King v. Barr

• Decision Date: 05 January 1920
• Docket Number: 3313.
• Citation: 262 F. 56
• Parties: KING et al. v. BARR et al. [1]
• Court: U.S. Court of Appeals — Ninth Circuit

262 F. 56

KING et al. v. BARR et al. ^[1]

No. 3313.

United States Court of Appeals, Ninth Circuit.

January 5, 1920

W. C Bristol, of Portland, Or., for appellants.

Eugene A. Cox, of Lewiston, Idaho, and Richard W. Montague, H. H Parker, Joseph Simon, Wirt Minor, and John H. Hall, all of Portland, Or., for appellees.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

ROSS Circuit Judge.

The present appeal is from an order denying (without prejudice to certain specified rights) the appellant King's application to file a proffered petition in intervention in a suit commenced in the court below November 19, 1915, growing out of the undertaking by the Lewiston Land & Water Company Limited (hereinafter called the Land Company), a corporation organized under the laws of the state of Idaho, to plant fruit trees upon certain lands adjacent to the city of Lewiston, in that state, the necessary water for the irrigation of which was to be furnished through an extensive water system by a subsidiary water company called Lewiston Sweetwater Irrigation Company, and to sell in small tracts to the public on the installment plan the lands so improved and watered. The money with which to do those things was, at least in large part, procured by borrowing it upon bonds, secured by trust deeds or mortgages, and in part by certain so-called gold notes, likewise secured. At the time of the commencement of the suit, which was brought by a holder of stock in the Land Company named Barr, a resident and citizen of the state of Washington, on his own behalf and in behalf of all other such stockholders similarly situated, the Land Company had outstanding portions of four different issues of such bonds, the first three of which issues were secured by trust deeds or mortgages upon certain specified and distinct portions of the lands, and the fourth covering all of the lands owned by the company, including those embraced by the first three mortgages. In each of the instruments the Idaho Trust Company (hereinafter called the Trust Company, and which was also an Idaho corporation) was made trustee.

In Barr's bill of complaint it was alleged, among other things, that of the lands owned by it the Land Company had then sold 3,320.52 acres in small tracts to purchasers residing in various parts of the United States, for a price aggregating $1,312,236.25, and that there was then owing to it from purchasers and unpaid on contracts of sale approximately $487,115, of which $150,000 was then due and collectible under the terms of the contracts, and that the Land Company still owned 4,054 acres of such lands, of the value of $1,500,000; that the Land Company was then in debt in the aggregate amount of $1,250,000, of which $907,000 was in the form of bonds secured by mortgages or trust deeds made to the defendant Trust Company as trustee, covering the property of the Land Company; that of the first issue of the bonds referred to all but $20,000 had been paid, and of the second issue all but $41,000 had been paid, and that of the third issue there remained outstanding $172,000 in amount; that all of the outstanding bonds of the first two issues had then, 'in great measure,' been taken up and replaced by the fourth issue of bonds, known as refunding bonds of date October 1, 1911, of which refunding bonds there was then outstanding and in the hands of many holders scattered throughout the United States the amount of $605,000 in the aggregate. It was alleged that the semi-annual interest upon the refunding bonds due April 1, 1915, and October, 1, 1915, respectively, was then due and unpaid, and of the principal thereof $25,000 became due and payable October 1, 1915, which likewise remained unpaid, and that the semiannual interest upon the second issue became due and payable October 1, 1915, and was then due and unpaid. It was alleged that the Land Company was also indebted on various notes, accounts, and other obligations in the aggregate amount of $264,000, a large part of which was then secured by various notes, stocks, and other properties of the Land Company, in addition to all of which taxes upon the real property of the Land Company in the amount of $29,000, including penalties and interest, were then delinquent, certificates of such delinquency having been then issued; that the time for redemption of a considerable part of the property would very shortly expire, to wit, December 15, 1915, and unless provision was made for the payment thereof the title of the property would pass to the purchasers, and be lost to the Land Company and its creditors; that further taxes, with penalties and high rates of interest, would soon accrue and become delinquent, and that the Land Company owed other debts, approximating $7,000, which constituted liens upon its lands superior to the lien of the mortgages and trust deeds; that the Land Company was in imminent danger of insolvency, and that the appointment of a receiver or receivers of its property was essential to the protection of both the company and its creditors.

The defendant Trust Company answered the bill of complaint, admitting most of its averments, and joining in the request for the appointment of a receiver or receivers, and also filed a cross-bill, in which it alleged, among other things, that on or about October 1, 1911, the Land Company issued the refunding bonds in the sum of $1,050,000, chiefly for the purpose of taking up and retiring its previously existing indebtedness, and issued to the cross-complainant, as trustee, the mortgage securing them that has been mentioned, a part of the lands covered by it being subject to the prior mortgages issued by the Land Company to the extent specified in the bill of complaint, and setting forth other reasons why it was necessary for the protection of the property that a receiver or receivers be appointed to take possession and administer the property under the orders of the court, and for such other relief as should be appropriate, including the foreclosure of the mortgages. Two receivers were appointed by the court-- one being the president of the Trust Company, who resided at Lewiston, and the other being a resident of Portland, Or., where the Land Company maintained its financial headquarters, by whom funds were obtained for the preservation of the title to the property and the protection of the orchards through the issuance of receivers' certificates.

After referring to the many difficulties experienced by both the court and the receivers in preserving and protecting the property during the years it was under such administration, the court below said in its opinion:

'The suit was brought in the Central division of the district, and was there pending when, on February 9, 1918, in order to facilitate further proceedings, the parties, through their attorneys of record, stipulated in writing that it be tried and a decree entered at Boise, in the Southern division, with the same effect as if tried in open court at Moscow, in the Central division, and pursuant to this stipulation a hearing was had upon the pleadings already referred to and a supplemental answer and cross-bill filed by the Trust Company, and decree was entered at Boise on February 15, 1918. Thereafter, upon March 28, 1918, by stipulation of all the parties, and for the purpose of making certain corrections in the original decree, an amended final decree was signed and filed as of February 15, 1918. It appearing from the supplemental cross-bill that the first and second mortgages had in the meantime been fully paid, and that therefore the fourth mortgage constituted a first lien upon all the lands, except those covered by the third mortgage, the decree in effect determined the total amount of outstanding receivership indebtedness, including the receivers' certificates, allocated to the lands covered by the third mortgage a sum which was deemed to be a just proportion thereof, and to all other lands covered by the fourth mortgage the balance of such expenses, and authorized the sale of the lands in two corresponding groups, the one

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