Mississippi Valley Trust Co. v. Railway Steel Spring Co.

• Decision Date: 19 April 1919
• Docket Number: 5131.
• Citation: 258 F. 346
• Parties: MISSISSIPPI VALLEY TRUST CO. v. RAILWAY STEEL SPRING CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

258 F. 346

MISSISSIPPI VALLEY TRUST CO. v. RAILWAY STEEL SPRING CO. et al.

No. 5131.

United States Court of Appeals, Eighth Circuit.

April 19, 1919

Loomis C. Johnson, of St. Louis, Mo. (J. D. Johnson, Breckenridge Jones, and A. H. Roudebush, all of St. Louis, Mo., on the brief), for appellant.

Joseph M. Bryson, of St. Louis, Mo., for appellee, Schaff.

C. S Burg, of St. Louis, Mo., for appellee Missouri, K. & T. Ry Co.

Before SANBORN and CARLAND, Circuit Judges, and BOOTH, District Judge.

BOOTH District Judge.

This is an appeal from an order, made after a hearing, denying a petition by the trust company to set aside a restraining, or injunctive, order, theretofore issued against it without a hearing. The salient facts are as follows:

September 27, 1915, two creditors' bills were filed in the court below against the Missouri, Kansas & Texas Railway Company. One of these bills was filed by the Railway Steel Spring Company. The bill prayed for a marshaling of the assets of the railway company and a distribution of the same, and also for an injunction against the railway company 'and all persons, firms, and corporations whatsoever and wheresoever located, situated or domiciled, from interfering with transferring, selling, or disposing of, attaching, levying upon, or in any manner whatsoever disturbing any part of the railroad's assets, moneys, and property now or hereafter in the possession of any receiver appointed in this cause ' On the same day, answer was filed by the railway company admitting the allegations of the bill. A receiver was thereupon appointed to take possession and administer all of the properties and assets of the railway company. In the order appointing the receiver was the following provision:

'The Missouri, Kansas & Texas Railway Company and the officers, directors, agents, attorneys, and employes of said railway company, and all other persons claiming to act by virtue of or under said railway company, and all other persons, firms, and corporations whatsoever, and wheresoever situated, located, or domiciled, be and they are hereby restrained and enjoined from interfering with, attaching, levying upon, or in any manner whatsoever disturbing any portion of the assets, goods, moneys, and property and premises of which receiver is hereby appointed, or from taking possession of, or in any way interfering with, the same or any part thereof, or from interfering in any manner to prevent the discharge by said receiver of his duties or the operation of said property and premises under the orders of this court.'

Among the mortgages upon property of the railway company was the consolidated mortgage, being, in general, a fourth lien upon the properties. Under this mortgage, bonds in the amount of $30,292,000 were outstanding; $24,516,000 of these were in the hands of the Central Trust Company, pledged to secure $19,000,000 of two-year gold notes of the railway company under a collateral trust agreement dated April 29, 1913. Of the bonds outstanding, but not thus pledged to the Central Trust Company, $250,000 of said bonds were held by the Mississippi Valley Trust Company to secure a note of the railway company, amount $125,000, due May 1, 1916; $800,000 held by the Mercantile Trust Company, to secure a note, amount $240,000; $250,000 held by the National Bank of Commerce, to secure a note, amount $125,000; $600,000 held by Speyer & Co., to secure a note, amount $243,750. The Mississippi Valley Trust Company also held $100,000 of the two-year gold notes above mentioned.

October 23, 1915, the receiver presented a petition to the court, setting forth among other things the facts above stated, and that the interest on the notes held by the Mississippi Valley Trust Company, Mercantile Trust Company, National Bank of Commerce, and Speyer & Co. would presently fall due. He also set forth in his petition that upon default upon maturity of said notes the holders might under the terms of their contracts sell the bonds held as security, and that in some one or more of the contracts it was provided that the appointment of a receiver, or insolvency, should immediately effect the maturity of said notes. Receiver prayed that he be allowed to pay the interest on the notes held by the four companies above mentioned, and further prayed that said four companies and each of them be enjoined until the further order of the court from selling or attempting to sell, or otherwise dispose of, any of the collateral respectively held by them.

Upon said petition the court made its order, October 23, 1915, directing the payment of interest on the notes held by the four companies above mentioned, and included in said order the following:

'The Central Trust Company of New York, as trustee in the collateral agreement dated April 29, 1913, and the National Bank of Commerce, of St. Louis, the Mercantile Trust Company, of St. Louis, the Mississippi Valley Trust Company, of St. Louis, and Speyer & Co., of New York, as payees and holders of the notes hereinabove referred to, be and each of them are hereby enjoined until the further order of this court from selling or attempting to sell, or otherwise dispose of, any of the collateral referred to in the above and foregoing petition and respectively held by them.'

On the 1st of November, 1915, the receiver transmitted to the Mississippi Valley Trust Company the payment of interest on the note held by it, and stated in the letter of transmittal:

'This payment is made pursuant to order of the court dated October 23, 1915, a certified copy of which is herewith inclosed.'

Attention was also called in the letter to the last clause of the order, enjoining the sale of the collateral.

March 31, 1917, Mississippi Valley Trust Company filed its petition to vacate the order of October 23, 1915. In its petition the trust company stated:

'Your petitioner, Mississippi Valley Trust Company, appearing herein only for the purpose of this motion and strictly limiting its appearance thereto, states: * * * '(7) Your petitioner respectfully states that it had neither notice nor knowledge of the filing of the said petition of the said receiver on the 23d day of October, 1915; that it had neither notice nor knowledge of the hearing on said petition; that neither at the time of the entry of said order, nor for a long time thereafter, had it the power or the intention to sell the said bonds aforesaid; that, the premises considered, the said injunction or restraining order, having been made and entered without notice to your petitioner as aforesaid, was made and entered improvidently, in violation of the provisions of rule 73 of the Rules of Practice in Equity (198 F. xxxix, 115 C.C.A. xxxix) and further of section 718 of the Revised Statutes of the United States (Comp. St. Sec. 1243a), and without jurisdiction in this court to make and enter the same; and that because thereof your petitioner unjustly and unlawfully is deprived of its rights and the power to assert the same.'

The prayer of the petition was as follows:

'Wherefore, your petitioner prays that said order made and entered October 23, 1915, may be vacated and set aside, and by an order entered of record be declared to be void and of no effect.'

After full hearing the court, on the 1st of March, 1918, filed the following order:

'Upon consideration of the petition of the Mississippi Valley Trust Company for the vacation of the order of October 23, 1915, restraining the sale of certain collateral, and of the briefs for the petitioner and the briefs and affidavits for the receiver and the railway company, it is ordered that the petition be and it is hereby denied.'

The present appeal is from the last-named order.

Among the questions raised by the appeal are the following:

(1) Was the original order of October 23, 1915, irregular and invalid?

(2) If so, does the order of March 1, 1918, of necessity fall with the original order?

(3) Or was the order of March 1, 1918, valid and justified?

1. It is plain from the record that the order of October 23, 1915, did not conform to the provisions of the Act of October 15, 1914, c. 323, Sec. 17, 38 Stat. 737 (Comp. Stat. 1243a), or to new federal equity rule 73. Many irregularities are pointed out by counsel for appellant: Lack of notice of hearing to the appellant trust company; lack of opportunity to be heard; that the trust company was not a party to the suit in which the receiver had been appointed; that no bond was required; that the order did not define the injury, and state why it was irreparable; that no definite time was fixed for the continuance of the order.

Some of these objections proceed on the assumption that the order of October 23, 1915, was a restraining order; others, that it was a preliminary injunction. It has some of the features of both, and lacks some. But, whatever its precise nature, it failed in several particulars to conform to the statute and the rule above cited.

Without discussing at length its exact character, we shall assume that it was a preliminary injunction. The order of March 1, 1918, was therefore appealable. Section 129, Judicial Code (Act March 3, 1911, c. 231, 36 Stat. 1134 (Comp. St. Sec. 1121)); Western Union Tel. Co. v. Trust Co., 221 F. 545, 137 C.C.A. 113; Davis v. Hayden, 238 F. 734, 151 C.C.A. 584. In view of the irregularities accompanying the issuance of said order of October 23, 1915, we are of opinion that, if timely and proper application had been made by the trust company for the vacation of said order, either the irregularities would have been cured, if curable, or the order would have been vacated.

2. Was the order of March 1, 1918, necessarily erroneous, in view of the irregularities attending the order of October...