Ribon v. Railroad Companies
| Decision Date | 01 December 1872 |
| Parties | RIBON v. RAILROAD COMPANIES |
| Court | U.S. Supreme Court |
APPEAL from the Circuit Court for the District of Iowa.
Ribon and several others, bondholders and stockholders in the Mississippi and Missouri Railroad Company, filed a bill against the Chicago, Rock Island, and Pacific Railroad Company, to set aside as collusive and fraudulent a sale which had been made of the road of the former company (one which had numerous stockholders, and also numerous bond creditors, secured by five different mortgages) to the latter company, through means of an amicable foreclosure and decree, in which certain persons, trustees in one mortgage given by the latter company, were complainants, and certain other persons, trustees in four other mortgages given by the same company, along with the company itself, were defendants.
The bill alleged an agreement between a company called the Chicago and Rock Island Railroad Company, and a majority of the bondholders and stockholders of the Mississippi and Missouri road, by which this latter road should be sold to the former company, and the proceeds divided among the bondholders and stockholders of the latter, in a way fixed upon; that there being several stockholders and bondholders in the latter company who dissented from this arrangement, a scheme was devised by the majority of the stockholders, to which the different trustees under the different mortgages were parties, to carry the thing out in the way above named, and so cut off those who dissented; and the execution of the scheme through a sale of the Mississippi and Missouri Railroad to the old Chicago and Rock Island Company, with a somewhat different organization, and a name so far changed as to have the addition of 'Pacific.'
The bill was filed by the complainants for themselves and such other dissenting bondholders and stockholders as should choose to become parties and contribute; and it prayed, as already stated, that the sale might be set aside; praying further that the property might be resold under the decree; that the money arising from the sale be applied, first, to the payment of the bonds of the complainants and of any dissenters who might come in, and be afterwards applied upon the stock of the complainants and of any dissenters who might come in; and praying for other and further relief.
It made both the Chicago, Rock Island, and Pacific company (the company purchasing), and the Mississippi and Missouri company (the company whose road had been sold), defendants; but it did not make any of the stockholders through whose assent the trustees had acted, nor the trustees through whose act the scheme was charged to have been actually consummated, parties.
For these omissions, as of indispensable parties, the defendants demurred; and the court below sustained the demurrer and dismissed the bill. Ribon and his co-complainants appealed.
Mr. J. Grant, for the appellants, cited Dodge v. Woolsey;1 Mr. T. F. Witherow, contra.
Mr. Justice SWAY E stated particulars of the case, and delivered the opinion of the court.
This is an appeal in equity from the decree of the Circuit Court of the United States for the District of Iowa. The appellants are the complainants. A brief statement of the case as presented in the record will be sufficient for the purposes of this opinion.
The Mississippi and Missouri Railroad Company was incorporated to construct a railroad from Davenport, on the Mississippi River, to a point at or near Council Bluffs, on the Missouri River. It executed five mortgages to secure different sets of bonds, and issued stock in shares of $100 each, to the amount of $3,500,000. The company built a part of its roadway, and became greatly embarrassed. A large majority in interest of the bondholders and stockholders decided to sell all the property of the company to the Chicago and Rock Island Railroad Company, or to such other corporation as that company might designate to receive the transfer; and in order to pass the title it was determined to have the mortgages foreclosed and a sale made under the decree. The Rock Island company entered into the arrangement, and agreed to pay $5,500,000 as the consideration of the sale. Payment was to be made in bonds as specified in the contract. The majority in interest of the bond and stockholders of the Mississippi company agreed among themselves as to the distribution of the fund. Such proceedings were subsequently had that under a decree in a suit in equity, wherein the trustees in one of the five mortgages were complainants, and the trustees of the other four and the Mississippi company were defendants, a sale was made to the Chicago, Rock Island, and Pacific Railroad Company for the sum of $2,100,000. Five and a half millions of the bonds of the purchasing company were nevertheless paid over according to the prior contract, and have been distributed according to the agreement among...
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