64 F. 253 | U.S. Circuit Court for the District of Northern Ohio | 1894
Memorandum for decree: I shall not undertake to make any statement of the case. The record is one of the most voluminous ever submitted to this court. The pleadings are numerous ani much complicated. Much bitterness of feeling exists between the parties, and counsel have suffered themselves to participate in some degree in the feeling and opinion of their clients. The record has been fully examined, and counsel heard both orally and by brief at unusual length. I do not deem it necessary to go into the facts any further than shall be found necessary in the statement of such conclusions as will enable counsel to draw a decree.
The questions to be decided will be stated in such order as shall be most convenient.
1. The attack on the judgment of the complainants, McMullens:
McMullens’ judgment: At the October term, 1893, application was made foi* leave to file an amended and supplemental answer and cross bill by the defendant Hit chie, which, among other things, attacked the McMullens’ judgment for fraud, in so far as it rested upon $71,230 of Central Ontario coupons, clipped from the bonds of said company. Tn the said cross bill, Ritchie alleges that these coupons were not valid, because they had been severed from the bonds by the company before the bonds were issued, and that they had been surreptitiously taken from the company’s place of deposit by the McMullens, and were not valid obligations of the said railroad company. In January, 1886, the defendant Ritchie contracted to buy from James 13. McMullen and George W. McMullen, the plaintiffs in this case, 210 of the first mortgage bonds of the Central Ontario Railroad Company, with past-due coupons, which had matured the 1st of April, 1885, the 1st of October, 1885, and the 1st of April, 1886. Ritchie, by some contract, bought coupons amounting to ¥71,250, which were described as having matured prior to January 14,1885. These were detached coupons, and are those now complained of. Ritchie was to pay for these bonds and coupons described as above the sum of $210,000, and also §40,000 in stock of the Canadian Copper Company; payment to be made on or before the 1st of July, 1886. The delivery of the bonds and coupons, and the payment of the consideration, were to be simultaneous acts. Ritchie failed to make payment: was sued in the Canadian court for breach of contract on the 8th day of October, 1887. The declaration filed in that case set up this contract, averred ownership of the bonds and coupons, and readiness and Avillingness to deliver same in accordance with the terms of the contract. Ritchie entered his appearance by attorney, and put in pleas. Neglecting to further niaite defense to the suit, judgment was rendered against him, February, 1888, for the sum of $2138,000. Afterwards suit was brought on that judgment in this court, in September, 1888. Various pleas were entered by Ritchie, none of which challenged the validity of 'the coupons in question. The result of the second suit was that judgment was rendered at the .November term, 1890, upon the Oa-
The failure of Ritchie at an earlier date to set up the defense which he now, by amended cross bill, seeks to assert, is fatal to his application. The only reason suggested for failure to make this defense is that he had no knowledge at the time of the rendition of the judgment in Canada, and none at the rendition of the judgment in this court, of the fact that the said coupons were without validity, and that they had been surreptitiously obtained by the said McMullens as before stated. There is no averment of diligence whatever. No reason is shown why he did not earlier acquire the same information upon which he now seeks to attack the judgment. Mr. Ritchie was himself the president of the railroad company at the time the bonds were issued, and at the time the contract of 1886 was made, and has continued to be president of that company down to a very late date. In one of his depositions given in this case, where he touches upon this question and upon the McMullens’ judgment and the alleged invalidity of these coupons, he says: “I am not now able to state to you when I became aware of the fact, but that I did become aware of it, and I promise to take pains to find out exactly.” The McMullens had, jointly with Ritchie, been the owners of this railroad. The contract for the purchase of these coupons described them as coupons “maturing prior to January 14, 1885, and stipulated to be delivered to the McMullens by the contract made in January, 1885.” Under these circumstances, it is very extraordinary that several years should have been suffered to elapse without his discovering any improper thing as to the validity of these coupons, or the title of the McMul-lens to them. Certainly, it is very essential to the jurisdiction of this court, when it is called upon to go behind a judgment rendered at law, that the facts and circumstances which prevented the complainant from making the defense, which was a legal defense, should be fully and thoroughly stated. It certainly was his right to have examined these bonds and coupons, to have inspected them, to have taken their dates and the number of the bonds from which they were clipped; and, looking to the fact that he was president of the railroad company issuing the bonds, it is impossible for him to escape the charge of very gross negligence in this matter, assuming that the defense which he now seeks to make has any merit in it. The inquiry which he did ultimately make of the McMullens as to the coupons covered by this contract does not seem to have been made until some time in the spring of 1893. The McMullens responded to his letter by stating that these coupons consisted of coupons maturing October 1, 1882, and subsequent dates between that time and 1885. At this stage of this case, he should be remitted to his remedy at law against the McMullens,
2. The debts of Bitchie to Burke, Bayne, and Cornell:
First. There is no substantial question raised as to the amount due to Burke, and a decree will be drawn for the sums indicated by notes filed by Judge Burke, with interest.
Second. The only controversy as to the debt claimed to be due the Cornell estate is as to a note for ¡§8,000. This note is not produced, nor its loss accounted for. I am convinced that it was taken up, 'and that the note for §8,040 was given for the old note and interest.
Third. The only controversy as to the indebtedness claimed by Senator Payne against Bitchie is as to a note for §60,000, dated November 8, 1887, payable three months after date, and executed by the Central Ontario Railroad Company to Ritchie, and indorsed by Ritchie to Senator Payne, before maturity. Ritchie’s claim is that this note was taken as a payment, and was to be credited by Payne upon Ritchie’s obligations to him. This claim is not supported. The weight of evidence is against it. The railroad company was indebted to Bitchie at the time something in excess of §60,000, and this note was executed as part payment of that indebtedness, and has been charged up by the railroad company to Ritchie as a credit upon his account. We think the real purpose of the execution of this note and its indorsement to Senator Payne was to prevent the McMullens, who were then suing Ritchie on account of his large indebtedness to them,'from garnishing that money in the hands of the railroad company, and that this note was then turned over to Senator Payne as a mere collateral. The note was practically worthless at the time it was executed, as the railroad company had no means of payment, and there was no practical way of coercing payment. This fact was well known to Benator Payne, and tends to corroborate his evidence and that of Mr. McIntosh that there was no agreement that this note should be taken as an absolute payment upon the amount of Ritchie’s indebtedness to him. Ritchie is entitled to haw: this note sold or collected, if it can be, and the proceeds applied to the payment of Benator Payne’s debt; but he is not entitled to have a credit for amount of note thereon as .if a payment. The other debts or claims of Benator Payne are allowed, without regard to this col-la! eral.
3. Compensation claimed by Ritchie for services rendered the mining companies, and for expenses incurred by Mm in their service:
The aggregate amount of compensation claimed by Mr. Ritchie for services of one kind or another to one or other or both the mining companies exceeds §1,000,000. These services may be summarized under the following heads: First, for buying mineral lands now owned by the copper company; second, for buying lands now' owned by (he iron company; third, for services rendered in getting
With regard to each and all of these claims, it may be said that, when Mr. Bitchie was engaged in tbe matters for which be now claims compensation, be was officially connected with tbe companies, either as an officer or director; and neither company bad by any resolution or by-law provided for any salary or compensation to any president or director, and that the only salary paid for services rendered by any president or director was a small salary paid tbe secretary and treasurer, Mr. McIntosh; and that tbe services rendered, by Mr. Bitchie were voluntarily rendered, and without expectation on bis part that be would be paid for them, or on the part of either company that be expected payment. There was neither an express nor implied contract upon which he can now predicate a claim for services rendered. That he expected no salary or other compensation is overwhelmingly shown by circumstances, as well as by his direct declarations, established by several witnesses. Most of his claims for services have no equitable basis whatever. For the purchase of the original tract of land containing copper ore he claims $50,000. That tract was bought by him for $14,000. It was bought for himself and Senator Payne. Bitchie took a three-fourths interestj and Payne one-fourth, each paying the purchase money in that proportion. Subsequently, it was conveyed to the copper company, for the consideration of $1,000,000 in the stock of that company. This stock Bitchie thinks was then and is now worth par. This stock was issued to Bitchie and Payne, and to such other persons as they directed. Just why the copper company should now pay him $50,000 for selling to it at $1,000,000 property which cost him $14,000 does not appear. The great bulk of the mineral lands now owned by the iron company consists in a tract of 15,000 acres, in which the company owns an undivided three-fourths interest, the other one-fourth interest being owned by one Coe, who has persistently refused to sell his interest to the company. The interest the iron company owns was conveyed to it by Bitchie, Payne, and one McClaren, each of whom owned an undivided one-fourth interest; Coe, as before-stated, own
That Mr. Ritchie was extremely active and zealous in endeavoring to make a market for the nicked ores produced by the copper company, and in securing the admission of such ores into this country free of duty, and in efforts to give some value to the iron ores of the iron company by the discovery of some cheap process by which lean ores might he concentrated and deprived of the excess of sulphur which rendered them useless, is most clearly shown. That he spent his time, influence, and money under any employment by either company is not shown. On the contrary, it is shown that he gave his services with no expectation of compensation, other than as the stocks owned by him in the mining companies would he enhanced in value or made salable as a result of his efforts. Another motive moving him to do all in his power to bring about a large operation of these mining properties is found in the fact that he was the president of the railroad company extending from Lake Ontario to the iron company’s lands, in the interior. That road was valueless unless it could get freight, and its chief expectation of freight was in the large operation of this iron property. Ritchie was also rhe owner of a inajori ty of the bonds issued by the railroad company, and of a majority of its shares of stock. It was unable to pay interest upon its bonds. The operation of these iron mines on a large scale would, it was believed, enable it to pay interest on its bonds, and give value to its stocks. Still a stronger explanation of his willingness to aid in every way the
4. Expenses:
What has been said as to compensation for services applies equally to his claim for $50,000, spent in the service of these companies. He admits that he kept no account of such expenses. He cannot apportion them between the several corporations, or say in what service he spent any particular sum. He had no purpose to
5. Amended cross bill:
First. The application to file amended answer and cross bill, made at October term, 1893, has been again considered in the light of the evidence in the record. The charge of a conspiracy between the complainants, the McMullens, and cross defendants Payne and Burke and Cornell’s executors, entered into for the purpose of depreciating the securities held by them as collateral security, with a view of acquiring these securities at low prices, is not supported by the facts of this record. That there has been some concert of action as creditors' having securities of the same class, and who are also owners in their own right of large interests in the same enterprises, is more than likely. But that this concert extended to an unlawful purpose, or was intended to maliciously injure Ritchie, is not supported. Whether McMullen was induced to file his creditors’ bill by Burke and others, or that his motive in filing his bill was not altogether the offspring of his interest as a creditor, is in no sense a material matter, lie has a legal demand, established by judgment. A return of nulla bona entitles him, as a legal credit,or, to subject equitable interests of his debtor through a creditors’ bill. It is no defense to a legal demand, instituted in the mode and according to the practice of this court, that the complainant is actuated by personal or improper motives. Forrest v. Railroad Co., 4 De Gex, F. & J. 131; Dering v. Earl of Winchelsea, 1 Cox, 319. The motive of a suitor cannot be inquired into. Ex parte Wilbran, 5 Madd. 2; Thornton v. Thornton, 63 N. C. 212. Were it otherwise, nearly every suit would degenerate into a wrangle over motives and feelings. Macey v. Childress, 2 Coop. Ch. 442. Complainants had for years no interest in the several corporations in which Burke, Ritchie, and others were concerned. That they have, in concert with the defendants, who are also creditors of Ritchie, some plans looking to a rehabilitation of these companies, as a consequence of acquiring stocks and bonds now owned by Ritchie, as a means of saving their large demands, is no reason for repelling them from court.
Second. The several acts complained of in the proposed cross bill, aiid for which Ritchie seeks to hold his creditors Burke and Payne and Conull liable to him, in so far as they are acts of alleged corporate mismanagement or maladministration, are corporate rights of action, and the remedy is a corporate remedy. Take the instance alleged of the refusal of the contract made by Ritchie of a large sale .of nickel ores to the United States government, or the sale to Carnegie, Phipps & Co. of another lot of nickel ore, or the failure of the company to enter Into a contract with Edison for the desulphurization of iron ores. All of these instances are contracts wiili one or other of the mining corporations. If any wrong was. done by failing to ratify the arrangements made or proposed by
Another decided objection to any recovery against the cross defendants for alleged acts by which the corporation sustained loss lies in the fact that the acts complained of are for the most part disagreements between Mr. Ritchie and the several boards of directors as to the feasibility or wisdom of the several engagements, schemes, or enterprises into which he wished these companies to embark. They all concern the management or policy of the company’s assets. They do not involve acts ultra vires done or threatened, or acts of gross negligence in protection of corporate prop-
The refusal of the cross defendants to sell the corporate property, or to give options for a side, is not a matter of legal wrong. 1 know of no rule by which the discretion of an owner jointly interested in property to join in a sale, or efforts to sell, can be complained of by those wishing such a sale. Mr. Ritchie’s own evidence does not support the allegations in this regard made by the cross bill. No sale is shown to have been made by him, and no offer was bona fide made for a purchase. He had most exaggerated ideas as io the value of these properties. Some of .the cross defendants at times entertained like ideas. That they should refuse to give Mr. Ritchie power to sell them out is not a ground for damages. We find in the record no evidence to support the vehement charges that in refusing to permit Mr. Ritchie to dominate the affairs of these corporations, or to sell them when he washed, or to consolidate with other companies, defendants were actuated by any malicious or improper motives towards Ritchie, or desire to ruin Mm or squeeze him out. They were Ms own chosen associates and Mends. They advanced to one of the mining companies large sums of money, either as loans or stock subscriptions. They were largely interested in each of them. They loaned Mr. Ritchie enormous sums on the strength of the security of stocks and bonds of these corporations, which moneys lie seems to have invested in railway bonds, issued to extend the road in which he was chiefly interested. Any injury done either corporation affected them as much as it did Mm. They carried Mm as long as they deemed safe and prudent. His own finances seem to have been locked up in an unprofitable railroad. He makes no ease which, in my judgment, could have been aided by Ms proposed new pleading, and it was properly not allowed to be filed.
6. Mrs. Ritchie’s stocks:
McFarlin, executor of Cornell, shows that, of the copper stock shares held as collateral by Cornell, the following certificates appear to have been originally issued to Mr. Ritchie: No. 30, for 500 shares, indorsed by Mrs. Ritchie; No. 209, for 100 shares, in
Certificate No. 36, for 200 shares, held by the executor of Cornell, was ,a certificate issuéd to Burke, and is indorsed by him in blank. McFarlin also shows that the executors held certificate No. 102 for 1,939 shares of the iron company stock issued to Mrs. Ritchie, and indorsed by her. The remainder of the iron shares certificates held by these executors do not appear to have been issued to Mrs. Ritchie.
Certificate No. 102, for 1,939 shares iron stock: Mrs. Ritchie, in her answer, claims that this certificate was authorized to be pledged only to secure a note for $14,580.85, bearing date February 6, 1889, and for no other purpose whatever. A note of that description is produced by the executors of Cornell, who also produce a paper bearing date January 28, 1889, signed by S. J. Ritchie, in which he pledges a number of certificates for stock to Mr. Cornell, “as collateral security for any note or notes he has against me, or may acquire.” On the 1st day of August, he added a memorandum to the paper above mentioned, in which he permitted the securities above referred to to stand as collateral security for a note for $12,000, that day indorsed by Cornell for him. There is no competent evidence showing any limitation upon Ritchie’s authority to use these certificates, indorsed in blank by his wife, as collateral security for any or all of his debts to Cornell. The burden was upon Mrs. Ritchie to show a limitation upon her husband’s authority to use her indorsed certificates, and that Cornell had notice of that limitation. A number of papers are exhibited by Cornell’s executors, signed by Ritchie, agreeing that the collaterals then in his hands should stand as security for any and all of his indebtedness. The conclusion I reach is that all of Mrs. Ritchie’s indorsed certificates of shares in either of the companies are valid pledges in Cornell’s hands for all of Ritchie’s debt to him.
7. I next come to Mrs. Ritchie’s claim to have the coupons and bonds levied on by execution applied in exoneration of her securities held by Cornell:
That the 901 shares of copper stock and 1,938 shares of iron stock held by Cornell as collateral security for Ritchie’s debt to him belonged to Mrs. Ritchie is clearly made out. Ritchie also testifies that-these shares were pledged to Mr. Cornell by her consent, and that he (Cornell) knew that these shares were the property of his wife. He says that on the 31st day of July, 1890, just before he went with Cornell to Europe, with the view of investigating the nickel industry, Cornell said to him that “a great deal of the collateral that I hold belongs to your wife, and I don’t like the idea of relying on that.” “Haven’t you some other collateral which you can put up?” To which he says that he told him that he had a large lot of coupons clipped from bonds of the Central Ontario Rail-road, for interest past due and unpaid, and that he then put up coupons amounting to the sum of $180,000, and five bonds of the same rail
But it is insisted that the evidence of Mr. Ritchie as to the purpose and agreement under which this second batch of collaterals was deposited with Mr. Cornell is incompetent, and must be excluded. This objection appears first to have been made upon the taking of the evidence in this cause by the executors of Mr. Cornell, in October, 1893. Upon the taking of the last batch of depositions in this case, Mr. Ritchie, being again upon the witness stand, was asked concerning the circumstances under which these coupons were deposited with Mr. Cornell. Upon the argument of the case, a general objection was entered by the executors of Cornell to any evidence of Mr. Ritchie as to any transaction or conversation with Mr. Cornell. It seems to me that this objection is not well taken. Mr. Ritchie was first examined as a witness by the complainants on the 81st of May, 1892. In the deposition which he then gave, he substantially stated the same facts elicited more than two years afterwards, in another deposition. When he wms first examined by the complainants, Mr. Cornell wás alive, and a party to this litigation. Mr. Ritchie was therefore, when he then testified, a competent witness as to this transaction. In June, 1S92, Mr. Cornell died, and the suit was revived in the name of .his executors, who thereafter interposed the objection heretofore mentioned. I am of opinion that, inasmuch as Mr. Ritchie was a competent witness at the time that the complainants took his proof in regard to the very matter now under consideration, the deposition thus taken is competent testimony for all purposes. It was possible for Mr. Cornell to have given his own deposition in reply. He did not do so at once, and died within perhaps six weeks or two months thereafter, and before testifying in the case. My opinion is that Mr. Cornell’s misfortune, whereby he was ultimately deprived of an opportunity of denying Mr. Ritchie’s statements, ought not to, and does not, affect the competency of evidence that should be tested as of the time when the evidence was taken. “The intermediate incapacitation of a witness, therefore, does not exclude his deposition taken when he was competent.” 1 Whart. Ev. § 477; Bingham v. Lavender, 2 Lea, 48; McDonald v. Allen, 8 Baxt. 446. I am therefore of opinion that upon the issue between Mr. Ritchie and his wife, the McMullens, and Mr. Cornell, as to whether Mrs. Ritchie is entitled to have these securities, levied on by
It is true that neither the memorandum found in the packages containing the collaterals, nor the paper produced oy Mr. Ritchie, in terms say anything about tbe purpose for which these coupons had been left with Mr. Cornell. That these coupons were left with Mr. Cornell as a depositary, and not in the hands of the First National Bank of Akron, is made clear by the testimony of Mr. McFarlin, one of the executors of Mr. Cornell, and an officer of that bank, who states distinctly and positively that the bank had nothing to do with the box; that it was left with Mr. Cornell, and not with the bank, and was placed by Mr. Cornell in the vault, which he had the right to do. Upon the issue as to whether these coupons were left with Mr. Cornell as additional collateral, I am of opinion that both the testimony of Ritchie and Sperry is competent; and that the testimony, taken in connection with the fact that coupons were in the possession of Mr. Cornell and in the box with Mr. Ritchie’s name upon it, makes it reasonably satisfactory that Mr. Cornell did hold them as collateral security for the payment of bis debts.
The attitude of Mrs. Ritchie as a mere surety is clearly made out by the testimony of Mr. Ritchie, and it must follow that tbc-fact of the levy by the McMullens cannot operate to defeat her right to have these coupons sold in exoneration of her liability as a surety. A decree will therefore be drawn on this point of the ease directing that the collaterals held by Mr. Cornell’s executors, other than those belonging to Mrs. Ritchie, be first sold, and then a sufficiency of the coupons levied upon by the McMullens to pay any further sum be next sold; and, if any surplus remains after satisfying Cornell’s debt, the McMullens will be entitled to such surplus. If, on the other hand, there be a deficiency, enough of Mrs-
8. Is Cornell’s estate liable to the McMullens in consequence of their loss of these coupons to Mrs. Ritchie?
I think that that question has perhaps been sufficiently answered by the ruling that Mrs. Ritchie had the right to pursue these coupons, and that her right had not been lost by. reason of the levy. But, independently of that, the insistence of the counsel of the McMullens is that Mr. Cornell waived any right which he had to these securities as collateral in favor of the McMullens.. If that were so, it ■would not necessarily follow that Mrs. Ritchie would be affected by anything which he did. It did not operate to put these securities in the hands of an innocent purchaser without notice. The McMullens occupy no such attitude. They are mere execution creditors, and must stand or fall upon the character, of title which Ritchie had to these coupons. They have levied, not upon Cornell's title, but upon Ritchie’s title, who was the owner of these coupons. When the levy was made, these coupons were held in pledge by Mr. Cornell, as a' security for his debt, and, secondarily, for the protection of Mrs. Ritchie’s securities. The McMullens cannot set up an estoppel because they have not been misled to their injury by anything that Cornell may have stated which induced them to believe that these coupons wrere Ritchie’s absolutely, and therefore subject to levy. I am not at all satisfied from the evidence that Mr. Cornell made any distinct waiver of his rights as against these coupons. Mr. McMullen’s testimony is perhaps relied upon to show that Cornell disclaimed having any interest in these coupons. I do not think that Mr. McMullen is a competent witness as to that conversation. If Mr. Cornell had testified before dying, and liis deposition had been filed in this case, then McMullen would have been competent as an opposite party to have testified concerning any matter which his dead adversary had been examined about. But that is not this case. The McMullens had then taken Mr. Ritchie’s testimony, and shown by him that these coupons were deposited as collateral with Mr. Cornell. Mr. Ritchie was not examined at all concerning any conversation between Cornell and McMullen. The effect of Mr. McMullen’s testimony, if sufficient to establish the fact which he testifies to, would be, if contention of counsel is sound, to throw a large liability upon Mr. Cornell’s estate. It is a case of a living party undertaking to maintain an issue against his dead adversary by detailing a conversation which occurred between them. I think it is incompetent, and I think the objection taken by the executors of Cornell is well taken, and all parts of Mr. McMullen’s testimony relating to conversations with Cornell concerning his interest in these coupons must be excluded. But counsel say, if excluded, it is immaterial, because Mr. McIntosh testifies to the same thing. That is a mistake. . Mr. McIntosh was present in the room when Cornell and McMullen were discussing
9. The purchase of the Vermillion mine:
Without stating the facts of this matter, I am of opinion that: Ritchie has no just demand against Cornell’s estate for any part of t he shares of the copper company issued to Cornell for the Vermillion property.
10. It is next insisted, by both Ritchie and his wife, that on the 21-th day of January, 1890, Mr. Ritchie assigned and transferred to Cornell, by way of additional security, certain collaterals held by the savings and loan bank, to secure it in a loan theretofore made to Ritchie, for which it held Ritchie’s note for $171,500. The col-laterals held by the bank were supposed to exceed in value (Ik* amount of the bank’s debt. In support of this insistence, Mr. Ritchie produced a. paper signed by himself alone, bearing date as of Ian nary 29, 1890, purporting to transfer all of his interest in the securities belonging to him and held by the said bank, as additional security for the payment of a note1 of Riichie’s held by Cornell at. that time. This paper, thus produced by Ritchie, purports to be subject to an assignment made to Henry B. Payne. Ritchie was examined as to this matter by the counsel of Cornell’s executors, and he testifies that on the 29th of January, 1890, he, in consideration of a certain indorsement renewed that day by Mr. Cornell, and in consideration of certain oilier obligations executed in his favor by Cornell, had drawn up and executed three copies of an assignment, one of which he filed in evidence. He testifies that the other two copies were delivered to Mr. Cornell. He also testifies that the subsequent transfer of these same collaterals to Senator Payne, made on the 10th of March, 1890, and conditioned that he would take up and pay off Ritchie’s note for 8171.500, due to the said savings bank, was made with full knowledge of the previous assignment of January 24, 1890, to Cornell, and was made subject to it. In support of the alleged assignment to Cornell, it is shown that Cornell paid one installment of interest on the 29th of January, 1890, on Ritchie’s note, held by the bank. Mr. McIntosh testifies that on the 6th of March, 1890, Mr. Cornell informed him that he had paid one installment of interest for Ritchie, under the belief that Ritchie had executed to him an assignment of the bank’s collateral, but that he would pay no more
The bank had power of attorney authorizing it to sell, upon default in payment of interest, these securities. A sale under this instrument would have thrown upon the market a very large amount of securities that Senator Payne was interested in upholding. On the 10th of March, Cornell saw Senator Payne, at Washington, and executed an absolute transfer of all his interest in these securities, in consideration that Payne would pay off his note of $171,500, payable to the bank. This Payne did, and took up the securities, and now holds them. Ritchie insists that he informed Payne, at the time of this transfer of the securities to him,, of the previous transfer to Cornell. This Senator' Payne absolutely denies, and insists that the only information he (Payne) had upon this subject was the information imparted to him by McIntosh as to Cornell’s admission. Payne did not owe the $171,500 note. There were two notes, one for $10,000, and one for $25,000, held by this bank as security for the payment of this note, and this was his only interest in that transaction. According to Ritchie’s own admission, these securities were held, not only for the benefit of the bank, but to secure Payne’s indorsements upon the two small notes held as collateral to the large one. Payne’s conduct was that of one who believed that, by paying off that note, he would obtain these securities unaffected by a liability for any other debts due from Ritchie. It is exceedingly improbable that Senator Payne would have paid this note off if he had understood that he was taking these collaterals subject also to a prior lien in favor of Cornell. The circumstances all tend to support Senator Payne’s denial that he was ever informed by Ritchie of the actual existence of any such assignment to Cornell. It is clear that, as between Cornell and Payne, Cornell’s estate would not be permitted to set up the assignment which had been repudiated to Mr. McIntosh, and which was communicated and acted upon by him to Senator Payne. Upon this point, therefore, my conclusion is that Senator Payne is entitled to prior payment out of these assets, and to have satisfaction of his claims out of these collaterals, as well as those he already had.
It is well to observe right here, as to the actual truth of any such
11. The McMullens will deliver the coupons and bonds sold to Ritchie, and for which they have obtained judgment, to Irvin Bel-ford, clerk of this court, who is hereby appointed special commissioner, and take his receipt. The securities thus turned over will, after due advertisement (the terms of which to be hereafter stated), sell them separately from any and all other coupons; and after deducting a reasonable compensation for his services as commissioner in making the sale, and a fair proportion of the cost of advertising, he will pay over the entire proceeds of sale to the complainants, crediting same upon their judgment. Each of the defendants holding collaterals will likewise turn over their said collaterals to said Belford, as commissioner, taking his receipt. Said commissioner will, after advertisement, sell at public sale each lot of collaterals, keeping proceeds separate. In regard to the collaterals held by Cornell’s estate, he will first sell the securities belonging to Samuel J. Ritchie, including the coupons and bonds levied on by complainants, and now in the possession of -, as receiver, who, for this purpose, will place same in the hands of said Commissioner Belford. If the sale of Ritchie’s col-laterals is insufficient to pay the debt of Cornell, and a just proportion of all costs of the cause, and his own compensation, he
The costs of the cause, including receiver’s costs and commissioner’s costs and all expenses of sale, will be paid out of the proceeds of sale, being proportioned between each separate fund.