The sixteenth article of the ,agreement indicates very conclusively that every subscriber to the agreement, whether bondholder or stockholder, was to be protected in the event of a pnrchase of the property by any other subscriber, directly or indirectly, which would include a. purchase by the trustees. Under this article it would have been the privilege of the complainant to surrender his six bonds under the seventh article of the agreement, and receive a certificate for their amount. Thus, the agreement was carefully devised to protect every subscriber to' the full extent of his interest, both as bondholder and certificate holder, in the event that the trustees might be unable to protect him. That contingency did not occur, but the trustees themselves pnrchased the property. They could acquire no better rights upon such a purchase against the complainant than could have been acquired by any other purchaser who had become a party to the agreement. 'rhere is nothing in the provisions of the agreement conferring upon certificate holders the right, by a majority vote, at general meetings or special meetings called for the purpose, to modify the conditions of the agreement which affect the rights of the complainant as a holder of bonds. It was evidently contemplated by the agreement that those who surrendered their claims to the trustees were, to the extent of claims surrendered, to be placed upon the footing of stockholders of the company. They were ultimately to receive stock in proportion to the amount of their respective surrendered claims. While the readjustment was pending, they were to be permitted to exercise the powers ordinarily exercised by stockholders in directing and controlling the trustees, who, through the stock in their hands, were, in turn, to direct and control the affairs of the corporation. The trustees were therefore, in effect, representing a body of quasi stockholders. But neither certificate holders nor trustees were invested with any authority to extinguish or impair the rights of bondholders whose claims against the corporation were paramount to any equities which stockholders' could acquire in its property. The obligations assumed by the trustees towards bon«iholders in the of the complainant are not to be found in any of the express provisions of the trust agreement. These provisions are mainly intended to define the powers and duties of the trustees in administering the trust fund which should come to their hands, and the rights and interests of those entitled to participate in it. The duties incumbent upon the trustees in the protection of the complainant grow out of the character of the relations which they assumed towards every person who became a party to the agreement. They undertook to use their best exertions for the financial rehabilitation of the company, without requiring any sacrifice on the part of construction bondholders beyond that of one-third of their holdings. The complainant had a right to reply upon the faithful discharge of that obligation. The trustees were placed, by his consent, in part, in a.
position which enabled them to control the financial situation. They did control it; but, after they had acquired control, used the opportunity to subordinate his rights to the interests of the certificate holders.. It is by no means certain that the complainant cannot enforce his bonds against the new corporation as an equitable lien upon its property. Whether this is so or not, he can look to the trustees personally by whose acts his lien upon the property of the company was subverted. The defendant Whitewright did not become a trustee until July 27, 1867, after the purchase by the trustees at the foreclosure sale. One of the original trustees had died, and Whitewright was elected to fill the vacant place in order to join with the other trustees in a conveyance of the property to the new corporation. The eighteenth article of the trust agreement provides that neither of the trustees shall be responsible for the act or omission of any of his associates, or for any act not willfully or grossly negligent. 'l'his article merely expresses what a court of equity would hold in the absence of such a provision. Worrall v. Harford, 8 Ves. 8; Dawson v. Clarke, 18 Ves. 254; Clough v. Dixon, 8 Sim. 594; Peter v. Beverly, 10 Pet. 532; Lat1'Obe v. Tiernan, 2 Md. Ch. 4:74. When Whitewright consented to step into the place of a prior trustee, it was his duty, before joining in any disposition of the property of the trust fund, to ascertain whether the act he was about to perform would be prejudicial to any of the cestnis que trust whom he represented. The legal lien of the complainant under the construction mortgage upon the mortgaged property was cut off by the sale under the foreclosure of the prior mortgage. His equitable lien remained, however, until the property was conveyed to It purchaser for value, and without notice. Whether the new corporation was such a purchaser may be doubtful; but however this might be, the effect of the conveyance was to introduce new owners, and compel the complainant to follow the property into the hands of strangers, under complications which it is not incumbent upon him to unravel. A decree is ordered for complainant for the value of his bonds at the time of the conveyance, with interest.
WESTERN ASSUR. CO.l
(Oircuit Oourt, lJ.ltfinnesota.
FIRE INSURANCE-AuTHORITY 01l' AGENT-LoBB.
Motion for New Trial. The opinion states the facta. Wilson d: Lawrence, for plaintiff. Cole d: Bramhall, for defendant.
BREWER, J. In this case it appears that the plaintiff, Mr. May, went to Judge Ames, an insurance agent in Minneapolis, who had been carrying his insurance for a series of years, and told him that he wanted $20,000 of insurance. Judge Ames knew the condition of the property, and he afterwards handed in to the plaintiff $20,000 of insurance; but Judge Ames, it seems, was unwilling to carry that amount in the company or companies that he represented, and therefore went to the agent of the defendant, Mr. Seeley, and offered him $2,500 of it, and Mr. Seeley took the insurance, wrote out the policy, and sent it to Judge Ames' office, and Judge Ames thereupon delivered it to the plaintiff. Mr. Seeley, as the agent of the defendant, did not know the condition of the risk, and he had no communication with the plaintiff. The question was whether Judge Ames was the agent of the plaintiff to solicit the insurance, and whether Mr. Seeley, as agent of the defendant, should have been informed by him of the condition of the risk, or whether the defendant company was bound by the knowledge that Judge Ames had,-whether his knowledge of the connition of the risk, under the circumstances, was the same as the knowledge of their agent, and Lindingupon the company. It seems to me, from whichever stand-point you approach this case, that it would not be fair to release the defendant company from liability. The plaintiff did not go to an insurance broker to employ him to solicit insurance. He never thought of employing an agent to act for him; but he, as principal, wanting to buy insurance, went to a man who was selling insurance, and proposed to buy from him $20,000 worth of insurance. Judge Ames proposed to sell it to him, and they each stood in the relation of principal in that negotiation. There is no pretense that when the policies were delivered to the plaintiff any actual notice was given him that Mr. Seeley alone was the
by Robertson Howard, Esq., of the St. Paul bar.