Case v. Kelly

The Green Bay & Minnesota Railroad Company being in the hands of a receiver, namely, Timothy Case, in the circuit court of the United States for the eastern district of Wisconsin, in a suit by the Farmers' Loan & Trust Company to foreclose a mortgage on said railroad, said receiver was directed by the court to take possession of all the property, real and personal, of said company, namely, its roadbed, lands, right of way, and all its other property and rights whatsoever, with authority to bring suits, in the name of the railroad company, as he should be advised by counsel to be necessary. Under this order, Mr. Case, as receiver, broght the present suit, stating that he sues in behalf of said railroad company, and as receiver, the defendants David M. Kelly, Henry Ketchum, and George Hiles, and the Arcadia Mineral Spring Company, a corporation created by the laws of the state of Wisconsin. The allegations of the bill are that the defendants Kelly, Ketchum, and Hilles, who were officers of the railroad company during its period of construction, had procured numerous donations of land from citizens who were interested in the construction of the road, along its line, intended to be for the use and benefit of the railroad company, and to assist it in such construction. The fundamental allegation of the bill is that these defendants, representing to the persons who made the donations that they were officers of the road, and soliciting these grants for the benefit of the road, took the conveyances to themselves individually; that they did this in a fraudulent manner, by making the grantors in the conveyances believe that they, as the officers of the company, could receive the conveyances for the benefit of the road; and that either the grantors did not really know to whom the conveyances were made, or were induced to believe that when made the grantees held the lands as a trust for the benefit of the road. These defendants not recognizing this trust, and the conveyances on their faces being merely conveyances to the individuals, either separately or collectively, to-wit, to Ketchum, Kelly, and Hiles, who now refuse to convey to the company, or to admit its right to the lands, this suit is brought to have a declaration of the trust made by the court, and a decree ordering conveyances by the defendants of the land to the corporation. It is further alleged that the mortgage in process of foreclosure in the court under which Case is acting as receiver covered all the lands of the corporation, and would cover these lands, if the title of the corporation in them was established. The defendants Kelly, Ketchum, and Hiles filed answers, in which they denied all fraud or deception, denied that they held the lands in trust for the railroad company, and denied the right of plaintiff to any relief. A decree, for want of an answer, was taken pro confesso against the Arcadia Mineral Spring Company. Replications were filed to the answers. The case was put at issue as regards the three principal defendants, and an immense mass of testimony, documentary and otherwise, was taken. The circuit court, on the hearing, was of opinion that the conveyances made by various persons to Kelly and Ketchum and Hiles of the lands described in the bill were made by the grantors, and received by the defendants, as contributions to the railroad company, to aid in the construction of its road; and that, if the railroad company had authority by law to receive such grants, and to hold such real estate, it would be entitled to the relief sought in the bill in this case. But being also of opinion that, by the laws of Wisconsin, and under its charter, it could only receive and hold lands for the defined purposes of the road, it held that only such lands as were necessary and proper for the immediate use of the road could be recovered in this suit. 13 Amer. & Eng. R. Cas. 70. It therefore e tered the following interlocutory decree: 'This day came the parties, by their counsel, and, on consideration of the pleadings and proofs in this cause, and the arguments of counsel thereon, it is ordered, adjudged, and decreed by the court that the complainants is entitled to recover from the defendants the title and possession of all such lands mentioned in the bill of complaint as are required by the railroad company for right of way, depot buildings, and other necessary railroad purposes, as described and limited in the charter of the company; and that the bill of complaint, as to all other portions of the lands described therein, be dismissed. For the purpose of ascertaining what lands are required for right of way, depot grounds, and other railroad purposes, as above stated, and also the extent and value of any improvements made by defendants, this cause is referred to Hon. James H. Howe, as special master of this court, who will take such additional proof as either party may offer, upon reasonable notice; the evidence to close by the first day of October next, and the report of the master to be filed herein by the 20th day of October next. The master will accompany his report with such reasons as he may deem proper in support of the conclusions reached by him. For that purpose he may visit the premises, and report the result of his personal examination.' The master made his report, accompanied by the testimony, to which exceptions were taken, both by Case, the receiver, and by the defendants Hiles and Kelly; which exceptions were overruled by the court, and a final decree entered. From this the present appeal is taken.

That decree, after specifying certain pieces of land which the court considered as necessary and proper to the road, for its use, in the way of track, right of way, depots, and other similar, proper, and necessary uses, ordered the conveyance of these pieces of land, by Kelly and by Ketchum, and by Hiles and by the Arcadia Mineral Spring Company, to the railroad company. It also directed a master to ascertain and report the value of certain improvements made by Hiles upon a portion of this property, and report the same to the court; for which Hiles was to be paid, in case complainant should elect to take such improvements.

Walter C. Larned and H. B. Turner, for appellant.

E. H. Ellis, for David M. Kelly, appellee.

Geo H. Noyes, for George Hiles, appellee.

[Argument of Counsel from pages 25-26 intentionally omitted]

MILLER, J.