tonallLequities that could have been asserted against' the receiver? Mlthe,paperwas past due. L. F. Brown knew that the collateral notes 'went he can assert no claim which could not have been 88stlrted by Armstrong; Let us goa step further. L. F.Brownand his lboother,Moses KBrown, wereindorsers of the forged note for which was among the collaterals, and they thereby guarantied the genuineness of the forged signatures. He was therefore indebted upon that note. ,His own, note for $750" with 15 months l interest, was also among tDe'collaterals. His entire plliyment to Armstrong' was $987, bein§.'lessthanthe amount due by him upon the two notes last above refeneclrW. ' What he calls a purchase was 'therefore secured by the paymentofless than the alllount due upon <lollaterals held by Armstrong on have been !which ,he was personally liable, and which Armstrong compelled by Barhorst and wife to exhaust before resorting to the $500 notewhicb they had paid to Moses F. Brown. It has the look of a thrifty expedientto payoff his own indebtedness at less than its f!,lce, and to get in addition a judgment for $500 against Barhorst and wife, secured by a levy upon all their property, and they the intended victims of his own brotherls most outrageous fraud, proven by conclusive and uncontradictedevide:il:Ce. If it was a purchase it was subject to equities. If the transaction be treated as nothing more'than a payment, in part, of his .own obligations which were held by Armstrong as collateral, 'the transfer of the judgment placed him in no better position than Armstrong ocoupied. In either view, the equity of the complainants against his claim upon the judgment is strong enough to extinguish it. Conceding lthat L. F. Brown was free from fraud in the transaction, it results, nev'ertheless, that he has taken nothing against Barhorst and wife by his purchase of the judgment against them, and that, so far as they are concemed, the judgment must be canceled. The decree will find the facts in accordance with this opinion, and will direct the cancellation of the judgment as againstBll.rhorst and wife, leaving it to stand against Moses F. Brown. L. F. Brown will be required to pay all the costs which have been incurred upon that judgmentsince its rendition, as well as the costs Of this proceeding. .
TRUST CO. BIPPUS
& A. Ry. Co. et ale
.(Oirooit 000'11, D. indiana. December 24, 1889.)
:M:oRTGAGE-CAR.TRusT LEA.SE:....PRIOBITmS. An intervenor in proceedings to foreclose a 'railroad mortga.ge was the owner of ,cars ia hands of the company under a lease which reserved to it a right to reciaim its property upon default in payment of rent. Upon the appointment of a receiver, the company being then in defaulthit petiti.oned the court, and demanded the receiver be returned wit in 30 days. They were not returned, 'but were continuouslY used by the receiver, without objection of the bondholders
FARMERS' LOAN & TIlOST 00. fl. CHICAGO & A. RY. CO.
or trustee, and payments were made on tbe rental by the application thereto of the ' freight earned by transportation for the After a, lapse of three month.. , intervenor filed a second petition, stating the facts, and asking that the receiver be, directed to pay the amount due under the car-trust contract; and that the same be declared a prior lien upon the, earnings, as well as on the PTP.P6rtr embraced in the mortgages. Held the retention and use of the cars by the and the nonaction of the bondholders, did .not amount to a conTersion; that petitioner was not entitled to payment of the rental according to the terms of the car-trust lease, out of the CorpU8 of the estate, but only to a return of the cars within a reasonable time, if so demanded, and a quantum meruitfortbe use thereof. '
In Eqnity. James L. High, for petitioner. Bakerec Daniela, for the receiver.·
GRESHAM, J. This is an application by the United States Rolling Stock Company for payment of the amount claimed by it under a lease of rolling stock executed to the defendant prior to the appointment of the receiver. On April 11, 1883, the Rolling Stock Company leased to the defendant the Chicago & Atlantic Railway Company 1,000 box' cars, 400 gondola cars, and 100 stock cars, under what is known as a Cl cartrust lease," in the usual form of such instruments. ' 'rhe agreed rental was $723,500, of which $72,000 was paid in cash on delivery of the cars. For the remaining sum, of $651,000, car-trUst bonds were exeCUboid, drawing interest at 6 per cent. per annum; the final payment of principal maturing July 1,1889. At the same time an equipment lease was executed between the parties, in the usual form. By this lease it was provided, among other things, that upon payment in full of all installments of principal and interest, and upon performance of all other covenants of the lessee, the legal title to the rolling stock should vest in it upon the 'payment of a nominal consideration. The lease also proVided that upon default in payment of principal and interest as it matured the lessor shonld have the right to reclaim the property; and the' lessee should deliver it at the shops of the lessor in Chicago, or at suchothel' point upon the line as the lessor might direct. The cars continued 'in the possession and use of the company until the receiver was appointed, since which time they have been in his possession and use. On February 26, 1886, the Farmers'Loan & Trust Company original bill of foreclosure. The bill averred execution of thefirstmdrtgage by the railway company on June 13, 1881, to secure 6,500 bonds of $1,OO(Yeach, the morlgagecontaining a provision that uporl. six months' default in the payment of coupons representing semi-annual 'indemand made for the payment of the same, the trustee!!, upon the 'request of a majority of the bondholders; might declare the entire principal to be due, take possession of the property, and institute proceedingS for the foreclosure of the mortgage and,the appointment Of a receiver. The bill also aVfrred that the coupons representing the seini-annual interest, due, respecively, November 1,1884. May 1,1885; and November 1, 1885, were in default and unpaid,demand having been niade for the payment thereof; that the company wasinsolVentj that thec()ntinued operation of the road was necessary fortbe'pr6teetioln
oftbe bondholders; and that a receiver should be appointed. It further 8verrell'the exepution of a second mortgage by the railway company on September 15, 1883, upon which there had been defaults similar to thffile undE;lr the first mortga.ge. The prayer was for foreclosure of the mortgages and the appointment of a receiver. To this bill a demurrer was fiHidithe principal grqund of demurrer being that the bill did not show any request by a majority of the bondholders for the trustees to declare the principal indebtedness due, and to institute foreclosure proceedings. In an opinion, filed April 8, 1886, (27 Fed. Rep. 146,) the court overruled the demurrer, holding, in effect, that any bondholder was entitled to foreclosure for unpaid interest,although no such demand had been made by a majority of the bondholders as to mature the prinThe was brought at the request of the holders of coupons, but against the wish and protest of a majority of holders of the bonds, who in open court moved that the. suit be dis, Tlle court declined to appoint a receiver at that time. On 2, 1887, the complainant filed an amended and supplemental bill. This bill averred that a meeting of the first mortgage bondholders held in New York August 17, 1886. at which a majority requested the trustee, ,in writing, to declare the principal due, and to take such steps as might ,be necessary for foreclosure and the protection of their iQterests. It also averred the insolvency of the railway com.pany, and that if the operation of the, road should, be suspended the security of the bondholders would be greatly impaired i and it contained averments similar to the averments in the ,original bill as to action taken to mature indebtedness, spd prayed fOreclosure and the appointment the of r,ecei:ver. On Februll.ry' 25, 1889, a decree of foreclosure was enteredj,the amount of principal and interest found due under the first being 88,874,000, and the amount of principal and interest found under the second mortgage, $6,500,000. From this decree an appeal was taken in behalf of the second mortgage bondholders, or filed. Pending the apa portjon of them, and a supersedeas bond peal,on;-the application of the trustee and a so-called "purchasing committee,'1 representing, substantially, all the first mortgage bonds and a large a:mount of the boncls secured by the second mortgage, Volney T. Malott was appointed receiver. This appointment was made May 18, 1889. On July 24, 1889, the rolling stock company filed its petition of intervention, reciting the history oCthe car trust as, above set forth, alleging its ownership of all the car trusthonds ann coupons described in the lease,l;tnd remaining unpaid, default in the payment of principal under the terms of the lease, to immediate and interei;t, and its the cars in question. The petition prayed that the receiver be directed to deliver the cars to the petitioner, within 30 days, at Hegewich, Ill., where, the tracks of the railway company connected with the petitioner's yards. Demllnd was also made upon the receiver for; the cars. On thed;typrevious to the filing of this petition the ra-Ce.iVf;lr presented to ,the a report in which he stated the various uponthepJ;operty in his possession, the history ofJhe \Jar tru\>t,.