United States Rolling Stock Co. v. Potter

Day, J. i. pbaotioe: mijiistrátor. I. The plaintiff appeals from the order of the court setting aside the judgment by default, and permitting a defense. The original executors of the estate of Eber B. Ward were O.W. Potter, Samuel R. Mumford, George H. Wyman, and T. C. Owen, all non-residents of this State, the said Eber B. Ward being, at the time of his death, a resident of the State of Michigan. Administration was granted to these executors in. Iowa, pursuant to the provisions of section 2368 of the Code, on the 12th day of April, 1875. O. W. Potter filed his final report and resignation as executor of said estate, in the Circuit Court of Des Moines county, Iowa, on the 28th day of May, 1875. The resignation was not accepted by an order of the court until February 22, 1876. The original notice was served upon Orrin W. Potter, alone, in Chicago, on the 20th day of January, 1876, almost eight months after his resignation was tendered. An executor may refuse to accept the trust, or may create a vacancy by removal from the State. Code, § 2347. We think, also, that he may surrender his trust by resignation, and that, after the lapse of a reasonable time for supplying his place, he ought not to be required, against his will, to take further action in the administration of the estate. In this case there were three executors remaining, who are presumed competent to act. There was, therefore, no necessity for supplying Potter’s place. Under the circumstances of this case, after the lapse of so long a time from the tendering of his resignation, we are of opinion that Potter was released from the duty of participating in the settlement of the estate, without any formal order of the acceptance of his resignation. It follows that the service of original notice upon Potter conferred no jurisdiction upon the court, and that for that reason the judgment by default was properly set aside. It is claimed, however, that no affidavit of merits [67] was filed, nor did the defendant plead forthwith, nor was the application made at the term at which the default was entered. Code, § 2871. This section does not apply where default has been entered without legal authority. Boals v. Shules, 29 Iowa, 507. 2. contract : of. II. The plaintiff claims thatthe contract' between Ward and the Burlington and Southwestern Bailway Company is a lease; that Ward became the lessee of the company, and became liable for the payment of the operating expenses of the company out of his private means. The contract declares that the Burlington and Southwestern Bailway Company, “does hereby grant, demise and lease, unto the said Eber B. Ward» their entire line of railroad, including the unfinished portion thereof, ” and it further provides that “said Ward shall be President or Managing Director, as he may choose, duñng the continuance of this lease. ” But the real nature of the agreement is to be determined from a consideration of all its parts, and not from the above, or like expressions. Considering the contract in this manner, it appears that the bonds of the company were unsalable because the road was unfinished, and not in a condition to earn the interest on the bonds. Ward agreed to furnish to the company the sum of $750,000, to be expended in the construction of forty additional miles of road, estimated to cost $255,000; in paying construction indebtedness incurred, and to be incurred, $150,000; in payment of notes indorsed by Ward for the company, $245,000; in purchasing rolling stock and equipments, $100,000. Ward agreed to enter upon and take possession of the road, to use and operate' it to the best advantage he might be able, to pay out of the earnings thereof — First, all the running expenses, salaries of officers, taxes, necessary repairs, fences, and all other charges and expenses which the company might be liable to pay, on account of operating said road; second, he was authorized to pay certain western creditors of the road; third, the net earnings of the road were to be applied to the repayment to Ward of the sum of $750,000, with ten per cent interest, pay [68] able semi-annually. It is further provided that there should be included in the current expenses, and be paid to Ward, for-his services and commissions, such reasonable sum as might .be mutually agreed upon. It is further provided, that in case the net earnings of the road shall not be sufficient within five years to pay such indebtedness as Ward shall be obliged to pay for the company, together with the principal sum of $750,000, with interest thereon, then the time shall be extended for a sufficient length of time to fully pay up the $750,000, with interest; and that in case the company, its assigns, or the holders of its bonds, at any time after the completion of the road, shall pay to. said Ward the sum of $750,000, and interest at ten per cent per annum, semi-annually, together with his costs, charges, and any liabilities which he may have incurred for said company, then this contract shall cease; and that said Ward shall be President or Managing Director, as he may choose, during the continuance of this lease, to the end and with the intent that Ward shall have complete control of said road, until he is fully satisfied of his advances, charges and interest. It is quite apparent, we think, from these provisions, that Ward was constituted the agent or trustee of the company, to manage the road for the benefit of the company, and apply the net earnings to the payment of .his advances. It appears, also, from the agreed statement of facts that, “while said road was being operated under contract (Exhibit “B”), as hereinbefore stated, it was operated in the name of the Burlington and Southwestern ; Railroad Company, E. B. Ward being President of said com- | pany, and exercising such control as such President as he had • the right and power under said contract to exercise. Operating the road thus in the name of the company, accounting for the net earnings, and paid for his services, Ward can in no proper sense be regarded as a lessee of the road, liable to answer for - the contracts of the company out of his private means. It is to be observed that the locomotives, for the use of which plaintiff sues, were leased to the Burlington and South [69] western Railway Company on the 10th day of May, 1873,, three months before Ward entered into his contract with said railway company. Plaintiff, at the time its contract was made, could only look to the railway company for performance. Ward’s contract with the railway company did not diminish' the means of payment out of the company’s earnings. Upon the contrary, by furnishing the means for the completion of the road, it tended to increase its earnings and enhance the means of payment. It is not shown that Ward failed in any respect to fully and fairly account for the earnings of the road. On the 19th day of October, 1874, E. McKitterick took possesion of the road as receiver. At that time Ward turned over to the receiver the sum of $3,897.66. The outstanding! liabilities of Ward, under said contract, for running expenses,, salaries of officers, etc., were at that time in excess of said| sum, and McKitterick paid it all out on pay rolls, for operat- • ing expenses incurred while Ward managed the road. If Ward had paid plaintiff’s claim, there would have been a less, sum to turn over to the receiver, and other operating expenses' must have remained unpaid. Ward did not hire the locomotives, nor did he personally have the benefit of their use. Indirectly he might have been benefited, if the road had earned enough to apply anything upon the principal or the interest of his advances. But the, record does not show that anything was so applied during the, time he operated the road. The Burlington and Southwestern Railway Company hired the locomotives, and had the benefits of their use in the earnings of the road. It appears that during the receivership, and after Ward’s, death, there was'a dividend paid to Ward’s estate of $1,500., This dividend was paid out of earnings which accrued afterj the road passed into the hands of the receiver. Ward’s; estate was a creditor of the railroad company, and it cannot, be held liable to this plaintiff, because a part of the debt due the estate has been paid. If Ward, whilst he managed the. [70] road, had applied, to the payment of himself this $1,500, leaving the operating expenses unpaid, 1 e would, to that extent, probably, have been liable. It seems quite clear, however, that under the agreed statement of facts the estate of Ward cannot be held liable for the rent of the locomotives in question. Reversed.