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,
and advertised the securities for sale on
September 19, in accordance with the inden-
ture of trust, due notice being given, which
sale was adjourned to September 26, at the
instance of the creditors of the Union Loan
& Trust Company, when the sale took place,
and Tod & Co. bought the securities as pur-
chasing trustees, thereto duly appointed, and
held the same for the benefit of the holders
of the notes. Certificates were issued by
Tod & Co. as such purchasing trustees that
they so held the securities and that each of
the note holders was entitled to a three-hun-
dredth part interest for every $5,000 note de-

the entire evidence is that the trust company
consented to the repledging of these securi-
ties, in order that further funds might be
procured for carrying on the work in ques-
tion, but by so doing it did not abandon its
*lien upon or equity in the securities, but [493]
only subordinated its rights to those created
by the repledging of the securities."
That the sale of the securities by Tod &
Co. under the provisions of the trust agree-
ment of December 31, 1892, did not devest the
trust company, or its assignee, of the junior
lien on the securities, and that its right to
redeem remained because the $1,500,000 of
notes were not purchased in the ordinary
course of business, nor in fact issued by the
bridge company in connection with its busi-
ness, but made at the dictation of the syndi-

After the interest had defaulted Tod &
Co. were interviewed on behalf of some of the
creditors of the Union Loan & Trust Com-cate on the suggestion of Tod & Co., and
pany, and an offer to pay the defaulted inter-
est was made on condition that such credit-
ors should be put in control of the board of
directors of the Sioux City & Northern Rail-
road 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


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.

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 under-
stood; and that the transaction must be con-
sidered 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


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
an appeal to une circuit court of appeals for
the eighth circuit, assigning as error, in sub-
stance, that the circuit court erred in not
finding that intervener had a prior lien;
that the securities were wrongfully taken
from the Union Loan & Trust Company, and
that defendants were not bona fide holders
and took with notice; that the loans were
usurious and void, and defendants, there-
fore, unable to hold the securities as against
the intervener.

The opinion is reported 65 Fed. Rep. 559,
and it appears therefrom that District Judge
Shiras, by whom the cause was heard, held
that the transactions prior to the million
and a half loan could not be passed on, but Defendants also appealed from the decree,
that the inquiry at issue was to be deter-assigning as error the failure of the court to
mined by considering the contracts under sustain objections to certain evidence; the
which Tod & Co. obtained possession of and allowance in the final decree of leave to in-
claimed title to the 10,600 shares of Sioux tervener to file his second amended petition;
City & Northern stock, and the $2,340,000 of and the award of redemption.
Sioux City, O'Neill, & Western bonds held
by them.

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 Company parted with the possession of the 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

The cause was heard in the court of appeals by two circuit judges, and the decree affirmed by an equal division; but on a petition for rehearing by the intervener an opinion was filed from which it appeared that both judges were agreed that appellees' lien [494] on the securities was paramount to any claim of intervener, but that they were divided on the question whether or not the right of redemption was cut off by the auction sale under the loan agreement.

The intervener then applied to this court for a writ of certiorari, which was granted.

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 [9: 694, 695].

The maxim has been largely expounded and defined by this court in cases of insurance against fire.


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In Louisiana Mut. Insurance Co. v. Tweed, 7 Wall. 44 [19: 65], cotton in a warehouse was insured against fire by a policy which provided that the insurers should not be liable for losses which might "happen or take place by means of any invasion, insurrection, riot, or civil commotion, or any military or usurped power, explosion, earthquake, or hurricane." An explosion took place in one warehouse, resulting in a conflagration which spread to a second warehouse, and thence, in the course of the wind blowing at the time, to a third warehouse containing the insured cotton. This court held that the loss of the cotton was caused by the explosion, and therefore the insurer was not liable; and, speaking by Mr. Justice Miller, said: "The only question to be decided in the case is whether the fire which destroyed plaintiff's cotton happened or took place by means of the explosion; for if it did, the defendant is not liable by the express terms of the contract. That the explosion was in some sense the cause of the fire is not denied, but it is claimed that its relation was too remote to bring the case within the exception of the policy. And we have had cited to us a general review of the doctrine of proximate [455] and remote causes as it has arisen and been decided in the courts in a great variety of One of the most valuable of the criteria furnished us by these authorities is to ascertain whether any new cause has intervened between the fact accomplished and the alleged cause. If a new force or power has intervened of itself sufficient to atand as the cause of the misfortune, the other must be considered as too remote. In the present case we think there is no such new cause. The explosion undoubtedly produced or set in operation the fire which burned the plaintiff's cotton. The fact that it was carried to the cotton by first burning another building supplies no new force or power which caused the burning. Nor can the accidental circumstance that the wind was blowing in a direction to favor the progress of the fire towards the warehouse be considered a new cause. We are clearly of opinion that the explosion was the cause of the fire in this case." 7 Wall. 51, 52 [19:67]. In that case, as has been since observed by Mr. Justice Strong in delivering judgment in a case to be presently referred to more particularly, "it was, in effect, ruled that the efficient cause, the one that set others in motion, is the cause to which the loss is to be attributed, though the other causes may follow it and operate more immediately in producing the disaster." Etna F. Insurance Co. v. Boon, 95 U. S. 117, 131 [24: 395, 399].

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In Howard F. Insurance Co. v. Norwich & N. Y. Transportation Co. 12 Wall. 194 [20: 378], a large steamboat on Long Island sound was insured against fire, excepting fire happening "by means of any invasion, insurrection, riot, or civil commotion, or of any

found by the circuit court and stated in the report, were as follows: Another vessel came into collision with the steamboat, striking her on the side, and cutting into her hull below the water line, in consequence of which she immediately and rapidly began to fill with water. Within ten or fifteen minutes after the collision, the water reached the floor of her furnace, and generated steam which blew the fire against her woodwork, whereby her upper works were enveloped in flames and continued to burn for half or three quarters of an hour, when she rolled over and gradually sank in twenty fathoms of water. From the effects of the collision alone, she would not have sunk below her [456] promenade deck, but would have remained suspended in the water, and could have been towed to a place of safety, and repaired at an expense of $15,000. The sinking of the steamboat below her promenade deck was the result of the action of the fire in burning off her upper works, whereby her floating capacity was decreased and she sank to the bottom, and the amount of the additional damage thereby caused, including the cost of raising her, was $7,300. Upon that state of facts, this court, affirming the judgment of the circuit court, held the insurers liable for the latter sum. But in the opinion of this court, delivered by Mr. Justice Strong, the rule was recognized and affirmed, that "when there is no order of succession in time, when there are two concurrent causes of a loss, the predominating efficient one must be regarded as the proximate, when the damage done by each cannot be distinguished." And it was added, "And certainly that cause which set the other in motion, and gave to it its efficiency for harm at the time of the disaster, must rank as predominant." 12 Wall. 199 [20: 379]. The rule was held to be inapplicable to that case, because the damage resulting from the fire, and that caused by the collision, apart from the fire, were clearly distinguished; and because the policy, exempting the insurers from liability for losses by fire by certain specified causes, covered losses by fire from all other causes, including collisions. But for those distinctions, the decision could hardly be reconciled with the earlier opinions already referred to, or with that delivered by the same able and careful judge in the latter case of Etna F. Insurance Co. v. Boon, 95 U. S. 117 [24: 395].

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 States forces, was attacked by a superior armed force of the rebels, and defended by the *United States forces; and during the bat-[457] tle the commander of these forces, upon its becoming apparent that the city could not be successfully defended, and, in order to pre

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vent military stores, which had been placed | caused by the attack. It was one of a conin the city hall, from falling into the hands tinuous chain of events brought into being of the rebels, caused them to be destroyed by by the usurped military power,-events so burning the city hall; and the fire, spreading linked together as to form one continuous from building to building, through three in- whole." 95 U. S. 133 [24: 400]. termediate buildings, to that containing the goods insured, destroyed them. This court held that the loss was within the exception in the policy, because the rebel military power was the predominating and operating cause of the fire; and in the opinion of the court, delivered by Mr. Justice Strong, and strongly supported by authority, the true rule and its application to that case were stated as follows: "The question is not what cause was near-grounded on the flats, and, in the effort to get est in time or place to the catastrophe. her off, became disabled by the bursting of That is not the meaning of the maxim, her boiler, and afterwards sank. It was arCausa proxima non remota spectatur. The gued, among other things, on the one side, proximate cause is the efficient cause, the that the explosion was not a danger incident one that necessarily sets the other causes in to navigation; and, on the other, that the operation. The causes that are merely in- sinking of the vessel was the immediate cause cidental or instruments of a superior or con- of the damage to the wheat. The question at trolling agency are not the proximate causes issue was whether the vessel was entitled to and the responsible ones, though they may be freight pro rata itineris. This court, speaknearer in time to the result. It is only when ing by Mr. Justice Nelson, said that "the exthe causes are independent of each other that plosion of the boiler was not a peril within the nearest is, of course, to be charged with the exception of the bill of lading," and the disaster." 95 U. S. 130 [24:399]. "The therefore the case fell within that class in conclusion is inevitable, that the fire which which the ship is disabled or prevented from caused the destruction of the plaintiff's prop- forwarding the goods to the port of destinaerty happened or took place, not merely in tion by a peril or accident not within the ex-[459] consequence of, but by means of, the rebel ception in the bill of lading. 8 Wall. 162 invasion and military or usurped power. The [19: 409]. Although this statement fire occurred while the attack was in prog- perhaps not absolutely necessary to the deciress, and when it was about being success- sion, it was upon a point argued by counsel, ful. The attack, as a cause, never ceased to and shows clearly that the court was of operate until the loss was complete. It was opinion that the explosion, and not the sinkthe causa causans which set in operationing, was the proximate cause of the loss. every agency that contributed to the destrucIn The Portsmouth, it was decided that a tion. It created the military necessity for jettison made to lighten a steamboat which the destruction of the military stores in the had been run aground by her captain's negcity hall, and made it the duty of the com-ligence was not within an exception of "the manding officer of the Federal forces to de- dangers of lake navigation," in a bill of ladstroy them. His act, therefore, in setting fire ing; and Mr. Justice Strong, in delivering loss by to the city hall, was directly in the line of the judgment, said: "A a jettiforce set in motion by the usurping power." son occasioned by a peril of the sea 95 U. S. 132 [24:399]. "The court below reis, in ordinary cases, a loss by perils garded the action of the United States mili- of the sea. But it is well settled that, tary authorities as a sufficient cause inter- if a jettison of a cargo, or a part of it, [458]vening *between the rebel attack and the de- is rendered necessary by any fault or breach struction of the plaintiff's property, and of contract of the master or owners of the therefore held it to be the responsible prox fault, or breach of contract, rather than to vessel, the jettison must be attributed to that imate cause. With this we cannot concur. The proximate cause, as we have seen, is the the sea peril, though that may also be presdominant cause, not the one which is inci-ent, and enter into the case. This is a prindental to that cause, its mere instrument, ciple alike applicable to exceptions in bills though the latter may be nearest in place of lading and in policies of insurance. and time to the loss. In Milwaukee & St. Though the peril of the sea may be nearer Paul Railway Co. v. Kellogg, 94 U. S. 469 in time to the disaster, the efficient cause, [24: 256], we said, in considering what is the without which the peril would not have been proximate and what the remote cause of an incurred, is regarded as the proximate cause injury: "The inquiry must always be whether of the loss. And there is, perhaps, greater there was any intermediate cause discon- reason for applying the rule to exceptions in nected from the primary fault, and self-op- contracts of common carriers than to those erating, which produced the injury.' In the in policies of insurance, for, in general, negpresent case, the burning of the city hall and ligence of the insured does not relieve an unthe spread of the fire afterwards was not a derwriter, while a common carrier may not, new and independent cause of loss. On the even by stipulation, relieve himself from the contrary, it was an incident, a necessary in- consequences of his own fault." 9 Wall. 684, cident and consequence, of the hostile rebel 685 [19: 755, 756]. attack on the town,-a military necessity

Generally speaking, the words "perils of

In general accord with the opinions above quoted are two cases in this court upon the meaning and effect of the term "dangers of navigation," or "perils of the sea," in a bill of lading. The Mohawk, 8 Wall. 153 [19: 406]; The Portsmouth, 9 Wall. 682 [19: 754].

In The Mohawk, a steamboat carrying wheat under a bill of lading containing an exception of "dangers of navigation"

the sea" have the same meaning in a bill of ❘ of the explosion; and it was one of a conlading as in a policy of insurance. There tinuous chain of events brought into being is a difference, indeed, in their effect in the by the explosion,-events so linked together two kinds of contract, when negligence of as to form one continuous whole. the master or crew of the vessel contributes to a loss by a peril of the sea; in such a case, an insurer against "perils of the sea" is liable, because the assured does not warrant that his servants shall use due care to avoid them; whereas an exception of "perils of the sea" in a bill of lading does not relieve the carrier from his primary obligation to carry with reasonable care, unless prevented by the excepted perils. But when, as in the [460]present case, it is *distinctly found that there was no negligence, there is no reason, and much inconvenience, in holding that the words have different meanings in the two kinds of commercial contract. The Portsmouth, above cited; Phonix Ins. Co. v. Erie & W. Transportation Co. 117 U. S. 312, 322325 [29:873, 879, 880]; Liverpool & G. W. Steam Co. v. Phenix Ins. Co. 129 U. S. 397, 438, 442 [32:788, 791, 792]; Compania La Flecha v. Brauer, 168 U. S. 104 [42:398]; The Xantho, L. R. 12 App. Cas. 503, 510,

The damage was not owing to any violent action of winds or waves, or to the ship coming against a rock or shoal or other external object; but it was owing to an explosion within the ship, and arising out of the nature of the cargo, which cannot be considered, either in common understanding or according to the judicial precedents, as a peril of the sea.

514, 517.

As was observed by this court in Etna F. Insurance Co. v. Boon, above cited: "Often in case of a fire, much of the destruction is caused by water applied in efforts to extinguish the flames. Yet it is not doubted all that destruction is caused by the fire, and insurers against fire are liable for it." 95 U. S. 131 [24: 399]. If damage done by water thrown on by human agency to put out a fire is considered a direct consequence of the fire, surely damage done by water entering instantly, by the mere force of gravitation, through a hole made by an explosion part of the cargo, must be considered as a direct consequence of the explosion.

Upon principle and authority, therefore, our conclusion is that the explosion, and not the sea water, was the proximate cause of the damage to the sugar, and that this damage was not occasioned by the perils of the sea, within the exceptions in the bill of lading.

Nor can the damage to the sugar, attributable, not to a peril of the sea, but to the explosion of part of the cargo after the ship had ended her voyage, and had beer finally and intentionally moored at the dock, there to remain until her cargo was taken out of her, be considered as "occasioned by accidents of navigation." Canada Shipping Co. v. British Shipowners' Mut. Protection Association, L. R. 23 Q. B. Div. 342; The Accomac, L. R. 15 Prob. Div. 208; Thames & Mersey Cas. 484; The Mohawk [8 Wall. 153, 19: Marine Ins. Co. v. Hamilton, L. R. 12 App. 406], above cited.

In the case at bar, the explosion of the case of detonators, besides doing other damage, burst open the side of the ship below the water line, and the sea water rapidly flowed in through the opening made by the explosion, and injured the plaintiff's sugar. The explosion, in consequence of which, and through the hole made by which, the water immediately entered the ship, must be considered as the predominant, the efficient, the proximate, the responsible cause of the damage to the sugar, according to each of the tests laid down in the judgments of this court, above referred to. The damage to the sugar was an effect which proceeded inevitably, and of absolute necessity, from the explosion, and must therefore be ascribed to that cause. The explosion concurred, as the efficient agent, with the water, at the instant when the water entered the ship. The inflow of the water, seeking a level by the mere force of gravitation, was not a new and independent cause, but was a necessary and instantaneous result and effect of the bursting open of the ship's side by the explosion. There being two concurrent causes of the damage the explosion of the detonators, and Queen's bench division, held that damage to the inflow of the water-without any ap-goods by sea water which, without any negpreciable interval of time, or any possibility lect or default on the part of the shipownof distinguishing the amount of damage ers or their servants, found its way into the done by each, the explosion, as the cause hold of a steamship through a hole which had which set the water in motion and gave it been gnawed by rats in a leaden pipe conits efficiency for harm at the time of the dis- nected with the bath room of the vessel, was aster, must be regarded as the predominant within the exception of "dangers or accidents cause. It was the primary and efficient of the seas" in a bill of lading. Hamilton v. cause, the one that necessarily set the force Pandorf, L. R. 12 App. Cas. 518, L. R. 17 Q. of the water in operation; it was the su- B. Div. 670, L. R. 16 Q. B. Div. 629. There perior or controlling agency, of which the is nothing in the report of any stage of that water was the incident or instrument. The case to show that the sea water entered the inflow of the sea water was not an inter- ship immediately upon the gnawing by the mediate cause, disconnected from the pri- rats of the hole in the pipe; and any such inmary cause, and self-operating; it was not ference would be inconsistent with one of a new and independent cause of damage; the opinions delivered in the House of Lords [461]*but, on the contrary, it was an in-in which Lord Fitzgerald said: "The recident, a necessary incident and consequence, mote canse was in a certain sense the action

Much reliance was placed by the appellee upon a recent English case, in which the House of Lords, reversing the decision *of [462] Lord Esher and Lords Justices Bowen and Fry in the court of appeal, and restoring the judgment of Lord Justice Lopes in the

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the balance were applied with Smith's knowl- | everything belonging or appertaining to said
edge, without objection on his part, or that estate, and, generally, do whatsoever the
of any other officer or director of the trust debtor might have done in the premises."
company, to taking up notes secured thereby,
which had been given by Garretson to acquire
the Nebraska & Western bonds, which he af-
terwards pledged to Tod & Co., and which
were exchanged for the bonds of the Sioux
City, O'Neill, & Western Railroad in con-

None of the securities ever stood in the name of the Union Loan & Trust Company. And they were delivered in such form as to enable Garretson to hold himself out as the owner or lawful holder thereof, with full power of disposition.

Conveyances by insolvent debtors in fraud of their creditors may be attacked by their statutory assignees, though equity would not aid the debtors themselves to recover the property, for the property transferred would, in the eye of the law, remain the debtors' and pass to the assignees, who would not be subject to the rule that those who commit iniquity have no standing in equity to reap the fruits thereof. But equities or rights belonging to particular creditors are not, by operation of law, transferred to such assignees.

The trust company did not own these securities, and did not transfer them in fraud of its creditors, prior to the assignment, so as to entitle the assignee to treat the transfers as void and the securities as belonging to the company.

The district judge well said [65 Fed. Rep. 564]: "It is entirely clear that E. R. Smith, the secretary and treasurer of the trust company, dealt with these securities as though he had full authority from the company so to do, and he obeyed Garretson's instructions in regard to the same without demur; and *And it must be remembered that this prc [499] it does not appear that the trust company, ceeding is an attempt on behalf of the holders or any officer thereof, ever objected to such of railroad syndicate paper, which constidisposition of the securities; and, further-tuted only a portion of the liabilities of the more, so far as the evidence in this case discloses, the general management of the business of the trust company was intrusted to Smith, with but little, if any, supervision on part of the directors or other officers of the corporation."

The truth of the matter seems to be, as the circuit court held, that, in order that the various properties represented by the stock and bonds should become valuable, it was necessary that the enterprises on which they were based should be carried through, and this required additional funds, to procure which the trust company consented to Garretson's negotiations with Tod & Co., and the debenture company, and the pledging of the rities.

98] The presumption on the facts is that the curities were delivered by the company to Garretson for use, and, if they had ever been pledged to the company, that the pledge was discharged by the voluntary parting with possession. There is nothing to show an intention to limit the use to a hypothecation in subordination to a prior pledge, let alone the question whether any such pledge existed, and the absence of evidence of any as

sertion thereof.

trust company, to establish equities in the
securities on the ground that they were
pledged to the company to secure it against
liability on its indorsements of such paper,
and that these equities, if any, must be
worked out through the company.

The difficulty with the contention that the
trust company was bound to hold the se-
curities for the benefit of the holders of syn-
dicate paper; that they were not duly parted
with; and that Tod & Co. took with notice of
the alleged interest of the trust company,
and the equities of those holders, is that it
does not appear that any of the syndicate
paper was taken on the strength of these par-
ticular securities; or that Smith acted other-
wise than with the knowledge and assent of
the directors; or that Tod & Co. had notice
of any claim of the trust company or its in-
dorsees, or of any defect in Garretson's right
to dispose of the securities.

The securities were railroad bonds, payable to bearer, and certificates of stock in the names of Garretson and his associates, with transfers indorsed by them in blank; and they were, in large part, sent to Tod & Co. by the trust company, at Garretson's request, with presumably full knowledge that they Certainly, under the circumstances, the were to be used as collateral to loans he was company could not be allowed to set up its procuring, without anything to indicate that alleged title as against third parties taking the trust company had any interest in them, in good faith and without notice. And the or any intimation of such interest. The sesame principle is applicable to its assignee curities did not stand in the name of the and to creditors seeking to enforce rights in trust company, and Garretson did not, in his name. So far as this case is concerned

there is nothing to the contrary in the stat- any of his dealings with Tod & Co., assume to
ute of Iowa regulating assignments for the act for the company. The mere fact that he
benefit of creditors as expounded by the su-
preme court of the state. Code Iowa, title
14. chap. 7; Schaller v. Wright, 70 Iowa,
667; Mehlhop v. Ellsworth, 95 Iowa, 657.
Section 2127 of the Code provides: "Any
assignee as aforesaid, shall have as full pow-
er and authority to dispose of all estate, real
and personal, assigned, as the debtor had at
the time of the assignment, and to sue for
and recover in the name of such assignee
U. S., Book 43.

was one of its officers was not in itself suffi

cient to call for an inference that he was act-
ing as such in these transactions, nor did he
make his requests of Smith in that capacity,
nor were they complied with by Smith as on
that theory.

171 U. S.


There was no actual notice, and as the visible state of things was consistent with Garretson's right to deal with the securities as he did, such notice cannot be presumed or


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