Love v. North American Co.

• Decision Date: 04 December 1915
• Docket Number: 4491.
• Citation: 229 F. 103
• Parties: LOVE et al. v. NORTH AMERICAN CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

229 F. 103

LOVE et al. v. NORTH AMERICAN CO. et al.

No. 4491.

United States Court of Appeals, Eighth Circuit.

December 4, 1915

C. B Ames, of Oklahoma City, Okl. (John M. Wood, of St. Louis, Mo and Ames, Chambers, Lowe & Richardson, of Oklahoma City Okl., on the brief), for appellants.

Edward T. Miller, of St. Louis, Mo. (William F. Evans, of St. Louis Mo., on the brief), for appellees.

Nagel & Kirby, of St. Louis, Mo. (White & Case, of New York City, Charles Nagel, of St. Louis, Mo., and Roberts Walker and Perley H. Noyes, both of New York City, of counsel), for mortgage trustees.

Before CARLAND, Circuit Judge, and AMIDON and VAN VALKENBURGH, District Judges.

CARLAND Circuit Judge.

This is a petition in intervention filed June 14, 1914, wherein the Corporation Commission of the state of Oklahoma and the United States Fidelity & Guaranty Company pray that the sum of $88,751.86 be declared to be entitled to preferential payment as against the claims of the bondholders and other general creditors of the St. Louis & San Francisco Railroad Company, hereafter called the Frisco Company. The claims of interveners were allowed by the District Court, but denied a preference.

The facts conditioning the preferential character of the claims are as follows: On July 3, 7, and 31, 1911, and on September 14, 1911, the Corporation Commission of Oklahoma made five separate orders in cases pending before it, wherein the Frisco Company was a party, prescribing certain rates for the transportation of freight. The Frisco Company appealed from said orders to the Supreme Court of Oklahoma. The orders were superseded by the giving of a supersedeas bond in each case signed by the Frisco Company as principal and by the Fidelity & Guaranty Company as surety. The condition of the bond in each case was as follows:

'Now, therefore, if the said St. Louis & San Francisco Railroad Company shall refund to the Corporation Commission of the state of Oklahoma, for the parties entitled thereto, all charges which said company may collect or receive, pending said appeal, in excess of those fixed or authorized by the final decision of the Supreme Court of the state of Oklahoma on appeal, * * * then this obligation shall become null and void; otherwise, to remain in full force and effect.'

The Supreme Court decided the appeals December 5, 1912 (35 Okl. 214, 128 P. 900; 35 Okl. 220, 128 P. 903; 35 Okl. 224, 128 P. 904; 35 Okl. 229, 128 P. 907; 35 Okl. 233, 128 P. 908), and the rates prescribed by the Supreme Court were made effective as of the original date of the orders appealed from. The rates prescribed by the Supreme Court were higher than the Corporation Commission rates, but lower than the regular rates prescribed and collected by the Frisco Company. It thus happened that there became due to the parties entitled thereto, namely, the shippers of freight, from the Frisco Company, $88,751.86 as excessive charges for the transportation of freight. This is the demand which the interveners ask to have allowed as a preference.

The Fidelity & Guaranty Company paid $12,124.51 of this amount to the Corporation Commission for the benefit of the parties entitled. The Fidelity & Guaranty Company on July 23, 1908, entered into a contract with the Frisco Company, whereby it agreed to sign all bonds or instruments which the Frisco Company should desire to execute for a certain consideration specified in the contract, and it is conceded that the Frisco Company paid the surety company the sum of $580 for signing the supersedeas bonds in question.

On May 27, 1913, on a bill filed by the North American Company, an unsecured creditor of the Frisco Company, receivers were appointed for said company. On May 27, 1914, the Bankers' Trust Company and Neill A. McMillan, trustees under the general lien mortgage of the Frisco Company, commenced proceedings in which the appointment of receivers was prayed for, and this suit so commenced by the trustees was afterwards, on the 22d day of June, 1914, consolidated with the suit brought by the unsecured creditor on the 27th day of May, 1913. It thus appears that the bondholders took no proceedings to impound the revenue of the Frisco Company until May 22, 1914. The claims of the shippers arose at the time the Supreme Court of Oklahoma decided the appeals, namely, December 5, 1912, which was within six months from the date on which the receivers were appointed. Subsequent to the collection of said excess charges by the Frisco Company there was at all times in its treasury, down to the date of the appointment of the receivers, an amount of money equal to or in excess of the aggregate of the sums so collected. The gross receipts of the Frisco Company during the period from July 1, 1911, to May 27, 1913, were in excess of its actual operating expenses, and since the appointment of the receivers the gross receipts have continuously been in excess of its actual operating expenses. During the period from July 1, 1911, to May 27, 1913, the Frisco Company paid large sums in excess of the excess charges so collected by way of interest on its mortgaged indebtedness, and during the period of the receivership the receivers have expended for betterments and improvements sums in excess of $1,000,000 as well as sums in excess of said excess charges by way of interest on defendants' bonded indebtedness.

When the receivers were appointed, they received from the Frisco Company, as shown by their first bimonthly report, over $600,000 in cash. It also appears that, eliminating all items except current receipts and current expenses, the earnings and operating expenses of the Frisco Company, from May 27, 1913, to April 30, 1914 (all prior to any action by the bondholders), were as follows:

Earnings . . . $48,380,219.06

Operating expenses...