Kansas City Terminal Ry. Co. v. Central Union Trust Co. of New York

• Decision Date: 05 November 1923
• Docket Number: 6217.
• Citation: 294 F. 32
• Parties: KANSAS CITY TERMINAL RY. CO. et al. v. CENTRAL UNION TRUST CO. OF NEW YORK et al. [a1]
• Court: U.S. Court of Appeals — Eighth Circuit

294 F. 32

KANSAS CITY TERMINAL RY. CO. et al. v. CENTRAL UNION TRUST CO. OF NEW YORK et al. ^[a1]

No. 6217.

United States Court of Appeals, Eighth Circuit.

November 5, 1923

Samuel W. Sawyer, of Kansas City, Mo., and Gardiner Lathrop, of Chicago, Ill. (Edward J. White, of St. Louis, Mo., N. H Loomis, of Omaha, Neb., R. Bruce Scott, H. H. Field, and W F. Dickinson, all of Chicago, Ill., N. S. Brown, of St Louis, Mo., and F. H. Moore, of Kansas City, Mo., on the brief), for appellants.

H. C McCollom, of New York City, Edward C. Eliot, of St. Louis, Mo. (Nagel & Kirby, Charles W. Bates, Boyle & Priest, Bryan, Williams & Cave, Lee Hagerman, Charles A. Houts, George C. Hitchcock, and Charles P. Williams, all of St. Louis, Mo., Edward Cornell and Charles E. Hotchkiss, both of New York City, Allen C. Orrick, of St. Louis, Mo., Roberts Walker, of New York City, George H. Williams, of St. Louis, Mo., Geller, Rolston & Blanc, Hornblower, Miller & Garrison, White & Case and Masten & Nichols, all of New York City, Richards, Smyth & Conway, of Brooklyn, N.Y., and King, Lane & Trafford, of New York City, on the brief), for appellees.

Joseph M. Bryson, of St. Louis, Mo. (C. S. Burg, of St. Louis, Mo., on the brief), amici curiae.

Before LEWIS, Circuit Judge, and FARIS and McGEE, District Judges.

FARIS District Judge.

Heretofore, and on the 27th day of September, 1915, an action was begun by the Railway Steel Spring Company, a corporation of the state of New Jersey, as plaintiff, against the Missouri, Kansas & Texas Railway Company, a corporation of the state of Kansas (hereinafter called old company), as defendant, in the form of a creditor's bill, in which such proceedings were had as resulted in the appointment of a receiver for the railroad, defendant therein. Later, actions were begun by the appellees to foreclose certain mortgages, or deeds of trust, made to secure bonds of the old company, in which deeds of trust the appellees were trustees, and which deeds of trust were liens upon all the properties of the old company. All these actions were consolidated by the District Court, and the consolidated case thereafter proceeded with such effect as that a sale under a decree of foreclosure of all of the deeds of trust was ordered and had, and upon such sale the properties of the old company were bought by one Hugo W. Blumenthal and another, who subsequently assigned all rights, property, and privileges accruing to them by such purchase to the Missouri-Kansas-Texas Railroad Company, a new corporation, organized under the laws of Missouri (hereinafter called the new company), to which latter company all the properties of the old company were conveyed, and which now holds and operates them.

Pending the entering of the final decree in the consolidated cause, appellants, Kansas City Terminal Railway Company (the holder of title to the properties of the Union Station at Kansas City, Mo., and of terminals affording ingress and egress to such station), the Illinois Trust & Savings Bank, and one Charles G. Hutcheson (as trustees in a certain deed of trust made by the Kansas City Terminal Railway Company), and nine of the railroad companies, out of twelve, which were parties to certain contracts made and entered into by and between them and the old company, came into the District Court and filed their bill of intervention, praying that the final decree, when entered, should provide that upon the sale of the properties of the old company under foreclosures of the mortgages, the purchaser should take these properties in all things subject to all of the contracts above mentioned and which are hereinafter more specifically described. The St. Louis & San Francisco Railroad Company and the Chicago Great Western Railroad Company, which were parties to these contracts, did not join as interveners. No point is made as to this however, if in fact there be any possible point in it; so no question is made of it here.

The contracts referred to, and which constitute the bases of contention in this controversy, were:

(a) A contract, dated May 21, 1906, between the Kansas City Belt Railway Company (the predecessor of the appellant Kansas City Terminal Railway Company), and the ten railroad companies (including the old company) then having lines of railroad through or into Kansas City, Mo. This contract provided for the transfer of a part of the stock in the Belt Railway, then held by the Atchison, Topeka & Santa Fe Railway Company, the St. Louis & San Francisco Railroad Company, and the Chicago, Milwaukee & St. Paul Railway Company, to the old company, and to six other railroad companies, then having terminals in Kansas City, and for the subsequent transfer of such stock to the Fidelity Trust Company, in trust, to be held by the latter until further conditions of the contract were complied with. It was also agreed that a new union station should be erected in Kansas City, and certain further trackage acquired, so as to afford a complete double belt track around the north and west sides of Kansas City. To these new facilities, as well as to existing facilities, each of the ten signatory railroad companies was to have access and use, without preference. The fixed charges, including taxes, for all such facilities, were to be borne by the signatory railroad companies equally; that is to say, each company was to pay one-tenth thereof. The cost of operation and maintenance was to be borne by the ten railroad companies, but to be apportioned for payment upon a wheelage basis. By this contract it was further provided that each railroad company should have a representative on the board of directors of the Terminal Company (then the Kansas City Belt Railway Company).

(b) A contract, called the 'operating agreement,' made on the 12th day of June, 1909, by and between the terminal company, of the first part, the ten railroad companies, of the second part, and the Illinois Trust & Savings Bank, as trustee, of the third part. This operating agreement provided for the furnishing to such railroads of terminal tracks and facilities for passenger trains and coaches, including sleeping cars, passengers, mail, and express, and for the use, under conditions, of the terminal company's tracks for freight trains, for the term and period of 200 years. As foreshadowed by the presence of a trustee in this contract, a deed of trust securing not to exceed $50,000,000 of bonds was agreed to be made by the terminal company. The principal and interest of these bonds were to be paid by the ten railroad companies in equal proportions, as the same fell due, and, if default should be made by any one or more of the ten contracting railroad companies, such sum so in default should be paid by the others, each contributing its proportionate part thereof. Each of the contracting railroad companies bound itself to use the terminal facilities for all passenger trains, except suburban trains, for the full term of the contract, and it was agreed that:

'The several covenants, conditions, and stipulations of this agreement shall be binding upon and inure to the benefit of the respective parties hereto, their successors, lessees, and assigns. No assignment by any of the railway companies of any interest or right under this agreement, whether in connection with the sale of the assigning railway company's railway and other property or otherwise, shall release such assigning railway company from any of its obligations under this agreement. If any of the railway companies should be consolidated, the consolidated company shall be liable to make all payments and to perform all obligations hereunder which would be obligatory upon each of the constituent companies as if such consolidation had not been made.

It was also provided that this operating agreement should be and it was by the terms thereof--

'transferred and assigned to the trustees under said first mortgage of the terminal company by way of further security for the bonds issued under and secured by said mortgage and such other bonds as may be issued in accordance with the terms thereof, and it is hereby covenanted and agreed by and between the parties hereto that this agreement is subject to the lien of said first mortgage and that said trustee company shall have the right and power in its own discretion to enforce and require the enforcement of any and every covenant herein contained.'

(c) On the same day-- that is to say, on the 12th day of June 1909-- the ten constituent and contracting railroad companies, as parties of the first part, entered into a contract, called the 'stock trust agreement,' with the Pioneer Trust Company, trustee, as party of the second part, and the Kansas City Terminal Railway Company, as party of the third part, pursuant to which it was agreed that of the 1,000 shares of stock, then held by each of the ten constituent railroad companies, 995 shares thereof should be transferred to the Pioneer Trust Company, and that each of these railroad companies should retain 5 shares only, as qualifying shares. Such trustee was empowered to hold such 9,950 shares as a stockholder, subject to the terms of this agreement; but so long as a constituent company was not in default under the terms of the operating agreement hereinabove mentioned it was entitled to vote all of its 1,000 shares of stock. Generally this agreement provided for further assurance that each of the constituent companies would in all things comply and carry out the provisions and covenants of the operating agreement. All dividends earned by the 9,950 shares of stock, so transferred to the trustee, were to be paid by the trustee to the railroad company owning such stock, so long as such owner was...