St. Louis, V. & T.H.R. Co. v. Terre Haute & I.R. Co.
Decision Date | 11 January 1888 |
Citation | 33 F. 440 |
Parties | ST. LOUIS, V. & T.H.R. CO. v. TERRE HAUTE & I.R. CO. |
Court | U.S. District Court — Southern District of Illinois |
Trumbull Robbins & Trumbull, John M. Butler, and J. T. Brooks for complainant.
George Hoadly, William M. Ramsey, Greene & Humphrey, and John G Williams, for defendant.
Before GRESHAM, C. J. and ALLEN, D. J.
The complainant, the St. Louis, Vandalia & Terre Haute Railroad Company was chartered by an act of the general assemby of the state of Illinois, approved February 10, 1865, to construct and operate a railroad from the bank of the Mississippi river, opposite East St. Louis, to the eastern boundary of the state of Illinois, at a point most convenient for extending the same to the city of Terre Haute, in the state of Indiana; and this charter was amended by an act approved February 8, 1867. The defendant was chartered by an act of the general assemby of the state of Indiana, passed January 26, 1847, under the name of the Terre Haute & Richmond Railroad Company, with power to construct and operate a railroad from a point on the western line of the state of Indiana, easterly through Terre Haute to Richmond, in the same state; and by an act passed March 6, 1865, the name of the defendant was changed to the name it now bears.
The bill avers that the complainant was not authorized by its charter to part with the possession of its property and franchises indefinitely, or for a fixed period of time, by a lease or other contract; and that the defendant was not authorized by its charter to acquire, by like means, the possession, management, or control of any railroad located beyond the limits of the state of Indiana, for an indefinite or fixed period; that in order to secure money to construct and equip its road, the complainant on April 6, 1867, executed a mortgage or deed of trust, dated January 1, 1867, conveying to trustees all its railway and equipment to secure the payment of bonds aggregating $1,900,000, drawing interest at the rate of 7 per cent. per annum, in which instrument it was provided that beginning on July 1, 1872, there should be set apart and paid to a commissioner out of the earnings of the railroad, $20,000 annually, as a sinking fund for the redemption of these bonds; that on March 13, 1868, the complainant executed its second mortgage, or deed of trust, to secure the payment of an additional issue of bonds aggregating $2,600,000, drawing 7 per cent. interest; that these two issues of bonds were all sold, and the proceeds thereof applied to the construction and equipment of the railroad; that they are all outstanding and unpaid, and that no sinking fund has been created, as provided in the first mortgage; that on the tenth of February, 1868, the complainant executed a pretended lease of its railroad, property, and franchises to the defendant for the period of 999 years, which is set out in the bill as follows:
The bill further avers that on January 12, 1869, and after the bonds had been sold as previously stated, the board of directors of the complainant adopted a resolution declaring that the defendant should be allowed 70 per cent. out of the gross receipts, instead of 65 per cent., for operating the road, and that by agreement between the parties the lease should be modified only to that extent; that by a statute of the state of Illinois, in force at the time the pretended lease was executed, no railroad company in the state of Illinois was allowed to lease its railroad and other property and franchises to any foreign railroad company, without having first obtained the written consent of all stockholders residing in that state; and that the pretended lease was executed without the written consent of 59 stockholders who then resided in Illinois; that on the completion of the construction and equipment of the road, on July 1, 1870, the defendant took possession and control of the same, and from that time to the present has operated the entire property under the franchises granted to the complainant, and has received, in tolls and other earnings, more than $21,600,000; that the pretended lease is void, because neither the plaintiff nor the defendant was authorized by the states which created them to enter into such a contract; that the defendant is liable as trustee to account to the complainant for all the property embraced in the pretended lease, together with all receipts and profits derived from the management and operation thereof, and to restore immediately to the complainant the full control and possession of all its property, and its earnings, after deducting reasonable disbursements made by the defendant in the care, management, and maintenance of the same; that the defendant has refused to deliver to the complainant, on demand, its property, and the earnings derived therefrom; that during the entire period the defendant has been in possession of the railroad, it has failed to pay over to the complainant, according to the terms of the lease, the latter's full share of the gross receipts; that there is now due the complainant from this source, after payment of interest which has accrued upon the mortgage bonds, more than $500,000; that by reason of the defendant's failure to make such payments as they became due the complainant has been unable to create any sinking fund, as required by the terms of the first mortgage; that the complainant entered into the contract supposing it had lawful authority to do so, but it has been recently advised by its counsel that it had so such power, and that the lease is null and void, and that it is its duty to repudiate the same, and resume possession of its property and franchises; that the complainant is liable to have its charter and corporate rights forfeited by the state of Illinois; that by proper management the income of its property can be largely increased; that the present income is more than sufficient to pay the interest on its bonded indebtedness, and create a sinking fund as required by the first mortgage; and that the first mortgage is liable to be foreclosed at any time on account of the failure to create such sinking fund.
The bill also further avers that whether the lease be valid or void, an accounting is necessary to determine the amount of money received from the defendant in the operation of the road, which will require the examination of long and complicated accounts, covering a period of 17 years; that the pretended lease is a cloud upon the complainant's...
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