAT WESTERN R. CO. et al. v. DES MOINES UNION RY. CO. et al. DES MOINES UNION RY. CO. et al. v. DES MOINES TERMINAL CO. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

52 F.2d 616 (1931)

DES MOINES TERMINAL CO. v. DES MOINES UNION RY. CO. et al.

CHICAGO GREAT WESTERN R. CO. et al. v. DES MOINES UNION RY. CO. et al.

DES MOINES UNION RY. CO. et al. v. DES MOINES TERMINAL CO. et al.

Nos. 8990-8992.

Circuit Court of Appeals, Eighth Circuit.

August 10, 1931.

Rehearing Denied October 28, 1931.

COPYRIGHT MATERIAL OMITTED

J. G. Gamble, of Des Moines, Iowa (R. L. Read and Gamble, Read & Howland, all of Des Moines, Iowa, on the brief), for Des Moines Terminal Co.

Donald Evans, of Des Moines, Iowa (W. D. Eaton and J. C. Pryor, both of Burlington, Iowa, and Carr, Cox, Evans & Riley, of Des Moines, Iowa, on the brief), for interveners Chicago, B. & Q. R. Co. and Chicago Great Western R. Co.

N. S. Brown, of St. Louis, Mo., and John N. Hughes, of Des Moines, Iowa (Homer Hall, of St. Louis, Mo., and Hughes, O'Brien & Faville, of Des Moines, Iowa, on the brief), for Des Moines Union Ry. Co. et al.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and DAVIS, District Judge.

KENYON, Circuit Judge.

Three appeals are here involved. The Des Moines Terminal Company (hereinafter designated the Terminal Company) brought action in the district court of Polk county, Iowa, at the May term, 1923, against the Des Moines Union Railway Company (hereinafter termed the Union Company), Chicago, Milwaukee & St. Paul Railway Company, and Wabash Railway Company, to quiet title in it to certain railway terminal property in Des Moines, consisting of rights of way upon which were located railroad tracks, switches, and other terminal facilities. The cause was duly removed to the United States District Court, and an answer and cross-bill was filed by defendants, in which they asserted that the Union Company was the owner in trust for the benefit of the cross-petitioners, the Milwaukee Railway Company and the Wabash Railway Company, of all the tracks, rights of way, and facilities claimed by the Terminal Company; that the Terminal Company had acquired them as the result of a scheme and conspiracy entered into between F. M. Hubbell, F. C. Hubbell (his son), and H. D. Thompson (brother-in-law), as officers and stockholders of the Union Company, to enrich themselves out of the trust estate, of which the Union Company was trustee; that the transactions of said parties were in violation of their duties as such officers and trustees, and cross-petitioners asked that the tracks and right of way and other terminal property claimed to be owned by the Terminal Company be decreed to be a part of the trust estate held by the Union Company as trustee for the exclusive use of cross petitioners.

In reply the Terminal Company denied any scheme or conspiracy on the part of F. M. Hubbell, F. C. Hubbell, and H. D. Thompson, to enrich themselves out of trust property; further that, in an equity suit in the District Court of the United States for the Southern District of Iowa, in which the Milwaukee and Wabash Companies were complainants and the Hubbells were defendants, together with the Union Company, complainants filed an amended bill on May 12, 1909, in which they set up part of the same dereliction they now assert in this case; that they had at that time full information of the facts and are estopped to now raise these questions. Waiver and laches are also asserted.

The Chicago Great Western Railroad Company and the Chicago, Burlington & Quincy Railroad Company intervened in the action, claiming the right to possession of the so-called terminal tracks and properties of the Terminal Company by virtue of a lease from that company of date June 3, 1921. We shall hereinafter refer to these two intervening railroads as interveners.

Eight weeks of time was occupied in the trial of this case in the District Court. The facts are intricate and involved, and show a much scrambled condition of affairs. To outline them in detail would make a book. A mass of records, correspondence, and evidence is presented to us. The legal questions discussed are numerous. The trial court held that Messrs. Hubbell, who were in control of the Terminal Company, had violated their trust in developing the system of tracks, known as the Terminal Company's system, for their own benefit and profit, and in failing to carry out the purposes for which the Union Company was organized, but held that any right on the part of the Union Company or the Milwaukee and Wabash Companies to claim ownership of the Terminal properties had been waived; that the Union Company was not entitled to have transferred to it as trustee for the Milwaukee and Wabash Companies ownership of these properties. It held that, while the Union Company and the proprietary roads were not in position to claim ownership in the railroad properties of the Terminal Company by reason of waiver, they were entitled to claim as to said properties the exclusive use thereof upon reasonable terms to be fixed by the court if no agreement should be made covering the same. It held that the finding of waiver and abandonment by the Union Company and the proprietary roads of the right to claim equitable ownership of the Terminal properties was not inconsistent with the right to have established an implied parol arrangement for the exclusive use of the tracks by the Union Company enforced upon reasonable terms.

As to interveners, the trial court held they had acquired their rights by lease with the Terminal Company under such conditions as to put them on inquiry and to require them to use reasonable diligence to ascertain the rights of the Union Company, and that the lease to them was void. The main relief granted by the trial court is expressed in this order: "It is therefore the Order and Judgment of this Court that all of the tracks of the Des Moines Terminal Company and the real estate used in connection therewith, and the real estate, if any, now under lease to the Des Moines Union be impressed with a trust in favor of the Des Moines Union Railway Company for the exclusive possession and use thereof by the Des Moines Union Company upon reasonable terms."

As the Hubbells are the parties around whom this controversy rages it will be well to get clearly in mind their relationship to the situation. The Des Moines Union Railway Company was incorporated in 1884. F. M. Hubbell was one of the incorporators. He was secretary and a director of said company from the date of its incorporation until April 5, 1921. His son, F. C. Hubbell, was president and director of the company from 1892 until April 5, 1921, when he became president of the Terminal Company. Mr. H. D. Thompson, a brother-in-law of F. M. Hubbell, was director and treasurer of the Union Company at the time the Terminal Company was organized, and so continued until April 5, 1921.

The Des Moines Terminal Company was incorporated in May, 1902, by F. M. Hubbell, H. D. Thompson, and C. Huttenlocher (an employee of F. M. Hubbell). F. M. Hubbell was by the articles of incorporation made the first president of the Terminal Company, H. D. Thompson, vice president, and Mr. Huttenlocher, secretary and treasurer. They also comprised the first board of directors. The Frederick M. Hubbell estate is a trust estate created by Frederick M. Hubbell. F. M. Hubbell Son & Co., Inc., is a corporation which took over the real estate business formerly conducted by the partnership of F. M. Hubbell & Son. The Frederick M. Hubbell estate was a stockholder of the Terminal Company, as was F. M. Hubbell Son & Co., Inc. The Hubbell interests and Thompson were in complete control of the Terminal Company during its entire existence and it was entirely a Hubbell enterprise. The stock of F. M. Hubbell Son & Co., Inc. was owned at the time of trial of the original case, one-third by H. D. Thompson, one-third by F. C. Hubbell, and one-third by the trustees of the F. M. Hubbell estate. Contracts were made between the Terminal Company, signed by F. M. Hubbell as president, with the Union Company, signed by F. C. Hubbell, as president.

The dominating personality in the Union Company until 1921, and in the Terminal Company from its organization, was Mr. F. M. Hubbell. We shall refer to the various Hubbell enterprises, individual and collective, as the Hubbell interests.

The genesis of the Des Moines Union Railway Company is this: On the 2d day of January, 1882, an agreement was made in the city of New York between the Des Moines & St. Louis Railway Company, the Des Moines Northwestern Railway Company, and the St. Louis, Des Moines & Northern Railway Company, and several individual signers, to organize a terminal company in Des Moines to be known as the Des Moines Union Railway. The purpose is expressed in subdivision 8 thereof, as follows: "It is understood and agreed that spur tracks shall be built connecting the said terminal grounds with such manufactories and other sources of trade in and about the City of Des Moines, as afford sufficient opportunity for profit by so doing, and that all of said tracks shall be adopted for use for both broad and narrow gauge (trucks), provided that in case either of said Companies shall deem the construction of any of said tracks as not advantageous to its business, the question of constructing said tracks, and which of the parties hereto shall pay therefor shall be determined by arbitration."

Mr. F. M. Hubbell did not sign this agreement, but was active in organizing the Union Company. He was holding offices in a number of these roads and was regarded by the Wabash, which in fact controlled one of the signatory roads, as their representative in Des Moines. From 1882 to 1888 the terminal properties were largely operated by the Wabash, and Mr. Hubbell was participating in acquiring the property for the Union Company intended to be used for terminal purposes. The respective railway companies entering into said agreement, and to carry out its provisions, caused to be incorporated the Des Moines Union Railway Company.

The articles of incorporation...