Farmers' Loan & Trust Co. v. Burlington & S.W. Ry. Co.

• Decision Date: 10 December 1887
• Citation: 32 F. 805
• Court: U.S. District Court — Western District of Missouri
• Parties: FARMERS' LOAN & TRUST CO. v. BURLINGTON & S.W. RY. CO. and others. In re NEUMAN and others.

32 F. 805

FARMERS' LOAN & TRUST CO. v. BURLINGTON & S.W. RY. CO. and others.

In re NEUMAN and others.

United States Circuit Court, W.D. Missouri.

December 10, 1887

The following are the principal facts: Prior to 1872 the Lexington, Lake & Gulf Railroad Company, a corporation organized under the laws of the state of Missouri for the purpose of building a railroad from the city of Lexington southward, had expended large sums of money in grading and tieing a portion of its road, and upon such road was an existing lien of something over $10,000, evidenced by a note and trust deed, and given for liabilities incurred in its construction. In that year it leased its road in an incomplete condition to the Burlington & South-Western Railway Company. The latter united this leased road with that portion of its own road running northward from Lexington to Unionville, making it one property and line of road with one common stock and one franchise, and known as 'the Linneus Branch of the Burlington & South-Western Railway Company ' Upon this Linneus branch in entirety was placed a mortgage of $1,600,000. By the term of a contract entered into between the parties about a year after the lease, as well as after the execution of said mortgage, the lessee agreed to pay the liabilities of the lessor to the extent of $20,000, which included, as admitted, the debt above described. That debt became, by transfer, the property of the intervenors. In 1877 certain proceedings were had, by which as it is claimed, this deed was foreclosed, and the legal title to the road upon which it had been given, to-wit, the road south of Lexington, vested in the intervenors. In the mean time, default having been made in the payment of the coupons on the $1,600,000 of bonds, a suit had been commenced in this court to foreclose the mortgage. The intervenors were not made parties to that suit. A receiver was appointed, who took charge of the whole line, and in April, 1876, a decree of foreclosure was entered, but no sale was made until 1880 the road in the mean time being operated by the receiver. In 1879 the intervenors, who claimed to own that portion of the road south of Lexington, entered into negotiations with one Brown for the sale of it to him for $50,000, whereupon the receiver obtained from this court an injunction restraining the parties from interfering with his possession, which injunction broke up the negotiations. Thereafter the receiver entered into negotiations with the intervenors for the purchase of their claim and interest. Before these negotiations were consummated, the receiver applied to the court for authority to issue receiver's certificates, to amount not exceeding $500,000, for the purpose of completing the road south of Lexington, and at the same time, and by the same petition, applied for authority as follows:

'Your petitioner also asks for authority to settle and adjust, by payment or purchase, any claims against said Lexington, Lake & Gulf Railway Company which may seem to be prior or adverse to the claims of the Burlington & South-Western Railway Company under the contract by which said Lexington, Lake &amp Gulf property was acquired.'

Upon this petition, the receiver obtained authority to issue such certificates, and also the following authority in reference to the purchase of claims: 'And the said receiver is further authorized and directed to settle and adjust, by payment or otherwise, any outstanding claims against the Lexington, Lake & Gulf Railway Company under the contract before mentioned, and to purchase in any outstanding or adverse lien, or title to any portion or all of said property, and any right or title so acquired to be conveyed to him, as receiver, for the benefit of the parties in interest herein.'

The authority to issue receiver's certificates provided that those certificates should be a first and specific lien only upon that part of the road south of Lexington. In fact, no receiver's certificates were issued, and nothing done towards the completion of that part of the road; but in March, 1880, a contract was made between the receiver...