Illinois Steel Co. v. Ramsey

• Decision Date: 29 January 1910
• Docket Number: 3011.,2988
• Citation: 176 F. 853
• Parties: ILLINOIS STEEL CO. v. RAMSEY et al. [1] SAME v. Aigler et al.
• Court: U.S. Court of Appeals — Eighth Circuit

176 F. 853

ILLINOIS STEEL CO. v. RAMSEY et al. ^[1]

SAME v. Aigler et al.

Nos. 2988, 3011.

United States Court of Appeals, Eighth Circuit.

January 29, 1910

[Copyrighted Material Omitted]

June 2 1908, Ralph W. Aigler, as a judgment creditor of the Oklahoma Central Railway Company, filed a bill in the United States Circuit Court for the Eastern District of Oklahoma in behalf of himself and all other creditors against said Railway Company and the Canadian Valley Construction Company, wherein he prayed for an accounting between the Railway Company and the Construction Company, and that all the property, income tolls, issues, and profits as well as the assets of every name and nature of said defendant Railway Company might be sold at a judicial sale, and the proceeds thereof justly and equitably applied for the equal benefit of all creditors of said company in accordance with their just liens, rights, and claims; that a receiver be appointed to take possession of the property and assets of the Railway Company and administer the same under the direction of the court until a sale could be had. On the same day, by consent of the Railway Company, Asa E. Ramsey was appointed such receiver. On July 1, 1908, the Illinois Steel Company, a corporation of the state of Illinois, and a creditor of the Railway Company in the sum of $129,124.64 for steel rails, steel splice bars, steel track spikes, and steel track bolts, sold to said Railway Company and used in the construction of its railway, on leave granted by the court filed its petition in intervention in said action, and prayed therein that process issue against all parties interested, and that upon final hearing the claim of said Steel Company be adjudged a prior lien on all the property of said Railway Company and paid by the receiver as a preferred debt and obligation of said Railway Company. July 23, 1908, Aigler, through his attorneys, filed in court a consent that the Steel Company, as intervener, should have a writ of subpoena against all parties in interest not then of record in said suit. On September 15 and 16, 1908, Aigler, the complainant, and Ramsey, the receiver, demurred to the petition in intervention for want of equity. October 10, 1908, after argument, the court sustained the demurrer of Aigler, and granted leave to the Steel Company to amend its petition within 30 days. November 6, 1908, the Steel Company filed its amended petition in intervention, which was as follows:

'(1) That it is a corporation duly organized and existing under and by virtue of the laws of the state of Illinois; that it has its principal place of business in the city of Chicago, in the county of Cook, in said state; that it is engaged in the business, among other things, of manufacturing and selling steel rails, splice bars, spikes, and bolts.

'(2) That the Oklahoma Central Railway Company is a corporation organized and existing under and by virtue of the territory of Oklahoma, now state of Oklahoma, and a citizen of the state of Oklahoma, and the Canadian Valley Construction Company is a corporation organized and existing under and by virtue of the laws of the United States, applicable to and in force in the territory formerly known as Indian Territory, now a part of the state of Oklahoma; that said defendant, the Oklahoma Central Railway Company, is authorized to construct, own, and operate a railway from the city of Lehigh in a northwesterly direction through the counties of Coal, Pontotoc, Garven, McLain, and Grady, all located in the Eastern judicial district of Oklahoma; that the Canadian Valley Construction Company was organized for the purpose of constructing the railroad aforesaid.

'(3) That on the 23d day of December, 1905, your intervening petitioner entered into a written contract with said defendant, the Oklahoma Central Railway Company, to sell and deliver to the said Railway Company, 15,000 gross tons of No. 1 steel rails; also a sufficient quantity of its standard steel splice bars to lay the rails covered by said contract, said Railway Company agreeing to accept not exceeding 5 per cent. of No. 2 steel rails, in addition to the above-mentioned quantity of No. 1 steel rails, and said Railway Company, agreeing to pay for first quality steel rails $28 per gross ton and $26.60 per gross ton for second quality steel rails and $1.50 per 100 pounds for said splice bars, said parties also agreeing to furnish and receive the necessary standard steel track spikes at $1.85 per one hundred pounds and the necessary standard steel track bolts at $2.45 per one hundred pounds.

'(4) That your petitioner in fulfillment of said contract delivered to said Railway Company 13,430 1140/2240 tons of first quality steel rails, 676 2220/2240 tons of second quality steel rails, 4,265 kegs of spikes, 785 kegs of bolts, and 907 1840/2240 tons of splice bars; that the balance of said steel rails, splice bars, spikes, and bolts called for by said contract were not delivered for the reason that said defendant Railway Company was in default under said contract, in that it had failed to pay for the material already delivered in accordance with the terms of said contract.

'(5) That there became due to your petitioner under the terms of said contract long before the filing of this petition the sum of $129,424.64, together with interest thereon; that there is now due and owing to your petitioner from said Railway Company under the terms of said contract, after allowing said Railway Company all just and proper credits, the sum last above mentioned.

'(6) That your petitioner has frequently requested said Railway Company to pay your petitioner the balance so due and unpaid, but said Railway Company has neglected and failed so to do.

'(7) That all of the steel rails, splice bars, spikes, and bolts delivered as aforesaid by your petitioner to said Railway Company were used as your petitioner is informed and believes in the construction, maintenance, operation, and repair of the railroad of said Railway Company; that all or a part of said material was necessary and essential as your petitioner is informed and believes to enable said defendant to operate its road as a going concern; that such use of said steel rails, splice bars, spikes, and bolts has largely increased and added to the value of said railroad, and has substantially increased the assets of said defendant Railway Company; that by means and by reason of such use of said steel rails, splice bars, spikes, and bolts your petitioner ought to have and is entitled to a lien upon all the property, real, personal, and mixed, of said defendant.

'(8) That your petitioner is the holder as security for its claim of 160 first-mortgage trust bonds of said Railway Company, which said bonds are secured by a trust deed to Western Trust Savings Bank of Chicago, Ill., conveying to said bank all of the property of said Railway Company of every kind, character and description, including rights and franchises; that said trust deeds securing said bonds is a lien upon all of the property of the Oklahoma Central Railway Company, and that as the holder of 160 of the bonds secured by said trust deed this petitioner is entitled to and has a lien upon all of the assets of said Railway Company.

'(9) That said defendant, the Railway Company, was organized as your petitioner is informed and believes some time in the month of September, 1904, for the purpose of building a line of railway as above alleged in the second paragraph hereof; that the persons who were connected with and were instrumental in the organization of said Railway Company were, as your petitioner is informed and believes, Dorset Carter, of Purcell, Oklahoma, Herman Wollenburger, J. S. Keefe, Willoughby G. Wallen, and Joseph E. Otis, of Chicago, Illinois, Solomon Frederick Van Oss, The Hague, Holland, and certain other persons to your petitioner unknown; that the authorized capital stock of said company is $10,000,000; that thereafter and prior to the 14th day of September, 1905, these same persons caused to be incorporated the Canadian Valley Construction Company with a capital stock of $30,000, of which as your petitioner is informed and believes $16,000 has been paid in; that the president of said Railway Company has at all times been one Dorset Carter, who has also acted and is now acting as general manager of said Construction Company; that the officers and directors of said Construction Company whose names are unknown to your petitioner with the exception of said Dorset Carter, have been and are mere dummies; that said Construction Company has always been and is now under and subject to the control of the officers and directors of said Railway Company; that, through said Construction Company was organized by the persons aforesaid for the sole purpose of building the railroad of said Railway Company; that, through said Construction Company, the persons aforesaid planned to use and put upon the market an amount of stock and bonds largely in excess of the cost of the railroad of said Railway Company; that said Construction Company was organized as aforesaid merely as a scheme or device to enable the persons aforesaid to obtain all of the capital stock of said Railway Company.

'(10) That pursuant to said scheme, the officers and directors of said Railway Company, on or about the 14th day of September 1905, entered into a contract purporting to be made between said Railway Company and said Construction Company, but as a matter of fact between said officers and directors as represented by the Railway Company and themselves; that in and by the terms of said contract said Construction Company agreed to construct the line of railway of said Railway Company along the route already surveyed, said Construction...