Talk:St. Louis Company v. Cleveland C. C. I. Railway Company

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Edition:	St. Louis Company v. Cleveland C. C. I. Railway Company, from in this case was rendered upon an intervening petition of the St Louis, Alton & Terre Haute Railroad Company, filed October 30, 1882, in a suit then pending in the circuit court of the United States for the district of Indiana, wherein Hinman B Hurlbut was complainant, and the Indianapolis & St Louis Railroad Company defendant, the object of which suit was to foreclose the second and third mortgages, in which Hurlbut was the surviving trustee, upon the railroad and other property of the defendant A decree of foreclosure and sale had been rendered therein on May 22, 1882, in pursuance of which the mortgaged premises were sold on July 28, 1882, for the sum of $1,396,000, subject to the outstanding first mortgage; and, at the date of the filing of the intervening petition of the present appellant, they had become by purchase the property of the Indianapolis & St Louis Railway Company The proceeds of the sale were under the control of the court for purposes of distribution; and the matter had been referred to a master in chancery to hear evidence in support of the claims of any creditor claiming the right to share in that distribution, and to make report thereon The petition alleges, and it so appears, that by a decree of the circuit court of the United States for the district of Indiana, rendered July 26, 1882, in a certain suit in equity, in which said petitioner was complainant and the said Indianapolis & St Louis Railroad Company and others were defendants, he obtained a decree against said n dianapolis & St Louis Railroad Company for the payment of the sum of $664,87470, besides costs, which decree remains unsatisfied and unreversed This amount, it is claimed by the petitioner, is a lien upon the proceeds of the sale of the Indianapolis & St Louis Railroad, prior in equity to that of the bondholders secured by the second and third mortgages The indebtedness for which this decree was rendered arose under an agreement entered into between the petitioner and the Indianapolis & St Louis Railroad Company on September 11, 1867, whereby it was provided that the Indianapolis & St Louis Railroad Company should manage, operate, and carry on the business of that portion of petitioner's road known as its principal or main line, extending from Terre Haute, in the state of Indiana, to East St Louis, in the state of Illinois, a distance of 189 miles, and of the Alton branch thereof, extending from Alton junction, in the state of Illinois, to Alton, in said state, a distance of 4 miles, for the period of 99 years from the 1st day of June, 1867; that said Indianapolis & St Louis Railroad Company should pay annually during said term to the petitioner 30 per cent of the gross earnings of the said main line and Alton branch until such gross earnings for the year should amount to $2,000,000, and 25 per cent of any excess over $2,000,000, until the whole earnings for the year should amount to $3,000,000, and 20 per cent of any excess over $3,000,000 of gross earnings for such year; and, further, that the said payment should amount in each and every year to at least the sum of $450,000, which amount was agreed upon as a minimum rental, to be paid absolutely without reference to the percentage which if formed of the gross earnings of any year, and without leaving or creating any claim or charge upon the earnings of any future year The petition further shows that at the time of the execution of the said operating contract, the Indianapolis & St Louis Railroad was not built, and that the Indianapolis & St Louis Railroad Company was organized and created for the express purpose of furnishing to the Cleveland, Columbus, Cincinnati & Indianapolis Railroad Company and the Pittsburg, Fort Wayne & Chicago Railway Company a through line to the Mississippi river by means of its connection with the petitioner's road, the St Louis, Alton & Terre Haute Railroad, under the foregoing contract; and that while the Indianapolis & St Louis Railroad Company nominally under that contract was the lessee of the petitioner's road, yet in fact it was leased and operated for the benefit of the other two companies named, who furnished the money to build the said Indianapolis & St Louis Railroad, and who entered into a contract with the petitioner, guarantying performance of said agreement on the part of the Indianapolis & St louis Railroad Company, and who had entered into a contract between themselves for the management and operation of the continuous line of railroad from Indianapolis, in the state of Indiana, to East St Louis, in the state of Illinois, including the Indianapolis & St Louis Railroad and the petitioner's road It was further alleged in the petition that the Pennsylvania Railroad Company, which, together with the Cleveland, Columbus, Cincinnati & Indianapolis Railway Company, are made defendants to the petition, had succeeded to the rights and obligations under these several contracts and arrangements of the Pittsburg, Fort Wayne & Chicago Railway Company; and that the Pennsylvania Railroad Company and the Cleveland, Columbus, Cincinnati & Indianapolis Railway Company were equal owners of the capital stock of the Indianapolis & St Louis Railroad Company, and that the Cleveland, Columbus, Cincinnati & Indianapolis Railway Company is the holder, substantially, of all the second mortgage bonds of the Indianapolis & St Louis Railroad Company The petition further alleges that the eastern terminus of the St Louis, Alton & Terre Haute Railroad is the wet ern terminus of the Indianapolis & St Louis Railroad, the two thus forming a continuous line from Indianapolis to East St Louis on the Mississippi river, the road of the petitioner being the only outlet for the Indianapolis & St Louis Railroad west of Terre Haute; that a very large proportion of the earnings of the Indianapolis & St Louis Railroad Company are derived from business received by it from the petitioner's leased line; and avers that the earnings of the leased road over and above the amount authorized to be retained by the Indianapolis & St Louis Railroad Company for the purpose of operating the same at all times have been and are the property of the petitioner The petitioner further claims that the rental for the use and occupation of said continuous line constituted a part of the operating expenses of the Indianapolis & St Louis Railroad Company; that the operating contract was executed before any of the bonds of the Indianapolis & St Louis Railroad Company were issued and sold; that it was the duty of the Indianapolis & St Louis Railroad Company to pay all of its operating expenses, including the rental of the petitioner's road, out of its earnings before it paid any interest on said bonds; but that the said Indianapolis & St Louis Railroad Company, instead of paying its operating expenses as thus defined, diverted and appropriated its earnings to improvements of its property in better equipment and new construction, and to the payment of interest upon its bonds, and neglected and refused to pay the rental accruing to the petitioner for which it had obtained a decree, as above stated And the petition alleges that during the time the Indianapolis & St Louis Railroad Company has been in possession of the petitioner's road the amount of such misappropriation and diversion of funds, that should have been applied to the payment of operating expenses, amounts to the sum of $1,000,000 The petition further shows that on May 1, 1878, the Indianapolis & St Louis Railroad Company mand default in the payment to petitioner of the rental then due under the terms of said contract, and so continued to make default from and including April 1, 1878, up to and including October 26, 1878, during which time it was in possession and use of the leased road, receiving the profits and income thereof, and paid over no part of the gross earnings of said road to the petitioner whatever, but appropriated the whole of the same to its own use, 30 per cent whereof during said time amounted to the sum of $164,05282, which, it is alleged, was appropriated by the Indianapolis & St Louis Railroad Company to improvements, betterments, and new construction upon its own line of railroad, in the purchase of rolling stock and equipment, and in the payment of interest upon its bonds It is further alleged in the petition that when the Indianapolis & St Louis Railroad Company took possession of the leased road in 1867 it received from the petitioner supplies of the value of $91,86005, which, by the terms of the lease, the lessee contracted and agreed to return or account for to the lessor at the termination of the lease; that said supplies have long since been consumed by the lessee; that by the terms of the decree and sale in the principal cause the lease has been assigned and transferred to the Indianapolis & St Louis Railroad Company, and it is claimed that said amount is a charge upon the proceeds of the sale of the leased road in the possession of the court for distribution The petition therefore prays for a decree awarding priority in payment in its favor out of the proceeds of the sale of the two sums of $664,87470 and $91,86005 To this petition answers were filed by the Cleveland, Columbus, Cincinnati & Indianapolis Railway Company, and by the Pennsylvania Railroad Company, in which the allegations of the petition in regard to the diversion of the earnings of the St Louis, Alton & Terre Haute Railroad Company to the purposes of the Indianapolis &S t Louis Railroad are denied, as well as the general equity set up by the petitioner On June 27, 1884, the cause having been fully heard upon the petition, and the answers and proofs, a final decree was rendered awarding to the petitioner an amount found due to it for rental accrued while the road was in the possession of the receiver appointed under the foreclosure proceedings, and directing payment thereof; but so far as the petition sought to establish a claim for rental prior to the date when the receiver took possession of the property, as against the proceeds arising from its sale, and so far as it sought to recover the value of the supplies turned over to the Indianapolis & St Louis Railroad Company in 1867, at the time of the execution of the lease, the petition was dismissed It is from that decree that this appeal is prosecuted .
Source:	St. Louis Company v. Cleveland C. C. I. Railway Company from http://bulk.resource.org/courts.gov/c/US/125
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