for want of jurisdiction. The fact that it maintains an office and an agent ;in. lthisstate for the transactitm :Qf ita businEll:ls does not, as cOU tended, amount to a waiver 'of its.;I)ig4t, under the act of March 3, 1887, to be sued in the district of its residence, or in the district where the plaintiff resides; 'A,witiver of such right will only be implied from some act done in this very case, as by appearing generally and pleading to the q;lidoipg Sonte .other equivalent act. , i$' true, a,s has Been , under the judiciary act of March 3,'1875, and,under previ 'Clll$.:a;9ts, it was held that a corporation maintaining an agent RJ;ld trans'acting business ina foreign state might be there sued in the federal courtsbfprocess served on its agent,especially laws of the foreign state,.sanctioned such- service. But those decisionll, were predicated on ',the. that the jUqicia;ry acts then in force defendant to be · sued,notonly. in the district of which he was an. inhabitant, ,butjl,lso in any district "in which he was found at the time of serving .the writ." The theory was that a corporation might be found, within the meaning of the statute, in a foreign' Eltatei,1Vhe:re'ft'kept an 'agent and'offiea 'and transacted business, although II'Ot il citiieil or resident of such state. · Good Hope Co. v. Fenci'flg 00., 22 Fed. Rep. 635j :St 'Lbuis Wire M11J/Oo. v. Barb- Wire Co., 32 Fed. Rep. 802. The act of March 3, 1887, unlike -all previous acts on. the subject,requires suits, to'bebrohght agaimst a. ··defel'ldantin the district df the residence of the plaintiff or detendant, when',l'jutisdiction is dependent on diverse citizenship. ''l'he decisions cited are, for that reason, not applicable. ' They. do not establish .that ·[email protected]
R. Co. et al. v.
VAL. R. Co. et al.
In a proper a oourt :0.1, eqUity, the possession by a. receiyer of the of .an lnsolvent 'r&llway company, may mllke an inte,locutoryorder for , the sale of the. pro'!>ertybefore the rights of the patti6$ under lIeveral mortgages . ','I been fully ascertaine4 and determined. , '$; S4ME-DISCHARGE 011' MORTGA.GE NOT SET DUE. . ,, , Butiri this olass of Ci&Eies a court of eqliitywiU never make such interloclltorj6r. der for an ilale terms. disohtrging .the lien of a D.qtyet due, unlesl\ it appears, ,only that 1ll tlle end there. mus.t be a sale of tp.e property. but,. tIiOseterms.· , . " ' ! -
l'ENNSYLYANIA]l.CO. fl. ALLEGHENY'\!AL. R. CO. 8. -SAMl'l.,
, " , Income bondholders secured by 8 junior mortgage, the plaintiffs in 8 crOs!.-bill, petitioned the court, pendente lite, for an interlocutory order for the' immeB.iate sale of the property of an Insolvent railway company defendant in the hands of a receiver, upon terms discharging the lien of two senior mortgages securing a large issue of bonds having a long time yet to run. The litigation involved the validity of the lien of these two mortgages, and that question was undetermined, and the final issue of the was otherwise uncertain. HeW, that the petition for 8 sale upon the proposed terms should be denied.
In Equity. Sur petition for an interlocutory order of sale, and demurrer to same. Motion foran order of sale under said petition. John G. Johnson, George Shiraa, Jr., and D. T. Watson, for petitioners. Samuel Diehon. for trustee.
ACHESON, J. This case is now before the court upon a motion for an interlocutory e)fder of sale, before final hearing, of the lines of railroad, franchises, and corporate property generally of the Allegheny Valley Railroad Company, a defendant in the suit. For the proper understanding of the application, it will be necessary to state the issues here involved, and to recite briefly the proceedings in the cause thus far. The original bill set forth thatthe fixed charges of said company are-First, a mortgage on the company's main line, dated Marc4 1, 1866, to ,secure 84,000,000 of interest-bearing bonds, due MarchI, 1896jsecond, an to $10,000,000, dated March 31, 1869, and issue of bonds due April1, 1910, with coupons attached, for the payment semi-annually of interest at the rate of 7 per cent. per annum, secured by a first mortgage, of the same date as the bonds, on the company's line of railroad, from the 'mouth of the Mahoning to the mouth of Bennett's branch, and further secured by a mortgage dated September4" 1874, on the company's main linej third, a dated April 1,1869, to secure to the commonwealth oiPennsylvania $3,500,000 of bonds, which are further secured bya IllOrtgage dated September 0, 1874,. of which, bonds about $2,600,000 rti'wain,unpaidj fourth, a mortgage dated October 1, 1874, to secure $10,000,000 of income bonds. These inGome bonds on their face are entitled to interest only out of the company's net income after payment of interest on bonds secured by the m.ortgagesof prior date, and the mortgage ,to secure the income bonds is made expressly under to the lien of five mortgages above mentioned. By an and indorsementon each bond of the issue of March 31, 1869, the.Pennsylvania Railroad Company (plaintiff in this suit) binds itself to purchase from the holder at par, and also the several couthe bond pons at par as t.hey fall due, "and, when so purchased, each and all of said bonds and coupons are to be held by said company, with all the given, and with all the benefit of every therefor," rights and by an indorsement on each coupon the company binds itself so to that the Allegheny Valley Railroad purchase the same. The bill Company is insolvent, and had defaulted in payment of the interest on the 810.000,000 ofponds of the issue of March 31, 1869; and that in consequence thereof, and by reason of its said indorsement, the Pennsylvania RaijrqAdCompauy had been compelled to pay and purchase cou-
pons of that issue of bonds to the amount of over $4,000,000; and the bill prays for a sale of the corporate property, franchises, etc., of the Allegheny Valley Railroad Company, "under and subject to the lien" of the aforesaid five mortgages prior in date to the income bond mortgage, "as to the principal of the bonds thereby secured, and not theretofore matured, and the interest thereafter payable after the making of said sale." Under one of the prayers of the bill, receivers were appointed, the survivor of whom is in possession of all the corporate property of the Allegheny Valley Railroad Company, and operating its lines of railroad. The trustees under the mortgages of March 31, 1869, and September 4, 1874, were made defendants in the suit. and in their answer to the bill they submitted themselves to the court, but prayed "that, in the event of a sale being decreed as prayed for in the said bill, such de- . cree may be formulated and enforced as will leave unaffected the lien of the several mortgages of which they are trustees, except so far as the interestthereonmay be payable out of the proceeds of said sale." E. W'. a holder of some of said income bonds, having beeu permitted to intervene in the suit, filed a cross-bill, the allegations of which are stich that, if sustained by the proofs, the Pennsylvania Railroad Company would have no valid claim under the coupons of the bond issue of 1869 it· had lifted and holds, but, on the contrary; would be bound to account for and pay to the Allegheny Valley Railroad Company large the sums of money, and appropriate relief is prayed for as Pennsylvania Railroad Company. The cross-bill also avers that the line of railway described in the mortgage of March 31, 1869, was never constructed, but another line (the low-grade railroad). was built, and said mortgage was not given on the line actually constructed; that the mortgage of September 4, 1874, is fraudulent as against creditors, and void also for want of authority to execute it; and the cross-bill prays that it be decreed that the mortgage of March 31,1869, is not a valid lien upon the "low-grade railroad" as constructed, and that the mortgage of 'September 4, 1874, is nota valid lien upon the premises therein described, and is void as against the income bondholders and other creditorsof the company. There is no prayer in the cross-bill for any sale·. Other income bondholders intervened in thestIit, and have come with Ross in the cross-bill. The cause being at BUe, s.n' examiner' was appointed,before whom a large amount ofte&timoJiy ,has been taken, but the testimony is not closed. .: :'Ib this State of the case, on February 1, 1890, the plaintiffs in the croSs-bill presented a petitiontd the court, setting forth that; ."sofar as be seell, many years must elapse before all in:controversy can be settled;" that during each year of the receivership the' ea.rnings til tHe company have not' beBu sufficient to meet the interest on the flxedcharges, arid that t,he arrears of indebtedness are thus -increasing largely;'that the railroad cannot be operated as advantageollslyby a receiver as in the hands of the oWners; that in itaequipments j /ltc., it is deteriorating invalne; that the present is the-most tll Wle'propel'ty,' lind that an; ilhmedia:te'sale·. is· to ' tbe' -interest Mall
PENNSYLVANIA R. CO. 11. ALLEGHENY VAl... R. CO.
the creditors; and that the longer the sale is delayed the more detrimental it will be to the petitioners and other hoiders of income bonds, "as well, as to the complainants in the original bill." And the petition prays for an order for the immediate sale of the corporate property, franchises, etc., of the Allegheny Valley Railroad Company, discharged of all liens except the first mortgage, dnted March 1, 1866, for $4,000,000. The petition also contains a prayer that, upon the confirmation of the sale, it be decreed that the principal of the $10,000,000 of bonds of the issue of March 31, 1869, shall become due and payable; but that prayer need not be here quoted at length or considered, as the present motion is simply for an order of sale of the property discharged of liens, as above stated. To this petition William J. Howard, the surviving trustee under the mortgages of March 31, 1869, and September 4,1874, to secure the Qond issue of the former date, has filed a demurrer, and resists the granting of the pending motion.. All the other parties to the litigation' have virtually submitted themselves to the decree of the court. The commonwealth of Pennsylvania, however, is no:ta party to the suit.' Notice of the present appHcation, indeed, was given to the treasurer and' a:ttorney general of the state, but there has been no appearance in behalf oithe commonwealth. ' Such being the matters in controversy, and this the state of the liti.. : gation, ought the present motion to be allowed? Undoubtedly, in a proper a court of equity, having the possession by a receiver of the' property of an insolvent railway company, may make an interlocutory order for the sale of the property before the rights of the parties under. several 'mortgages have been fully ascertained and determined; and we have an instance of the exercise of the power in the case of Bank v.. Shedd, 121 ,U. S. 74,7 Su p. Ot. Rep. 807. That decision the petitioners cite as a precedent to be followed here. ' In that case, however, not only was it certain that in the end the sale must take place in the manner ordered, but the property was depreciating in value by the accumu"· lation of receiver's indebtedness, while the contested points were simply' as extent of the priority of the lien of the first mortgage, and the. aLJlOu,nt due on that issue of bonds,-:-disputes which could be:as easily the.salo,as pefore, /lud which, in ,truth, involved mere tioris of distribution. But very ditferentja ·.. Hereno receiver's indebtedness has been created. Indeed, the net incomo from the railroad hilS been SUfficient, at least, to meet the interest on the first for $4,000,000, and hence it is not proposed to disturb that lien. But the court is asked, by income bondholders secured by a junior mortgage, to discharge, by an immediate sale, the lien of prior mortgages securing an issue of bonds amounting to $10,000,000, which have yet 20 years to run, while the question of the validity of the lien of _those mortgages-a question raised by nobody but the petitionersis still pending and undetermined. The discharge of the lien of said mortgages is of the essence of the present application, the petitioners ,not seeking a sale upon any other condition. Now, I think it may be confidently affirmed that in this class of cases
voL 42.. ·
CQurt'of equity will never make an interlocutory order for· an immediate sale upon, terms discharging. the lien of a mortgage not yet due, unless it: clearly appears not only that in the end there must be a sale of the prop,but a sale upon those terms; for otherwise irremediable injury might be done to the parties whose security was thus stricken down lite. But here the original bill is framed with a view of preserving the lien of the mortgages of March 31, 1869, and September 4, 1874, as respects the principal of the bonds thereby secured, alld the interest to accrue after the sale; and the 'prayer of the bill is that to that extent the property shall be sold under and subject to the lien of those mortgages. Whether, by virtue of its ownership of the matured coupons acquired under its contract of purchase, the Pennsylvania Railroad Company, as against the bondholders, could enforce a sale of the property discharged of the lien of the mortgages before the maturity of the bonds, is a question which need not now be discussed or considered. Such a sale is not within the scope: of the original bill. Therefore, if at final hearing the cros&-bill should be dismissed, assuredly a sale upon the' terms of the proposed interlocutory order could not be decreed under the pleadings. On the other hand, should the plaintiffs in the cross-bill· obtain the full measure of relief therein sought, it would seem that no' ground. would be left upon which to base a decree of sale; or if they should succeed in securing only the relief 'prayed for against the Pennsylvania Railroad Company, then, in the event of a sale, the supposed insuperable objection urged by the petitioners to a decree discharging the lien of the mortgages as to part of the indebtedness, but retaining it as to part, might cease to have any application to the case, the coupons lifted bY'that company being out of the way. Taking into consideration, then, the nature of the controversy, and the uncertainty as to the final of the litigation, it seems to me very clear that the court would not be justifiel1, at this stage of the case, by an interlocutory order to impose upon the holders of the bonds of 1869 the proposed terms of sale; and, this view being decisive, it is not necessary to discuss or pass on the other objections urged by the trustee of the bondholders against the allowaneeof the motion. And now, April 28,1890, the motion for an· interlocutory order of sale, under the petition of February 1, 1890, is denied, and said petition is dismissed.
DU :PONT ..,. TItDEl'I.
et ale ". TILDEN.IJC aLI
OoBPORA'l'IONII-LUBILI1'T OP STPCXJlOLDBRS.
it in fuij-paid stock, isllUes. Iluch Iltock in payment for'iand to an amount greatly
Where a corporation which is authorized by its charter to :buy land,and pay tor
in excess of the value oftl;le Ill-nd, and the. stock is aoid to a purchaser for value, luch putcbaser is not liable to the creditors of the coI-p'(lration on the ground that his stock is not fully paid for, where tl1ere wail no fraud iii the origiDal transactlOA" and the corpol'l'tlon has ,taken no atepa to reaoiD.d iii. ' '
' '.,.'.' B!08.., for cotiip,lainanta. Eaker. for defendants.
,J3WOOETT, J. Thiais II. bill brought bys8vera11udgment eredi tors of the ·Dlinois Coal'& IroI1Company of La Salle, in this state, seeking to obtain, '.decree for the' of theit several ,judgments from certain 'of tfiestookholde1'8 of the on the ground that their stock fully paid for. 'Orilrtnally there were quite a large nudlber of: stodkholde1'8 made parties,defendil,nt, but the billhas been dismissed alrto some by the complafuants;othem have been dropped out by the death of the defendants, and the bill was dismissed at the time of the .final hearing, On pleadings and proOfs as to foul' of the other defendanta, on ground that the proof did not' show them to bestockholde1'8;so that the case, as it now stands for' final decree, only affects the estate,9f .William 'B. Ogden, deceased, whoae executors have appeared and'ant'llwered,and James F. Joy. The ground' on which complainants claim that the'stock is not fully paid is that one E. D. Taylor, who was'the president of'thecoal company, in the month of May; '1866, conveyed to ,theoompany, by deed , certain tracts of Iand in La Salle county, in this "Iltate, in payment for'which there was iSsued to him 7,000 shares of the eapitalstock of the company', at $100 per share; that,the deed of these l8.ndsfrom Taylor to the company only expressed' a consideratiohof ,8150,000, and complainant has iutroduced parol proof tending to show that it' was worth, in cash, eveh less than that sum'at the time the conveyance was made, wherefore compliiinllDtsconterid that the stock so issued was only paid for to the extent cifthe value of the land 80 conveyed to the company. The proof shows tbatthecompllriywM organbed under a special charter gra.nted by the legislature of Illinois on the'18th of February, 1857 j that by'its charter the capital of said company was fixed at 8500,000, 'with power to increaseit,but not to·exceed $1,000,000, and that the company was, by its charter, authorized to purchase real estate, and pay ,for the same in stock; that lltock certificates were to be issued to ,the full payment for their stock; that the company orgauized . under the' said charter, and before'the18th of <May, 1866, had,issued
; ,JBepOtted b,Lou,ia BoillOtjJr;,eftohe Chloagli Iar.,
FEDERA.L BE1'ORTER ,vol.
stock to the amount of $300,000; that on the 18th day of May, 1866, at a meeting of the stockholders of the company, a resolution was adopted increasing the capital stock to the sum of $1,000,000, and provided that the $700,000 of increased stock should be issued to E. D. Taylor "for and in consideration of certain lands conveyed by him to said company by deed bearing date April 21, A. D. 18p6." It also that Taylor did make a deed to the company, dated the 21st day of April, 1866, of certain laqds in La Salle county, in which a consideration of $150,000 is expressed. There i8 also in the record the oral testimony of two witnesses, claiming to have sonie recollection or to the value of the said lands in April, 1866, who testified, in subs41.nce, that said lands were not at that time worth to exceed the sum of $88,000. It also appears that 5,000 shares of these 7,000 shares of $100 each, which were to be issued for this land, were issued to Taylor, and that ,within a few months thereafter, eold to William B. Ogden 1,363 ,ofsai<fshares, and that 1.874 he sold to the defendant James F. Joy 250 shares of stock, for which both Ogden and Joy, respectively, paid a rulland valuable consideration ,-probably more than the stock was worth time they recei'ved it,or ever has been ing' the stock to be full paid at the time of the. purchase, and the said pUI:9hasers understanding and believing that it was fully paid. There proof showing the value of the stock of the company at the time this<;leed was made, and there is no proof of any bad faith or deception ·on the part of Taylor as to the value of the said land. Upon these iiwts, ,cotUplainants claim that, even if the land conveyed by the deed of April .2l, from Taylor the company, was worth $150;000, the consideration recited in it, there. was still left $550,000, which is about 78 per ce;t1t,·.,unpaid on the par value of this stock, and that the defendants now before the court. as such stockholders, are liable to contribute thisunpaid amount to the complainants as crtlditors of the company. I think there .can be z:10 doubt from the proof in this case that the coal company agreed to give Taylor 7,000 shares of its stock for the land which he conveyed to it. The question, therc:lfore, arises, does the fact , complainants' testimony shows, or tends to show, that this l!1nd was not worth in CRsh over $lQO,OOO at the time it was conveyed to the coal company, establish any liability as against these stockholders? There being no proof in therecord, aside from the resolution of.the 18th of May, 1866, and the deed, of the negotiations and dealings between Taythe transac.lor and. the company, orof the circumstanpes ·tionand leading up to it, I shall assume it, as the only natural conclusion from the proof, that Taylor offered to sell these lanqs to. the com·panyfor 7,000 shares of its stock, company the proposition·. ',raylor made the deed of the. land to the company, and th.e compan,y iSsued to him the stock, or, at least, issued the shares now held, by defendants. . th.e th,ljI;l }lrises, could the company hav? sued Taylor, and. recovered the difference between the CRsh value of thIS land and the par value of its stock, without fi.fSt rescindiI;lg .this contract, even if the land
DU PONT ". TILDEN.
was not worth the par value of its stock? And this question, I think, must, upon reason and authority, be answered in the negative. See Cook, Stocks, § 47, where it is said: "Many attempts have been made in cases where stock was issued for property taken at an overvaluation to hold the party receiving such stock liable for its full par value, less the actual value of the property received from him. These attempts have not been successful. As already seen, the transaction is upheld as legal and valid and binding on all parties, unless there is an over" valuation, and that overvaluation is shown to have been fraudulent. When this is proved, then, the contract is to be treated like other fraudulent contracts. It is to be adopted in toto or rescinded in toto and set aside.' Both parties are to be restored as nearly as possible to their original positions. The property, or its value, is to be returned t.o the person receiving the stock, and he must return the stock 01' its real value." See, also, Coffinv. Ransdell, 110 Ind. 417, U.N.. E. Rep. 20; Sco'Vill v. Thayer, 105 U. S. 143; Van eoU v. Van Brunt, 82 N. Y. 535 j and many other cases which might be cited to the same point. It may, I think, be assumed as probable that the 7,000 shares of the stock of this coal company issued to Taylor were not worth, in cash, more than the land conveyed by Taylor to the company at the time this transaction took place. But the proof shows that, since these lands were so conveyed, the company has Leen engaged in mining coal from them, and hence it will be presumed that these lands were deemed valuable for the coal deposits supposed or known to be beneath them, and it is wellkriown how prone men, and especially sanguine and hopeful men, are to overvalue mining and coal lands, what high estimates they place upon their future possibilities of value and development; and the fair inference from the testimony in this case is that this coal company, with its favorable charter, was satisfied to accept these lands, and did so accept them, in full payment for this stock, in the expectation and belief that the full value of the stock was represented by these lands. And the fact that this expectation may have proved fallacious, although there is no proof to that effect in the record, furnishes no ground for the present claim of complainants. They certainly have no higher equity than the company would have had as against Taylor, and the company would have had no such equity, except fora fraudulent overvaluation, and that only by a rescission of the contract by a prompt reconveyance of the land, so as to place Taylor in as good a position as he was when the transaction began. 'l'he charter of the company allowed it to take real estate for stock, and hence, necessarily, left the value of such real estate to be agreed upon between the person from whom it acquired the real estate and the company; and also provided that stock certificates should only be issued on full payment. It therefore seems to me palpable that, even if a pur'chaser of its stock was bound ,to inquire whether the stock had been fully paid for or not,-a proposition which I do not think supported by 1lUthority',---:'such inquiry, at most, would, if made, only have disclosed the fact that the stock had been paid for in lands, and tbat perhaps some persons· did not consider them worth as much as the stock at par;
but !that would not proVetbatthe company had not accepted .them in ful't payment, as the resolution of the stockholders' meeting shows it
did, nor that the stock so issued was not full paid. Nor would such: iactsharve suggested that if he purchased the stock he would. bletO contribute to the difference between the value of the land and the parva1Ue' of the stock.. The stock had already been paid for once, and, in the the parties to the contract, that payment was .to·protect purchaser of the stock for value against the companyoJ:"itscreditol's. ltmay be said that, on the ground of gross valuation alone, the company might, if it had acted in apt time, have had transaction set aside, and the stock surrendered and canceled on a recorlvtlyance of the land for the stock while it still remained in the hands of Taylor, but it is now impossible to restore the parties to their original condition. The stock, at least a part of it; 'has gone into the purchasers for value, and the coal, as the proof shows, has been largely mined out of the land. The cases of Bridge 00. v. Mo. App; 500, and Brant v. Ehlen, 59 Md. 1, seem to me to be instructive upon the points raised, and conclusive against plainall1:$'.right· to recover. The bill is dismissed for want of equity.
BBI'tISH FOREIGN MARINE
11. BOARD OF ASSESSORS. GLOBE INs. Co. tJ. SAME.
(Oircuit Oourt, E. D. Louisiana. April10,1890.)
Under 1 Acts La. 1886, No, 76, whioh provides that if the ospital of a foreign fnsul'auce ;oompB1lY shall not have heen taxed in any other state tbe. company shall be taxed on Its gross receipts,. hut provides no method for ascertaining the amount of the groBareceipts, and :lI.xes no rate of taxation, the gross receipts cannot be taxed.
On Motion for Injunction pendente lite. W. lV.Huwe, for British Foreign Marine Insurance Company. Huntingt.on &: DufoVlr, for Liverpool & London & Globe Insurance Company. Wynne Rogers, for the State. Sam. L. Gilmore, for city of New Orleans. Before: PKRDEE and BILLINGS, JJ·
. PER CuRIAM. These suits are proceedings in equity, and submitted upon bill and affidavits for injunctions pendente lite. The complainants are foreign insurance companies, and have been taxed .upon their gross receipts, estimated for the current year in advance by the assessors, and seek to enjoin the state officers and the officers of the city of New Orleans from collecting this tax. The statutes of the state on the subj'ect are an actin relation to insurance companies, etc., No. 76 in the Acts of 1886, and the general annual revenue act No. 98 of the sallle year. Both these