and fraud as existing between the grocery company and the bank with relation to the transfer of this negotiable instrument.

The trustee, failing to show that the note was the property of the grocery company, seeks to enforce against the claim of the bank the equities which would have existed by virtue of the provisions of the bankruptcy act in favor of the estate of the bankrupts against the grocery company, the original payee of the note. The rights of a purchaser or holder of a negotiable instrument who has taken it bona fide, for a valuable consideration, in the ordinary course of business, before due, without notice, are not affected by the equities existing between the antecedent parties. This proposition is too well settled to need the citation of authorities for its support. The bankruptcy act does not by its terms alter the rights of the indorsee of negotiable instruments, and so they exist just as before its enactment. In this case to permit the equities that would have obtained against the grocery company to be interposed against the bank would be to radically depart from those rules which have long controlled the interchange of commercial paper. It would be a departure which could only be justified by plain provisions of law. That the grocery company, by a timely indorsement and discounting of this paper to the bank, has been enabled to secure its whole debt to the discomfiture of the other creditors, and to possibly successfully evade the effect of the bankruptcy act relating to preferences, does not warrant a conclusion contrary to all authority.

The wisdom of vouchsafing to the indorsee of negotiable paper the high degree of security now almost uniformly observed by the courts is made manifest by tracing the different rulings on the subject, and their effect upon credit and commerce. While it is right to scrutinize carefully every circumstance in a transaction of this character for evidence of mala fides, yet a judge should not be led by considerations of expediency to leave the beaten tracks of law and precedent.

The ruling of the referee in permitting the claim to stand is affirmed.

SYNNOTT v. CUMMINGS.

(Circuit Court, D. New Jersey. April 24, 1902.)

1. CONSTRUCTIVE TRUST-SALE OF CORPORATION-SECRET PAYMENT OF BONUS TO ONE STOCKHOLDER.

A stockholder in a corporation, who joins with the other stockholders in a contract for the sale of all the stock and property of the corporation as an entirety, cannot lawfully, by a secret agreement with the purchaser, secure and retain for his own benefit an additional sum, and he can be required to account to his fellow stockholders for a sum so received. Bristol v. Scranton, 57 Fed. 70, distinguished.

2. ASSUMPSIT-GROUNDS FOR ACTION-MONEY RECEIved.

Where, in such case, the interest of each stockholder in a sum so received can be definitely determined without an accounting, another stockholder may maintain an action in assumpsit to recover his share as money had and received to his use.

12. See Corporations, vol. 12, Cent. Dig. § 726.

At Law. On motions by each party for the court to direct a verdict.

Action on contract, and declaration in the common counts in assumpsit. At the trial it was shown that the plaintiff and defendant, with one Graham, were the owners of the stock of the Atlantic Match Company, a corporation of New Jersey; Synnott owning three-eighths, Cummings three-eighths, and Graham two-eighths. They were approached by one Eaton, a promoter of the National Match Company, who desired to buy out the Atlantic and made an offer for it; his offer being to take the entire stock of the company, giving in exchange $500,000 of preferred stock and $250,000 common of the proposed National Match Company. In the negotiations plaintiff and defendant acted together for themselves and for Graham, whom Synnott represented. Unknown to the plaintiff, the defendant made a private bargain with Eaton, by which, if the transaction went through, he was to have $200,000 in cash for himself, regardless of what was paid to the others. This was reduced to writing as follows:

"July 19, 1901.

"Memo. of agreement between J. E. Cummings, of the Atlantic Match Co., and F. C. Eaton, of the National Match Co. J. E. Cummings agrees to sell the entire capital stock of the Atlantic Match Co. to F. C. Eaton upon the following terms: Eaton gives in exchange for said stock $500,000 of the preferred stock of National Match Co., $250,000 of common stock of said company, and $200,000 in cash. The Atlantic Match Company stock is to be delivered to the Standard Trust Company, of New York, who will issue temporary receipt or certificate therefor, which shall be exchanged for certificates of stock of National Match Co. as soon as issued, as above stated. The cash payments are to be: $20,000 upon signing of contract for sale, $80,000 on August 5th, and $100,000 on September 5th. The National Match Co. to guaranty Eaton's purchase. The entire bond subscription of the Atlantic Match Co. is to be canceled. Possession is to be given August 1st. Thos. W. Synnott and J. E. Cummings are to be elected directors of the National Match Co., and J. E. Cummings is to remain in the business in employ of National Match Co.

After some further negotiations, in which Synnott endeavored to secure a better price than Eaton was apparently willing to pay, he finally acceded to the latter's terms, and the following agreement between Synnott, Cummings, and Eaton was executed:

"This agreement, made this 23d day of July, A. D. 1901, between Thos. W. Synnott and J. E. Cummings, of the city of Philadelphia, parties of the first part, and F. C. Eaton, of the city of New York, party of the second part, witnesseth: Parties of the first part, in consideration of the sum of one dollar to them in hand paid by party of the second part, do hereby sell, assign, and transfer to said second party the entire capital stock of the Atlantic Match Company, a corporation duly organized under the laws of the state of New Jersey; said capital stock consisting of seven hundred and fifty thousand ($750,000) dollars preferred stock and two million ($2,000,000) dollars of common stock. The first parties agree that the bond issue of the Atlantic Match Company, which has been underwritten, to wit, two hundred and fifty thousand ($250,000) dollars shall be canceled. Party of second part, in consideration of above transfer of said Atlantic Match Company's stock, hereby sells, assigns, and transfers to said first parties, or their assigns, five hundred thousand ($500,000) dollars of preferred stock and two hundred and fifty thousand ($250,000) dollars of common stock of the National Match Company, a corporation duly organized under the laws of the state of New Jersey. The parties of the first part agree to deposit said Atlantic Match Company's stock with the Standard Trust Company, of New York, for account of said party, and second party hereby authorizes

said Standard Trust Co. to give in exchange therefor certificates of stock of the National Match Company, as above provided. In witness whereof, the parties have set their hands the day and year above written.

Indorsed: "National Match Company has $1,000,000 of preferred 6% noncumulative stock and $1,500,000 of common stock, of which $1,000,000 preferred stock and $500,000 of common stock has been subscribed for on terms of subscribers' agreement, leaving $1,000,000 of common stock to be used for future purposes. The liabilities of the Atlantic Match Co. consisting of notes, etc., to the amount of about 94,000, are to be paid by the National Match Co. between date hereof, and Jan. 1, 1902, at which time the bonds of the Atlantic Match Co. will be canceled. F. C. Eaton."

On the same date Eaton and Cummings executed the following: "This agreement, made this 23d day of July, A. D. 1901, between J. E. Cummings, of the city of Philadelphia, of the first part, and F. C. Eaton, of the city of New York, of the second part, witnesseth: Party of first part, in consideration of the sum of two hundred thousand ($200,000) dollars, sells, assigns, and transfers all his right, title, and interest, in and to the stock of the Atlantic Match Co., a corporation duly organized under the laws of the state of New Jersey, to second party. The party of second part agrees to pay said sum of two hundred thousand ($200,000) dollars in the following manner to first party: Twenty thousand ($20,000) dollars on or before July 27th, eighty thousand ($80,000) dollars on or before August 5th, and one hundred thousand ($100,000) dollars on or before September 5th. Party of the first part covenants and agrees that possession of the Atlantic Match Company's business shall be turned over to second party on the 5th day of August, 1901. Party of first part further agrees that, in consideration of one dollar to him in hand paid by the party of the second part, the receipt of which is hereby acknowledged, second party shall have the option to purchase first party's interest in the property and business of the Safe Harbor Match Co., which said property is located at Safe Harbor, Pennsylvania, at a price to be determined by examination of the books, said price not to exceed the actual cash paid in to said company. option to cover a period of six months from date hereof. First party also agrees to use every means to secure balance of Safe Harbor Match Co. on terms above set forth. The first party also covenants and agrees with second party that during the period of this option second party shall have the entire output of the Safe Harbor factory at factory cost of goods. This contract is made part of contract of even date between Thos. W. Synnott, J. E. Cummings, and F. C. Eaton. In witness whereof, the parties hereto have set their hands and seals the day and year first above written.

"J. E. Cummings.
"F. C. Eaton.

This

[L. S.]
[L. S.]"

"The capital stock of the within named Atlantic Match Company having been reduced from $2,750,000 to $2,000,000 by retiring the $750,000 of its authorized preferred stock before the actual issue of any thereof, the within agreement is hereby amended by conforming to such fact the within statement of the capitalization of said company.

J. E. Cummings. "F. C. Eaton."

The transaction having been consummated, the Atlantic Match Company's stock was transferred according to the arrangement with Eaton, and the exchange stock in the National Match Company was delivered. Cummings was also paid the $200,000 in cash, which he had bargained for. Upon discovery of this, Synnott brought the present action. At the close of the evidence, both parties asked for binding instructions.

D. J. Pancoast and M. Hampton Todd, for plaintiff.

F. P. Prichard, C. V. D. Joline, and David O. Watkins, for defend

ant.

1

ARCHBALD, District Judge (orally). Both sides agree that there are no material facts in dispute, and that the case is therefore to be disposed of by the court as a legal question, which throws the responsibility of it upon me. In meeting this task, however, I have not only the benefit of any previous ideas upon the subject, but of what I may properly characterize as a very lucid and able argument on the part of the respective counsel, which always makes the work of the court much easier. There is no doubt of the right of parties who are jointly interested in a concern to each sell his own interest at his own price, without incurring any responsibility to the other; and, if that was the ruling feature in this case, the plaintiff would have made out no right to recover. But it does not seem to me that that is this case as it stands. We have here an entire thing that is to be sold. While the plaintiff and defendant, and the co-owner, Mr. Graham, each had a distinct interest in the Atlantic Match Company, the whole stock of that concern was bargained for by Mr. Eaton, and agreed to be sold to him as an entirety, and the negotiations that were conducted, looking to that end, were all upon that basis. In those negotiations, Mr. Cummings and Mr. Synnott undertook to speak, not only for themselves, but for Mr. Graham; and the first proposition which we have, which was virtually the one finally carried to a conclusion,-I refer to that of July 18th,-is addressed to Mr. Synnott by Mr. Eaton. The next that we have-the "initialed" agreement; that is to say, the one signed by the initials of Mr. Cummings and Mr. Eaton-also undertakes to treat of the matter as an entirety; and so does the final agreement which consummated the affair. Therefore we have this state of things, and this question presented: Can two parties, who are jointly interested in a corporation or association, or any other matter, although they have separate interests, can they jointly bargain for the disposition of the whole subject, and then one or the other make a covert and different agreement, for his own benefit, and reciprocally to the disadvantage of his co-owners?

It seems to me that in a court of conscience there could be but one answer to anything of that kind,-that, equitably, a person who undertook to make a bargain of that character would have to account to his fellows for the result; and I can see no escape from that responsibility for the defendant here. He, very clearly and beyond controversy, when these negotiations were going on, while it was being jointly. considered and jointly bargained for, made a separate and distinct. stipulation, by which he was to receive a very material benefit to himself different from what the others received. It might be suggested, as long as the others got all that they were desirous of getting, and were satisfied with the bargain which they made, that, if he got a better bargain, that was his own lookout; that, to use the expression that has been given here, it did not matter if he "did" the others who were interested with him. But, coming to that low level of the street, if I may call it that, we lose sight of this very material circumstance, and that is, that in bargaining that way for his own benefit he beyond question acted to the detriment of those who were in the negotiation. 1 Specially assigned.

jointly with himself. Here was Mr. Eaton, who was prepared to give, and did give, to Mr. Cummings individually, $200,000 more than he gave to Mr. Synnott, Mr. Graham, and Mr. Cummings together; and, if Mr. Cummings had not exacted that, a better general bargain for all could have been made. Mr. Synnott, according to his testimony, was trying to get more, as seems to have been conceded to have been the fact. But whether it was or was not the fact, it still remains that by this secret bargain Mr. Cummings put that in the way of a possible better bargain made openly between Mr. Eaton for the purchase of the stock of this concern with the three owners of it. Therefore, as I say, if this were a bill in equity, calling upon Mr. Cummings to account, I can see no reason why he would not be compelled to account for that which he has received, not on the principle, perhaps, of agency, but on the general principle of trust. It seems to me that a trust would arise out of the circumstance and out of the relation in which he stood.

Let me say, however, at this point, that, if this case took on a feature which I do not think it has, it might be that the defendant would not have to account; that is to say, if it were clear that these $200,000 were given to Cummings as a distinct and separate sum for something that he himself individually and personally contributed, and which was demanded of him that he should do, or give, or contribute, we should have something which could be supported in his favor. I refer to that, in order that I may put of record that the case in this circuit of Bristol v. Scranton, 57 Fed. 70, and again on appeal, 11 C. C. A. 144, 63 Fed. 218, is clearly in my mind. That case presented that feature. There was there a separate bargain in favor of the defendants in that bill by which they got $350,000 over and above the price of the stock of the concern which they and the plaintiffs were interested in as stockholders. But they got that as a remuneration for a separate and specific agreement, which was demanded of them, that they would not for 10 years themselves go into the iron business, the concern which they were disposing of being in that business. There has been an endeavor to have the case that I am now trying take on that character; but I do not find it in the agreement or in the facts. Mr. Cummings from the outstart says that he asserted to Eaton his right to have something more, stating that he would not dispose of his interest, excepting for a cash consideration; and my remembrance of the testimony is that he suggested the amount from the beginning, or at least quite early in the negotiations. On the 19th of July, according to this memorandum, which was signed by his initials, he brings that out, and asserts his right to have $200,000 over and above what he was to get from the open agreement, which included himself, Mr. Synnott, and Mr. Graham. It is true that, in the agreement dated the 23d of July, which was executed contemporaneously between Mr. Eaton and Mr. Cummings with that which was executed between Eaton, Cummings, and Synnott, we have something brought in which is distinct. But it will be remembered that that was not exacted by Mr. Eaton as part of the original negotiations; that is to say, he did not demand of Mr. Cummings that he should turn over or give an option on the Safe Harbor match works, or the product of it, in con