112 F. 212 | 8th Cir. | 1901
Lead Opinion
after stating the case as above, delivered the opinion of the court.
The record discloses that on November 1, 1888, the Kansas Investment Company, a corporation of that state, issued a series of debenture bonds amounting to ¿50,000, and, to secure their payment, deposited with the Boston Safe Deposit & Trust Company, hereafter termed the “Boston Company,” certain securities, consisting of notes secured by mortgages on lands principally situated in Kansas, to an amount exceeding by 5 per cent, the par value of the debenture bonds. These debentures were sold in Scotland, and Hugh Campbell, the appellee in one of the cases, and the appellant in the other, became the purchaser of four of the debentures, ea.ch for the sum of ¿5O0, which by their terms matured on November 1,1894. As the debentures were not paid at maturity, Campbell brought an ac
In support of the first proposition it is said that the intervener should not have been allowed to amend his intervening complaint so as to challenge the .validity of the sale that was made by the Boston Company, since in' his original complaint he failed to state any.such ground for relief, but averred the existence of a general lien upon all of the securities in the hands of the! receiver in favor of all the creditors of the Kansas Investment Company, growing out of the transfer by that company of all its assets to the Colorado Company
Passing to the second proposition stated above, we observe at the outset that the case before us discloses a sale by a trustee of securities which at par amounted to a sum exceeding $250,000 for $15,600, ■or about one-sixteenth of their par value, of which amount only $612
By tlieir third proposition the appellants assert that, although the sale in question was invalid, yet the Boston Company was an indispensable party to any proceeding which might be brought to have the sale adjudged invalid, and that the decree below should be reversed because the Boston Company was not made a party to the action. It will be conceded, of course, that the Boston Company would have been a proper party to the proceeding which was inaugurated in Kansas by the filing of llie amended intervening complaint. It is obvious, however, that it could not have been made a party otherwise than by the voluntary entry of its appearance as an inter-vener, because it was a foreign corporation; and we are unwilling to hold that 110 relief could be afforded to the intervener because the Boston Company did not elect to intervene. It is also manifest that Campbell could not have proceeded against the Boston Company with a view of annulling the sale except by an original bill exhibited against that company, and that he could not proceed against it in Kansas by an original bill, because it was a Massachusetts corporation, unless it elected to enter its appearance to the action, waiving the issuance and service of process. On the other hand, the assets in controversy, consisting of notes and mortgages on which Campbell claimed a prior lien, were in the exclusive custody of the federal court sitting in Kansas, and were undergoing administration there, and were liable to be distributed at any time for the sole benefit of the holders of the general issue debentures. For these reasons, and because the property was of such a nature that the title would pass by delivery, he was compelled to intervene for the protection of his interests. By thus intervening in the court which had the custody of
“In all cases where it shall appear to the court that persons, who might otherwise be deemed necessary or proper parties to the suit, cannot be made-parties by reason, of their being out of the jurisdiction of the court, or incapable otherwise of being made parties, or because their joinder would oust the jurisdiction of the court as to the parties before the court, the court may, in their discretion, proceed in the cause without making such persons parties; and in such case the decree shall be without prejudice as to the rights of the absent parties.”
The case at bar, in our judgment, falls fairly within the provisions as well as the spirit of this rule. It was beyond the power of the in-tervener to make the Boston Company a party to the suit in Kansas-in which he found it necessary to intervene. A suit in Boston would have occasioned much unnecessary delay and expense, and wliile it was pending the securities in question might have been distributed by the court which had them in its custody. Besides, such interest in the controversy, if any, as the Boston Company may have had,,
The fourth and fifth propositions on which the appellants rely are closely related, and may be considered together. By these propositions they assert, in substance, that Campbell is in no position to question the validity of the sale that was made by the Boston Company, because he has been guilty of laches in not challenging it at an earlier date, and because he has, in effect, ratified it, by accepting his proportion of the' proceeds of the sale. The charge of laches is based on the ground that Campbell did not attempt to have the sale set aside or treated as a nullity- until November 21, 1898, the sale having taken place June 19, 1895, whereas a statute of the state of Kansas (Gen. St. Kan. 1897, c. 95, § 12, subd. 3) provides, in substance, that an action for relief on the ground of fraud must be brought within two years; “the cause of action in such cases not to be deemed to have accrued until the discovery of the fraud.” It is claimed that this provision of the statute should be held, by analogy, to bar his right to equitable relief. The merits of this' contention can be best determined by a brief statement of certain conclusions of fact which have been reached after a careful perusal of the testimony. On August 5, 1895, Campbell, who at all times resided in Scotland, was advised by the Boston Company that the securities in controversy had been sold for the benefit of the debenture holders of the Kansas Company to George C. Morrell for a price that would net $30.60 upon each ¿100 of outstanding debentures. At that rate Campbell was entitled to receive about $612 on account of the four debentures which he owned. No further information was vouchsafed to him concerning the sale, or the circumstances attending it, or the disposition that had been made of the securities. Some time thereafter Campbell employed certain attorneys who resided in Kansas to attend to his interests in this country. These attorneys advised an action at law upon the four debentures which he held, against the Kansas Company, that had issued them, together with certain supplementary proceedings to be thereafter taken against the stockholders of that company. An action was accordingly brought upon the debentures, which resulted in a judgment against the Kansas Company on November 27, 1897. Before this action was brought, and while it was pending, the inter-vener's attorneys appear to have had several interviews with the officers of the Colorado Company at the main office of that company, in the city of Topeka, Kan., in the course of which they were informed that the securities that had been sold in Boston had turned out to be practically worthless, and had been sold by the trustee for
The result is that there is no merit in the appeal prosecuted by Anthony and by the receiver of the Colorado Compaii}''.
In support of the cross appeal in case No. 1,516, the intervener contends that the sum awarded to him by the decree of the lower court was inadequate, and that it should have decreed the full payment of his judgment against the Kansas Company out of the proceeds of the securities in the hands of the receiver of the Colorado Company which were originally pledged with the Boston Company to secure the Scotch debenture holders. The reason assigned in support of this contention which deserves the most consideration is as follows: That, when the other Scotch debenture holders of the Kansas Company exchanged their holdings for general issue debentures of the Colorado Company, they released the former company from all liability as a debtor, and also relinquished their lien on the securities then held in pledge by the Boston Company,
It is furthermore insisted by the intervener that, in addition to the special lien aforesaid, he has a species of general equitable lien on all the notes, mortgages, and real estate now in the hands of the receiver, growing out of the circumstance, heretofore explained, that, 11 years since, the Kansas Company transferred all of its assets to the Colorado Company, without other consideration than the capital stock of the latter company. The theory of the intervener is that he is now the sole creditor of the Kansas Company, all of its other creditors having accepted obligations of the Colorado Company in payment of their debts; that a large part of the assets now in the receiver’s - hands are the assets, or the proceeds of assets, which formerly belonged to the Kansas Company; and that, being the sole creditor of the last-named company, he should be paid in full in preference to every one else, although they were mostly, if not entirely, originally creditors of the Kansas Company. This proposition has been argued at much length by learned counsel for the intervener, but, after a careful consideration of the argument, we have not been able to conclude that the various propositions enunciated therein are sound. And, even if they were sound, we should nevertheless be of the opinion that the right to recover full payment on the ground of a general equitable lien having its origin as far back as the transfer of July, 1890, has been lost by laches. The intervener or his counsel appear to have been aware as early as October, 1894, and probably much earlier, that the Kansas Company had ceased to do business and transferred all of its property
The decree of the circuit court was formulated, we think, on the right theory, and it meets with our approval, except in one minor respect, to be now mentioned. The lower court awarded to the intervener 4 per cent, of the net proceeds realized by the receiver from the Boston securities, upon the ground that the sale of those securities was invalid, and that the special lien in favor of the inter-vener had not been extinguished. It also decreed that he should receive 4 per cent, of such sums as might thereafter be realized from notes and mortgages in his -hands which had not at the time been collected. It directed that the sum of $612 heretofore received by the intervener from the Boston Company as his distributive share of the proceeds of the sale should be deducted from the sum so awarded to him. It is claimed, however, that the testimony shows that prior to the appointment of a receiver the Real Estate Company or the Colorado Company had collected on account of the securities in question the sum of $62,795, which had been appropriated and used for the exclusive benefit of the general issue debenture holders, and that the intervener should have been allowed 4 per cent, of this sum in addition to the aforesaid allowances. We have not been able to verify the claim thus made as to the amount of these collections prior to the receivership, but some such collections must have been made; and, if they were, we think that the intervener is legally- and equitably entitled to 4 per cent, thereof
Dissenting Opinion
(dissenting). In'a single respect the opinion of the majority seems to me to fail to carry to its legitimate conclusion the admirable argument it contains. The securities in the hands of the Boston Company were pledged to secure the payment of the debentures of the Kansas, Company. Nineteen-twentieths of those debentures (all but the one-twentieth held by Campbell) were exchanged by their holders for the debentures of the Colorado Company. They were thereby paid, discharged, and surrendered. The securities in the hands of the Boston Company were discharged of all lien to secure their payment, and these securities were not pledged to secure the payment of the debentures of the Colorado Company. The result was that these securities stood pledged for the payment of the four debentures held by Campbell, and for the payment of these alone. These securities, or their proceeds, have come to the possession of the receiver in this case, and he has realized from them far more than an amount sufficient to pay the debt of Campbell. Why should he not first pay out of the proceeds of these securities the entire indebtedness of Campbell, with interest and costs? It does not seem to me to be material that the Colorado Company and the other holders of the Kansas debentures intended to acquire the securities in the hands of the Boston Company, and to pledge them as security for the indebtedness of the Colorado Company. If they had such an intention, it could never have become effective without the payment or the discharge of the established lien which Campbell had upon the securities. That lien covered all of them,—bound them all to pay his debt. It never was discharged, and it seems to me to remain unassailable to the present day. A. issues 20 notes to 20 different holders, and secures them by a pledge of collaterals. B. induces 19 of them to surrender their notes in exchange for his own, and for his promise or intention to obtain the collateral and pledge it to' secure his debts. He fails to release it from the lien of A.’s single debtor. The result is that the collateral stands pledged for the payment of the outstanding debt of A., and of that debt alone, and it cannot be lawfully applied to the payment of the indebtedness of B. until the single debt of A. is first discharged. In my opinion, the decree in this case should be for the payment of the entire indebtedness of Campbell from the proceeds of the securities originally pledged to the Boston Company to secure the debentures of the Kansas corporation.