95 F. 497 | 6th Cir. | 1899
after malting the foregoing statement of facts, delivered the opinion of the court.
The principal questions arising upon the assignment of errors filed by the railroad company or the intervening general creditors are these: (1) Hid the court have jurisdiction to entertain1 the foreclosure suit? (2) If Hie court had jurisdiction, did it err in hearing and deciding the issues which were raised under the foreclosure suit without deciding all of the issues raised in the creditors’ suit? (3) Did the court err in holding that the railroad company was at least: a corporation do facto, and in dismissing the intervening petition of the Rhode Island Locomotive Works, based upon the insistence that the consolidated company was not: a corporation do jure or de facto? (4) Hid the circuit court err in holding that the bonds were not illegal under section 3290, Rev. St. Ohio? (5) Did the circuit court err in holding that the bonds were not void for violation of section 3313, Rev. St. Ohio? (6) Did the court err in holding that the preferred stockholders were entitled to a preference in the distribution of the property of the corporation, after the payment of debts, over the common stockholders? These questions can be most conveniently discussed in the order in which they have been stated, and in connect non with such further facts as have application to the particular question.
1. As to the jurisdiction of the court to entertain the foreclosure bill: The foreclosure bill ivas not a suit between parties having the requisite diversity of citizenship to give a court of the United States jurisdiction upon that ground. The jurisdictional fact averred in the bill ivas the fact that the property covered by the mortgage was within the actual custody and control of the court in which the
“And whether this hill will he regarded as a pure cross hill, as an original bill in the nature of a cross hill, or as an original hill, there is no error calling for the disturbance of the decree, because the court proceeded upon it in connection with the other pleadings. The jurisdiction of the circuit court did not depend upon the citizenship of-the parties, but on the subject-matter of the litigation. The property was in the actual possession of that court, and this drew to it the right to decide upon the conflicting claims to its ultimate possession and control. Minnesota Co. v. St. Paul Co., 2 Wall. 609; Bank v. Calhoun, 102 U. S. 256; Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. 27.”
The identical question arose in this court in the case of Compton v. Railroad Co., 31 U. S. App. 486, 522, 529, 15 C. C. A. 307, and 68 Fed. 263, where an original foreclosure bill was filed, and jurisdiction maintained solely upon the ground that the property was within the possession of the court through a receiver appointed in another foreclosure case. That case has been approved and followed in Lumley v. Railroad Co., 43 U. S. App. 476, 22 C. C. A. 60, and 76 Fed. 66, and in Blake v. Coal Co., 47 U. S. App. 753, 28 C. C. A. 678, and 84 Fed. 1014, where Judge Hammond, for the court, said, “Whether. the auxiliary jurisdiction be marked by original bill, cross bill, or by intervening pet ilion, diversity of citizenshp is not necessary to its maintenance.”
2. Appellants contend that, if the foreclosure proceedings were in any sense of a dependent character, a single decree should have been entered, determining all the rights, equities, and priorities of all the creditors of the insolvent debtor, and that any creditor intervening in the creditors’ suit was entitled to contest, the-claims of every other creditor coming into that suit, and that no proper decree could be entered until the amount and rank of every claim so filed had been determined, and all objections to such claims had been do-í.'iTi.'ineíI, and that the foreclosure decree was therefore premature and erroneous. We quite concur in the view taken by ilie circuit <ourt of the relation of the one suit to the other, and of the consequences of this sort of jurisdictional dependency. In justifica! ion of the order allowing the foreclosure suit to be fill'd as an independent bill, and directing consolidation of the creditors’ suit with, íumI under the style of, the foreclosure suit, the circuit judge said:
‘•It cannot bo, o£ importance that tlie bill was apparently filed as an inde-l-mdont bill. I1‘, in fact, tlie only way of maintaining jurisdiction of it is ns a dependent bill, ancillary to the creditors’ action, it is the duly of the court so to font it, provided it appear, as it does, that it can be maintained as such. But care must be taken not to give too much effect to the dependence of one suit on (he other for jurisdictional purposes. Such dependence does not throw both suits into hotchpot, and dispense with the ordinary rules of pleading and practice as to parties proper and necessary to each cause of action. Because tlie res acquired under the original bill gives ancillary jurisdiction to entertain a dependent bill sticking relief in respect of the res, parties to the original bill are not thereby made parties to the dependent bill. The parties to the original bill have no more right to intervene in the dependent cause than if the court had independent jurisdiction thereof. Hence the rule as to who may appear to a foreclosure bill and file answers is the same here as if the bill had in fact been an independent bill. In other words, the relation between the two suits is principal and ancillary only so far as that, without possession of the res in the former suit, the court would have no jurisdiction of the latter; but, having thus acquired and thus ’maintaining its jurisdiction in the second suit, the court proceeds in it without further regard to the pleading or course of the principal action.” Continental Trust Co. v. Toledo, St. L. & K. C. R. Co., 32 C. C. A. 44, 87 Fed. 183.
It was not error, therefore, to hear the foreclosure suit upon the issues properly made between those who were parties to that suit. ]Sor was it necessary that the court should refuse a decree enforcing
3. Certain general creditors, parties to the foreclosure suit, have challenged the validity of the agreement under which the Toledo, St. Louis & Kansas City Railroad Company claims existence as a valid consolidated corporation of Ohio, Indiana, and Illinois. This consolidated corporation was organized June 19, 1886, the constituent companies being the Toledo, Dupont & Western Railway Company of Ohio, a corporation owning that part of the consolidated line lying within the state of Ohio; the Bluffton, Kokomo & Southwestern Railroad Company of Indiana, a corporation owning that part of the consolidated line lying within Indiana; and the Toledo,
“Whenever any railroad which is situated partly in this state and partly in one or more other states, and heretofore owned by a corporation formed by consolidation of railroad corporations of this and other states, has been sold pursuant to the decree of any court or courts of competent jurisdiction, and the same has been purchased as an entirety, and is now or hereafter may be held in the name or as the property of two or more corporations incorporated, respectively, under the laws of two or more of the states in which said railroad is situated, it shall be lawful for the corporation so created in this state to consolidate its property, franchises and capital stock with the property, franchises and capital stock of the corporation or corporations of such other state or states in which (lie remainder of such railroad is situated, and upon such terms as may be agreed upon between the directors and approved by the stockholders owning not less than two-thirds in amount of the capital stock of such corporation.” 3 Starr & C. Ann. St. Ill. p. 3241.
Section 3380 of the Revised Statutes of Ohm was in these words:
“A company organized in this state for the purpose of contracting, owning and operating a line of railway, or whose line of road is made or is in process of construction to the boundary line of this state, or to any point either in or out of the state, may consolidate its capital stock with the capital stock of any company in an adjoining stale organized for a like purpose, and whose line of road has been perfected, constructed, or is in process of construction to the same point where the several roads, so united and constructed, will form a continuous line tor the passage of cars.”
The principles we have been discussing have application to the objections urged against this consolidation under both the Illinois and Ohio law. The objections made to the eligibility of the constituent companies to unite themselves as a consolidated corporation under the Illinois law above set out are these: First, that the railroad now owned by the Toledo, St. Louis & Kansas City Kailroad “was not owned, prior to the attempted consolidation, by a corporation formed by consolidation of railroad corporations of Illinois and other states.” The fact is that prior to 1886 there was a line of narrow-gauge rail
But it is said that the old consolidated narrow-gauge railroad was not “purchased as an entirety,” under the decree of a court having jurisdiction. It appears that the narrow-gauge railroad company had mortgaged its railroad as two separate divisions. That jiart of its line from Toledo to Koltomo was known and mortgaged as its “Toledo Division,” and that portion from Kokomo to East St.Louis was known and separately mortgaged as its “St. Louis Division.” These two mortgages were necessarily foreclosed under distinct decrees. These two divisions were sold on the same day, and confirmed on the same day, to Sylvester H. Kneeland, and both divisions were conveyed to him by a single master’s deed, dated March 10, 1886. Subsequently Kneeland organized a corporation in Ohio, to which he conveyed so much of this line as was situated in Ohio, and also organized corporations in Indiana and Illinois, to which he conveyed, respectively, so much of the said railroad as was situated in each state. In thus buying said entire line of railroad, Kneeland was acting as the trustee for the holders of all the bonds, and with a view and under a contract for a reorganization and reconstruction of said line of road, and in accordance with this purpose and agreement of the beneficial owners, these three consti tuent companies were aft-erwards consolidated, and became the present mortgagor consolidated company.
Upon the facts stated, we hold that the said railroad was “purchased as an entirety,” within the meaning of the Illinois statute, and that the constituent companies were, under that statute, eligible to form a de jure consolidated corporation. Thus is it to our minds clear that, under the law of both Indiana and Illinois, a de jure consolidation was not only possible, but was a fact brought about. But it is said that the Ohio statute only permits the consolidation of an Ohio corporation with that of an adjoining state, and that, Illinois not being adjoining to Ohio, the attempted consolidation was unwarranted. Coucededly, the Ohio company could have consolidated with the Indiana company. So, the Indiana company could have consolidated with the Illinois company. The objection goes, then, only to the order in which these three companies united themselves. If the Indiana company had first united itself with the Illinois company, and that act had preceded its union with the Ohio company by but a single instant, no objection would lie. But, when the union of the Ohio corporation with the Illinois corporation occurred, it was a result of a coincident union of the Ohio company with the Indiana company, which was a corporation of an adjoining state. Such a simultaneous union with two companies, one being a corporation of an adjoining state, was a substantial compliance with the Ohio law, the prime object of which was to limit consolidation to connecting lines. The consolidation resulted in a de jure corporation.
4. This brings us to the question of the legality of the bonds issued
“The directors of the company may sell, negotiate, mortgage or pledge such bonds or notes, as well as any notes, bonds, scrip or certificates for the payment of money or property which the company may have theretofore received or shall hereafter receive as donations, or in payment of subscriptions to the capital stock, or for other dues of the company, at such times and'in such places, either within or without the state, and at such rates and for such prices, at not less than seventy-five cents on the dollar, as in the opinion of the directors, will best advance the interests of the company; and if such notes or bonds are thus sold at a discount, without fraud, the sale shall be as valid in every respect,- and the securities as binding for the respective amounts thereof, as if they were sold at their par value.”
Tbe facts essential to be understood which, have direct relation to this question were clearly and compactly stated in the opinion of the circuit judge, and are as follows:
“In 1882 the railroad that is the subject of this litigation was a narrow-gauge line, running from Toledo to St. Louis, and was owned by the Toledo, Cincinnati & St. Louis Railroad Company, a consolidated corporation of Illinois, Indiana, and Ohio. It was 450 miles in length. It had a total mortgage indebtedness of about $10,000,000, and a capital stock of the par value of $21,000,000. It was divided into two divisions. By two agreements, two committees, of five members each, were constituted to protect their respective interests in the purchase of the two divisions of the road then about to be sold, and to effect a reorganization of the two divisions, united in one road, upon a plan stated in the agreements. The plan embraced the issue of first mortgage bonds to the extent of $15,000 a mile with which to rebuild and widen the gauge of the road, and the issue of $7,000,000 of second mortgage bonds with which to take up the first mortgage bonds of the two divisions. The agreement gave the trustees very wide powers and discretion in the working out of the scheme of reorganization. In the latter part of 1S85, James M. Quigley, who was chairman of the two committees, made a preliminary contract with S. H. Kneeland, by which Kneeland agreed to bid in the two divisions of the old road at the foreclosure sale, to be held in the following January, and to advance the cash which it was necessary to deposit in order to become a bidder at the sale. The preliminary agreement looked to a subsequent agreement .by which Kneeland was to be given the first mortgage bonds on the narrow-gauge road, and with them to assume all the obligations of the purchaser imposed by the decree for sale, to convey the road to a newly-organized consolidated corporation of Ohio, Indiana, and Illinois, and, as contractor, to rebuild the road and widen its gauge. Kneeland made the necessary deposits, and bid in the two divisions at the sale. Upon January 23, 1880, after the sale, he made with the two bondholders’ committees the two contracts under which the bonds here in controversy were subsequently issued. The agreements are in all substantial respects similar. By these contracts, Kneeland on his part agreed: (1) To complete the purchase in accordance with the terms of the decree, which required the purchaser to pay off receiver’s certificates and other underlying liens prior in right to the first mortgage bonds. (2) To form three corporations, of Ohio, Indiana, and Illinois, respectively, to each of which he would convey the part of the road lying in the state of its organization, and then to consolidate them into a corporation of the three states. (3) That the consolidated corporation should change the gauge of the road from narrow to standard width; lay down steel rails of not less than 60 pounds to the yard of'main line; widen all embankments and cuts to the requisite width; widen, strengthen, and rebuild bridges as the same might be necessary; construct all necessary stations, tanks, houses, repair shops, and sidings, so that the said road, reaching from Toledo to East St. Louis, should ‘in all respects be a first-class road of standard gauge’; equip the road with all necessary cars of every description, and with requisite motive power; and use, of the $1,000 bonds of the company to be issued, the proceeds of at least four per mile in the purchase of the equipment. (4) Kneeland agreed to complete the construction and equip*513 ment, and deliver the road to the new consolidated company, on1 or before the 1st of July, 1888, unless he encountered unforeseen obstacles, in which case the bondholders’ committees were to have the power to extend the time for one year. (5) To pay the interest that might accrue on the newly-issued mortgage bonds, pending tlio periods of construction. The net earnings of the company during this period were to 1)3 devoted to such betterments as seemed desirable to tlio company. (6) To pay all the expenses of the two committees in litigation and reorganization and their compensation. It was further provided that, as a consideration for the performance of these obligations, tlio consolidated company would be required (1) to issue. $9,000,000 of 6 per cent, bonds, or $20,000 a mile, secured by a first mortgage; (2) to issue $5,805,000 of nonvoling stock, in $100 slmres, having coupons attached payable semiannually, at the rate of 4 per cent, per annum if earned, but noncumulative, and convertible into common stock after five years, and before ten years, and. if not converted, to become a preferred 4 per cent, noncumulative nonvoling stock; (3) to issue $11,250,000 of common stock, or $25,000 a. mile; (4) to issue the bonds, preferred stock, and common stock at once to two trustees, one to be selected by Kneeiand, and the other by the bondholders’ committee, for distribution. According to the contract, the trustees were (1) to deliver to Knee-land $2,000,000 in bonds and $2,500,000 in common stock at once; (2) thereafter, as the work of construction and equipment progressed, to deliver the remaining bonds and common stock to Kneeiand according to the value of the work done and equipment furnished, as certified by the chief engineer of the company; (3) to deliver $1,000,000 of tlio preferred stock to Kneeiand to aid in the purchase and payment of the underlying liens, as the satisfaction of the same should be certified by the clerk of the court; (4) to deliver $4,805,000 in preferred stock to tlio holders of the old narrow-gauge first mortgage bonds, on the basis of 15 shares, of $100 each, for one bond of $1,000 on one division, and 10 shares for one bond on the other division. It is further provided that the bondholders’ committee (1) should deliver all their first mortgage narrow-gauge bonds to Kneeiand to enable him to complete his contract of purchase; and (2) should litigate all claims made for liens prior to these bonds as lie should request, but at his' expense.
“Soon after the signing of the contracts, Kneeiand proceeded to organize three corporations—one of Ohio, called the Toledo, Dupont & Western Hailway Company; one of Indiana, called the liliiilton, Kokomo & Southwestern Railroad Company; and one of Illinois, called the Toledo, Charleston & St. Louis Railroad Company. To the first, by deed of June 12, 1886, lie conveyed all of the railroad lying in Ohio in consideration of all its capital stock; to the second, by deed of June 11, 1886, lie conveyed all of the railroad lying in Indiana in consideration of all its capital slock; and to the third, by deed of April 1, 1886, he conveyed all of the railroad lying in Illinois in consideration of its capital -stock. At the same time lie made contracts with the three companies or a similar diameter. It will be sufficient to state briefly his contract with tlio Ohio company. The recitals refer to the foreclosure proceedings of the old narrow-gauge consolidated company, the Toledo, Cincinnati & St. Louis, and lvneeland's purchase of the railroad at the. foreclosure sale. Kneeiand agreed to convey the Ohio part of the railroad to the Ohio company; agreed that the companies of Indiana and Illinois organized by him, to whom he would convey or had conveyed the remainder of the road, would consolidate with the Ohio company, so that a new consolidated company should become the owner of the continuous line from Toledo to East St Louis; and agreed that the consolidated company should, without delay, broaden the gauge of the road to a standard gauge, should lay the track with steel rails weighing not less than 60 pounds to the yard, and should make said line a first-class standard-gauge railroad in all respects, and equip the same with proper rolling stock and motive power. The Ohio company, on its part, agreed--First, to issue all its capital stock to Kneeiand; second, agreed that the consolidated company, formed as before provided, should issue, in full and complete payment for the broadening of the gauge, ihe reconstruction of the railroad, and its equipment, ‘and for tlio purpose of exchanging some of said stock and securities with the holders of certain securities issued by the companies heretofore owning and controlling said railroad and property, or portions thereof, for the payment of certain debts,*514 underlying liens, rights of way, and other corporate purposes,’ $9,000,000 of bonds, $11,250,000 of common stock, and $5,805,000 of preferred coupon convertible stock. The three corporations were then consolidated, and the organization of the new company was effected on the 19th of June, 1886. The articles of incorporation of the consolidated company described the preferred stock as follows: ‘Of said capital stock, $5,805,000, being 58,050 shares thereof, shall be four per cent, preferred coupon convertible stock, with right to vote only after conversion.’ The articles of association of the consolidated company provided that the first board should consist of James 51. Quigley, Isaac W. White, and Robert G. Ingersoll, of New York, together with ten others named thereof, and that the first officers of the company should be James 51. Quigley, president, and Isaac W. White, secretary and treasurer. The first meeting of the stockholders and directors was held on the 19th of June,- and Quigley was elected president, and White secretary and treasurer, accordingly. The board of directors then passed resolutions authorizing the issue of the bonds and stock provided in the articles of association and the contracts of January 23, 1886. There was no formal confirmation of the contracts of January 23, 1886, by the board of directors of the company, but they proceeded at once to conform to the provisions of the contracts in the issue of the stock and bonds, and in their delivery to trustees. Kneeland selected Robert G. Inger-soll as his trustee, and the bondholders’ committee selected Isaac W. White as their trustee, the two to hold the' bonds and stock, and deliver the same to Kneeland, as the contract required.”
The negotiable character of these bonds has been questioned, because it is said the time of payment is uncertain, in view of the option given to the holders of one-half the entire issue to precipitate their maturity for default in interest, and because the amount payable is uncertain, in view of the provision that “all payments of principal and interest shall be made free and clear of all taxes.” We express no opinion upon this question, as we find it unnecessary, in view of our conclusions upon the question of the legality and validity of the bonds themselves.
The bonds and stocks thus placed in the hands of Ingersoll and White, as trustees, were from time to time, as the work of reconstruction and re-equipment progressed, delivered to Kneeland, and have passed finally into the hands of holders, many of whom are unknown. The contention is that the railroad company did not realize for its bonds the minimum price at which the bonds might be sold under this contract with Kneeland, and that, therefore, the holders of these bonds who do not establish their title as bona fide holders, for value and without notice, can, at most, recover only the actual money value or money’s worth received by the company, and not the amount of their investment. Without at this point deciding whether this question has been properly raised or can be by any of the appellants, we shall examine the question upon its merits. The trial court found upon the evidence that the money value of that which Kneeland did under his contract and the money value of the benefit received by the company for the bonds amounted to the price of 76.6 per cent, of the par of the bonds, and that there had been, therefore, no violation of this provision of the Ohio law. After a careful consideration of this vast volume of evidence, we concur with the circuit court in finding that the price realized by the company for their bonds was in excess of the limit fixed by the Ohio statute. The amounts paid out by Kneeland in performance of his contract, as found by the circuit court, aggregated $10,805,106. This consisted of the following items:
*515 <Ionstraction disbursed through Crowell........................ $ 3.309,317
Steel rails.................. 1,528,179
iron bridges, etc............................................... 500,000
Allowed by Kneeland for completion of road..................... 100,000
For interest on bonds down to June 1st, 1891.................... 1,780,465
For equipment................................................. 1,314,071
For lien claims prior to mortgage.............................. 650,247
Profit — 10 per cent, on cash paid out............................. 936,827
$10,305,106
From this aggregate value of benefits received the court deducted the following items, in order to arrive at the net value actually received by the company for its bonds:
Market value of common stock issued to Kneeland at 15 per cent____$1,687,500
Market value preferred stock issued to Kneeland at 30 per cent...... 300,000
Value of old materials received by him........................... 200,000
Net earnings received by him for year ending June 30, 1889........ 200,000
Net earnings received by him for year ending June 30, 1890........ 470,352
-Net earnings received by him for year ending June 30, 1891........ 549,902
$3,407,814
This aggregate of payments to Kneeland, other than in bonds, being deducted from total value of benefits received by the company under the contract with Kneeland, leaves $6,897,292, which is the value actually received by the company for $9,000,000, or 76.6 of par. The criticism of counsel for appellants upon this method of arriving at the consideration received for the bonds is chiefly this: That the bonds and the stock furnished, together, the consideration paid Knee-land for the construction and equipment of the road, and for the payment of the preferential liens upon the property of the old company, and that, if any apportionment is to be made, the only one which would carry out the intention of the parties “would be to apportion the consideration ratably upon the three classes of securities.” Thus apport ioned, the consideration for the bonds would necessarily be less than 75 per cent, of par. We are unable to appreciate this objection. To adopt such a construction of the contract of January 23, 1886, would be to assume that the parties attached a value to the stock which it did not have, and which could not have been obtained. The common stock had little, if any, actual value, and only such market value as Kneeland’s dealings in it created for it This value the court found to be 15 cents upon the dollar. This is a liberal allowance. The preferred stock had a probable market value of' 30 per cent. JSfo statute forbade the sale of either class of stock at its marketable value, either for money or in payment for construction of its railroad, unless section 3313, Rev. St. Ohio, forbidding a sale of bonds or stock to a director, has application to such a contract as was made with Kneeland, when made with a director. In Fogg v. Blair, 139 U. S. 118-126, 11 Sup. Ct. 476-478, the bill of a judgment creditor was dismissed upon demurrer which averred that the defendant had received for construction work the mortgage bonds of the company to the full value of the work done, and capital stock to a like amount as a bonus. The court said that it was competent for the company to use its bonds and stock in payment for the construe
“Wliat was such an equivalent depends primarily upon .the actual value of the stock at the time it was- contracted to be issued, and upon the compensation which, under all the circumstances, the contractors were equitably entitled to receive for the particular work undertaken, or done by them.”
It is impossible to suppose that the parties intended to treat these securities as of equal actual or market value, and there is no reason why so improbable a view of the contract shall be taken.
There is, however, a view of the contract under which the price received for the bonds and stock together would be the reconstructed and re-equipped railroad. The contract with Kneeland was but a plan for the reorganization and sale of the old narrow-gauge railroad, reconstructed and re-equipped. The original parties thereto were the first mortgage bondholders of that company, acting through their committee, and S. H. Kneeland. The plan was that Kneeland should buy in the mortgaged property for them, for this purpose using their bonds as far as they would go in satisfying his bid, and advancing for them the cash necessary to make the requisite money payment required by the decree of foreclosure, and for paying the claims adjudged to be entitled to priority over their bonds.' Thus these mortgage bondholders were to become, through Kneeland’s purchase, the beneficial owners of the narrow-gauge railroad. But the scheme went further. There was to be organized a corporation to which these owners should convey this property for purposes of operation. Hence the agreement that Kneeland should first organize three corporations, one in each state within which the road was situated, and convey to each such corporation that part of the railroad within the state of each corporation, and then consolidate these companies, so that the road in its entirety should be held by one corporation organized under the law of each state. The conversion of this narrow-gauge road into one of standard gauge, and to re-equip it according to the necessities of the changed gauge, was deemed wise and prudent in order to secure the possibility of some return for the large investment by these beneficial owners. Thus a part of the plan of reorganization required that the road should be reconstructed and reequipped, that it might be in all respects a first-class standard-gauge railroad. This Kneeland also undertook to do, and the method adopted was that the consolidated company should obligate itself to the constituent companies to thus reconstruct and re-equip the said railroad. For this purpose, and for the purpose of paying to the beneficial owners of the old property the price for which they consented to sell the same to the reorganized company, the consolidated company was obligated, as a condition upon which it received this property, to issue $9,000,000 of first mortgage bonds, $11,250,000 of common stock, and $5,000,000 of preferred stock; making a total capitalization of $25,250,000., This, in the last analysis, constituted the price to be paid for this property in its reorganized, reconstructed, and re-equipped condition, and was a price which the beneficial owners of the property required the reorganized corporation to pay for.
The principal distinction between the provision of the Arkansas constitution construed in Railroad Co. v. Dow and the Ohio statute involved here is that the latter prescribes a minimum price at which bonds may be lawfully sold. But we are not here dealing with a sale for money, but with an exchange of bonds and stocks for a completed railroad, including its franchises. In this aspect of the case, are the bonds illegal unless the actual money value of the railroad, as ascertained by evidence, shall prove to be equal to 75 per cent, of the par of the bonds, plug the market value of the stock, which was also used in the purchase? If so, the record discloses no such state of facts as would justify us in holding that the statute has been violated. Indeed, the evidence relied upon to support the claim that the statute has been violated has not been addressed to this aspect of the question. The circumstances would tend to show quite the contrary. The old narrow-gauge road was bonded for nearly $10,-000,000, and its capital stock exceeded that of the new company. This fact, taken into consideration with the fact that of the price scv paid not less than $6,000,000 was to be expended in betterments upon the old road, and about $1,000,000 in paying underlying liens upon that road over and above the mortgage debt, and in a provision for the payment of interest upon the bonds so used for several years, tends strongly to establish that the actual value of the reconstructed railroad was equal to 75 per cent, of the par of the bonds, plus the value of the entire common and preferred stock, the first being estimated at 15 cents on the dollar and the last at 30. The Ohio statute did not forbid the sale or exchange of stock at its market value. Neither does it any more forbid the exchange of its bonds for a railroad, or their use in exchange for construction work, than did the Arkansas constitution. The most that can be said is that, if used in exchange for a railroad, or in payment for property or construction work, the railroad, or the property, or labor and materials, shall be the equivalent of the money price for which the bonds might be lawfully sold. Tried by this test, the appellants have not supported their averment. But, waving the aspect of the case presented by the assumption that all the bonds and all the stock, common and preferred, represent the price paid for the reconstructed and re-equipped railroad required by the contract of January 23, 1886, and treating the transaction as one between Kneeland and the consolidated company, by which the former, in consideration of the bonds and common stock and one million of the preferred stock, agreed to pay off all .under
During the performance of this contract by Kneeland, many disagreements arose between him and the company touching his performance of the contract. In dune, 1891, a compromise and settlement of all differences was agreed upon, which was assented to by both the company and the committee of the bondholders of the old Narrow-Gauge Company. By that agreement Kneeland acknowledged his indebtedness to the company in a large sum, and his obligation to pay some $600,600 of underlying liens, which are still unpaid. The railroad company and the bondholders’ committee agreed that the trustees, Tngersoll and White, should deliver to him the bonds'and stock remaining In their hands, to be held to secure his notes executed on the consideration before stated. They also solemnly acknowledged that all the bonds and stock theretofore delivered to Kneeland by the trustees had been lawfully and properly delivered, and discharged the trusiees from all responsibility therefor. It is clear from this action of the corporation and those representing the old bondholders that neither the stockholders who consented to tMs settlement nor subsequent creditors may, at this late day, open up any mere question of breach of contract, and thereby affect bonds which had been theretofore delivered.
This question of the value of the contract with Kneeland is an aspect of the case to which neither the pleadings nor the evidence was addressed, and upon which the court is without the assistance of counsel. For this reason we are unable to compare the value of the work and equipment done or furnished with that agreed to be done
5. The next contention is that a majority of the bonds are void under section 3313, Id., which provides as follows:
“All capital stock, bonds, notos or other securities of a company purchased of a company by a director thereof, either directly or indirectly, for less than the par value thereof, shall be null and void.”
The contention is that J. M. Quigley, who was a director and president of the consolidated railroad company, was the secret partner of S. H. Kneeland in the contract of January 23, 3886, heretofore in substance stated, and therefore a joint purchaser with Kneeland of the mortgage bonds of the company at less than par. To support this averment, Kneeland produces a copy of an agreement between himself and J. M. Quigley, and testifies that this agreement was but the written embodiment of a parol agreement which had existed between himself and Quigley prior to the date of the agreement of January 23, 1886. This contract is dated July 8, 1886, and was at that date signed and deposited, as a secret arrangement, with Robert G. Ingersoll, the private attorney of Kneeland. and his representative as one of the trustees to whom the railroad bonds had been delivered in escrow for delivery to Kneeland as his contract was performed. That agreement was in these words:
“Memorandum of agreement between Sylvester H. Kneeland, of the first part, and James M. Quigley, of tlie second part. Whereas, the, party of the first part, on the 23d of January, 1880, made certain contracts for the reconstruction, widening of the gauge, and equipping of the line of railroad from Toledo to East St. Louis, now known as the Toledo, St. Louis & Kansas City R. R. Co., said contracts having been made with the first mortgage, bondholders’ committee or the trustees, respectively, of the lines of road heretofore known its the Toledo & St. Louis Divisions of the Toledo, Cincinnati & St. Louis R. R. Co., contracts of like character and tenor having been since made with the Toledo, Charleston & St. Louis R. R. Co., the Bluffton, Kokomo & Southwestern R. R. Co., and the Toledo, Dupont & Western R. R. Co., being the companies forming by consolidation the Toledo, St. Louis & Kansas City R. R. Co., before mentioned; and whereas, the party of the first part, owing to the complicated and hazardous character of the contracts above referred to, having been unable to associate with himself therein such persons as he desired and anticipated, and now finds himself alone, and in danger of failing to accomplish all he has undertaken, and Cor these reasons, and to better carry out the great work in hand, finds it necessary to avn il himself of the extended acquaintance and great knowledge and experience possessed with respect to the railroad property by the party of the second part: Kow, therefore, in consideration of the premises, and other valuable and sufficient consideration, hereto him moving, the party of the first part hereby associates with himself the party of the second part as full partner equally in all the contracts above mentioned. Any profit to be made thereby to be equally divided; that is to say, each to be entitled to one-half of such profits. And the party of the first part declares he has no associates or partner in such contracts but the party of the second part. It is agreed between the parties hereto that their respective duties shall be as follows: The party of the first part to have charge of the reconstruction and financial arrangements therefor, and negotiations looking to alliances with other companies. The party of the second part to attend to the closing up of the trust created under a certain trust deed or agreement dated April 9, 1884, to conduct and have charge of the various litigations and references involving the purr chase-money fund in court, conflicting title, and all lawsuits pertaining to the line of said Toledo, St. Louis & Kansas City R. R. Co., and to manage the*522 business, other than financial, of the railroad company. If, owing to illness, or any other cause, the party of the second part should he unable to perform his duties as above, there is to he deducted from his share of the profits, before a final division, the amount required to pay the persons other than legal counsel who may be employed to take his place and do his work. The party, of the first part in his department to be without restriction, except that he shall not close any negotiations tending to reduce the interest or profits of the party of the second part without the consent of the party of the second part. Any profits in securities or money withdrawn before the completion of the contracts shall be divided equally at the time.”
So far as it appears, this corrupt agreement was known only to the parties thereto, and to the depository thereof. The relation thus established continued until September 8, 1887, when it was dissolved by mutual consent, and the signed agreement destroyed. A partial settlement of the profits seems to have been at that time agreed upon, and on July 5, 1889, Quigley received from Kneeland 180 of the bonds of the railroad company in compromise of his claims against Knee-land under this most infamous contract. The evil and vicious character of this arrangement by which Quigley was to become interested with Kneeland in the profits to be realized under this contract is at once seen when we recall that Quigley was. not only the chairman of the bondholders’ committee, which was the other party'to the contract, but the president of the consolidated railroad company, which by the act of consolidation had assumed or adopted the contract made in anticipation of its. organization. The object in uniting Quigley with himself was plainly to facilitate the acceptance of the work he was doing in the' reconstruction of the railroad'through Quigley’s influence with his fellow directors, and more directly through his influence with Isaac W. White, the representative of the old bondholders’ committee and of the new railroad company. This influence Knee-land says was supreme with White; the latter being, as he says, a mere “office boy” under Quigley. Between June 19, 1886, and September 7, 1887, bonds aggregating $4,550,000 were delivered' by In-gersoll and White, trustees, to Kneeland, under the terms of the contract of January 23, 1886; and the contention is that all of these bonds so delivered prior to September 8, 1887, when the relationship between Kneeland and Quigley was dissolved, were bonds sold by the railroad company “directly or indirectly” to Quigley, who was a director of the company, for less than par, and are therefore “null and void,” under section 3313, Rev. St. Ohio.
The first question is whether Quigley was associated with Knee-land when the contract of January 23, 1887, became obligatory upon the consolidated company. The constituent companies composing that company accepted the title to the railroad from Kneeland subject to the conditions of his agreement of January 23, 1886, and either expressly or impliedly assumed the obligations of that agreement. The same may be said as to the consequences which resulted from the consolidation of the constituent companies. The burdens, obligations, and contracts of the constituent companies were’ imposed upon the consolidated company as a consequence of the act of consolidation, and without any formal adoption of such contracts by the officers and directors of the consolidated company. Section 3384, Rev. St. Ohio; Compton v. Railway Co., 45 Ohio St. 592, 16 N. E. 110, and
In Anderson v. Roberts, 18 Johns. 529, Spencer, C. J., in differentiating void and voidable acts, said:
“Whenever the act done takes effect as to some purposes, and is void as to persons who have an interest in impeaching it, that act is not a nullity, and therefore, in a legal sense, is not utterly void, but merely voidable. Another test of a void act or deed is that every stranger may take advantage of it, but not of a voidable one.”
It appears to us that there is good reason for refusing to give to-the words “null and void,” in section 8313, any narrow or rigorous construction, and good reason for interpreting them as used in the* sense of “voidable.” The reasons for this construction are found in the object of the statute. The object was not to compel the sale of all such corporate securities at par. There is no statute in Ohio-prohibiting a corporation from disposing of its capital stock at its fair market value, except to a director. Neither is .there any policy to be discovered from the statute of that state regulating the organization of railroad corporations from which we might infer a purpose to-compel sales of corporate stock at par only. Neither do we find any statute which forbids generally the sale of railroad bonds at less than par. Upon the contrary, section 3290 declares sales at any price not less than 75 per cent, of par value to be valid and regular, and does not in terms declare sales at less than that price as operating to destroy bonds so sold. Neither does this section 3313, nor any other Ohio statute, prohibit sales of either corporate stocks or bonds to directors. The plain and obvious object was to protect such corporations from improvident or fraudulent sales of such- securities by directors to directors by requiring that such sales shall be for not less than par. The statute affects only the personal capacity of the directors to buy bonds frota the corporation at less than par. No public policy is declared upon the face of the statute, and none is discoverable from the evident object and purpose of the law. By section 3290, the state consents that sales of bonds shall be valid and eff ectual if made at any price equal to, or in excess of, 75 per cent, of par. If we assume that that statute is based upon some principle of public policy looking to the interest of the public who may become creditors of the company, then the public policy of Ohio and the interests of future creditors-are protected by requiring that all'bonds shall be sold at not less than 75 cents on the dollar. Whether bonds are sold to a stranger, a stockholder, or a director at 75 cents, or at any sum above that and below par, does not affect any public policy which may be indicated by section 3290. It follows, therefore, that if directors are not permitted to buy bonds at 75 cents, as all the rest of the public may, the prohibition is intended to protect the corporation against sales by those who represent the corporators to themselves, and that the public have no concern, except so far as the public interest may be regarded as protected by section 3290. We are therefore led to construe the statute as one intended only for the benefit of railroad corporations- and their stockholders. Such a statute serves its purpose when construed as making sales in violation thereof voidable at the instance of the corporation for whose benefit it was enacted, whether the latter be put in motion by its proper officers, or by stockholders when the-corporate management refuses to act. The rule deducible from the decided cases is this: Where the enactment is not based upon some declared or evidént ground of public policy, but has for its object the-protection of persons sui juris, the word “void” will generally be construed as “voidable” only at the election of the persons for whose-
“It would seem Hull we ought to construe the word ‘void,’ in this statute, as moaning ‘voidable’ only, if we can find any established rule by which to distinguish cases in which it has been and ought to be so construed from those in which a literal construction has been adopted, and to hold that this case comes within the former category. Such a rule, we think, is found in the following language of Bayley, J., in Rex v. Inhabitants of Hipswell, 8 Barn. & C. 471, where, discussing a question of statutory construction, he says: ‘But it is said that “void” is someiiines consi rued “voidable,” and, where the provision is introduced for the benefit of the parties only, such a consiruction may be right, but where it is introduced for public purposes, and to protect those who are incapable of protecting themselves, it should receive its full force and effect’ Tested by this rule, the word ‘void,’ in the statute under consideration, may ba held to mean ‘voidable’ only, for fcliis provision of the statute was obviously introduced only for the benefit of parties to be affected by the sale. The public at large have no interest in the matter, and the parties in interest have full opportunity to protect themselves by interposing to prevent the confirmation of a sale, or moving to set it aside, or, in a proper case, by a direct proceeding to avoid it after the conveyance is made. A rule substantially similar is stated by Lord Denman in Pearse v. Morrice, 2 Adol. & E. 94, in these words: ‘The word “void” had certainly been construed as “voidable” in some instances, where tlie proviso was introduced in favor of the party who did not wish to avoid the instrument.’ ”
In Bank v. Portner, 46 Ohio St. 381-384, 21 N. E. 634, the court held (hat the indorsee of a check could Hot recover against the drawer, although he took same for value and without notice of any vice in the transaction, because of the provisions of section 4269, Rev. St. Ohio, declaring all notes, bills, bonds, and contracts, when given for money won or lost upon any game, to be “absolutely void and of no effect.” But the Ohio court clearly distinguished the principle upon which it proceeded in that case from the principle to be followed where the statute using the word “void” is not one enacted for the purpose of advancing some public policy, by saying:
“Xoiwithshmdiug the general tendency of courts to construe the word ‘void’ as ‘voidable’ only, when used in statutes that affect contracts made in disregard of their provisions, yet where a public policy is to be subserved, as the suppression of usury or gaming, Hie settled rule is to give to the language employed its full force and effect. The rule with its limitations is thus stated by a very reliable author on the interpretation of statutes: ‘In general, however, it would seem that, where the enactment has relation only to the benefit of particular persons, the word “void” would be understood as “voidable” only, at tiie election of the persons for whose protection the enactment was made, and who are capable of protecting themselves, but that when it relates to persons not capable of protecting themselves, or when it has some object of public policy in view which requires the strict construction, the word receives its natural full force and effect.’ Maxw. Interp. St. (2d Ed.) 256.”
Thus, a Massachusetts act declared all mortgages given to secure usurious obligations “utterly void.” Tlie supreme court of Massachusetts interpreted the purpose of the act to be the protection of
This provision of the Ohio statute does not limit the scope of the powers of the companies affected, but only prescribes regulations as to the manner of exercising the general powers of the corporation. If this regulation of the disposition of corporate securities be one intended only for the benefit of the corporation, it is a provision which the corporation and its stockholders might waive. Zabriskie v. Railroad Co., 23 How. 381-398; St. Louis, V. & T. H. R. Co. v. Terre Haute & I. R. Co., 145 U. S. 393-403, 12 Sup. Ct. 953; Louisville Trust Co. v. Louisville, N. A. & C. R. Co., 43 U. S. App. 550, 22 C. C. A. 378, and 75 Fed. 433, and decided by supreme court of the United States May 15, 1899 (not yet officially reported) 19 Sup. Ct. 817; Central Trust Co. v. Columbus, H. V. & T. Ry. Co., 87 Fed. 815-826.
A statute of Illinois prescribed that any lease by an Illinois railroad company without the written consent of the Illinois stockholders “shall be null and void.” It was construed as a provision enacted for the benefit of the stockholders alone, and to be availed of by them only. St. Louis, V. & T. H. R. Co. v. Terre Haute & I. R. Co., 145 U. S. 393-403, 12 Sup. Ct. 953.
The conclusion we reach is that subsequent creditors cannot avail themselves of a defense which the corporation has not made, and which was available only to the corporation. If the corporation chooses to acquiesce, a creditor who became such afterwards will not be heard to impeach the transaction. This is well settled in respect to a fraud practiced upon a debtor. If the debtor waives the-right to impeach the transaction, or elects to abide by it, a creditor subsequent to the fact will not be suffered to inquire into or question it. Graham v. Railroad Co., 102 U. S. 148; Porter v. Steel Co., 120 U. S. 673, 7 Sup. Ct. 1206. So, where a transaction is within the general scope of the powers of the company, but is in violation of some limitation
The corporation having made no issue, and having chosen to acquiesce in the purchase of the bonds averred to have been sold to directors, the defense is not available to subsequent Creditors. The consequences to innocent holders of securities, such as Ohio railroad bonds, would be most appalling and unjust if tbe provision in question should be construed as making such bonds void to all intents, and upon the challenge of any subsequent creditor, for a secret vice growing out of their original disposition by the corporation. So harsh and unjust a construction is not necessary, and would be unjustifiable, in view of the object of the enactment. A construction which casts upon innocent holders of such bonds all the consequences of a violation of the statute, and suffers the corporation to retain the benefits of such a violation of law, and the original purchasers to escape responsibility, would bring about most deplorable results. The issuance and sale of bonds and stocks were within the general scope of the powers of the corporation. Their sale at less than par to a director was a mere violation of the provision regulating the exercise of that power. This regulation, being for the benefit of the corporation, is only available to the corporation while the bonds are in the hands of those who took them in violation of the law, or with notice that they had been purchased in viola lion of law. It is a defense not open to strangers, nor to those who became creditors after the execution of the contract. Upon this ground, as well as upon the ground that the evidence fails to show a violation of law by a sale to directors at less than par by the corporation, we affirm the decree of (he circuit court holding that all the bonds are legal and valid obligations of tbe corpora tion.
6. The circuit court did not err in holding that the preferred stockholders were entitled to a preference over the common stockholders in the distribution of the property of the corporation after the payment of debts. The form of these certificates of preferred stock has been heretofore set: out. The contention of the common stockholders of the company is that the words contained in the foregoing certificate, ''‘this stock constitutes a lien upon the property,” were inserted without authority of the corporation, and by the president, or some one acting for him, in the printing of the certificates, and ihat they were not: authorized by the contract with Kneeland of January 23, 3 886, nor by the resolutions of the board of directors. The evidence fails to establish the contention that this language was inserted fraudulently. The form of the certificate was left by the directors to Kneeland. who represented this common stock, and to Quigley, and the bondholders’ committee, who represented those who were to receive the greater part of the preferred shares. There was much conference lie tween Kneeland and the bondholders’ committee, and more than one form was suggested and considered. The evidence as to the verbiage thus suggested and finally adopted is altogether un
7. The original decree of foreclosure' denied to the preferred stockholders the right to use their stock in the payment of any hid made by them for the railroad property when exposed for sale under the foreclosure decree therein ordered. The ground for this denial, as staled by Judge Taft in his opinion, was as follows:
*531 “Such a clause in a decree is, in effect, a distribution oí the assets oí the company among the stockholders, and. would necessarily work to the irrejudice of those creditors whose claims are not to be paid under the decree for sale. Are there not or may there not he such creditors? In the foreclosure proceeding. only judgment creditors are parties. Such a provision in a foreclosure decree would utterly ignore the rights of creditors whose claims are not reduced to judgment. Xor does the creditors’ bill necessarily include all creditors of the company. The advertisement for creditors of the company under
“Upon application made by and on behalf of the cross complainants Hannibal E. Hamlin and others for a modification of the decree for foreclosure, entered April 1, 1898, the court grants the application by adding, at the foot of said decree, the following: Upon the issue arising between the cross bill of said Hamlin and others, and the answer to said cross bill of the defendant the Toledo, St. Louis & Kansas City Kailroad Company, and the answer of S. H. Kneeland, for himself and other common stockholders, the court finds that said cross complainants and others as holders of the preferred stock in said Toledo, St. Louis & Kansas City Kailroad Company have, by virtue of the terms under which said stock was issued, a priority over said common stockholders, not only in the payment of dividends, but also in the distribution of the assets, remaining after the payment of all the debts of said company, secured or otherwise, when the same may come on to be distributed, and therefore that, if said preferred stockholders or any of them choose to do so, they may deposit, in partial fulfillment of any bid which they may make at the sale ordered herein, shares of the preferred stock of said railroad company; provided, however, that such stock shall not be received for this purpose until the holders thereof shall have paid into the registry of the court a sum. upon their bid in cash sufficient to satisfy all the costs and expenses of this suit and sale, all the receiver’s debts, all the mortgage debt, and all the debts, claims for which have been filed either in this foreclosure proceeding, or under the creditors’ bill consolidated herewith, with interest thereon to the day of distribution, as said debts have been or shall be hereafter adjudicated either under the foreclosure bill or the creditors’ bill herein; and provided, further, that said preferred stock thus deposited shall be received to pay only that part of the surplus of the bid after payment of debts of the railroad company which its owners would be entitled to receive on their shares of stock in the distribution of the surplus among the holders of the entire issue of said preferred stock, and the remainder of said surplus, to be paid in cash, shall be held for ratable distribution to the owners of the shares of the preferred stock not joining in the bid; and provided, further, that, as a condition of the privilege of using the preferred stock to complete their bid as above permitted, such preferred stockholders shall, if they become the purchasers of the said mortgaged railroad ordered sold, hold said road thus purchased subject to a lien equal in amount to the entire surplus remaining out of the purchase price bid after the payment of ail the costs, expenses, receiver’s debts, and debts of the company, mortgage or otherwise filed and adjudicated herein, to secure the payment of any debts of said Toledo, St. Louis & Kansas City Kailroad Company which have not been presented under this bill or the creditors’ bill herein, as the holders of said claims may present them and establish their validity; and the court reserves the right to retake the mortgaged property again into its possession, to enforce the payment of said debts as they are presented, until the said surplus shall have been exhausted.”
Hamlin and others, representing the preferred stockholders, have appealed only from so much of said decree as subjects the property, if
u “The case may be stated thus, assuming for a moment that no act had been, passed for the winding up of companies: An act is passed enabling certain persons to form a railway and a harbor, .and they are constituted a corporation for making and maintaining that railway and harbor. By a second act their powers are extended. They are unable to carry on their works, and a third act is passed, reciting that their powers had become extinct, and authorizing the transfer of their undertaking to another company, which is accordingly effected, the property is sold, and, after providing for all the liabilities of their own company, the directors have a balance of several thousand pounds in hand. Oan it be said that there is no remedy, and that they are entitled to keep this money for themselves? The proposition .amounts to this: That, unless the act of parliament gives a remedy, there is none. I consider that they are trustees for the members of that body which was once a corporation, but which has become extinct, and that this court, making all due and just allowances to them, may call on the directors to pay the money, and divide it among the persons entitled, as though no winding-up act had ever passed. This case does not, in my opinion, come within the 199th section of the companies act of 1862, nor*535 within ths railways abandonment act of’ 3850 (13 & 14 Vict. c. 83), nor the railway companies act of 1867 (30 & 31 Vict. c. 127). None of these acts were intended to supersede the principles of equity, "but only to assist the court, by giving addilional powers, to enable persons to enforce equities, without those peculiar difficulties arising from the number of shareholders, and from the rules of equity, which theretofore had made it Impossible for persons in such cases oyer to get to a decree. I am of the opinion that there cannot be a plainer equity than, this: that, where ihe functions of a corporation have ceased, the managers of that corporation are bound to account for all moneys belonging "to the corporation, and, when such moneys are improperly retained, this court will make a decree, in order that they may be divided among the various members.”
A note sliotvs that a reference was made to ascertain what debts and liabilities of the company remained unsatisfied. The doctrine of this case was recognized in Re Suburban Hotel Co., 2 Ch. App. 737. That which the court might do upon a bill filed by stockholders against ihe directors of a corporation which has permanently ceased to do business, and has lost the power to carry out: the purposes of its organization, it may do, under the pending creditors’ bill, in con-nee I ion with the pleadings and decrees affecting this corporation and its property in the foreclosure case. The court should, in the administrative case, exercise the jurisdiction arising out of the fact that a de facto dissolution has occurred, and on that basis ascertain, as in Cramer v. Bird, whether any debts and liabilities remained unpaid. For this purpose it will be proper for the circuit court to cause publication to be made, requiring all creditors to file their claims within a reasonable time, to be prescribed by the court, and to establish ihe same before the master. After providing for the payment of debts so ascertained, it will be the duty of the court, no debt remaining unpaid., to declare a final distribution of the capital among the shareholders who, for this purpose, should file their certificates with the master. The decree of foreclosure will be so modified as to reserve a lien upon the railroad in the hands of the preferred stockholders, as purchasers, only for the payment of such debts of ttiQ Toledo, St. Louis & Kansas City Bailroad Company as have or may be so established under the pending creditors’ suit, and allowing such purchasers to intervene and contest all claims therein pending.
8. The petition, or so-called answer and cross bill, of Dana A. Bose, was properly dismissed. 3 le was not a party, and had filed a verbose and belligerent pleading without leave of the court. Bose is a holder of preferred stock. The Hamlins, representing a majority of that stock, were suffered to become parties defendant to the foreclosure bill as representatives of (lie class. The facts and reasons permitting that intervention appear in the opinion of this court in the case of Hamlin v. Trust Co., 47 U. S. App. 422, 24 C. C. A. 271, and 78 Fed. 664. When Hamlin’s appeal had resulted in his reinstatement as a party, the circuit court directed ihe master to make publication, directing all holders of preferred stock certificates like those set up in Hamlin’s answer and cross bill to appear and become parties complainant to the representative cross bill filed by Hamlin and others. Bose was not content to have himself made a cross complainant with the Hamlins, as permitted by the order recited. Desiring to present his claim in his own way, and upon his own view of the facts, he de-