Page images
PDF
EPUB

and the full enjoyment ever since by Sisson, Rathbun, ani Waugh among them, the notes and mortgage to Waugh and H. B. Ellis were satisfied; and as those to Sisson are also satisfied, that T. B. Ellis is entitled to the first lien on the property for his paid-in interest." Cable thereupon filed a petition for rehearing, and from the opinion it appears that one of the grounds relied on was that the court below had no right to allow the amendment of the bill after the decision on the former appeal, by setting up in substance that the agreement of Waugh was by parol instead of in writing, as was originally alleged, but this petition was overruled and the case remanded to the circuit court for further proceedings in accordance with the opinion. Ellis v. Sisson, 96 Ill. 114, 119, 122. When the case got back to the circuit court, on the tenth of February, 1881, a receiver of the property was appointed on the application of Thomas B. Ellis, and against the objections of Cable.

During the year 1876, while the several suits were pending, Philander L. Cable caused a small part of the property to be laid off into lots, one of which went into the possession of Hiram Cable. On the fourteenth of May, 1881, after the receiver was appointed, Hiram Cable filed in the circuit court his petition of intervention in the cause, on the ground that he was “pecuniarly interested in the subject-matter of the litigation,

and that the orders and decrees that may be entered concerning the same may very materially affect him pecuniarily and conclude him with respect to his rights in the premises." He then states in substance that “on or about the day of December, 1876,” Philander L. Cable was in the actual and exclusive possession of part of the premises described in the pleadings, and represented that he had bought the Waugh and Ellis mortgage; that the mortgage had been declared by the supreme court to be a first lien on the property; that in a short time there would be a final and conclusive decree for a sale of the property; that he should buy the property at the sale; and that in that way and others he would acquire an indefeasible title in the course of two or three years at the most." Relying on these representations, Hiram Cable, “on the said day of December, 1876,” orally agreed with Philander Cable to purchase one of the lots that had been laid out, and to pay the reasonable and fair value thereof when a title was made. Under this agreement, with the leave of Philander, he went into the possession of the lot, ro. lying on “the said decision and determination of the said supreme court, and then being fully advised by the pleadings and proceedings herein of the ex. tent and character of the claim of the said Thomas B. Ellis in and to said premises, and fully believing the said claim of the said Ellis was not other or different than he had himself stated the same in his pleadings, and that he would forever thereafter be estopped in equity and right, as against your petitioner or the said Cable, to assert and maintain that the same was other or different than as stated in his said pleadings herein, your petitioner did enter upon and take possession of said lot and parcel of said premises, and has ever since remained in possession of the same." After entering into possession, and while the rights of the parties remained the same, he erected on the property permanent and lasting improvements of the value of $1,800. He then charges that long after the improvements were made it was adjudged and determined by said supreme court, "upon and by virtue of a now and distinct claim (not germane to or consistent with his original claim in the premises) made and asserted by said Ellis, in and by an amendment to his pleadings, long since said improvements were so made,

* that the said mortgage so purchased by said Cable from said Waugh was not a first lien upon said premises, but that the same was in oquity * satisfied and discharged," and the lien of Ellis was established for more than the property and all the improvements thereon were worth. “But your petitioner says that the said Ellis ought not to be allowed in a court of equity to insist and maintain, as against your petitioner, such a now claim, so made

by his amendment aforesaid, but that in equity and good conscience he ought to be stayed and estopped from so interposing the same. That the said Cable has in all things acted in good faith and fairly with your petitioner, and las strenuously endeavored to maintain his claimed rights in the premises, but that, as your petitioner believes, in case such premises shall be sold in behalf of the said claim of the said Ellis, without the decree and direction of this court that the value of said improvements shall be first paid to your petitioner out of the proceeds of such sale, your petitioner will wholly lose all costs, disbursements, labor, and expenses he has incurred in making the same, as in such case the said Cable will not purchase said premises at such sale, and as your petitioner is advised that, under the facts and circumstances aforesaid, the said Cable will not be liable in law or equity to your petitioner for the same, or in any respect, on account of said agreement so made with him as aforesaid.” He then asserted the priority of the lien of the Waugh mortgage over that of Sisson, and that, although Ellis had notice of his acts and proceedings, no objection was made to what he did in the way of improvements. After referring to the pleadings and proceedings in the cause for further particulars, he submitted his rights to the court, and prayed that, if the premises should be sold under the decree, “it shall be ordered and directed that out of the proceeds of such sale there shall be paid to your petitioner such part thereof as shall bear the same ratio to the whole amount of the proceeds of such sale as the value of said improvements shall bear to the whole value of said premises, or an amount equal to the value of said im provements, such ratio or value of said improvements to be first determined, as the court shall order and direct, in accordance with chancery practice, and for such other and further relief in the premises as shall seem meet and proper.”

This petition was answered by Ellis on the twenty-first of July, and by the other parties in opposition within a few days after, but on the twentyninth of July Ellis moved to strike the intervening petition from the files for. reasons stated. Before this motion was disposed of, and at the same term, to-wit, on the thirtieth of July,*Hiram Cable filed his petition for the re-* moval of the causes as consolidated to the circuit court of the United States for the Northern district of Illinois, alleging that the value of the matter in dispute exceeded $500; that he was a citizen of Iowa and Ellis a citizen of Missouri, and Austin, Sumner & Co. citizens of Massachusetts; that none of the other parties to the causes were citizens of Iowa; that “there is a controversy presented and made by his intervening petition *

which is wholly between citizens of different States, and which can be fully determined as between the sole parties interested therein in the circuit court of the United States,” and that such controversy was solely between him and Ellis and Austin, Sumner & Co. On the twenty-ninth of August the state court made an order staying all further proceedings in that court and transferring the causes to the circuit court of the United States. Afterwards all parties entered their appearance in the circuit court, and thereupon Ellis moved to remand. This motion was granted on the sixth of April, 1882, and from that order the present appeal was taken.

Both Philander Cable and Hiram Cable acquired their respective interests in the property involved in this litigation during the pendency of the suit brought by Thomas B. Ellis in 1861 to establish his alleged superior lien. Philander Cable is concluded by all that has been done, because he was and is an actual party to the suit. There has been no time since the first term of the Mercer county circuit court, after the act of March 3, 1875, c. 137, was passed, that he could remove the suit from the state court. Removal Cases, 100 U. S. 473. Hiram Cable made the arrangement with Philander Cable on which all his rights depend long after that time had gone by. In fact, the decree of June 13, 1875, was the result of a hearing begun after the act went

868.

into effect. So that the question here is whether Hiram Cable has by his petition of intervention, after 20 years of litigation between the original parties, introduced a new and separate controversy into the suit, which entitles him on his own application to transfer the whole case to the circuit court of the United States. *If Hiram Cable is not to be concluded by any. thing done in his absence, he ought not to be allowed to force himself into the suit at this late day. No sale made under a decree to which he is not actually or constructively a party can cut off his rights. If he can be bound by a decree in his absence, it is because he has been all the time represented in the suit by Philander Cable under whom he claims, and as an intervenor he can do nothing that might not have been done for him by his representatire without his intervention. He took his place by intervention in the suit subject to all the disabilities that rested at the time on the party in whose stead he is to act. If his application to have his rights in respect to the improvements he has put on the property settled in this suit can be entertained at all, it will be only as an incident to the original controversy, and whatever would bar a removal of suit before be intervened will bar him afterwards, even though by his intervention he may have raised a separate controversy.

This disposes of the case, for, as has already been seen, the right to remove this suit was barred long before Hiram Cable intervened. Without, therefore, determining whether Hiram Cable can claim the benefit of his improvements, notwithstanding the pendency of the suit, or whether, if his petition had been filed in time, he would have been entitled to a removal of the suit on the showing made, we affirm the order remanding the cause.

(110 U. S. 288)

AMERICAN FILE Co. and others o. GARRETT and others.

SAYLES and others 0. SAME.

(January 28, 1884.)

1. NEGOTIABLE Bonds—PURCHASER FOB VALUE-PRE-EXISTING DEBT.

Any person taking negotiable bonds as collateral security for a pre-existing debt,

is a purchaser for value. 2. SAME-PRIVATE CORPORATION-LIABILITY OF STOCKHOLDERS.

A purchaser for value of the negotiable bonds of a private corporation, the stockholders of which had become personally liable for its debts, is entitled to enforce the bonds against the stockholders without reference to a private agreement, of which he had no notice, that their individual liability was to be discharged by the

bonds. 3. SAME-BANKRUPTCY.

The individual liability of a stockholder does not descend upon his assignee in bankruptcy, nor attach to the assets in his hands.

Appeals from the Circuit Court of the United States for District of Rhode Island.

The American File Company is a manufacturing corporation created by a special act of the legislature of Rhode Island, passed in May, 1863, and carrying on its business in the town of Lincoln, in that state.

The company purchased a patent under which the manufacture of files had before been car. ried on in the city of Baltimore, and the persons, among them one Allan A.

S. C. I Fed. Rep. 371.

[ocr errors]

Chapman, who sold the patent, took nearly half the stock of the company. The business of the company was carried on at a loss. About the beginning of the year 1870 it owed a large sum of money, which was evidenced by promissory notes of the company, indorsed by the stockholders in Rhode Island, and Chapman and other stockholders in Baltimore-all the stockholders being under the statutes of Rhode Island individually liable for the debts of the company by reason of its omission to filo certain statements respecting its business in the office of the clerk of the town. In this state of affairs the company resolved to issue its bonds, to be secured by a mortgage on all its property, real and personal. They were to be offered to the stockholders in proportion to the stock held by them, and such as were not taken were to be disposed of in “the order of applicants." The bonds were issued accordingly. They were payable to bearer five years after January 1, 370. The bonds for Chapman and the other Baltimore stockholders, for which Chapman had subscribed, were sent to him and charged against him on the books of the company, and the bonds were paid for by him by the surrender of a like amount of the promissory notes of the company. The notes so surrendered were the property of the firm of Kirkland, Chase & Co., merchants of the city of Baltimore, of which Chapman was a member. Some of the Baltimore stockholders refused to subscribe for the bonds, and their share of them was taken by Chapman or his firm.

The firm of Kirkland, Chase & Co., on May 2, 1872, borrowed of the firm of Robert Garrett & Sons, bankers of the same city, $50,000, and pledged as security therefor certain promissory notes, which were afterwards, on May 28th, withdrawn, and a cargo of sugar, stored in a warehouse in Baltimore, was pledged in lieu thereof, and the warehouse receipt deposited with Garrett & Sons. Besides the $50,000, Kirkland, Chase & Co. at this time owed Garrett & Sons more than $500,000, and it was the agreement between them that all securities pledged were to be held, not only for the specific loan for which they were pledged, but for the general balance due from the pledgeors to the pledgees. On September 12, 1872, Kirkland, Chase & Co. failed, and the firm and each of its members were subsequently adjudicated bankrupts, and their property, copartnership and individual, was assigned for the benefit of their creditors. On

the day of the failure Chapman informed Garrett & Sons that on May 30th, Kirkland, Chase & Co. had withdrawn and sold the cargo of sugar pledged as security for the loan of $50,000, and that bonds of the American File Company, to the amount of $81,500, had been substituted therefor, and handed to his son previous to September 12th to be delivered to them. On September 12th the bonds were delivered into the manual possession of Garrett & Sons in lieu of the cargo of sugar so withdrawn and sold. The assignees in bankruptcy of Kirkland, Chase & Co. disputed the title of Garrett & Sons to these bonds and some other securities on the ground that their transfer was a fraudulent preference. The assignees and Garrett & Sons settled all their controversies growing out of the bankruptcy of Kirkland, Chase & Co. by an agreement in writing, dated May 4, 1874, whereby the assignees relinquished all claim upon the “collaterals" of every nature, or the proceeds thereof, held by Garrett & Sons on the debts due them by the bankrupts, and agreed to pay Garrett & Sons $5,000, and the latter relinquished all claim to dividends declared and to be declared on the estate of Kirkland, Chase & Co. by the assignees or their successors. The settlement also contained this stipulation: “And said Robert Garrett & Sons likewise further agree that whereas said assignees have been offered the sum of fifty cents in the dollar for certain bonds of the American File Company, (now deld by Messrs. Robert Garrett & Sons, which were received as collaterals from Messrs. Kirkland, Chase & Co.,) and an indemnification against loss or damage of any kind as holders of certain stock of said American File Company, as assignees of A. A. Chapman and Kirkland, Chase & Co., said Robert

*291

Garret & Sons hereby agree to indemnify the said assignoes against loss or damage of any kind as holders of the stock aforesaid; and in consideration of said acts of said assignees, said Robert Garrett & Sons do also hereby agree to indemaify the said assignees and said estate of Kirkland, Chase & Co. and the ostate of A. A. Chapman against loss or damage of any kind for releasing their claim to the said bonds of the American File Company now held by Messrs. Robert Garrett & Sons, and agree to hold said assignees and said estate harmless for said transfer and release.”

Garrett & Sons, on June 23, 1876, recovered a judgment in the supreme court of the state of Rhode Island against the file company on the bonds transferred to them by Chapman, or the firm of Kirkland, Chase & Co., for the sum of $132,611.33, the principal and interest due on the same. At that time, by the statute law of Rhode Island, the creditors who recovered a judgment against a corporation whose stockholders were individually liable for its debts could take out execution thereon and seize the persons and property of the stockholders in satisfaction thereof, in the same manner as on executions issued against them for their individual debts.

Before either of the cases brought up by these appeals was commenced, the affairs of Kirkland, Chase & Co. had been nearly settled, and the bankrupts discharged. After the recovery of the judgment by Garrett & Sons, William F. Sayles and other Rhode Island stockholders, about November 9, 1876, Aled a bill in equity against them in the supreme court of Rhode Island to enjoin them from levying execution upon the persons or proputy of the complainants. The bill alleged that when the bonds of the file company were issued in 1870 there was an agreement between the stockholders that the bonds were to be taken by them in proportion to the stock which they held respectively, and that they were to be a final payment of the debts of the company, relieving the stockholders from liability, and requiring tho holders to look for payment of their bonds to the property which was mortgaged to secure them, or to the property of the company, and not to the individual liability of the stockholders; that Garrett & Sons had notice of this agree ment when they acquired the bonds, and had no better right to enforce the individual liability of the stockholders than Chapman or Kirkland, Chase & Co., from whom they derived title; and that they, Garrett & Sons, had agreed to indemnify the assignees in bankruptcy of Chapman and Kirkland, Chase & Co., and thereby had discharged the complainants from any liability, if any such existed, by reason of said bonds, and that in equity and of right their said guaranty inured to the benefit of the complainants, and the court should enforce it in that suit, and thereby avoid the circuity of action which would ensue if the complainants*should call on the assignees for contribution, and they on Garrett & Sons for indemnity.

After this cause was put at issue by the answer of Garrett & Sons, and by the replication of complainants, it was removed to the circuit court of tho United States for the district of Rhode Island. In the year 1877 an act was passed by the legislature of Rhode Island taking away the right of the judgment creditors of a corporation, whose stockholders were individually liable, to issue execution against them, and substituting a bill in equity or an action of debt to enforce the liability of the stockholder. In pursuance of this statute Garrett & Sons, on April 6, 1878, filed their bill in the United States circuit court, for the district of Rhode Island, against the American File Company, and all the stockholders thereof who were citizens of the state of Rhode Island, to enforce their individual liability to pay the judgment recovered against the American File Company. The stockholders, against whom this liability was sought to be enforced, filed their joint answer to the bill, in which they set up by way of defense the same matters, in substance, as they had alleged in their bill against Garrett & Sons.

These two cases, which involved substantially the same questions and con.

[ocr errors]
« PreviousContinue »