Harrison v. Union Pac. Ry. Co.
| Decision Date | 21 September 1882 |
| Citation | 13 F. 522 |
| Parties | HARRISON v. UNION PACIFIC RY. CO. and others. [1] |
| Court | U.S. District Court — Eastern District of Missouri |
The plaintiff, Harrison, is the holder of 20 bonds of the Arkansas Valley Railway Company, guarantied by the Kansas Pacific Railway Company, on which he brought his action at law in this court to recover judgment against the Union Pacific Railway Company, alleging that the latter company is responsible upon said bonds as successor in liability under a contract of consolidation between said two last-named companies, and certain statutory provisions concerning the same. The said railroad companies brought their bill in equity to enjoin the plaintiff, Harrison, from further prosecuting his action and from negotiating said bonds, and also asking for an accounting between Harrison and the Arkansas Valley Railway Company for interest paid by said company to Harrison, as well as for a surrender of the bonds so guarantied, and of two Clay county bonds alleged to be held by him. The plaintiff, Harrison, filed a cross-bill praying alternative relief, as follows:
(1) If the court holds that the Union Pacific Railway Company is liable directly to Harrison, that the injunction be dissolved, and he be permitted to proceed with his action at law. (2) If, on the other hand, the court holds that the company is liable only to the extent of the property received from the Kansas Pacific Railway Company, then that the trust be fastened on that property, and for a discovery as to its character, identity, and present value.
The material facts with respect to the 20 bonds sued on are as follows:
(1) In 1873 the Arkansas Valley Railway Company was a corporation existing under the laws of Colorado, and had authority to construct a railroad commencing on the line of the Kansas Pacific Railway at Kit Carson, and extending to Pueblo. (2) The construction of this line was regarded as of great importance to the prosperity and success of the Kansas Pacific Railway Company, to whose line it would become a feeder. (3) In order to accomplish this object bonds were issued by the Arkansas Valley Railway Company, and guarantied by the Kansas Pacific Railway Company, and it was agreed by the former company that any one subscribing to the scheme $7,500 should receive $10,000 first mortgage bonds of the Arkansas Valley Railway Company, guarantied by the Kansas Pacific Company, $1,000 of Clay county municipal bonds, and stock of the Arkansas Valley Railway Company, $7,500 amounting to $18.500, nominal value, in consideration of a cash payment of $7,500. (4) Harrison, then being a director in the Kansas Pacific Railway Company, and that company being a stockholder in the Arkansas Valley Company, subscribed to the scheme $15,000, and accordingly became entitled to and did receive $20,000 of the bonds guarantied by the Kansas Pacific Company, $15,000 stock in the Arkansas Valley Railway Company, together with $2,000 Clay county bonds. (5) The railroad bonds were secured by mortgage upon the road, and when default of interest had occurred the trustees on the mortgage sold out the road and its belongings, and the proceeds were divided out among the bondholders, including Harrison, who credited on his bonds the sum he received. The allegations of the cross-bill with respect to the consolidation, in so far as it is deemed necessary to state them, are to be found in the opinion of the court.
The case is before the court on demurrer to the cross-bill of Harrison, which, it is conceded, presents all the material facts.
Dyer & Ellis and George M. Block, for Harrison.
J. P. Usher and H. D. Wood, for the railroad company.
The intention of the Arkansas Valley Railway Company was to sell the stock to Harrison for less than its par value; i.e., to give him $15,000 in stock, 20 bonds of the company guarantied by the Kansas Pacific Company, and the Clay county bonds, all for $15,000 in cash. There is nothing in the statutes of Colorado, where the corporation was created, to forbid...
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