Seney v. Wabash W. Railway Company

Statement by Mr. Justice BROWN.

This was also an intervening petition against Humphreys and Tutt, receivers of the property of the Wabash, St. Louis & Pacific Railway Company, and was instituted by Seney, as trustee in a mortgage covering what was known as the 'Clarinda Branch' of the Wabash Railway, to recover a rental equal to the interest at 6 per cent. on $264,000 of bonds, from August 1, 1884, to April 1, 1886, which bonds were secured by a mortgage to Seney as trustee.

On July 15, 1879, the Clarinda & St. Louis Railroad Company, being the owner of a projected railway, 11 miles in length, extending from Clarinda, Iowa, in a southerly direction to a point on the state line between Iowa and Missouri, leased its road to the St. Louis, Kansas City & Northern Railway, the owner of another road extending from that point on the state line to Rosebury, Mo. For the purpose of raising the funds necessary to complete and equip that branch, the lessee issued bonds to the amont of $246,000, interest payable in February and August, and mortgaged both branches of the line to Seney, as trustee. The mortgage to Seney did not purport to convey to him any of the income or earnings of the road. By way of further assurance, the Clarinda & St. Louis Company executed to the same trustee a guaranty mortgage, conveying all its right, title, and interest in the road, subject only to the lease.

Upon the execution of this lease and these mortgages, which formed a single transaction, the St. Louis, Kansas City & Northern Railway took possession of the demised premises, and with the proceeds of the bonds constructed and subsequently operated the Clarinda Branch until November 10, 1879, when it was consequently with the Wabash Company, and subsequently became a part of the Wabash, St. Louis & Pacific Company. This branch passed into the hands of the receivers, and became subject to the orders of May 27, 1884, June 28, 1884, and April 16, 1885, referred to in the previous case. 14 Sup. Ct. Rep. 86.

Seney, the trustee, did not attempt possession of the premises until March 22, 1886, when he filed his petition in the Wabash Case, reciting the defaults that had occurred in the payment of interest upon the bonds secured by his mortgage, and praying for the surrender of the road to a receiver to be appointed by another court in a suit brought to foreclose his mortgage. On April 6, 1886, the court ordered the surrender made. While the Clarinda Branch was in possession of the receivers, they expended in necessary maintenance, operation, and taxes a large sum in excess of the gross earnings therefrom. The master to whom the case was referred was of the opinion that under the order of June 28, 1884, the receivers were only bound to pay the interest on the Clarinda bonds after meeting such other obligations as they had been directed to pay by the former orders of the court; found that the petitioner had not brought himself within the terms of that order; and recommended that the petition be dismissed, which was subsequently done, 34 Fed. Rep. 259, 38 Fed. Rep. 63. From this decree, Seney appealed to this court.

Theo. Sheldon and E. W. Sheldon, for appellant.

Wells H. Blodgett, Thos. H. Hubbard, and F. W. Lehmann, for appellee.

Mr. Justice BROWN, after stating the facts in the foregoing language, delivered the opinion of the court.