Sebree v. Cassville & W. R. Co.

• Decision Date: 16 May 1919
• Docket Number: No. 19571.,19571.
• Citation: 212 S.W. 11
• Court: Missouri Supreme Court
• Parties: SEBREE v. CASSVILLE & W. R. CO.

212 S.W. 11

SEBREE v. CASSVILLE & W. R. CO.

No. 19571.

Supreme Court of Missouri, in Banc.

May 16, 1919.

Appeal from Circuit Court, Bates County; C. A. Calvird, Judge.

Bill by G. M. Sebree against the Cassville & Western Railroad Company. Judgment for plaintiff, and defendant appealed. Transferred from the Court of Appeals. Reversed and remanded, with directions.

This is a creditor's bill filed by plaintiff in the circuit court of Barry county, Mo., on July 15, 1914. At the instance of plaintiff, the venue was changed, and the cause tried in the circuit court of Bates county, Mo. Plaintiff seeks to charge the property formerly owned by the Cassville & Western Railway Company, which it is claimed the defendant now holds, with the payment of his judgment for $6,769.95, together with 6 per cent. interest thereon from August 29, 1913.

It appears from the record that on the 1st day of June, 1911, the Cassville & Western Railway Company, a corporation organized under the laws of Missouri, issued $100,000 of bonds, secured by a deed of trust on all its property, being 4½ miles of railroad in Barry county, Mo. At the date of this issue, the majority stockholders of the railway company were S. M. Mitchell, W. T. Ayres, and O. H. Orendorf, who were also directors, and who were president, secretary, and vice president, respectively, of said company. The bonds were not sold, but part of them were used as hereafter mentioned. On June 29, 1911, said railway company also made its promissory notes, payable one year after date, and placed its bonds as collateral to said notes, as follows:

                                                                Collateral
                Name.                             Note.          Bonds
                F. B. Taber ...................... $10,000 00    $30,000
                Geo. L. Sands......................  6,000 00     12,000
                O. H. Orendorf..................... 10,000 00     10,000
                N. B. Allen ........................ 6,000 00     12,000
                F. C. Ellis ........................ 4,000 00      8,000
                Geo. M. Sebree ..................... 2,500 00      5,000
                S. M. Mitchell...................... 1,300 00      1,500
                St. Louis & San Francisco
                 Railroad Co........................ 3,000 00      3,000
                Wesco Supply Co..................... 1,291 25      1,500
                Skinner Engine Co ...................  432 85        500
                

So that on June 29, 1911, said railway company was indebted about $44,500, evidenced by above notes, and the total of the bonds placed as collateral to secure the same was $83,500. Afterwards, in March, 1912, Taber, Mitchell, and Ayres loaned said railway company $400 each, taking notes secured by $1,000 bonds each, and plaintiff loaned it $250, taking note secured by $500 bonds. In addition to the bonds held as collateral, there were $11,000 in bonds, which were acquired outright by plaintiff, Allen, Sands, Taber, S. M. Mitchell, and Ellis, so that the total amount of bonds disposed of by the railway company, and placed as collateral, amounted to $98,000.

The above notes having matured on June 29, 1912, there was brought, on July 15, 1912, by this plaintiff as attorney for O. H. Orendorf, in the United States District Court, a bill of complaint against said Cassville & Western Railway Company and others, as defendants, for the appointment of a receiver.

Plaintiff had been the attorney for said railway company from May 1, 1911, and had drafted the mortgage securing the above bonds. At the time of filing said bill for the receiver, and for some time prior thereto, said railway company was hopelessly insolvent, and in a bankrupt condition. This was known to plaintiff and other creditors, and he was Insisting upon a receiver being appointed. The property of said railway company had been depreciating rapidly; its revenues were insufficient to pay the running expenses, taxes, and other charges against the same. On July 10, 1912, the plaintiff procured his own appointment as receiver for said railway company, qualified as such, and held this position until after the sale of said property by the commissioner, when he was succeeded by Mr. Taber. He had the management and control of the property during his receivership, and knew that it was constantly losing money instead of being a paying enterprise. He received for his services as receiver of said company the sum of $1,800.

On February 10, 1913, the Conqueror Trust Company, of Joplin, Mo., having become trustee in said Bond mortgage, filed its supplemental bill for foreclosure of said mortgage, in the case brought by Orendorf, supra, which was thereafter continued in the names of O. H. Orendorf and Conqueror Trust Company, as plaintiffs, against Cassville & Western Railway Company, Mercantile Trust Company, George L. Sands, C. F. Ellis, F. B. Taber, W. D. Ayres, S. M. Mitchell, G. M. Sebree, Wesco Supply Company, and St. Louis & San Francisco Railway Company. The supplemental bill sets out fully the indebtedness of said railway company, and disclosed its insolvency and inability to pay its debts. In said action of foreclosure all of the holders of outstanding bonds, issued by said railway company and described in said mortgage, amounting in face value to $98,000, were made parties thereto. Each several defendant and bondholder appeared to said action, filed answer therein, confessed the truth of the allegations of said supplemental bill, and prayed the federal court to enter a decree of foreclosure in accordance with the prayer of said bill.

On February 12, 1913, said cause was reached for hearing before the above court, all parties in interest being present in person or by counsel, including the plaintiff herein, and said court entered its final foreclosure decree, ordering said property covered by said bond mortgage to be sold by F. W. Kelsey, who was appointed commissioner to sell same, at the depot of the Cassville & Western Railway Company, at Barry county, Mo., upon due notice as required by said decree. The minimum price fixed by the decree for which said property could be sold was originally $45,000, after testimony had been heard in respect to the value of same.

Pursuant to said decree, the commissioner aforesaid duly advertised said property for sale on May 17, 1913, at the depot aforesaid, and offered the same for sale at such place, on said date, but no bids were offered therefor. On May 21, 1913, the original decree was modified by the court so as to authorize the sale of said property at the minimum price of $30,000.

Plaintiff and other bondholders were present on May 17, 1913, when the property was offered for sale under the minimum price of $45,000, but made no bid for same. When the court heard evidence as to the value of property and fixed the minimum price at $45,000, the plaintiff and his witnesses contended that said property was worth $50,000 or $60,000, while the contention of Mitchell and others placed the property as low as $25,000. All the parties in interest were before the court, by letter or otherwise, when the minimum price for the sale of the property was fixed at $30,000, and the sale directed to be made as in the previous order. There was a readvertisement by the commissioner, and on June 30, 1913, the property of said railway company was again offered for sale at the depot aforesaid.

Mr. C. M. Robeson was present at said last sale, representing the majority of the bondholders of said railway company, and buying in their behalf. Mr. Garrett was likewise present at the instance of plaintiff. Robeson and Garrett were competitive bidders at said sale, and the property was finally knocked off to Robeson, as the highest bidder, for the bondholders aforesaid. The plaintiff was present at said sale, and had requested Mr. Garrett to attend same. The property was sold to Robeson, as aforesaid, for $31,050, to be paid for in accordance with the terms and conditions of the decree of foreclosure. He paid to said commissioner $14,500, in cash, as part of said purchase money, and turned over to the latter $81,500 in amount of said bonds, out of a total outstanding issue of $98,000. This was a compliance with the decree of foreclosure.

The commissioner in his report of sale recited, among other things, that C. M. Robeson, representing the majority of the bondholders, had bought said property for the above sum, and that he had paid therefor the $14,500 in cash, and turned over to him said $81,000 in amount of bonds.

From all the facts and circumstances in the case, we are satisfied that plaintiff knew, before said report of the commissioner was approved, that Robeson had bought in said property at the sale for the majority of the bondholders of said railway company. He also had full knowledge of the confirmation of the report of said commissioner. Plaintiff offered no objection to the sale as made by commissioner, was present when said property was sold, filed no exception to the report of said commissioner, and took no steps whatever to set aside said sale. On the contrary, he accepted his distributive share of the proceeds of the sale.

On page 10 of his brief respondent says:

"The plaintiff received only his pro rata share of the $31,050 at the foreclosure sale which, after deducting court costs, allowances, etc., amounts to 22 cents on the dollar, and which left unpaid the plaintiff a balance of $7,450."

It is clear from the evidence that C. B. Robeson bought the property of said railway company at said sale for O. H. Orendorf, C. M. Mitchell, and W. T. Ayres, as bondholders of said company, and that they controlled and put up, or caused to be put up, the $81,000 in amount of bonds as part of the purchase price of said property. Plaintiff's position in respect to the sale is better expressed by his testimony in relation to this subject, as follows:

"Q. You knew the road had been purchased by the bondholders, didn't you? A. Yes; I didn't think there was anything wrong about the bondholders purchasing the road; I wouldn't have objected if they did.

"Q. If ...