James v. Central Trust Co. of New York

• Decision Date: 09 November 1899
• Docket Number: 289.
• Citation: 98 F. 489
• Parties: JAMES et al. v. CENTRAL TRUST CO. OF NEW YORK et al.
• Court: U.S. Court of Appeals — Fourth Circuit

98 F. 489

JAMES et al. v. CENTRAL TRUST CO. OF NEW YORK et al.

No. 289.

United States Court of Appeals, Fourth Circuit.

November 9, 1899

A. C Avery (B. F. Long and Lee S. Overman, on the brief), for appellants.

Charles Price, for appellee.

This is an appeal by the respondents below from a decree of the circuit court of the United States for the Western district of North Carolina, granting an injunction against S. T Pearson, Mrs. Clemye James, administratrix of W. A.

James and Mrs. F annie E. Howard, administratrix of J. H. A Howard, their agents and attorneys, enjoining the said S. T. Pearson and said Clemye James, administratrix, from proceeding any further in the prosecution of an action set out in the bill of complaint, depending in the superior court of Rowan county, wherein the said S. T. Pearson and said Mrs. James, administratrix, were plaintiffs, and the Western North Carolina Railroad Company defendant, and enjoining Mrs. Fannie E. Howard from instituting any action or proceeding such as the plaintiffs James and Pearson had begun, and from beginning or taking any action for a similar purpose, and enjoining all said persons and their agents and attorneys from in any manner interfering with the property of the Western North Carolina Railroad Company, or the Southern Railway Company, or with the franchise purchased at the foreclosure sale, and owned and possessed by the said Southern Railway Company. The facts necessary to an understanding of this appeal are as follows: The Western North Carolina Railroad Company was originally chartered by North Carolina in 1854-55, to build and operate a railroad within that state. In 1880, by an act of the legislature, the corporation was reorganized, and on September 1, 1884, the company executed a first mortgage to the Central Trust Company of New York to secure bonds to the amount of $3,856,000, and on September 2, 1884, executed a second mortgage to the same trust company to secure bonds to the amount of $4,110,000. On April 30, 1886, the company leased its road for 99 years to the Richmond & Danville Railroad Company having become insolvent, the property went into the hands of receivers appointed by the circuit court of the United States for the Western district of North Carolina. On April 20, 1894, the Central Trust Company of New York filed in the circuit court of the United States for the Western district of North Carolina its bill to foreclose the second mortgage made to it by the Western North Carolina Railroad Company, and such proceedings were had that a decree of foreclosure of the second mortgage and sale was entered May 2, 1894. On August 21, 1894, the railroad property and franchises of the said Western North Carolina Railroad Company were sold under said decree, subject to the first mortgage, to the Southern Railway Company, a Virginia corporation. On August 22, 1894, the sale was confirmed, and the court accepted the Southern Railway Company as purchaser, and directed that possession of the property be delivered to it, and proper deeds of conveyance executed, subject to the first mortgage, and reserving to the court the right to retake and resell the property if the Southern Railway Company as purchaser, and directed that possession of the property be delivered to it, and proper deeds of conveyance executed, subject to the first mortgage, and reserving to the court the right to retake and resell the property if the Southern Railway Company should fail to discharge the debts, liens, or claims which the court should decree to be paid out of the purchase money in preference to the debt secured by the mortgage foreclosed. The Southern Railway Company thereupon was put in possession of the said railroad property, and has ever since operated it as a part of its system of railroads. In 1897,-- three years after the railroad was sold and conveyed to the Southern Railway Company,-- Mrs. James, administratrix of her husband, brought an action in the superior court of Rowan county against the Western North Carolina Railroad Company for the negligent killing of her husband, who was engine driver of a locomotive on the said road in the employment of the Southern Railway Company, and who was killed in 1896, about two years after the foreclosure sale. In said court a verdict was recovered for $15,000, and on appeal to the supreme court of North Carolina it was held (James v. Railroad Co., 121 N.C. 523, 28 S.E. 537) that the Western North Carolina Railroad Company as a corporation under the laws of North Carolina, was still in existence, and was still liable for damages caused by the maladministration of the railroad by the Southern Railway Company, and that the railroad property itself in the possession of the Southern Railway Company could be held liable for such damages, and judgment was entered upon said verdict against the Western North Carolina Railroad Company. A judgment on a similar cause of action was also recovered in the same court by Mrs. Howard for the negligent killing of her husband, who was a fireman in the employment of the Southern Railway Company. The James judgment having been directed to be entered by the supreme court of North Carolina, and that court having ruled that, notwithstanding the foreclosure sale, the property of the railroad was liable for the damages for which she had recovered judgment, Mrs.

James together with S. T. Pearson, instituted a proceeding in the superior court of Rowan county, setting forth the recovery of the judgment against the Western North Carolina Railroad Company, and alleging, among other things, that the Western North Carolina Railroad Company was insolvent, and the Southern Railway Company, for reasons therein stated, was also insolvent; that the mortgages put upon the railroad property, both by the Western North Carolina Railroad Company and by the Southern Railway Company, were invalid; and praying that a permanent receiver be appointed to take possession of the franchise and property of the Western North Carolina Company, and run the railroad under the orders of the court. The scope of the bill of complaint filed in the superior court of Rowan county was very broad. It was filed not only on behalf of Mrs. James, in an effort to subject the railroad property to the payment of her judgment, but was filed also on behalf of all stockholders of the Western North Carolina Railroad who claimed not to have assented to its reorganization, and all creditors of that company; and one of the complainants was S. T. Pearson, a holder of a share of the original capital stock of the company. The bill alleged that the reorganization, in 1880, of the Western North Carolina Railroad Company, was illegal, and in disregard of the rights of certain stockholders; that the Western North Carolina Railroad Company had abdicated its duty as a corporation, and had, without authority of law,, permitted the Southern Railway Company to take possession of its roadbed, property, and franchise; that the pretended title of the Southern Railway Company to the franchise and property of the Western North Carolina Railroad Company was null and void; that the rolling stock and movables of the two railroad companies had been commingled so that the property of the Western North Carolina Railroad could not be identified; that Pearson and certain stockholders of the Western North Carolina Railroad Company had not assented to the reorganization of the Western North Carolina Railroad, and were entitled to hold their stock discharged from any lien created by either of said mortgages to the Central Trust Company of New York (if any lien was created by either of said deeds), and were entitled to have a receiver appointed to collect a fair rental for the franchise and property of the said Western North Carolina Railroad Company from the corporation or persons now operating the road. And on behalf of creditors it was alleged that, by reason of the fraudulent concealment of the property of the Western North Carolina Railroad Company by the Southern Railway Company, the said judgment creditor was unable to distinguish the rolling stock of the Western North Carolina Railroad Company, and subject it to execution, and that the pretended sale under said second mortgage executed by the Western North Carolina Railroad Company to the Central Trust Company of New York had cast a cloud upon the title to the franchise and...