Kilpatrick v. Kansas City & Beatrice Railroad Company
| Citation | 57 N.W. 664,38 Neb. 620 |
| Decision Date | 03 January 1894 |
| Docket Number | 5034 |
| Parties | JOHN D. KILPATRICK ET AL., APPELLEES, v. KANSAS CITY & BEATRICE RAILROAD COMPANY ET AL., APPELLEES, IMPLEADED WITH NEW YORK SECURITY & TRUST COMPANY, APPELLANT, AND E. P. REYNOLDS & COMPANY, INTERVENORS |
| Court | Supreme Court of Nebraska |
APPEAL from the district court of Gage county. Heard below before APPELGET, J.
AFFIRMED.
Hornblower Byrne & Taylor, Warner, Dean & Hagerman, and Griggs & Rinaker, for appellant.
Harwood Ames & Kelly, I. P. Dana, and R. S. Bibb, for appellees.
Marquett Deweese & Hall, for intervenors.
See opinions for authorities upon the propositions discussed.
This is an appeal from a decree of the district court of Gage county, rendered July 17, 1891. The action was brought by the appellees, Kilpatrick Bros. & Collins, to foreclose a mechanic's lien against the property of the Kansas City & Beatrice Railroad Company (hereinafter called the "Beatrice Company") for a balance due for labor and material furnished in the grading of that company's railroad. The appellant, The New York Security & Trust Company (hereinafter called the "Trust Company"), was made a party defendant, as it held a mortgage on the road of the Beatrice Company, given by it to secure an issue of $ 400,000 of its negotiable bonds. The appellee, The Kansas City, Fort Scott & Memphis Railroad Company (hereinafter called the "Fort Scott Company"), was also made a party and filed its answer, claiming a lien for a balance due it for ties sold and delivered to the Beatrice Company, and used in the construction of its road. The appellee, The Kansas City, Wyandotte & Northwestern Railroad Company (hereinafter called the "Wyandotte Company"), was made a party defendant, as it was in the possession as lessee of the road of the Beatrice Company. By the decree of the district court Kilpatrick Bros. & Collins were given a lien upon the property in question for the sum of $ 29,445.17; and the Fort Scott Company was given a lien for the sum of $ 33,864.79. The two were declared first liens of equal rank and to prorate one with the other. The Trust Company, by the decree, was also given a lien on the property, subject to the first two liens, for the sum of $ 278,267.85. The decree also provided that in case of default in the payment of these amounts within a time fixed, the property and franchises of the Beatrice Company should be sold and the proceeds of the sale applied to the satisfaction of the liens in the order of their priority. The Trust Company brings the case here and avers that the decree is erroneous, in the fact that its lien is postponed to those of the Kilpatrick Bros. & Collins and the Fort Scott Company.
It is conceded that the value of the property in controversy is insufficient to pay the amount of all the liens adjudged against it. The facts disclosed by the record before us, so far as they are deemed material, are these: That some time prior to the 29th day of May, 1889, the Wyandotte Company, a foreign corporation, had constructed a line of railroad from Kansas City, Missouri, to the line between the state of Kansas and the state of Nebraska, at a point called Summerfield. For the prosecution of this undertaking, money had been furnished by the Philadelphia Investment Company (hereinafter called the "Investment Company"), a Pennsylvania corporation, having its place of business in the city of Philadelphia, in said state, upon terms and security which are not disclosed by the record, and which are immaterial except as showing that the Investment Company was familiar with the affairs of the Wyandotte Company, which shortly thereafter proved to be insolvent, and was, at the date of the negotiations hereinafter mentioned, financially unable to carry out an enterprise involving an outlay of considerable sums of money. Previous to this time, however, and during the progress of the construction of the road of the Wyandotte Company, and probably as a part of that undertaking, it was proposed to extend this line of road to Beatrice, Nebraska. At the time this project was first undertaken, it was supposed and intended that this extension would be made in the name and under the authority of the Wyandotte Company. Subsequently, however, pursuant to correspondence between one Erb, the president of the Wyandotte Company, and one Brockie, the president of the Investment Company, the plan was so changed as to require the formation of a Nebraska corporation, and accordingly a certificate of incorporation of the Beatrice Company was executed and recorded on the 19th day of June, 1889. On the first day of July, 1889, a mortgage was executed by the Beatrice Company upon all its property and franchises then existing, or thereafter to be acquired, purporting to be given to secure its negotiable bonds to the amount of $ 400,000. This mortgage, which was filed for record on the 13th day of July, 1889, contained, among other things, the following:
On the 17th day of July, 1889, all these bonds were delivered to the Investment Company under an agreement as finally perfected, that the latter company should advance, from time to time, to the Wyandotte Company, or to Erb, as its president, money for the construction of the proposed Beatrice Company, upon the notes of the Beatrice Company, guarantied by the Wyandotte Company, for the payments of which these bonds should be held as collateral security. The entire amount of the capital stock of the Beatrice Company was subscribed by and issued to the Wyandotte Company; but it is evident that nothing was ever paid or intended to be paid therefor. During the earlier weeks of these negotiations, and until about the time of the execution of the bonds and mortgage, it had not been decided whether a Nebraska corporation should be formed or not; nor if so, what should be its name; nor had the right of way been secured, or the route, or the Nebraska terminus of the road determined upon.
Elias Summerfield, the treasurer and general manager of the Wyandotte Company, testified on the trial as follows:
Q. Was there a note for this money?
A. Yes, sir.
Q. Who executed it?
A. It was first executed by the Kansas City & Northwestern road. Afterwards the attorney of the Trust Company suggested that it had better be changed, and returned the note to us to be executed by the Kansas City & Beatrice road, and indorsed by the Kansas City, Wyandotte & Northwestern road, and by the Northwestern Construction Company.
Q. When was that exchange made?
A. I can't tell you now. It was after the first note was signed, and we had gotten some of the money on it.
Q. Was it as late as October?
A. I can't remember. I possibly might find out at my office.
Q. But the original notes were made by the Kansas City, Wyandotte & Northwestern Railroad Company, and indorsed by the Construction Company?
A. Yes sir. We hadn't even incorporated the Kansas City & Beatrice road.
Q. It hadn't been incorporated?
A. No, sir; I think not, when the arrangement was made for the loan.
Q. The money was borrowed by the Kansas City, Wyandotte & Northwestern road, and placed in its treasury?
A. The exchange of notes was made before we got all the money. We might have got one payment, or the second, I can't tell which.
Q. Did you have a treasurer for the Kansas City & Beatrice road?
A. Yes, sir, a nominal one.
Q. But none of this money went into his hands?
A. No, sir.
Q. And these bonds of the Kansas City & Beatrice road were placed as collateral, after issued, to these notes?
A. Yes, sir.
Q. Do you know when the bonds were issued, as a matter of fact?
A. I think it was some time after we got the first issue,--the first $ 65,000.
Q. After that?
A. Yes, sir.
Q. How long after?
A. I think some time after the latter part of July, 1889; I am not sure.
Q. At the time these first notes were executed, what, if anything, had been done by the Kansas City & Beatrice road towards the organization for the building of such road?
A. Nothing at all.
Q. Had the grade stakes been set?
A. No, sir; we had not even concluded on the final location at that time, nor even the name of the road.
Q. And the right of way had not been procured?
A. No, sir.
Q. So that nothing, in fact, had been done at the time you executed these first notes and got the first money?
A. I think not. Of course we had...
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