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ST. JOSEPH & ST. LOUIS R. CO. V. HUMPHREYS, 145 U. S. 105 (1892)

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U.S. Supreme Court

St. Joseph & St. Louis R. Co. v. Humphreys, 145 U.S. 105 (1892)

St. Joseph and St. Louis Railroad Company v. Humphreys

No. 287

Argued and submitted April 12, 1892

Decided April 25, 1892

145 U.S. 105

Syllabus

Following Quincy, Missouri & Pacific Railroad Co. v. Humphreys, ante, 145 U. S. 82, it is, with regard to the lease of the St. Joseph and St. Louis Railroad Company by the Wabash Company, now held:

(1) That, the circumstances in the latter case being similar to those in the former, the receivers were entitled to a reasonable time to ascertain the situation of the leased railroad before they could be held to have assumed the lease.

(2) That the time taken by them in deciding not to assume it was a reasonable time.

(3) That the course pursued by the court below towards the various independent roads which made up the Wabash system was equitable and just, and will not be disturbed in this case.

The court stated the case as follows:

June 1, 1874, the St. Joseph and St. Louis Railroad Company leased its road to the St. Louis, Kansas City and Northern Railroad Company for the full term of 99 years. The lessee agreed to pay the lessor on the first days of March and September in each year, as a rental, thirty per cent. of the gross earnings of said line, and it also agreed that such percentage should not be in any one year less than $20,000; and agreed to pay all taxes, and put the road in good running chanroblesvirtualawlibrary

Page 145 U. S. 106

order, and keep it in good condition during the whole of said term. The lease also contained the following provision:

"But in case default shall be made by the party of the second part in the payment of the rents herein reserved, and the same or any part thereof shall remain unpaid for the space of thirty days from and after the day when the same shall become due and payable, or if said party of the second part shall fail to comply with its covenants to pay taxes aforesaid, or in all things keep and observe all and every the covenants, stipulations, and agreements herein contained and on its part to be observed and kept, then it shall be lawful for the said party of the first part to enter upon and take possession of all the property hereby leased, together with all the improvements thereon constructed, and to have again, repossess, and enjoy the same as in the first instance; and upon such default in the payments of rent or taxes or the breach of any such covenants as aforesaid this lease shall cease, terminate, and be forfeited, at the option of the party of the first part."

The St. Louis Company took possession of the leased line, and operated it until November, 1879, at which time that company consolidated with the Wabash Railway Company, the consolidated company taking the name of the Wabash, St. Louis and Pacific Railway Company. On the first of June, 1880, the Wabash Company executed to the Central Trust Company of New York and James Cheney a mortgage on its entire system, to secure what were known as its "general mortgage bonds," of which $17,000,000 were issued, and subsequently a mortgage to the Iron Mountain Company to indemnify that company for certain advances, and also a collateral trust mortgage. On May 27, 1884, the Wabash Company filed in the Circuit Court of the United States for the Eastern District of Missouri its bill of complaint, which has already been sufficiently set forth in the preceding case, No. 223, Quincy &c. Railroad v. Humphreys, ante, 145 U. S. 82, and upon the filing of which receivers were appointed as therein detailed.

On June 15, 1884, the Wabash Company filed by leave of court an amended bill of complaint, setting forth with greater chanroblesvirtualawlibrary

Page 145 U. S. 107

particularity the various lines of railway belonging to its system, the liens and encumbrances thereon, and the financial condition of the company, and stating the lease between the St. Joseph Company and the St. Louis, Kansas City and Northern Railway Company, and the consolidation between the latter company and the Wabash Company.

On June 26, 1884, the receivers asked instructions from the court, but the St. Joseph Company is not mentioned in their petition of that date nor in the master's report thereon. The petition states, however, that the Wabash Railway Company and the St. Louis, Kansas City and Northern were possessed of certain valuable lines of railroad which were subject to mortgages and deeds of trust, and gives a list of them, not including the St. Joseph; and after excluding certain lines or divisions whose earnings had not theretofore been sufficient to pay operating expenses, cost of maintenance, and interest, says that from the incoming rents and profits of the property now in their possession under the court's former order, they believe they can, until otherwise directed, pay the expenses, cost, and interest on bonds or other obligations secured by mortgages or deeds of trust on the lines or divisions that were owned or possessed either by the Wabash or by the St. Louis, Kansas City and Northern before their consolidation, which lines they thought would continue to yield sufficient to make such payments.

The order of appointment directed, among other things, that the receivers should pay rental on all leased lines "out of the income that shall come into their hands from the operation of said railroad or otherwise," and

"keep such accounts as may be necessary to show the source from which all such income and revenues shall be derived, with reference to the interests of all parties herein and the expenditures by them made."

By its confirmation of the master's report, June 28, 1884, the court ordered the receivers to keep the accounts of the earnings and incomes from, as well as the accounts of, all the operating expenses, cost of maintenance, and taxes of certain enumerated lines, not including the St. Joseph Company, separately, and report quarterly in respect thereto. On September chanroblesvirtualawlibrary

Page 145 U. S. 108

20, 1884, the court announced, upon an application for instructions with respect to payment of interest on that branch line of the Wabash system known as the "Havana Division," that the earnings belonging to other branches in the consolidated system would not be taken to support concerns that did not pay running expenses.

November 25, 1884, the St. Joseph Company filed its intervening petition asking for the payment to it of rentals claimed to be due from the receivers from March 1, 1884, to August 31, 1884, together with a penalty of one tenth of one percent a day as provided by the terms of the lease, and on January 2, 1885, filed its amended intervening petition, setting up the lease, the general mortgage, and the indemnity mortgage, and char, and on January 2, 1885, filed its amended intervening petition, setting up the lease, the general mortgage, and the indemnity mortgage, and char