Farrington v. Stucky

• Decision Date: 18 November 1908
• Docket Number: 2,749.
• Citation: 165 F. 325
• Parties: FARRINGTON v. STUCKY et al.
• Court: U.S. Court of Appeals — Eighth Circuit

165 F. 325

FARRINGTON v. STUCKY et al.

No. 2,749.

United States Court of Appeals, Eighth Circuit.

November 18, 1908

A bill in equity was filed in this cause by Alonzo J. Farrington the appellant, against the defendants, W. L. Stucky, trustee William Kenefick, trustee, and William Kenefick Company asking a preliminary injunction to restrain the foreclosure of a trust deed under power of sale therein contained, and as final relief asking that the trust deed and the notes secured thereby be declared illegal and void, and canceled.

The facts out of which the controversy arose are substantially as follows:

The William Kenefick Company was, in the month of November, 1904 engaged in locating and constructing the Missouri, Oklahoma & Gulf Railroad, from Muskogee, Ind. T., southwesterly to a point of connection with the Ft. Smith & Western Railroad, within six miles of the station of Dustin. The defendant William Kenefick was at the time a stockholder, director, and president of both the construction company and the railroad company. He visited the town of Henryetta, in Indian Territory, and informed the complainant and other citizens that, unless a right of way and station grounds and a bonus of $20,000 were furnished by the citizens of Henryetta, the railroad would be constructed along the line of a preliminary survey about four miles east of that town. In response to that solicitation a written agreement was entered into securing the right of way and station grounds, and checks or notes secured by mortgage, amounting in the aggregate to $20,000, were placed in the hands of W. B. Hudson, John W. Sullins, and Anthony Crofton as a committee to represent the contributors to the bonus. At the same time this committee, as trustees for the contributors, entered into a written contract with the William Kenefick Company, providing on their part for the assignment of the $20,000 of securities to William Kenefick, as trustee, and on the part of the construction company binding it to have trains running on a regular schedule into the town of Henryetta on or before January 1, 1906, and to complete the road to its connection with the Ft. Smith & Western Railroad on or before September 1, 1906, and stipulating that, in case these provisions were not complied with, the notes and other securities should be absolutely void, and the trust deeds discharged of record. The complainant, as his contribution to the bonus, executed two promissory notes, for $250 each, payable to the committee above mentioned January 1, 1905, 'or 30 days after trains are running on regular schedule into the town of Henryetta,' and the other payable September 1, 1905, 'or 30 days after connection is made with some railroad south of Henryetta, by the extension of said road through Henryetta to some point of connection. ' These notes were secured by a trust deed upon real property, which contained a power of sale to be exercised in case of default in paying the notes. It is further averred in the bill that at the time of the execution of the several instruments above mentioned it was orally agreed that no depot or townsite should ever be constructed or laid out between Henryetta and Dustin, and no stops or stations recognized by the railroad company, and that a written agreement to that effect should be executed and forwarded to the committee representing the contributors to the bonus, on the day following the execution of the other instruments, but that such supplementary agreement had never been given.

It is further averred that on the same day on which these papers were prepared and signed, viz., November 21, 1904, the said committee, to whom the securities were made payable, indorsed and assigned them to William Kenefick. The averments of the bill are, however, contradictory as to whether the assignments were made to William Kenefick personally, or to William Kenefick as trustee. In some parts of the bill the transaction is stated in one form, and in others in the other form. The written contract itself provided, as above stated, that the securities should be assigned to William Kenefick, trustee, and the notice of foreclosure, which is attached as an exhibit to the bill, also states that they were assigned to him as trustee; and the record at other places indicates that the assignment was made in that form. These securities were afterwards assigned by William Kenefick, as trustee, to W. L. Stucky, trustee.

The railroad was constructed in accordance with the agreement between the parties, and, default having been made in the payment of the notes, W. L. Stucky, as trustee, began the publication of a notice for the foreclosure of the trust deed under the power of sale therein contained. Thereupon the present bill was filed, and a preliminary injunction restraining the foreclosure granted. A general demurrer was afterwards interposed to the bill, which was sustained, and a decree entered dissolving the injunction and dismissing the bill upon the merits. An appeal was taken from this decree to the Court of Appeals of Indian Territory, where the decree was affirmed, and the present appeal is brought to review the action of that court.

W. M. Matthews, for appellant.

Preston C. West, William M. Mellette, and Edward R. Jones, for appellees.

Before SANBORN and HOOK, Circuit Judges, and AMIDON, District Judge.

AMIDON District Judge (after stating the facts as above).

It is contended by the appellants that the notes and trust deed are void because the consideration therefor was against public policy and illegal. It is now too late to hold that an agreement for the payment of a bonus to a railroad company to secure the construction of its line along a given route is void as against public policy. That has been one of the conspicuous features of American railroad building. The Legislatures in nearly every state in the Union have authorized counties, cities, and other municipal bodies to issue bonds in aid of such enterprises. The conflict and strife of different communities to gain the location of the road in their midst has been a large factor in the building of every important railway line. After Legislatures have authorized the issuing of municipal bonds, and the exercise of the power of taxation, so as to compel every property owner in the community to contribute to these bounties, it would be wholly unwarrantable for the courts to declare that voluntary contributions made by citizens are void as against public policy. The courts as a rule are to get their notions of public policy from the legislative department; and when that department, by a long course of legislation, has indicated its views of what constitutes sound public policy on any subject, the courts cannot set up another standard. We are clearly, therefore, of the opinion that the mere giving of a bounty by the citizens of Henryetta for the purpose of securing the construction of the railroad through that city cannot be held to be illegal or against public policy. Neither can we say that the deflection of the road from the line of its preliminary survey to Henryetta prejudiced either the welfare of the railroad company or the public welfare. The bill contains no such charge, nor any statement of facts from which such an inference could be drawn. Its only averment on the subject is:

'That in causing said road to be built by way of Henryetta it was necessary to deflect the same from its most natural and cheapest route a great number of miles, namely, four miles, at a great additional cost to the Missouri, Oklahoma & Gulf Railroad Company, namely, about fifty thousand dollars.'

We cannot hold as a matter of law that, because the route was not the cheapest and most natural, it was therefore not the best route, both for the public and the railroad company. In the early days of railroading, cheapness and shortness were regarded as controlling considerations; but at the present time the avoidance of short curves and high grades is deemed of greater importance. Within the last 12 years the Pennsylvania Railroad Company has expended more than $50,000,000 in reconstructing its line between Pittsburgh and New York, and now, after the improvement is completed, it is found that the line is several miles longer than it was originally.

The expense, however, is amply justified, because short curves and steep grades have been eliminated. There is no averment in the bill impugning the route selected, except that it was not the cheapest and most natural; but any practical railroad man might still say that the route was best for all interests concerned, because it avoided curves and grades, and reached the traffic and served the convenience of the town of Henryetta.

The complainant, however, bases his charge of illegality mainly upon the contention that the bonus was solicited and received, not for the railroad company, but for the construction company, or for Mr. Kenefick personally. The bill leaves us in doubt on this subject. The written contract was made on the one part by the committee representing the contributors to the bonus, and on the other part by the William Kenefick Company. But we think a fair consideration of the entire record indicates that the securities were immediately assigned to William Kenefick as trustee, and by him assigned to the present holder as trustee. The bill in no way indicates the nature of the trust. It is urged by counsel representing the complainant, that the word 'trustee' should be regarded as merely descriptio personae; but the doctrine which he invokes is confined to negotiable instruments or contracts executed by an agent in his own name. When dealing with equitable considerations, such as are presented by this record, the affixing of the term 'trustee' to the name of the...