Leavenworth County v. Chicago Ry Co

• Decision Date: 14 April 1890
• Citation: 10 S.Ct. 708,134 U.S. 688,33 L.Ed. 1064
• Parties: LEAVENWORTH COUNTY v. CHICAGO, R. I. & P. RY. CO. et al
• Court: U.S. Supreme Court

10 S.Ct. 708

134 U.S. 688

33 L.Ed. 1064

LEAVENWORTH COUNTY v. CHICAGO, R. I. & P. RY. CO. et al.

April 14, 1890.

D. K. Tenney, S. S. Gregory, and J. M. Flower, for appellant.

Thos. F. Withrow and M. A. LOW, for appellees.

BLATCHFORD, J.

The bill in this case was filed in the circuit court of the United States for the western district of Missouri, on the 25th of September, 1882, by the board of county commissioners of the county of Leaven worth, a municipal corporation of the state of Kansas, on behalf of itself and of all other stockholders of the Chicago & Southwestern Railway Company, chartered in Missouri, against the Chicago, Rock Island & Pacific Railway Company, an Illinois corporation; the Chicago & Southwestern Railway Company in Iowa; the Chicago & Southwestern Railway Company, (consolidated;) the Iowa Southern & Missouri Northern Railroad Company,—the last-named three companies being Iowa corporations; the Chicago & South western Railway Company, a Missouri corporation; David Dows and Frederick S. Winston, citizens of New Youk; and Calvin F. Burnes, a citizen of Missouri. The plaintiff sues as the owner of $300,000 out of $3,000,000 of the capital stock of the Platte City & Fort Des Moines Railroad Company, a Missouri corporation, which stock it originally subscribed for and paid for at par. The circuit court, held by Mr. Justice MILLER, on a final hearing on pleadings and proofs, dismissed the bill, (25 Fed. Rep. 219,) and the plaintiff has appealed.

The following are the material facts of the case, in the view we take of it, substantially as they are set forth in the opinion of Mr. Justice MILLER, delivered in the circuit court:

The Platte City & Fort Des Moines Railroad Company was created for the purpose of constructing and operating a railroad to commence at a point on the Missouri river opposite or nearly opposite the city of Leavenworth, Kan., and run thence north-easterly to a point on the state line between Missouri and Iowa in the direction of Fort Des Moines. The name of the company was afterwards lawfully changed to the 'Leavenworth & Des Moines Railway Company,' and later to the 'Chicago & Southwestern Railway Company.' Such changes, however, were merely of name, and without prejudice to the rights of stockholders in such original company. This company was also authorized by law to build a branch road from some point on the main line to a point on the north line of Missouri, in the direction of Ottumwa, Iowa. On the 12th of May, 1869, a corporation was duly formed under the general laws of Iowa, and called the 'Chicago & Southwestern Railway Company in Iowa,' for the purpose of building and operating a railroad from Washington in Iowa, south-westerly, to meet the road of said Chicago & Southwestern Railway Company, chartered in Missouri, at the state line between Iowa and Missouri. The capital stock of this Iowa corporation was fixed in the articles of incorporation at $3,000,000, and it was provided in said articles 'that in the event of the consolidation of this corporation with the Chicago & Southwestern Railway in Missouri, the company in which the two companies may e consolidated shall have the power to subject the said corporation to such amount of indebtedness or liability as the board of directors may deem necessary, not exceeding, however, six million of dollars.'

On the 25th of September, 1869, these two companies adopted articles of consolidation, and became one company, under the name of the 'Chicago & Southwestern Railway Company,' for the purpose of building a railroad from some point on the Washington branch of the Chicago, Rock Island & Pacific Railroad, in the state of Iowa, to the Missouri river, in the state of Missouri, at a point on the Missouri river opposite or nearly opposite the city of Leavenworth, in the state of Kansas. In the proceedings which resulted in this act of consolidation the county of Leavenworth, as one of the stockholders in the Chicago & Southwestern Railway Company of Missouri, was represented by its duly-appointed agent, who gave his assent to the consolidation. On the 1st of Cotober, 1869, six days after this consolidation, the new company entered into a contract with the Chicago, Rock Island & Pacific Railroad Company, whereby it agreed to issueits bonds to amount of $5,000,000, payable 30 years after date, bearing interest at the rate of 7 per cent. per annum, for which coupons were to be attached to the bonds, the whole to be secured by a mortgage on its entire line of road to the Missouri river. In consideration that the proceeds of those bonds should be placed in the hands of the Rock Island Company, and certain advantages be secured to that company by the contract, in the way of connection and running arrangements between the two companies and their roads, the Rock Island Company agreed to indorse those bonds, and out of the proceeds of their sale to pay the interest on all of them, until the new road was constructed and turned over to the Southwestern Company. In pursuance of this agreement, the Southwestern Company issued its bonds to the amount of $5,000,000, and placed them in the possession of the Rock Island Company; and on the 6th of October, 1889, made and delivered to the defendants Dows, Winston, and Burnes a deed of trust upon their entire line of road from the Missouri river, in Missouri, to a point on the Washington Branch of the Chicago, Rock Island & Pacific Railroad in Iowa, to secure the payment of the bonds and interest, as agreed. The Rock Island Company indorsed the bonds, and sold them in open market, or paid them, with its graranty on them, to the contractors who built the road. On the 16th of August, 1871, articles of consolidation were signed between the Chicago & Southwestern Railway Company, of the states of Missouri and Iowa, and another company organized under the laws of the state of Missouri, by the name of the 'Atchison Branch of the Chicago & Southwestern Rail way Company,' which was authorized to construct a road from a point on the east bank of the Missouri river opposite the city of Atchison, in the state of Kansas, by the most practicable route, to a junction with the Chicago & Southwestern Railway. These articles of consolidation were duly filed in the office of the secretary of state of the state of Missouri, according to the law of that state. The validity of that consolidation is assailed by the plaintiff, on the ground that it is void by reason of a failure to conform to the laws of Missouri.

The original bill prays for the appointment of a receiver to take possession of the railroad operated by the Chicago, Rock Island & Pacific Railway Company, extending from Washington, in Iowa, to the Missouri river, and for a decree declar- ing the articles of consolidation between the Chicago & Southwestern Railway Company, chartered in Missouri, and the Chicago & Southwestern Railway Company, in Iowa, to be void; that those companies, and the stockholders of each, be remitted to their rights as existing before such attempted consolidation; that the $5,000,000 of bonds and their coupons, and the trust-deed securing them, be decreed to be void as a lien upo the road; that the trust-deed be canceled by the trustees, as a cloud upon the title; that all payments of interest made on those bonds by the Rock Island Company, or for such consolidated company, on any account whatever, be adjudged to have been voluntary and unauthorized; that it be declared that no right of action ever existed for the reimbursement thereof; that the proceedings for the foreclosure, hereinafter mentioned, of the trust-deed, be decreed to have been and to be collusive, fictitious, and fraudulent; that the decree therein, the sale thereunder, the personal judgment against the consolidated company, and all other proceedings had under such decree, be held to be fraudulent and void; that the organization of the Iowa Southern & Missouri Northern Railroad Company, hereinafter mentioned, the consolidation of the last-named company with the Chicago, Rock Island & Pacific Railway Company, and all acts done by either in execution or confirmation thereof, be adjudged to be void; that an accounting be had between the plaintiff and the Southwestern Railway Company, chartered in Missouri, on the one part, and the other defendants, charged as trustees, on the other part, as to all proceedings had by either, involving the receipt or lawful disbursement of money, in which the plaintiff or the Chicago & Southwestern Railway Company, chartered in Missouri, had or have any interest, as well as for the use and occupation of the road and franchises of the latter company; that the true balance be ascertained, and the parties fron whom and to whom payable; that, if the balance should be found due to the plaintiff or to the latter company, a decree be given for its recovery against the party indebted, and, if the balance be found against the plaintiff or that company, the plaintiff or it be decreed to pay the same, which the plaintiff offers to do that the line of railroad running from the Missouri river, opposite or nearly opposite the city of Leavenworth in Kansas, by was of Cameron, to the state line between Iowa and Missouri, be decreed to belong to the Chicago & Southwestern Railway Company, chartered in Missouri; that the same be delivered up to that company, free and discharged of all liens; and that that company and the plaintiff be re-established in all the rights, properties, and franchises of that line of railroad; and for general relief.

The Chicago, Rock Island & Pacific Railway Company answered the bill, and Dows and Winston, trustees, also answered it, those answers being filed on the 5th of March, 1883. On the 30th of March, 1883, the plaintiff filed exceptions to the first answer, and on the 2d of April, 1883, exceptions to the second answer. These exceptions were heard by the court, held by Judge MCCRARY and KREKEL, and were...