Sidebilder
PDF
ePub

no

In these actions William L. Scott ap- and control until after the sale of the railpeared and filed a cross bill in October, 1881, road and the property hereinafter set forth. claiming to be the owner of certain bonds se- Such further proceedings were had in the cured by the mortgage to Roosevelt and Fos- foreclosure suits that on the 15th, 16th, and dick, and praying, among other things, for 230 days of November, 1882, in the *several(501) its foreclosure. But he asked relief circuit courts similar decrees were entered, against the Parkhurst mortgage or the wherein it was adjudged that in case the bonds secured thereby. Prior to the begin. Columbus, Chicago, & Indiana Central Rail. ning of the foreclosure suit Thomas re- way Company failed for ten days to pay the signed his trust under the mortgage made to sum found due in the decree the mortgage Fowler and himself, and thereafter that should be foreclosed and the property con. trust was administered by Fowler alone. veyed by it-which, as we have seen, includ

In said actions the Columbus, Chicago, & ed all the property described in the petition Indiana Central Railway Company, Fowler, herein-should be sold for the payment of and others were made parties defendant, and the principal and interest of said bonds, subwere duly served with process or entered ject to the outstanding sectional bonds prior their appearance therein.

in lien to the mortgage to Roosevelt and FosIn the bills of foreclosure the plaintiffs, dick, and to all other, if any, paramount liens among other things, prayed for the ap- thereon, but free from the lien of the moitpointment of a receiver or receivers of all gage to Roos velt and Fosdick; hat the de the railroad, equipment, and appurtenances cree should not in any manner affect, prejuand other mortgaged premises, and of the dice, or preclude the holders of the paraearnings and income, rents, issues, and mount liens or any of them, but should be profits thereof; that the net amount of such without prejudice to the right of them and

earnings should be first applied to the pay. each of them. It was also adjudged that 800]ment of the interest on all the bonds issued the purchaser of the mortgaged premises

under the mortgage to the plaintiffs, and to should be invested with, and should hold, the payment of the interest on all mortgage possess, and enjoy the same and all the bonds having prior liens on the property, in rights, privileges, and franchises appertainsuch order as the court might direct; and ing as fully and completely as the Columthat the balance should be applied to the bus, Chicago, & Indiana Central Railway payment of the sums due and in arrears to company at the commencement of the suit and for the sinking fund provided for in the by Roosevelt and Fosdick held or then held mortgage to them for the redemption of the and enjoyed, or was entitled to hold or enbonds issued under said mortgage.

joy, but free from liens then represented by Such proceedings were had in the fore any party to said cause. closure suits brought in the circuit courts

In that decree it was further adjudged that of the United States that, on the 28 and 3d the sale decreed to be made, and the conveydays of February, 1875, Roosevelt and Fos. ance, after confirmation thereof, to be exe dick were duly appointed receivers of the cuted and delivered, should be valid and efrailroad, equipment, and appurtenances and fectual forever, and that thereby the defendother mortgaged premises embraced in and ants in said suits, respectively, and all percovered by said mortgage, and of the earn

sony claiming or to claim under them or any ings, income, rents, issues, and profits there of them, subsequent to the beginning of the of; and they were directed not to disturb suits by Roosevelt and Fosdick, as purchasthe possession of the mortgaged premises by ers, encumbrancers, or otherwise, howsoever, the Pittsburgh, Cincinnati, & St. Louis Rail should be forever barred and foreclosed of way Company under the lease to it, but and from all rights, estate, and interest, claim, should collect and receive the rental payable lien, and equity of redemption of, in or to the by the lessee, and apply the same as provid. premises, property, rights, and interests so ed by the further orders of the court. And sold and every or any part thereof. in the order of appointment it was further

On or about the 10th day of January, 1883, directed that the Columbus, Chicago, & In- in conformity with the decree, the said propdiana Central Railway Company forthwith erty and every part thereof was sold by mas. transfer and convey to the receivers the said ters theretofore appointed to execute the railroad equipment and appurtenances and order of sale, to William L. Scott, Charles J. other mortgaged premises embı ed by the

Osborn, and John S. Kennedy, for the sum of mortgage, and including the income, rents, $13,500,000, which sum was insufficient *to[502] issues, and profits thereof. The conveyance pay the outstanding bonds and interest seso ordered was duly executed and delivered eured by the mortgage to Roosevelt and Fos. to Roosevelt and Fosdick as receivers, on or

dick. about May 25th, 1875. That deed was not

Afterwards, and on or about the 30th day recorded, and the plaintiff Charles R. Lynde of January, 1883, the circuit courts for the had no actual knowledge of its existence un northern district of Illinois and the district til the commencement of this action in 1891. of Indiana, and on the 31st day of January,

Immediately after their appointment the 1883, the circuit court for the southern disreceivers, in pursuance of the above order, trict of Ohio,--the said purchase money hav. took possession and control of all said rail. ing been paid, -by orders entered in those road and property, its income, rents, issues, causes, duly confirmed and approved the sale, and profits, subject, however, to the physi. and ordered said premises and propertv, cal possession and operation of the railroad rights and franchises, to be conveyed to the by the lessee. They continued in possession 'purchasers in fee simple, in accordance with

[ocr errors]

the former decrees of those courts. Such In the months of May, July, and August,

conveyance was made February 21st, 1878, Lynde purchased the 36 bonds in good 1883.

faith, in the usual course of business, for valu. Subsequently, on or about the 17th day of able consideration (being about ninety cents March, 1883, Scott, Osborn, and Kennedy, on the dollar, which was at the time the usual with their respective wives, executed and de- market price for them), without knowledge livered their deed of that date, conveying or notice of the unauthorized or fraudulent said premises and property, rights and fran. acts of Smith, and without any knowledge or chises, to the Chicago, St. Louis, & Pittsburgh notice that the bonds had not been sold by the Railroad Company, which was authorized to Columbus & Indianapolis Railway Company, purchase and own the same.

and thereby became the bona fide holder and On or about the 10th day of June, 1890, owner of the bonds and the coupons thereto the Chicago, St. Louis, & Pittsburgh Railroad belonging. Before the 36 bonds had been Company was duly consolidated with the purchased by him the railway company had Pittsburgh, Cincinnati, & St. Louis Railway not made default in the paynent *of interest(504) Company, together with other railway com- on them, and no holder prior to Lynde had panies, under the name of and thereby became elected that the principal sum should become the Pittsburgh, Cincinnati, Chicago, & St. due. Louis Railway Company.

At the time Lynde purchased the bonds the The latter company was, at the commence coupons due May 1st, 1878, were still atment of this suit, -and through its predeces- tached to the bonds and were unpaid. sors in title has been ever since the convey. On or about the 27th day of August, 1878, ance to Scott, Kennedy, and Osborn,-in the Lynde presented the 36 bonds for registration actual, peaceable, and undisputed possession to the secretary of the Union Trust Company, of all said railroad, premises and property, New York, which had been designated by the rights and franchises, including that de- Columbus, Chicago, & Indiana Central Railscribed in the petition.

way Company as registering agent for such The history of the 36 bonds in suit is as bonds in the city of New York,—to put the follows:

bonds in the name of the party registering On and before the 1st day of November, them and taking them out of the register and 1864, Benjamin E. Smith was the president making them to bearer; and the secretary of the Columbus & Indianapolis Central then caused the same to be registered in the Railway Company. He continued to be pres- name of Lynde. At the time of such regisident of that corporation and of its succes-tration no inquiry was made by the secresors into which it was successively consoli- tary as to whether or not the bonds had been dated, until the sale of the railroad hereinbe- regularly issued by the Columbus & Indianfore mentioned in 1883.

apolis Central Railway Company. In the months of November and December, The coupons maturing May 1st, 1878, on 1503]1875, Smith borrowed *for his own purposes these 36 bonds, which were attached to them

$48,000 from W. H. Newbold, Son, & Co., when Lynde purchased, were paid to the latbrokers in Philadelphia, executing and deliv- ter by the firm of A. Iselin & Co., Wall street, ering to them his individual notes. At that New York, upon presentation by Lynde of the time he had, as president of the Columbus, coupons in October, 1878; and the 36 coupons Chicago, & Indiana Central Railway Com- maturing November 1st, 1878, were paid to pany, the custody and possession of the 179 Lynde by the same firm upon the presentahereinbefore described; and, without the tion of the coupons in April, 1879. Iselin & knowledge, authority, or consent of that com- Co. were acting for the receivers and a bondpany, but falsely pretending to W. H. New holders' committee,—that committee fur. bold, Son, & Co. that he was individually the nishing the money for taking up the coupons, owner of such bonds, delivered certain of and being afterwards reimbursed by the rethem, including the 36 described in the plain- ceivers. In October, 1879, Lynde presented tiff's petition, as collateral security for the the coupons falling due May 1st, 1879, on the payment of his notes. He subsequently re- 36 bonds, but Iselin & Co. then declined to newed his notes, with the same collateral, pay them, which was the first knowledge or from time to time until about the 14th day of notice of any kind that he had of any disJanuary, 1878, when the 36 bonds were sold crimination against or difference between by W. II. Newbold, Son, & Co., and the pro- those bonds and any other bonds of the same ceeds applied to the payment of Smith's series. And he has never received payment notes. The balance was paid over to him or of any coupon on the 36 bonds or any of them for his use, and no part of it was used for the since the payment to him as aforesaid of the benefit of the railway company.

coupons maturing in November, 1878. At At the time the bonds were so pledged all the time the May and November, 1878, cou. the past-due coupons had been cut off, and pons were paid, Iselin & Co. had no knowl. while they were so held as collateral security edge but that the 36 bonds had been regularthe subsequent coupons, as they fell due, were ly issued and sold by the Columbus & Indian. cut from the bonds and delivered to Smith, a polis Central Railway Company. but were never presented for payment. From the year 1871 until after the pur

At the sale of the bonds, Newbold, Son, & chase by him of the 36 bonds, * Lynde held and(505) Co. themselves became the purchasers of the owned other bonds secured by the mortgage 36 bonds, paying the full market price and of the Columbus & Indianapolis Central Rail. buying them in good faith without knowledge way Company to Parkhurst, trustee, above of any defect in them; and thereafter they referred to, being some of the 821 bonds besent them to New York for sale.

fore described.

was

on

The Columbus, Chicago, & Indiana Cen. | facts, the court of common fleas found the tral Railway Company made default in the equities of the case in favor of Lynde. It payment of the interest coupons upon said held that the 36 bonds and the coupons there821 bonds due on the 1st day of May, 1875, to annexed were the valid and binding obli. and on the 1st day of Noveniber, 1875, and gations of the Columbus & Indianapolis Cen. the interest coupons were not paid until after tral Railway Company and of the Columbus June 30th, 1876, when they were paid by or Chicago, & Indiana Central Railway Com. on behalf of the receivers hereinbefore men. pany; that Lynde was the owner and holder tioned, all which facts were known to Lynde of those bonds and coupons, and each of at the time he purchased the 36 bonds de them, as well as the coupons that accrued scribed in the petition.

May 1st, 1879, to May 1st, 1891, inclusive; At the time of the demand made by Lynde that there due to him such upon Parkhurst, trustee, hereinafter set coupons, down to the entry of the decree, forth, and at the time of the commencement the sum of $47,673.37; and that, under of this action, interest coupons which had and by virtue of the said mortgage or theretofore fallen due upon more than 700 deed of trust described in the petition, of said 1000 bonds described in said mort. Lynde had a valid and subsisting lien, gage had been paid.

to secure said bonds and coupons, upon the On or about the 27th day of June, A. D. railroad property described in the petition 1891, at Newark, in the state of New Jersey, as of November 1st, 1864, and was entitled Lynde made a personal request and demand to a decree for the payment of the sum so in writing of Parkhurst, as trustee, to com found due. A decree was subsequently en: mence an action for the foreclosure and sale tered in conformity to these conclusions. of the premises in accordance with the pro Upon a writ of error to the circuit court of visions of the deed of trust, for and on ac. Franklin county that judgment was afcount of the default made by the Columbus firmed. The judgment of the latter court & Indianapolis Central Railway Company in was also affirmed upon writ of error to the[597) the payment of the coupons upon the 36 supreme court of Ohio. bonds; and then and there offered to the trus- While the cause was pending in the su: tee sufficient security and indemnity to pro preme court of the state, Lynde died, and the tect him against all expenses and personal Long Island Loan & Trust Company quali. responsibility by him to be made and in fied as his executor. curred in the commencement and prosecu. The first question to be considered relates tion of an action for the foreclosure and sale to the jurisdiction of this court to review of the premises. Parkhurst as such trustee the final judgment of the supreme court of refused to take the action requested.

Ohio. The Columbus, Chicago, & Indiana Central The contention of the defendant in error Railway Company and the Pittsburgh, Cin is that the record presents no Federal ques. cinnati, Chicago, & St. Louis Railway Com. tion which this court will review; and that pany have neglected and refused to pay the the state court based its decision upon an coupons due upon each of the bonds described independent ground, not involving a Federal in the petition, being coupons from and in- question, but depending upon principles of cluding coupon maturing May 1st, 1879, to general law and broad enough to sustain ite and including coupons maturing May 1st, judgment. Its further contention is that the 1892, the last two of which fell due since the supreme court of Ohio rightly held that nei. commencement of this suit.

ther Lynde nor the trustee, Parkhurst, were (606) *On the 1st day of October, 1890, the Pitts- affected by the proceedings in the foreclos.

burgh, Cincinnati, Chicago, & St. Louis rail. ure suits instituted in the circuit courts of way Company made its mortgage to the Far. the United States. mers' Loan & Trust Company of New York, Upon looking into the record, we find that and to W. N. Jackson of Indiana, as trustee, the defendant railway company claimed in for the purpose of securing an issue of bonds its answer that, if a lien at any time at. to be made by that company to amount in tached to the property in question to secure the total to 75,000 bonds at the par value of the 36 bonds purchased by Lynde, such lien $1,000 each, to be issued as in said mortgage was wholly devested and discharged by the set out, and upon the property described in above proceedings in the Federal courts, un. the answer and cross petition of the said der which that company claims title. This, Farmers' Loan & Trust Company filed in this it would seem, was such an assertion of a cause, including the line of railroad and right and title under an “authority exercised other property connected therewith, described under the United States” as gives this court in the petition of the plaintiff herein; that jurisdiction to re-examine the final judg. said mortgage was duly recorded as required ment of the state court. Rev. Stat. $ 709. by law in all of the counties in the several In Dupasseur v. Rochereau, 21 Wall. 130, states through or into which that line runs; | 134, 135 (22: 588, 590, 591), which was a that by virtue of that mortgage there have suit to subject certain lands in satisfaction been issued bonds to the total number of of a debt secured by a mortgage, and for the 5,318, being the bonds numbered from 1501 amount of which debt judgment had been to 6818, both inclusive, and amounting in obtained.—the defense was rested upon the the total to $5,318,000; and that said bonds ground that the defendant purchased the are now outstanding and in full force, and property at a sale made under a judgment no default has been inade in the payment of of the circuit court of the United States for interest thereon.

the eastern district of Louisiana, in a named As conclusions of law from the foregoing' case, “free of all mortgages and

encum

V. Ansley, 1 Campb. 343; Wilson v. Milner, petent and is admitted as against one of the
2 Campb. 452; Cooley on Torts, pp. 148, defendants only, and the court, on its own
149. A verdict might, therefore, be rendered motion or on the request of the other defend-
against all defendants and collected out of ants, would charge the jury that such evi-
one, and he would have no right of contribu- dence could not be taken into consideration
tion. And the verdict enhanced by the evi. as against the defendants to whom it did
dence of the wealth of one defendant, might not apply. But here such a * power cannot(554)
be collected from the defendant the least be exercised. The court cannot say to the
able to respond and the least culpable of all, jury that the evidence of the wealth of the
who would thus be mulcted in punitive dam- corporation is only received in regard to it
ages, the amount of which might have been and as furnishing a basis for a computation
measured by the evidence of the wealth of of exemplary damages against it. If received
another defendant.

at all it must be received against all the In this case the jury was bound to give defendants, as but one verdict can be given one entire sum against all the defendants against all who are found guilty, when in found guilty, and that sum would be includ. truth in regard to all of them but the corpoed in ihe judgment against each of them. ration it is evidence which is absolutely, in, The object of the evidence in relation to the competent. Yet if the evirmce is received capital stock of the corporation and the divi- on the assumption that it is material in re dends declared by it was, as stated by the lation to the corporation, the other defendcourt to counsel, for the purpose of furnish- ants are affected by it the same as the corpoing the jury the basis upon which they ration, and a verdict may very probably be might calculate exemplary damages, yet it enlarged against them because of the evi. is not plainly limited to that purpose by any dence as to the ability of the corporation de

direction given to the jury by the court. If fendant to pay. The jury is thus permitted 53]the evidence woulà be admissible for the to take into consideration the wealth of one

purpose stated by the court to counsel, in a defendant upon the question of the amount
case against the corporation alone, can it be of the verdict against all of them.
that it would be admissible also in a case Objection to the evidence was taken by
like this, where individual defendants are counsel, and we think under the circumstan-
joined by the voluntary act of the plaintiff? ces was well taken, and the exception is good
We are of opinion that the evidence in re- in behalf of the individual defendants who
gard to them would be inadmissible. It were necessarily affected by its introduction.
would form no basis for any verdict against

But it is said that this error, if any, was the individual defendants. While a defend- cured by the ruling of the court in response ant who is least to blame is still liable for to the request of defendants' counsel' that all the damages suffered by plaintiff, he is punitive damages should not be granted. We not liable to respond in punitive damages, are not certain as to that. As we have said, the amount of which may be based upon par

the court gave no instruction to the jury that ticular evidence of the wealth of some other it could only consider the evidence in connecdefendant.

tion with the question of punitive damages. Punitive damages are damages beyond The remark of the court as to the object of and above the amount which a plaintiff has the evidence was made to counsel, and the really suffered, and they are awarded upon

court did not, in any instructions given, the theory that they are a punishment to the plainly limit the jury to its consideration defendant, and not a mere matter of compen never withdrawn by the court, nor was the

for that purpose alone. The evidence was sation for injuries sustained by plaintiff. While all defendants joined are liable for jury directed to take no notice of it. If the compensatory damages, there is no justice only, and yet did not afterwards in terms

court admitted the evidence for one purpose in allowing the recovery of punitive damages in an action against several defendants, withdraw it from the consideration of the based upon evidence of the wealth and abil: jury, it was of such a nature that it still ity to pay such damages on the part of one for its admission originally had disappeared.

might affect the jury, even though the basis of the defendants only. As the verdict must It is true the defendants did not in so many be for one sum against all defendants who words ask the court to withdraw the evi. are guilty, it seems to be plain that when a dence from the jury. It was, however, duly, plaintiff voluntarily joins several parties as defendants, he must be held thereby to waive to receive it. Under such circumstances, in

objected to when received, and it was *errori any right to recover punitive damages against order to cure the error, the court, when deall, founded upon evidence of the ability ciding that punitive damages could not be of one of the several defendants to pay them. recovered, should have plainly, and in disThis rule does not prevent the recovery of tinct language withdrawn this particular punitive damages in all cases where several evidence from the jury. We cannot be cerdefendants are joined. What the true rule tain that its effect was removed by this action is in such case is not, perhaps, certain. 7 of the court. In a case of this character, III

. App. 639; 99 Pa. 63. But we have no where the line between compensatory and
doubt it prevents evidence regarding the punitive damages is quite vague, and com-
wealth of one of the defendants as a founda- pensatory damages may be based upon the
tion for computing or determining the injury to the feelings and good name of a
amount of such damages against all. plaintiff, and where the amount even of such

In many cases against several defendants compensatory damages rests so largely in the
it frequently
happens that evidence is com- 'discretion of a jury, we think it is utterly

[ocr errors][ocr errors][ocr errors][merged small]

cause.

that it was conclusive proof of probable gotiable paper, those principles of natural

The supreme court of Louisiana, af- justice universally *applicable to the affairs[512] firming the judgment of the inferior state of mankind, when applied to this transaccourt, denied to it, not only the effect tion, would seem to demand the protection of claimed, but any effect whatever."

the defendant in error as against the maker According to these decisions and in view of the bonds and all who stand in its shoes. of the statute giving this court authority to He was wholly free from fault in connection re-examine the final judgment of the high- with the transaction. Each bond contained est court of a state denying a right specially a declaration of its transmissibility from set up or claimed under an authority exer- hand to hand by mere delivery. He found cised under the United States, it is clear them for sale, before they were due, in the that we have jurisdiction to inquire whether market, where such securities are usually of due effect was accorded to the foreclosure fered for sale, and bought them at their fair proceedings in the circuit courts of the Unit. market value without notice of any infirmity ed States under which the plaintiff in error in their title. Soon thereafter he took them claims title to the lands and property in to the Union Trust Company, in New York question.

city, the agents of the makers, specially ap; The plaintiff in error contends that the pointed to register its bonds, and caused state court did not give due effect to the de- them to be registered in his name on its crees of the circuit court of the United books. What more could even the highest

States in the suits instituted by Roosevelt degree of prudence or diligence demand of [811]and Fosdick,* in that it did not recognize as him? The inaker of the bonds, a railway

paramount the rights acquired under those company, capable of acting through agents
decrees by the purchasers of the property in only, placed these bonds in the custody of its
question, but postponed or subordinated president, an agent clothed with high,
those rights to a lien upon such property, though possibly not clearly defined, powers.
which it is alleged, was created or attempt. The bonds were perfect obligations, bearing
ed to be created while those suits were pend on their face a certificate of authentication
ing, and while the property was in the actual by the trustee, and containing an express
custody of those courts, by receivers, for pur. declaration of their transmissibility from
poses of being administered.

hand to hand by mere delivery. He was, up
Did Lynde, under the circumstances stated to and long after the time these bonds were
in the finding of facts, acquire a good title, negotiated, continued as president of the dif-
as between himself and the mortgagor com ferent consolidated companies as they wero
pany, and the companies which succeeded it successively formed. The companies thus
by consolidation, to the 36 bonds purchased held him out to the world as one who could be
by him from Newbold & Son, as well as the trusted to transact matters of importance.
right to claim the benefit of the mortgage Under these circumstances, what can be
executed to Parkhurst! Referring to the found tending to excite a doubt in the most
facts recited in the finding, the supreme court cautions mind respecting his power to dispose
of Ohio said: “Plaintiff in error contends, of honds so entrusted to him? If the maker
among other things, that the facts thus of these bonds and those who must abide by
stated show that neither the maker of these its title can shift the responsibility and con-
bonds nor the consolidated companies into sequent logs resulting from this transaction
which it became merged consented to the from themselves to the holder of the bonds, it
salo or delivery of the bonds, and, as an must be by the application of some stern rule
owner cannot be deprived of his property of law. founded upon considerations of pub-
without his consent, no title passed. It is lic policy.” 55 Ohio St. 23, 45.
true that these bonds were negotiated to The state court adjudged that there was
Newbold & Son without the knowledge or

no rule of law arising out of the public pol.
consent of the company; but such consent icy of the state, as manifested by state legis.
and knowledge is not indispensable to pass lation, that required it to deny to the holders
the title to negotiable instruments. Where of these honds the rights and privileges per-
this class of paper, complete in form and taining to commercial “paper purchased in(518)
transmissible by delivery, is placed by the good faith in the ordinary course of business.
maker or owner in the custody of one who Assuming that this question of general law
is thereby clothed with an apparent power of was correctly determined by that court, we
disposition, and the custodian avails him are now to inquire what effect, if any, the
self of the opportunity thus afforded him to proceedings in the foreclosure suits insti.
negotiate it to an innocent party, the title tuted by Roosevelt and Fosdick in the cir.
of the holder is not to be tested by princi. cnit courts of the United States had upon
ples applicable to stolen securities, but by the right of Lynde, as the bona fide holder
principles properly applicable to the transac- of the 36 bonds, to the security furnished by
tion as it actually occurred. That the title the Parkhurst mortgage.
to negotiable securities may pass by virtue We have seen that when Lynde purchased
of such a transaction as the finding of fact the 36 bonds to secure which, with other
shows occurred in respect to the negotiation bonds, the Parkhurst mortgage had been pre-
of the bonds in question is, we think, clear viously executed, the property described in
upon principle and sustained by authority that mortgage and here in question was in
Indiana & 1. O. Railway Co. v. Šprague, 103 the actual custody of the circuit courts of
U. S. 756 [26: 554); Fearing v. Clark, 16 the United States by receivers appointed in
Gray, 74. Independently of the rules of law the foreclosure_suits brought by Roosevelt
designed to protect and give currency to ne- and Fosdick. The contention of the plaintiff
394

172 U...

« ForrigeFortsett »