the Pacific Short Line from Sioux City west- | the obligations of the improvement company June 24, 1891, pursuant to a demand made on the Manhattan Trust Company as trustee and to notice given, and at the sale purchased all the bonds of the Nebraska & Western Railway Company. In June, 1891, Tod & Co. loaned Garretson $75,000 on $200,000 Nebraska & Western bonds as collateral. III. October 1, 1891, Garretson entered in to a contract with Tod & Co. to borrow one The Manhattan Trust Company held $2,100,000 of the Nebraska & Western bonds to secure the $1,050,000 loan and, subsequently, $483,000 more to secure other loans. About November 1, 1890, it became neces-million dollars, which recited that Garretson sary to provide for the payment of the loan by Belmont & Co. On that date Garretson borrowed through the Manhattan Trust Company $500,000 on his individual notes secured by $750,000 Sioux City & Northern bonds, and took up the Belmont loan of $500,000. He at the same time negotiated with the officers of the Manhattan Trust Company touching other loans to the improvement company under the underwriter's agreement to the effect that the Manhattan Trust Company should cause said loans to be renewed or placed elsewhere and that the Nebraska & Western bonds in possession of the Manhattan Trust Company should be used as collateral. And January 28, 1891, Garretson entered into a written agreement with the Manhattan Trust Company for the taking up of the then outstanding notes and receiving the collateral held as security therefor. was the holder of $2,500,000, or thereabouts, Among the transactions, Garretson bor-sale of the notes at par, and to advance thereon at once $200,000, if required in ob taining title, the collateral to be held by Tod & Co. for the equal benefit of the holders of the notes; on the reorganization of the Nebraska & Western Railway Company under the foreclosure, a new mortgage to be executed to the Manhattan Trust Company The testimony of Garretson was relied on to secure a new issue of bonds at the rate (484] to sustain the charge that the Manhattan of $18,000 per mile, and the whole amount of Trust Company perpetrated a fraud on him such issue, $2,340,000 and one half of the at the time he entered into negotiations to capital stock of the new company to be de assume or take up the obligations of the im-livered to Tod & Co. in the place of the Neprovement company, in the acquisition of the braska & Western bonds and stock. If the Nebraska & Western road, in that it misrep-Nebraska & Western bonds were required to resented the amount of that company's in- be deposited in court, the road was to be debtedness. The officers of the Manhattan purchased in the name of trustees, and unTrust Company positively denied any such til the new corporation was formed and new misrepresentation; and the eighth paragraph bonds and stock delivered, no more than of Garretson's contract with the Manhattan $600,000 was to be paid over to Garretson. Trust Company of January 28, 1891, de- the balance to remain to his credit with the clared: "This agreement and the settlement banking company. herein made is in full adjustment and settle-cured by all the stock of the Pacific Bridge ment of all questions heretofore arising between the parties hereto, in reference to the Company except such part not exceeding fifty shares as should be necessary to qualify said improvement company or the construc-directors. The note holders were also given tion of the Nebraska & Western Railway, and certain options, and Tod & Co. were to rethe first party agrees that his note for $500,- ceive one per cent commission for their serv 000 heretofore given on taking up certain | ices. The new bonds were also to be further se loans shall be paid at or before maturity." The notes representing this million-dollar bonds were delivered to Tod & Co. October 19, 1891, $800,000 by the Manhattan Trust Company and $200,000 by Tod & Co.'s cashier, which had been pledged to them to secure the loan of $75,000, and these bonds 186] were sent that day to Wickersham, Tod & Co.'s attorney and agent at Omaha, to be used in the purchase under the foreclosure. One hundred and fifty thousand dollars of the bonds had been delivered to the St. Charles Car Company, and were received by Tod & Co. October 27, and forwarded to Wickersham that day. Of the remainder of the bonds, 500 were held by the Manhattan Trust Company as collateral to the $250,000 subscribed by Garretson and Hedges to the underwriter's agreement, and had been shipped to the Union Loan & Trust Company by the Manhattan Trust Company by direction of Garretson, December 2, 1890. And $933,000, which had been lodged in Tod & Co.'s custody by Garretson, had been sent to the company in August, 1891, on his instructions, which contained nothing to indicate that the Union Loan & Trust Company had any claim of lien thereon, or right thereto, while Tod & Co. testified that they supposed they were transmitted as a mere matter of safety deposit. These bonds for $1,433,000 were sent to Garretson at Omaha by the Union Loan & Trust Company, and delivered by him to Wickersham. The railroad was sold under the foreclosure decree October 23, 1891, and bought in by Garretson and Wickersham as trustees for the holders of the first-mortgage bonds of the Nebraska & Western Railway Company, and on October 30 the entire issue, $2,583,000, was deposited by Wickersham with the clerk of the court, and the sale thereupon confirmed. The road was reorganized under the name of the Sioux City, O'Neill, & Western Railway Company, and Wickersham and Garretson as trustees conveyed the property to the new company in exchange for the issue of the bonds and stock. Pending the issue of the engraved bonds of the Sioux City, O'Neill, & Western Railway Company, a temporary bond was issued and delivered to Tod & Co., and afterwards exchanged for the engraved bonds. All the bonds of the company were thus pledged to secure the $1,000,000 loan with 87] the full knowledge and participation of Garretson, and of Smith, secretary and treasurer of the Union Loan & Trust Company. Some of the notes issued under this loan were sold to various parties and some retained by Tod & Co. the railway company was not authorized un- Its The Pacific Short Line Bridge Company was a corporation of Iowa, organized for the purpose of constructing a bridge across the Missouri River at Sioux City, as a part of the Nebraska and Western enterprise. stock was divided into 20,000 shares of $100 each, which were issued November 13, 1891, in four certificates of 5,000 shares each, in the name of “A. S. Garretson, trustee," and these certificates were delivered by Garretson, November 19, 1891, to Tod & Co., who, on December 14, delivered them to the Manhattan Trust Company as trustee under the mortgage of the Sioux City, O'Neill, & Western Railway Company, pursuant to the million-dollar-loan agreement of October 1, 1891. The bridge company had executed a mortgage to secure $1,500,000 of bonds, but of these only $500,000 had been certified by the trustee, and it did not affirmatively appear that any had been negotiated. Garretson testified that the purpose of the $1,500,000 loan was to take up the million-dollar loan and to get "additional funds with which to carry on the construction of the bridge to a *point where we could get money from [488] the bonds of the bridge to complete it." December 26, 1892, the Pacific Short Line Bridge Company, at a meeting of its board of directors, passed a series of resolutions by which it agreed to purchase the bonds of the Sioux City, O'Neill, & Western Railway Company, and 10,200 shares of the capital stock of the Sioux City & Northern Company, and to give therefor its promissory notes in the sum of $1,500,000 to the order of Garretson, dated December 30, 1892, and to pledge said bonds and stock to Garretson as security. Accordingly on December 31, 1892, a contract was entered into between Garretson, Hedges, Hornick, and Haakinson (the remaining member of the syndicate, Booge, having failed and dropped out), and the Pacific Short Line Bridge Company, by which the bridge company purchased the securities and agreed to give its notes therefor, payable to Garretson's order, February 1, March 1, and April 1, 1894, bearing date December 30, 1892, to be forwarded to Tod & Co. to be delivered to Garretson or his order, or held by Tod & Co. as trustees to secure the payment of said notes. The notes were to provide, and when issued did provide, that on thirty days' default in payment of interest, the principal was to become due and payable at the option of Tod & Co., on behalf of the holders, to be exercised on the written request of a majority. It having been intimated that payment of the one million-dollar loan would be required, Garretson applied to Tod & Co. for the negotiation of a loan of $1,500,000. It was contemplated that the notes of the Sioux City, O'Neill, & Western Railway Company for that amount should be given, to be secured by the bonds of that company and the Tod & Co. negotiated a sale of the notes stock of the Sioux City & Northern Com- through the Union Debenture Company, a pany, then in pledge with Tod & Co. But corporation of the state of New Jersey, which Tod & Co. were advised by their counsel that was evidenced by a contract under date of December 30, 1892, between Garretson and | that company, which recited that the notes were to be secured by the 2,340 Sioux City, O'Neill, & Western bonds and 14,206 shares of the Sioux City & Northern stock, by an indenture of trust with Tod & Co. December 31, Garretson entered into this indenture of trust whereby he pledged the said bonds and stock to Tod & Co. as trustees for the equal and pro rata benefit and security of all the holders of the notes, it being provided that if default should be made in the payment of the principal or interest of any of the notes, the trustee, on request, might declare the [489]*principal and interest due and sell the bonds and stock at public auction, and that the holders might appoint a purchasing trustee, in whom, if he bought at the sale, the right and title to the bonds and stock [should vest] in trust for all the note holders in proportion to the amounts due them respectively. The note holders were given certain tions, and Garretson agreed to pay the debenture company three and a half per cent commission. The Union Debenture Company was a cor poration of New Jersey, with a capital stock of $300,000 and over $800,000 of assets, and had issued and had outstanding $500.000 of twenty-year debenture bonds, which had been sold mainly in England, Scotland, and Holland. Tod & Co. owned one third of the capital stock, and the business of the company was transacted through Tod & Co. as brokers. The notes in question, except about $40,000 retained by the debenture com pany, were sold by them as brokers to various persons, including $590,000 to parties abroad and $500,000 to the Great Northern Railway Company, but Tod & Co. took no part of the loan. The commission of three and one-half er cent, $52,500, was paid to the debenture company by Tod & Co. The remainder of the proceeds of the $1.500,000 loan, after the discharge of the mil op-lion-dollar loan, the payment of the commissions, and of a temporary loan of $39.900 to Garretson, was paid over on Garretson's drafts, to the Union Loan & Trust Company, to be applied to the payment of bridge estimates and to the credit of Hornick, trustee. About $200,000 was applied on bridge account. As already set forth, Tod & Co. then held the 2,340 bonds and 7,200 shares of Sioux City & Northern stock. Of the remaining 7,000 shares of this stock to be pledged under the agreement, 6,190 shares were deliv- All the members of the syndicate were parered to Tod & Co. by Garretson in December, ties to the agreement by which the bonds 1892, in New York, and certificates for 1,000 and stock in controversy were sold to the shares were sent to Tod & Co. by Smith, sec- bridge company, and knew of the use Garretary, January 16, 1893. All these shares retson proposed to make of the notes and se were transferred by members of the syndi-curities. They did not repudiate the transcate. In March, 1893, Tod & Co., as author-action, and never made any complaint or ized by the indenture of trust, at the request gave any notice to Tod & Co. that Garretson of Garretson, released and delivered to the treasurer of the Great Northern Railroad Company 3,600 shares, which Garretson had sold to that company for $350,000 in cash, all of which was received by Garretson. W. S. Tod testified that his firm supposed the proceeds of this sale were to be applied towards the construction of the bridge, and the evidence tended to show that the money was paid over to the Union Loan & Trust Company to be applied in payment of notes of the syndicate. was wrongfully pledging the collateral. Tod & Co. rendered full accounts of the two loans to Garretson, which were sent by him to Smith as they were received. Great Northern Railway Company, of which J. Kennedy Tod was a director. Mr. Tod stated that they believed during the negotia tions between their firm and Garretson that he was a man of large wealth. Garretson was a prominent man in banking, financial, and railroad circles when he began his dealings with Tod & Co., and continued to be so until 1893. He had been, or was, an officer of many business corporations or companies; and one of the chief promot- 491 ers and builders of the Sioux City & Northern Railway, and organizers of the Union Loan The notes for the $1,500,000 were executed & Trust Company. He was highly recom and indorsed by Garretson, and the transac-mended to Tod & Co. by the president of the tion closed, January 30, 1893, and on that date the Union Debenture Company turned over to Tod & Co. $1,507,500, being principal with accrued interest, and thereupon Tod & Co. paid off the million-dollar loan with accrued interest. $1,004,833.33. They thus released the $2,340.000 Sioux City, O'Neill, & Western bonds, the 18,000 shares of Sioux City & Western stock, and 7,200 shares of Sioux City & Northern stock, and delivered to themselves as trustees under the indenture of trust the bonds, 10,200 shares of Sioux City & Northern stock and also 4,000 of the latter stock; and certified and delivered the bridge notes to the debenture company. [490] *These notes contained the provision that they might be declared due on default in payment of interest or principal, and that they were secured by the indenture of trust of December 31, 1892, and the deposit of the bonds and stock as collateral. The Tods testified that they knew nothing of the dealings between the Manhattan Trust Company and the improvement company, or of the loan transactions of the improvement company, and had no connection therewith; that they had no knowledge or notice of any claims of the Union Loan & Trust Company to these securities at or before the time they were pledged to secure either the loan for $1,000,000. or the loan for $1.500.000, and the first information they had of any such claim was after default had been made in the payment of interest on the latter loan. The interest on the notes was payable July 1, 1893, and January 1, 1894, and the interest due July 1, 1893, not having been paid. and the default having continued for thirty to repledge the same as security for further days, Tod & Co., on a request of a majority of advances." That "the fair inference from the note holders, declared the principal due, the entire evidence is that the trust company and advertised the securities for sale on consented to the repledging of these securiSeptember 19, in accordance with the inden- ties, in order that further funds might be ture of trust, due notice being given, which procured for carrying on the work in quessale was adjourned to September 26, at the tion, but by so doing it did not abandon its instance of the creditors of the Union Loan *lien upon or equity in the securities, but [493] & Trust Company, when the sale took place, only subordinated its rights to those created and Tod & Co. bought the securities as pur- by the repledging of the securities." chasing trustees, thereto duly appointed, and That the sale of the securities by Tod & held the same for the benefit of the holders Co. under the provisions of the trust agreeof the notes. Certificates were issued by ment of December 31, 1892, did not devest the Tod & Co. as such purchasing trustees that trust company, or its assignee, of the junior they so held the securities and that each of lien on the securities, and that its right to the note holders was entitled to a three-hun- redeem remained because the $1,500,000 of dredth part interest for every $5,000 note de- notes were not purchased in the ordinary posited. course of business, nor in fact issued by the bridge company in connection with its business, but made at the dictation of the syndicate on the suggestion of Tod & Co., and operated as a fraud on the bridge company; that the use of its name was in reality a matter of form merely, and was so understood; and that the transaction must be considered as a loan to the syndicate, secured by a pledge of the collateral, which lien was superior to that existing in favor of the trust After the interest had defaulted Tod & Co. were interviewed on behalf of some of the creditors of the Union Loan & Trust Company, and an offer to pay the defaulted interest was made on condition that such creditors should be put in control of the board of directors of the Sioux City & Northern Railroad Company, but with this condition Tod 192]& Co. were without authority to comply, and the creditors committee declined to pay. No money was tendered. According to the evidence of the Tods it was then, for the first time, that Tod & Co. received any intimation that their right to hold the securities was questioned by the Union Loan & Trust Company or its cred itors. The circuit court entered a final decree authorizing the redemption of the securities by the intervener on payment to Tod & Co., as trustees, of the sum of $1,500,000, with interest thereon from December 30, 1892, computed with semiannual rests, to the date of payment. company. The suggestion as to usury was dismissed on the ground that in any view equity required the payment of the sums advanced with interest, and no offer to do this was made by the intervener. From the decree the intervener prosecuted The opinion is reported 65 Fed. Rep. 559, sustain objections to certain evidence; the The cause was heard in the court of ap- After a brief review of the formation of the syndicate and its dealings with the Union Loan & Trust Company, the conclusion was drawn "that the trust company, as against the members of the syndicate, is entitled to the benefit of the securities which were placed in its possession, and upon the faith of which it may be assumed it indorsed the syndicate paper," but that it was fairly deducible from the evidence that "the trust The intervener then applied to this court Company parted with the possession of the for a writ of certiorari, which was granted. securities, knowing that it was intended to rehypothecate them," and that "it is not now open to the trust company to repudiate the acts of its secretary and treasurer in regard to these securities, by whose action in placing the same in the possession and under the control of Garretson the latter was enabled Messrs. John C. Coombs, Henry J. Taylor, and William Faxon, Jr., for appellant: An equitable lien may be created by agreement of the parties. Walker v. Brown, 165 U. S. 654, 664 41 L. producing the sinking." 11 Pet. 219, 220 | military or usurped power." The facts, as The maxim has been largely expounded and defined by this court in cases of insurance against fire. found by the circuit court and stated in the which blew the fire against her woodwork, cases In Etna F. Insurance Co. v. Boon a policy of insurance against fire, issued during the war of the rebellion, for one year, upon goods in a store in the city of Glasgow, in the state of Missouri, provided that the insurers should not be liable for "any loss or damage by fire which may happen or take place by means of any invasion, insurrection, riot, or civil commotion, or of any military or usurped power." The city of Glasgow, being occupied as a military post by the United In Howard F. Insurance Co. v. Norwich & States forces, was attacked by a superior N. Y. Transportation Co. 12 Wall. 194 [20: armed force of the rebels, and defended by 378], a large steamboat on Long Island the *United States forces; and during the bat-[457] sound was insured against fire, excepting fire tle the commander of these forces, upon its happening “by means of any invasion, insur-becoming apparent that the city could not rection, riot, or civil commotion, or of any be successfully defended, and, in order to pre |