Farmers' Loan & Trust Co. v. Eaton

• Decision Date: 10 March 1902
• Docket Number: 1,512.
• Citation: 114 F. 14
• Parties: FARMERS' LOAN & TRUST CO. v. EATON et al.
• Court: U.S. Court of Appeals — Eighth Circuit

114 F. 14

FARMERS' LOAN & TRUST CO. v. EATON et al.

No. 1,512.

United States Court of Appeals, Eighth Circuit.

March 10, 1902

W. H Rossington, Charles Blood Smith, and Clifford Histed, for appellant.

J. D McFarland and George H. Whitcomb, for appellees.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER Circuit Judge.

The questions to be determined in this case arise on the following facts: In a certain action which was brought by the Farmer's Loan & Trust Company, as trustee, to foreclose a mortgage on the property of the St. Louis, Kansas &amp Southwestern Railroad Company, the circuit court of the United States for the district of Kansas, on November 27 1896, appointed Dwight Braman as receiver of the mortgaged property. On January 27, 1897, the receiver aforesaid presented a petition to the court, requesting leave to lease the property of said railroad company to Francis S. Eaton, one of the appellees, for the period of one year from January 30, 1897, until January 30, 1898. Such leave was granted, and the proposed lease was submitted to the court and approved. On June 30, 1897, the receiver filed another application for authority to enter into another lease with said Eaton for a term of one year from July 1, 1897, with an option to said lessee to continue such lease in force for a second year. The proposed lease was authorized and approved by an order made and entered of record on June 30, 1897, and was duly executed. By the terms of the latter lease Eaton, the lessee, was to pay a deficit, in the sum of $2,780, which had accrued from the operation of the railroad from March 17, to July 1, 1897. The lessee also agreed to assume and pay certain notes, which had been given for equipment, amounting to $2,400, and were payable at the rate of $200 per month. He also agreed to pay the interest which accrued during the term of the lease on certain receiver's certificates, to the amount of $12,000, to insure the buildings along the road, to put in at least 2,000 new ties, and to place the road generally in a safe condition. The receiver, on his part, was to pay all the taxes upon the property, but the lessee was to receive all the income and earnings of the property, together with all cash then in the hands of the lessee as manager, and also all accounts and bills receivable, which accrued or were received from the operation of the road while the same had been under the charge of the lessee. On September 23, 1897, the court entered a decree of foreclosure and sale, by virtue of which the mortgaged property was sold and the sale confirmed on December 20, 1898, at which time the purchaser at the foreclosure sale was placed in possession of the mortgaged property. In the meantime, on November 30, 1898, Eaton, who had been or was about to be dispossessed of the leasehold property, filed a petition, asking, by way of relief, that he might continue to operate the road which he had leased until the 1st day of July, 1899, in accordance with the option which he had reserved by the terms of the lease. This petition on the part of Eaton was subsequently referred to a master, to report what, if any, compensation should be allowed to him as lessee, on account of the wrongful termination of his lease. After a full hearing and report, and after exceptions to said report had been heard and considered, the lower court allowed the lessee, as damages for the cancellation of his lease before the termination thereof, the sum of $8,298.88, which was a sum somewhat in excess of the amount recommended by the master. The present appeal was taken by the Farmer's Loan & Trust Company, the complainant in the foreclosure proceedings, from such order or allowance.

The principal question which this court is called upon by the appellant to determine is whether Eaton, the lessee, is entitled to any damages on account of being dispossessed of the leasehold property, prior to the natural termination of his lease. It is conceded, apparently, that a court, having possession of property through its receiver, may authorize him to lease the same; but, if such property is not fully conceded, it is, at least, well sustained by the authorities. In the case of Mercantile Trust Co. v. Missouri, K. & T Ry. Co. (C. C.) 41 F. 8, 11, it was held by Judge Brewer that receivers, acting under the direction of the court which appointed them, have power to execute leases without the consent of the mortgage bondholders. And in the case of Vault Co. v. McNulta, 153 U.S. 554, 560, 14 S.Ct. 915, 38 L.Ed. 819, it was taken for granted that such power exists. See, also, Weeks v. Weeks, 106 N.Y. 626, 13 N.E. 96; Beach, Rec. Secs. 288, 289. The point relied upon by the appellant seems to be that when such leases are made, even with the approval of the court, the court has the right to terminate them whenever the necessities of the litigation so require, and that, if terminated, the lessee is not entitled to compensation for any damages which he may have sustained. We are at a...