Badgerow v. Manhattan Trust Co.

64 F. 931 | U.S. Circuit Court for the District of Southern New York | 1894

COXE, District Judge.

The transactions out of which this controversy arose are complicated and perplexing. The actors are so numerous and appear in so many different characters, individual and representative, their rights, duties and obligations cross and recross at so many points Thai it is by no means an easy task to weigh the questions involved in the light of all those relations or to follow to a demonstration any of the theories presented. If the complainants had an equitable lien upon the bonds of the Nebraska Company to the extent of their interest under the subscription receipts they are entitled to relief of some sort in equity. The court understands that ibis is not seriously disputed, but. even if if were, it is thought that, t lie proposition is a sound one. If the bonds of this company were impressed with such a lien, and the defendants, with full knowledge of its existence, disposed of the bonds without the complainants’ consent arid (o their injury, equity will afford relief. The question is,, does i lie bill allege such a lien? The following is a summary of the alleged facts: If was agreed that-the complainants' money was to be expended; in constructing the Nebraska Kail way and that the bonds to he deli vert'd to them, in return for their money, were to he jlie bonds of thill railway company and no other. The subscription receipts delivered to them by the improvement company expressly recite that the complainants were entitled to receive bonds of the Nebraska Company. At the time the complainants contributed, it was understood by and between them and the defendants that these bonds, to the amount specified m the receipts, should be set apart and reserved for delivery to the complainants. In short, upon the express agreement that they should receive these bonds — it being the intent and purpose of both parlies that a sufficient number of bonds should be set apart and reserved for the complainants — they subscribed their money. If they were deprived of the bonds their money was lost. There was nothing else of value left. In these circumstances the defendants, with full knowledge of complainants’ rights and in fraud of those rights, entered into a scheme which resulted in taking from the complainants their bonds and leaving them without a dollar to show for the money they had advanced. These, in brief, are the averments. Are they sufficient? It is true that the bill might be more explicit. It is not, perhaps, as clear and full as it should be on this subject. On the other hand it must be remembered that the form of the agreement which creates a lien is not as material as the ultimate intent of the parties. Equity looks through form to substance. If the intent to charge designated property is established the lien follows. 3 Pom. Eq- Jur. § 1287. The bill is not demurrable if its allegations when aggregated establish an agreement from which the deduction follows that it was the intent and purpose of the parties to create such a lien. While conceding that the proposition is not free from doubt the court is inclined to the belief that the bill states a cause of action. As was said by Mr. Justice Miller in Merriam v. Publishing Co., 43 Fed. 450:

“The demurrer goes to the whole hill and asserts that it contains no averments warranting equitable relief of any sort. We are unable, at this time, to assent fully to that view; but, at the same time, we do not wish to be understood as declaring definitely that the complainant is entitled to equitable relief.”

Many authorities have been examined without finding one exactly in point, but in the action brought by the Fidelity Loan & Trust Company against these defendants to recover damages, this court decided that the western subscribers had no remedy at law against the Manhattan Trust Company, and, incidentally, suggested that their remedy was to enforce their lien in a court of equity. Though this suggestion was, probably, obiter, it is not unlikely that the complainants were influenced by it in bringing this action and, though not controlling, it is, in the circumstances, entitled to weight. . It is thought that wisdom and prudence require that the court should not at this time attempt to deal with the novel and complicated situation foreshadowed by the bill, but should postpone its consideration until the proofs are all before it.

The demurrers are overruled, the defendants to answer within 30 days.