GILCHRIST tiiHELENA, HOT SPRINGS &: S. R. CO.
criminal. Sheehy v.Fldherty, 8 Mont. 365, 20Pac. .Rep.687; 2 Daniells, Ch. Pl. & Pro 1620. Other cases might be cited to the same effect. Courts of equity, it is held by the supreme court in ReSawyer, 124 U. S. 200, 8 Sup. Ct. Rep. 482, will not restrain criminal proceedings. In regard to the action of forcible entry and ·unlawful detainer, High on Injunctions (1st Ed. § 65) lays down the rule that, without some special reasons indicating "certain and manifest irreparable injury," a court will not stay an action for the· same; and says that when a party comes into court seeking equitable relief he must come with clean hands, and that one who has been guilty of a forcible entry does not so come into a court of equity. Supportin[! these views are Crawford v. Paine, 19 Iowa, 172; Lamb v. Drew, 20 Iowa, 15. It is said that allowing this action to proceed might hav.e the effect of ousting this court of jurisdiction to try this cause. I do not say that would be an effect of a judgment· in the action of forcible entry and detainer should the defendant recover judgment therein. But if it would, I should still see no reason for granting the injunction. Jurisdiction of a court, obtained by fraud, cannot be sustained. Brown,Jur.§ 43, and note 3. The application for an injunction is denied, and the restraining order set aside. .
t1. HELENA, HOT SPRINGS
& S. R: Co. It al.
(CirCUit Court, D. Montana. February 25, 1899.
Where there are a number of different liens upon the property of an insolvent railway company, a stockholder who holds a judgment against the company can· not, of his own motion, or at the instance of one lien-holder, set off the amount thereof unpaid subscriptions on his s1iOck, since the subscriptions, being a trust. for all creditors according to their equities, might be absorbed, in whole or in part, by liens found to be superior to his judgment. A stockholder in an insolvent. corporation owes nothing on unpaid subscriptions, except so much thereof as may be necessary, together with the other assets. to satisfy the creditors; and hence, before this sum is ascertained and demanded of him, he cannot be compelled to set off the whole unpaid subscription against a juo!!'ment held by him against the corporation. Emmert v. Smith, 40 Mil. 123, distmguished.
In Equity. Bill· by Thomas Gilchrist and others, partners, doing business as Gilchrist Bros. & Edgar, against the Helena, Hot Springs & Smelter Raiiroad Company, the Farmers'Loan & Tr.ust Company, and others, to enforce the lien of ajudgment. The Northwestern Guaranty Loan Company, having intervened,filed a cross-bill, and the hearing was upon a demurrer thereto. Demurrer sustaibed. For forul,er report, see 47 Fed. Rep. 593. Walsh &: Newman, for plaintiffs. Toole &: Wallace, .A. K. Barbour, and H. G. McIntire, for defendants.
KNOWLES, District Jndge. Plaintiffs obtained two judgments against the defendant Helena, Hot Springs & Smelter Railroad Company, a corporation organized under the laws of Montana. These judgments, it is claimed, were liens upon the property of said railroad company by virtue of the provisions of section 707, Compo St. Mont. p. 824. Plaintiffs then brought an action in equity to have their said liens satisfied out of the said property, and to be declared a prior lien to that of the Farmers' Loan & Trust Company, which they made a party to the action. Many other parties who have judgments against said railroad company, claimed to be liens on the property of the same, were made parties. It was prayed, among other things, that a receiver be appointed, etc. The Northwestern Guaranty Loan Company, a corporation organized under· the laws of Minnesota, and Erastus D. Edgerton, asked to be allowed to intervene in said action. This petition was The cause was removed from the state court to this. The Northwestern Guaranty Loan Company filed its bill of intervention, setting forth that the Helena, Hot Springs & Smelter Railroad Company roMe, executed, and delivered to the Farmers' Loan & Trust Company, as- attnstee, a mortgage upon its property to secure the payment of some 150 bonds. of $1,000 each, of said railroad company; that 100 of said bonds, amounting to $100,000, were sold to said intervener, who is now the owner and holder thereof; that said railroad company has failed to pay said bonds, or the interest thereon, accord.ing to their terms, and in accordance with the terms of said mortgage; that the said trustee, the Farmers.' Loan & Trust Company, has failed to enforce the rights of the said intervener in the premises, although requested by it in writing, and the proper security for costs and expenses of;fered, as is required in the mortgage deed aforesaid. Intervener asks to have the said mortgage foreclosed, and the property sold to satisfy said bonds. The bill, also,arnong other things, sets fo.rth that, in organization of the said railroad company, W. E. Cullen, H. B. Palmer, C. G. Evans, and W. H. Hunt· subscribed. each, to the capital stock of said company, the sum of $33.750, and one R. C. Wallace the sum of $15,000; that the stock subscribed by the said Hunt was for the use and benefit of one William Muth, who is now the owner ahd holder thereof, to-wit, 33H stock; that no payment has been made on said stock subTlJe bill further shows that certain judgments against said railroad company held by W. C. Whipps and W. E. Cox and George Green were purchased by them from the parties who obtained them, for William Muth, who is now, in fact, the owner of the same, and claims them as a lien upon the property in the mortgage. These .claillls amouQt to near $3,000. It is alleged that the said railroad company is insolvent. The bill asks that these claims be canceled or offset by an equal sum of the amount due by said Muth on his unpaid t·tock subscripti()l1.The said Muth demurred to this portion of said bill of intervention, and the question is presented as to whether said unpaid stock subscription should be reduced by the amount of said judgments; that is, so much thereof be offset against said judgments. .
GILCHRIST V. HELENA, HOT SPRINGS & S. R. CO.
The money which the said Muth owes said railroad company for unpaid stock subseription is.a trust fund, which should be paid into the treasury of the company for the benefit of all the creditors. The debts which the company owes to said Muth on these judgments is not of this character. In the case of Sawyer v. Hoag, 17 Wall. 610, the supreme court said, in a case in which the plaintiff, Sawyer, sought to compel the defendant, Hoag, as an assignee in bankruptcy of an insolvent insurance company, to allow, as a set-off, a certain claim which he held against the insurance company on the amount due from him on a subscription of stock to said company: "The debts must be mutual.,-must be in tbe same right. The case us is not of that character. The debt which the appellant owed for bis stock was.a trust fund, devoted totbe payment of all the creditors of the company. As soon· as tbe company became insolvent, and this fact became known to the appellant, the right of set-off for an ordinary debt to its full amoun't ceased. It became a fund belonging equally in equity to all the credit-ors, and could not be appropriated by the debtor to tbe exclusive payment .of bis ow.n claim. It is unnecessary to go into the inqUiry whetber this claim was acqUired before tbe commission of an act of bankruptcy by tbe company, pr the effect of the bankruptcy proceedings. The result would be the same if the corporati(jn was in the process of liquidation in the hands of a trustee, or under other legal proceedings. It would still remain true tbat the unpaid stock was a trust fund for all the creditors, wbich could not be appliedexclu. sively to the payment of one claim, though held by a stockbolder who owed that amount on his subscription." . 'l'his rule was affirmed in Scammon v. Kimball, 92 U. S. 367; SCO'V'ifJ, v. Thayer, 105U. S.152jand Patterson v. Lynde, 106 U. S. 519, 1 Sup; Ct. Rep. 432. It is evident, from these decisions, that Muth could not himself offset the amount of these judgments against him for unpaid stock due from. him to said railroad Now, can the company, or a creditor of the company, having a lien upon its property, compel him to credit the amount the company owes him upon these judgments, to the extent of the same? In order that one debt may be offset against another, the debts must be in the same right. But the supreme court, in the cases referred to above, say they are not in the same right. If Muth should be required to pay his subscription of stock to the said railroad company, the amount so paid might not be devoted to paying his deLts against the company. It would be devoted to paying the claims of those who had the right to be first paid after the property of the company is exhausted* or to all the claims pro rata. There are in this case quite a number of judgments claimed to be liens against the property of the railroad company. Suppose it shouldturn out that there was not enough property belonging to the railroad company to satisfy the liens which are prior to those it is alleged the defendant Muth owns, then would not the subscription of stock of Muth be devoted to first paying off these liens under the decisions of the supreme court above referred to? I think this must be true. The rule to be established in such a case must be a general one, and apply to all similar cases. If it should appear that there might be
cases in which the if to the would not go to liquidating the cllJ.ims of this stockholder who. has not paid his subscription, I am sure there would be no right in any to have the sum due the cqmpany to extent set off again!>t the debts such company Jllight owe such stockholder. There might be cases where equity would decree such a set-off. If the party owning the claims against the company was notoriously insolvent, and there would be no chance for the unpaid subscriptionofstockof such a stockholder beingliquidated, and henc6;no fund could arise for the paying of the claims ",hich would be prior to his claims. then a court of equity might decree that these claims of such unpaid stockholder should be treated as a payment upon the Ullpaid stock sub!>criptiotl. Under such circumstances, a joint claim is allowed to be a set-off against an individ:Ual claim, although they are: not held in the same right. Story, Eq, Jur.§ 1437, 1437a. How ,far a court of equity might go, if such a case were presented, I am not lJO vv' prepared to say. But no such case is here presented. It is riot lilleged' that William Muth is insolvent; tt Mews to be the approved practice in the courts, of the United States:'for creditor of a' corporation, who has an unpaid claim against the same. and the property thereof is exhausted, t9 briug an action in: the nature of a creditors' bill to compel a stockholder to pay in his un-: paidwbscription of stock. Brown v. Fiik, 23 Fed. Rep. 228; Patter-; 80n v.' LYnde, 106 U. S. 519,1 Sup: Ot.Rep. 432: And this action, may be brought against one stock subscriber. Hatch v. Dana, 101U.1 S. ,This bill is allowed to be filed only after a judgment against the co,rpox:atlon, or it is known,to be insol,:"ept. Then the suit is brought in Buch a way as to allow aU parties who are creditors of the corporati()ll to come in ,and be parties to the action, and share in its results._ It would seem, that, in this case, the intervener contemplated some such relief as is provided in a, ,creditors' bill; and yet there is no provision. for other creditors to join in surh relief. There is no sllegatiQIl that there has beenanydemllnd on Muth to pay his unpaid subscription Qfstock. Undoubtedly this demand can be rna<:ie by a court of. in behalf of tbe creditors, but before any demand can be made tlWl'e must be ascertained,spproxirnately, at least, how rnuch Muth would be required. to pay on his subscription. In the case of Scovill v. Thayer, supra, the supreme court said: "The defendant owed the creditors nothing, and he owed the company nothing, save such unpaidpOltion of his stock as might be necessary to satisfy the claims·of the crediturs. Upon the bankruptcy of the company. hisobligation was, to pay to the assignees, upon demand, such. an amount upon his tillpald stock as would be sufficient, with the other assets of the company, to pay its debts. He was under no obligation to pay anything until the amount necessary for bim to pay was, at approximately ascertained, lJ ntH tben bisobllgation to pay did not become complete."
'fhere is DO allegation that in anyway would show that it is yet ascertained, how much Muth would be called upon to pay on his unpaid aubS!:lription, ofstock. The requiring;him to setoff the claims he has
GILCHRIST 'D. HELENA, HOT SPRtNGS & .S. R.
against the company in part liquidation of his subscription of stock would, in effect, be requiring him to pay the company so much of his subscription. I do not think the time has come when this can be done. It is claimed that the case of Emmert v. Smith, 40 Md. 123, is an authority in point justifying the proceedings sought in this· case. In that case the property of the corporation had been converted into money under a sale made by trustees in pursuance of an order of court, and the contest was as to distribution of the proceeds among the creditors. In that case the court says: "In the distribution of this fund in equity the creditors are severallyact. ors, and each entitled to set .up any equitahle defense against each other. The provisions of the statute, without undertaking to prescribe any spl'cific modo of recovery, make the stockbolclers of the company individually reo sponsible to the creditors, and were designed for the relief of the creditors, and to afford them an ample and expeditious remedy before any forum competent to administer the Jaw." There is no statute in Montana which makes the stockholders of a railroad corporation individually liable to the creditors of the same for unpaid subscriptions of stock. In the case of Terry V. Little, 101 U. S. 216, the supreme court say: "The individual liability of stockholders in a corporation is always a creature of statute. It does not exist at commolllaw." It will be seen that, while that wasll. different proceeding from that now presented in this case, there was also a different element for consideration, namely, the individual liability of a subscriber of stock to a creditor. It would seem, also, that in that case the court did not consider the precise point presented in this,-namely, the right to have an individual claim against a corporation setoff' against an unpaid SUbscription of stock,-but whether this could be done without calling in all of the other stockholders who were indebted to the company for unpaid subscriptions of stock, and the liahility of each determined. and only the amount each was required to contribute andpay in so as to liquidate the debts of the company determined. The court held that it could. That caRll, however, I do not consider in point in .this case. For these reasons I think the demurrer should be sustained; and it is so held.
FEDERAL REPORTER, vol.
March 5, 1899.)
1:. REBInJUDIOATA.a consideration paid by the husband of C., a deed of land was executed 1840, for
(Otrcutt Oourt, E. D. MisSOUri, E. D.
to·a trustee in trust for C., which by mistake vested only a life-estate in C., remaint\er to her childreJ;l, or, in default of children. to her right heirs, the intention: being·toat &fee should be vested. Thereafter an action was brought to reform the deed, in which the trustee and other parties to the deed, but not the contingent remainder-men, were made parties. Before final decree' therein, the husband of C. died. Held, that the trust became executed by the statute of uses, and the trustee duties to perform, and the deoree thereafter entered was not bindillg On the contingent remainder-men,tneynot being represented in the action.
H,; whfle acting asoonfidenJ;ial agent in oharge of property, both under C. and 'tbe trti$tJees under C.'swill,aoquired full information of a defect in C.'s title, and the,intentibn of C. and oUhe trustees to title, or to oontest v!llidity,but secreto/ purchased suoh title in thl;l name of another, and by his oonllivance oaused the teliants of the property to attorn to the person to whom the outstanding title had been conveyed. Held, that he would not be allowed to profit . but would betl'eated in equityas,holding the title for his principals, 8. BAMlIl. , No" will the heirs of an attorney who was jointly interested with H. in the pur. cl/.e.se, IIlld conducted all the negotiatlolils with full knowlege of. H.'s relations to C., ,stall-d in any better position than H.
:T.betelltament!lry trustees.under C.'s will were given full power to sell, mortgllo8:e, ",nd lease, and reinvest the proceeds, in their discretion. Held, that they had 'pOwin' 'to bUy in an outstanding claim as a oloud on their title, and could maintain the,aotion against H. and the others to them as construotive trustees, and ill. Sllllh defendants would 1:le wi,th the rents and profits, and credited With .all 'expenditures fOr taxes, insurance, and improvements,' and the sums expendedin'purchll8ing the outstanding interests.
AND LiABILITIES. '
In Eq,uity. In the opinion by BREWER, J., on demurrer to the bill, (39. Fed. 887,) the, facts were stated as follows:
"In 18,40"one William Myers was the ownel' of the property in question. of $4,000 paid by Elija4 Cllrtis, a deed was executed by FQr fl wife to one Samuel Russell in trust for Mrs. Curtis. '.rhe deed, as executed, vested a life-estate in Urs. Curtis, and the remainder in Mr'rlght heirs. It was so drawn and executed through a mistake of the draug'htsman; the intent of all the parties being that the fee shou'id be vested, and nota Ufe-estate, and that Russell,whd so held the title as, trustee for Mrs. Curtis, could, with his cestui que trust, convey the fee. After the deed had been so executed and recorded, in 1843, the mistake having been discovered, proceedings were had in the circuit court of St. Louis county to correct that deed. A decree was entered that it be reformed so as to express the intent of the parties, and vest a fee instead of a life-estate. To that proceeding Mr. and Mrs. Curtis, Mr. Russell, the trustee, and Mr. and Mrs. Myers, the grantors, were parties. The heirs of Mrs. Curtis were not made parties. By SUbsequent conveyances, the title vested in Mrs. Curtis and Mr. Russell, her trustee, passed to one Edward Chaffin, in 1850. He entered, took possession, and remained in possession until his death, in 1883. There. after the present complainants, holding under his will, took possession, and retained it l1ntill886. Mr. Curtis, the husband of Mrs. Curtis, the party who paid the money, died in 184:3; but Mrs. Curtis lived until 18!:!4, when she died, leaving no children. Mr. Chaffin during his possession became aware of the fact that, inasmuch as the heirs of Mrs. Curtis were not made parties to that decree of reformation, they had, at least, an apparent title to the re-