Chicago, M. & St. P. Ry. Co. v. Des Moines Union Ry. Co., 254 U.S. 196 (1920)
U.S. Supreme CourtChicago, M. & St. P. Ry. Co. v. Des Moines Union Ry. Co., 254 U.S. 196 (1920)
Chicago, Milwaukee & St. Paul Railway Company
v. Des Moines Union Railway Company
Nos. 66, 67
Argued March 23, 24, 1920
Decided December 6, 1920
254 U.S. 196
1. It needs no particular form of words to create a trust, so there be reasonable certainty as to the property, the objects, and the beneficiaries. P. 254 U. S. 208.
2. If the subject of a trust be a legal interest in property and capable of legal transfer, the trust is not perfectly created unless the legal interest be actually vested in the trustee. But it is not necessary that the trust be expressed in the same instrument that transfers the title; various instruments may be read together in order to ascertain the intention to establish one. Id.
Three railroad companies agreed that they would contribute in stated proportions to establish a terminal for the common use of themselves and of such other railroads as they might admit, that the title should be in a trustee, that they would share the cost of maintenance and operation in proportion to their use of the terminal, and that a depot company might be formed to take permanent control and issue its mortgage bonds to them for their respective contributions to the purchase and improvements. Later they caused to be formed a terminal railroad company with broad corporate power to which they conveyed, by absolute deeds, the property they had acquired for the terminal. The bonds and stock of the terminal company were declared to be issued to them "in payment," but recitals and provisions of its articles, and resolutions attending the transfer, evinced that the main object was not to abandon, but to effectuate the plan of the original agreement. A subsequent contract between the four companies fixed terms for management of the property,
for performance of the terminal service and division of the cost among the three railroads according to use, permanently allotted the stock among them, authorized one of them to sell one-half its allotment to any outside railroad, acceptable to a majority of them, which might then be admitted as a party to the agreement, but provided that, with such exception, admission of an outside company to the use of the terminal should require consent of all three.
3. That the terminal Company took the title in trust to maintain and operate the property and to exercise all its corporate powers for the common use and benefit of the three railroad companies, their successors and assigns, and such other companies as might be admitted by them to a proprietary participation in the terminal. Pp. 254 U. S. 202-206.
4. That the subsequent contract was a modification only of the original plan, and inconsistent with a purpose to treat the terminal company as an independent entity subject only to contractual obligations and remit the proprietary companies to the ordinary rights of stockholders. P. 254 U. S. 208.
5. That, as between the proprietaries and others having notice, the stockholding interest was restrained to the full extent necessary to give effect to the trust, and the shares, representing the right to participate in the trust, could not be regarded, while the trust continued, as having an independent exchange value. P. 254 U. S. 210.
6. That the fiduciary character of the terminal company extended to its officers and directors. P. 254 U. S. 211.
7. That, where stock in the terminal company was sold by one of the proprietary companies to fiduciaries, officers, and directors of the terminal company for value, to enable them to sell it to some company capable of participating in the use of the terminal, the successor of such vendor company was not estopped from denying that the vendees acquired a substantial and valuable interest in the terminal company. P. 254 U. S. 213.
8. That, where a successor of two of the proprietary companies bought terminal shares from such individuals, and afterwards, through its directors, transferred to one of them and to another officer and director of the terminal, in settlement of a loan, equivalent shares of the terminal and enough more to make more than a majority of the terminal stock, still retaining an interest, it was not estopped to dispute their claim of full ownership, or from asserting its rights under the trust and seeking relief against any inequitable use of the shares so transferred. P. 254 U. S. 214.
9. That, in the absence of express authorization, agents deputed by the proprietary companies to vote their stock in the terminal company, including the presidents of two and the vice-president of the other, were without power to amend its articles so as to do away with the trust or seriously impair the rights of the proprietaries under it. P. 254 U. S. 215.
10. That the absence of any reference to the trust in deeds and mortgages of the property, including the terminal shares, of the proprietary companies, and in contracts made by the terminal company in discharging its functions, was not persuasive evidence against the existence of the trust. P. 254 U. S. 218.
11. That, where the articles of the terminal company were in form amended so as to deprive the proprietary companies, as it was claimed, of their exclusive ownership and control, and in effect to discharge the trust, and the validity of the amendments was unchallenged for 17 years, and where certain individuals, for value, acquired from proprietary companies bonds and a majority of the shares of the terminal company, and held them many years, during which the property increased in value, the successors of the proprietary companies were not estopped, or barred by laches, from asserting the trust against such individuals, it appearing that the latter were and remained officers and directors of the terminal company, with constructive and actual knowledge of the trust, and were not misled, that the amendments were not authorized or ratified by the proprietaries, that, although their officers acquiesced in certain internal changes in the terminal company directed by the amendments and in the de facto distribution of its stock, there was no substantial departure from the trust in the management and possession of the property, and it appearing further that no claim that the trust had been repudiated was made until shortly before the suit. Pp. 254 U. S. 219-222.
12. That the fiduciaries holding such shares were estopped to avail themselves of incautious, negligent, or mistaken acts of officers of the proprietary companies in order to obtain an advantage for themselves at the expense of those companies. Pp. 254 U. S. 221-222.
13. That the shares held by such fiduciaries represented no value or interest which they could set up against the proprietaries, and that the latter, upon repaying what the former had paid for them, with interest, were entitled to have the shares surrendered and cancelled, and meanwhile to have any sale, assignment, transfer, or voting of the shares prevented by an injunction. P. 254 U. S. 223.
14. That, under contracts of the parties, earnings derived from switching
and other terminal services and privilege should be credited, as they accrued, to the proprietaries in proportion to their use of the terminal -- i.e., to wheelage. P. 254 U. S. 225.
254 F. 927 reversed.
The case is stated in the opinion.