Lincoln Trust Co. v. Missouri Water, Light & Traction Co.

• Decision Date: 24 January 1910
• Citation: 151 Mo. App. 322,131 S.W. 889
• Court: Missouri Court of Appeals
• Parties: LINCOLN TRUST CO. v. MISSOURI WATER, LIGHT & TRACTION CO. et al. (STONE, Intervener).

131 S.W. 889

151 Mo. App. 322

LINCOLN TRUST CO. v. MISSOURI WATER, LIGHT & TRACTION CO. et al. (STONE, Intervener).

Kansas City Court of Appeals. Missouri.

January 24, 1910.

On Rehearing November 7, 1910.

1. RECEIVERS (§ 158)—CLAIMS.

In receivership in a mortgage foreclosure proceeding, the court may prefer unpaid claims for current expenses of the ordinary operation of the concern, incurred within a limited time before the receivership, to a previous mortgage lien; and if the mortgagor has diverted current income from payment of current expenses to interest on the mortgage or improving the mortgaged property, so that current expenses remain unpaid, the court may, out of income accruing during receivership, restore to the unpaid claims for current expenses the amount so diverted.

2. RECEIVERS (§ 152)—CLAIMS—BURDEN OF PROOF.

In mortgage foreclosure against a public service corporation, the burden was on intervening creditor, who claimed a preference because current earnings have been diverted to payment for betterments, to show the current earnings and their relation to current expenses.

3. RECEIVERS (§ 152)—FORECLOSURE—CLAIMS —EVIDENCE—SUFFICIENCY.

Evidence in mortgage foreclosure against a public service corporation held insufficient to show that current earnings were diverted to the payment of betterments, as affecting the right of an intervening creditor to a preference.

On Rehearing.

4. RECEIVERS (§ 152)—FORECLOSURE—CLAIMS —BURDEN OF PROOF.

In mortgage foreclosure against a public service corporation, the burden was on an intervening creditor to establish his right to a preference and to show that his demand is for sustenance that prolonged the mortgaged concern's

life, and that funds which should have been used to pay his debt were diverted.

Appeal from Circuit Court, Vernon County; B. G. Thurman, Judge.

Suit by the Lincoln Trust Company against the Missouri Water, Light & Traction Company and others; H. H. Stone intervening. Judgment dismissing intervener's bill, and he appeals. Affirmed.

Clarence I. Spellman, for appellant. Sam A. Mitchell and M. P. Murray, for respondent.

BROADDUS, P. J.

This is a controversy arising over the claims of an intervening petitioner. We gather from the abstract that in February, 1907, the Lincoln Trust Company began proceedings against defendant companies at the request of a majority of the bondholders to foreclose a deed of trust on the property of the companies past due. There is this allegation of the petition in the case, viz.: "That said defendant Missouri Water, Light & Traction Company so in charge of and operating said property as aforesaid is now in default under requirements of said deed of trust and has been in default more than 18 months prior to this date of all conditions and requirements hereinbefore set out." In reference to intervener's case, the abstract shows that on the 7th day of October, 1907, H. H. Stone, intervener, filed his petition in behalf of intervening creditors. In his petition he alleges: "That he is assignee for value of certain claims for merchandise owing by defendant to creditors prior to and at the time of the appointment of a receiver herein, which claims intervener acquired by purchase on or about September 15, 1907, and that a schedule of claims, their amounts, dates, considerations, and other pertinent facts, will be set out hereto and made a part of this petition." The petition then proceeds to state that the claims represent current debts of the companies for supplies ordinarily used by defendant and necessary and proper to keep its plants as a going concern, and that they were incurred immediately prior to the appointment of the receiver, and that they should have been paid out of the current earnings of defendant. Then it is alleged that such earnings were applied to the betterment of the mortgaged property. The petition further alleges that the mortgage became due long prior to the date of the institution of said suit, and that the debts he presents were incurred in the meantime. On trial it developed that the Missouri Water, Light & Traction Company was the lessee of the codefendant company and was operating the concern. Evidence was introduced showing the nature of the articles furnished the company and that they were used in its business, and we presume from the character of some of them that they were necessary for that purpose. There was no definite showing as to the earnings of the operating...