Kappner v. St. Louis & St. J. R.
14 F. Cas. 132
U.S. Circuit Court for the Dis...
1875
Check Treatment
DILLON, Circuit Judge.

In a causé of this importance I should ordinarily deem it proper to state my views as to the rights of the parties with some fullness; but the careful statement of the facts by the district judge (which, in argument, the counsel on both sides concede to be correct), and his opinion thereon, with the conclusions of which I concur, render it unnecessary to go into the case at length. Looking at the history of the transaction, the objects of the defendants, as declared in their articles of association, viz: “The completion and ownership” of the railroad and the nature of the agreement made between the president of the railroad company (who, together with the vice presiden,., were secret members of the defendant association), in execution of which the mortgage, whose lien is now sought to be enforced, was made, my opinion is that as against the as-signee in bankruptcy (who represents alike the rights of the railroad company and of its creditors) the lien can not stand in equity as against the creditors of the railroad company.

I have less hesitation in reaching this conclusion, because until comparatively a late *133period in the transaction tlie defendants never contemplated getting a lien which would defeat the creditors of the company, but contemplated advancing money enough to pay off all the debts of the company. Whether the effect of the bankrupt act [of 1807 (14 Stat. 517)] upon the transaction would not lead to the same conclusion, it is not material to inquire.

In respect to the appeal of the assignee: That the defendants actually advanced in money the $392,511.02 to the railroad company is not disputed; and of course they should be allowed to prove the amount against the company’s estate in bankruptcy, unless some rule of law forbids it. While the transactions between the officers of the railroad company and the defendants were constructively frauu-ulent by reason of the trust relations, and the effect on the company and its creditors of giving judicial sanction to it, yet I fail to see any equitjT in the view which would deprive the defendants of the right to prove the amount of their actual advances; and considering the date of the agreement between the parties and the time when the railroad company was proceeded against in bankruptcy, as well as the nature of the agreement, I do not think the bankrupt act disentitles the allowance on the ground that the defendants took the mortgage for the purpose of obtaining an illegal preference. The decree is in all respects affirmed — the costs of the appeal to be paid by the assignee. Affirmed.

The decision was acquiesced in by the parties and cross-appeals to the supreme court, which had been allowed, were not prosecuted.