KROHN
1).
WILLIAMSON.
869
not be conveyed to saId clty as part of saId waterworks plant. The value of saId Kaw PoInt pumpIng statIon has been deducted from the price to be paid for the complete works. Twelfth. It is further adjudged that each party shall pay one-half of the costs that have accrued in these suIts up to the entry of this decree. Thirteenth. That the court doth now reserve to Itself the power to make any further order or orders that may hereafter be found necessary to carry this decree into full effect, and as may be deemed equItable and just. .
KROHN v. WILLIAMSON et aL (Circuit Court, D. Kentucky. June 12, 1894.) No. 1,841.
1.
CORPORATIONS HOLDERS.
PROFITS OF CONTRACTS BY OFFICERS -
RIGHTS OF STOCK-
Promoters of a brIdge company, the only subscrIbers to Its stock, agreed to assign to complaInant a certaIn Interest therein. Thereafter two of them, ofllcers of the company, made on its behalf a contract with a construction company, whereby that company, for $1,000,000 in bonds of the brIdge company and the entire $1,500,000 of bridge company's stock subscribed, agreed to construct the brIdge, furnish money to acquire land for approaches, and return to the subscribers to the stock $200,000 thereof, the contract recitIng that the $1,500,000 stock was used by the bridge company with the consent of the subscribers. At the same time, said two ofllcers agreed witb the construction company, for $300,000 in bridge company's bonds and $600,000 in bridge company's stock, to procure and convey title to said lands needed for right of way. '.rhey reported the construction contract to theIr board of dIrectors, but said nothing about the right of way contract. They afterwards procured the necessary lands, using only the bonds for that purpose, and making a substantial profit In the transactIon, as they had expected to do. Beld, that the $600,000 of stock was not a part of the real consideration for the right of way contract, but was a profit on the construction contract, In which complaInant was entitled to share, as agaInst saId ofllcers, and they held his share thereof as trustees for hIm. As said ofllcers, in so disposing of the stock, held the direct relation of agents to the stockholders, including complainant, they were directly accountable to the stockholders for the stock improperly diverted to their own benefit, and complainant might maintain an actIon for his share thereof without showIng a refusal of the company to sue. The subscribers to stock of a bridge company agreed that it might use so much of the stock subscribed as might be necessary to construct the bridge, returning the remainder to be divided among them. The company made a contract with a construction company by which the latter, in consIderatIon of the transfer to it of all the stock subscribed,agreed to construct the bridge, and to return to the subscribers a certaIn quantity of the stock; and It was agreed that the whole issue of stock should be treated as paid up by the acquisition of the franchIses and the erection of the brIdge. Held that, as between the bridge company and its subscribers, this agreement was valId, and the stock returned to them must be treated as paid up. The subscribers to stock of a bridge company agreed that It might use so much of the stock subscribed as mIght be necessary for the construction of the bridge, the remainder to be returned to be dIvided among them. Two ofllcers of the company, dUly authorized, made a contract on its behalf with a construction company, by whIch the latter was to construct the bridge, receive a transfer of all the stOCk, and return a part of
S.
SAME-AGENCY OF OFFICERS-AcTION BY STOCKHOLDERS.
8.
SAME-PAID' Up STOCK.
4.
RELEASE-IGNORANCE OF FACTS-TRUSTS.
870 ," It to· 'the' S'Ubscribers. I ' By.. llillothel' contract., the .Sll.Ule officers. agreed . procure for the COl1stm1.t:ltlon>company,OOooElsary Qf way., in eration of the transfer to them of certain bonds and iii Pllrt of the Com'Plainan1;,. one· entJ,tled,t9 rshare in . j:lle distribution llnder the his pqr1;loj:l of the .stock returned thecon/il,truction QonjJ."l!jlt,,8.nd th \;.,1JJi,cel1s a release of all claims jl.gainst them. having ll,t;tp.at time JW of the right of way con,: tract.. H,eld, th,at the not from subsequently claiming his share of the stock received by the officers under the right of was contract, on the ground that such stockwas a profit under the construction con.act, and should be divided among the stockholders. LACHES-FAILURE T,O
5.
The defense of theg'round' that complainant, by inquiry, mig!It have learned relled on" .his· bill .earlier, is avaIlable to defendants, who were under obligation to dIsclose to hIm such facts without inquiry; especially where the delay has worked no ,
.".'
6.
SPECIFIC PERFORMANOE-JURISDICTION-':TRANSFER OF STOCK.
a:cquired on the ground thal;r,the suit is to enforce a trust, the court ma(f, compel performance of an:. obligation to transfer stock, the· subject of such trust,. the value of whichdsuncertain.
'1.' CORPORATIONS-CONBor,rDA1'ION--STOCK- REGIS'fRY OF fI'RANSFERS. . Two corporations, sevel'l1lly chartered ,by Kentucky and by Ohio for the purpose of a.crosBthe' Ohio river, were consolidated underlaWfl of both ·states. wRlaintiff, ina suit against stockholders to recover stock of the collsolidated company;.pra)'ed that the transfer to him, if decreed, might be i:egistered, and to that end made the Kentucky corporationaparty. Held, that the bUlDiullt,be dismissed as to it, for it had no authoritY to register transfers of theconsolidatedlltock.
This is. a bill in equitY:ihro.ught by Lo. uis Krohn, a citizen of J()hn A. Willi'amson, citizens Ohio, to compel R. Kentucky, to tAecapital stock of the Oentral Railway & 13ri4ge Company.; The Central Railway & 'Bridge Company, averred to be a citizen of Kentucky, is made a a register by it of the party to the bill, for the'purpose of transfer of the stock. ,, , ' " The action is based ,on the following facts: Nelson and Williamson, to.gether with one Kirk andoUe,;Hawthorn,pr9cured from the Kentucky legislature a charter for a corporation, with power to erect a toll highway bridge ,from Newport, Ky., to Cw.Qinnati. Ohio. 'The .Qompany was organized, and the four promoters subscribed to $1,500,OOO;'0( the capital stock. An Ohio cor' poration for the same purpose was organized, and the two companies were then consolidated, under the laws of bo,thstates. The needed federal, state, l,tIld municipal franchisel!l and priv:Ueges :were obtained in both states; so tha.t no.thing re.maine.d to..b. on.e but t 4 .e.p,u,rchase o.f lll,nd for the approac.hes, an(i 1J1e construction of , Louis, Krolm and O. B. Simrall were 'intereste.d i.nthe OhiO. River.,.,' C. .. . . c.pm-pany, organized to float the company's bondsapd, to build tll,e bridge, A contract was entered ip.to with the bridge company for this ,Pl1rpose. Subsequently, in October, it was deemed best. to abandon i;becontract. after tl1e partial erection of one pier, begun to pre",ep.t the laplile 'Qt, rights secured to the. bridge comP9JW by an ordlDAp.ce of,1;be·city of NeWpOrt, to the,erection of the pier $336. When the contract between the! Gonstruction company and the bridge company was aband0J;led, the promoters of the bridge company" who wereals9 largely interested in the construction company, executed the following.,agreement: ..> ." . .''', . "We, the undersigned, to Louis Krohn the same interestln the. Celltral Railway &; Bridge. Company thatsajd Krohn now holds in the Ohio River ConstlluetiOl1 Company, which it is agreed is eight per cent; the said Krohn to· bear bis of future expenses incurred by
v.
8il
the Central Railway & Bridge Company whenever the other holders of stock in said bridge company contribute to said expenses their proportion; the consideration hereof being the cancellation of the contract between the OhilJ River Construction Company and the Central Railway & Bridge Company, in which said Krohn is interested. "[Signed] R. W. Nelson. "Jno. W. Kirk. "Jno. A. Williamson. "L. R. Hawthorn. "Newport, Ky., Oct. 23, 1889." By a similar contract, Simrall was given a 5 per cent. interest in the bridge company. By resolution of October 24, 1889, Williamson, as president of the bridge company, was authorized to make a contract for the construction of the bridge. After various negotiations with different bridge construction companies, Williamson and Nelson, who was vice president, director, and attorney of the Centml Bridge Company, went to Cleveland, and made two contracts, of date March 31, 1890, with the King Iron Bridge & Manufacturing Company, of that city. One ,vas a contract between the King Company and the bridge company, by which, for $1,000,000 of the bonds. of the latter company and $1,500,000 of its stock, the King Company agreed to completely construct and equip the bridge by January 1, 1891; to furnish the money necessary to acquire the title to lands needed for the approaches to the bridge on both sides of the river; to return to the promoters of the enterprise and the subscribers to the stock $200,000 of the capital stock; to treat the entire $1,500,000 of stock as paid up by the acquisition of the franchises and privileges and the erection of the bridge; and to pay to the Central Bridge Company daily' interest on $1,000,000 for every day's delay in the completion of the bridge beyond .January 1, 1891, except for such dela;rs as might be occasioned by the failure of the Central Bridge Company promptly to procure land for the approaches at reasonable terms. 'l'he contract recited that the $1,500,000 of stock to the King Company by the contract had been subscribed for by the four uirectors and stockholders of the company, but was used by the briuge company, with their assent, to secure the construction of the bridge. The second contract was made by the King Company with Williamson, Nelson, and D. P. Eels, a banker of Cleveland. By this contract the King Company agreed to give 'Villiamson, Nelson, and Eels $300,000 in money or bridge bonds, and $600,000 in bridge stock, in consideration of their procuring a title to the land necessary for the bridge approaches, and conveying the same to the bridge company; the three individuals agreeingthat, if the cost of the land and expenses of purchase and condemnation should exceed $300,000, they would pay the excess. Without such an assur· ance of the cost of the rights of way, signed by gels, the King Company would not have entered into the first contract. Eels' interest in the contract grew out of the fact that had agreed to float the bonds for the compensation usually paid for such services. By a writing of the same date with the contracts just described. Eels stipulated that he was to have no interest or part whatf.:ver in the $600,000 of stock, "in consideration of Williamson and Nelson giving their personal attention and service to the purchase and appropriation of the rights of way" necessary to the completion of the bridge. Williamson reported to the board of directors of the bridge company the execution of the construction contract between the two companies, but he said nothing of the right of way contract. Shortly before the execution of these contracts, Williamson induced SimraIl to assign to him his 5 per cent. interest in the bridge enterprise for about $200; and, a few days or weeks\thereafter, made several efforts to procure an assignment to him of Krohn's mterest in the company, but Krohn declined his offer. The bridge was constructed, and the necessary rights of way for the approaches were procured. The land cost about $250,000. The expenses and lawyer's fees amounteu to $30,000. It was necessary in buying the land to purchase more than enough for the approaches, because the approach on each side ran diagonally across many of the lots. 'l'he land was taken in the name of Williamson, and then there was conveyed to the bridge company
872'
FEDERAL REPORTER,
vol. 62.
only what was required for the approaches. The remnants ''were kept by WUliaIllSOn·.for the benefit of himself, Nelson, and Eels. Three such lots kaye; been :sold for $15,000. On the whole, the profit of the right of. way conof the $600,000 of stock, rangE:d from thirty-five to fifty thousand dollars. Neither Williamson nor Nelson was satisfactorily that subject. In the settlement between Eels, Williamson, and Nelson, 'WIlliamson .took. $5,000, to pay for his services in superintending the pU3'chase and oon4emnation of the right of way; while Nelson, as counsel 1D the transaction. had received $6,250. After the completion of the bridge, Krohn applied to Williamson and Nelson for his share of whatever was due to the projectors of the enterprise. He was informed by Nelson, speaking for himself and Williamson. that his interest was limited to 8 per cent. of $200,000 of bridge stock. Krohn was suspicious that this did not include everything he was entitled to, Whereupon Nelson exhibited to him the original contract for the construction of the bridge. Krohn insisted that he was also entitled to the $336, which he had advanced' to the first construction company, with interest. After correspondence and much delay, upon threat by Krohn of a suit, Nelson and Krohn settled for $10,000 of the stock and $1,050 in money, and Krohn signed the folloWing receipt: "Received of R. W. Nelson, John W. Kirk, John A. Williamson, L. R. Hawthorn, the Central Railway & Bridge Co., sixteen thousand dollars of the capital stock of the Central Railway & Bridge Co., in full satisfaction and discharge .of all obligations against them, and each of them, and especially as regards an obligation dated October 23d, 1889, of which the paper on the face of which this is written is a true copy; and also the $1,050.00, -in full of all claims whatsoever to date. "[Signed] Louis Krohn. "March 16,1892." Nelson says that he told Krohn that Williamson and he would not make anything except their share pf the $200,000 and whatever they might make out of the right of Krohn denies that Nelson ever said anything about the right of way. Neither Nelson nor Williamson exhibited the riljht of way contract to Krohn, and Krohn denies all knowledge of it or its contents until shortly before bringing this action, .when he learned of it from a pUblished account of a suit brought by C. B. Simrall against Williamson, in which the fact and contents of the right of way contract were stated. Krohn thereupon tendered back the $1,050 received at the settlement, and demanded $48,000 of the bridge stock, as 8 per cent. of the $600,000 received by Nelson and Williamson In addition to the $200,000 mentioned in the construction contract.
Wm. Goebel, for complainant. Paxton, Warrington & Boutet, George Washington, and W. W. Oleary, for defendants. TAFT, Circuit Judge (after stating the facts as above). Were this proceeding an attempt by Krohn to obtain from Williamson and Nelson the profits received by them from the $300,000 in money or bonds, paid by the King Company for the right of way, or from the remnants of land bought, but not used, for the bridge approaches, the objection made by defendants' counsel that Krohn is here seeking to assert the rights of the bridge company, without showing a refusal of that company to ,act in its own behalf, would be well taken, and the' bill would have to be dismissed on that ground; for it is undoubtedly the law that a stockholder cannot be permitted to institute litigation on behalf of the corporation until he has made every effort to induce the corporation to appear and maintain its rights in its own person, and unless its failure or refusal to do so is something like a fraud upon the complain-
873
ant. Porter v. Sabin, 149 U. S. 473, 13 Sup. Ct. 1008; Dimp· fell v. Railway Co., 110 U. S. 209, 3 Sup. at. 573; Hawes v. Oak· land, 104 U. S. 450; Macdougall v. Gardiner, 1 Ch. Div. 13. But in the case at bar the stock which Krohn seeks to recover never was the property of the bridge company. It belonged to the original subscribers, who, as the construction contract shows, per· mitted the corporation to use the same as part consideration for the work of building the bridge. The real agreement between the four promoters and the corporation was that the bridge should be built for the bonds and as much less than the $1,500,000 of subscribed stock as possible, and whatever was left of the stock should be divided among the promoters and subscribers, in proportion to their interests in the enterprise. The original promoters gave Krohn an interest of 8 per cent. When Williamson and Nelson went to Cleveland to malre the contract, they not only were acting for the company, but, in the disposition of the stock, they held the direct relation of agents to the stockholders, including Krohn, because it was the stockholders' property they were proposing to deliver; and they owed a duty, not to the company only, but di· rectly to the stock subscribers, to save as much of the stock as possible for division among them. If it turns out that Williamson and Nelson have so arranged the contracts that they have secured for their individual benefit $600,000 of the stock, as an apparent profit of the right of way contract, when, in fairness, it should have been added to the $200,000 returned to the original stock subscribers in the construction contract, I can see no difficulty at all in holding that there was such a direct trust relation between Wil· liamson and Nelson, on the one hand, and the stock subscribers, on the other, in the use of the stock to secure the erection of the bridge, that the former are directly accountable to the latter for the $600,000 stock thus improperly diverted to the individual benefit of the trustees. It will be observed that the net result to the King Company of the construction and right of way contract was that it should build the bridge for the proceeds of $1,000,000 of bonds and $700,000 of stock, less $300,000 in cash,-the fixed cost of the right of way. It was entirely immaterial to the King Company how the remaining $800,000 of bridge stock was disposed of. It was of no concern to that company whether it was all returned to the stock subscribers in the construction contract, or that some of it was made to con· stitute part of the consideration for the right of way contract. Nor had Eels any interest in the mode of distributing this $800,000 of stock between the two contracts. In other words, Williamson and Nelson, as trustees, undertook to decide that, of the $800,000 of stock which the King Bridge Company was willing to give back, out of the total issue, the subscribing stockholders should receive but $200,000; and they, in their individual capacity, as additional compensation for entering into the right of way contract, should receive the remaining $600,000. The equity and fairness of this arrangement and division they never submitted to those for whom
:874
they acting, but they regal:ded the right of way contract as "a private matter" (to use Nellilon's language), with which the other stockholders had no concern. Under these circumstances, tb.ere is a heavy burden upon Nelson and Williamson to clearly establish that it was fair and entirely just for them to make the $600,000 of stock part of the consideration for the right of way con· tract, instead of returning it to the stockholders in the construction contract.. The writing by which Eels agrees that he has no interest in the $600,000 of stock im,ports that he relinquished his interest to Williamson and Nelson in consideration of their giving their personal attention to the purchase of the right of way. But I cannot give this recital any Weight., When Eels, Williamson, and Nelson came to divide the profit of the right of way contract Williamson took $5,000 for his attention to the purchase of the dght of way, and Nelson's lilervices had been fully paid for by a counsel fee of $6,250. When the three men made the right of wu,Y contract, t)1ey believed the'y coulpsecure the necessary land for less than $30Q,000. Eels. expressly so states. Their judgment was they mape .a,. halldsome profit out of it. Whether vindicated, and Williamson,can be ,called to account for that profit by the,bddge company need not be here considered. Suffice it to that, with the bv.rden on them toshQw that the $600,000 of stock was a reasonable addition to the consideration for the right of way contract, they have notlilustained it. If it ,had been, why sbould Eels not share it? The. eiKplanation that it was used as a consideration for persQnal services of Nelson and Williamson is shown to be unfounded by the subsequent settiemellt between the parties. The stock of the,bridge company had no determined value. It was wholly speculative. The division of the $800,000 between the two contracts was, in effect, a decision by Nelson, and Williamson that, in consideration of the right Of way contract, they were entitled to three shares in the profits of the enterprise, while all the stockholders, including themselves, should have but one; and this, without consulting those most interested. Now, was the agreement to furnish the right of way contract for $300,000 burdensome? The circumstaDC'es show that it was not.. Williamson and Nelson may be presumed to have been quite familiar with the land to be bought an,d its pr,obable cost, and they do not show any reason whatever a hazardous one. Eels went for thinking that the contract into it on their assurance, without any indemnity from them, because he and. they thought it a profitable speculation. They were r:ight. They cannot complain, now that they to account by their principal, who was given no option to approve or disap' prove the arrangement before it was executed, jf·the fairness of it is judged somewhat by its results. On the whole, I am convinced that the $600,000 of stOck was no part of the realc()nsideration in . the right of way contract, but that it should have been included in--the construction. contract. !tis probablethatNelson and Williamson considered that Krohn's contribution of money and labor to the enterprise. was. 1'10 small, as compared with their own, that
. V. WILLIAMSON.
875
they were justified in thus reducing the value of his interest. But they had given him 'an 8 per cent. interest in the whole enterprise, and no such plan as this was, to deprive him of the full benefit of it, can stand for a minute when challenged in a tribunal administering equity. This is not the first time that men of good repute and character have deceived themselves into regarding as shrewd business strategy that which, in a court of equity, is wholly indefensible. The conclusion I reach is not based on the comparative credibility of the parties and their witnesses. It rests on the admitted circumstances, from which the inferences I have drawn seem to me to be necessary. Finding, as I do, that the $600,000 was really a profit of the construction contract, and not of the right of way contract, I must hold that Krohn is entitled, as against Nelson and Williamson, to 8 per cent thereof. Kimber v. Barber, 8 Ch. App. 56; Tyrrell Bank, 10 H. L.Cas. 26; Parker v. Nickerson, 112 Mass, 195. We come next to the objection, urged on behalf of defendants, that, if this $600,000 is to be treated as belonging to the· original stock subscribers, then nothing has been paid in on it by them, and its issue as paid-up stock is a fraud upon the company, which a court of equity will not countenance, by compelling its transfer from one subscriber to another. It might be difficult to support such a defense, even if the original issue of the stock were fraudulent as against the company; but it is entirely unnecessary to consider it in this light, for there was no fraud upon the company in the issue of the stock. It was an express agreement between the King Bridge Company and the Central Bridge Company, acting for itself and its other stockholders, that the completion of the bridge, the acquisition of the right of way, and the possession and enjoyment of the franchises and privileges, should be considered a full payment of the $1,500,000 of the capital stock, justifying its issue as full paid-up stock. Such an agreement, as between the company and its stockholders, was entirely valid, however subject to attack· by creditors it might be. Scovill v. Thayer, 105 U. S. 143, 153. The next defense is that Krohn is prevented from recovering herein by the settlement made between him and Nelson, !farch 16, 1892, when Krohn, in consideration of $16,000 of the stock and· $1,050, gave a receipt in full of all claims. It is manifest from what has been already said that the relation between Nelson and Wile liamson, on the one hand, and Krohn, on the other, was that of trustees and cestui qui trust, or of agents and principal. Before any binding settlement could be made between them, it was necessary for Nelson and Williamson to make a full disclosure of what had been done by them as trustees. Farnam v. Brooks, 9 Pick. 212, 232; 1 Story, Eq. JUl'. §§ 315, 316, 316a; Kimber v. Barber, 8 Ch. App.56; Tyrrell v. Bartk, 10 H. L. Cas. 26; Parker v. Nickerson, 112 Mass. 195. It is not claimed that they did this. Nelson says that he told KrOhn that he and Williamson would receive nothing except their share of the $200,000 of stock and what they might
876
FED]!1lU1. REPORTER,
make out of th,e right of way procecclings. Simrall and Krohn deny that Nelson alluded to the right of way matter. Butit is not impQrtant, for, even if Nelson's account is accurate, this was by no means a full disclosure of the facts. Krohp. might fairly have inferred that Nelson was alluding {)Jlly to reasonable and ordinary compensation for his services in the condemnation proceedings, and for V\,Tilliamson's i services in securing' evidence, etc., for the same purpose. We can be very certain that, if Krohn had known the full truth (which it was Nelson's duty to tell him), Krohn would never have made the settlement. It is quite true that Krohn suspected that he was not being fairly dealt with, and that he therefore insisted that he should be paid an additional amount in cash over and abovetlrat which under Nelson's statement of the facts he was entitled to; but I do not see that Krohn's suspicions of Nelson's fair dealing, and a settlement bas,ed on them, at all relieved Nelson of the duty to disclose everything. It did not put the parties at arm's length. The trust relation continued in existence so long as the proceeds of the transaction in which it had its inception remained undistributed. For these reasons, Krohn is-entitled to have the contract of rescinded, he having tendered back that which he received under it. , It is urged that Krohn cannot ha"ve a rescission because he was guilty of laches in not filing his 'bill earlier. The settlement was made in March, 1892, and this bilJ ,was filed a year later. There is no evidence at all to show that Krohn knew of the right of way contract until just before he filed bill. It is said that he might have learned the facts by inquiry., His inquiries of Nelson, who owed him the duty to tell him, were not productive of much information. Nelson says that he ,considered the right of way contract a private matter, and so did not think it necessary to tell, to C. B. Simrall, his fellow attorney in the condemnation proceedings, the particulars of it. It does not lie in the mouth of either Nelson or Wil,liamson, with the obligation on them to tell Krohn everything without inquiry, to complain that he did not go to the King Bridge Company or Eels to learn the facts. Certainly, Krohn has not been supine or slow to assert his rights since he did learn the facts. It is not in evidence that between March, 1892, and a year later, there was such a <:bange in the circumstances, in the market value of the stock or otherwise, that a year's delay in asking rescission, even with full lmowledge, would work any inequity to defendants. Mining Co. v. Watrous, ,9 C. C. A. 415, 61 Fed. 163, 186. We have thus far in the base proceeded on the ,theory that by the of October 23,1889, signed by Nelson, Williamson, Hawthorn, aridKirk, Krohn took a present interest in the enterprise. The lanof the paper seems to be, at first sight, that o:f an executory contract, not giving Krohn any present interest in the enterprise, but only a right to thecQDveyance an interest at some time in tb.e future. Taking the, whole instrument together, in the light of the surrounding circumstances, however, 1 thipk it may be fairly construed to a present interest. Under, it" Krohn
KROHN t1. WILLIAMSON.
877
could be compelled to contribute his proportionate share to any expenses thereafter to be incurred when "the other stockholders" should do so. This certainly implies that, as between the parties to the instrument, Krohn was then a stockholder. Of course, the stock subscriptions were in the names of the four signers of the writing of October 23, 1889, and the legal title to the stock, if it could be properly said to have any existence at all, remained in the four subscribers; but an equitable interest in the enterprise certainly vested in Krohn from the delivery of that writing. The fact is that these projectors were like partners, and, by this writing, they let Krohn in as a partner to share to the extent of 8 per cent. in any stock which after the construction of the bridge might remain for distribution among them. When, therefore, the four stock subscribers received the paid-up stock under the construction contract from the King Bridge Company, they held 8 per cent. of it as trustees for Krohn. This equitable ownership of the stock entitles him to the form of relief he here asks. It is true that the relief asked is in the nature of a decree for the specific performance of an obligation to transfer personal property, and that, ordinarily, courts of equity will not afford such a remedy. The modern tendency of courts, however, is towards a much more liberal rule in this regard; and, if any good reason appears why damages for conversion will not be adequate remedy for the injury, a decree will be granted. Here the stock has no market value. The damage from conversion would be wholly speculative and uncertain. But the controlling reason why, in this case, the delivery of the stock in specie should be decreed, is that the defendants hold it in trust for the complainant. The confidential relation, in violation of which defendants seek to retain its possession, gives the complainant the option either to have the stock or its value. The court, as a court of equity, acquires jurisdiction of the action, not because damages at law would be inadequate, but because it is an action to enforce a trust, and, having jurisdiction on this ground, may give such full relief as the nature of the case requires. Johnson v. Brooks, 93 N. Y. 337; Stanton v. Percival, 5 H. L. Cas. 257; Cowles v. Whitman, 10 Conn. 121; Kimball v. Morton, 6 N. J. Law, 26; Pom. Eq. JUl'. § 14. The result is that Krohn is entitled to a decree against Nelson and Williamson, finding the ownership of $48,000 of the stock standing in their name to be in Krohn, and ordering them to assign the same to him. The defendant company, the Central Railway & Bridge Company, is a Kentucky corporation, because the bill so avers. If it were the consolidated company, it would be a citizen of both Kentucky and Ohio ; and then, the plaintiff being a citizen of Ohio, and one of the defendants being a citizen of the same state, the jurisdiction of this court would be ousted. The stock which Krohn seeks here to recover is stock in the consolidated company, for it was with that company that the King Company contracted. The Kentucky corporation has no authority to transfer or register transfers of such stock. I cannot therefore make a decree against
FEDERALREPQBTER".:vol. '62. the defendant the Kentucky company to register the trallsfer' which' Nelson and Williamson are required to ·execute.! i The bill,. as against that company, will be dismissed. As against Nelson. and Williamson, however" the decreewilLbe as already stated, and forcosts. , . I'
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WUNSCH,et a1. v. NORTBERN PAC. R. CO. (Circuit Court, N. D; tJaltfornia. May 14;1894.)
No. '10.,985. way company, without knowledge as toitlfcontents; from a traveling salesman . I:ll\v.ng: a tlplfet over 'llDd was checked, as baggage tQ.. hisdestqlation a,nd placed iJ:l a car. The train was derailed, the car took':tli'e, and the trunk and Part of Us 'contents Were destroyed or lost. The salesman delivered the jewelry saved· to the conductor of the train, telling 'the conditotorrwbere he ws'H;QllJ,g.After his II.rrival tb.ere he presented,hts ,cb.eck to the company's anCi.demanded his baggag,e, I19te:x:plainil;l,g, tbat it had beep def>troyed, Ilor asking for the goods, sa'Vel;i;'atidasubsequeJ1t tender by the company of sucb. goods on identifishould be without prejudice cation :\Vas'refused,unless their to a clad\ll, against theeompany for damlliges, .Held ,that, as ,the, original delivery .tiO COInWLtIY was l\. ,upon it, .and tlJ,e t:ru,nk .and its contents. dil;i. J:!.ot bec(jlIie. tMrelit, thel:e was. ho 'converSion of the rescuedl\rtlcles l;iY' tlleii; nond.eU"'erY Qll the demand 'made; the only duty· impoSed on 'thecoIllpany with respect to:thembeingtokeep them safely and (}eijvflt tbem On <ielllllllld and to their· owneI" OF PASSENGER'S EFEECTS .,.,..MEROHANDISE CARltum BY TRAVELING SALESMAN., . ... ' : . ' , A trunk containing a stock of jewelry Wll.S received by an.agent of a rail-
actltlIi;bY M;iWunacb.&Cornpany itgainsfthe Northfor; the,]oss of certain gdods delivered todefen4ltnqor traIlsp6rtation. . . . . . E. . Joseph D. ReddiIlg and Horace for defendilnt. I .. I.
Circuit Judge {oraJly).'1'he facts. of this case are as follows:9neEisenbach, a traveling M. Wunsch & Co., passage at Spokane for Mont., he having a ticket over defendant's road. He checked his trunk for that towIl' paying fOf; extra weight, p,nd received llreceipt for the latter, . ordinary baggage c1).eck for the trunk. The trunk wasrecltiyeq.·by the,iagent of the company, and pntin the baggage' Car. 1t,containedabont $20,000 worth..of jewelry 9f:various kinds, the property of There is, AO that the agent of thecqw-pq.ny)mewits contents. .QiDthe morniIlg,of. the next day the train, Wa.s.' derailf.p,near a p .." . . f:- 1l.lJ,EJ!l ."N0iKon," a.nd. the bagg .. .age ear took we. Mr.$isenbach testj1iil:ld that he got the trunk out, but the hellt .drove hiJP, away, fire got to. tpe trunk, and it Partlof them. only were putJIl a p'ox .obtained .froID the newsto' Noxon"a,n-<l:'jhere to a.' train a· ,pwce' called i from, . transported to Missoula, and, by direction of the then superintendent, turned over' I I
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