Canton Roll & Machine Co. v. Rolling Mill Co. of America

155 F. 321 | U.S. Circuit Court for the District of Northern West Virginia | 1907

DAYTON, District Judge

(after stating the facts). Every proposition involved in this case has been so bitterly, and, I may say so ably, contested by counsel that upon my former considerations of it I thought it best to postpone all questions of demurrer and other technical objections until final hearing. Nevertheless, I have had grave doubt all along as to whether this bill could be maintained for many, if any, of the purposes for which brought. It is earnestly insisted by counsel that the bill is warranted by section 8 of the jurisdictional act of March 3, 1875 (18 Stat. 472, c. 137 [U. S. Comp. St. 1901, p. 513]), allowing suits “to enforce a legal or equitable lien upon, or .claim to, or to remove any incumbrance, lien, or cloud upon title to real or personal property” to be brought in the district where such property is. This statute clearly does not enlarge the right of the individual to bring suit, where before he had no right to sue, but simply allows him, if he has right of action, to bring it in loco rei sitae. The cases of Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358; Cates v. Allen, 149 U. S. 451, 13 Sup. Ct. 977, 37 L. Ed. 804, and Hollins v. Brierfield Coal & Iron Co., 150 U. S. 371, 14 Sup. Ct. 127, 37 L. Ed. 1113, were all decided long since the passage of the act of 1875, and all distinctly hold that no simple contract creditor can maintain in federal courts, under and by virtue of state statutes or otherwise, a suit in equity to set aside as fraudulent a conveyance by his debtor of property, because to allow him to do so would contravene the seventh amendment to the Constitution of the United States, guaranteeing to the defendant, where the amount in controversy exceeds $20, the right of trial by jury to test the validity of such debt demanded of him. If the statute of 1875 did have the scope contended for by .plaintiff’s bill, it would under these decisions be unconstitutional and void; but to my mind, as above stated, it has no such scope or purpose. 1 have no doubt that in the preparation of the bill the right of plaintiff to assail-, before judgment obtained, alleged fraudulent conveyances, was-misconceived, and that its purpose was to rely upon this supposed right. It is true, I think, that a suit in equity can be maintained in the federal court to enforce a mechanic’s lien. In Scott v. Neely, supra, Justice Field says:

. “It is the existence, before the suit in equity, is instituted, of a lien upon or interest in the property, created by contract or by contribution to its value by labor or material, or by judicial proceedings had, which distinguishes cases for the enforcement of such lien or interest from the case at bar.”

See, also, Sheffield Furnace Co. v. Withrow, 149 U. S. 574, 13 Sup. Ct. 936, 37 L. Ed. 853; Idaho, etc., Co., v. Bradbury, 132 U. S. 509, 10 Sup. Ct. 177, 33 L. Ed. 433; Davis v. Alvord, 94 U. S. 545, 24 L. Ed. 283.

But this last .cásé, to an extent at least, defines the extent to which suit can go in the enforcement of such lien, to wit, that it is “a suit in equity, requiring specific, directions for the sale of the property, such as are usually given upon the -foreclosure of mortgages and the sale of mortgaged premises.” It is to be remembered that this lien is not a general one like a judgment, binding the property generally of the debtor therein; but, on the contrary, is a limited one against a specific piece of property, and may, according to circumstances, involve no personal liability upon the owner of the property. The holder of such lien can bd interested only to the extent of. the specific property itself and the order of priority of his lien thereon. If such lien has, by compliance with the requirements of law, attached to the property, it is immaterial to the holder what mortgage or judgment liens may ■thereafter attach to it, and, I conceive, it is likewise ordinarily immaterial to him what conveyances, fraudulent or otherwise, may be made of the property. In other words, such conveyances cannot affect this specific lien, affecting not .the individual, but attaching solely ad rem, unless such conveyances are made subsequent to the attachment of such lien, and it would be under most extraordinary circumstances, hard to conceive of, if such prior conveyances were duly recorded, and notice thereof thereby given, th'at the holder of such mechanic’s lien could assail them. I am fully persuaded that he cannot in the federal courts, by reason of this limited lien alone, undertake to bring a general creditors’ bill, assailing conveyances and seeking to charge defendants individually for alleged personal fraudulent transactions. Again, while these liens must be liberally construed, the statutory provisions -by which they are obtained must be strictly complied with, and the claimant thereof in the suit brought to enforce it must prove “all that is essential to the creation of the lien, and that includes proof of the commencement of the work, of its character, and its completion. The commencement of the work must be shown, for from that date the lien attaches, if at all. The character of the work must be shown, for it is not for all kinds of work that a lien is allowed. The completion of the work must be shown, for notice of claiming a lien must be filed in the recorder’s office within 60 days from that time. This proof must be furnished by the party who asserts the existence of the lien.” So says Mr. Justice Field, in Davis v. Alvord, 94 U. S. 545, 24 L. Ed. 283.

_ The single allegation contained in plaintiff’s bill asserting such lien is in these words:

“(13) Your orator is entitled to and has filed a mechanic’s lien for all its said claim of $14,889.98, with interest as aforesaid, against said real estate and manufacturing plant in accordance with the laws of the state of West Virginia, and claims and is entitled by virtue thereof to a lien on said property.”

Nothing can be better settled than the principles that every bill in equity must state the right, title, or claim of the plaintiff with accuracy and clearness; that every essential to the plaintiff’s title to maintain the bill and obtain the relief must be stated in the bill, otherwise the defect will be fatal; that no facts are properly in issue unless charged in the bill; that every material allegation should be put in issue by the pleadings, so that the parties may be duly apprised of the essential inquiry, and may be enabled to collect testimony in order to meet it; and that the bill must show sufficient matters of fact per se to maintain the case, and, if it be defective in this, the bill will be dismissed; Sand’s Suit in Equity 10; Story’s Eq. Pl. 284; Mitf. Eq. Pl., 125; Parker v. Carter, 4 Munf. (Va.) 273, 6 Am. Dec. 513; McGugin v. O. R. R. Co., 33 W. Va. 63, 70, 71, 10 S. E. 36.

Standing alone upon this single allegation and statement of fact in this bill, I have not believed plaintiff could maintain this suit to assert its claim as a mechanic’s lien. This allegation states the bare fact that it is entitled to and has filed a mechanic’s lien; but does not state when it filed it or where or any other essential facts showing whether it be in such form and substance as to constitute it such lien in fact. It fis true that on June 19, 1906, by leave of the court, plaintiff was permitted and did file in the cause what purports to be the record of such lien relied on from the clerk’s office of Monongalia county, W. Va., but this was two years after the bill was filed, after Sturgiss and his co-petitioning bank had intervened, and - after original defendants had filed their demurrer to this petition going, in its nature, to the bill also. Unidentified and not referred to or brought in- by any amendment either made, asked or in any way sought to be made to the bill, 1 cannot believe that it can be regarded as curing the defective allegations or lack of allegations therein. It would follow that if I be right in these conclusions that the bill cannot be maintained on its face to enforce a mechanic’s lien, and cannot be maintained by plaintiff on the other hand as a simple contract creditor to assail the alleged fraudulent transfers, ordinarily it would seem that I would not be called on to further consider the matter. But this position is, however, so strenuously resisted by so able counsel, and the other questions involved have been so earnestly and extendedly discussed, that I feel compelled to say that, if I should be wholly mistaken in the foregoing conclusions that the bill cannot be maintained and should’ substantially fall on demurrer, nevertheless, that, on the merits, I do not believe the plaintiff and the intervening petitioners are entitled to the relief prayed for by it and their petition. It seems to me clear that this controversy no longer exists between the original plaintiff in interest and the defendants; that its claim has either been paid by or assigned to petitioner George C. Sturgiss; that the allegations of the original bill charging the transfer of the property of the Rolling Mill Company of America to the Morgantown Tin Plate Company to be fraudulent must fall and drop out of the case, for it is conceded that the organization of the Tin Plate Company and the transfer to it from the Rolling Mill Company of its property and assets was not only known and consented to by Sturgiss, but that all the papers and proceedings necessary to accomplish this result were either prepared or supervised by him as attorney for the parties interested in the two companies; and it is further admitted that he, by transfer from Humbert upon the organization of the Tin Plate Company, became a stockholder of the Tin Plate Company; that he consented to be one of its original incorporators, but was not finally called upon to be such. Under such condition of affairs, it being uncontroverted that he owns the plaintiff’s debt, either by assignment or payment, and that this creditor alone has made these charges of fraud, it would be a matter of supererogation to cite authorities to the effect that he is estopped from maintaining himself or having his assignee maintain them for his benefit. Nor is it denied that the mortgage or deed of trust was also advised by him and prepared under his supervision and that he subscribed and took bonds to the amount of $50,000 secured thereby, with full knowledge of all the facts arid conditions under which it was executed, and therefore is also estopped from further maintaining the allegations of the bill charging this mortgage, or deed of trust to have been executed for fraudulent and corrupt purposes. And, finally, it is admitted that the stock of the Tin Plate Company was issued to the extent of $150,000 to the stockholders of the Rolling Mill Company, with his full knowledge and assent, if not under his direction, in payment of assets and property transferred by the latter to the former company, a part to Humbert from whom he, Sturgiss, took part, and he is therefore es-topped, either directly or through his co-petitioner bank, his assignee, from seeking to hold said stockholders personally liable for the payment of his debt by reason of the alleged fraudulent issue of this stock to them.

Under these circumstances the controversy narrows itself down to two questions upon its merits: First. Can the cause be maintained for the benefit of petitioner Sturgiss to assert a valid mechanic’s lien against the property for the debt originally set up in the bill by his assignor, the Canton Roll and Machine Company? Second. Can it be maintained at his instance and for his benefit, and possibly that of other creditors represented by Corbin as the trustee of the Morgantown Tin Plate Company in the bankruptcy proceeding, to assail and set aside the sale in New York of the $100,000 of bonds deposited as collateral with the Kings County Trust Company to secure the notes of the Tin Plate Company for $21,500 borrowed money ?

Taking up the first question, there very naturally arises at the very threshold of the inquiry this question: Is it sufficiently shown in the bill, pleadings, or evidence that the machinery furnished was of the character that entitled the plaintiff to a lien? If it can be asserted at all, it must be by virtue of section 3111 of the Code of West Virginia of 1906, which reads as follows:

“Every mechanic, builder, artisan, workman, laborer, or other person, who shall perform any work or labor upon or furnish any material or machinery for constructing altering, repairing or removing a house, mill, manufactory, or other building, appurtenances, fixtures, bridge, or other structure, by virtue of a contract with the owner or his authorized agent, shall have a lien to secure the payment of the same, upon such house or other structure, and upon the interest of the owner in the lot of land on which the same may stand or to which it may be removed.”

It will not be contended by any one that this statute can be construed to give a lien to the man who may sell, under contract, the furniture that may go into a house, nor can it be any more seriously contended that this lien can be taken for tools and machinery to be operated in the house, unless they become part and parcel of the structure itself. There is no substantial evidence that I recall in this case that shows that this machinery furnished by plaintiff was to be attached to and made a part of the realty so as to authorize this lien. It might naturally be assumed that some of the heavy machinery was so attached, and, on the other hand, the presumption arises just as strongly that some of it was not to be so attached. For example: The contract provides for twelve pairs chilled rolls, six pairs to be delivered with the mills, balance when required. Manifestly to one unacquainted with these mechanical details it would be assumable that, whether the “mills” were to be incorporated with the structure or not, the rolls could not be, because they could be supplied independently at any time, and as needed. I confess myself in entire ignorance touching this class of machinery, and it certainly cannot be contended that courts must take judicial knowledge of such matters. On the contrary, the burden is upon the person asserting such lien fully to prove the facts and establish the character of the machinery or work; for it is not for all kinds of such that a lien is allowed, as decided by Davis v. Alvord, supra.

In Van Stone v. Stillwell & Bierce Mfg. Co., 142 U. S. 128, 12 Sup. Ct. 181, 35 L. Ed. 961, Mr. Justice Lamar says:

“This lien is a creature of the statute, not recognized at common law. It may be defined to be a claim created by law for the purpose of securing a ■priority, of payment of - the price and value of work performed and materials furnished in erecting or repairing a building or other structure, and as such it attaches to the land as well as the buildings thereon. 15 Am. & Eng. Enc. Law, 5. Now, it is not the contract for erecting or repairing the building which creates the lien, but it is the use of the material furnished and the work and labor expended by the contractor, whereby the building becomes a part of the freehold, that gives the materialman and laborer his lien under the statute.” <

The same principles and conclusions are deducible from the rulings of the Circuit Court of Appeals of this circuit in the cases of Liberty, etc., B. & L. Co. v. Furbush & Son Machine Co., 26 C. C. A. 38, 80 Fed. 631. Withrow Lumber Co. v. Glasgow Inv. Co., 42 C. C. A. 61, 101 Fed. 863, both of which cases arose under the Virginia statute very similar to ours. In the latter case it was attempted, as in this case, to set up an “equitable lien” independent of the mechanic’s lien law, but the court expressly holds no such lien has existence at common law or equity except by statute for material or labor furnished. In this case both the validity and existence of this lien were denied and put in issue by the answers. It would therefore appear that the case of Central City Brick Co. v. Norfolk & W. R. Co., 44 W. Va. 286, 28 S. E. 926, is decisive of the point that the mere declaration of the lien on record was not sufficient proof. The Supreme Court of Appeals of this state, without dissent, therein held:

“It is not sufficient to file with such a bill the account filed with the clerk of the county court for the purpose of creating such lien, but the fact that the material was furnished to the contractor, to be used in the construction of the house, in pursuance of a contract with such contractor,' must be alleged iand proved before such lien will be enforced against the property.”

It may be said that this case applies to a case where the material was furnished to a contractor, and not direct to the owner or his vendee as in this cáse. It is impossible, however, to see why any less proof should be required of the claimant as against the owner building by a contract than should be required of him as against other lienors whose debts may be wholly lost if his be maintained.

But another question comes in this matter, and that is whether the lien claimed in this case was secured by a strict compliance with the requirements of the statute. The allegations of the two answers of the original defendants 'and of Corbin, the trustee in bankruptcy, are fully sustained by the evidence. Briefly, these facts may be stated to be: That, by the terms of the contract, plaintiff was to furnish, together with other machinery', six pairs of rolls unconditionally, and six additional pairs.' when required by-the purchaser. The first six were furnished,- and plaintiff was substantially notified not to furnish the other six pairs. When the plaintiff had furnished all the machinery unconditionally, required by the contract, it undertook ■ to file in the clerk’s office a declaration of mechanic’s lien, which was duly recorded, ■p.pd suit was brought to enforce it, when it appears to have been discovered that this, declaration had been-filed 61 days after the last item had been- delivered, 1 day too late, and that other defects were apparent on the face thereof. Thereupon plaintiff dismissed its suit, and nearly a year afterward it shipped to the Rolling Mill .Company at. Morgan-town these six extra rolls, which were never delivered and could not be delivered to the Rolling Mill Company, for it was dissolved and had no existence, were not delivered and could not be delivered to. the Tin Plate Company, because its mill, plant, and- property was in custodio legis in the bankrupt court. As a result the six rolls remained undelivered in the railroad yards at Morgantown. Within 60 days after this shipment of these last rolls plaintiff filed and had recorded the declaration of lien now in controversy.

Under these circumstances, I do not believe this lien to be valid for several reasons:

First. Because it was not filed within the time required by the statute. It is earnestly insisted by counsel that:

“A contractor is entitled to one valid mechanic’s lien, and, if the first one filed is faulty and defective, he may file another and perfect one within 90 .lays (by our statute 60) from the time the work is finished.”

Also:

“When a contractor files a perfect mechanic’s lien for work done and materials furnished, as required by statute, such lien is valid, not only against the party with whom the contract was made, hut also against its assignee, who takes with notice and ■who assumes to pay its creditors itself, nor. will the fact, if the contractor has accepted money due on his contract from the assignee, affect the validity of the lien against the assignor.”

And the case of Williams v. Chicago, etc., Ry. Co., 112 Mo. 463, 20 S. W. 631, 34 Am. St. Rep. 403. is cited.

Grant these propositions without a moment’s hesitation, wherein are they applicable to this case? A contractor is entitled to one valid mechanic’s lien if taken within the 60 days after he has finished the work or ceased furnishing the material. If he is not satisfied with his first declaration of lien, or finds it faulty, he may file another, within that 60 days. I am not sure but that he may file as many as he desires within such time, and, when he institutes his suit to enforce his lien, may rely on one or all of these declarations so filed. An examination of this Missouri case, so confidently relied on, shows that the contractor filed his faulty declaration on March 13, 1888, and his valid one on April 16, 1888. There is an error in stating this date on page 427 of the report of the case (112 Mo. 20 S. W. 631) as given in 34 Am. St. Rep.. It is there given as April 16, 1889,. and this may have misled counsel. By turning back to the statement of facts at the top of page 409, and also to page 429, this error is apparent. The date fixed by the contractor upon which he finished work was January 19, '1888, so that both the faulty and valid lien were filed within the period of 90 days provided by the statute. The whole question turns upon the 'words of the statute: ' •

“Within sixty days after he ceases to labor on, or furnish material or machinery.” ' .

Who determines the date of that “ceasing” ? The contractor, and he must fix it correctly, at his peril, with no qualifications or reservations, and he must swear to it. The whole proceeding tip to the bringing of the suit to' enforce is purely ex parte,.and, being so, it must be done. in absolute good faith. Who can tell, but the man-himself, when he intends to quit finally to work on a job, when he has driven the last nail? Can he swear he has quit and file a solemn legal declaration to that effect, and then, if it suits his purposes and will be to his financial advantage, go back and drive a-few.more nails.and then file another legal declaration that in effect says, “I did not quit, I didn’t intend to quit, and I made a mistake when I swore I did”? Who must judge when he has fulfilled his contract in whole or as far as he intends to fulfill it, but the contractor himself? And when he has determined this date and by legal declaration, sworn to, filed, and recorded it, by which act of his he confidently expects to acquire a lien upon the property prior to others, by what principle of common sense, justice, and equity will he be permitted, at his own will and volition, after he finds that, for errors and mistakes committed, he has lost out, to solemnly file another declaration, nearly a year after he has lost his right, which in effect says, “I did not.cease, I thought I had, but I found 1 had not, for I commenced ‘furnishing’ again”? What a complete mockery of orderly judicial administration of justice it would be to allow such a thing to be doné. It seems to me that no better case of complete estoppel could be presented.

Turning again to Davis v. Alvord, we find it distinctly decided that “occasional repairs, if subsequently made, could not be added to the work performed in the erection of the buildings months before, so as to render the whole work one continued performance, for which a single lien could be claimed within sixty days after the last repairs.” By a parity of reasoning, I am persuaded that the shipment by this plaintiff of some extra rolls which it knew could not be delivered, and could not in the very condition of things become part of the building or structure, cannot be added to the material and machinery furnished nearly a year before, so as to render the whole one continued performance for which a single lien could be claimed within 60 days after the last shipment. But, again, the statute only gives this lien for machinery used in constructing, altering, repairing, or removing the structure, and I have shown that it must be proved that it is used for this purpose. The evidence shows that these rolls were extra ones; that the mill was complete without them; that they were not fixtures, and in my judgment .could not be subjects of this lien if they had been delivered in time. And yet again I do not believe that the contractor, knowing the Rolling Mill Company to be dissolved and its successor, the Tin Plate Company, to be in bankruptcy, could possibly, in good faith, make this shipment with any expectation that it could be used in “the construction” of the mill. Por these reasons I think this mechanic’s lien void.

And, now, touching the hypothecation and sale of the bonds: It s,eems to me from the testimony: That Humbert induced these New York men' to organize the original company and locate its plant at Connellsvillé under representation that a six-mill plant there could be built for $100,000. That they subscribed this sum in stock among themselves, Humbert taking $10,000, and paid it into the treasury of this company and that of the reorganized one, the Tin Plate Company, in cash. That Humbert brought to them Sturgiss’ proposition to. remove to Morgantown and urged them to accept' it, assuring them that a ten-mill plant could be erected there for $150,000, the $100,000 they had subscribed and the $50,000 Sturgiss agreed to take in bonds. That in conveying this proposition Sturgiss constituted Humbert his agent and should be equitably bound by his representations and the inducements held forth by him to effect the purpose designed. That all the details of removal and reorganization were supervised by Sturgiss, who became a stockholder by purchase of part of Humbert’s stock, and that the expenditure of the money derived from the stock subscriptions, Sturgiss’ bonus, and the sale to him of $50,000 of bonds was to the cent expended by Humbert at Morgantown, under the eye of Sturgiss, while these other stockholders were in New York. That the mortgage had been made for $150,000 under the assumption that the plant would cost $150,000, and would be paid for by the unexpended stock subscription of $100,000 restored to the full amount by the $20,000 bonus, and the proceeds of the $50,000 bonds taken by Sturgiss, and that, for the necessary working capital, the company would have $100,000 of bonds in its treasury to sell. That the representations of Humbert as to the cost of plant proved wholly untrue, and, under his management, the amount stated by him to be necessary for that purpose proved to be wholly inadequate. That after he had expended the $150,000 on the plant, he called on the New York stockholders for money to pay actual outstanding indebtedness, and represented that, if they would furnish $7,500, he could complete and start the plant. That Jacob Meurer, Logan, and Ramsey,personally supplied and loaned without security this sum for the purpose. That Humbert’s representation in this particular proved to be untrue and the sum inadequate. In consequence he again called upon these New York stockholders for money. That in the meantime a part of the bonds had been sent to Morgantown, and both Humbert and Sturgiss, alike stockholders, had tried to sell them and raise money, but without success. That Jacob Meurer, vice president, proposed to the stockholders that they be assessed on their stock for a sum sufficient to meet the situation, but some of the stockholders objected and refused to submit to such assessment, among the number Sturgiss; that in this emergency, with suits brought by creditors, Jacob Meurer, the vice president, applied to the Kings County Trust Company for a loan upon the bonds of the company as collateral, at least morally binding himself personally to see that the trust company should not suffer loss. That this act on his part was fully known to Sturgiss and Humbert, who had tried to accomplish a loan at Morgantown in much the same way, but had failed. That at first $10,000 was thus secured, sent to Humbert, and expended — this on May 2, 1903. That on May 26, 1903, another $10,000 went the same road, secured in the same way, from the same source and upon the same security, and finally, August 7, 1903, $1,500 more, and still debts multiplied, unpaid, and pressing; that an examination of the books was had, the true condition learned, Logan threw up his hands, resigned the presidency of and his directorship in the company, and went to Europe. These three loans of $10,000, $10,000, and $1,500 were evidenced by demand notes that fully set forth that, if not so. paid on , demand, the holders thereof should have full power, “without further demand or notice, to'sell,- assign, and deliver the whole or any part-of such securities, substitutes, or additions, at any brokers board or at public or private sale,, at their option, at any time or times thereafter, without advertisement or notice, and also with the right to become purchasers thereof at such sale or sales, freed and discharged from any equity of redemption.” ' These notes subject to this express contract embodied in them, executed with full knowledge of this stockholder Sturgiss, were carried from May 2, 1903, until October 16, 1903, a period of over five months, when demand was made by the borrower upon Jacob Meurer, the then president of the company, for their payment on the 19th, three days following. On October 7th, nine days preceding, Sturgiss had written defendant Palliser a letter in which he said-:

“I cannot and will not advance any money to pay off existing indebtedness. Mr. Meurer and his colleagues have put up, as I understand, $100,000 of the bonds as collateral to secure a loan .of $20,000. Whether these bonds were put ■up to secure a loan made to the Tin Plate Company, and were treasury bonds, or were put up by the bona fide holders of the bonds or not, I do not know, but' he and his colleagues must take steps at once to protect the property of 'the company and their associates as stockholders and bondholders from the Claims of the parties here who have ordered suits to be Instituted.”

Did,he not know that these bonds were put up to secure a debt of the.'Tin Plate Company? I think, he did. If the bonds had been sold to bona- fide holders for money, he would have been very quick, I think, to have demanded the application of .the proceeds of sale, if sold below par, to have-called for explanation, if at par, to know why .any debts were allowed to remain unpaid. As I construe this language, .it. was, a plain declaration to the New York stockholders that they •fijust 'riot only pay’ this, loan without any assistance from him, but 'cb.ñtifiúé. paying debts of the company out of their personal funds. ,Wrs‘ tlíéré any obligation, due to him as either bondholder or co-,Stockholder.that,required them to do this? 'Meurer very naturally declined tó. pa'y these notes on October 19th, and in consequence the '$í'00,0Ó‘Q of bonds were placed in .the hands of Adrian 'H. Muller •& Sofi, auctioneers, and, although expressly by the note contracts not required to' be advertised, were so advertised for sale in the Tribune, Tost, Times, and-Wall Stréet Journal-on the 20th, and sold at public aubtion on the' 21st to R. J. Kimball & Company, brokers. The contention on behalf of defendants is that this broker firm bought these bonds for Frank Logan, and that he.is' now the owner thereof. On íhé other' hand, it is contended that this shle to Frank Logan is a pretense, that they, were, in fact, bought, through'him by W¡ J. Logan, the former 'president and director and then stockholder - of the Tin'Plate Company, and that the -latter so 'bought them for the benefit of him.self and the other New York stockholders, and the sale arid purchase were made in fraud of creditors and other stockholders. This' contention, is now made by Corbin, 'trustee in bankruptcy," in his answer, and by Sturgiss and his assignee bank in their -petition-. In this connectiorij it is-proper to consider the facts, -shown in testimony by copies from the records,' that prior to the bringing of this- brie in this court, two suits had'been instituted, in-the circuit -court of Monongalia county, W. Ta.,'the*one by-thé Dunbar Fire-Brick Company and-other-creditors, in which the original plaintiff herein intervened and subsequently by order was allowed to withdraw, the other by the Hoovens, Owens, Rentschler Company, the scope of the bills in both of which was an elaborate attack upon the transfer of the property of the Rolling Mill Company to the Tin Plate Company, the execution of the mortgage by the latter, and the sale of the bonds thereunder as being fraudulent and void. To these bills, so similar to the one here, both Sturgiss and Corbin, trustee in bankruptcy, filed elaborate answers, sworn to by them. Sturgiss denies in these answers of his all fraud in these transactions, not referring, however, in detail to the hypothecation and sale of the $100,000 of bonds. On the other hand, Corbin in both answers to these two suits, in direct conflict with the allegations of his answer filed herein, does, in almost if not quite the same words in both, refer specifically to this, and says (quoting from his answer to the Dunbar Fire Brick Company) :

“Further answering, respondent says that, for the purpose of completing said tin plate mill, the Morgantown Tin Plate Company borrowed divers and sundry sums of money, namely, of Jacob Meurer $2,500, of W. J. Logan $2,-500, and of Dick S. Ramsey $2,500, which remains still due and unpaid, and on the-day of August, 1903, it borrowed from the Kings County Trust Company of New York the sum of $21,500 on a promissory note of the said Morgantown Tin Plate Company, and deposited and placed with said trust company as collateral security to further secure the payment of said sum the $100,000 par value of the first mortgage bonds that still remained in its possession and treasury, which note was a demand note, and.payment thereof was demanded in October, 1903, and said Morgantown Tin Plate Company was unable at that time to sell the said bonds or raise the money to pay off said note, which, with its interest and renewals of said note or some parts thereof, amounted on the 22d day of October to the sum of $22,055.67, and thereupon said trust company caused said bonds of the amount aforesaid to be advertised and sold at public auction at 12:30 o’clock at the New York Real Estate salesroom, No. 161 Broadway, by Adrian II. Muller & Son, through Andrew J. McCormack, auctioneer, and said bonds were sold on said day, at said time and place, for the sum of $22,500, and the costs and charges for advertising and selling said bonds amounted to $254, leaving a net balance of $190.33, which was paid over by said bank, and the liability and indebtedness of said Morgantown Tin Plate Company to said bank thereby extinguished, and the sum of $190.33 aforesaid was received by said Tin Plate Company by its attorneys. Further answering, respondent says that he is not informed, and does not know, who became the purchaser or purchasers of the said $100,000 of bonds, nor to whom they were delivered by said Kings County Trust Company, nor who is now the holder of the same, but he avers that, so far as the record of said sale discloses, the said bonds were sold in the due and -ordinary course of business and according to the custom and practice in such case in the city of New York, and that such hypothecating and pledging of said bonds to secure said loan, and said sale and delivery were upon their face bona fide, and so far as this respondent or the said Morgantown Tin Plate Company is concerned, were in good faith, and not intended to hinder, delay, or defraud the creditors of the said Tin Plate Company, nor to give any preference to any of its creditors over any other creditors, but only to secure the payment of the debt created at the time the bonds were hypothecated or put up with said Kings County Trust Company as collateral security for money said Tin Plate Company borrowed, and which said moneys were actually used by said Tin Plate Company in the construction of- its buildings and mill.”

But these quoted allegations were not original with Corbin, trustee. They were almost exact copies incorporated in an original draft prepared by Sturgiss, or at least supervised,' corrected; and interlined by him, of an answer of the Morgantown Tin Plate Company to the Dunbar Fire Brick Company bill.

After Sturgiss had purchased these claims involved in these two suits brought in the state courts. in which these answers were filed, they were, on motion of the plaintiffs and with the consent of defendants, dropped from the docket. The property of the Tin Plate Company was, in the bankruptcy proceeding about June, 1904, appraised regularly by appraisers at a value of $84,100, as shown by a letter of the trustee filed in evidence; that at that time it was not expected to sell at public auction for more than $50,000 to $75,000, and, if the creditors assailing the transfer of the property, the mortgage, and sale of- the bonds, on the grounds of. fraud, in these two suits in the state court should succeed, little or nothing could be realized on such bonds either those held by Sturgiss or by any one else. It is not denied that Frank Logan, the alleged purchaser of the bonds, is the brother of W. J. Logan, and that' doing business with his brother to an extent, at least, the payment therefor was directed to be charged to their funds in bank standing in the name of the brother W. J. Logan.

There is evidence tending to show statements made by Jacob Meurer and Palliser indicating an interest on their part in the purchase and ownership of these bonds, but such interest and the utterances alleged are expressly denied by them. In this condition of affairs, when a sale of the property in bankruptcy proceeding, at a ruinous sacrifice, seemed inevitable, Sturgiss, naturally enough, sought ways and means to save himself. He first sought to buy up the stock and bonds of the company. By communication with Palliser, he ascertained that the latter could control and negotiate a sale of these or a part thereof, and as a consequence he took an option from Palliser to purchase $75,000 of the bonds, and 825 shares of the stock for 30 days at $30,000, for which option he paid $1,000. Upon consideration, however, he was not satisfied to buy less than the whole amount of the bonds and forfeited the option. Subsequently he offered $35,-000 for the whole $100,000 thereof and said stock. Palliser informed him that his client who held them declined this proposition, and thereupon the negotiation' fell through. Sturgiss then entered into some kind of contract, which is not disclosed, with the American Tin Plate Company. By this contract he agreed to buy the property of the Morgantown Tin Plate Company at the sale thereof to be publicly made and sell it to said American Tin Plate Company, it may be assumed, at an agreed price free from incumbrances. This agreed price must have been in the neighborhood of $130,000, for he admits in his testimony that the $200,200 which he paid for the property finally , was over $70,000 more than he had agreed to sell it for.

The property was sold in the bankruptcy cause and, to the surprise of all, was knocked down at $154,200 to one John G. Frazer. Sturgiss filed ah upset bid of $160,000, and on his motion the bidding was reopened in court, and there sold to him, Sturgiss, at $200,200. Frazer then came in, filed upset bid,, and on his motion this' sale was set aside, bidding reopened and sale made to Frazer for $220,000, Sturgiss bidding as much as $219,900. This last sale to Frazer was excepted to, exception was overruled, an appeal thereupon was taken to the Circuit Court of Appeals of this circuit, which reversed the lower court, and directed the last sale to be set aside and the second sale to Sturgiss at $200,200 to be confirmed. See Sturgiss v. Corbin, 72 C. C. A. 179, 141 Fed. 1. It is in evidence here now that in the last sale so set aside Frazer was acting as agent and through orders of the defendants Hitchings and Palliser.

It may be stated, also, that the last sale at $220,000 would have paid substantially all the debts of the company, including the par value of the bonds. It is fairly to be assumed from the evidence that either before or after his purchase of the property, and in view of the probable requirements of his apparently unfortunate contract to buy and sell it to the American Tin Plate Company, that Sturgiss bought up the outstanding debts of the company. Certain it is that by his petition he shows himself to be the owner of all the debts involved here, and the evidence shows that the original plaintiff, the Canton Roll & Machine Company, was but the American Tin Plate Company in fact, all of its stock belonging to and all its acts being controlled by the latter, and that its debt was obtained by Sturgiss through the direction of the latter by assignment by its attorney acting as secretary of plaintiff company under the American Tin Plate Company’s directions. Under the circumstances, can Sturgiss successfully assail the sale of these bonds ? I think not for several reasons.

First. Because from the evidence I believe Frank Logan to be the bona fide purchaser and owner thereof; at least, I believe the evidence to be wholly insufficient to show the contrary. All the undisputed facts that tend to the contrary can be reasonably accounted for. The fact that he was the brother of W. J. Logan and used his bank account to pay for them is not sufficient, in the absence of any evidence that he was not a man of means and had no authority to do so. It is to be remembered that plaintiff called these defendants, made them its witnesses, and, contrary to all rules of evidence in this state and at common law, proceeded to subject them as its own witnesses to the most extended cross-examination. W. J. Logan was so subjected, yet no effort was made to substantiate these facts. Again, it is no badge of fraud that Frank Logan may have had business connection with Hitchings and Palliser, and was on intimate relations with them. The fact that this was so is a very reasonable explanation of how he was led to purchase these bonds. Finally, the fact that he authorized Palliser to give Sturgiss the option for the purchase of them can very reasonably be explained upon the theory that, finding after his purchase that he was in danger of losing in the transaction, he may have very well concluded that he had better sell $75,000 of them for what substantially he gave for them, but retaining the other $25,000 in hope of a happier turn in affairs. As I have heretofore said, the declaration of Meurer and Palliser tending to show interest are fully denied and on their face seem to me to be improbable. On the other hand, these defendants by answer and in evidence have denied any and all interest in these bonds. They have done so upon their introduction by plaintiff as its witnesses, arid I think it must be bound by their statements in regard thereto.

Second. Even if these bonds, were bought by Frank Logan for his.brother, and these other .defendants have an interest in them, I conceive that Sturgiss cannot make this assault because he does not, under all the circumstances, come into this.court of equity with clean hands to do so. So long as there was probability of his being able to purchase these bonds at about what they sold for, he stood ready to uphold the integrity of their sale. As attorney, he prepared, or at least supervised, interlined, and added to, the answers to be filed by the Morgantown Tin Plate Company to thé suits of some of its creditors pending in the state court, in which in full and specific terms all fraud was denied either in the hypothecation, sale, "or holding thereunder of these bonds, and it was only after he had changed his mind about the purchase of the bonds, and had concluded his secret agreement to buy and sell the property to the American Tin Plate Company which involved the purchase of these outstanding debts in order to clear title, that he changed front. It is a source of bitter complaint against defendants that the name of the purchaser of. the bonds was not disclosed: On the other hand, it may be pertinently asked if Sturgiss disclosed to his fellow stockholders the fact that he had a contract with this American Tin Plate Company whereby it agseed to pay $130,000 or thereabouts for the property. If he had, possibly .a concerted action on the part of all concerned would have led to its immediate sale, a composition with creditors, and an ending of the whole matter, for this price was about twice as much as any one then thought the property would sell for. He did not inform . his co-stockholders of this contract; on the contrary, he kept it secret, and its production is refused up to this time. Had he purchased this property at $50,000, which he already had a contract to sell for $130,000 would he, after buying in the debts for a few cents on the dollar which he could then have done, have divided any profit with his co-stockholders ? It would seem not. When the shoe gets on the other foot, has he right to say in effect: “I expected to come out in the sale of the property, and left you to try to come out in the sale of the bonds. We both were keeping our plans secret from each other. Your plan was successful, while mine was a dead failure. Now I demand you give me the full benefit your success brought you to save me from the loss my failure brought me”? I think not. It is no longer in effect a question between stockholders and creditors, but between co-stockholders. Had Sturgiss allowed the $220,000 sale last made to Frazer to stand as I have said, all debts would have been paid substantially in full without further controversy.

Third. If it be held that this sale of bonds was in ■ fact made to W. J. Logan and that other New York stockholders have an interest in them, even then I conceive Sturgiss cannot make this assault for another reason. He was an attorney at law, and was clearly acting as such for this bankrupt company and' for these nonresident stock-' holders. He prepared for them substantially-the charter papers, revised and corrected the minutes and records of its directors’ -and stockholders’ meetings, prepared the mortgage, defended the suits, and sent written opinions to the New York officers, defendants here, as to the validity of these debts and the liens claimed for them. It seems to me the relation of attorney and client could not be more fully established. It is well settled that an attorney cannot purchase the debt against which he has engaged to defend and then proceed to prosecute such debt, either in his own or an assignee’s name, without the consent of his client. Baker v. Humphrey, 101 U. S. 494, 25 L. Ed. 1065; Chaffin v. Hull (C. C.) 49 Fed. 524. In 4 Cyc. 959, in notes, more than 30 cases are cited from the courts of this country, Canada, and England to sustain this doctrine. Perhaps no court has gone further in this direction than our own Supreme Court of Appeals in Newcomb v. Brooks, 16 W. Va. 33, where Judge Green, in an elaborate opinion, has extended the principle to all fiduciary relations, and has expressed doubt whether an attorney in any case, even with the consent of his client, can purchase property sold for the benefit of his client at judicial sale pending the suits, or on an execution after judgment.

Finally, the Morgantown Tin Plate Company was adjudged bankrupt. By election of creditors Corbin was elected trustee. He thereby became clothed by the bankrupt law with full and plenary power, as the legal representative of these creditors here, to institute suits to recover the bankrupt’s property, to set aside its fraudulent conveyances, to intervene in pending suits instituted by others for such purposes, and to contest claims asserted against such bankrupt’s estate. In discharge of his duties, and without protest, so far as shown, from any of these creditors whose legal representative he was, he did intervene in the suits pending in the state courts, filed his sworn answers wherein he repudiated all effort to impeach the sale of these bonds, denied all fraud charged, and set forth the details under which it was made. The allegations of his answers in this respect have hereinbefore been set out. He is clearly estopped by this action on his part from now, in this suit, changing front and from assailing this transaction. As well said by Mr. Bigelow in his work on Estoppel (3d Ed.) c. 34, p. 601:

“If parties in court were permitted to assume inconsistent positions in the trial of their causes, the usefulness of courts of Justice would in most cases be paralyzed, the coercive process of the law, available only between those who consented to its exercise, could be set at naught by all. But the rights of all men, honest and dishonest, are in the keeping of the courts, and consistency of proceeding is therefore required of all those who come or are brought before them.”

And in Railway Co. v. McCarthy, 96 U. S. 258, 24 L. Ed. 693, Mr. Justice Swayne says:

“When a party gives a reason for his conduct and decision touching anything involved in a controversy, he cannot, after litigation has begun, change his ground, and put his conduct upon another and a different consideration. He is not permitted thus to amend his hold. He is estopped from doing it by a settled principle of law” — citing .authorities.

For reasons indicated, I do not believe this cause can be maintained, either by the original plaintiff or by the intervening petitioners, and it must be dismissed, with costs against them.