104 F. 409 | 9th Cir. | 1900
The defendant East Side Railway Company is a corporation organized by G. A. and James Steel for the purpose of building and operating certain lines of railway and street railway in and about Portland, Or. G. A. Steel became its president and James Steel its vice president, treasurer, and general manager. Each of them was a director of the corporation, the only other difect- or being John B. Cleland, who was also-its secretary, and who held hut one share of the stock of the corporation, and that only to qualify him as director. Indeed, it appears that at all the times herein mentioned the two Steels were the real owners of all of the stock of the railway company, 100 shares of which, however, were hypothe-cated by them as security for an indebtedness to the Bank of British Columbia, and for that purpose stood in the name of George Good as trustee, whose prosy, however, James Steel held. It appears that the company built at least some of the lines of railway for which it was organized, and acquired various rights of way, rolling stock, power house, and other necessary and appurtenant property. Under
> 1 "ilie Owmini i .'.⅞®1 ⅛ ^^^Kccieiy was not seeking- i/ > realize upon its v*vurities, but io effect' it the title of. Uie bonds lúilil by it to Mor-⅜⅛ & Whitehead. The be so called, was xioi a cash sale, as advertised, except as to which, when the amount involved is eon-Vifiered, appears to be too s^HWKnm to have operated as an inducement for what was done. The debt of the Steels,"except as to $4,©TO, ws, 0 simply transferred to Morris & Whitehead. I am satisfied that the solvency 5 of these bankers was not an inducement for the transfer. The security for the debt was he bonds. The German Savings & Loan Society was merely playing into the hands of Morris & Whitehead, and, if the former has no pecuniary share in the title derived from the sale, yet its conduct has all the con sequences of such an interest to the debtors whose property was sold. But whether the pledgee may buy at his own sale is not considered. It is enough [ 0 defeat the sale that it was contrived between the seller and buyer in order to get the pledgor’s title at a sacrifice of his interest, with that result. *) am of the opinion that the purchasers of -these bonds are duly entitled to a ctecree for the amount of the debts for which the bonds were pledged and inleivst and costs, and this conclusion is based upon the fact that the sale to Morris fc Whitehead was prearranged between the parties, that it was contrived between them as a means of acquiring the property pledged, and that it is immatoria l whether the German Savings & Loan Society have any interest in the sale or not. In reaching this conclusion I assume, from the earning capacity of ¡he railway as shown by what appears in the case, that the bonds have a vitlu* greatly in excess of the price bid for them at the sale. If this is so, it is ruu-onscionable that the mortgagors, or, what is the same thing, the other creditors, shall lose this excess by the expedient of this sale, while some ip5,000 of tht; ociginal debt remains unsatisfied in the hands of the purchasers at the naT„ If it shall turn our that the price bid is substantially all that the bond:', ar-e vorth, then the considerations upon which this decree is based will fail. Tm (hat case the sale could not have prejudiced the mortgagors and other credit 01s, but in that case the purchasers at the sale will not be prejudiced by the decree. In any event, they will have their debt and interest, whether that is íUxíl'cient to absorb the property or not; and it is all they are equitably entitled to have.”
We are unable to concur in these views of the court below. We find nothing in the record justifying the conclusion that Morris <& Whitehead, in purchasing the bonds in question, were in any way acting for the German Savings & Loan Society, or th it the savings and loan society had any interest whatever in that purchase. Those of the officers of that bank who testified in the cause testified explicitly that the bank had no such interest; and the', circumstances of the case, so far from impeaching or tending to inmoach that testimony, in our opinion strongly corroborate it. The ''bank had been trying for a long time to collect the loans. The borrowers had been unable to pay either principal or interest. Both of'them, as well as the railway company, all of wbose stock, as bus been said, they really owned, were insolvent, and hard pressed for noney. All of the property of the railway company was in the Lands of a receiver appointed by the court, who, for lack of means io operate it, had been compelled to issue, under the orders of tin court, receiver's certificates, which were made prior liens to 1lie mqrigage. Under such circumstances, what more natural than that ¡;he savings and loan society should be anxious to realize upon its loans, and to aid any one worthy of confidence found willing to buy tie bonds? Mor
“Sec. 8000. When performance of the act for which a pledge ¾: Aven is due, in whole or in part, the pledgee may collect what is <ltie to him ,⅛ a sale of property pledged, subject to the rules and exceptions hereinafter 'prescribed.
“See. 3001. Before property pledged can be sold, and after performance of the act for which it is security is due, the pledgee mast demand performance thereof from the debtor, If the debtor can be found.
“Sec. 3002. A pledgee must give actual notice to the pledgor of the ,'i'Hto mid. place at which the properly pledged will be sold, at such a reasonable time before the sale as will enable the pledgor lo attend.”
“Sec. 3005. The sale by a pledgee, of property pledged, must be made by I>ublic auction, in the maimer and upon the notice to the public usual at the place of sale, in respect to auction sales of similar property; and must be for the highest obtainable price.
“Sec. 3000. A pledgee cannot sell any evidence of debt pledged to him, except the obligations of government, states, or corporations; but he may collect the same when due.”
The record in the ease shows that these provisions of the California Code were complied with on the part of the savings and loan society.
In respect to the mutual mistake stated in the findings to have been made by the parties .in pledging bonds numbered 154 to 300, both inclusive, as security for the 883,000 note, instead of the $80,000 note, it is sufficient to say that all of the bonds were alike in all respects, and under the terms of the mortgage were entitled equally to its security, and were, therefore, of the same value, as was evidenced by the sale in question, at which, although each bond was offered for sale separately and altogether, there was no difference made between the bonds in the bidding. In such case the identity of the bonds becomes immaterial. Atkins v. Gamble, 42 Cal. 86; Thompson v. Toland, 48 Cal. 116; Krouse v. Woodward, 110 Cal. 643, 42 Pac. 1085. The pledge of bonds numbered 154 to 300, both inclusive, was certainly valid to the extent of $80,000 and interest, as provided for; and as the sale disclosed no difference in the value of the bonds, and the whole of the 300 brought less by $4,970.10 than the aggregate amount due upon the two notes, it' is obvious that bonds 154 to G00. both inclusive, brought less at the sale than the amount for which they were properly pledged. We are of opinion that the record shows Morris & Whitehead to he the legal and
The judgment is reversed, and thCprause remanded to the court below, with directions to enter a decree in accordance with the views here expressed