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SCHLESINGER V. KANSAS CITY AND SOUTHERN RY. CO., 152 U. S. 444 (1894)

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U.S. Supreme Court

Schlesinger v. Kansas City and Southern Ry. Co., 152 U.S. 444 (1894)

Schlesinger v. Kansas City and Southern Railway Company

No. 243

Argued and submitted February 1, 1894

Decided March 5, 1894

152 U.S. 444

Syllabus

A condition in a grant of land to a railway company that the company shall construct a certain length of road within a given time, and on its failure to do so, that the granted estate shall revert to the grantor, is a condition subsequent, for breach of which the grantor may enter upon the land and repossess himself of it, and in case of his doing so, the land is not subject to attachment thereafter for debts of the company, contracted while the land was in its possession.

This is an appeal from a decree dismissing, for want of equity, a bill brought by the appellants to subject, in satisfaction of their demand against the Kansas City and Southern Construction Company, certain railroad property in the possession of, and claimed by, the Kansas City and Southern Railway Company.

The facts, so far as it is necessary to state them, are as follows: on the 11th day of January, 1877, the roadbed, masonry, rights of way, and appurtenances of the Kansas City, Memphis and Mobile Railroad Company, a Missouri corporation, were sold at public auction under the order of the District Court of the United States for the Western District of Missouri, sitting in bankruptcy; John D. Bancroft, of Kansas City, becoming the purchaser at the price of $15,025, in cash paid. And a deed was made to the purchaser on the 25th day of April, 1877.

Bancroft, by deed of April 27, 1877, conveyed to Thomas K. Hanna, Benjamin McLean, and himself, as trustees for sundry residents of Kansas City who had contributed the purchase money, and in whose behalf the property was purchased.

By deed executed January 13, 1880, Hanna, McLean, and Bancroft, trustees, in consideration of $19,156.87 cash in hand chanroblesvirtualawlibrary

Page 152 U. S. 445

paid, conveyed to James I. Brooks all the property and rights so purchased, upon the following terms and conditions:

"Said party of the second part is to build said railroad from Kansas City to Harrisonville or Belton, as said second party may elect, on or before January 1st, 1881, so as to be ready for use as a railroad, and also to build said railroad to the coal fields of Bates County, to a point south of Butler, on or before July 1st, 1881, so as to be ready for like use as aforesaid, and if said second party shall fail to build said railroad to said coal fields as aforesaid, then the property hereby sold as aforesaid shall revert to said first party, and reinvest in them, the same as they now hold the same, provided, however, that as soon as said second party shall expend the sum of fifty thousand dollars in the construction of a roadbed for said railroad, commencing at Kansas City and running southwardly, then the said provision shall become null and void and of no effect whatever, and upon said expenditure's being made in the building of said railroad as aforesaid by said second party of said sum of fifty thousand dollars, then said trustees are to execute to said second party or his assigns an instrument in writing acknowledging the waiver and extinguishment of said forfeiture. In the event of a disagreement between the said trustees and said second party as to the expenditure in fact by said second party of said fifty thousand dollars as aforesaid, as said second party may hereafter claim, said trustees and said second party shall each select an arbitrator, and they, in case of disagreement between them, shall select a third arbitrator, and, in case either party refuses to select an arbitrator, then the arbitrator chosen by the other party shall select two additional arbitrators, and the arbitrators selected in any of the above-mentioned modes shall determine whether such expenditure has been made by said second party, and such determination of said arbitrators shall be binding on both parties, and may be enforced by judgment as provided by the laws of this state. Said first party covenants and warrants to and with said second party that they, the said trustees, have not in any wise encumbered the said property, and that the same is free from all encumbrances done or suffered by them. "

Page 152 U. S. 446

By a declaration in writing executed February 27, 1880, Brooks acknowledged that the property conveyed to him was held in trust for the benefit of the Kansas City and Southern Construction Company, and covenanted that he would, by a sufficient quitclaim deed, transfer it to that company or their assigns, as they might direct and require. And by deed of April 1, 1880, he conveyed the property by quitclaim deed to the construction company.

On the 2d day of March 1880, the construction company made a written contract with the appellants, under the name of Naylor & Co., for the furnishing of steel rails to be used in completing the railroad. But on the 18th of May, 1880, Naylor & Co. were notified by the construction company that it was unable to carry out its contract with them, and they were authorized to sell the rails for account of that company, but without prejudice to any rights or claims of Naylor & Co. for damages.

The construction company, by deed of May 24, 1880, conveyed the property to the Kansas City and Southern Railroad Company, the consideration recited being $300,000 of the capital stock of the railroad company, for which certificates were to be issued, and $300,000 of its first mortgage bonds, to be secured by mortgage upon the property. But in fact there was at that time no such corporation. Brooks, the president of the construction company, contemplated the organization of a railroad company to be named the Kansas City and Southern Railroad Company, but he failed to effect such an organization.

By deed of September 18, 1880, the construction company conveyed to the Kansas City and Southern Railway Company, a corporation of Missouri, the Kansas City, Memphis and Mobile Railroad, running from Kansas City, in the direction of Memphis and Mobile, together with all its rights of way, roadbed, masonry, property, rights of property, and appurtenances, etc. This deed was executed in the name of the grantor company by Henry Ashley, agent, and is attested by its corporate seal, which, the acknowledgment of Ashley states, was affixed thereto by order of the board of directors. The consideration recited was $250,000 cash in hand paid. chanroblesvirtualawlibrary

Page 152 U. S. 447

Hanna, McLean, and Bancroft, as trustees, made, December 15, 1880, a written contract with the Kansas City and Southern Railway Company, as follows:

"Whereas the Kansas City, Memphis and Mobile Railroad Company, with all its roadbed, rights of way, and appurtenances and property and rights of property whatsoever, connected with the said railroad, with all the franchises of the Kansas City, Memphis and Mobile Railroad Company, were, by deed dated January 13, A.D. 1880, sold and conve