Peninsular Iron Co. v. Eells

68 F. 24, 15 C.C.A. 189, 1895 U.S. App. LEXIS 2836
CourtCourt of Appeals for the Eighth Circuit
DecidedMay 6, 1895
DocketNo. 406
StatusPublished
Cited by14 cases

This text of 68 F. 24 (Peninsular Iron Co. v. Eells) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Peninsular Iron Co. v. Eells, 68 F. 24, 15 C.C.A. 189, 1895 U.S. App. LEXIS 2836 (8th Cir. 1895).

Opinion

SANBORN, Circuit Judge.

This is an appeal from a decree dismissing a bill brought in September, 1887, by the appellants, the • Peninsular Iron Company, a corporation, and others, to set aside the decree of foreclosure of a mortgage for $2,700,000 on the St. Louis, Keokuk & Northwestern Railway Company, rendered in the circuit court for the Southern district of Iowa on July 7, 1887, and to establish and foreclose a superior lien to that of the $2,700,000 mortgage upon the property of this railroad company. The facts out of which this controversy arises are substantially these:

On January 27, 1875, in the circuit court for the Eastern district of Missouri, a decree of foreclosure of two mortgages on the Mississippi Valley & Western Railway Company was rendered, which directed the sale of the property of that corporation to be made by a master on April 14, 1875. This railway company had constructed a railroad from Keokuk, Iowa, to Hannibal, Mo., and had expended a large amount of money towards its extension from Hannibal to Louisiana, a distance of 26 miles. This extension was, after the mastex^s sale, completed by the Keokuk Company, which was formed by the purchasers, and the railroad was extended from Louisiana to Clarksville, 10 miles, and afterwards from thence to St. Peters, a distance of 43 miles, so that it ultimately became about 134 miles in length. On March 27, 1875, certain of the lienholders and bondholders of the Mississippi Valley Railway Company appointed one A. B. Stone their agent and trustee to purchase the property of the company at the foreclosur-e sale, and to hold or dispose of it as a majority in interest of those who made this appointment, and joined in ‘the purchase through him, should direct. Those who joined in this purchase agreed with each other and with their agent, Stone, [27]*27that they would deliver to him all the bonds and liens upon this railway property that they held, and that each of them would pay to him in cash, to be used in the purchase of the property, such a proportion of the cash required to complete the purchase as his bonds and liens bore to, the aggregate amount of the bonds and liens received by Stone under the agreement. Under this agreement the appellants joined in the purchase, and furnished in bonds, at the value awarded to them by the court, and in cash, about 4 per cent, of the purchase price paid. They furnished $24,391.61, and the price paid by Stone was $606,830.28. The appellants were creditors of the Adrian Car & Manufacturing Company, of Adrian, Mich., and received the bonds they furnished to make this purchase from that company to secure debts it owed to them. Tlieir bonds were part of 125 bonds that had been previously pledged by the railway company to the car company to secure a debt due from the former to the latter. At the time of this contract to purchase this railway property, these 125 bonds were held by parties in and about xldrian who joined in the purchase, and together furnished about 11 per cent, of the purchase price. These Adrian parties acted together throughout these transactions, and were actively represented by the appellant William S. Wilcox, and by W. H. Angel, husband of the appellant Adelia S. Angel. Pursuant to the agreement of March '27, 1875, Stone purchased the property on April 14, 1875, and the court required him to pay $296,463.08 of the purchase price in cash on or before June 17, 1875. On June 8,1875, Stone signed, and delivered to the Adrian parties, a contract in which he recited that he had purchased the property of the railroad company at the foreclosure sale; that a majority in interest of the purchasers had directed him to convey it to the St. Louis, Keokuk & Northwestern Kailway Company, a corporation to be formed by those interested in the purchase; that these Adrian parties were interested in the purchase, and were required to furnish before June 17, 1875, their ratable proportion of the cash required to complete it, which was estimated to be $30,844.12; that they desired to borrow the same, and that to enable them to do so he agreed to convey the property to the Keokuk Company, to cause that company to mortgage the property to Dan. P. Eells, as trustee, to secure notes to the amount of $600,000, to deposit those notes with Eells, and to have Eells hold such an amount of those notes as would equal the amount of cash which the Adrian parties should pay to him before June 17, 1875, as collateral security for the repayment of the money so paid by them to complete the purchase of the property. The Adrian parties furnished $30,844.12, and Stone and others interested in the purchase furnished $265,619.86, in money, to complete (he purchase, and with this money, and the bonds and liens of the purchasers, Stone completed it, and obtained a conveyance of the property to himself. Immediately thereupon the Keokuk Company was organized by those interested in this purchase. Stone then sold and conveyed the properly to that company on these, among other, terms: That the company should issue $600,000 of notes payable in two years, and should secure them by a mortgage; that it should [28]*28issue bonds to the amount of $2,700,000, payable in 30 years, and secure them by a mortgage; that the bonds should be used first to pay off and satisfy the mortgage for $600,000; that all these notes, bonds, and mortgages should be placed in the hands of Dan. P. Eells, trustee; that the notes and bonds should be sold and disposed of as Stone should direct; and that Stone should use the proceeds thereof in the construction of the railroad, until it was completed, and when the road was completed all the bonds and stocks should belong to him, but that until that time the bonds and notes should not be issued any faster than at the rate of $20,000 per mile of completed and equipped railroad. Pursuant to this contract, Stone conveyed the property to the Keokuk Company. On June 22, 1875, the Keokuk Company made and delivered to Eells, as trustee, notes amounting to $600,000, payable in two years, and secured them by a mortgage on the property. On August 10, 1875, the Keokuk Company appointed Stone its financial agent to sell and dispose of its bonds and notes, and ratified his prior contracts for their sale and disposition. The notes secured by the mortgage for $600,000 were never sold or used, and on November 10, 1875, by direction of Stone, they were canceled, and Eells delivered them back to the .company, and released the mortgage which secured them. On the same day the company executed and delivered to Eells, as trustee, the 30-year bonds, amounting to $2,700,000, and a mortgage to secure them. Stone was unable to sell the bonds, and he proceeded to equip and operate the railroad, and to extend it towards St. Louis, on the credit of the bonds, which lie pledged for materials and money to accomplish this purpose. In 1877 the road had been equipped and extended from Hannibal to Clarksville, a distance of 36 miles, through his exertions,, at an expense of about $700,000, and $1,800,000. of the bonds had been pledged for this purpose.

Differences had arisen between the parties interested in the original purchase, as to their respective interests, and thereupon Stone brought a suit in the district court of Lee county, in the state of Iowa, against all the parties interested in the original purchase, including the appellants in this suit, and against all the parties to whom the Keokuk Company had become indebted, to determine the respective interests of these parties in the property, and to obtain his discharge as their trustee. In his petition he pleaded all the facts to which we have referred, except his agreement with the Adrian parties, of June 8, 1875, that such an amount of the notes secured by.

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Bluebook (online)
68 F. 24, 15 C.C.A. 189, 1895 U.S. App. LEXIS 2836, Counsel Stack Legal Research, https://law.counselstack.com/opinion/peninsular-iron-co-v-eells-ca8-1895.