# Simmons v. Burlington, Cedar Rapids & Minnesota Railway Company

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United States Supreme Court
159 U.S. 278
Simmons v. Burlington, Cedar Rapids & Minnesota Railway Company
The Burlington, Cedar Rapids & Minnesota Railway Company was a corporation organized under the laws of the state of Iowa, and, in pursuance of its granted powers, had, prior to the litigation which brings the case before us, constructed a main line and three branches, known as 'the Milwaukee Extension,' 'the Pacific Extension,' and 'the Muscatine Western.' It had at different times executed mortgages,-one upon the main line, covering the railway, rolling stock, and franchises held or thereafter to be acquired, securing bonds to the amount of $5,400,000; one, subsequent in date, upon the Milwaukee extension, securing bonds to the amount of $2,200,000; one, later in date, upon the Muscatine Western extension, securing bonds to the amount of $800,000; and one, still later in date, upon the Pacific extension, securing bonds in the sum of $1,800,000; and, finally, one known as the 'income and equipment mortgage,' which was a second mortgage upon the railway and branches, and purporting to be a first mortgage upon the income and upon certain rolling stock not covered by the first mortgages.
On the 15th day of May, 1875, Charles L. Frost, as surviving trustee in the 'mainline' mortgage, filed in the circuit court of the United States for the district of Iowa an original bill against the Burlington, Cedar Rapids & Minnesota Railway Company, as sole defendant, to foreclose the mortgage on the main line. By amendment the Farmers' Loan & Trust Company was made a party defendant upon an averment that said company were trustees in a mortgage executed subsequent to the plaintiffs' mortgage, and praying that 'their lien on the income and equipment of said road may be declared subsequent to that of the plaintiffs', and they may be decreed to redeem plaintiffs' mortgage, or their equity be barred and foreclosed, and for such other relief as the plaintiffs' case may require.' A demurrer to this bill had been filed by the railway company, and, after the Farmers' Loan & Trust Company was added as a party defendant, it joined in the demurrer.
The several trustees in the Milwaukee extension mortgage and the Muscatine extension mortgage likewise filed in the same court foreclosure bills, in which, by amendment, the Farmers' Loan & Trust Company was made a party defendant, and as to which the same relief was prayed as that contained in the bill filed by Frost, trustee.
On June 23, 1875, the Farmers' Loan & Trust Company, as trustee in the mortgage on the Pacific division, and as trustee in the income and equipment mortgage, filed an original bill against the railway company, praying a foreclosure of both of said mortgages. In that portion of the bill that dealt with the income and equipment mortgage it was alleged that said mortgage was a first lien on 2 engines, known as Nos. 30 and 31, and upon 130 box cars, known as the even numbers from 882 to 1140. An answer was filed by the railway company, not traversing or denying the allegations of the bill as respected the mortgage on the Pacific division, but denying that as many equipment or income bonds had been sold as were averred to have been sold. On the 30th of October, 1875, the case came on for hearing, and a final decree was entered, ordering that the property covered by the Pacific division mortgage be sold without appraisement or redemption at public auction, etc., but ordering that 'that portion of complainants' bill relating to the 'income and equipment mortgage,' so called, is ordered to be consolidated with the causes pending in this court against said respondent, wherein said Frost, Taylor, and others are, respectively, complainants.'
On the same day on which this decree was entered there was filed in the cause wherein Charles L. Frost and others, trustees, were plaintiffs, and the Burlington, Cedar Rapids & Minnesota Railway Company was defendant, an answer on behalf of the Farmers' Loan & Trust Company, in which it was admitted that the deed of trust to Frost was a first lien upon the main line and upon the ordinary rolling stock used thereon, not included in the mortgages executed by the company, known as the Pacific, Milwaukee, and Muscatine Western mortgages, and not including also engines Nos. 30 and 31, and box cars Nos. 882 to 1140.
On the same day the Farmers' Loan & Trust Company filed a cross bill against the complainants in the several bills of complaint heretofore mentioned. The prayer of this cross bill was as follows: 'Wherefore your orator prays that said several suits be consolidated; that an equitable portion, as above shown, be decreed as against all of said parties to be included in said deed of trust (the income mortgage), and that the same be properly designated as proper to be sold with said division under said mortgage; and that your orator have a decree declaring its lien upon said two engines 30 and 31 and said 130 box cars, under said mortgage, to be prior and paramount to any held by any of said trustees and parties.'
The record discloses that on October 30, 1875, the causes were ordered to be consolidated; the defendant railway company withdrew its demurrers, pleas, and answers in the said several causes; and thereupon 'said several causes and said consolidated cause came on for final hearing and trial before the court on the several bills of complaint, the amended bill, the several mortgages and deeds of trust, and the proofs.'
The decree found the amount remaining due and unpaid on the bonds secured by the main-line mortgage, and adjudged the defendant to pay the same within 10 days, in default of which payment its equity of redemption was to be forever barred, and W. M. Kaiser was appointed a special master to advertise and sell said main line and its franchises and appurtenant property 'without redemption or appraisement,' and it was ordered that James Grant be a special trustee to purchase the property for all holders of bonds secured by the main-line mortgage who shall assent to such purchase, and pay their share of the expenses, and he was ordered to convey the property, under the direction of the court or one of its judges, to such corporation as such bondholders may organize to hold the title thus acquired for the benefit of the whole or such part as should assent thereto.
Pending the foreclosure proceedings, a new corporation, called the Burlington, Cedar Rapids & Northern Railway Company, was formed for the purpose of purchasing the several mortgaged properties at the foreclosure sales. On the 22d day of June, 1876, the main line was sold by the master to a committee, who purchased for the benefit of all bondholders, and who directed that a conveyance be made by deed to the Burlington, Cedar Rapids & Northern Railway Company. On the same day the Muscatine Western extension was sold to the same purchasers, and at their request a deed was made to the said new company. Likewise, on the same day, the Pacific division was sold by the master named in that decree; and the purchaser, John I. Blair, acting as trustee for the bondholders of the Pacific division, directed that the conveyance should be made to the said new company.
The masters making these sales executed deeds of the main line and of the several branches to the said the Burlington, Cedar Rapids & Northern Railway Company, conveying in terms an absolute title to the property described in each deed. The reports of the several sales, accompanied by the deeds executed by the masters, were submitted to the court for approval, as required by the decree, and on July 20, 1876, the circuit court judge approved said sales and deeds, and ordered the property to be delivered to said new company as of July 1, 1876.
The plan of reorganization provided for the execution of a mortgage of the entire property of the new company to the amount of $6,500,000, and such a mortgage, bearing date 1st of September, 1875, was, on November 9, 1876, executed and delivered to the Farmers' Loan & Trust Company, as trustee.
It appears that the stock and bonds of the new organization were put upon the market, and have been bought and sold as mercantile securities since their issue in 1876.
In February, 1882, the Farmers' Loan & Trust Company addressed to the holders of the income and equipment bonds of the Burlington, Cedar Rapids & Minnesota Railway Company, and to Hubbard, Clark, and Dawley, attorneys of some of said bonds, a communication, resigning as trustee under the income and equipment mortgage.
On April 13, 1883, there was presented to the district judge of the United States for the Southern district of Iowa a petition of one Lawrence Turnure and others, claiming to be holders of income and equipment bonds of the Burlington, Cedar Rapids & Minnesota Railway Company. The petition alleged the resignation as trustee of the Farmers' Loan & Trust Company, asked that Charles E. Simmons should be appointed trustee, and that he should be authorized, as such, to file an 'amended and supplemental cross bill in the nature of a bill of revivor and supplement,' and that he be permitted to bring in new parties in accordance with such amended and supplemental cross bill.
On this petition an order was indorsed by the judge, appointing Simmons trustee, and giving him leave to file his cross bill in the nature of a bill of revivor and supplement, 'subject to the right of all parties interested to move the vacation of this order after process to or appearance of the defendants.'
On the following day the cross bill of Charles E. Simmons, as trustee succeeding the Farmers' Loan & Trust Company, was filed against Frederick Taylor, as successor to Charles L. Frost, trustee, the Burlington, Cedar Rapids & Minnesota Railway Company, the Burlington, Cedar Rapids & Northern Railway Company, and the Farmers' Loan & Trust Company.
This cross bill set up a history of the proceedings, not differing in substantial particulars from the statement herein previously made, but claimed that in no proceeding had there been any adjudication, determination, decree, or order in any manner affecting or determining the rights of the Farmers' Loan & Trust Company as trustee under the income and equipment mortgage, or of the bondholders claiming under said mortgage.
The cross bill prayed for an account to be rendered by the Burlington, Cedar Rapids & Northern Railway Company of the earnings of the main line since the said company had had control and management of the same, and prayed for a decree permitting the complainant to redeem the said main line upon payment of the amount did by the committee of bondholders at the foreclosure sale, less the profits and gains ascertained by the accounting prayed for, and that upon such redemption the complainant should be decreed to take the title to said railway, franchises, and property free and clear from the trust deed of Frost and the decree of the court in his behalf, and from all rights of the Burlington, Cedar Rapids & Northern Railway Company in the property, and that the trust deed or mortgage from the Burlington, Cedar Rapids & Northern Railway Company to the Farmers' Loan & Trust Company, trustee, and the lien thereof, be utterly canceled as to said main line, and as to the complainant and bondholders claiming under said trust deed.
Issue was made by answer filed by the Burlington, Cedar Rapids & Northern Railway Company, in which answer, among other things, that company denied that there had been no adjudication determining the rights of the trustee under the income and equipment mortgage, and denied that any right of redemption remained in the Farmers' Loan & Trust Company, or in its successors, after the sale under the decree of October 30, 1875. This answer likewise denied that the bonds held by those on whose behalf the cross bill was filed by Simmons were ever legally issued.
On November 28, 1883, the Farmers' Loan & Trust Company filed its answer to the cross bill. In this answer it was averred that the Farmers' Loan & Trust Company had, in fact or law, no valid claims to the said engines and box cars, except subject to the prior claims of the other mortgages, and that all such claims were cut off and foreclosed by the sale under the decree of October 30, 1875.
Replications were filed and evidence taken, and on October 28, 1885, an opinion and decree were filed, finding: First, that the income and equipment mortgage was a valid lien upon the main line of the railway, and that the right of redemption under it had not been foreclosed by the decree of October 30, 1875, nor by the sale thereunder; second, that the Burlington, Cedar Rapids & Northern Railway Company was entitled to redeem the main line by paying off the income and equipment mortgage; third, that in event such redemption shall not be made, then the bondholders secured by the income and equipment mortgage shall be entitled to redeem said main line of railway by paying into court the amount due thereon, as the same shall be determined in the manner provided in the decree; fourth, that in the event of neither of these redemptions taking place, the Burlington, Cedar Rapids & Minnesota Railway Company shall be entitled to redeem said main line by paying off the amount due on the deed of trust or deeds of trust against which such redemptions shall be made; fifth, in the event that neither the Burlington, Cedar Rapids & Northern Railway Company nor the Burlington, Cedar Rapids & Minnesota Railway Company shall so redeem, then the income and equipment mortgage shall be foreclosed, and a sale of the property had, and the proceeds be applied-First, to the payment of the bonds issued under the main-line mortgage; and, second, the amount, thereafter to be determined, that shall be due upon the income and equipment mortgage. The cause was then referred to a master to determine sundry matters stated in the decree.
From this decree an appeal was taken to this court, which appeal was dismissed, for the reason that the decree appealed from was not a final decree. Railway Co. v. Simmons, 123 U.S. 52, 8 Sup. Ct. 58. Subsequently a report was filed by the master, which was excepted to by Simmons, trustee, and by the Burlington, Cedar Rapids & Northern Railway Company. This report and the exceptions thereto were passed upon by the court below in an opinion filed on May 15, 1889, reported in 38 Fed. 683; and on May 29, 1889, a final decree was entered in accordance with the opinion of the court.
From this decree the Burlington, Cedar Rapids & Northern Railway Company appeals, as well from so much thereof as finds the cross complainant entitled to redeem at all as from those portions thereof which affirm the validity of any of the bonds, and which hold the railway company bound to account; and the cross complainant appeals from such portions thereof as find invalid some of the bonds asserted in the cross bill.
Charles A. Clark, for Simmons and others.
J. M. Woolworth and E. E. Cook, for Burlington, C. R. & N. Ry. Co.
Mr. Justice SHIRAS delivered the opinion of the court.

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This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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