Merriman v. Chicago & E.I.R. Co.

• Decision Date: 27 November 1894
• Docket Number: 69.
• Citation: 64 F. 535
• Parties: MERRIMAN et at. v. CHICAGO & E.I.R. CO. et al. (two cases).
• Court: U.S. Court of Appeals — Seventh Circuit

64 F. 535

MERRIMAN et at. v. CHICAGO & E.I.R. CO. et al. (two cases).

No. 69.

United States Court of Appeals, Seventh Circuit.

November 27, 1894

The decree from which this appeal was taken was rendered by Mr Justice Harlan, sitting in the circuit court, on the 18th of June, 1892. It dismissed the original and amended and supplemental bills of complaint as to the appellee the Chicago & Eastern Illinois Railroad Company, hereinafter called the 'Eastern Illinois Company,' for want of equity, and decreed that the appellees Edwin Walker and Joseph E. Young should account for certain bonds received by them respectively from the Eastern Illinois Company, which were adjudged to have been assets belonging to the Chicago Danville & Vincennes Railroad Company, hereinafter called the 'Danville Company,' which the appellants, as judgment creditors of that company, were entitled to have applied in satisfaction of their judgments. The execution of the decree against Walker was stayed until the final determination of a cause pending in the circuit court of Cook county, in the state of Illinois, brought by other parties against Walker and Young, after the commencement of this suit. From this decree two appeals were prayed and allowed. The first is from that part of the decree which dismissed the original amended, and supplemental bills of complaint as to the Eastern Illinois Company; and the second is from the entire decree. On the hearing of the appeal in this court two errors are pointed out: (1) In staying the execution of the decree as to the appellee Walker; (2) in dismissing the original amended, and supplemental bills of complaint as to the Eastern Illinois Company.

(1) So far as the appellee Walker is concerned, the decree is as follows: 'That the said defendant Edwin Walker, on or about the 6th day of November, 1884, received one hundred and twenty-seven of said bonds, of the par value of one thousand dollars each, together with interest coupons thereon, and that the said defendant Walker should account for the said bonds and coupons so received by him, together with interest thereon. But said Walker is entitled to credit for such sum or sums as may be rightfully due him. It appearing that there is now pending in the circuit court of Cook county, in the state of Illinois, a suit in equity in which one John McNanomy is complainant, and said Walker and Young defendants, touching the said bonds in the decree mentioned, which said was commenced prior to the filing herein, on the 14th of December, 1875, of the supplemental bill in lieu of the original bill, and it also appearing that an accounting had been had in said case in respect to said bonds, and that a report thereon has been made by the special master, which report has been acted upon, it is therefore ordered that the execution of the foregoing decree, settling the rights of the complainants and the defendant Walker in this suit, be stayed until the final determination of said suit in the state court, or until the further order of this court. The court reserves the right to allow such further proceedings in this case between the complainants and said Walker as may become necessary or proper by reason of the final determination of the case in the state court. ' The appellee Walker has moved the court to dismiss this appeal, so far as it concerns himself, on the ground that the decree touching himself is interlocutory, and not final.

(2) The appellants concede that the decree dismissing the original, amended, and supplemental bills of complaint as to the Eastern Illinois Company is correct, unless the original bill of complaint was a creditors' bill which created a lien on $500,000 of bonds of the Eastern Illinois Company, which it was about to issue to certain officers, agents, and attorneys of the Danville Company, and which it did issue before the filing of the amended and supplemental bills of complaint.

The original bill of complaint, after stating the parties plaintiff and defendant, and their respective citizenship, and that the complainants had severally recovered judgments against the Danville Company for certain amounts named, and had severally caused executions to be issued on their respective judgments, which executions had been severally returned nulla bona, alleges, in substance:

That the indebtedness merged into said several judgments was all incurred by the Danville Company and existed prior to, and has existed ever since, the year 1873, and that said judgments, since their rendition, have been and still are liens upon the property, or some portion thereof, of the said Danville Company. That the Danville Company was heretofore the owner of a line of railroad extending from Dalton, Cook county, Ill., southerly to Danville, in Vermillion county, a distance of about 108 miles, and a branch line from Bismarck in said Vermillion county, southeasterly to the east line of the state of Illinois, a distance of 4.5 miles, with right of way, station and other grounds, grading, bridges, culverts, tracks, shops, tools, fixtures, station buildings, structures, fenced, and supplies for the use and operation of said road, and terminal tracks, sidings, and switches along said road, and in and near the city of Chicago, and certain lots and leaseholds, rights, and contracts by it acquired for use in connection with said line of railroad, and engines, cars, and machinery and equipments pertaining to said line of railroad, and certain franchises to it belonging, in that regard, together with other property in the state of Illinois; and also a line of road connecting with said lines in the state of Illinois and the state of Indiana to a point near Covington, Ind., with certain franchises and other property connected therewith. That on or about March 10, 1869, the Danville Company executed a purported deed of trust conveying to William R. Fosdick and James D. Fish, defendants herein, as trustees, the road and property of said company in the state of Illinois, extending from its terminus in Chicago to a point on the state line of Indiana, and including all property between said terminal points which said party of the first part 'now has or possesses, or may hereafter acquire,' and purporting to be its entire property and assets in the state of Illinois, to secure a pretended issue of bonds of said railroad company, of even date with said trust deed, amounting to $2,500,000, payable April 1, 1909, with interest at the rate of 7 per cent. per annum, payable semiannually, as evidenced by certain coupons issued with and attached to said respective bonds. That said trust deed was not acknowledged and recorded as required by the laws of the state of Illinois, and was not a valid conveyance of said property for the purpose therein stated, the property thereby sought to be conveyed being largely personal property thereby left in the possession of the mortgagor, and said mortgage or trust deed not being acknowledged before a justice of the peace in the town where said property or any part thereof was situated, and said personal property was sought to be conveyed contrary to the laws of the state of Illinois. That, as your orators are informed, said bonds to the amount of $2,500,000 were issued, and a large part of them was sold or hypothecated soon thereafter and passed into the possession of holders thereof, and afterwards, by transfer, or under the conditions of certain agreements hereinafter mentioned, into the possession and ownership, or under the control, of certain of the defendants hereto, as representatives of the owners thereof, as hereinafter stated. That on March 4, 1872, the Danville Company became consolidated into one corporation, by the same name, with the Rossville & Indiana Railroad Company, and on March 9, 1872, a further consolidation was effected, by the same name, with the Western Railroad Company, an Indiana corporation, whereby the consolidated company was empowered to build and operate a railroad from the state line, in Warren county, to Brazil, in Indiana; and on March 12, 1872, the consolidated company, for the alleged purpose of raising means wherewith to construct its Indiana Division, issued its bonds to the amount of $1,500,000, bearing interest at the rate of 7 per cent. per annum, payable 40 years after date, to secure which, on the same day, was executed a pretended mortgage to said Fosdick and Fish, defendants herein, covering its Indiana Division and a branch road extending from a point three miles south of Covington to the village of Newberg, being about 80 miles in all, and being all the property of said company in the state of Indiana; all the bonds secured by this mortgage were issued, and some part of them was sold or hypothecated soon thereafter. That said mortgage was nor properly executed, acknowledged, or recorded, and was invalid, and said issue of bonds was never properly authorized by said company, and was for an amount largely in excess of the cost of the property conveyed by said trust deed. That the Danville Company, on April 24, 1872, executed another mortgage to Fosdick and Fish, purporting to convey the Indiana Division as security for the first issue of bonds on the Illinois Division, and purporting to convey the Illinois Division as security for the bonds originally issued on the Indiana Division; but whether or not said mortgage was ever acknowledged or recorded the complainants are not certainly advised, but are informed and believe that the said mortgage was not properly acknowledged and recorded in the state of Illinois, and in this state said mortgage was not valid, and was never properly authorized and executed by said company, and was wholly without consideration in Illinois, and was void under the laws of Illinois, for that it...