Guaranty Trust Co. of New York v. Minneapolis & St. LR Co.

• Decision Date: 17 August 1931
• Docket Number: No. 9147-9149.,9147-9149.
• Citation: 52 F.2d 418
• Parties: GUARANTY TRUST CO. OF NEW YORK et al. v. MINNEAPOLIS & ST. L R. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

52 F.2d 418 (1931)

GUARANTY TRUST CO. OF NEW YORK et al. v. MINNEAPOLIS & ST. L R. CO. et al.

Nos. 9147-9149.

Circuit Court of Appeals, Eighth Circuit.

August 17, 1931.

Warren S. Carter, of St. Paul, Minn. (Davis, Polk, Wardwell, Gardiner & Reed, of New York City, Kellogg, Morgan, Chase, Carter & Headley, of St. Paul, Minn., and Edwin S. S. Sunderland and Thomas O'G. FitzGibbon, both of New York City, on the brief), for Guaranty Trust Co. of New York, trustee.

Frederick G. Ingersoll, of St. Paul, Minn. (Larkin, Rathbone & Perry, Henry V. Poor, and James L. Banks, Jr., all of New York City, on the brief), for Central Hanover Bank & Trust Co., trustee.

Frederick F. Greenman, of New York City (Cook, Nathan & Lehman, of New York City, O'Brien, Horn & Stringer, of St. Paul, Minn., Alfred A. Cook, of New York City, Thomas D. O'Brien and Edward S. Stringer, both of St. Paul, Minn., and Arthur Kramer, of New York City, on the brief), for Bache Committee.

William Lloyd Kitchel, of New York City (Cadwalader, Wickersham & Taft, of New York City, Sanborn, Graves & Andre, of St. Paul, Minn., Eugene J. Conroy, of New York City, and William G. Graves and J. Neil Morton, both of St. Paul, Minn., on the brief), for Perkins Committee.

John Junell, of Minneapolis, Minn. (Junell, Oakley, Driscoll & Fletcher, of Minneapolis, Minn., and Cyril J. Curran, of New York City, on the brief), for Hawley Committee.

Wendell Berge, Sp. Asst. to Atty. Gen. (Lewis L. Drill, U. S. Atty., of St. Paul, Minn., John Lord O'Brian, Asst. to Atty. Gen., and Elmer B. Collins, Sp. Asst. to Atty. Gen., on the brief), for the United States.

White & Case, of New York City, Kingman, Cross, Morley & Cant, of Minneapolis, Minn., Jesse E. Waid, of New York City, Kenneth Taylor, of Minneapolis, Minn., and Carlos L. Israels, of New York City, for appellees New York Trust Co. and the Bennett Committee.

Before STONE and GARDNER, Circuit Judges and YOUMANS, District Judge.

GARDNER, Circuit Judge.

There are here three appeals consolidated for the purpose of presentation in this court and presented on one record. They all grow out of and are bottomed on the opinion and mandate of this court on a former appeal, which involved questions of construction and priorities of various mortgages on the railroad property of the Minneapolis & St. Louis Railroad Company. Guaranty Trust Company of New York, as Trustee, etc., v. Minneapolis & St. Louis Railroad Company et al., 36 F.(2d) 747. As noted in the opinion in that case the mortgages covering the various portions of the railroad property, the mileage included therein, the bonds authorized, and the amount of bonds actually issued are as follows:

                                              Mileage   Amt. Authorized  Amt. Issued
                     Mortgages                Covered
                  Merriam Junction
                   and Albert Lea
                   Feb. 1, 1877               117          $1,100,000    $1,100,000
                  Minneapolis & St
                   Louis First Consolidated
                   Nov. 2, 1894               368          10,000,000     5,282,000
                  Minneapolis & St
                   Louis First & Refunding
                   March 1,
                   1899                       633          25,000,000    13,244,000
                  Iowa Central First
                   Mortgage, Aug. 1,
                   1888                       503           7,650,000     7,650,000
                  Iowa Central First
                   & Refunding,
                  March 1, 1901               539          25,000,000     7,156,000
                  Des Moines & Ft.
                   Dodge First Mortgage,
                   Jan. 1, 1905               139           3,072,000     3,072,000
                  Refunding and Extension
                   Mortgage,
                   Jan. 1, 1912              2090          75,000,000     8,985,000
                

On the previous appeal, the court had under consideration provisions of the last six named foregoing mortgages. The appeals here, however, involve a consideration of but three of these mortgages, and the issue is further limited to a consideration of the liens upon equipment acquired from January 1, 1912, to January 26, 1923, the date of the appointment of the receiver.

In suit No. 9147, the Guaranty Trust Company of New York, as trustee of the refunding and extension mortgage, dated January 1, 1912, has appealed from two orders of the lower court entered on the opinion and mandate of this court. The appellant, Guaranty Trust Company, upon the filing of the mandate, filed its petition to amend the final decree. The court, in denying this petition, found that the divisional mortgage which was first executed, had a prior lien on all the equipment acquired for the system since January 1, 1912; that the other divisional mortgage, executed second in point of time, had a second lien upon all of the system's equipment so acquired, and the third and last mortgage had a third lien upon such equipment. On this appeal it is urged that the refunding and extension mortgage should be a first lien upon a proportionate part of such equipment, calculated upon a first lien mileage basis, or upon some other basis of allocation, and that by reason of the replacement covenants in that mortgage, it should have a first lien upon such portion of such equipment acquired since January 1, 1912, as is necessary to maintain and replace the equipment acquired on January 1, 1912.

The court, in the original case, made no separate assignment of equipment for the lines west of Watertown, S. D., which are the only lines of the Minneapolis & St. Louis system upon which the refunding and extension mortgage is a first lien. Modifying the decree and remanding the cause to the lower court, this court directed a modification of the judgment on the record already made. The lower court was, therefore, without jurisdiction to reopen the case for the taking of additional testimony, if such existed, on this question. It is, however, claimed that on the record already made, the additional equipment could have been apportioned upon a first lien mileage basis. It must be apparent that in the present case any apportionment of equipment, based upon a mileage basis, would not be an equitable one. The mileage upon which the refunding and extension mortgage is a first lien is that portion of the system which extends west from Watertown. It is at best merely an extension, and if we may take judicial notice of the population and importance of towns and cities located upon this branch, and can know what is a matter of common knowledge, we are warranted in the conclusion that the density of traffic upon this portion of the line is very small as compared with the traffic upon other portions of the system. Such an apportionment would certainly not be equitable. It is now claimed, however, that a proportion of the equipment acquired subsequent to January 1, 1912, should be allocated to this mortgage, based upon the replacement covenants therein. Appellant, neither in the trial of the original action, nor on the former appeal, asserted any right or claim under any alleged replacement covenants in its mortgage; in fact, it denied that the replacement covenants of the Iowa Central first mortgage had such effect, and its contention throughout this litigation and until the mandate issued, has been inconsistent with any such contention. We think it cannot now be heard to urge such a claim. It would require the reopening of the record and reframing of the issues, and retrial of the case. The orders attacked on this appeal are, therefore, affirmed.

The appeal in No. 9148 is by the Central Hanover Bank & Trust Company as trustee of the first and refunding mortgage of the Iowa Central Railway Company. This court on the former appeal held that the Iowa Central first mortgage contained no after-acquired property clause, but that it contained replacement clauses making that mortgage a first lien upon a value amount of equipment acquired by the Iowa Central, or its successors, equal to the value amount of equipment in existence at the date of its execution. We also held that the Minneapolis & St. Louis first and refunding mortgage and the Iowa Central first and refunding mortgage both contained after-acquired property clauses, which were not cut off, either by the 1912 sale or the 1916 consolidation.

The lower court, on motion of the Perkins committee, representing the Minneapolis & St. Louis first and refunding mortgage bondholders, amended the original final decree of foreclosure so as to declare that that mortgage was a first lien on all equipment acquired after January 1, 1912, prior to the lien of the Iowa Central first and refunding mortgage, and so as to declare the lien of the Iowa Central first and refunding mortgage a second lien thereon.

The Bache committee, representing the holders of bonds secured by the Iowa Central first and refunding mortgage, challenge the correctness of the lower court's decision in so modifying the decree and in denying their application to apportion the equipment to each of these mortgages. The question presented on this appeal is, therefore, whether the lien of the Minneapolis & St. Louis first and refunding mortgage is prior to that of the Iowa Central first and refunding mortgage on equipment acquired between January 1, 1912, and the date of the receivership. While this court, on the former appeal, held that the after-acquired property clauses of both of these mortgages survived the closure agreements of 1912 and the consolidation of 1916, it did not, in its attempt to unravel the tangled skein then presented, consider the question of priority. The question has been presented with great skill and marked ability by counsel on either side, but even the industry of distinguished counsel has not been able to present any direct precedents which may guide us in the determination of this question.

The after-acquired property clause of the Minneapolis & St. Louis mortgage was an obligation and covenant created by that company in 1899. The after-acquired property clause in the Iowa Central first and refunding mortgage was an obligation and covenant created by that company in 1901. When the Minneapolis & St. Louis Railroad...