REPORTER;
vol. 49.
viewed, land the question fully Qonsidered, Where the contraot is for the'sale' of securities issued by the government, specifio performance will not be decreed, since they may be easilypurohased in the market; but vendee's remedy is at law for damages. ROB8V. Railway Co., 1 26, 32; Cud v. Rutfp, 1 P. Wms. 570; Colt v. Nettervill, 2 P. Wrnl:!. 304; Buxton v. Lister, 3 Atk. 38p. If stock ofaprivate corporation contracted to be sold is easily obtainable in the ijlarket, and there are no special reasons why the vendee should have the particular stock m¢ritioned in the contract, he is left to his actionatlil.Wfor daolages. Cook, Stocks, § 338. But here the contract is fOf aU: the stock of the corporation, and that clause of the contract was evidently' adopted as an eJ!:pedientjo secure, the trunl!fer of the real estate. · objection to the jurisdiction of the court on ,this ground has, however, belln practically abandoned., It is without merit, and cannot be sustained.' only,remaining js that of the'alleged inQUIPPfill1CeS upon the real estate, or indebtedness by the qorporations, , The Excelsior Company is free from debts, as appears from t11e testimony of J. W. Megibben. 'rhe Sharpe Compan.yhas a J,'flqrtgage upon its lands for about 87 ,000, which it is by an arrangE;lmentwit9 the holder, the Farmersl Bank of Cynthiana, to be paid off and vyhenever the thepropeJiy, and the payment and,cltncellatiou can be,provided for by th,e decree, which will be forthecpmplainants, with cos1;&. " , , ,
FARMERs' .,Lo,AN& 'TRUSTCO.'l1. '''<CtrcUtt L
SAN
s.
8.
In fOreclose a I;llortgag\'l given by ,8 lOtreet-rai\road company to payment"ot 'ceM;ain' bonds, it. appeared that' the bonds were invalid; but, all the by the mortgage beinA' in possession of a,receiver appointed pend· ing the who had issueil ce.rtificatesfor eJlpenses incurred .for the PreSErvation of the property, a d.eoree was entered, upon consent of all parties in inter; est,aIlcertalning and fixing thelamounts of their respectiveolaims, and direoting a sale of all the· property pf. the satisfy the.same. Held, that rails. fish-plates, and bolts purchased by the' company for use on its road, but which had not been actUally. used, and were stacked upon land not within' the right qf",ay,wero within the terms of the mortgage, which includeQ all real and personal prop'ertyof every kind and description "used or intended to be used in conneotioll with or for the purpose of said railroad, " and came clearly within the decree. SAME.
AND' SALE-"'PIIOPERTY INCLUDED,
.
Certain'11Otes, secured by mortgage, which had been executed to the company by a land assOQiation',were set out in the, receiver's inventory of property taken possession of by hiI!l under ardEll' of the court, and were in his hands at the time of making the decree by consent for the sale of all the company's property. Held, that eveQ: .,tboug!j, :such notes and mortgage were ,not included in the mortgage' sought foreclosed, as they bad been brought into the custody of the court under color' of its authority, and all parties in interest were parties to the suit, the court badjurii!dict,ipn to decide!,!l conflicting rigbts thereto, and Should not release its control of them in order thilt. tbeymlght bfl subjected to process obtained by creditors of the company froin a state coUrt,' nor should it award sucb creditors a. prioritY!>! lien by reason Qf their prqceedings in t.he state oourt.
"'"
FARMERS' LOAN & TRUST CO.1i. SAN DIEGO STREET-CAR CO.
189
In Equity. Bill forfore910sure.pf mortgage. On petition of interveners to enforce claims against prvperty in possession of the receiver. Denied. For former report, see 45 Fed. Rep. 518. Turner, McClure & Rolston and M,'ljTick &; Deering, for complainant. Oscar 4. Trippett, for C. J, Fox and West Coast Lumber Company. Works, Gibson« Titus, for receiver. Ross"District Judge. This suit was brought to foreclose a mortgage executeQ.bY tl;1e .defendant company to secure the payment of 250 of itsbond,$' o($l,OOOeach,payable to the complainant as trustee ()r bearer, TheproPlJrty mortgaged was described in the mortgage 8S follows: \W d singu,lar. the fpllowing rights, franchises, and property ,lying allPt: sUuatl;l iIl the ci);y of San Diego, and in the county of SaJ;l Diego. 'state of California; 'Vlz.: Being the line <l'f railway owned and controlled by the party of the first part in the city of San Diego, county of Ban Diego. and state of California, including the right of way. 'road·bed and superstructure. tracks, turn-tables, sidings. switches, cars, rolling-stock of any kind, machinery,iixtures. real and personal property of any and every kind and description, now owned by said party of the first part, and used or intended to be used in connection with or for the purposes of said railroad. incomes, issues, and profits arising or being received therefrom; also, all the franchises vested in said party of the first ,part, including its franchises to be a corporation, and also lin franchises and property that may pereafter be acquired by said party of the first part for the purposes of its line of railway, all its branch lines .and extensions, alldall side tracks and switches that may be hereafter ,constructed; it being the ,true intent and purpose hereof to secure the JD,ent of described bonds and coupons. according to their tenor and effect. by charging with a lien for that purpose all the property of every kind and description that is now owned by said party of the first part for the pU'rposes of its said'lines of railway. and aUsnch property as from time to timeoratany time, during the existence of said bonds or the life of may be acquired by, or come into the possession of. said party ,of ;the use in. connection with its line of railway, as herein set by iftscharter powers, granted to it by the Californ\'a:'" , . '.... , , . ,
,
making such action proper, a receiver at the .commencement of the suit to take pqssession was :Qf the involved in it. To the bill the defendant company interp,qf$edno ;defense, but numerous parties,-some unsecured creditors, and some ,claiming to be legal holders of the bonds thus secured,-with leave of Uw court, intervened in the cause. Among the unsecured creditors 80 intervening were the present petitioners, C. J. Fox and the West Coast Lumber Company. A reference was mude to the muster to take the evidence ill respect to the claims of the respective parties, and to report his findings of fact in the premises, with the names of the holders of the bonds, and the respective amounts thereof, together with the character and amount of all claims made against the defendant company. Upon of the master's report, and a full hearing, the court held that none of the bonds in question ever were legally issued. or ever became valid outstanding obligations of the defendant corpora,a consequence that the billwas not '.Vell filed. :But lnas-
'190
'much as, pending the litigati6ni, cilrtificates bad been issued by the reunder the direction of, tlie ,court to various persons for expenses necessarily incurred by him. in the care, preser:vatio'n, an(i operation of the property, and inasmuch pleadings and the master's report, that the defendant company Was .WhoUyinsolvent, and upon the request and consent of all of the parties in interest, the court determined to retain the cause for all purposes, and to direct a sale of 'aU the'property involved,snd a disposition of the in accordancewith'the rights of the respecti"'e parties. Accordingly" it was agreed by all oftheparties in interestthat!a final decree should be entered, confirming the report of the Juaster, which ascertained and fixed the amounts of the' respective claims, and'. (li':recting a sale of the' property to satisfy the '.. The property so ordered to be sold was thus described in the . .. All the right, title, interest, and equity of the said defendant company, the San: Diego Street-Car Company. iuand to that certain line of railway of the said,cumpany J,Ying and being in the city of San Diego. county of San Diego, and state of CaUfornia,incJudingthe of way. road-bed and superstruoture, tracks, turn-tables, sidings. 8witchps, cars. 1 0Uing 'stock of any kind, machinery, fixtures, real andpersonlll. property of any and every kind anddtlSqription. owned and used or intendl'd to be usedirt connection with 01' fop the purposes of said and its franchises,btanoh Imes and extensions, lntert'sts and properties. wherever situate. whether the same was in existence and owned or possessed' by said defendant company at the time of the execution of said mortgage or deed of, trust. or has been since acquired by said defendant company, or by the receiVers herein appointed. or by either of them," 1
1
,For reasons, not now necessary to be stated, the court hesitated to sign the decree as prepared by counsel; and it was not only upon the consent, but only after the urgent request, of all of the parties in interest, including the. present petitioners,and only aller the decree was made to express such consent upon its face, that it was signed and entered of record. A sale of the property was subsequently made by the master to one A. B. Spreekles, which was, upon like consent of all of the parties in interest, confirmed by the court; but, all of the conditions of the sale not been yet complied with, there has been no conveyance of the property to the purchaser. Subsequent to the confirmation of the sale, to-wit, on the 7th of December last, the aforesaid interveners, C. J. Fox and West Coast Lumber Company,uled in this court a verified petition setting forth that the petitioners are creditors of the defendant corporation, and that their respective demands were established as unsecured. claims against the street-car company by the aforesaid final decree of this court; that on the 20th of November, 1891, the petitioner C, J. Fox reduced his demand, amounting to $2,117.80, to judgment, in one of the superior courts of the state, after personal service upon the defendant, and that on the 14th of October, 1891, the petitioner West Coast Lumber Company likewise reduced its demand, amounting to $6,168.20, to judgment, in. the same state court, and that no part of either of said judgments has been paid; that petitioners are
FARMERS'LOAN & TRUST CO.
v.
BAN DIEGO STREET-cAR
co.
191
informed and believe that the proQeeds of the sale made by the master under the aforesaid final decree in this suit will be almost if not entirely exhausted by the application of the same to the costs of the court, the expenses of the receivership, and the preferred claims, as established by the decree, and that little or nothing of such proceeds will remain to be applied upon the unsecured claims, including those of the petitioners; that among the assets of the defendant corporation at the time of the filing of the bill of complaint herein, and at the time. of the appointment of the original receiver, was certain personal property, consisting of steel street-railway rails, with fish-plates .and bolts, of the value of $10,000, or thereaboutB;that said. rails, plates, and bolts were taken possessiop of by the herein.appointed upon his construction of the order appointing him, and that' upon his resignation the same were turned over to his. suc.cessorj thllt at the time of the filing of the bill herein, and at all. times thereafter,. the rails were stacked upon a vacant lot near H street,in the city Diego,and outside of any right 9f. way of the defendant ,companyj: that none,of the rails, plates, or bolts ever formed any part of the track or structures of the defendant company, and that neither the whole nor any part thereof were in any way appurtenant ,to or conriected with the defendant company's road; that the rails, plates, and bolts were never embraced by the mortgage to the complainant,nor formed any part of the subject-matter of the snit for its foreclosure; that the act of the receivers in taking and holding possession thereof was without authority, and upon a mistaken construction of the orders. Qf the court; that the jurisdiction of this court at no time attached to the rails, plates, or bolts "to any extent beyond the fact that its said receivers took the netual possession of the same, and so removed the same beyond the reach of the process of the court in which the petitioners' said judgments have been rendered;" that said , rails, plates, and bolts are not embraced by the decree of sale entered herein, and did not pass to the purchaser at the master's sale, but that the purchaser claims to have acquired title thereto thereby, and with the consent and aid of the receiver "is appropriating and about to appropriate tbe said rails to his own use by way of annexing tbe same to the street railway I the title to which passed under said master's sale to him, and, unless prevented by the order of the court, said purcbaser will convert, under the prQtection and authority of the receiver, all of said rails to his own use. and benefit." The prayer of tbe petition is tbat the court direct the receiver to return tbe possession of the rails, plates, and bolts to tbe defendant company, and relinquish all control over the same, "and for permission to tbese petitioners to proceed, as by law tbey may, with final process upon their said judg. ments in tbe court of the state,to subject the said assets of the said defendant to. the satisfaction of said jUd,gments, and for such otberreas maybe meet and appropriate in the premises." . Accompanyingtbis petition was an affidavit of J. B. Winship, setting forth, among ,other things, that he is the manager of the intervening West Coast Lumber Company; that on tbe.7th of December, 1888,one
192
, l'EDERAL:R:i!lPORTER,
vOl,"49. '
J. a.Arnold, trusteej'&xecmted'to EiS. Babcock, Jr., trustee for the San Diego Street"Car Company; a nlortgage upon certain 10tsaIidblocks of land, to secure the payment of certain promissory notes given to the street-car companyJjy the College ':s:ill Land AssociatiOriof San Diego, over $25',OQO, the whole of which, with interest, is still due and unpaid; that the real estate so 'mortgaged is worth the full amount due upon the notes; that' the notes were given to the street-car company in consideration-of that oom pant buildhig and operating that portion of its line known as the "Park 'Belt Motor -Line;" that; asc'affiant is inforIlled· and believes, the:notesand' mortgage never came into the possession of the receivertll.ntl we're not :included iIi the mortgage tt> the complainant, and were "never sold by any order of this court, but are still apart of the assets' of the deflmdant 'street-car company; that the notes' and mortgage 'wiW'becoIne valueless as' such" assets" if the said raila·areremoved off Of the' Park Belt Motor I,ine/becausc' the considerationthereof will' tbenhave The'affidavit alsh states tiaIly the same mattersrespectiD'lftM rails and the petitioners in the sbite;oourt as are sl:Jt forth in On the 4th of January:, 1892, the petitioners filea asupp]emental tition, ,duly -verined,in which. itiastated that on' the'10th ,lind 24th days >(jfNovembel', 1891; respecti,:ely, petitioners'caused' execution to be issued upon thetespective judgments they had obtained in' the state court ll.gahlst the street"car company; and that ih order to assert Ii lien lipon the rails, plates, and bolts mentioned in tHeir original petition, and in the hands of the receiver, lisa far as the slitrl¢ havanot already been delivered to A; B. :Spteckles, ahd fixed itl Ih'etrack or different system of railway," they Caused the executions to be far lIa 'Possi ble by serving them 11 pon the receivei' and' upon the s'ecretliry of the defendant coIiipilny, but that the sheriffholdingtl;te executions was expressly directed noVtodisturbthe <receiver's posses!:lIon of tIle property; nor have the pethioners sOl1ghttosubject the receiveHoill1swer personally to theatate coutt; thMthesole objectElind purpose of those proceedings to lay the foundation fdrthe equitable interposition of this Cburt,andthat it might" by order, upon application to it, award the' petitioners pi'iorityof lien upon said rails and material in the event it should be found that the!.were not embraced;by the decree of this court.. The petItIon further sets forth that among the assets of the street-car company are two certain notes, secured by mortgage, made to it by theCollege Hip: Land Association of San Diego,--one for the sum of $12;850, dated vember 24, 1888,and duelO months after date, and the other for the SUIll of $12,800, dated ;November 24, 1888, and' due 22 months after date; that to secure the payment of the notes, G. C. Arnold, trustee for the College Hill Land Association, 'executed to E. S. Babcock, Jr., a,s trustee for the street-car company, Ii. mortgage upon a largeuumber of lots and blocks in the city of San Diego; that petitionets caused writs of attachment to beissrted out of the state court in their aforesaid actions flga,iIlst the street-car company, and, to be served upon the Hill IAnd-Associlltion and upon E. S;'Babcock, Jt., in the manner provided
FARMERS' LOAN & 'TRUST CO. tJ. SAN DIEGO STREET-CAR CO.
193
by law. , The supplemental petition further states "that the petitioners are informed and believe thlltthe receiver claims to have taken possession of these notes and the mortgage by virtue of the order of this court, and that uuder thfl terma of the notice of the sale 'by the master, ,A. B. Spreckles, the purchaser at the sale, claims to have purchased said mortgage debt, by reason of all of which petitioners are prevented from enforcing final 'process on their judgments obtained in the state court. They allege that the notes and mortgage never constituted any portion of the subject-matterofthe suit, and were never embraced by any issue tendered or made therein; that the act of the receiver in taking possession of the notes and mortgage was without authority , and was based Upon a mistaken constructionof the ordersofthls court; that the jurisdiction of this court at no time aUached to the notes and mortgage to any extent "beyond the fact .that its said receiver took the actual possession of the same, and so removed them beyond. the final execution of the process of the court which the petitioners' said judgments were rendered." The supplemental petition also contains the following: , ·· (3) Petitioners further represent tbat among tbe assets of the San Diego Street-,Car Company are certain unpaid subscriptions to the capital stock of said corporation, and petitioners are not informed as to the full amount of all said unpaid SUbscriptions. bUt among said assets is the follOWing: Petitioners allege tbat on January 9. 1890, a certain action was brought in the superior court of the county of San Diego. state of California, by W. E. Baines. as a judgment creditor for bimself. all other creditors of the San Diego StreetCar Compaqy. against the corporation and certain p,ersonsalleged to be stockllOlders tberein. for the ascertainment of the amount due upon the capital stock of said corporation as unpaid subscriptions thereto. and for judgment against Buch stockholders for the amount due said cOl'potation for unpaid,subscriptions to said stock, with all proper relief; that such pl'Oceedi ngs were had upon issues joined in said action; that 011 the 28th day of June. the said found, among other things. that one E. S. Babcock. Jr.· was indebted to said corporation in thesnm of $48.600.00. that H. L. Story was indebted to said corporation in tile sum of $21,275.00, that Josephus Collett was indebted to said corporation in the sum of $5.350.00, all upon tbeir several unpaid stock subscriptions. and that judgment was dUly given and made upon the findings in said cause; and it was further adjudged and decreed that the said cause be retained in the said court. and that any other jUdgment creditor of the said defendant corporation who should make proper showingtothe Baid court 'of his right tberetbbe allowed to become a party to said action, es" tablish his claim; and have to the extent of such unpaid SUbscriptions, against the said Babcock, Story. and Collett; that yonr petitioners are entitled to come in and be made parties. and to have execution tocol1ect their said judgments from the unpaid snbscriptions. and they have an eqUitable lien upon said unpaid stock subscriptions; that. as petitioners are informed and believe, it is claimed on behalf of the receiver herein that the said unpaid stock subscriptions have been drawn within the jurisdi<;tion of this court, and are now in the constructive possession and control of said receiver, subject to the orders of this cOjlrt ; that 'petitioners fear that they will be embarrassed in proceeding upon the" jUdgment against saId stockholders and other stock.. hblders unlE-ss this court make an order construing the extent of the powers of said receiver. and limiting hIs possession so that the same does not includE! said unpaid stock sUbscJ"iptiona. pray that the said i'ail8' and' material bedellvered to and placed in- the hands of said sheriffot v.49F.no.3-13
,r,'
FEDERAL REPORTER,
San Diegoco"nty, to be sold under tbepetttloners' writs of execution, in orthe,proceeds oftbe sale of theliaine might be appropriated, so far as der necessa-ry, to the satisfaction of petitioners' said judgments, or. if sold under theo17der' of this court, that the proceeds be turned over to said sheriff to be applied on said jUdgments, or applied order of this court directly thereon, and for sU,ch other aid. remedy, andfelief as the nature of the case may reo quire, and law. and equity may permit. And petitioners further pray that the receiver herein be directed to deliver to and place in the hands of the said sheriff San Diego county, to be, sllbjected to petitioners'said writs of execution.,'as provided by law. the saId notes and or, if the same be sol<1 or coIlected under the orders of this court. that theprocepds. so far as necessary to satisfy petitioners' said judgments. be turned over to said sheriff, to be appIJed on said executions and judgments, or applied by the order of this court directly thereon, and for sl1ch other aid. remedy, ,and relief as may be,lawfl1l and equitable in the premises; that the court declare that its made, appointing said receiver. and ordering the property orders of said defendant to be sold. do not comprehend the unpaid stock subscriptiQns dil*, to, said defendant 3ssbove set forth. " Annexed to and made a Plirt of the supplemental petition is an amdavitofH. L. Story, who deposes that, at the time the defendant com':' pany the rails: in question, ..he. was the president of the corpojtbat the rails were for the purpose of waking efi:tensions of the· railway systew of the street-car company; that none of them have been used JOT any purpose, except an extension made upon First street, and a double track on Fifth and D streets, and the crossings between streets H street. also on Santa Fe wharf; that they "have,never been used in connection with the said San Diego Street-Car " Upon the filing of the priginalpetitjon the court wade an order recting cause to be shown why the petition should not be grantedj and thereafter,and after the filing of the BuppleIIlental petition. the receiver filed tpe following as an answer to the petition, and by way of return to the order to show cause:" . "The undersigned. Joseph A. Flint, the receiver appointed in this cause. for answer to the petition of C. J. Fox and the West Coast Lumber Company, creditors and interveners herei.,. and byway of return to the order of this COUI't, tosbow cause said petition should not be granted, respectfully showeth: (1) That the property mentioned and described in said petition was. at the the mortgage sued on in tbis action was executed,and continued to be until the saJe tllereof to A. B. Spreckels by the master in cbaneery appointed in this ct\se.the property of, and owned by. the San Diego Street-Car Company. property was purchased by said company for the purpose of repairil?-galld.extending its line of street and motor rOl\d coverpd by its to the plaintiff and liued ()D in this action. and was included In the propert;ydescribeq. in said mortgage. and covered thereby. (8) Th4t, uPQJ)., the appointment of Santee as receiver herein,qe caused to be made. and filed in this court a and complete inventory of the. property of the Said street.car company, including all of the peti tion ofC.J. Fox and the West Coast Lumproperty described in the ber Company., (4) That OlJq8r A. Trippett, ",ho now appears as the soUcil;pr of saidpetition.erS" from the time. of :their intervE'ntion or the filing ofthei,r claims in tbis action, and as such bad:full knowledge of the foregoing facts. (q) said facts,and tl/.e.bondswbich were
on
FARMERS'LOAN
&'TRUST
CO. V. SAN DIEGO STREET-CAR CO.
195
the fOl1t1dation of this suit'had been held by this court to be voio, and that the cOll'Id not recover, for that reason, the said Oscar A. Trippett, acting.1'b.tsald creditors, the present petitioners, joined with the other itors, and consented to a dooree being entered in favl)1'of all of the creditors, and against said defendant stteet-car and decreeing the sale of all of the property of 1laid company for the satillfacti on of the claims of all of said creditors iri'the order in which they were entitled to payment; and such decree was entered accordingly. (6) 'fhat said consent was given and decree entered with the full understanding of all of the said creditors that said'street-car company was insolvent, and unable to pay its debts in full, and the to the rendition of said decree was made and given with, the view and for the purpose of winding up the affairs of said company, in so far as the Ilame could be done by this court, and of applying all of its property to the payment of its said debts with the h'ast expen8e possible; and to avoid further litigatiun and expense in the state courts. (7) That the property covered by said mortgag-e was described therein as follows: · All and singular, the follOWing described rights, franchises, and pl'operty lying and being ,situate in the city of San Diego, county of ::ian Diego, state qf California, to-wit: Being the line of railway owned and controlled by the party of the first [San Di!'go Street-Car Company] in the city of San Diego, county of San Diego, state of California, including the right of way, road-hed and superstructures, tracks, sidings, SWitches, cars, rolling stock of every kind, machinery, fixtureS, real and personal property of every kind and description, now owned by the said party of the first part, [San Diejto StreetCar Co.,] and used or intended to be used in connection with or for the purposes of said railroad, incom!'s and profits arising or being received therefrom; also, all the franchises'vested in the said party oftlie first part, [San Diego Street-Car Co.,] inclUding its franchise to be a corpol'ation; and also all franchises and property that may hereafter be acquired by said party of the first part [San Diego Street-Car Co.] for the purposes of its line of railway, all its branch lines,extensions, and a1lside tracks and switches that may .be hereafter constructed; it being the true intent and purpose hereof to secure the said hereinbefore described bonds and to their tenor and effect, by charging with a lien for that purpose all the property of every kind and description tllat is now owned by the said party of the first part [San Diego Street-Car Company] for purpos!'s of its said line of railway, and all such property as from time to time. during the existence of said bonds or the life of this mortgage, may be acquired by or come into thp. possession of the said party of the first pal't [San Diego Street-Car Company] for use in connection with its line of railway as herein set forth, and as authorized by its.charter powers granted to it by the state of California.' (8) That the decree of tllis court ort.le!ing the sale of this property, the notice of stich sale, and all pro-ceedings SUbsequent thereto, reSUlting in the confirmation' of said sale; described the property to be Rold, and sold, as the same was described in said mortgage. (9) That notWithstanding the entry of said decree, the consent to the entry thereof, the purpose for which such consent was given, the sub. sequent sale thereund.er, and the confirmation thereof, the petitioners, through their said solicitor, who consented to said decree, have, in violation of the terms of said decree and the rights of other creditors, as well as of the purchaser linder said decree, attempted to reach said property under the process of the state courts, and to that end have, since the filing of their petition in this court and the making of the temporary order thereunder, at their instance, caused execution to issue from the state cO\lrt against said street-car company, and bad the same levied upon the property in controversy in this proceeding. (10) That the petitioners, as this respondent is informed and believes, during this whole litigation, had full know ledge of theexisteDce of the property now
196
FE.DERAL REPORTER,
in. controversy, but during the pendeneyof the suit made no objection to the. mortgage l\.S affecting the same on the grounds now set up in their petition. but stood. by and allowed the decree for its sale to be made. and consented thereto, and are now, for the first time, attempting to. gain an' unfair ad van· tageof the purchaser, and an unfair.and unjust precedenqe over other creditors, by procuring the releasl;! of this pl'Operty from the effect of the decree and sale. so that their execution lien may. first attach."
Accompanying this answer was an affidavit of the solicitor for the complainant, setting forth,'amongother things, that the draft of the decree herein was prepared by him and submitted to the counsel for the respective interest, and after certain amendments Was engrossed, with the full kn9wledge .and consent of said counsel,itnd as so engrossed was presentl':'d to the court as and for a consent decree, and as such was signed, filed; and recorded; "that A. Haines, Esq., appeared and acted in the said final settlement of this form of the decree for the clients of Oscar Trippett/Esq., [the petitioners,] and So stated in open court; that it was the intention of all parties concerned in the preparation of the said decree, in the form in which the same was presented to the court and is now entered and recorded, to embrace within its operation all the prop· erty of the defendant company, personal as well as real; and that the present, said decree was read in open court, A. Haines, Esq., acting for Oscar Trippett,Esq., and his clients, as well as others, and stating in open court tPa,tbe waS authorized by Mr. Trippett to give such .. . consent." So far as .the ,rails, fish-plates, and bolts are cqncerned, they clearly covered hy the mortgage, "md conl;ltituteda part of the subjectmatter of the suit embraced by the complainants' bill.... ,The circumstance that theyhadnot beetl used; and that they were not the· defendant COD.1pallts ()f way; wholly They were to be In the. extenSIOn company'sroad, .andcame within theexpresB terms of the mortgage, which aU :reaLand personal property, of every kind .and description, cClised odntended to 'be used in .e6nnection, with or for the purposef.lof . They were rightly taken possession of by 'the receiver uMer the orAef. of this court, and clime clearly within the decree iog a sale of the property.. . . In respect to the notes executed to the street-car company by the Col. lege Hill Land Association, and the mortgage securing them, the same,. I think, ca.nnot be said. But none of the property of the defendant company was,decreed to be sold by virtue of them6rtgage: On the can.; trary, the court beld that the bonds for which the ·nlortgage was given as security were invalid, and as a consequence, ofpourse, that none of the property could be sold by virtue of the mortgage. .But at the time of this decision all of the property covered by the mortgage was in the bands of the receiver appointed by the court. It is now, for the first time, brought to the notice of the court thllt the notes executed to the defendant cOQlpany by the College Hill r.alid together with the mQrtgage securing them, werelikewise.then jptp.e hands of the re--
FARMERS'LOAN & TRUST CO. 'V. SAN DIEGO STREET-CAR CO.
ceiver, although they were set out in the inventory, returned by, the receiver first appointed, of the property taken possession of by him under the order of the court. This was the condition of the property in ques" tion when all of the parties in interest, including the present petitioners, agreed upon a decree confirming the rElport of the master, which, as has been said, ascertained and fixed the amounts of the respective claims, and ordering the sale of all of the property of the defendant company to satisfy the same. This was undoubtedly done because all of the parties in interest were parties to the suit; all of the property of the defend. ant company, which was insufficient to pay the creditors in full, was supposed to be in the hands of the receiver of the court; it was neces. sary that the court should retain the cause for the purpose of paying the receiver's certificates issued for the· protection of the property pending the litigation; and it was therefore deemed advisable by all of the parr ties in interest to have the whole matter disposed of in this court, thereby avoiding the unnecessary expense of again litigating their respective claims. Under such circumstances, for this court to release its control of the notes and mortgage ill question in order that they may be sub,. jected to the process obtained by the petitioners out of the state court; or for this court to award petitioners priority of lien by reason of their proceedings in the state court, would be to give them an unconscionable advantage over the other creditors of the defendant street-car company; who acted upon the petitioners' consent to the entry of the decree in this court, and who have, so far as appears, taken no actionJn the state courts for the protection or enforcement of their demands. The order ing the receiver, and directing him to take possession of the property involved in the suit, evidently proceeded upon the theory that the defendant company had no other property than that covered by the mortgage. It was undoubtedly illegal in the receiver to take possession of any prop- . erty not so covered; for the bill was filed todol'ecIose the mortgage executed to the complainant, and the order appointing the receiver, and directing him to takeposaessionof the property oithe defendant, was legally applicable only to the, property embraced by the bill. But.the notes and mortgage in question having been. brought into the custody of this court under color of its authority,although illegally, the court has jurisdiction to decidellll conf\icting rights thereto; all parties in interest being parties to the suit. This conclusion is, I think, justified and sustained by the decision.of the supreme court'in the caseofG'umbel Pitkin, 124 U. 8.131, 8 Sup. Ct., Rep. 379. There it appeared that the marShal had taken possession of a certain stock of goo,dsofone Dreyfus on Sunday, under color of process issued the same day, suit in the circuit court of certain of his creditors. Gumbel, another creditor of Dreyfus, suit against him in one of the state courts, and procured an attachment to be issued and placed in the hands of the sheriff, who was prevented by the marshal's possession frommaking an actual levy on the goods of the attachment held by him. The supreIJJ.e courtheld that, thoughthe taking of the goods by the marsnal writ under which he acted having been illegally iss.ued
198
were taken urider color. of and the circrlihlourt therefore acquired jurisdiction by :of the seizure to dequestions'concerningtbe, property,and should have done compl:etejusticebetween the partJies;byenforcing their equitable rights. So here,Ithink that the notes and mortgage in question; having been taken possession of by the receiver under the order of this court purporting to authorjze him to take possession of all of the property of the defendant cOmpany; were taken by that officer under color of authority, and the court therefore acquitTed jurisdiction over it; and, all the parties interested being before the court as parties to the suit, it became the dutyofthecourt to dispose of the property in acoordance with theirequitable.rights. Those rights are fixed by the orderof the court, entered by theconsflnt of all of the parties in interest, including the petitioners, confirming the report ofthe master, which ascertained the amounts and order of priority of the claims or the respective parties. The notes and mortgage now in question not having been embraced by the decree of sale already made,there must bea supplemental decree directing a sale of the notes and mortgage, and a disposition of the proceeds thereof in accordance with the rights of the respective parties, as fixed by the ap;reed order and ,decree. In respect to the stock subscriptions, referred to in the supplemental petition, nothing more need be said' than that it is a matter over which this' court never acquired any jurisdiotion, and with which it is therefore in no way concerned. Petitions denied, and counsel will prepare'; a supplemental decree in accordance with the views above expre&:ied.
GAIa". TcTTLE et al. (oCrouu Court,
w. D. Me-IOU", B. D.
February S. 1892.)
L
The grantOr In a deed of trust, made to secure a debt, became involved in trouble, and ded the state. The oreditor secured induced the trustee to sell, and the property was purchased by defendants,bringing enough to pay the creditor and leave a surplus to the grantor.. Apprehensive that they would be made to pay this surplus to grantor's other creditors, defendants, who had received a conveyance from the trustee, reconveyed the to the trustee, procured him to resell the land, and at such sale repurchased the land for a tride, and received a second deed from the trustee. HeW, in an action by the aJtainst defendants to recover the surplus On the first sale,. that the second sale was a nullity, and that plaintiff was entitled to recover the surplus. , 8AJ,{B-CONTEMPORANIIOUS PAROL· AGRImMENT.
TO BBOl1BB
OF DBBTOR.
lL
Defendants alleged that plaintiff had directed the trustel:! to apply any surplUS remaining after satisfaction of the debt secured to the payment of plaintiff's other Indebtedness. There was no evidence to support the contention,except an admisQccurrlng in an imputed conversation three YElars prior to the sale. sion of Beld, tha1;suchalleged dIrection to trustee, purporting to have been made contemporaneously with the deed of trust, and giving a different direction to the fund tban that tW:lrein prescribed, was not admissible in evidence· OF OJ' TRUSTEE.
..
Tbe having provided tha.t any suchsurpllls sjlOuld go to plaintlff,defendantapurobased witb noticie of such provision, and acted at their perU in rely-