Opposition Brief — Chicago & C. Ry. v. DES MOINES & C. RY

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JAMES ©. caro,

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IN THE

Supreme Court of the United States

OCTOBER TERM, A. D., 1918

CHICAGO, MILWAUKRE & ST. PAUL

RAILWAY COMPANY, awp WABASH

RAILWAY COMPANY,

Petitioners, 66

DES MOINES UNION RAILWAY COM.

PANY, F. M. HUBBELL, F. C. HUBBELL

axp F. M. HUBBELL & SON,

Respondents

BRIEF IN OPPOSITION TO PETITION FOR

CERTIORARL.

F. W. LEHMANN axp

J. L. PARRISH,

Of Counsel or Respondents.

Peres 4 8 FLO PREFTING CO. ST Lou

Organization of the Des Moines Union Railway Company... 4-15

Resolutions for Transfer of Property to Des Moines Union Com.

Py Sherderccorccoscoterooroosoeeooeoeesooooseeenn« 13-17

The Terminal Mortgage ............................... 17-19

Resolutions for Conveyance by How and Dodge 19-20

Assent of Terminal Company............................... 21

The Deeds of Conveyance........ Zi2z

Operating Contract of 1889............... 23-25

Amendment of Articles of incorporation of Des Moines Union

ME evceconscsbdesoecoescedoocesnioes< veweee 25-0

Issuance of Stock of Des Moines Union .__.. wo-24

Acquisition of Stock of Des Moines Union Railway Compuny

gS SES en ae 34-40

Relation of the Milwaukee Co. to the Des Moines Union

GR anccnenscoedeewoccoccoccessnones 42

Ratification Agreement of 1897............... 42-42

Moqubensomes of AN Parties... o.oo occ cee cece a

GE wocorcesousbococoosoeeososese. casam 44-45

Note: The page references in the brief are to the large nom-

hers at the top of the pages of the record.

7 - —

ae . - eatetiel =

IN THE

Supreme Court of the United States

OCTOBER TERM, A. D., 1918

CHICAGO, MILWAUKEE & ST. PAUL

RAILWAY COMPANY, anp WABASH

RAILWAY COMPANY,

Petitioners,

Us.

No. 819

DES MOINES UNION RAILWAY COM-

PANY, F. M. HUBBELL, F. C. HUBBELL °

AnD F. M. HUBBELL & SON,

Respondents.

BRIEF IN OPPOSITION TO PETITION FOR

CERTIORARI.

The Parties.

The petitioners, the Chicago, Milwaukee and St.

Paul Railway Company and the Wabash Railway Com-

ee IPE HLL LLEELO I LEER LIE AAT SS LORS

pany, have each of them a line of railroad terminating

at Des Moines, Iowa.

The respondent, the Des Moines Union Railway Com-

pany, owns and operates the railway terminal system

which is used by the Milwaukee and Wabash and some

other railway companies at Des Moines.

The respondents, F. M. Hubbell and F. (. Hubbell,

are officers of the Des Moines Union Railway Com-

pany and have been for thirty years or more.

The respondents, F. M. Hubbell and Son are stock-

holders in the Des Moines Union Railway Company.

The Subject of Contention.

The nucleus of the property of the Terminal (‘om-

pany was acquired about 1882 and prior thereto by

the Milwaukee and Wabash Companies, or rather by

their predecessors, also railroad companies, and own-

ing and operating the same lines of railroad now owned

and opérated by the Milwaukee and Wabash.

These predecessor companies organized or caused

to be organized, tlie Des Moines Union Railway Com-

pany, with authorized capital stock of one million dol-

lars and with authority for the issuance of bonds.

By deeds absolute and unqualified in form, the pre-

decessors in title of the petitioners, conveyed this ter-

minal property to the corporation they had created

and as consideration for such conveyance they took

four hundred thousand dollars of the bonds of this

terminal company and all of its capital stock.

Other property was later and from time to time ac-

quired by the company and paid for by its bonds or

by proceeds of the sale of bonds.

The capital stock of the Des Moines Union was taken

by the companies which created it, one-fourth to each

of the two original companies which are predecessors

of the Milwaukee, and one-half to the predecessor of

the Wabash.

The amount of this capital stock was fixed in the

first instance at one million of dollars, increased then

~ to two million dollars, and finally left at two million

as being authorized, but only four hundred thousand

as having been paid for and as so adjusted and issued

one-half of the stock was assigned to the Wabah pre-

decessor and the other half to the Milwaukee predeces-

sors.

Of this stock F. M. Hubbell and Son have acquired

twenty-five hundred shares by purchase from the pre-

decessors of the Milwaukee and the Wabash, and the

stock holding in the Terminal Company now is and

has been for more than twenty years as follows:

Se NS hn he ooh ne baabees 500 shares.

TD WI so ooo:k is 0'e de va veo 1,000 shares.

F. M. Hubbell & Son............2,500 shares

The Question in the Case

Is as to the title by which the Terminal Company

holds its property.

It got that property from the predecessors of the

petitioners and they had unquestioned and unqualified

good title. It got it by deeds which by their terms

conveyed to the Terminal Company the same unques-

tioned and unqualified good title which the grantors

had. And it paid full rounded measure of value there-

for in its stocks and bonds,

Nonetheless, the petitioners contend that at some

time in the course of dealing between the parties, there

was in some way, some sort of an easement in this

property reserved to the grantors, an easement which

gave to them the entire beneficial use, right and inter-

est in the property in perpetuity, and that the Ter-

minal Company by the deed absolute to it and for

which it gave full value, got only the barren legal

t: le.

Under this contention the Terminal Company must

operate this property always for the use and behoof

of the petitioning railway companies, for the hare cost

of operation so far as they are concerned, with no al-

lowance on account of the value of the property em-

ployed, and moreover, all rents, incomes, earnings and

profits, the fruit of the use of the property by or for

third parties, must go to these same petitioning rail-

way companies.

The shares of stock of the Terminal Company are

thus rendered entirely worthless, which the railway

companies can well afford since they absorb every-

thing as owners of the dominant estate. F. M. Hubbell

& Son, however, lose everything.

The Decision of the Court of Appeals

Was against this contention of the railway companies,

and held that the Des Moines Union Railway Company

was the owner of its property, that it had in fact got-

ten what it had bought and paid for, and that the pre-

decessors of the petitioners had parted with what they

had sold and received the price for. The Wabash and

the Milwaukee seek by their petition a review of this

decision.

The Beginning of the Enterprise.

From our point of view the petition for certiorari

herein is not entirely accurate in its presentation of

the facts of the case, and we therefore think it appro-

priate to make a statement in chronologica! order of

the acts and contracts involved, and to let these, as far

as possible, speak for themselves in the very words of

the record,

Three companies, predecessors of the petitioners,

priw to 1882 determined on building lines of rail-

re «i to Les Moines, one of them, now the Wabash,

from the south, and two of them, now the Milwaukee,

from the north and northwest. They acquired land

in Des Moines to be used by them for terminal pur-

poses jointly, the purchase Leing made in part directly

by the railroad companies and in part by James F.

llow and General G. M. Dodge, as trustees.

The Contract of January 2nd, 1882.

The arrangement between the companies, the Des

Moines & St. Louis (predecessor of the Wabash), and

the Des Moines Northwestern and St. Louis, Des Moines

and Northern (predecessors of the Milwaukee), was

expressed in a writing between these original com-

panies and Col. How and General Dodge of date, Janu-

ary 2nd, 1882 (Reec., Vol. 2, p. 411).

It provided:

“FIRST.

The companies above named are engaged in the

construction of railways converging at the City of

Des Moines and have heretofore agreed upon the

purchase, construction and maintenance, at their

joint expense for terminal facilities in the City of

Des Moines to be heid and used in common 4s

hereinafter provided.

SECOND.

In pursuance of said agreement, various pur-

chases have been made of real property in the

City of Des Moines in the name of James F. How,

individually; James F. How, trustee, and Gren-

ville M. Dodge, and certain additional property

has been appropriated by the Des Moines and St.

Louis Railway Company, and the construction of

buildings and other improvements upon said prem-

ises has been begun.

THIRD.

It ix mutually agreed by the parties above

named that the expense ineurred by the purchases

and improvements above mentioned and such

others as may be hereafter made, shall be borne in

the proportion of one-half by the Des Moines and

St. Louis Railway Company and one-quarter by

each of the other two companies above named, It is

understood that a Depot Company may be organ-

ized and may take permanent charge of the prop-

erty upon the terms herein set forth and that said

company may issue and deliver to the companies,

parties hereto, its mortgage bonds to the amount

of their respective portions of the cost of the said

purchases and improvements.

FOURTIL

The title to said property shall be and remain

in a trustee to be named by agreement of said

companies, but subject to the joint use and oceupa-

tion of all of said Railway Companies upon the

terms herein described.

FIFTH.

The individual signers hereby declare said pur-

chases to have been made in their names upon the

trusts above referred to, and agree to quit claim

and convey the same to said trustee upon demand

and reimbursement.

SIXTH.

The Des Moines and St. Louis Company shall

at all times be charged with the police control,

supervision and maintenance of said property,

and the expense thereof shall be apportioned be-

tween it and the said other two companies, the

apportionment to be determined by the use there-

of which they shall respectively make as evidenced

by the wheelage; payment of the sum required to

be made monthly to the Des Moines and St. Louis

Railway Company, within ten days after rendition

of an account stated.

SEVENTH.

The control of said property by the Des Moines

and St. Louis Railway Company shall not extend

to a determination of the character and extent of

improvements to be now or hereafter put upon the

same, but differences between the parties under

this head shall be settled by arbitration.”’

The remaining provisions of the contract need not

be here considered.

It is obvious that under this contract the Railroad

Companies were the absolute owners of this property

with right to use it or dispose of it as they might agree

among themselves, subject only to the right of Col.

How and General Dodge to be reimbursed for what

they had paid for lands purchased by them.

The contract does not provide, as stated on page 4

of the petition, that the property constituting its sub-

ject matter ‘‘should be held in perpetuity subject to

the joint use and occupation of all said railway com-

bd ’*

panies.

No trustee was ever named by the parties under para-

graph four of the contract.

Operation under and according to the terms of this

contract, each company doing its own switching over

the tracks with simply police control, ete., by the Des

Moines and St. Louis, proved to be unsatisfactory.

Organization of the Des Moines Union Railway

Company.

December 10th, 1884, the Des Moines Union Rail «ay

Company was organized under the laws of lowa relat-

ing to corporations for pecuniary profit. This was

done at the instance of the railroad companies, parties

to the agreement of January 2nd, 1882, and was con-

templated by paragraph three of that agreement.

The agreement of January Ond, 1882, is recited and

set out in fullin the Articles <* Incorporation and then

it is further recited (Vol. 2, p. 419):

«Whereas, each of said Railway ¢ ‘ompanies and

said parties has expended large sums of money in

purchasing and improving the property aforesaid,

and in the construction of suitable buildings for

the use of said companies, and

Whereas, it was provided in the contract afore-

said that a Depot Company might be organized

to take permanent charge of the property, and it

understanding of the parties that such

was the

company might acquire, operate and maintain said

well as for those hereinafter the under-

Tenel hereby naoratethemaetven in bod cor

porate, and adopt the following Articles of Incor-

The following among the articles of incorporation

are pertinent to be considered:

ARTICLE 2.

The general nature of the business to be trans-

acted shall be the construction, ownership and

operation of a railway in, around and about the

City of Des Moines, lowa, including the construc-

tion, ownership and use of depots, freight houses,

railway shops, repair shops, stock-yards and what-

ever else may be useful and convenient for the op-

eration of railways at the terminal point of Des

Moines, Ia., as well as the transfer of cars from the

line or depot of one railway to another, or from

the various manufactories, warehouses, store-

houses, or elevators to each other or to any of the

railways or depots thereof, now constructed or to

be hereafter constructed, in or around said City

of Des Moines, and such corporation shall possess

all the powers conferred upon corporations for pe-

euniary profit by chapter 1 of Title LX of the Code,

and the amendments thereto. All the powers ex-

ercised by this company shall be in accordance

with the terms and spirit of the aforesaid contract

entered into on the 2nd day of January, A. D. 1882,

by and between the Des Moines and St. Louis

Railroad Company, the Des Moines Northwestern

Railway vy, the St. Louis, Des Moines &

Northern Railway Company, Jas. F. How, Jas. F.

How, trustee, and Grenville M. Dodge. The said

company shall have the right to lease or otherwise

dispose of the use of any part of its franchises to

any other railway company— ied that the

assent in writing of the Des Moines & St. Louis

Railroad Company, the Des Moines Northwestern

Railway Company and the St. Louisa, Dee Moines

and Northern Railway Company shall be neces

sary before any such lease of disposition can be

made to any other than the parties above named.

ARTICLE 3.

The capital stock of thie corporation shall be

one million ($1,000,000,00) dotlars, which shall be

divided into shares of one handred ($100.00) dol

lars each and shall be paid in at each times and

in such manner as the Board of Directors may

determine, and the Beard are authorized to receive

in payment therefor the property and fronchiee=

in the City of Des Moines, now held by the Dex

Moines & St. Louis Railroad Company, the Dex

Moines Northwestern Railway Company, the St.

Lauis, Des Moines & Northern Railway Company,

Jas. F. How, Trustee, Jas. F. How and Grenville

M. Dodge.

ARTICLE 4.

The affairs of the Company shall be managed by

a Board of cight directors, who shall be elected an-

nually, by the stockholders, on the first Thursday

of January of each year. provisional Board

of Directors, who shall held office antil the first

Thursday in January, A. 1. 1886; shall consist of

Jas. F. How, A. 1. Hopkins, A. A. Talmage, J. 8.

Runnells, J. 8. Polk, F. M. Hubbell, G. M. Dodge,

C. F. Meek.

Four members of the Board shall be nominated

by the Wabash, St. Innis & Pacific Railway Com-

pany, two members by the Des Moines Northwest.

ern Railway Company and two members by the St.

Louis, Des Moines & Northern Railway Company,

and no stockhoklers shall be cligible for member-

ship of the Board unless so nominated.

fact that a candidate has been duly nomi-

nated shall be certified to the stockholders’ meeting

of this Company by the Secretary of one of the re-

ey mnies aforesai| and such certifieation

ve.

The provisions herein with respect to nomina-

tion for the Board of Directors shall apply to and

be enjoyed by any grantee or assignee of cither

of the railway companies aforesaid. No contract,

lease, or other agreement, amounting to a perma.

nent charge upon the property of the corporation,

shall be entered into by the Board unless the same

shall have been first approved by the Des Moines

& St. Louis Railroad Company, The Des Moines

Northwestern Railway Company and the St. Louis,

Des Moines and Northern Railway Company, or

their assigns, and shall have been submitted to a

mecting of the stoekholders, duly called, and shall

have been approved by more than three-fourths of

all the stockholders; and it shall not be within the

power of the Board of Directors to create any limi-

tation whatseever upon any of the franchises of

the corporation, except the same shall have heen

submitted to and syoqeves by the Stockhollers as

hereinbefore provided.

The Directors shall elect, from their number, a

President, Vice-President, Seeretary and Treas

urer. All vacancics arising from the death or

resignation of a member of the Board shall be filled

by the Board.

ARTICLE 9.

These Articles may be amended by a vote of

more than three-fourths of all the steck in favor

thereof, at a qmerting of stockholders thereof, of

which a notice containing the ~~, amend.

ments shall be mail«! to each stockholder at his ad-

dress, as disclosed) by the transfer hooks of the

tion of a railway in, around and about the City

Moines” and all sorts of things and everything imei-

dent thereto.

Second: The corporation was organized for peeu-

niary profit.

Third: The Company could net lease or otherwise dis

reme of its franchises without the consent of the Rail-

road Companies.

Fourth: The steck of the Company was to be paid for

by the property held under the agreement of January,

1882.

Fifth: The members of the Board of Directors were

to be nominated, four by the Des Moines & St. Lowis

Co. and two by ench of the other Railroad Companies.

nee: esmancat charge wpon the property of the

corporation could be made by it without approval of

the Railroad Companies.

Seventh: These Articles could be amended only by «

all the interest they had to the Terminal Company.

The revtrictive provisions of the Articles of Incor-

poration simply determined the mode in which an! the

limitations wader which the powers of the Terminal

Company were to be exercised.

Resoluticns for Transfer of Property to Des Moines

Union Railway Company.

‘in January Ist, 1885, at a meeting of the share

holders of the St. Lowia, Des Moines & Northern Co.

the following resolution providing for the conveyance

and transfer of all ite right and interest in the ter.

minal property at Des Moines to the Des Moines Union

Railway Company was ananimonsly passed (Vol. I,

Whereas, On the 10th day of December, A. D.

1884, a corporation under the name and style of

the Des Moines Union Railway Company was or-

ganized as contemplated, an provided in the

aforesaid contract to acquire, hold, use and enjoy

the real estate property, rights and franchises in

the City of Des Moines, east of Farnham Street in

said city of the aforesaid railway companies and

signatories of said contract acquired or held there-

under and to carry out the purposes of the said

contract of January 2nd, 1882.

Now, Therefore:

1. Resolved, That this Company accepts and

ratifies, so far as its interests are affected thereby,

the Articles of Incorporation of the Des Moines

Union Railway Company as in substantial accord

and compliance with the terms and conditions of

the said contract of January 2, 1882, and under-

takes to discharge all the obligations imposed

upon it by said contract in order to make effective

the purposes of said Des Moines Union Railway

Company.

2. Resolved, That the proper officers of this

Company be authorized upon the rssuance to it

of the share of the bonds and stock of said Des

Moines Union Railway Company to which it may

be entitled, under said contract to convey, assign

and transfer to said Company all its rights, title

and interest of whatever name and character, in

and to the real estate, franchises, choses in action,

and rights in possession or contingent to all the

property in the City of Des Moines east of Farn-

ham Street in said city, now held, enjoyed or

claimed by either or all of the signatories of said

contract of January 2nd, 1882, or any agent or

trustee thereof purchased, acquired or held in pur-

suance of said contract.”’

At the same meeting the following resolution pro-

viding for the transfer of the management and opera-

tion of the property was passed (Vol. IV, p. 1474):

‘*Resolved, That the proper officers of the Com-

pany be authorized to transfer the management

and operation of its property in Des Moines so far

as the same may now be vested in the Company

on the first day of January or as soon thereafter

as practicable, leaving the question of settlement

between this Company and the Des Moines Union

Railway Company as authorized under the reso-

lution for that purpose heretofore this day adopted

to be arranged as directed therein.’’

On the same day like resolutions were passed at the

shareholders’ meeting of the two other Railway Com-

panies.

It is to be observed that by these resolutions the

Railroad Companies intended three things—first, a

ratification of the incorporation of the Des Moines

Union Company, which involved approval of the

ownership of the terminal property by that Company;

second, a sale of the terminal property to the Des

Moines Union Company in consideration of its stocks

and bonds, and, third, the immediate transfer of the

control, management and operation of the property to

the Des Moines Union, leaving the settlement of the

amount of stocks and bonds to be paid for the peapeety

to be determined thereafter.

On the same day at a meeting of the Directors of

the Des Moines Union Company the following resolu-

tions were adopted (Vol. II, p. 433):

‘*Resolved,

FIRST.

That this Company accepts the transfer and

management and operation of said property in

the City of Des Moines, east of Farnham Street

in said city, heretofore owned and controlled by

the Des Moines & St. Louis Railroad, Des Moines

Northwestern Railway Company and the St. Louis,

Des Moines & Northern Railway Company, and

the several others, parties to said contract, and

assumes control thereof from this date, so far as

practicable, and it hereby instructs its President

to make such order as may be necessary to render

such control and management effective, as pro-

vided in said contract.

SECOND.

That the President, Vice-President, Secretary and

Treasurer of this Company be, and they are here-

by, appointed a committee to confer with the sev-

eral parties to said contract and agree with them

severally upon the terms and price at which they

will respectively assign, transfer and convey said

railroad property and franchises to this Company,

and procure from them, and each of them, such con-

veyance and transfers as may be necessary to fully

invest this Company with the title, control and

management of said properties provided for in

said contract of January 2nd, 1882.

THIRD.

That to enable this Company to pay for the

property and to maintain, operate and improve

the same, and purchase other property necessary

to carry out its objects, and remove any and all

liens or ineumbrances thereon, and pay off all just

claims against the same, the President and Sec-

retary of this Company are hereby authorized and

directed to issue full-paid capital stock of this

Company not to exceed one million ($1,000,000.00)

dollars and not to exceed five hundred (500) bonds

of this Company, of the denomination of one

thousand dollars ($1,000.00) ; the form to be agreed

upon hereafter by this Board.

And to secure said bonds, the President and

Secretary are authorized and directed to execute,

in the name of this Company, a first mortgage or

deed of trust, conveying all of said property so to

be conveyed to this Company or thereafter to be

acquired, to a trustee therein named, the form of

. which deed of trust shall be hereafter determined

by this Board.

And when said committee shall have agreed with

the said several parties to said contract as to the

amount of bonds and stocks of this Company nec-

essary to be delivered to them, and each of them,

in payment for said railroad property and fran-

chises, the President and Secretary of this Com-

pany shall deliver the same to said several par-

ties as each appear to be entitled, on receipt of

the conveyances and assignments of said property

so to be made to this Company.’’

Here, then, was the assent of the Des Moines Union

to purchase this property with its stocks and bonds

and at once to take over its control, operation and

management.

The Terminal Mortgage.

But financial difficulties intervened. The railroad

enterprises were not prosperous and nothing was done

in the way of carrying out these resolutions until some

time in 1887, when a mortgage by the Des Moines

Union of all its property was prepared by Col. Blod-

gett, the General Counsel of the Wabash and of the

Des Moines and St. Louis. The mortgage is dated

November Ist, 1887, but was acknowledged February

28th, 1888, and recorded May 21st, 1888 (Vol II, p.

459).

The mortgage recites that the Des Moines Union is

‘‘fully authorized to locate, construct, own and oper-

ate a railway in, around and about the City of Des

Moines’’ and that it ‘‘has undertaken and partially

completed the construction of a railroad in the City

of Des Moines,’’ and that it ‘‘has purchased, acquired

and owns by condemnation and otherwise, valuable

real estate in said city, and valuable franchises from

the City Counsel of said city’’ (Vol. II, p. 460), and

‘*Whereas, Fer the purpose of paying for the

property afores::J, aiding in the construction and

extension of said railway, perfecting the title to

said property, and completing all necessary and

desirable improvements thereto and thereon, said

party of the first part proposes to issue its bonds

to the amount of eight hundred thousand ($800,-

000) dollars, to be dated on the first day of Novem-

ber, 1887, in accordance with the resolutions and

orders of its Board of Directors at a duly called

and authorized meeting thereof.’’

The mortgage described the property covered by it

by detailed descriptions which include all the prop-

erty that was ever within the scope of the agreement

of 1882 and then to leave no doubt contains this para-

graph (Vol. II . 464):

‘*Also ali the property and realty embraced in

the several conveyances made to the said Des

Moines Union Railway Company by James F.

How, Trustee, James F’. How, Grenviile M. Dodge,

the Des Moines Northwestern Railway Company,

the Des Moines and St. Louis Railway Company,

and the St. Louis, Des Moines & Northern Rail-

way Company, or any other person or corpora-

tion not specially named above, and for which con-

veyances reference is hereby prayed to the records

of said Polk County, lowa.’’

The mortgage was in the general form usual at that

time. “i ™

While this mortgage was in the course of prepara-

tion, the Railroad Com) anies and the Terminal Com-

pany were engaged in carrying out the purposes of the

resolutions of 1885.

Resolutions for Conveyance by How and Dodge.

Those resolutions, through inadvertence, perhaps,

contained no direction to the Trustees, Col. How and

(ieneral Dodge to make conveyance of the property

held by them, and this omission was now supplied.

November 5th, 1887, the Board of Directors of the

St. Louis, Des Moines and Northern passed the fol-

lowing resolutions (Vol. II, p. 435):

‘* Whereas, James F. How has prior to 1881 and

since then purchased certain property and made

expenditures on same as Trustee for this Com-

pany, the money expended for said property being

furnished by the Wabash, St. Louis & Pacife Rail-

way Company, and

Whereas, Under an agreement between the Com-

pany and the Wabash, St. Louis & Pacific Railway

Company and others it was intended that said

sroperty, standing in the name of James F. How,

rustee, should be transferred to the Des Moines

Union Railway Company under certain condi-

tions, it is hereby

Resolved, That James F. How is requested by

this Company to transfer to the Des Moines Union

Railway Company the property referred to above,

so purchased on receiving from said Company a

stipulation that as soon as practicable after the

transfer said Union Railway Company is toe de-

liver to him first mortgage bonds of that Company

to the amount of the money advanced for the pay-

ment of said property and improvements, with

interest on same and taxes paid thereon and also

three-fourths of the stock of the Des Moines Union

Railway Company, said bonds and stock to be

transferred said How to the Purchasing Com-

mittee of the Wabash, St. Louis & Pacific Railway

vee awd or their successors or assigns in lieu

for the money advaneed by said Company to make

the purehase of the above property and improve-

ments and the payment of taxes for this Company.

Whereas, Grenville M. Dodge has prior to 1881

and since then purchased certain property and

made expenditures on the same as Trustee for this

Company, the money expended for said property

being furnished by the said Dodge, and

Whereas, Under an agreement between this

Company and the Wabash, St. Louis & Pacific

Railway Company and others it was intended that

said property standing in the name of Grenville

M. Dodge, Trustee, and Grenville M. Dodge, indi.

vidually, should be transferred to the Des Moines

Union Railway Company under certain conditions,

it is hereby

Resolved, That Grenville M. Dodge is requested

by this Company to transfer to the Des Moines

Union Railway Company the property referred to

above so purchased on receiving from said Com-

pany a stipulation that as soon as practicable said

Union Railway Company is to deliver to him first

mortgage bonds of that Company to the amount

of the money advanced by him for the payment of

said property and improvements, with interest and

taxes on the same, and also one-fourth of the cap-

ital stock of the Des Moines Union Railway Com-

pany.”’

Similar resolutions were passed by the two other

Railroad Companies on November 8th (Vol IL, p. 437

and 442).

Assent by the Terminal] Company.

And on November &th the Terminal Company

passed resolutions assenting to the proposals of the

Railroad Companies (Vol. TV, p. 1299) and authorizing

the delivery of its stocks and bonds in payment of the

property conveyed to it, }

The Deeds of Conveyance.

Conveyances were now made by the Trustees, Col.

llow and General Dodge, of the land standing in their

names (Vol. IL, pp. 446 to 453).

Under date of November 7th, 1887, the St. Louis,

Des Moines and Northern made a deed to the Des

Moines Union of the property standing in its name,

which, after describing the property conveyed, reads

as follows (Vol. II, p. 456):

‘*Together with all and singular the tenements,

hereditaments and appurtenances thereunto be-

longing, or in any wise appertaining, and the re-

version and reversions, remainder and remainders,

rents, issues and profits thereof. And also, all the

estate, right, title, interest in the above described

property, possession, claim and demand whatso-

‘ ever, as well in law as in equity of the said parties

of the first part, of, in or to the above described

premises, and every part and parcel thereof, with

the appurtenances. To have and to hold all and

singular the above mentioned and described prem-

ises, together with the appurtenances, unto the

said parties of the second part and assigns for-

ever.”’

There could hardly be left in the grantor after all

this, the entire beneficial interest in the property.

Under date of February 21st, 1888, the Des Moines

and St. Louis Company executed a deed which, after

specifically describing a number of parcels of real

estate conveyed by the deed, proceeds (Vol. II, p. 458):

‘And all of the real estate within the City of

Des Moines, lowa, which is the property of the

poe. together with all real estate which may

ter be acquired by this grantor either

condemnation proceedings or otherwise. Also all

its embankments, bridges, turnouts, sidetracks,

buildings and structures, water tanks and fixtures,

— engine and other houses, depots, turntables

all its railroad property acquired and to be

—— and everything appurtenant to said

rai , and all franchises and rights it may have

acquired by grant, donation, purchase or other-

wise and particularly all rights, franchises and

emg = granted by the City of Des Moines,

owa, under an ordinance ‘Granting the right of

way to the Des Moines and St. Louis Railroad

Company and its assigns, over, across, along and

_— certain streets and alleys in the City of Des

oines, lowa, and the right to bridge the Des

Moines River on the south alley in aaid city be-

tween Court Avenue and Vine Streets. And the

said Des Moines and St. Louis Railroad Company

hereby covenants to warrant and defend the said

premises against all the lawful claims of all per-

sons whomsoever, claiming by, through or under

it.’’

The contention is made in the face of this warranty

deed that the grantor reserved to itself and to the two

other Railroad Companies the entire beneficial interest

in all the property conveyed.

The bonds of the Terminal Company were delivered

to the Railroad Companies, and by them were sold

upon the general macket. It is conceded by petition-

ers that the bonds were a lien upon the property. of the

Terminal Company, but it is contended that the stock

represents no sort of beneficial interest in that prop-

erty.

Actual possession of the property was taken by the

Terminal Company May Ist, 1888, and ever since then

that Company has held possession of and has operated

the property.

The Operating Contract of 1889.

Under date of May 10th, 1889, a contract was made

between the Terminal Company and the three Rail-

road Companies, effective from May Ist, 1888, and to

run for thirty years from that time, providing for the

use and operation of the property by the Terminal

Company.

This contract was prepared by the Gene:al Counsel

of the predecessor of the Wabash Company.

The preliminary recitals of this contract are as fol-

lows (Vol. IIL, p. 479):

“This agreement, made and entered into this

10th day of May, A. D. 1889, by and between the

Des Moines Union Railway Company, of Des

Moines, lowa, y of the first part, and the Des

Moines & St. Louis Railroad Company, the Des

Moines & Northwestern Railway Company, and

the St. Louis, Des Moines & Northern Railway

Company, parties of the second part, witnesseth

that:

Whereas, The said party of the first part is the

owner of valuable terminal facilities in the City of

Des Moines, lowa, hereinafter described; and

Whereas, The respective parties of the second

part have railroads in the State of Iowa which

terminate at, or run into and through, said City of

Des Moines, and in order to prevent unnecessary

expense, inconvenience and loss attending the |

accumulation of a number of stations, and in order |

to facilitate the public convenience and safety, it

has become important that said second parties

should have the use of the terminal facilities of

said first party; and

Whereas, Said a | Seo part has be.

come incorporated and organized under the laws

of the State of lowa for the purpose of owning

and operating a line of railway im the said City

of Des Moines, lowa, extending from the eastern

boundary line of said city to Farnham street, in

western part thereof; and

Whereas, Said party of the first part, in puree.

ance of said charter, has acquired and new owns

a railway in said city, as above set forth, and has

already acquired or constructed a large womber

of valuable main and side tracks, depots, depot

grounds, lands, yards, shops, round houses, freight

houses and other terminal facilities, and intends

to acquire and construct more; and

Whereas, Said second parties are each desirous

of having the right to use said terminals in connec.

tion with their respective railroads; and

Whereas, For the protection of the parties here-

to and their assigus, it i* important that the

rights, duties and liabilities of cach im regard to

the whole subject-matter of said terminal facilities,

including their use, care, control, rental, taxes, ex

penses, renewals, insurance, amd repairs, shall be

stated and defined. |

Now, therefore, in consideration of the premises,

it is mutually agreed by and between said party

of the first part and each of the several parties

of the second part (each of said second parties

contracting for itself), as follows:"’

The contract then provides for the acquisition of

more property and the construction of more facilities

by the Terminal Company, as follows (Vol. [1, p. 480):

to proceed wi i and when-

ever its Board of Directors shall deem it expedient,

to erect and furnish az one ot Se pean of

the second part, in said City of Des Moines, a

union passenger depot, and such additional

switches, sidings, freight depots, round houses,

ne ee os as Perea, & Ge

of Directors of said party may con-

sider reasonable, and for those said first

party shall acquire by lence, purchase, or other-

wise, such additional real estate as may be neces-

sary.

Section Two. The amount of such additional

grounds, and the form, character and cost of said

(ther sections of the contract prescribe details of

the service to be rendered and the charges therefor.

Thete are sections dealing with the transfer of stock

in the Terminal Company to be considered later.

This contract was observed by the parties and their

successors until the close of its term.

Amendment of Articles of of the Des

Moines Union Railway q

The petition for certiorari, p. 6, states that:

“He (F. M. Hubbell) caused the records of the

les Moines Company (the Terminal) without

This ix a charge, certainly a suggestion, that the

amendments to the articles of incorporation were fur

tively made by Mr. Habbell.

A recital of what was done, with references to the

record, will show that nothing was dene without the

presence of all parties in interest and participation by

them.

It is true that at this time no certificates of share

had been printed and ixsued to the parties entitled,

but the authorized amount of capital stock had been

determined, its issuance in payment of property re-

ceived had been directed and the amount dne to eacl:

of the railroad companies had been settled.

The integrity of the records of these various cor-

porations is not impeached, and there is nothing in the

testimony to contravene any recital of facts in them.

At the anneal meeting of the stockholders of the

Terminal Company held January 2rd, 1890, among

other things done, a Board of Directors for the enen-

ing year was elected. General G. M. Dodge presided

at the meeting.

J. F. Hew, on behalf of the Wabash Railroad Co.,

operating the Des Moines and St. Louis Kk. Kk. Ce,

nominated Jas. F. How, (. M. Hava, W. 1. Moedgett

and A. B. Cummins “te be voted for as directors of

Railread Company’’ (Vol. IV, p. 1306).

Col. Jas. F. How was a vice-president of the Wabash

Company and C. M. Hays was its general manager.

The same record shows that General Dodge, on be-

half of the Des Moines and Northern nominated him-

velf and L. M. Martin as directors of the Terminal,

and F. M. Hubbell, on behalf of the Des Moines and

Northwestern, nominated himeelf and F. C. Hubbell

to represent his company.

The men nominated were all elected. Here was

an annual meeting, of which every stockholder had

constructive notice, and which was attended in the

only way in which corporations can attend, that is,

by personal representatives, by every stockholder in

the campany, and those representatives were on be-

half of the Wabash, Col. J. F. How and (has M.

Hays; on behalf of the Des Moines and Northern,

(ieneral G. M. Dodge and L. M. Martin, and on be-

half of the Des Moines & Northwestern, F. M. Hab-

bell and F.C. Hubbell.

Further proceedings were had at this meeting as

follows (Vol. Il, p. 1307):

“James F. How moved that the question of

amending the articles of incorporation of thi«

Company, as well as the question concerning

issuing of stock for the purchase price of the

terminal property be referred to Attorneys W. H.

Blodgett and A. B. Cummins for their investiga-

tion and recommendation.”’

Thus, what the petition for certiorari says was

done by F. M. Hubbell ‘‘ without knowledge or con-

sent of the railway companies’’ was initiated at a

meeting presided over by Gen. Dodge of the Des

Moines and Northern, being moved by Col. How of

the Wabash and referred for investigation and rec-

ommendation to Col. Blodgett and Hon. A. B. Cum-

mins, both representing the Wabash.

This meeting adjourned without action on the

amendments to February 18th. Meanwhile the at-

torneys were busy. Mr. Cummins prepared the

amendments and sent them to Col. Blodgett for re-

view (Vol IV, p. 1598).

At the February meeting, there being present A. B.

Cummins, representing the Wabash, L. M. Martin for

the Des Moines and Northern and F, M. and F. ©.

Hubbell of the Des Moines and Northwestern, the pro-

ceedings had were as follows (Vol. IV, p. 1311):

‘The secretary reported that notice of the meet-

ing had been duly published and also reported

that he had, pursuant to the articles of incorpora-

tion, notified each stockholder of the time, place

and object of this meeting, which notice contained

the amendments proposed to be offered to the arti-

eles of incorporation.

Upon motion of A. B. Cummins the report of the

secretary was adopted and this meeting declared

to be duly and legally called, for the purpose of

considering and adopting or rejecting amendments

to the articles of incorporation.

Thereupon A. B. Cummins presented certain

amendments to the articles of incorporation.

Thereupon F’, M. Hubbell moved that the meet-

ing of stockholders do now adjourn for the pur-

pose of having further opportunity to examine

said amendments, to meet on Tuesday, the 8th day

of April, 1890, at ten o’clock a. m., which motion

being seconded, was unanimously carried and

thereupon the meeting of stockholders adjourned

to meet as aforesaid.”’

At the meeting on April Sth there were present

three men who had been elected as Wabash directors

of the Terminal Company, viz., J. F. How, C. M. Hays

and A. B. Cummins; one a director representing the

Des Moines and Northern, viz., L. M. Martin, and the

Hubbells, F. M. and F. C., representing the Des Moines

and Northwestern.

The record, Vol. II, p. 488, et seq., shows that the

amendments to the articles of incorporation were

offered one by one, the different individuals present

each taking a hand, and all were unanimously adopted.

Under the law of Iowa, it was necessary for the

officers of the Des Moines Union Company to certify

the adoption of these articles of amendment and for-

mally to acknowledge the certificate.

This was done by F. M. Hubbell, F. C. Hubbell, L. M.

Martin, A. B. Cummins and Horace Seeley on April

10th, 1890; by James F. How, Charles M. Hays and

Wells H. Blodgett on April 14th, 1890; by G. M. Dodge,

April 16th, 1890, and by H. D. Thompson, April 21st,

1890 (Vol. IV, pp. 1604-1610).

The articles as thus amended and certified were filed

for record with the local recorder on April 23rd, 1890,

and with the Secretary of State on May 12th.

And then notice of these amendments under sig-

nature of General Dodge as president of the company,

| — eee ee ee ee ee en ee ei

attested by F. M. Hubbell as secretary, was published

in the Des Moines Leader for four consecutive weeks,

from April 23rd to May 20th, 1890.

And under these amended articles and in accord-

ance with them all parties concerned voted their stock,

elected directors and did business generally without

complaint for seventeen years, or until about the time

of the institution of this suit.

These amendments were made in light and leisure,

not in haste and darkness as charged in the petition.

And so Mr. Hubbell did not cause the records of

the Terminal Company ‘‘without knowledge or con-

sent of the railway companies to show’’ that the arti-

eles of incorporation were amended, but all concerned,

the representatives of all the railroad companies, and

particularly the Wabash, believed that amendments

were necessary and acting with great deliberation,

after successive adjournmerits and always under the

advice of competent counsel, made, published, declared

and accepted those amendments.

Issuance of the Capital Stock of the Terminal

Company.

The petition (p. 6) states that F. M. Hubbell caused

4,000 shares of the stock of the Terminal Company

‘‘to be issued under Article III of the alleged amended

articles, which falsely stated the stock would be issued

in payment for the property, bonds having been pre-

viously issued for that purpose. The stock was there-

fore issued without consideration.’’

This is distinctly misleading in its suggestion. What

was done respecting the stock of the Terminal Com-

pany, from beginning to end was with the knowledge,

approval and active participation of each and every

one of the railroad companies, the original ones and

their successors and assigns.

Article III of the original articles of incorporation

of the Terminal Company (Vol II, p. 420), provided

that the capital stock of the corporation should be one

million dollars and the board of directors was author-

ized to receive in payment therefor the Des Moines

properties and franchises of the three railroad com-

panies,

These properties and franchises had been acquired

from time to time since 1880. When they incorporated

the Terminal and took over the property, they gave

bonds to the parties who had advanced money for the

property in anounts equal to the money advanced and

as further consideration for the property acquired

distributed the stock one-half to the Des Moines and

St. Louis and one-fourth to each of the other companies

(Vol. II, pp. 423, 435, 436, 437, 438, 442).

In November, 1887, the articles of the Terminal

(‘ompany were amended increasing the capital stock

to two million dollars (Vol. IV, p. 1298).

The contract of May 10th, 1889, precedes by nearly

a vear the amendments to the articles of the Terminal

(Company made in 1890, This contract recites, section

26, that the Des Moines and St. Louis Company is

entitled to one-half of the capital stock of the Ter-

minal Company, and the two other companies each to

one-fourth. It further recites that ‘‘no certificates for

said shares have yet been issued to said parties,’’ and

’ then proceeds to say that certificates shall be issued

for ten thousand shares, par value one hundred dol-

lars cach, to the Des Moines and St. Louis and for

| Ear aoeeaseenesan ORIOLE EMPL” | SIPS PE,

five thousand shares to each of the other railway com-

panies (Vol. JI, pp. 486 and 487).

But no stock certificates were in fact printed and

issued to the raitway companies at this time. They

proceeded in the view, however, until in 1890 they

amended the articles of incorporation, that they held

stock in vhe Terminal Company in the amount and

proportion stated in the agreement of May 10th, 1889.

There was no doubt some water in this stock, but

of this the petitioners cannot complain, for they or

their predecessors did the watering.

Mr. Cummins set about to correct this evil by an

amendment to the third article of incorporation of the

Terminal Company, which provided, among other

things (Vol. II, p. 499):

“The eapi'al stock of the corporation shall be

two million Jollars ($2,000,000), which shall be

divided into shares of one hundred dollars each;

said shares shall be paid for and issued in the

manner followingand not otherwise; four thousand

shares as a part of the , irchase price of the Ter

minal property originally aequired by the corpo-

ration, it being now agreed by all the stockholders

that said sum of four hundred thousand dollars,

together with the first mortgage bonds theretofore

issued for that purpose constituting the fair value

of said property when so acquired; and all reso-

lutions and proceedings of the corporation here-

tofore had with respect to the amount of capital

stock to be issued as such purchase price, are set

aside and held for naught.

Said four thousand shares of the capital stock

shall be issued to the following corporations and

in the following proportions:

Two thousand shares to the purchasing com-

mittee of the Wabash, St. Louis & Pacifie Railway

Company, successor in ownership to the Des

Moines and St. Louis Railroad Company, and the

6 we owner of the property known as the Des

oines and St. Lovis Railroad.

One thousand shares to the Des Moines and

Northwestern Railway Company, successor to the

Des Moines Northwestern Railway Company, and

One thousand shares to the Des Moines and

Northern Railway Company, successor to the St.

Louis, Des Moines and Northern Railway Com-

pany, and the said shares are hereby declared to

be fully paid by the transfer of the aforesaid

property. The remaining capital stock, to-wit,

sixteen thousand shares, or any part thereof, shall

be issued only by the authority of a resolution of

the stockholders adopted by the vote of more than

seven-eighths of all the stuck theretofore issued,

and shall be fully paid either in money or prop-

erty at its fair market valuc, before certificates

therefor shall be executed and delivered.”’

At this same meeting of the Terminal Company Mr

Cumming introduced a resolution which explained and

was intended to explain the action of the meeting with

respect to the capital stock. The resolution recited

that by inadvertence there was some uncertainty in

the records of the Company as to the price at which

the property had been acquired, and all parties being

agreed that the property and franchises incident

thereto should be purchased at its fair value pavable

pavtly in bonds and partly in stock fully paid and it

heing agreed that the property was fairly worth the

sum of $861,257.11, and the relatiye shares of this to

which the parties respectively were entitled having

been ascertained and having been adjusted and paid

so far as payable in bonds, it was resolved unani-

mously (Vol. II, p. 496):

‘Ist. That the purchase price of the property

rE y

originally acquired by the Company, as above

stated, be fixed at said sum eight hundred sixty-

one thousand two hundred fifty seven and 21/100

($861,257.21) dollars as of the date of the convey

ance thereof.

Ond. That the payment of a portion of such pur-

chase price in first mortgage bonds, as above set

forth, be confirmed and approved.

3rd. That to complete the payment of such pur-

chase price, the president and secretary are here-

by authorized to issue certificates for thirty-

nine hundred and ninety-two (3,992) shares of

stock, which shares, including eight already issned

on behalf of said parties, aggregate four thousand

(4,000) shares, as follows:

To the purchasing committee of the Wabash,

St. Louis and Pacific Railway Company, nineteen

hundred and ninety-six (1,996) shares.

To the Des Moines and Northern Railway Com-

pany nine hundred and ninety-eight (998) shares,

and to the Des Moines and Northwestern Railway

Company nine hundred and ninety-eight (998)

shares.

4th. That the proceedings heretofore had re-

specting the issuance of capital stock, so far as

such proceedings are inconsistent with said amend-

ments to the articles of incorporation or with this

resolution, are hereby modified to conform

hereto.”’

Certificates of shares were now issued as provided

in this resolution to the several parties on the 8th day

of April, 1890 (Vol. Il, p. 711).

Acquisition of Terminal Stock by F. M. Hubbell & Son.

The petition states that (p. 6):

‘‘by mesne assignments F. M. Hubbell and his

son, F. C. Hubbell, acquired individually five-

————

eighths thereof, or “500 shares, from the com-

- pany they dominated in a trade at the alleged

price of ten cents on the dollar, in violation of

the agreement that the stock would be sold ‘‘only

to a railroad compaty who would join with the

Wabash in making a contract with the Des Moines

Company, guaranteeing interest upon the bonds,

operating expenses, ete.”’

There was no such agreement as that stated between

any of the parties, nor has che inference that F. M.

Hubbell & Son acted in bad frith, in acquiring their

stock any foundation in the testimony.

The original articles of incorporation contained no

restriction on eligibility to ownership of stock. They

did impose as a qualification for the directorship that

the person must be nominated by one of the three rail-

road companies and they did restriet the company

itself as to the disposition or burdening of the prop-

erty. The parties evidently thought that individuals

might become shareholders (Vol. I, p, 420-421),

The agreement of May 10th, 1889, in Section 26, did

contain a restriction on the transfer of Terminal stock

viz.: ‘‘all of said certificates (of shares) shall express

upon their face that they are not transferable in whole

or in part without the consent in writing of all the

parties of the second part to this agreement (the three

railroad companies) except that any shares of stock’’

issued to qualify some one as a director may be re-

transferred, ete., ete. (Vol. IH, p. 487).

The three railroad companies consenting, anybody

could aequire stock in the Terminal Company.

The articles of incorporation as amended in April,

1890, provided in Article 3 that the stock was trans-

ferable only on the books of the Company by and with

_———————E

the consent of three-fourths of all the directors, exeept

in case of a transferee who is or becomes the owner

of one of the three lines of railroad involved and a

director could not be elected except by vote of more

than seven-eighths of the stockholders (Vol. II, p.

491).

Here again individuals are not disqualified, but the

power of rejection is reserved to one-eighth of the

shareholders.

On February 5th, 1890, Mr. 0. D. Ashley, who was

secretary of the Purchasing Committee of the old

Wabash Company and president of the Company

itself, which owned all the stock and bonds of the Des

Moines and St. Louis Company, wrote F. M. Hubbell,

saying (Vol. IV, p. 1599):

“I will give you for the Purchasing Committee

the option of buying of them $135,000 of the bonds

of the Des Moines Union Railway Company, and

one-fourth interest in the capital stock of that

company for $135,000 and accrued interest from

November Ist, 1889, any time within ten days from

this date. Payment to be made in cash if the

option is availed of by you. (Signed) 0. D. Ash-

ley, See’y Pur. Com.”’

General Dodge came into this transaction for one

half of it, leaving Mr. Hubbell with the remaining

half as to which the Purchasing Committee solemnly

authorized and empowered ‘‘said Des Moines Union

Railway Company, or the proper officers thereof, to

issue to said Hubbell or his assigns, one-eighth of all

the capital stock in the said Des Moines Union Rail-

way Company”’ and further, ‘The said Purchasing

Committee hereby guarantees the approval by the

Des Moines and St. Louis Railroad Company of the

transfer of said stock to said Hubbell within sixty

days”’ (Vol. IV, p. 1601).

This sale to Hubbell was reported in writing to the

Purchasing Committee and on motion of General Hub-

hard was approved (Vol. TV, p. 1558).

April Sth, 1890, this sale of stock was approved by

the directors of the Des Moines and St. Louis Com-

pany, they bemg James F. How, C. M. Hays, HL. 8.

Priest, George S. Grover, F. M. Hubbell and A. B.

(Commins, all save Mr. Hubbell being Wabash repre-

sentatives (Vol. II, p. 1434).

And the Des Moines Union Company itself on April

Sth, by vote of all its directors, ratified and approved

the sale and ordered the transfer of the certificates

both to F. M. Hubbell and to General Dodge (Vol. TI,

p. 1312).

Pursuant to these transactions a certificate for five

hundred shares was on April 8th, 1890, issued to F. M.

Hubbell and for a like number to General Dodge (Vol.

2, p. 711).

April Sth, 1890, Mr. Ashiey as president of the

Wabash Railroad Company wrote to Mr. F. M. Hub-

hell as follows, viz. (Vol. IV, p. 1602):

**T have vours of April Ist, this morning. The

result of my conversation with Mesers. Joy and

Welles is a rather vague idea that we ought not

sell $100,000 of the Des Moines Union Railway

Terminal bonds and one-eighth interest in the

capital stock at less than $115,000 and accrued

interest on the bonds, and I do not feel auther-

ized to offer it at any less price. If, however,

you will make me a definite bid of the best price

you can, I will communicate it to the other mem-

bers of the committee and give you an early and

definite reply. It must be understood, of course,

Ste ieee!

The negotiations openc: Wy this letter

a contract on June Sth, 140. for the purchase by Hab-

bell of $50,000 of bonds and 4) shares of the stock

of the Des Moines Union Company for 667.7%. Trane

fer of the shares on the books of the Des Moines Union

was guaranteed ‘so far as the vote of the directors

of said Des Moines Union Railway Company, repre-

senting the Des Moines and St. Louis Railway Com-

pany will secure said transfer (Vol. TV, p. 1604).

The directors of the Des Moines and St. Lams Com

pany, on February 11th, 1891, by ananimous vote ay

proved the sale of the stock to Hubbell; Hays and How

of the Wabash Company being present (Vol. TV, p.

1438).

The Des Moines Union on the same day approved

the sale and made the transfer by unanimous vote of

its directors (Vol. TV, p. 1329).

The foregoing are the contracts aw! agreements un

der which Mr. Hubbell first got the Terminal stock.

The petition (p. 5) assumes to quote from an agree

ment providing that this stock would be sold “only to

a railway company who will join with the Wabash in

making a contract with the Des Moines Union guaran

teeing interest on the bonds, operating expenses, ete."”

No such words are to be found im any agreement bre

tween any of the parties; no such restriction on trens-

fer of stock is contained in any of the articles of incor.

poration, original or amnended.

More than a year and a half pricr to the sale of the

Habbell he wrote to 0. ID. Anhley, president

saying that he had been asked whether

les Moines Union stock could be bought and at what

it would be necessary to confine the sale to -

way companies as would be interested in the station.’

Hubbell in bie reply said, ‘I agree with you that the

sale of a quarter interest in the stock of the Termina!

Company should be made only to a railway company

who will join with the Wabash in making « contract

with the Des Moines Union guaranteeing the interest

upon the bonds and operating expenses, etc.'’ He says

that a certain Mr. Jones has been making inquiries

about the shares, but he takes no stock in Jones (Vol

111, pp. 1059-1060). The last letter was written on June

1#th, 1888. The subject of sale or purchase of stock

by anyone in the Des Moines Union was not broached

again wotil February Sth, 1890, when an entirely new

and distinct chapter was opened by the option which

Mr. Ashley gave to Mr. Hubbell.

The two transactions were distinct and worelated,

and they were eighteen months apart in time Nothing

was said in 1890 as to limiting sales of Terminal stock

to certain railway companies. It is evident thet Mr.

Ashley, on behalf of the Wabash Company, wanted to

market some Terminal stock and bonds. The transac

tions with General Dodge and F. M. Hubbell were sales

of bonds and stocks pure and simple And in making

these sales the Purchasing Committee acted with full

knowledge of the situation Months passed by before

the last sale was consummated by transfer of the

steck. In truth, the money paid at the time wae a

great desicderatum, and the record shows that it was

paid by Dodge and Hubbell to the Purchasing Commit:

tee and by that committee to the Wabash Company.

Relation of the Milwaukee Company to These Shares.

The Milwaukee Company has acquired the two

Northern lines and in connection with them one then.

sand shares of the stock of the Terminal, The orig-

inal Northern Companies <t the properties by fore.

closure. New companies were formed, which after

ward were consolidated. In the course of these pro-

ceedings Hubbell and Dodge transferred their Ter.

minal shares to the con-elidated company, which then

had 3,500 shares, The consolidated company civ met

fare well, and being in need of money, pleiged 2500

of ite Terminal shares to F. M. Habbell & Son. These

shares were by agreement of the parties taken by

F. M. Hubbell & Son in liquidation of some indebte:!

ness, This was in 1993.

This Northern Company found itself very depend

ent upon the Milwaukee, and whether it would prosper

or wet was determinable by the division of rates it se-

eared from the Milwaukee. To get a better division

the Hubbell, whe were largely interested in the serur.

ities of the Northern Company, both stocks ame beoneds,

im the vear 1994 gave a large block of the stock of the

Northern Company, 16,400 shares, te the Milwaukee,

together with an option to the Milwaukee te purchase

16.468 shares more at a low price and the exererse of

this option would give the Milwaukee full control of

the Northern Company (Vol. 11, p. 88, and Vol. IV, p.

1618).

At the very beginning of the negotiation. leading ap

If vou desire any farther information, | «hall

glad te farnieh it*’ (Vol. TV, p. 1617).

Thus the Milwaukee was advised from the begin-

ning and before it came inte the situation of the pre.

vise facts as to this Terminal stock, viz: one-cighth

held by the Wahash, one-fourth by the Northern Com-

Terminal «teck, heeaner it had aold it te them.

— = rs ——— a a ee i

Year after year passed, with frequent directors’

meetings and annual and perhaps other shareholders’

meetings of the Terminal Company, and always the

Wabash and the Milwaukee were represented and

always the Hubbells were present and at the share-

holders’ meetings they voted and were recognized as

having the right to vote the 2,500 shares of Terminal

stock held by them, and shown to be held by them by

the books of the Company.

The Ratification Agreement of 1897.

More than this, in the vear 1897 a revision of the

contract of May 10th, 1889, was desired by the Wabash.

For the present purpose it is not necessary to detail

the negotiations which followed. There resulted a

contract, dated July 31st, 1897, which in some measure

is a revision, but more strictly a ratification of the old

agreement (Vol. II, p. 506).

There seemed to be some doubt whether the rail-

road companies, then the Wabash and the Des Moines,

Northern and Western, were bound by the old agree-

ment and that was settled and the contract ratified and

confirmed by the railroad companies in every respect

with this exception, viz. (Vol. II, pp. 508-509) :

‘‘But it is expressly provided that so much of

the said contract, a copy of which is hereto at-

tached, as relates to the issuance and the distribu-

tion of the capital stock of the said Des Moines

Company, is no longer binding, and that the cap-

ital stock of the said Des Moines Company is held

as follows: .

The Purchasing Committee of the Wabash, St.

Louis and Pacific Railway Company, 500 shares.

The Des Moines Northern and Western Railroad

Company, 1,000 shares.

F. M. Hubbell & Son, 2,500 shares.

Of the above shares belonging to said Purchasing

Committee, two shares stand upon the books of the

Company as follows: Joseph Ramsey, Jr., 1 share,

and H. L. Magee, 1 share.

Of the shares belonging to the Des Moines

Northern and Western, Railroad Company, two

shares stand upon the books of the Company as

follows: A. B. Cummins, 1 share, and F, M. Hub-

bell, 1 share.

Of the shares belonging to said F. M. Hubbell &

son, five shares stand upon the books of the Com-

pany as follows: F. M. Hubbell, 1 share; F. C.

Hubbell, 1 share; C. Huttenlocher, 1 share; H. D.

Thompson, 1 share; A. N. Denman, 1 share.”

And this contract of 1897 was formally ratified, ap-

proved and confirmed by the directors of the Wabash

(Vol. IV, p. 1540); by the directors of the Des Moines,

Northern and Western (Vol. IV, p. 1497), and by the

directors of the Des Moines Union (Vol. IV, p. 1357).

Acquiescence.

Nearly ten years passed after this without challenge

of the rights of F. M. Hubbell & Son as shareholders.

And during all the years they were giving their serv-

ice in official relations to the development of the Ter-

minal Company and its business, and they did this

without pay, and that service constant and continuous,

faithful and arduous, was accepted without question

by these petitioners who now say the Hubbells have no

beneficial interest whatever in the property they have

served and managed so well.

In Conclusion.

The case involves no profound questions of law.

The three railway companies, predecessors of the

petitioners at the time of the contract of 1852, and

under it, owned the property in question and every

interest in that property.

_ The individual parties to that contract, Col. How and

General Dodge, had no interest or right except to be

reimbursed for what they had paid out, and they were

so reimbursed.

As the railway companies made the agreement of

1882 so they could change it, and they did.

They created the Terminal Company, and they did

this for the very purpose of having it acquire, own,

operate and develop this property.

They transferred this property to the Terminal Com-

pany by conveyances as comprehensive in description

of the rights and interests conveyed as the learning of

experienced lawyers could devise.

They mortgaged this property, issued bonds secured

by this mortgage, and sold those bonds to the public.

They issued stock against that same property and

sold the stock.

The stock had for its basis the same property and

the same interest in that property that underlaid the

bonds.

The organization of the Terminal Company, the con-

veyance of the property to it, the contract of 1889, the

amendments to the articles of incorporation in 1890,

the sales of stocks and bonds, the ratification agree-

ment of 1897, all were known to, participated in and

approved by the persons who at the time were the ac-

credited representatives of these petitioners or their

predecessors.

And there is not involved in this controversy any-

thing of public interest or importance. The Terminal

Company is discharging its public ‘functions and du-

ties and will continue to do so. Its property is affected

with a public interest and is dedicated to the public

use, and its obligations in this respect are the same

whoever its shareholders may be or whatever may be

their interest in the property. The controversy is

essentially of a private nature. It is whether, not-

withstanding the conveyance of the property in the

most absolute terms and for a good consideration, the

grantors reserved the entire beneficial interest in the

property and the grantee got only a barren legal title.

This affects the parties not as carriers, but as proprie-

tors, for only proprietory rights are involved.

Respectfully submitted,

F. W. LEHMANN,

J. L. PARRISH,

Of Counsel for Respondents.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1918

No.__

THE DES MOINES UNION RAILWAY

COMPANY, FREDERICK M. HUBBELL,

FREDERICK C. HUBBELL ann

F. M. HUBBELL & SON,

Petitioners,

THE CHICAGO, MILWAUKEE & ST.

PAUL RAILWAY COMPANY anp THE

WABASH RAILROAD COMPANY,

Respondents.

CROSS-PETITION FOR WRIT OF CERTIORARI

The Des Moines Union Railway Company, Fred-

erick M. Ilubbell, Frederick C. Hubbell and F. M.

Hubbell & Son, respectfully petition this Court to

grant a writ of certiorari to the Circuit Court of

Appeals for the Eighth Judicial Circuit, to remove

therefrom, for review here, the reeord in the case

therein pending, numbered 4885, wherein the peti-

tioners are appellees and the respondents are appel-

lants. .

Two controversies are involved in the case, one of

which was decided in favor of petitioners and the

other against them and in favor of the respondents

hereto.

The two controversies are fully presented by the

same record and certified copies of that record accom-

pany the petition for certiorari filed by the respondents

hereto. And while the two controversies are more or

less distinct, they rest upon the same evidence and

grow out of the same series of transactions.

The questions to be determined are of the same gen

eral nature, involving the construction of contracts

and of articles of incorporation as fixed by their terms

and the conduct of the parties under them.

Your petitioners believe that if the case is one ap-

propriate for review on writ of certiorari as to one

of the controversies therein, it should in justice to all

the parties be brought before the Court in its entirety,

and being advise that they cannot otherwise have a

review of the decision and decree herein, in so far as

adverse to them, they respectfully submit this eross-

petition for a writ of certiorari.

What is dealt with and designated by the parties

and by the Court of Appeals as the ‘*main’’ contro-

versy or question in the case is presented by the peti-

tion of the respondents hereto. The question pre-

sented by these petitioners is designated by the parties

and the Court as that of the ‘‘ surplus earnings.’’

The **main’’ question is as to the rights of the Chi-

cago, Milwaukee & St. Paul Railway Company and

the Wabash Railroad Company, hereinafter called the

Railway Companies, and the Des Moines Union _ ail-

way Company, hereinafter called the Terminal Com-

pany, in and to the property to which the Terminal

Company holds title and which it uses in the course of

its operations as a Terminal Company.

The contention of the Railway Companies is that

they are the real and beneficial owners of the property,

and that the Terminal Company simply holds the title

in trust for them, or that the ownership of the Ter-

minal Company is subject to an easement in favor of

the Railway Companies which gives them the right to

the use of the property in perpetuity fer terminal pur-

poses at actual cost of operation, maintenance and

taxes, they getting the benefit in reduction of the cost

of operation of all revenue from whatever source ob-

tained, thus depriving the Terminal Company of all

beneficial interest in the property, and making its

shares of stock worthless to the owners of them.

The issued capital stock of the Terminal Company

amounts to four hundred thousand dollars divided in-

to four thousand shares of the par value of one hun-

dred dollars each, of which the Wabash Company owns

and holds five hundred shares, the Chicago, Milwaukee

and St. Paul Company, one thousand shares, and F. M.

Hubbell & Son, twenty-five hundred shares. F. M.

Hubbell & Son bought their shares from the predeces-

sors in right and title of the Railway Companies.

The real purpose of this branch of the case, and the

effect of the contention of the Railway Companies, if

sustained, is to nullify and render worthless the shares

of F. M. Hubbell & Son.

The determination of this ‘‘main”’ controversy, the

Court of Appeals said, was ‘the definition of the legal

effect of certain instruments and acts of the parties

or their predecessors in interest.”’

This question was decided by the Cireuit Court of

Appeals in favor of these petitioners, the Court hob!

ing that the Terminal Company was the absolute own-

er of its property, and thas the rights of the Railway

Companies therein or thereto were simply those of

share holders in the Terminal Company.

The Surplus Earnings

controversy is the subject of this petition ef cross

petition for certiorari and we may say as the Court

of Appeals said of the main ‘*controversy,”’ that the

determination of it is ‘‘the definition of the legal ef

fect of certain instruments and acts of the parties or

their predecessors in interests,”’ and the same instru

ments and the same acts of the seme parties are im

volved in the petition and cross-petition. This a state

ment of the case will show.

In December, 1880, the Des Moines and Northwest

ern Railway Company and the St. Louis, Des Moines

and Northern Railway Company, to which companies

the Chicago, Milwaukee and St. Paul Railway is the

successor, and the Des Moines and St. Louis Rail

way Company to which the Wabash Railroad Com

pany has succeeded, desired to bring their lines to the

city of Des Moines, the first two from the North and

Northwest and the third from the South.

Among other things done by them was the acque

sition of certain real estate in the city of Des Moines,

respecting which they made an agreemnt on January

2nd, 1882, reciting the acquisition of the property and

providing that the expense of acquiring and improv.

ing it should be borne one-fourth each by the Northern

companies and one-half by the Southern. We can

speak of them hereafter, the Northern companies as

the Milwaukee and the Southern as the Wabash.

The property had been acquired chiefly in the names

of in dividuals who were confessedly trustees for the

railroad companies.

The contract provided ;

“Third: * * * it is understood that a

depot Company may be organized and may take

permanent charge of the property upon the terms

herein set forth and that said Company may issue

am! deliver to the Companies, part'es hereto, its

mortgage bonds to the amount of their respective

portions of the cost of the said purchases and

improvements."

“Fourth: The tithe to said property shall be

am! remain in a trustee to be named by agree-

ment by said Companies but subject to the joint

use and occupation of all of said Railway Com.

panies upon the terms herein prescribed. "’

Tenth: In the event that any Company, whose

railroad does not extend to Des Moines, shall ef-

fect an arrangement for running its trains into

Des Moines over the railroad of either of the

parties hereto, such Company shall be entitled to

the use of all of said terminal facilities upon the

payment of a fair sum for rental and its propor.

tion of the maintenance account, the rental te in

ure to the companies hereto in the same propor.

tion as the original outlay, and the sum due from

such Company for maintenance account to be de-

termined in the same manner as the sums due

from the other companies, parties hereto. Rail-

rowl Companies whose roads extend to Des

Moines, may be admitted to the use of said facili-

ties by agreement of all the parties hereto.”

(Record, pp. 120-122.)

———

The Wabash Company was te have control, -uper-

vision and maintenance of the property and the ex.

pen -e of this was to be ®orne by the several companies

on a wheelage basis.

The companies operated ander this contract for

some years, cach doing it« own terminal work, that

is, employing it own engines and crews and moving

its own cars.

This was not a satixfactory methe! of operation

and in December, 1884, the Railway Companies or

ganized the Terminal Company under the laws of the

State of lewa geverning corporations for pecuniary

profit, te carry out, as they said, the objects and por

poses of the contract of Jannary 2nd, 1862.

They provided for a capital stock of one millon

dollars “which shall be divided inte shares of one

hundred ($100.00) dollars cach, and shall be pad im

at such times and in such manner a« the Board of

Directors may determine and the Beard ate auther

ized te receive in payment therefor the property aml

franchises in the city of Dex Moines new held by the

Des Moines & St. Louis Railroad Company, the De«

Moines Northwestern Railway Company, the St.

Louis, Des Moines & Northern Railway Company, Jas.

F. How, trustee, Jax F. How and Grenville M.

Dedger."” (Record, pp. 911)

There was ne restriction im the articles as to whe

might become 2 stockholder im the Company, but the

directors were distributed among the Railway Com

panies, four to the Nerthern companies and four te

the Southern. And no stockheller was eligible to a

directorship unless sominated by a Railway Com.

pany.

The terminal property beld by and for the Rail

way Companies was in time duly conveyed to the Ter-

minal Company. The consideration for such convey-

ance was the proportion of each of the Railway Com-

panes of the stork and bonds of t' « Terminal Com-

peony. Bonds to the extent of Kight Hundred Thon-

~amd Dollars, secured by mortgage on all the property

of the Terminal Company, were authorized and exe-

cuted November Ist, 1887, and something above four

humired! thousand of these were delivered to the par-

tees entitled to them on account of the property then

and previously conveyed to the Terminal (Company.

‘ither of the bonds were issued from time to time as

other property was acquired.

No shares of capital stock were then actually print.

el or issued, but the parties assumed the existence

awl outstanding of ten thousand shares of one bun

dred dollars cach, one-fourth as held by each of the

Nerthern Companies and one-half by the Southern

( ompany.

May Ist, 1888, the Terminal Company took actual

possession of its property and has ever since operated

the sma.

The delay in the proceedings was due unmdoubtedly

to the fact that the railway enterprises were not pros-

porous, the Record showing a foreclosure of mort-

cages im every case except that of the Terminal Com.

pany.

May 10th, 1889, the contract was made between the

Terminal Company and the Railway Companies, which

underlies the contention as to “‘surplus carnings.”’ It

was to be effective from May Ist, 1888, and to ran for

a period of thirty years from that date. (Record, pp.

1158)

When this contract was executed, the capital «tock

EO e er ee PPE Oe oe

of the Terminal Company, was owned, one-fourth by

each of the predecessors of-the Milwaukee Company

and one-half by the predecessor of the Wabash.

The contract recited that the Terminal Company

Was the owner of valuable terminal facilities in’ the

city of Des Moines and that it was inmpertant that the

Railway Companies should have tse of them. Adse

that the Termunal Coripauy should framaetime to time

aequire other cine furthet® facilities, aimeng them a

Union passenger depot, freight depots, ete, ete, the

ninount, character, cost ated toanmagement of these to

be determined 1h the Board of Director. of the Ter

minal Company,

Section three of the contract provided:

“Keach of snid pairties of the ~econed part ( Raval

Wad Conipany } for dtself and its assigds, agrees to

pay to said party of the first part (Terminal

Coripuiny ) nosum Of motes te ler ascertained as

follows, to-wit: 4

P-t. There shall be ase ratte) the ameunt re

quired Tor pra five percent (terest Upon the taort

eave bonds of theparty of the first part, one

twelfth of whieh, lesssany deduction heremafter

provided tor, shill toe pouwatbols monthiv as here

thafter speettied,

nd. At the expiration of each menth, or as

soon thereafter as practicable, there shall be as

certained the expenses of imaintaiming and repair

ing the property of the party of the first part, in

eluding the maintenance and repair of tracks,

depots. round houses, engine houses, ete, during

the preceeding month, And in like manner there

chiall be aseertained the taxes, general or special,

hevie HWpon or ugwalnst said property ane praricl

ee te Of ee Oe NRE

ae ae ee ea ER LAM POLLEN LO ie Be GLEE EM

wee Fosters

during the preceding month, or to be paid during

the next sneceeding month, and the insurance, if

any, paid during the preceding month, or to be

paid during the next succeeding month.

ord. There shall be likewise ascertained the

costs and expenses of every nature connected with

the operation of said terminal station, freight and

jaissenger depots, depot grounds, round houses,

transfers and other properties, which is to inelude

every item of expense or disbursement ineurred

orimade by the party of the first part not herein-

before mentioned, except the expenses specified

in Section Nine hereof,"’

Section nine makes special provision as to the oper

ation of engine houses, whieh need not be further con

sidered,

Section four is as follows:

Having so ascertained the monthly aggregate

of all the items and sums mentioned in the pre

ceding section, there shall be deducted therefrom

the amount, if any, which other railway com- ‘

panies may be under obligation to pay by virtue :

vf contracts for the use of said property, or parts ‘

fheveot, Tor the preceding month, and the re-

maimder shall be paid by the parties of the see-

ond part in the proportion that the wheelage of

each of said parties bears to the entire wheelage

of all said second parties during such preceding

tnonth, and it is expressly understood and agreed

that in computing wheelage, three narrow gauge :

cars shall be taken as the equivalent of two stand. a

ard guage cars, and that the term ‘*wheelage”’ as

used in this contraet means that three narrow

sange cars are to be accepted as the equivalent of :

two standard wauge ears, s

nas treed.

Pens be

Provisions of the contract for the enforcement of

payment need not be considered.

The contract recites the shareholding in the Ter

minal Company by the Railway Companies as above

set forth, and further the authorized capital stock hav

ing been inereased to two million of dollars **that as

the authorized capital stock of said company is two

million dollars, or twenty thousand shares of one hun

dred dollars each, the same shall be issued and held

as follows, toowit: Ome certificate of ten thousand

shares shall be issued and delivered to the Des Moines

& St. Louis Railroad Company: one certificate for five

thousand shares shall be issued and delivered te the

St. Louis, Des Moines & Northern Railway Company,

and one certificate for five thousand shares shall be

issued and delivered te the Des Moines & Northwest

ern Railway Company, and all of said certificates shall

express upon their face that they are net transferable

in whole or in part, without the consent in writing of

all the parties of the second part to this agreement,

except that any shares of steck issued om request of

either of said companies to any person, to qualify him

as a member of the Board of Directors shall be re

transferable te the company on whose request it shall

have been issued without the consent of the other com-

panies; but certificates of steck so issued shall express

upon their face that they are only transferable to

the colpany on Whose request they were issued, an

less consented to by the other parties of the seeond

part.

The bonds of the Terminal Company were negoti

able and were in fact sold on the open market.

The Railway Companies were interested in the Ter

minal Companies in two ways, first as shareholders

Ns ON OP IAAP Dn i te EO Bi AM EET te tM

ee ae

and second as entitled to service by the Terminal Com-

pany in accordance with the terms of the contract.

Neither of these interests was an equal one as be-

tween the companies. As shareholders, two of them

had one-fourth each, and the other had one-half. So

far as the service was concerned each was to pay for

such service as it received, that is on a wheelage basis.

As shareholders each, if the company made any net

earnings out of its property, was entitled to the pro-

portion indicated by its holding of capital stock. As

lo service it paid for what it got on the terms te which

Wo had agreed,

The charge for the service Was to be ascertained as

to all the companies by ascertaining certain costs and

expenses, deducting therefrom certain items of credit

and then dividing the remainder between the Railway

Companies on a wheelage basis,

There is no controversy here as to the Wheelage basis,

hor as to the items of charge, whieh are: (1) interest

on bonds, (2) maintenanee and repair, (3) taxes, (4) in-

~urance, and (5) costs and expenses of every nature

connected with operation.

From the sum of these items of charge there is to

he a deduction and it is as te this that the controversy

arises,

The contract provides that the agwierate of the

items of charge having heer ascertained “there shall

he deducted therefrom the amount, if any, which other

railway companies may be under obligation to pay by

rintue of contracts for the use of said property or

parts thereat.’

The Terminal Company has such contracts and the

amounts received under them have always been de.

ducted from the ascertained items of charge against

the Railway Companies.

ee ee

Passer

wee rae

And the Terminal Company has other sources of

revenue, From time te time it moves ears from and

to industries located on its lines to carriers other than

the Railway Companies and other than those with

whieh it has contracts, and for this it makes and col

leet= a charge.

It leases portions of its depot building for news and

cigar stands and for restaurant purposes. And it les

acquired property tn advance of its immediate use

for termnial purposes and let= this fer various pur

poses. The returns Prem this <witehing servier ane

these rentals are known as ‘surplus earnings." Mt

the time of the trial m the District Court these earn

ines averegated about a half million dollars and thes

have aecumulated since at the rate of about a humedred

thousand dollars a year.

The Railway Companies contend that these -urplus

earnings should be deducted from the monthly aggre

wate of the items of charge again-t then wider the

contract of May 10th, TSS8. The petitioners contend

that. inasmuch as nene of the moneys Tron whieh the

* surplus earnings" are derived are ‘amounts to whiel

other vada companies WAS be under obligation te

pay by vortuc of contracts fey the use of said prop

erty,” they should not be se deeucted.

The Cirenit Court of Appeals decided this adversely

to these petitioners, <aving of the contention of the

petitioners that

‘this latter contention is a iil coustruction of

the evact wording of the contract, It i= net in

our judgment a fair construction of the spirit of

the agreement. This conclusion is based both upon

the history of the transaction and npon the mean

ine to be given te this precise language when read

oy connection with the entire contract.”

a ea

The provision of the contract here in question, that

ix, section four, is clear and unambiguous in itself,

providing for deduction from the aggregate of charge,

the moneys received on a single account, being the

amount, if any, which other railway companies may

he under obligation to pay by virtue of contracts for

the use of said property,

To deduct the rentals of news and cigar stands and

payments for restaurant privileges is to add te the

deduction provided for in the contract deductions of

avery different kind, and is te write something inte

the contract whieh the parties did not write there.

“The meaning te be given this precise language

when read in connection with the entire contract,” is

the same as when considered by itself, for this section

is the only one in the entive contract dealing with this

subject in any way. Ne other clause alludes te it even

remotely and so cannet in any way qualify it.

Nor is the spirit of the agreement in any wise of

fended, and on the contrary, the ‘strict construction

of the exact werding of the contrad”’ is ‘ta fair eon

struction of the spirit of the agreement.”

The contract is one for serviees by the Terminal

Company, involving the use of its property, to be ren-

dered to the Railway Companies. It did not involve

the use of properties not used for terminal railway

purposes, Tt had nothing to de with news stands or

restaurants.

The Railway Companies were shareholders in the

Terminal Company. Tndireetly they were proprietors,

and in such proportion as they had deliberately deter

mined a number of times by agrement with each other.

If there were any profits resulting from any use of this

property other than that provided for bw this contract

cach commpany aed its share in these profits in the meas

ure of its indirect share of the property itself,

These “surplus earnings’’ were incidents of the

proprietorship of the Terminal property and net ine

dents of the service contract between the Railway

Companies and the Terminal Company.

“The histery of the transaction” leads to the same

conclusion. There were ne individual shareholders in

the Terminal Company until seme time in DSO, whet

FP. OM. Uubbell and General G. Mo Dedge aequired

shares. Until new it was a matter of small signifi

cance what was done with the sarplus earnings, for

twe reasons, ioe, they were small in ameuwnt and thes

went te the benefit of the Railway Companies in amy

event, and whether on a wheelage or a steck basis made

ne practicen! dilercner.

(om February Pith, 1801. was had the first action re

~peeting them. mn that day i was erdered by the

Foard of Directors of the Terminal Company :

That the rents collected for the use of the Com

pany = real eMate, and the switehing charges paid

in, be credited on the roll. of the different tenant

companies occupying this Company's terminals,

civing to each Company its share ascertained bn

wheelage.”” (Reeord, p. 497.)

This was a disposition of these earnings by the Ter

minal Company aml the autherity of the Terminal

Company therefor was regarded as necessary. The

earnings were earnings of the use of the property and

net carnings of the serviee rendered by the Terminal

Company te the Rativeas Companios. Se they be

longed te the owner of the sroperty, and consequenthy:

the owner of the praperts determined the dispesition

of there.

fm the 7th day of January, 1802, the holdings of

KF. M. Hobbell had inereased to one thousand shares

awl G. M. Dodge still held five hundred, and the Board

of Directors of the Terminal Company again exer-

cised the right of disposing of these earnings by the

following resolution, viz. :

“Whereas, this Company is in need of a cash

capital with which to purchase supplies and pay

eurrent bills which come in before it receives its

monthly revenue from the tenant companies.

Therefore, Be It Resolved: That antil the fur-

ther action of the Board the sums received as rents

of veal estate and all switching charges shall not

he credited upon the accounts of the tenant com-

panies, but shall be used for the aforesaid pur-

purses ”* (Reeord, }'. 409.)

And from this time on without question these earn

ings were dealt with by the Terminal Company a= it-

own, amd grewing vearly in ameunt they were used in

the acquisition of more property aad in the making of

provements and extensions or cecumulated as a sur-

plus in the treasury until after January, 1906, a period

of fourteen vears, and but a short time prior to the

beginning of this litigation.

Meanwhile the shareholding interest< in the Ter-

mwital Company had greatly changed.

In April, 180, the articles of incorporation of the

Terminal Company were materially amended. At the

meeting of the shareholders making these amendment

on metion of A.B. Commins, there was a valuation of

the property of the Terminal Company in order te fix

its fair worth in bonds and stocks, he being evidently

of opinion that $2,000,000 of stock with the bonds that

had been issned constituted a material over-valuation.

The fair value wax fixed at $861,257 and 21100, the

individual interests i whieh wene <etthed as folhews,

Viz.:

The Wabash Sales

The Dex Moines & NW. 240

The St. 1... Des Maoes & N. Jima sen ene

(i, ML Dhewdae Ties

Lore UP eabvbvedl eee

es 721

(on thi< geeeonet beets hovel beens bested a follows:

The Walhaeh soe

(i. ML Dede Tie

Polk & Diabet! .. lene

ex Moines AN OW. lie

shih wene

This left aside Crem 297.21 setthesl on cash, seen,

whieh went in shaves of the Terminal Company te the

partios entitherd, SIM te the Wiaharsh) ated STH see

te each of the two Northern Companies.

But with this adiastenent of the Ternvinal -teck im

view the Wabash Company hued ao shert) tee before

cold one-eighth of it+ alletawent te FL M. Vuabebee dl anne

the same amount te GM. Deedee ame a tenth or mene

later soled 300 mene shaunes te FL M. Ubabebedl, sc that em

June Sth. D800, the steckhedeinng teed :

The Wabash 40) shores

Milwaukee predecessor a1) | a

VM. Uuabsbeett vw oo

5. Mo Dholae eT | ids

January Dth, 1802, Deedee and Mubbetl transferred

their <hares to a comsebicletest company whieh was the

—

vemnehate predeer-ser of the Milwaukee, giving it 3500

shares amd heaving the Wahash with five hundred.

Veteber 4th, INNS, the consolidated company

pledged 220) of it. shares to FL M. Habbell & Son

a collateral for indeltednes and Janwnary 2h, 184,

wohl the steck se pledged in liquidation of delat tw F.

M. Helthedl & Son.

Kver sinee January 29th, 184, the «tock of the Ter-

veinal Company has been owned :

The Wabash 00 shares

The Milwaukee, of predecessor 10000 +

VM. Naltbedl & Seon {nH

It se apyeewred en the record and the Wathesh Con

pony Was well aware of it all of the time. It had <obd

10) of its own shares amd knew where they had geome.

| The Milwaukee Company berame interested in the

Nerthern railways in 184 and acquired a majority

of their capital steck im large part by gift from FL M.

Hubbell & Sen and in lesser part by purchase, The

Milwaukee Company was advised that the cons<eli-

tated Company owner of the twe Northern railways,

owned alee 1000 shares of the Terminal Company

awl ne mene, that the Wahash owned 300 amd that

private parties ewned 250, of a majority.

With this knewhelge the Milwaukee acquiesced in

the dispesitien make of the surplas earnings for more

than twelve wears, after it acquired it. interest in the

Terminal Company.

The Cirenit Court of Appeals in it- opinion said and

held that “a <nhsequent contract of July S11, S87,

dees net affect this controversy.”

In this we think the Court erred, for the contract

wt duly 31st, 1807, was a reaffirmation in terms of the

coutract of May tth, 1886. Prom the beginning te

the time the new contract was made the * sarplas earn:

ings" had been dixposed of as determined by the Diree-

ters of the Terminal Company and ever sinee Jana

ary 7th, 182, they had so far ax dixpesed of, been

appropriated te the ases of the Terminal Company for

the acenisition of additional property. Amd this di«

Position of the earnings was deliberately approved by

Mr. Hays, the Wahash representative om the Beard.

Jane Tth, 184, Me. Haws wanted time te consider the

apprepriation marke te discharge a mertgage debt on

some newly acquired property. Jewe 1th, IS4, he

eave his coment. In August of that wear and again

in Newerber he approved ef ether like dispesitien= of

these monies, At the Newenwher meeting of the Ter

minal Beard, Mr. Cwnmeins representing Mr. Mars, #

reselution was passed directing that a certain mert

cage delt be paid out of the “sarplax earning-"" ane

presiding im terne= that

"The term *-urpdae earning=" as herein wel

means thet ford arinmg frem the rentals of real

estate and frem switehing charges" (Record, p.

Wiw such a resedution! Uf every penny reerived

be the Terminal Company frem any and all sarees

meet be deducted from the aggregate of the charge=

again! the tenant companies, there woukl be and coukl

he ne “surples earnings.” The very ase of the term

was an acknewlelgment that the parties recognized the

meaning of the contract te he expressed by what the

Court of Appeals <poke of as it- exact wording.

Deeenher 28th, 186, Mr Ashlew, President of the

Wahesh, wanted a new contract with the Terminal

Company, because of a foreclosure of mortgage against

one of the tenant Companies, whieh had weakened the

position of the Terminal bonds on the market.

When it came to drafting the new contract, change>

were desired and proposed by the Wahash ax te the

~urples earnings, and they were spoken of as change~

Mr. FL. Uebhell for the Terminal wrote te Mr.

Raneev of the Wahash, ax follow -

* Referring to the new terminal comtract, 1 have

seen the correspomdk-coe between ven, Mr. Blo

eett and Mr. Cummins. With respeet te the Dex

Meine Union's revenne from rental and «witeh

ix, Week say that this fumed hae alway = been con

tretled by the Terminal Company, amd i< the only

memes whieh Wt has te axe for other than «trietly

erating expemes, We therefore feel that the

new contract shew leave this famed the poroperty

of the Terminal Company. The rental and «witel

weg is a stnell item, and i« new being weed te per

eur Geating det, consisting of 01000) bed by

Commercial Bank of St. Legi-, which will com

~ame this fond for a goed many wears (Ree

ered, pe. Misty

tin the -ame cay, Febraary Isth, 1807, Me Com

reise wrete te Col, Mledgett, General Counmeed of the

Wahash, ax follows:

“Have veur faver of the 1th inet. and have

carefully considered the amendment~ that vou pre

pose te the terminal contract, and the reason

whieh are stated in Mr. Rameew"s letter for Oey

changes” (Meeord, pp. 1684.)

“With respedt te the chanar iw See 4, whack

wold ve quire the Dhow Maines Co. ta credit a poo

Ws Ciphers aad dislarse ments the avconwnts +

ER A etd cae ane be OR

20)

eorred hy iforsu itching charge Sy rental of houses

avd things of that character, Mr. Hubbell has writ

ten to Mr. Ramsey recalling to his attention the

situation, which absolutely precludes the disposal

of such revenues of the company in that way.”

(Record, p. 1686.)

February 24th, 1807, Mr. Cummins wrote to Mr.

Hubbell, saving. * bhave a telegram from Col, Blodgett

asking me to send a copy of the amended articles of

the company,” ete.

March 26th, IS97, Col. Blodgett wrote to FL M. Tub :

hell, enclosing proposed ninendiments to the contract

whieh he speaks of as changes. The second change ts

is follows ;

“ond, L send Seetion 3 in two forms, and |

need pot go inte any detailed exsdanation of them,

Number one is founded upon the theory that the

Des Moines Company may do a switching busi

ness during the whole period of the lease, paying,

on a wheelage basis, the same proportion of in

terest charges, cost of maintenance and operating

expenses, as is paid by the tenants, and using its

net revenne throughout the term in improving the

property. ‘That is the form suggested by Mr.

Ramsey and myself.

Number two presents the section as you and

Mr. Ashley suggested. Under it you are to switcil

and handle cars for others than tenant companies,

and collect the revenue, until the net profits, to-

wether with the rentals from portions of — the

vround, amount to fifty thousand dollars, of which

sum thirty-five thousand dollars is te be applied

on the floating debt, and the balance used for a

working fund. And after the fifty thousand dol-

lars has been realized, all the net revenues from

ewitehing is to go to the tenant companies to re

duce their expenses, on a wheelage basis."’ (Ree-

ord, p. 1687.)

Ditferent changes were proposed by different par-

ties, but not accepted, and the matter was closed by a

ratification agreement of date July ist, 1897.

At this time all the original parties to the contract

of ISS9 except the Terminal Company had gone out

of business because of insolvency and new companies

owned and operated their lines of railroad, one com-

pany having now acquired both Northern lines. The

new contract recited this history and further that ‘it

has been doubted whether the said contract is legally

binding upon the said Wabash Company and the said

Des Moines Northern and Western Company.”* It

was provided as follows:

‘Now, therefore, in consideration of the prem-

ixes and for the purpose of removing all doubt

with respeet to the said subject, it is now agreed

by and between the parties hereinbefore named

that the said contraet, a copy of which is at-

tached, shall be and become binding and obligatory

upon said Wabash Company and the Des Moines,

Northern & Western Company.

And the said Wabash Company for itself agrees

fo make the payments therein provided for at the

times and in the manner prescribed for the said

Des Moines & St. Louis Railroad Company so long

as it operates the railroad of the said Des Moine-

& St. Lowis Company, and when the said Wabash

Company ceases to operate the railroad of the said

Des Moines & St. Lonis Company its obligation

to so pay, and all the obligations herein assumed —

by it, shall at once determine and be and become

the obligations of whatever company operates the

said railroad, it being the intention that the obli-

vations of the said contract, so far as they pertain

REA MIELE

>”

to the Des Moines & St. Louis Railroad Company,

shall attach to and become the obligations of the

successor of the said) Wabash Company in’ the

operation of the said) Des Moines & St. Louis

Railroad, and any company suceceding the Wa

hash Company in such operation shall be held by

the operation of trains over the said Des Moines

& St. Louis Railroad, and upon the property leased

in the said contract, te assume all the obligations

therein or hereby undertaken by either the said

Dex Moines & St. Louis Company or the said

Wabash Corpany,

And the said Des Moines, Northern & Weetern

Company fer itsclf agrees te assume all the obli

eations of a dessee railroad company as preseribed

in the said eonteatf for the entire term narued

therein, and as though it had been mamed in and

Was a party te the said contract when originals

ninde, awd fo pawto the said Des Moimes Company

at the times and in the manucr therem prescribe d,

fhe sus of monenu which mau become die, com

pole d aecordimg iD thee ley His and fil OUISIOMS ol the

said contract with respect tod tenant company;

pnd the said Des Moines, Northern & Western

Company farther’ agrees that the obligations

therein uated and hereby assumed shall pass with

the railroad it now owns and operates, and shall

heeome the obligations of amy asstenee, grantee,

or sneeessor of the said Des Moines, Northern &

Western Company in the ownership or operation

of the said Des Moines, Northern & Western Rail

rond. and any eompany succeeding the Des Moines,

Northern & Western Company, in such ownership

or operation shall be held by the operation of

trains over the said Des Moines, Northern & West

ern Railroad, and upon the property leased in the

caid contract, fo assume all the obligations therein

expressed and herein undertaken by said Des

Moines, Northern & Western Company,

ee ee ae

jut it is expressly provided that so much of the

said contract, a copy of which is hereto attached,

as relates to the issuance and the distribution of

the capital stock of the said Des Moines Com-

pany, is no longer binding, and that the capital

stock of the said Des Moines Company is held as

follows:

The purchasing committee of the Wabash, St.

Louis & Pacifie Railway Company, 500 shares.

The Des Moines, Northern & Western Railroad

Company, 1000 shares.

I. M. Hubbell & Son, 2.500 shares.’ (Reeord,

}). DOG, )

Here is not only a ratifieation or adoption of the

contract by the Wabash Company and the company to

Whieh the Milwaukee is successor, but a reiterated

agreement to pay to the Terminal Company at the

time and in the manner preseribed in the contract the

sums of money “which may become due computed ac-

cording to the terms and provisions of said contract

with respect toa tenant company.’

And added to this is the very express recognition

of the faet that there is a large, a majority interest

in the shares of the Terminal Company which is inde-

pendently and individually held and is interested in

the construction .of the contract according to its ex-

press terms,

And from this time until 1906 the contract was eon-

strued according to its terms, surplus earnings being

ised from time to time for the acquisition of additional

property, without protest from any one and with the

approval of all concerned,

In view of all the facts, preceding, attending and fol-

lowing the execution of the contract of July 31st, 1897,

Ap eubaasy Deon ete

ERE RN Te OE MLE Se ETE NTE IIL BTS

there was manifest errer in holding that it **does not

affect this controversy.”

The history of this transaction has im considerable

part been given, but there is much more in the record

of the same nature, and much of that related to the

main controversy which bears direetly and indirectly

upon the question of surplus earnings. The Hubbells,

father and son, gave Liberally ane freely, the son for

mans vears entirely, their time and service to this en

terprise, Thes fostered it during all the thirty vears

of the contract of ISSO. whieh certainly they would net

have «ene if this contract lad been a barren one ined

their stockholdings barren alse. True, for a time thes

were interested in the Northern railroads, but from

the time the Milwaukee acquired its holdings in these

they hid, if the contention of the respondents mow

made is warranted, no interest whatever in the Ter

minal Company, except the holding of stock whieh: was

forever precluded from yielding ams profit, Stull thes

conducted its busines-, managed and directed its at

fairs for years and were permitted te deo this by re

spondents without the pray of a dollar, conduct upon

beth sides inconsistent with any view other than that

they had a substantial heneficial interest as large

stockholders in the Terminal Company,

We submit that the Ctrenit Court of Appeals erred

in holding:

1. That the contention of petitioners that the only

character of ereait: items to which the respondents

sere entitled under the contract “were such as were

paid by seme other railway by virtue of a contract for

the use of the properts * while ‘ta strict construction

of the exact wording ef the contract’ is not a fair

construction of the spirit-of the agreement.”

Hl. That its conclusion as to what was the “spirit

of the agreement was based upon or warranted by the

history of the transaction.

Il. That its construction of the contract giving

the surplus earnings to the respondents was justified

by the reading of the contract in its entirety,

IV. And in its order, judgment and decree direct

ing the District Court of the United States for the

Southern District of lowa to so modify its decree

“that the surplus earnings belong to the railways, and

to appoint a master under instructions to ascertain

the part due each upon a wheelage basis."’

The petitioners therefore pray that a writ of cer.

lierari issue to said Cirenit Court of Appeals to re

nove therefrom the Record in this cause for review

here by this Court of the questions presented and the

errors specified in this petition.

Respectfully submitted,

a. LL. PARRISII and

F. W. LEHMANN,

Of Counsel for the Petitioners.

IN THE

SUPREME COURT OF THE UNITED STATES.

fhovonee Team, A. DD 1918,

— ee —_

No.

THE DES MOINES UNION RAILWAY COMPANY,

FREDERICK M. HUBBELL, FREDERICK C.

HUBBELL and F. M. HUBBELL & SON,

Petitioners.

\«

hk CHICAGO, MILWAUKEE & ST. PAUL

RAILWAY COMPANY awl THE WABASH

RAILROAD COMPANY,

Ie sponds wis.

REPLY TO CROSS-PETITION FOR WRIT OF

CERTIORARI.

Supplementing the reply of respondent, the Chi-

cago, Milwaukee and St. Paul Railway Company, to

the ecross-petition for writ of certiorari, attention is

called to the following additional matters:

—Z—

The contract of May 1, 188, en which petitioners

rely (Reeord, p. 1), after deserilnng the terme!

property, including the prepesed wien paeecnwe

depot and additional facilities te be cometraeted, etl

gated the predecesser of feependent= te pan the

maintenance and operitong cost, otetest and tawes,

ete., and then by section 6 (leer, pe Paty the port)

of the first part in comeideration of the pan ment. te

bere sratcde ter it bey ened peerties ef the second poor

herely grants ty sicied secved pourties the Gee of ite ter

minal propertics a= aferesnkd’” « grant tet tends

of a richt te ee, beet ef the mee of n+. entre wee

fulness of usufruct of ‘it~ ternal preqettoe="", and,

of coutse, ineludes the pewte eborpced Doe a teh,

station privileges, ete.

That the language of the grant express the in

fentions of the parties t= cbyeies Prete the fact thet

all parties understeed at the the that the grentees

owned the terminal prepertie: ae sheen by th

dence of Colonel Bladgett on nega te the parece of

the contract (Record, pO) We the neshatien of th

Jes Moines Union Railway Conger thenentafter

called the Dies Moines Cheney), neqeestiog hm te

prepare it to be apqerewed and executed by all lite

now belding an interest in the property’. aud in ot

resolution that ‘*the terme and eornlit pete oom whieh

the sewers! lines new interested of which may bere

after heeene interested shall enjoy the axe of these

torminals be folly «t forth in « supplemental agree

went te be made and executed between the Dee

Veins Union Railway Company and cach of the liges

oon the «wid terminals” (Reeord, p. 478%). The com.

tract could have been supplemental only te the con.

treet of Jaweary Jed, 1882 (Record, p. 12) and ae

cording te the resolution its parpexe wae te define

the terms and conditions on whieh the grantees «hould

eajew the ase of the terminals, net te define or

recognize any right in the Dee Moines Company, and

woordingly ne rent or compensation for the wee of

the terminals was reserved and all the covenant« were

by or for the benefit of the grantees the Dew Moines

Compeny net having the slightest interest in their

peorformance it being merely an umpire or ageney

euploved te unify the operations and beek keeping

and enforce the covenants as between the granters for

whose sele benefit they were made,

(a) The parties at the oateet committed themselves

te o eomstrnetion of the contract whieh entithed the

crantees te the ineemne prodwced by switching, station

privileges, ote, Iw crediting it on their bills, firet,

woder the direction of the jeint <aperintendent (Ree

ened, pe 271), and after February 11, 1911, parsnant te

—4—

reselution of the Dies Metnes Cennpeny (Record, yp.

497), and thes were <o etedited antil Decenber, I

(Record, p. 353), when the Be= Mesirres Commeprennys

passed a farther resedut ven that the <a pene: ved ae

rent of real extate and all ewitehing charges” shell

he weed “te purchase sapqdies and pay corrent bolt

which come in before it receives its menthiy fevenir

from the tenant companies” (Reeve, pr 4°). w hoe

was eonivalent te eneditung the: <s0nn con thee girmttees”

bills becuse cash porchases of supqeies awl pry

ment of corrent bille would te that extent bewsen the

grates” Wills, This tethent of apqdyiee seh ty

come was te be temporary “te accumulate a stall

fund fer working capital”, and it wae tnterebedd the

practicr of direetly erestitina the bills sheathed be te

cone) January, 1 ter Supt. "« better, Record, p

as).

(hey After the: Phew Mosinee Ceonpeuny haved thas cern

mitted iteedf te a comstractien of the contract which

entithed the granters te the imeeme fem the <witel

nae. ote, the grantees pati for the coal, babe al

material weeessary fer the eqperat ney aneed pean pr Teorae eee

of the engines, tracks, passenart station aed new!

extate whieh predaeed the teen in Contrertvenes.

The petition states, om page 12, “at the tine of the

trial in the District Ceorart These emrtings aguredatest

about half a million dollars, and they haw: aerann

lated) <inee at the pate of abort one Herat treed Cheertescnreel!

dollars a year.” The outlays by the cranters for feel,

laber, material, ete, in predecing these earnings must

have been very comsiderabhe, whieh, together with the

protest made by the grantess when firet advice,

chertly before the bringing of thix «it, by FM. Hab

bell, that be claimed the granters were net entithed te

wach eorwings (Reeerd, p. 329), justifies the inference

that the grantees nude such euthays on the farth of the

oniform eomtrection of the contract bw all the per

tes. Haewing steed by and knewingly permitted the

cranters amd ther a=sigwe te paw the coet of pore

decing the inet in contreweres on the aeurenee

of said rescdation= that they were entith! te ri, Ube

Haltedi« are new estopped from came the [hee

Veines Company te claim, ad it ie extepqeed from

clommiwg, the contrary.

The inerme from «witeling, ete. belongs te the re

“eanlent« lecwuee it was derived from the ase and

occupation «f the teryninael property whieh the pared

ce mealemcmmmmmamas AA NM pepe a Be

snecessers by the contract of Janwary Jed, Pe. | Hee

ord, pp. 129); articles of assectation of the depet com

pony (Reeerd, p. 125) and the reselotion= parenent to

whieh the terminal property was transferred te (Mee

ord, pay, 151-7) and received by the Dee Moines Crm

pony (Record, py 11).

ei Mhom Soar

The right to the *tuse and occupation” of railroad

property by a railroad company under the laws of

Iowa embraces the entire usefulness of the property

(Cummins v. Des Moines, St. Louis Railroad Com

pany, 63 Towa 3uy, le, 405: Smith ve Hall, 105 Towa

95, 1. 6. DONT).

The contract of May 10th, S89, was merely an op

erating agreement defining the operations of the in

terested railway companies for a period, The Des

Moines Company under its articles of incorporation

(Record, p. 123) is the ageney of these companies Whe

nominated its direetors, it) having undertaken by

article TH] to exercise all of its powers ‘in accordance

with the terms and spirit of the aforesaid) contract

entered into on the seeond day of January, 1Ss82"".

IV.

The petition states on page 24 that ‘the Hubbells,

father and son, gave liberally and freely, the son Tor

many years entirely, their time and serviee to this

enterprise, They fostered it durimg all the thirty

years of the contract of Iss, which certainly thes

would vet have done if this contract had been a

barren one and their stockholdings barren alse’, but

no reference Is made to the record to justify this

statement. The reeord shows that) the Hubbell-

agreed when they purchased the stock from Ashes

that ‘‘the stock should be held by a railway com

fp EPORTAATE.

ait mu

pany entitled to use the terminal property’? and that

“it would be prejudicial to sell any of this stock to

outsiders’? (Record, pp. 1059-1060), and contrary to

this understanding they acquired the stock frora the

companies they dominated at a nominal value (Record,

pp. 1096-1097). The stock, therefore, was **barren”’

and they knew it was barren, and are not entitled to

derive contrary to their agreement any profit from it.

Hubbell testified, ** LT stated very clearly that [am in

charge of that property (meaning the terminal prop-

erty): | know all about it, manage it, buy all the ma-

terial. | decide on the location of every track, side

tracks and main line, changing of the tracks, every-

thing in reference to the details of the business”’

(Record, pp. P200-1201).

The son testified:

“(). Did you or your father, or together as a

firm, own and deal in real estate located near the

lines of the Des Moines Union?

“AL Yes, sir: FL M. Uubbell has beuglit con-

siderable lands along the Des Moines Union, and

I have, also. Tam oa trustee in his estate.

“() Well, didn’t you and your father make a

large sum of money in those real estate transac-

tions?

“\. The real estate which we have bought

and held | think has gone up in value very con-

siderably,

“Q. You have made plenty of money out of

that that you liave sold, haven't you?

“AV | do not recall ever having sold any at

pe BR Rr ae A ee

feat

il ek

a loss, because property has always advanced in

Des Moines; | mean, as a general rule (Record,

pp. 1198-1199).

The Hubbells own the Des Moines Terminal Com-

pany and the Des Moines Western Terminal Comn-

pany, which also own terminal railroad properties in

Des Moines, and the Hubbells operate them tor their

own profit: in connection with the operation of the

Des Moines Company (Record, pp. 1200-1201).

It is respectfully submitted the question sought to

be reviewed by petitioners is not an open one and that

the petition should be denied.

Respectfully submitted,

JAMES L. MINNIS,

Counsel fo Ri spondert Wabash

Raihean Compan,

JAN SOIS

- | “JAMES D, aceh

Supreme Coust of the Wuited States

Ocroser Term, A. D. 1918.

vo GOES 7 ;

THE DES MOINES UNION RAILWAY COMPANY,

_ FREDERICK M. HUBBELL, FREDERICK C. HUB-

_ BELL and F. M. HUBBELL & SON,

Petitioners,

vs.

THE CHICAGO, MILWAUKEE & ST. PAUL RAILWAY

COMPANY and THE WABASH RAILROAD COM-

PANY,

Respondents.

REPLY TO CROSS-PETITION FOR WRIT OF CERTIORARI.

Joun C. Coox,

Burroy Hanson,

Counsel for Respondent, Chicago Mil-

waukee & St. Paul Railway Com-

pany.

“ Sah a ae

is ia

er a oe am Se

| Ocroser Term, A. D. 1918.

THE DES MOINES UNION RAILWAY COMPANY,

FREDERICK M. HUBBELL, FREDERICK C. HUB-

} BELL and F. M. HUBBELL & SON,

No. sd

Petitioners,

vs.

} THE CHICAGO, MILWAUKEE & ST. PAUL RAILWAY

COMPANY and THE WABASH RAILROAD COM-

PANY,

Respondents.

REPLY TO CROSS-PETITION FOR WRIT OF

CERTIORARL

The objection to the issuance of a writ of certiorari

on the cross-petition herein may be briefly stated as fol-

lows: That the question involved is not of sufficient

gravity and importance, nor sufficiently open to contro-

versy, to call for the interposition of this court in grant-

ing the writ.

Two causes of action are involved in this litigation:

The first cause of action (Ree, 55-106 and 117) in-

volves the right of the St. Paul Company, which owns

and operates more than 10,000 miles of railway, and of

the Wabash Company, which owns and operates about

» 500) miles of railway, to continue to eceupy and use in

connection with their systems of railway, as they have

for many years last past, about three miles of main line

double track, including a bridge over the Des Moines

River, and about 27 miles of side and switch tracks, team

and warehouse and industry tracks, and a modern pas-

senger depot and freight houses, all located in the center

of business and population in the City of Des Moines, the

commercial center of Lowa, having a population of about

125.0), This canse of action is called in the opinions

of the court below The Main Controversy. (Ree., 2088.)

That this cause of action er controversy involves ques-

tiens of large public interest—and, therefore, questions

of gravity and importanee, and is sufficiently open to con-

troversy—is clearly shown by the opinion of Judges

Stone and Smith and the dissenting opinion of Judge

Hook in the court below. (Ree. 86-2120.)

The second cause of action (Ree., 106-113) relates

wholly to the matter of accounting during the life of

the operating agreement, whieh expired May 1, 1918, and

invelves merely the question of the ownership of cer-

tain funds in the treasury of the Des Moines Company.

This cause of action in the opinions of the court below

i< called Surplus Earnings. (Res., 2115.) The court

helow—all judges coneurring—held that these funds be-

long to the St. Paul and Wabash Companies. (Ree., 2115-

9119 and 2120.) No public interest is involved in this

cause of action, nor is there invelved any rule or prin-

ciple of law which the interest of the publie requires this

court to determine, and the eress-petition herein makes

pe such claim. The only reason assigned for the writ is

that if the first cause of action, or main controversy, is

to he reviewed here, then the second cause of action

should also be reviewed, regardless of the difference in

the subject matter and the questions involved. Tt seeme

tow plain for argument that each cause of action must

he dealt with on its own merits, and that as the second

cause of action or branch of the suit involves private in-

terests only, and the decision of the court below in re-

spect thereof being unanimous, and no rule of law on

which there are conflicting decisions in the different cir-

cuits being involved, a writ of certiorari should not be

granted for the purpose of reviewing that decision. If

the controversy in this litigation had been confined to

this single cause of action, and had heen decided by the

(irenit Court of Appeals as it was decided, there would

he ne grounds for granting the writ. Aside from this ob-

jection, this cause of action, as will be seen by reading

the opinions of Judges Stone and Hook, was correctly

decided by the court below and the question involved

therein—whether the so-called ‘‘surplus earnings’’ he-

lng to the St. Paul and Wahash Companies, as the court

lelow held they do or to the Des Moines Company—is not

snfficiently open te controversy to eall for a review there-

of by this court.

In addition to the faets stated in the opinions of the

court below, we call attention to the following: In See-

tion One of the operating agreement (Ree., 480), the Des

Meines Company agreed “‘to erect and furnish for the

use of the partics of the second part (the railways), in

aid City of Des Moines, a union passenger depot, and

wh additional switches, sidings, freight depots and

rundhouses, shops, water tanks and yard appurten-

oces.”" A eonsiderable portion of the so-called ‘‘ surplus

rarnings’’ arose from the renting of rooms and space in

this passenger depot, the use of which belonged to the

railways, and on the full cost of which the railways paid

interest, taxes, insurance and the cost of repairs and

maintenance. Other portions of such surplus earnings

were received from switehing that was done with en-

gines acquired at the cost of the railways. Every dollar

expended in maintaining and operating these engines and

in doing this switching service was borne by the railways

and charged to them each month, The receipts from

such rentals and switching, when collected, were ered.

ited on the monthly bills of the Des Moines Company

against the railways “from the time there were ang such

earnings.” (Ree., 327.) The first appearance of any

such earnings was a small amount in the month of De

comber, 1889, (Ree. 272.) This was nearly a year after

the operating agreement had been executed, and nearly

two years after the Des Moines Company took charge

of the terminal property. These rentals and earnings

arixing subsequent to the making of the operating agree-

ment, had there heen any dispute concerning their own-

ership or disposition, might well have called inte play

the provisions relative te arbitration between the par.

ties found in Section 28 of that agreement. (Ree., 487)

But no dispute arose ever them, as it was conceded be

all concerned that they should go inte the monthly ae

counts between the Des Moines Company and the rail-

ways as a credit on operating expenses in faver of the

railways. This was in line with the action of the execs

tive and accounting officers of the Des Moines Compas

(Ree, 272-313), the formal resolution of the beard of

directors of that company (Ree, 497), and, as the court

below decided, was in full accord with the spirit of the

operating agreement. It is significant that the resele-

tion of the hoard of directors of the Des Moines Com

pany was adopted long after the executive and acceunt-

ing officers had given the railway companies credit for

these receipts on their monthly expense bills. (Ree.

497.)

’

same

It is respectfully submitted that no grounds exist for

granting the eross-petition herein for a writ of certiorari.

Joux C. Coox,

Burrox Hayxsox,

Counsel for Respondent, Chicago,

Midwaukec & St. Paul Radway Company.

* ——_—— |) eee

In THE

Supreme Court of the Wnited States.

(krone: Team, 191%

[ce

CHICAGO, MILWAULKER & ST. PAtTL RAILWAY ¢

PANY axe WABASH RAILWAY CoMiriy)

ve.

PES MOINES UNTON RAILWAY COMPAS) ns

HUBBELL +f al. h

Ne. 67

pES MOINES UNION RATE CuMIA

HUBBELL of of j

CHICAGO, MILWAUKER & ST. PALL HADLS A)

PANY axe WABASH! RAILWAY CUM AS)

os WRITS oF CRNTHORAR Te Tit t NITE

APPTAIA Pom Tite fhanry

BRIEF AND ARGUMENT OF CHICAGO, MILWAUKEE « *%

PAUL RAILWAY COMPANY AND WABASH RAILWAY

COMPANY

Aone ‘ Coon,

ut rTvees Iiaxeers

Conunedl fer Chora VW

Daal Radwaat ov

Wixeow S. ews

Laweese® (imere,

Riemer A. Camy.

FL. Newnewrs, Js

Counsel for Watbad rr

(Company

eae

SUBJECT INDEX.

Page

STATEMENT OF THE CASE... eee eee errr ees Pe eer errr i ee 1

The blll ceeccces LE ne eT ee EE ET en eT, te 3

The answer ......eees ss SA WEN Gd HR Oa eae eR OPO RE Tee WS Te br)

succession of St. Paul Company and Wabash Company......... 6

Decree of District Court... ..6cce cece cece cence rere rece erecs 7

Decree of the United States Circuit Court of Appeals. ....-+-0- s

Writs of certiorari... 2.66.66 cece eee eee eee eke severed of)

Questions involved... .-- cece eee eer e eens eee bw <n rea He 9

Specification of error relied Wpon.. 6. see. ee renee pavenewosses 10

STATEMENT OF FACTS. 0.0.0 e cece eee c cere eer eereeresenens etitiweee. ae

1. Facts preliminary to establishinent of trust.......-++++- 12

The defendant F. M. Hubbell. ........-- eee eee ee eee 12

Railroad situation at Des Moines in ISSO. .....----6. 3

Contracts with Hubbell and his associated interests... 14

Organization of proprietary Companies.....-. ew se 16

Construction Work .......6-eee eee eee eenexvele- wats ee

Il. Terms of the trust. Its development in corporate form. . 19

Contract of January 2, ISS2...... eee eee eee eee ae

Completion of railroads..........-05+ ese awey 34605 23

Incorporation of Des Moines Company....-..++++ o- we

Resolutions of January 1, 1885.......-- cece eeeees ~ ae

Resolutions of November 5, and 8, 18S7......---+.. 32

Conveyances to Des Moines Company........+++ xine ae

les Moines Company's mortgage. ......6.-06 ee eee tn

Meeting of stockholders of the Des Moines Company

of March 31, 1888...... ie vad ema aes a enp eh Wa 41

Supplemental agreement of May 10, ISS0......-- a.

Amended articles of Des Moines Company.........+- 52

Annual reports of Des Moines Company........-+.. as

Fiduciary relations of F. M. Tubbell............ cay ae

III. Independent transactions of Hubbells in respect to trust

property ... wcsccesee pietesse Prey err rer Y TTT re M4

Agreement of July 31, I897....06.csccceccsceceres we Oe

Fyldence introduced hy Hubbells to show estoppel and

NE is geil ater eater gud Cetes vant etune hae a 73

Surplus earnings controversy. ........6eeeee ees oe oe

pon.

Seen GF GROUUETE... 0.000 ce rcs sccensnersecrenvereusssrsnererces 6)

eee og cd rinair edad nay sekes VON ER EITS EOE SYS" OP

I. Contract of January 2, Isse, created express trust. ...... &

Contract of January 2, ISS82....--- reer reer eee eer

Il. Des Moines Company organized to become permanent

eer ee ies ee he hed eevee sk nes ai

Conveyances of terminal properties eae te and ¢

cepted by it in Crust...-.-.eeee cere reer scree trees Wy

No defeasance the sreafter of trust estates... .- 6. cere WwW

Ill. Proprietary companies had no power to alienate equitable

PEER. ao Grad sod WOned HS TE ee ST CE CeEM RES MTEL SS” ly

IV. Capital stock intended to evidence and measure equitable

@STATOS 0 0c cere reece ree rsercnrece SOP ET TEL LEA 145

Stockholders’ meeting of Des Moines Company of

Macks Bi. BROS. i... 5006 edo ue 98 Ie PERT I SS O88 118

Stockholders’ meeting of Des Moines Company of

April 8, 100... 60. c es eerecserecmerersecestreces 1%

Intent of parties in amending articles of Des Moines

Company and results of such amendments. ....... 1

(1) Status of parties. .....cecsssccerrercorcers 1

(2) Reasons assigned by Cummins for waking

amendments ...0.ceesecerceseecrers ee

Results of amendments.......--- cere cere eee reteees 1%

(1) Amendment dividing interest into eighths in-

stead of Quarters....... cece reer eer ceees VW

(2) Amendment anthorizing issue to proprietary

companies of $400,000 of capital stock. ... 18

(2) Article fifteen expunging proceedings of

meeting of December 10, SOG6 . vcciaz+s ove» 13

(4) Resolution fixing value of Terminal proper:

thes at SSOLQ57.21. 2.0... 6c eee eres iets ae

(5) Amendments to articles not legally published 122

Independent transactions of F. M. Hubbell respecting

trust properties 2.2.66... see cer rete re reer rere ey

V. Series of acts and circumstances alleged to have caused

inadvertent dissolution of trust...... vias akearsees Ww

(1) Articles of incorporation of Des Moines Company 1%

(2) Deeds of CONVEYANCE... 6.6.6 cere reece ete eeee By

(3) Mortgage of Des Moines Company... ---- 6-0-0 Md

(4) Supplemental agreement of May 10, 1S80.....-. He

(5) Issue of capital stock.....--.---eeee rere oe

(6) Amended articles of Des Moines Company... -.-- 18

(7) Agreement of July 21, 1897. ..-..0.--- erry)

iff

VI. To give acts and circumstances construction in derogation

of equitable estates would permit trustees to repudiate

rights of cestui que trustenta............ Veweseneeeas 161

VII. Decree should authorize redemption of stock in Des

Moines Company held by Hubbells.................006 163

, VIII. Estoppel or laches not applicable to complainants........ 174

1X. Surplus earnings were properly awarded to complainants 18%

ee ALOT ELSE TT Lee rer ee errr 190

List OF AUTHORITIES CITED.

Bigelow on Estoppel, 6th Ed., pages 476, 580, G41.....0........ 91, 93, 154

Mae v. Pos, B86 U, &., 260 Gt DOO. oo i cccccccvevccesesnes 92, 130, 163

Brant v. Virginia Coal & — Company et al., 93 U. S., 326, 337. .93, 174

Brown Vv. Fletcher, 235 U. S., 580.......... ee $2, 89, 100, 101, 128, 152

Chapter SS of the acts of assembly of Iowa of 1888................ 142

(Central Transportation Company y. Pullman Company, 139 U. S.,

(Central Trust Company v. Wabash, St. Louis and Pacific Railway

ey re Hy I, Re oaks vb knw neo oe ovebue eaheocks ....93, 189

(hieago, Milwaukee & St. Paul Railway Company y. Des Moines

Tnion Railway Company and others, 165 lowa, 35............0- 93, 181

(iicago, Milwankee and St. Pau! Railway Company y. Iowa, 233

Fk SEE r acy RNa Vaio anton gud ternee Pab eu oiduh ends poLoteD. 86, 113

(uran v. State Bank of Arkansas, 15 How. (U. S.), S04.......... 136

firmers Mutual Telephone Co. v. Howell, 132 Iowa, 22........... 118

fumess Withy & Co., Ltd. v. Yang-Tsze Insurance Association, Ltd.,

i We Me Spec baru sacks bwewdeendacueysewidoierece 186

a a I i ie on re i a Vas re re a 118

fasthorne v. California, 2 Wall. (U. S.), 10.................06-. 136

a Ny MU Ws is wewsen nev ier svcvestdeeveesdesoeks 93

See Ge PO BOE Ole hy OY Wire ob vs coe cdecbecbeendlecses 86, 115

way. Chicago, Milwaukee & St. Paul Ry. Co., 152 Iowa, 317, 321 . .86, 114

mes on Collatera] Securities, Section 360a................ ee oe 168

‘ign v. Des Moines Union Railway Company, 113 Iowa,

Dia a Spas ad sou ewencnwol ee ce TELE ERE LAEL EE Tere 86, 114, 143

Methern Pacifie Railway Company v. Townsend, 190 U. 8., 267.85, 111

aur vy, Tennessee Central Railway Company 109 Fed. Rep

haeroy’s Equity Jurisprudence, Fourth Edition, Section

ee er eee a en Ae SE Se Me Loe 82, 89, 101, 152

‘aeroy's Equity Jurisprudence, Fourth Edition, Section 147...... 82

Rothwell v. Dewees, 2 Black, 615, at GIS... .--+-- coe M2, TO, 143,

Section 206 of Code of Lowa of U8NG.....-.-00ccrcercereeecers 1, 11)

Section 2116 of the Code of Lowa, 1807, page Eee —

Section 3 of Interstate Commerce Act. ...-.- secre er erees 0. Ma

Section 1300 of the lowa Code of IST. 0.6.6.6 6ee ere: mi

Speidel v. Henrici, 10 a ee ee eee 43, 184

Starkweather v. Jenner, 216 O°. %., RO8, wt WOM. wee eee 2 10 le

State v. Central Iowa Kailway Coopetny, 71 lowa, 410..... 1k

Tite IX, Chapter 1, page 587, Code of Towa, IsH7y.. eT

Tile X. Chapter 5. page TIS, Code of Towa, Isu7 6,14

Toplil v. Topi, 122 VS, VED Wee eee eee ee ee 16, 18

furner v. Sawyer, WOU, &, 57s, at SG. sc ckesraveote v2, 10, 16

IN THE

Supreme Court of the United States.

Ocrovern Term, A. 1). 1919.

No. 278.

Chicago, Milwaukee & St. Paul Railway Company and

Wabash Railway Company,

Petitioners,

us,

Des Moines Union Railway Company, Frederick M. Hub-

bell, Frederick C. Hubbell and F. M. Hubbell & Son,

Respondents.

No. 279.

Des Moines Union Railway Company, Frederick M. Hub-

bell, Frederick C. Hubbell and F. M. Hubbell & Son,

Petitioners,

vs,

Chicago, Milwaukee & St. Paul Railway Company and

Wabash Railway Company,

Respondents.

WRITS OF CERTIORARI TO CIRCUIT COURT OF APPEALS FOR THE

EIGHTH JUDICIAL CIRCUIT.

BRIEF AND ARGUMENT OF CHICAGO, MILWAU-

KEE & ST. PAUL RAILWAY COMPANY AND

WABASH RAILWAY COMPANY.

STATEMENT OF THE CASE.

The petitioners, Chicago, Milwaukee & St. Paul Rail-

way Company, called the *‘St. Paul Company,’’ and

—

The Wabash Railroad Company, called the ‘* Wabas)

Company’ and also referred to in the brief and arg.

ment herein as complainants filed their bill in the Dis.

trict Court of the United States for the Southern Dis.

trict of Iowa, against Des Moines Union Railway Con

pany, called the “Des Moines Company,’’ Frederick

Hubbell, Frederick C. Hubbell and F. M. Hubbell & Son,

called ‘‘the Hubbells,’’ and also referred to in the brief

and argument herein as the defendants, to establish ther

right as equitable tenants in common to the joint

and exclusive use in perpetuity of the termina

facilities and property in. the City of Des Moines

Iowa, held in the name of the Des Moines Company, an

for an accounting of large sums of money, called ‘sur

plus earnings,” collected from time to time by the De

Moines Company and the Hubbells for the use of sue!

terminal facilities and property. (Ree., 53, 119.)

The railroads and terminal facilities in controversy

include a double track railroad extending from a Con-

nection with the railroad of the Wabash Company @

its terminus at the east limits of the City of Des Moines

through the business center of the city over a bridg

across the Des Moines River to a connection with the

tracks of the railroad of the St. Paul Company at its

terminus at Sixteenth street near the western limits o!

the city, a distance of about three miles; modern pas

senger depot, f reight depot, sidetracks, switches, round:

houses, turntables and industry tracks connecting witl

all industries of importance in Des Moines, together with

switch engines and other incidental facilities, (Ree.

183, 480, 1047.) The original outlay for the ground api

rights of way was $461,257 and F. M. Hubbell est:

mated the value of the property at $2,000,000. (Ree., 47%:

1094.) The surplus earnings at the time of the filing «

the bill amounted to approximately $500,000. (Ree.

109, 194.)

The Hubbells claim that the complete title to and own-

ership of the terminal property and surplus earnings is

in the Des Moines Company, and as holders of 2,500

shares out of the total of 4,000 shares of the capital stock

of that company—1,000 shares of the remainder thereof

heing owned by the St. Paul Company and 500 shares by

the Wabash Company—they have asse rted the right to

exclude the petitioners from the use of such terminal fa-

cilities at the expiration of a supplemental operating

agreement, namely, on May 1, 1918, and to distribute

such surplus earnings among the holders of such capital

stock pro rata. (Ree., 329, 333.)

THe uu.

The bill of complaint as amended avers, among other

things, that three railway companies—Des Moines & St.

Louis Railroad Company, called **St, Louis Company,”

Des Moines Northwestern Railway Company, called

“Northwestern Company,’’ and St. Louis, Des Moines

and Northern Railway Company, ealled ‘* Northern Com-

pany’’—predecessors in title to the St. Paul Company

and the Wabash Company, acquired terminal property in

the City of Des Moines and constructed thereon railroad

tracks, switches, sidetracks, tarnouts, depots and other

terminal facilities for their joiwt use and occupancy ; that

pursuant to a contract dated January 2, 1882, said Rail-

way Companies created the Des Moines Company and

conveyed to it the terminal property se acquired subject

to the joint use and occupation thereof in perpetuity,

which use and occupation they reserved to themselves,

their successors and assigns; that thereafter additional

property was from time to time conveyed to the Des

Yoines Company, subject to such joint use and oceupa-

tion; that the articles of incorporation of the Des Moines

Company provided, among other things, that all powers

exercised by that company should be in accordance with

the terms and spirit of the contract of January 2, 188,

that the affairs of that company should be managed by

a board of directors to he nominated by the three Rail

way Companies, their grantees or assigns, and that the

Des Moines Company should act as the agent of the three

Railway Companies in operating, financing and develop.

ing such terminal property and facilities for their us

and benefit: that on May 10, 1889, the Des Moines Com-

pany and the three Railway Companies entered into as

agreement supplemental te the contract of Jawnary 2

1882, defining in detail the relations and duties of the

Railway Companies to each other and to the Des Moines

Company in the enjoyment of such joint use and oces-

pation of the terminal facilities and property for a period

expiring May 1, 1915; that the Jes Moines Company col

lected and received from time to time, for the use of suet

terminal facilities and property by others, income aggre

gating approximately $500,000, called surplus earnings:

that the Hubbells unlawfully obtained control of the Des

Moines Company by usurping its offices, and just prior

to the commencement of this suit had set up the clain

that they owned a large majority of its capital stock,

were entitled to elect its directors and officers, and that

the Des Moines Company owned such termined facilities

and property in its own right, free from such joint use

and occupation thereof by the St. Paul Company and

Wabash Company, successors in interest of said three

Railway Companies, except the rights conferred upon

them by such supplementa) agreement of May 10, 188%.

and that it, said Des Moines Company, was entitled te

reeeive and retain in its ows right such surplus earning:

so as aforesaid collected from others for the use of such

terminal facilities and property.

all ,

The bill, besides praying for general relief, prays,

among other things, that after May 1, 1918, it be declared

that the St. Paul Company and the Wabash Company

as successors and assigns of the three Railway Com-

panies, are entitled to the joint and exclusive use in com-

mon and in perpetuity of such terminal facilities and

ty, on the terms stated in the contract of January

9 1882; that the Hubbell. be restrained from interfering

with, or obstructing, such use; that the amount of such

sarplus earnings so collected and received from the use

of such terminal facilities and property by others be

ascertained and that the Des Moines Company be re-

quired to pay the same to the St. Paul Company and the

Wabash Company. (Ree., 53, 119.)

Tue Axswer.

The answer to the bill admits in substance the making

and execution of the January 2, 1882, contract, the in-

corporation of that contract in the articles of incorpora-

tion of the Dex Moines Company, that the various per-

cons tho had held tith te property under that contract

iad conveved the same to the Des Moines Company, but

as trustee, amd avers that that company owned said prop-

erty in its own right.

The answer alse admits that the Hubbells have as-

verted the claim that won the expiration of the supple-

mental agreement, May 1, 191%, the right of the St. Paul

Company and the Wabash Company to use such terminal

facilities and property will cease, and that if they should

desire to use such terminal facilities and property there-

after, they could do so only under such contract as might

ke made therefor.

The answer also admits that the Des Moines Company

had received for the use of such terminal facilities an

property by others income aggregating a large sum.

The answer denies that the St. Paul Company and We.

bash Company, or either of them, have any right in arb

terminal facilities and property except such rights as

were acquired ander the supplemental agreement of May

10, 1889, or that said companies, of either of them, hav

any interest in, or right te, the surplas earnings 0 a

aforesaid received by the Des Moines Company for th

use of said terminal property and facilities by others

(Ree., 174-196.)

Srccesston oF So. Part. Comraxy avy Wansen Compete.

Wahash Railway Company, herein called the ** Wabash

Company,”” on July 1, 1916, succeeded to the tithe of th

railway, property and franchises theretofore belonging

to The Wabash Railroad Company, the original com

plainant in this bill, and was by order duly entered heren

substituted in place of The Wahweh Radroad Compan

as party complainant in this Wil. (Ree, 2063.) The We

hash Railroad Company succeeded to the title of the rail-

way, property and franchises of the Wahach Weeterm

Railroad Company, whieh latter company sunecerded te

the title of the railway, property and franchises of the

St. Lonis Company and of the Wabash, St. Ioan &

Pacific Railway Company. (Ree, 590-534.)

The St. Paul Company i« the remote saecesser of the

Northwestern Company and the Northern Company. th

two companies last named having in TRAP consolidated

under the laws of Towa ander the name of Des Meine

Northern & Western Hadwaq Company. (Ree, 4)

Thereafter, hy foreclosure and sale, the railway, prep

erty and franchises of the leet named company were a

quired by the Des Moines Northern & Western Railroad

aa 7

Company, and this last named company in February,

1899, conveyed all its railway, property, franchises, rights

and interests to the St. Paul Company. (Rec, 673.)

The St. Paul Company having succeeded to all the

property, rights, interests and privileges of the North-

western Company and the Northern Company, and the

Wabash Company having sacceeded to all the property,

rights, interests and privileges of the St. Louis Com-

pany, they likewise succeeded to all the property, righte,

interests and privileges of the parties to the January 2,

1882 contract and to all the property, rights, interests

and privileges of the St. Louis Company, the North-

western Company and the Northern Company in the sup-

plemental agreement of May 10, 1889. Ever since such

sacerssion by the St. Paul Company and Wabash Com-

pany, they have used the terminal properties in Des

Moines under said contract of January 2, 18*2, and said

supplemental agreement of May 10, 1889, and such suc-

cession and use of the terminal properties in Des Moines

have been recognized by the Des Moines Company and

the Hubbell«, Neither of said railway companies nor

my of their predecessors ever had or now has access or

extrance to the City of Des Moines except over the

terminal properties in controversy.

Decker of rue Dretect Cover.

The deeree of the District Court adjudged

(a) That the Des Moines Company was organized

for the of tention touledl eavtine ¢

oom. ee apne one ae Sena Chmpany ome

predecessor Railway acquired

the terminal property and fecilities

WES.) The Dex Moines Company and the Hubbetl- ap

pealed from that part of the deeree set out in paragraph

“(ay ahewe, (Ree, 2677.)

Decrees ov toe U crren Sretes Coreret Cornet of Nereus

The decree of the Court of Appeals adjudged

(a) That the deeree of the Distriet Court +a

he modified «0 ax to state that the “

the terminal + and facilities was im the Te

a wheelage basis, (Ree. 2127.) Nook, Circuit Jade.

concurred ia this portion of the decree. (Ree, 02)

— ;

Warts of Certrnem

The St. Paul Company and the Wahech Company pet

troteed thie Court for a writ of corlrorer: te fete Ue

gecord in respect of that part of the decree of Ue 1 nited

Sates Civewtt Court of Appeals ehlich eljpoderd the

the compete: tith te the property and termemal fecrletees

is in the Des Moines Coanpany, and that the only ster

ett of the St. Paul Company and the Waheeh Compan)

in cach property and faciliti. of in the management of

the Tes Moines Company i« sock o* Mowe frm

their stock ee nership im the Thee Meenee Comper The

Des Moines Company and the Hubbelle petitioned oe

Court fer a weit of cerfrorar: te Petree the mooord »

epeet of that part of the deeree of the Lerted Stetes Ou

eat Court of Agyrals whieh adyodgrd that the eo cable!

verplus earnings belong toe the St. Peel (eepen en

the Wahash (ompeny. leth petitions Were grante:! |

thie ( ort, and thie Cae r here im tr agence te thee ert

4 vettenant, As the vo called sarples carne: brome)

4 tes wee teelves ne poblic interest end be rele om

prime iple of law «hich prabde iitetest Teqgurtes thie ( eart

te determine, and ae the decmrem of the Com f Ag

peal. thereon was wnaninmews, prrestreatds thee bene hb:

the case te bewe becwaee the other branch, oF the oe

emtreversy im the caer, wae broweht her Drckew edt

was the greed of the Habdeelle” petitocs

ow eminee® Pit Bie

Tie wrderty bee quests ate

ta) Whether thee: Ih View . Compan leewkebs the trth

te the terminal property in crest for the St. wel end

Wabash Compsrnie> ax eepuitabele tenants on commen ther.

wand subject te their joint Gee and coenye’ og wp ow the

terms described in the contract of January 2, 1882, with

the result that following the expiration of the Supple.

mental Agreement on May 1, 1918, the St. Paul and

Wabash Companies were, and are, remitted to the rights

and obligations of that contract, as held by Judge Hook

in his dissenting opinion, or whether the title to the ter-

minal property is absolute and complete in the Des

Moines Company, and the St. Paul and Wabash

Companies’ only interest therein is such as flows from

stock ownership, as held by the majority opinion; and

(b) Whether the St. Paul and Wabash Companies are

entitled to the so-called Surplus Earnings, as adjudged

by the Cireuit Court of Appeals—all the judges concur.

ring.

The questions in paragraph (a) are raised by the fol-

lowing specification of error:

Specification oF Error Reviep Upon.

The court below—Circuit Court of Appeals—erred in

holding that the Railway Companies have parted with

the exclusive ownership and control of the terminal prop-

erty which they had reserved to themselves under the

January 2, 1882 contract, and that the complete title to

this property is in the Des Moines Company, and that

the only interest of the St. Paul Company and the Wa-

bash Company in such property, or in the control and

management thereof or of the Des Moines Company, is

such as flows from stock ownership. (Ree., 2114, 2118.)

STATEMENT OF FACTS.

It is not questioned by any of the parties in interest

to this proceeding that the transactions and events out

of which has grown the present controversy began with

the existence of a trust under which the prede-

cessor Railway Companies of the complainants were

the beneficial owners in the property held by the Des

Moines Company.

The majority opinion of the Cireuit Court of Appeals

assumes as the premise upon which its conclusions are

founded the existence of this trust, and the result reached

by it is based upon the theory that through inadvertent

developments this trust has disappeared. (Ree., 2096,

2102.) This factor of inadvertence in the alleged dissolu-

tion of the trust is stated by that Court in the following

language :

“There is nowhere any indication that the rail-

ways intended any such result and yet such in our

judgment is the result. This unexpected outcome

was the product of several cireumstances.’’ (Ree.,

2113.)

The dissenting judge in the Court of Appeals states

that

“The excerpt quoted above touches the quick of

this controversy.’’ (Ree., 2119.)

And in commenting upon it, he says that the conclusions

of the majority are of this significance:

‘‘In other words the proprietary companies were

not cognizant of the trend of the circumstances and

the result held to follow though unexpected and not

intended by them, is enforced because of legal pre-

sumption of intention of natural consequences of

acts, regardless of intention in fact. The circum-

stances relied on do not appear to me to have the sig.

nificance attributed to them, but were it otherwise,

the presumption should not be so broadly applied

to the case of a trust, the destruction of which js

claimed by those subject to the disabilities of trus.

tees dealing for themselves.”’ (Ree., 2119.)

The several tests of the rights of the parties must al!

eventually come to the issue disclosed by the above quo-

tations from the majority and minority opinions of the

Cirenit Court of Appeals.

In such a situation it is believed that the faets of the

ease can be presented most significantly by classifying

them in the following three groups:

I. A statement of those faets which were preliminary

to the establishment of the trust and were the induce.

ment for the same.

II. A statement of the terms of the trust and of its

development in the corporate form which it eventually

took, and in this respect the relation of the defendant

Hubbell as the administrators and fiduciaries of the trust.

II. The independent transactions of the Hubbell:

in respect of the trust property and the several aliquot

interests evidenced and measured by shares of stock of

the corporate trustee.

A STATEMENT OF THOSE FACTS WHICH WERE PRELIMINARY

TO THE ESTABLISHMENT OF THE TRUST AND WERE THE IS

DUCEMENT FOR THE SAME.

The defendant FM. Hubbell,

In 1880 the defendant F, M. Hubbell and Jefferson s.

Polk were copartners, practicing law, trading in real

estate and promoting railroad enterprises in and about

the City of Des Moines, Iowa, under the firm name of

Polk and Hubbell. (Ree., 998.) The defendant Hubbell

was president of and he and his partner Polk and two

associates, J. S. Clarkson and J. S. Runnells, were the

stockholders of the Narrow Gauge Railway Construction

Company, a contracting company which had constructed

certain railroad mileage in the vicinity of Des Moines.

(Rec., 407, 408; 998.)

The radroad situation at Des Moimes in 1880.

At this period the Wabash, St. Louis and Pacifie Rail-

way Company, referred to in the pleadings as the orig-

inal Wabash Company, owned and operated a system of

railways Iving east and west of the Mississippi River,

including a line extending from St. Louis to Albia, a

point in the State of lowa about 67 miles southeast of

the City of Des Moines. (Ree., 998.) Polk and Hubbell

wing interested in a narrow gauge railroad partly con-

structed to the northwest of Des Moines from Waukee

to Adel, a distance of about 7 miles, sought to interest

the Wabash Company in the construction of new rail-

wad mileage in and about the City of Des Moines, in-

duding the completion and development of the partially

constructed road, of which they were the owners. (Rece.,

8, 1001.)

The projected railroad construction in which Polk and

lubbell sought to interest the Wabash Company, may

ve roughly indicated by the letter Y. The stem of the

Y represents a proposed extension of the road of the

Wabash Company from Albia to Des Moines; the left

am of the Y a line extending northwesterly from Des

Moines to Fonda, of which 7 miles of railroad between

Waukee and Adel had already been constructed under

the charter of a corporation controlled by Polk and Hub-

‘ell and known as the Des Moines Northwestern Railway

Company, hereafter referred to as the ‘‘Northwestem

Company.’’ The right arm of the Y represents a far.

ther projected line to extend in a general northerly diree.

tion from Des Moines to the Town of Boone.

A blue print of these roads as subsequently constructed

appears in the record at page 197.

As the three projected roads converged at Des Moines,

it was also proposed that proper terminals and termina

facilities in Des Moines be acquired for their joint and

common use. (Ree., 412, 1001.)

The contracts with the defendant Hubbell and his asso.

ciated interests.

On December 8, 1880, the defendant F. M. Hubbell

his partner Jefferson S. Polk and J.S. Clarkson and J.s.

Runnells, being the same parties who owned and con-

trolled the capital stock of the Narrow Gauge Railway

Construction Company, entered into a contract with the

Wabash Company providing for the construction of 3

line in extension of the line of that company along the

stem of the Y from Albia to Des Moines, this line to be

constructed at the cost of the Wabash Company in the

name of the St. Louis Company, a corporatio!

which the defendant Hubbell and his associate

contracted to organize. This contract provided in sub-

stance that the defendant Hubbell and his associate

would incorporate the St. Louis Company with a cap

tal stock of two million dollars and authorized to con

struct a railroad from Des Moines, Iowa, to Abbia in

said state. They were to give their time, personal at:

tention to and act as directors and officers of this enter:

prise, so far as necessary to locate and economically

construct the railroad, but subject to the approval ¢

the Wabash Company. They were personally to exer

themselves to procure subsidies in aid of the line and

donations of lands, stations, right of way and other bene-

fits in aid of its construction. They were to receive as

compensation for their services, in all of the above re-

spects from the time of the execution of the contract

made by them to the completion of the railroad, the sum

of $10,000 in money and a further sum of five per cent

of the amount of all subsidies which should be actually

paid, and five per cent of the value of donations in Jands

for right of way or station purposes and five per cent of

the value of all other aid to the construction of the rail-

road accepted by the Wabash Company. (Ree., 396.)

The contract also provided that the defendant Hub-

vell and his three associates should each subscribe for

ue Share of the stock, and that the balance of the stock

should be subscribed for by a nominee of the Wabash

Company, who should undertake to make payment of his

subscription by constructing the proposed railroad.

‘Rec. 398.) James F. How became the nominee of the

Wabash Company, and so subscribed for the balance of

the stock, and the road was constructed by the Wabash

(ompany in his name as contractor. (Rec., 999.)

Qn the same date with that of the above contract,

wumely, December 8, 1880, the line hereinbefore men-

toned as controlled by Hubbell and his associates,

umely, the Northwestern Company and a corporation

med the Narrow Gauge Railway Construction Com-

jay, also owned and controlled by the same parties,

atered into a contract with the Wabash Company, pro-

‘ding for the completion of the line of the Northwest-

«m Company along the left arm of the Y from Des

fines to Fonda. This contract provided that the line

“ould be constructed by the Construction Company in

‘usideration of $7,000 per mile of bonds of the Wabash

Company, to be secured in part by a mortgage given by

the Northwestern Company upon the proposed road, the

stock of the Northwestern Company to be equally di-

vided between the Construction Company representing

Hubbell and his associates, and the Wabash Company.

(Ree., 400.)

The contract also provided that, in order to. supply

the Construction Company with funds, the Wabash Com.

pany would purchase the mortgage bonds deliverable to

the Construction Company on the basis of 95 per cent

of their par value. (Ree., 406.) This formality was

not followed, but the Wabash Company, instead of acta

ally delivering the bonds to the Construction Company,

provided it with funds direct by selling the bonds in the

market. (Ree. 1001.)

No contract covering the construction of the line north-

wardly from Des Moines to Boone, along the right arm of

the Y, appears in the record, the financing of this road

having been undertaken by Gen. Grenville M. Dodge,

as an independent enterprise. However, the actual con-

struction work was performed by the Narrow Gauge Con-

struction Company, which company operated from the

office of Polk and Hubbell in the City of Des Moines.

(Ree., 1170, 1180.)

panies mentioned abore.

On December 15, 1886, Polk, Clarkson, Runnells and

Hubbell, in pursuance of the contract first mentioned

above, incorporated the St. Louis Company under the

laws of Iowa, for the purpose of constructing the pro-

posed line along the stem of the Y from Albia to Des

Moines. (Ree., 408.) Hubbell was made secretary of

Re CAs alae

the company and also a director, and held both positions

until 1891. (Ree., 1297.)

On December 23, 1880, the same four individuals, pur-

suaut to the contract last above mentioned, reincorpo-

rated said Northwestern Company for the purpose of

completing the line along the Jeft arm of the Y from Des

Moines to Fonda (Ree., 725.) Tlubbell was made treas-

urer of the company and also a director of the same, and

served continuously in both capacities until the reorgan-

ization of said company in 1886, except in 1880, when he

served as its assistant treasurer. (Ree., 1279.)

On April 4, 1881, the same four individuals, pursuant

toan arrangement with said Dodge, incorporated the St.

Louis, Des Moines and Northern Railway Company,

hereinafter referred to as the ‘‘Northern Company,”’ for

the purpose of constructing the third line along the right

arm of the Y from Des Moines to Boone. (Ree., 728.)

Hubbell was made a director of the company and served

in this capacity until 1800; he also served as treasurer

of the company until 1883. (Ree., 1297.)

The construction work.

The actual construction work of the three lines, as

well as the assembling the necessary terminal railways

This text is long and has been trimmed here. Open the source document for the complete record.

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