Rumsey v. People's Ry. Co.

• Decision Date: 19 December 1899
• Citation: 55 S.W. 615,154 Mo. 215
• Court: Missouri Supreme Court
• Parties: RUMSEY v. PEOPLE'S RY. CO. et al.

55 S.W. 615

154 Mo. 215

RUMSEY v. PEOPLE'S RY. CO. et al.

Supreme Court of Missouri.

December 19, 1899.

STREET RAILROADS — TRUST DEEDS — DEFAULT — MORTGAGES — BONDHOLDERS — BONDS — FORECLOSURE — TRUSTEE — RECEIVER — WAIVER — APPEAL AND ERROR — OPINION EVIDENCE — SALE FOR CASH — EQUITY — SALE BY SPECIAL COMMISSIONER — INTERVENERS.

1. Since a trustee in a trust deed of the property of a street-railroad company, given to secure bondholders, is the representative of the bondholders, such bondholders are not necessary parties to a suit to foreclose the deed.

2. A provision in a trust deed of a railroad company's property, declaring that bonds secured thereby should become due after 30 days' default in payment of any coupon, is self-executing, and such default justifies a decree of foreclosure for the entire amount of the bonds.

3. Where the appointment of a receiver was acquiesced in by all parties for more than a year, during which time they participated in the suit in which he was appointed, they waived any irregularity in his appointment.

4. Where the record fails to show what disposition was made of a motion to set aside an order appointing a receiver, the question cannot be reviewed on appeal.

5. In a suit to foreclose a trust deed of the property of a street-railroad company, evidence of the president's relations and influences with the board of directors was incompetent, as mere opinion.

6. A decree foreclosing a trust deed of a street railway, providing in express terms that the property be sold "to the highest and best bidder for cash," and that the bonds and coupons secured by said deed would be accepted in payment from the purchaser to the amount that they may be proportionately entitled to, is not objectionable as not ordering a sale for cash, since the proceeds of the sale would be applied in payment of such bonds and coupons, and, it would have been needless ceremony to pay cash on the bid, and then take up the bonds with the same cash.

7. Where a petition for a foreclosure of a trust deed of a street railway was in behalf of all the bondholders who might desire to become parties to the suit, it was proper to permit the bondholders to intervene.

8. On foreclosure of a deed of trust of a street railway the court of equity may order the property sold by a special commissioner, in the absence of statutory prohibition.

In banc. Appeal from St. Louis circuit court; Horatio D. Wood, Judge.

Action to foreclose a trust deed by Lewis M. Rumsey against the People's Railway Company and C. C. Maffitt. Judgment for plaintiff,

and defendant railway company appeals. Affirmed.

M. Kinealy, T. J. Rowe, and C. H. Krum, for appellant. Noble & Shields, A. Arnstein, and Boyle, Priest & Lehman, for respondent.

BURGESS, J.

This case was before this court on a former occasion, having been brought by writ of error which was sued out by the People's Railway Company, and will be found reported in 144 Mo. 175, 46 S. W. 144, where a full and clear statement of the facts up to that time may be found. It was then reversed, and remanded to be tried in accordance with the views expressed in the opinion of the court.

At the time the mandate was received by the clerk of the court below, there was pending in the cause, and undisposed of, a motion to remove the receiver, Charles Green, who had been appointed and took charge of the property in March, 1897, which was sustained on April 27, 1898, and F. B. Brownell appointed in his place. From the appointment of Charles Green as receiver, on March 6, 1897, to May 27, 1898, Michael Kinealy appeared and acted for Mr. Green as receiver, and Kinealy & Kinealy acted as counsel for the defendant railway company. In the application for a change of venue, however, filed May 27, 1898, Michael Kinealy appeared for the People's Railway Company, and in all subsequent proceedings has represented that company. On the day of the filing of the mandate of the supreme court the defendant railway company asked for change of venue, and the case was transferred to division No. 6, before Judge Horatio D. Wood. On the 3d of June, 1898, the defendant railway company filed a motion to strike out the intervening petition of the German-American Bank and others, and to set aside the order permitting same to be filed, which was overruled July 26, 1898. On the 30th of July, Michael Kinealy and T. J. Rowe, as attorneys for defendant railway company, filed a demurrer to the intervening petition of the German-American Bank and others, which was overruled. On June 24, 1898, — more than a year and three months after it was served with summons in this case, and more than a year and two months after it filed its original answer herein, and after Charles Green, who was president of the defendant company when the suit was brought, and on whom service of summons was had as such president, but after he had been removed as receiver, and Brownell appointed in his place, — the defendant railway company, by its attorneys, M. Kinealy and T. J. Rowe, filed its amended answer, admitting that it was a Missouri corporation; that C. C. Maffitt was trustee in the deed of trust described in the petition; that it was authorized by its charter and ordinances to maintain a street railway; that it made its first, second, and third deeds of trust mentioned in the petition; that it executed the bonds mentioned in the petition, and at the time of filing said petition there was a default in the interest of the bonds secured by the deed of trust to C. C. Maffitt; that it was indebted on open account for materials, labor, and other materials; that Maffitt, as trustee, was not authorized, under said deed of trust, to enforce its provisions, until required in writing by the holders of a majority of said bonds and coupons; and denied every other allegation in the petition. The answer then sets up that in the latter part of April, 1896, it was indebted to John A. Roebling & Sons in the sum of $84,000 for railroad supplies, and that Charles Green, then the largest stockholder and president of the defendant company, in October, 1896, without the knowledge of defendant, but with the knowledge of plaintiff Rumsey, entered into a contract with F. B. Roebling, Thomas C. Barr, and E. J. Moore, calling themselves a syndicate, for the purpose of forming a corporation to obtain franchises, rights, and property of the defendant company and of the Fourth Street & Arsenal Railway Company, whereby it was agreed that the new corporation should be called the People's Traction Company, with a capital of $2,000,000, and a bond issue of $2,000,000; that $1,050,000 should be applied to purchase the bonds of the defendant company and of the Fourth Street Railway; that $450,000 of said bonds were to be delivered to the syndicate, to pay Roebling's debt, and to equip the said railways; that, to carry out the plans, the People's Traction Company might adopt such course as it deemed fit, and that $1,000,000 of the stock of the People's Railway Company and $450,000 of the bonds should be delivered to the syndicate to equip and put said railway into operation with electric power; that plaintiff Rumsey agreed to become a party to said scheme in consideration of the exchange of his third mortgage bonds for bonds in the People's Traction Company and other benefits unknown to defendant; and that, for the purpose of carrying out said plan, Rumsey should bring a suit of foreclosure, and, in order to prevent interference by outside creditors, and to prevent payment of interest on its bonds, Rumsey would have a receiver appointed, and that Charles Green, as president of the defendant, would employ attorneys to represent this defendant in said foreclosure suit, and that no substantial defense would be made to said proceedings; that a sale of the defendant's property would be had, and the parties to the agreement would obtain options to obtain control of said third mortgage bonds; that at that time the defendant owned a large amount of property not covered by any of the deeds of trust; that it had ample credit to obtain money to pay its bonds, but, to insure the accomplishment of the plan, it was agreed by the parties, including Rumsey, that a default should be made and continued in the payment of interest on said third mortgage bonds; that Rumsey owned a number of said bonds, and had under his control others, belonging to his relatives, but the aggregate amount of the bonds so owned and controlled by Rumsey did not amount to more than one-fourth of the total number secured by the deed of trust; that when plaintiff Rumsey became a party to the agreement he had no intention of carrying it out in good faith, but formed a scheme of his own to make use of the plans of his associates, in order to obtain sale of the property, and to purchase the same for his own use, and he secretly combined with other bondholders, unknown to defendant, to control the said remaining bonds in opposition to said syndicate, but, as he knew he could not carry out this plan unless the nonresistance of defendant company was assured, he continued to operate with the syndicate and Green, ostensibly for the purpose of carrying out the agreement until final decree of foreclosure; that, in pursuance of the above agreement, Rumsey caused the petition in this case to be filed, and a summons issued, which was served on Green, and procured the said Green, then president of defendant company, to employ attorneys to represent this defendant in this case; that said attorneys, believing they were fully authorized to act as attorneys of defendant, in good faith filed an answer under the direction of Green, and "thereafter said decree was rendered in this cause in accordance with said agreement and arrangement, and without any dissent on the part of this defendant, to whom, in truth and in fact, all the foregoing acts and agreements were unknown"; that after filing said answer, and before the rendition of said...