Trimble v. Kansas City Southern Railway Co.

• Decision Date: 13 April 1914
• Citation: 165 S.W. 995,257 Mo. 414
• Parties: J. McD. TRIMBLE et al. v. KANSAS CITY SOUTHERN RAILWAY COMPANY, Appellant
• Court: Missouri Supreme Court

165 S.W. 995

257 Mo. 414

J. McD. TRIMBLE et al. v. KANSAS CITY SOUTHERN RAILWAY COMPANY, Appellant

Supreme Court of Missouri, First Division

April 13, 1914

Appeal from Jackson Circuit Court. -- Hon. J. H. Slover, Judge.

STATEMENT.

The plaintiff, a firm of attorneys, sued the defendant railway as the successors in title and obligation of two other railways, for the amount of two respective judgments aggregating $ 11,111.68, recovered by plaintiffs against said railways for personal services alleged to have been performed in and about the matter of carrying out a consolidation of the two railways according to the plan of a reorganizing committee formed for that purpose.

The roads which were acquired, in pursuance of a contract and plan adopted for that purpose, will be termed for brevity the "Gulf Company" and the "Belt Company." The reorganizing committee caused the incorporation of the defendant, the Kansas City Southern Railway Company, to acquire the property and corporate control of the two former. The process by which the defendant accomplished this was through a receivership and foreclosure of the Gulf and Belt companies at the instance of the holders of their bonds secured by mortgage, and the foreclosure of the stocks and bonds of the Belt Company, and a subsequent foreclosure of a mortgage therein.

After the appointment of a receiver for the Gulf Company by the Federal Court, a committee of reorganization at Philadelphia which had succeeded the New York committee, proposed and published a contract and plan to reorganize the Gulf Company and its associated companies, which plan as modified on November 7, 1899, was carried out. This plan was addressed to the holders of the bonds and stocks of the Gulf Company et al., and was designed for the purchase of the Gulf Company under a foreclosure of the mortgages thereon; and then, to transfer the property to a corporation to be organized (the defendant, the Kansas City Southern Railway Company), which new company was expected to receive the stocks and bonds of two other corporations allied to the Gulf Company and to issue in payment thereof, new securities to be disposed of as thereafter stated.

By this means it was contemplated: (1) That the new company would own the property of the Gulf Company and the stock and bonds of the Belt Company, and the bonds of its constituent companies and the bonds and stocks of the Port Arthur C. & D. Company and thereby unite the corporate control of "all the properties." The bonds and stock thus acquired were to be pledged as security for the new first mortgage to be executed by the purchasing company. (2) The attainment of efficiency, economy and control of the property. (3) That in case of the failure to acquire the two terminal properties then the purchase of others at Kansas City and Port Arthur and a corresponding reduction of the new securities.

The plan further set out the conditions of participation by the persons invited to co-operate therein, and a schedule of the securities to be issued, and the uses and payments to which they were to be put:

"(a) Bonds to the extent of $ 3,802,500 are to be put in the treasury for future requirements.

"(b) The sum of $ 5,900,000 arising from a sale of $ 3,000,000 first mortgage bonds and $ 3,000,000 preferred stock, and from payments of ten dollars per share by participating stockholders, are to be reserved for the cash requirements of the new company, which includes such payments as may be made upon the floating debt, not to exceed the sum of $ 475,000.

"(c) All the balance of the securities to be appropriated specifically in exchange for securities of the old companies."

Following the foregoing features was the reorganization agreement, taken as a part thereof, but stipulating that "no estimate, statement, explanation or suggestion contained" in either "should be accepted as a representative warranty or agreement."

This plan and contract, and also the foreclosure decrees and sales and purchases of the property, and the conveyance made thereunder to the defendant, and a full report by its vice-president of the accomplishment of the plan to the New York Board of Trade, were introduced in evidence. Other documents were introduced in the evidence and if necessary will be cited in the opinion.

The two plaintiffs were called to testify and give a history of the transactions and their connection therewith to the effect that the services rendered by them to the Gulf and Belt companies and upon which their judgments were based, were performed with the knowledge, consent and approval of the reorganization committee, and through correspondence with its attorney. That the legal steps taken by them were necessary and proper to the accomplishment of the contract and plan of the reorganizing committee, whereby the defendant secured ownership and control of the railway between Kansas City, Missouri, and Port Arthur, Texas, with suitable terminals at both places. The contract and plan of the reorganizing committee expressly provided that the new company (which the evidence showed was the defendant) should assume and pay all of the expenses incurred by the reorganizing committee in the accomplishment of the scheme incurred for the unification of the property described in its plan and contract.

The case was submitted to the trial court, upon the waiver of a jury, who subsequently rendered a judgment for plaintiff, July 6, 1910, in the sum of $ 16,763.14, with the following memorandum of his reasons.

"Inasmuch as the services sued for in this case were rendered in accomplishing the scheme from which the reorganization or consolidation in fact was effected, it became and was a part of the expense attending such reorganization, and for that reason, if for no other, these plaintiffs should recover in this case regardless of the question whether the defendant company was liable or is liable for the following obligations of the constituent companies. Judgment for the plaintiffs as prayed for."

From that judgment defendant, after the overruling of its motion for a new trial, appealed to this court.

Affirmed.

S.W. Moore, Cyrus Crane and James M. Souby for appellant.

The Southern Company is not liable for the debts of the Gulf Company or of the Belt Company upon the theory of a consolidation of these companies. R. S. 1909, secs. 1059, 1061; Harriman v. Securities Co., 197 U.S. 244; State ex rel. v. Leseur, 145 Mo. 322; Railroad v. Missouri, 152 U.S. 301; Burge v. Railroad, 100 Mo.App. 464; Dicky v. Railroad, 122 Mo. 223; Holton v. Railroad, 25 Mo.App. 322; Hagemann v. Railroad, 202 Mo. 249; Pullman Co. v. Railroad, 115 U.S. 587; Peterson v. Railroad, 205 U.S. 364; Hoard v. Railroad, 123 U.S. 222; Jones v. Electric Co., 135 F. 153; Lee v. Railroad, 150 F. 775; Jessup v. Railroad, 36 F. 735; Loan and Trust Co. v. Railroad, 103 F. 110; Paton v. Railroad, 85 F. 838; Armour v. Bennetts' Sons, 123 F. 56; Adams v. Railroad, 24 So. 211; Telephone Co. v. Telephone Co., 30 So. 725; Railroad v. Cochran, 43 Kan. 225; Commonwealth v. Bridge Co., 64 A. 909; Ulmer v. Railroad, 57 A. 1001; Bank v. Construction Co., 25 S.E. 326; Railroad v. Ashling, 43 N.E. 373; Foundry Works v. Water Co., 105 Wis. 48. (2) There is no express promise contained in the reorganization plan and agreement for the payment of the floating debt of the constituent companies upon which the plaintiffs are entitled to maintain an action to collect their judgments against the Gulf Company and the Belt Company. St. Louis v. Contracting Co., 202 Mo. 451; Manufacturing Co. v. Clark, 208 Mo. 89; Howsman v. Water Co., 119 Mo. 304; Bank v. Grand Lodge, 98 U.S. 123; Keller v. Ashford, 133 U.S. 610; Insurance Co. v. Water Co., 33 S.Ct. 32; Trust Co. v. Water Co., 132 F. 702; Sayward v. Dexter, 72 F. 758; Bank v. Railroad, 76 F. 130; McIlvaine v. Lumber Co., 54 S.E. 473; Manufacturing Co. v. Water Co., 37 So. 980; Moyer v. Railroad, 132 Ind. 88; Freeman v. Pennsylvania Co., 173 Pa. St. 274; Armour & Co. v. Construction Co., 78 P. 1106; Rochester D. G. Co. v. Fahy, 97 N.Y.S. 1013. (3) The Federal Court, in the foreclosure decrees in the cases of the Gulf Company and the Belt Company, retained jurisdiction to hear and determine such claims as those of the plaintiffs. Such retained jurisdiction was exclusive and this court is without jurisdiction to hear and determine this action. Julian v. Trust Co., 193 U.S. 93; Cotton Mills v. Manufacturing Co., 198 U.S. 188; Trust Co. v. Gulf Co., 120 F. 398; Trust Co. v. Gulf Co., 110 F. 10; Railroad v. Adelbert College, 208 U.S. 38; Ex parte Young, 209 U.S. 123.

John A. Eaton for respondents.

(1) There was a consolidation and consequent liability of the constituent company in fact and in law for the payment of the judgments of Trimble & Braley rendered for services. Improvement Co. v. Steel Co., 201 F. 811; Railroad v. Boyd, 228 U.S. 505, 177 F. 804; Trust Co. v. Railroad, 174 U.S. 674; Railroad v Howard, 7 Wall. 392; Trust Co. v. Railroad, 171 F. 43; Railroad v. Ashling, 160 Ill. 373; Sec. 1059, R. S. 1899; ...