National Foundry & Pipe Works, Ltd. v. Oconto Water Co.

• Decision Date: 10 October 1892
• Citation: 52 F. 29
• Parties: NATIONAL FOUNDRY & PIPE WORKS, LIMITED, v. OCONTO WATER CO. et al.
• Court: U.S. District Court — Eastern District of Wisconsin

52 F. 29

NATIONAL FOUNDRY & PIPE WORKS, LIMITED, v. OCONTO WATER CO. et al.

United States Circuit Court, E.D. Wisconsin.

October 10, 1892

W. D Van Dyke and Geo. H. Noyes, for complainant.

W. H Webster, for defendants.

JENKINS District Judge.

The conceded facts upon which the present application for a receiver and for an injunction are based, so far as now necessary to state them, are these: The complainant on the 2d day of January, 1892, recovered judgment in this court in an action at law against the Oconto Water Company for $24,250.04 damages and costs, and, upon return of execution nulla bona filed this bill against the judgment debtor and others to subject its property to the payment of the judgment. The Oconto Water Company was incorporated under the Revised Statutes of Wisconsin, on the 8th day of July, 1890, for the purpose of constructing and operating a system of waterworks within the city of Oconto, and of supplying the city and its inhabitants water for protection against fires, and for domestic, manufacturing, and other purposes. On the 9th day of July, 1890, the city of Oconto adopted an ordinance whereby it was ordained 'that the Oconto Water Company its successors and assigns, be and are hereby authorized, subject to the limitations herein or by law provided, to construct, own, maintain, and operate waterworks in the city of Oconto; to lay pipes for the carrying and distributing of water in any of the streets, avenues, alleys, lanes, bridges, or public grounds of the city, as now or may hereafter be laid out; to acquire and hold, as by law authorized, any and all real estate, easement, and water rights necessary to that end and purpose, with all necessary and proper buildings, wells, conduits, or other means of obtaining water supply, with all necessary machinery and attachments thereto, to supply the city and the inhabitants thereof with good and wholesome water, suitable for fire and domestic purposes; and for this purpose may enter upon any street, avenue, alley, lane, stream, bridge, or public ground under control of the city, to take up any pavement or sidewalk thereon, and make such excavations as may be necessary for the laying of such pipe and attachments. ' The ordinance further purports to grant continuance of the rights and privileges for a period of 30 years, and contracts for the use of hydrants and a supply of water for a like period at a specified annual rental. The city further undertakes, upon request of the water company, to adopt and maintain an ordinance protecting the company 'in the safe and unmolested enjoyment of the franchise hereby granted, from waste of water by consumers,' and 'to carry into effect the provisions of this ordinance, and the contract thereunder entered into,' and grants to the water company, 'its successors and assigns,'-- so runs the ordinance,-- 'the power to make, adopt, and enforce regulations not inconsistent with the law, for the convenience and security of said grantee, its successors or assigns, as well as that of the public, in the operation of said mains, and may enforce such regulations by cutting off the supply of water, or otherwise, and shall have the right at all seasonable hours of the day to have access to the water pipes and meters of any water takers, to protect themselves against abuse or fraud, and repair, observe, or remove the same, and may require all water takers to sign a contract to observe all reasonable regulations, as a consideration for furnishing water. ' The ordinance undertakes also to regulate the maxium charges to consumers, 'collectible quarterly in advance, except sprinkling rates, which shall be paid in advance for the season,' and provides that the company shall have the right, at will, to supply consumers at the meter rate instead of at the schedule rates, and that connections between the mains and the consumer shall be made at the expense of the consumer.

The debt of the complainant, for which it recovered its judgment, was for iron pipes furnished, to be used, and which were used, in the construction of the waterworks plant, under a contract therefor dated August 28, 1890. The pipe was delivered during the months of September, October, and November of that year, and laid in the streets of the city. On the 13th day of September the defendants Andrews & Whitcomb entered into an agreement with the water company, by which Andrews & Whitcomb agreed to loan to the company a sum not exceeding $40,000, upon interest, to be furnished between that date and January 1, 1891. The Oconto Water Company, in consideration of the premises, agreed to make immediate transfer in trust to Andrews & Whitcomb 'of the Oconto waterworks franchise as issued to said Oconto Water Company,' together with the entire issue of stock of the company, amounting to $100,000, and further agreed to issue immediately $100,000 in the first mortgage bonds of the company, to be secured on the entire Oconto waterworks franchise, and all the rights and privileges of said company; the deed of trust to be made to some trust company thereafter to be agreed upon by the parties. The stock and bonds were to be delivered to Andrews & Whitcomb as collateral security for the money to be advanced, and upon payment of the loan, with 7 per cent. interest, and the further sum of $5,000, were to be returned to the company. Afterwards, and about October 1, 1890, in fulfillment of that agreement, an assignment of what is denominated in the answer 'the rights and franchises acquired by said company under and in virtue of said city ordinance No. 153 of said city of Oconto' was executed by the water company, and delivered to Andrews & Whitcomb. This document was antedated to September 13, 1890, and by its terms sells, assigns, transfers, and sets over to Andrews & Whitcomb 'all the rights, privileges, immunities, franchises, and powers, of whatsoever name and nature, which were granted unto the said Oconto Water Company in and by that certain ordinance passed by the common council of said city of Oconto, and approved by the mayor of said city on the 9th day of July, 1890, said ordinance being entitled 'An ordinance providing for a supply of water to the city of Oconto, Wis., and its inhabitants, and authorizing the Oconto Water Company, its successors and assigns, to construct, operate, and maintain waterworks therein.' ' This contract was as security for the repayment of the loan contemplated by the agreement of September 13, 1890. Certificates for the entire issue of the stock of the company were delivered to Andrews & Whitcomb, except as to three shares made out by their direction in the names of others. The entire issue of stock was held by them as collateral security, as provided in the agreement of September 13, 1890.

At a meeting of the directors held October 29, 1890, action was had, authorizing the issue of first mortgage gold bonds of the company, to the amount of $125,000, in sums of $1,000 each, numbered consecutively from 1 to 125, both inclusive, payable in 25 years, with interest coupons attached; 100 of such bonds to be negotiated and sold, to provide funds for the completion of the system; the remaining bonds to be negotiated and sold, to provide funds for the extension of the system as may thereafter be deemed advisable; such bonds to be secured by trust deed to the Minneapolis Trust Company upon the franchises and rights of the company. The action of this meeting of the board of directors was confirmed at a meeting of the stockholders held subsequently on the same day. The bonds and the trust deed were prepared and executed, and bore date November 1, 1890. The trust deed was recorded in Oconto county, November 13, 1890, in volume 52 of Deeds, p. 394. On the 18th day of November, 1890, the officers of the company delivered to Andrews & Whitcomb 100 of such bonds as security, in accordance with the agreement of September 13, 1890; the other 25 bonds being lodged with the trust company. The sum of $40,000 mentioned in the agreement of September 13, 1890, was actually loaned to the company by Andrews & Whitcomb on or prior to December 23, 1890, the last sum of $5,000 being advanced on that day, and they received the notes of the company for the total loan pursuant to the terms of the agreement. On March 13, 1891, the company contracted with Andrews & Whitcomb for a further loan of an amount not to exceed $12,000, to complete the work; they to hold the security then held by them as collateral to the loan under the agreement of September 13, 1890, as further security for all additional loans theretofore made by them, amounting to $4,439.79, and for the loan of $12,000 so contracted to be made. This latter sum was advanced to the company on the 13th day of March, and was used in the purchase of material for the plant and for carrying on the work of construction. It was thereafter ascertained that further funds were essential, and on the 16th day of May, 1891, the parties contracted for another loan by Andrews & Whitcomb, not to exceed $15,000, upon like terms to those of the contract of March 13, 1891; under which agreement Andrews & Whitcomb advanced $8,763.33, which was used in completion of the plant.

On the 17th day of June, 1891, the loans remaining unpaid, Andrews &amp Whitcomb instituted...