Co. v. GREEN BAY & R. CO.
((Jircuit Court, E. D. Wisconsin.
RAILROAD-MoRTGAGE FORECLOSURE-PETITION FOR BILL OF VIEW.
A trustee filed a bill to foreclose two railroad mortgages, January 23, 1878, and obtained a decree of foreclosure April 3, 1879. Held, upon petition of a second-mortgage bondholder for a bill of review, filed January 10, 1881, within a few days before the sale under the decree of foreclosure was advertised to take place: (1) That an adjudication in such decree that part of the,secondmortgage bonds were issued in exchange for interest coupons due upon the first-mortgage bonds, and were, with interest thereon, "a lien under the said first mortgage, and constituted a part of the debt secured thereby," did not entitle such second-mortgage bonds to a preference over the first-mortgage bonds. (2) That, therefore, where the decree had provided that the greater part of the purchase money, upon the sale of the railroad, might be paid in cash, or first-mortgage bonds, or such second-mortgage bonds as had been therein adjudicated to be secured by said first mortgage, at such percentage as the court should authorize at the confirmation of the sale, it was not necessary that such decree should further provide for a cash payment at the time of the sale sufficient in amount to liquidate in full such second-mortgage bonds as were secured by ss.id first mortgage. (3) That a course of procedure prescribed by the mortgages, to be pursued in case of a sale by the trustee without foreclosure, was not binding upon the court in proceedings to foreclose such mortgages. (4) That, therefore, upon a foreclosure sale, the court was not bound to adopt the provisions of the mortgages, as to the application of the bonds upon the bid of a purChaser, or as to the proportion in which such bonds should be so received, or as to the manuel' in which their yalue should be ascertained. (5) That where the decree authorized the mortgage bonds to be applied on the purchase of the railroad UpOIl the foreclosure sale, it was not essential that such decree should determine the percentage value of such bonds before the sale actually took place. (6) That, therefore, a provision in such decree that the purchaser, after the payment of a certain specified amount in cash, could pay the balance of his bid in outstanding bonds and coupons, secured by the first mortgage, "at such percentage of the face value thereof as this court shall, at the approval of said sale, authorize and direct," was not erroneous, and was similar to that inserted in all railroad mortgage foreclosure sales entered in the (seventh) circuit.
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(7) That the court could require, upon the subsequent presenta· tion of intervening claims, as a condition precedent to the confirmation of the sale, that the purchaser Ihould make a larger cash pay· ment to meet all exigencies than that fixed by the terms of the decree. (8) That a question as to an adverse title to a part of the mort· gaged premises, pending between the receiver of the railroad and a third party, did not seem to be one that could be litigated in a suit to foreclose the mortgage. (9) That the denial of the railroad's title would divest the peti. tioner of all right to object to the decree and foreclosure proceedings, upon the ground that such third party was not made a defendant to the foreclosure suit. (lO) That where, upon default, a majority of the bondholders had requested the trustee to institute foreclosure proceedings, the mere fact that certain bondholders, including the president of the railroad, retained counsel for the company for the purpose of procuring servo ice of process of subpmna in a genuine action to foreclose these valid mortgages, given to secure a just debt, did not constitute a fraud upon the petitioner, although she had no knowledge at the time of such actiori by said bondholders. (11) That an agreement entered into between the bondholders for the proposed reorganization of the road could only be considered, under the petition, to the extent that the particular interests of the petitioner might be involved; and that under this restriction no such grounds of objection to the agreement were presented, or such probable injury to the petitioner shown, as made the petition sustainable. (12) That it was a serious question whether tIle petitioner had not been guilty of laches in presenting such petition nearly two years after the decree had been filed, and within a few daY13 before the sale was advertised to take place, without any averments in the petition that would seem to sufficiently excuse the delay. (13) That the petition did not allege that the petitioner had any interest in the second-mortgage bonds secured by the first mortgage, or that the mortgaged property was of sufficient value to pay more than the first-mortgage bonds, or contain any allegation whatever as to the value of the mortgaged property, and that therefore it was not certain that the petitioner, as the holder of the bonds degcribed in bel' petition, had any real interest in the subject-mattt:r of the controversy.-[En
In Equity. Finches, Lynde a; Miller, for petitioner. E. C. d: W. C. Larned, contra. DYER, D. J. On the twenty-third day of January, 1878, the complainant in the above-entitled cause, as trustee for bondholders, filed a bill in this court to foreclose two mortgages on the railroad and property of the defendant company,
given to secure the payment of certain issues olbonds, amounting in the aggregate to' $5,300,000. On the third day of April, 1879, a decree of fo.reclosure a l1 d sale of the mortgaged property was entered. On the tenth dl'!>yof January, 1881, and but a few days before the sale under the decree of fore:}losure was advertised to take place, Mary M. Kelly, a holder of bonds secured by one of the mortgages, filed a petition in said cause praying leave to file a bill of review for certain alleged errors and irregularities in the foreclosure proceedings; and the question has been raised by demurrer to the petition, and argued and submitted, whether or not leave to file such a bill should be granted. Thedetermillation of petiti01ler's right to file a bill of review involves, therefore, a consideration of the contents of the petition in connection with such parts of the record in the foreclosure case as are brought into controversy by the allegations of the petition. As appears by the foreclosure decree, the issue of bonds secured by the' first mortgage was $3,200,000, and the issue of bonds secured by the second mortgage was $2,100,. 000. The petitioner alleges herself to be the holder of second mortgage bonds amounting to $14:,320, besides interest. The decree adjudges ·that "of the said second mortgage bonds the 'sum of $850,260 was issued in exchange for interest coupons, due upon said first mortgage bonds, and is, with the interest due thereon, a lien under the said first mortgage, and constitutes a part of the debt secured thereby j" and by the decree it is further adjudged and decreed "that the entire amount of bonds secured by the said first mortgage is the sum of $4,050,260, being the amount of first mortgage bonds of $3,200,000, '" '" '" and the said amount of $850,260 of second mortgage bonds issued as security for interest due on said first mortgage bonds. '" '" '" That the entire amount of bonds outstanding and unpaid, securell by the said second mortgage, '" * '" is the sum of $2,100,000, of which amount the snm of $850,2GO was issued to secure past-due interest coupons on said first mortgage." Further provisions of the decree important to notice are,
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that any of the bondholders may become purchasers of the mortgaged property at the foreclosure sale; that the Bum of $25,000 shall be paid in cash at the time of sale, and that the purchaser shall comply with his bid on the day of the sale; that "after the payment to the ma;rsMI of sum of $25,000 in cash, of the sum bid by the' purchaser' at said sale, the marshal may receive from said purohaser"for the balance of the sum bid at such sale, in lieu: of cash, any of the outstanding and unpaid bonds or coupons secured by the said first mort· gage, at8uch percentage of the face value' thereoj as this court shall at the approval of 8aid 8ale authorize and direct." Also, "that so much of the purchase money at said sale as shall be necessary to pay the costs of this' suit as' taxed: and the costs and expenses of said sale, and the amount· hereby adjudged to be due to the said complainant and its solicitors, shall b& paid in cash, and that the remainder of said purchase money may be paid in cash or in 8aid first mortgage bonds, or such of said second mortgage bonds as arc by this decree held to be BCcUf'ed by 8aid fir8t mortgage in ,the proportion aforesaid." 1. It is claimed by the petitioner that; in various particulars set forth in her petition, error and ambiguity are apparent in the decree; and one of the allegations upon which this claim is founded is that "it appears on the face of the decree that a cash bid of $25,000 is not sufficient to make valid and effectual the terms of the decree, in this: that the said decree provides on its face that $850,260 of the second mortgage bonds given in exchange for first mortgage c'oupons, with the interest thereon, shall be a first lien and' charge upon all the property, real and personal, by said first mortgage conveyed, and to satisfy said $850,260 as a first lien, a sum of over $25,000 in money should and ought to be directed to be paid." This objection,to the decree is founded upon amisapprehension of its scope and meaning. The decree does not give to the $850,260 a rank in advance of the first mortgage bonds. It declares that second mortgage bonds of that amount were issued in exchange for interest coupons due upon the first mortgage bonds, and are, with interest, a lien under the first mortgage, and entitled to be proved under that mortgage and
constitute a part oJthe debt secured thereby. Again, in another part of the decree, it is declared that "the sum of $850,260 was issued to secure past.due interest coupons on said first mortgage, and is .secured by said first mortgage as aforesaid;" and, as we have already seen, it is further provided that the purchase money on the bid "may be paid in cash or in said first mortgage bonds, or such of said second mortgage bonds as this decree held to be.secured by saidfirst mortgage." It clear, therefore, that the second mortgage bonds to the amount of $850,260 are si:rp.ply placed on the same footing as the first mortgage bonds-not as having a preference over the latter, but as being equally secured under the first mortgage with the first mortgage bonds. There was, therefore, no greater or other reason why: the decree should provide for a cash payment on .the bid of a purchaser sufficient to cover the $850,260, than there was for a. cash payment adequate to cover the entire amount of the first mortgage bonds. 2. The mortgages provided that in case of default in pay. ment of either the principal or interest due on the bonds secured thereby, and on written request of the holders of llo specified proportion of the bonds, the trustee might seHthe mortgaged property; and it was therein further provided that "the amount of the bid or purchase money of said sale maybe paid and satisfied in whole or in part by the outstanding mortgage bonds, or any of them, issued hereunder, and the same shall be taken and received in whole or .in part payment and satisfaction by the party of the second part, its successor, or successors, according to their value, to be ascertained and determined by the net amount arising from such sale as compared with the amount of outstanding bonds issued hereunder as aforesaid." The decree, as we have before observed, provides that after payment of $25,000 in cash of the sum bid at the sale under the decree, the purchtLser may pay' the balance of his bid in outstanding bonds and coupons, secured by the first mort. gage, "at such percentage of the face value thereof as this court shall, at the approval of said sale, authorize and direct." Now, it is alleged in the petition that the decree is erro-
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neous in that it does not observe or follow the terms of the mortgages as to the receipt of bonds as part of the purchase price for the property sold. The sale authorized in the mortgages was one to be made in certain contingencies by the trustee. It was a sale to be made in accordance with 'the stipulations of the parties. .The course of procedure there prescribed was one to be pursued in case of a sale without foreclosure, and it was competent nnd proper for tlie parties to place upon the trustee certain and to define the limits within which he must act in making such a sale. But those provisions could not bind the court if foreclosure proceedings should be instituted, and a sale should be made under its direction. In such case the sale would have to be made according to the usual course of praCtice' 'in judicial proceedings, and the court would be no more boundtd adopt the provisions of the mortgages, as to the acceptance from a purchaser of bonds to apply on his bid, or the proportion in which bonds should be so received, or the manner in which their value should be ascertained, than it would be. bound to adopt the directions to the trustee, contained in the mortgages, as to the advertisement of the property for sale. As a test of this question, suppose the court, ignoring the provisions of the mortgages altogether, should order the property sold for cash, and in no manner authorize the payment of a bid in bonds, would that be an error of which a bondholder could complain? Clearly not. Undoubtedly, the Murt might adopt, so far as practicable, the method of procequre pointed out ,in the mortgages, but itwould not be erroi-affecting the validity of the decree not to do so, unless wrong and injustice were apparent in the decree entered by the court; and I am unable to perceive wherein· the decree in the particular under consideration fails to observe the rights of all parties. 8. This brings us to another point urged against the validity of the and which in some aspects connects itself with the question last considered. It is alleged in the petition, as.one of the grounds on which the court shoul4 allow a bill of review'to be filed, that the decree does not establish the percentage value of the or coupons secured by
either of the mortgages; that in order to secure just and equitable bidding a.t the sale, the value of the bonds should be ascertained by proof, on reference to a, master before the sale, and that .without such previous asc.ertainment of value no bidder can know what amount of bonds or coupons he can pay on his bid. In the first place it may be remarked that the provision in question in the decree is similar to that inserted in railroad mortgage foreclosure decrees in this circuit,as I am advised by the circuit judge, whom, for certainty of I have consulted on the point. Obviously, the value of the bonds and coupons must depend on the value of the mortgaged property, and that value. is best ascertainable by sale of the property. I do not see, therefore, how it would be possible, or at least practicable, to determine the value of the bonds, or to determine what percentage of value should be applied on the bid, before the sale transpires. There may be prior liens to be paid in the shape of intervening claims, and I cannot perceive how a proper and effectual sale can be made,-if bonds are to be applied on the bid,-unless the court is permitted to fix the rate, after the sale is reported, at which bonds shall be received. And it would seem that an attempted ascertainment of value of the bonds, before the sale, for the purpose of fi:x:ing the rate at which they may be applied on the bid, would be more likely to involve injustice, especially to small holders, pl,an an ascertainment made subsequently, because before sale the only value susceptible of proof might be one merely nominal, while after tpe sale the value. would be represented by a realized price. In this connection it is urged that the decree does, not determine what amount of bonds may be taken to apply on the bid, Whether it can be said, in strict. ness .of definition, that the sale authorized by the decree is a eash sale or not, I think it iE\equivalentto .T4e decree provides that in cash shall be paid by the bidder at the tiWe of the Bale ; that such payment the balance of the bid ma,y be paid in ,ppnds "and coupOnS, or, as)t is expressed in another PMt,of after the payment of eosts and etc., the rePlainder of the purchase money
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may be paid in cash orin certain designated Dlortgagebonds. Certainly the court would have the powel'to require the entire amount of the bid" to be paid intocol1rt in cash, and then to apply the money in payment of costs and upon the bonds at such a percentage as the entire bid would pay. In that case the com't would recei ve the money and directly pay it out again in dividends' on the bonds. In: the case contemplated by the decree, the bonds are brought in as representing a part of the cash bid, and stliiableindorsements and cancellations made, so that the transaction is made equivalent to the payment in cash of the entire pnrchasemoney, and the application of it on the bonds in the manner before indicated. Could the court have foreseen what 'has bccurred since the entry of the decree, especially in regard to the presentation of intervening claims, it is probable that it would have required, in terms,the payment of a larger sum in cash at the time of the sale than $25,000; but I do not think that very important, because the court has the undoubted power to require a sufficient sum to meet all exigencies to be paid into court as a condition of confirming the sale. After careful consideration of the question, lani unable to perceive how injustice could result to bondholders from the terms of this decree in the particulars referren to. Every bondholder 'Or other person is at febid at the sale. He may bid what he thinks the property is worth. ' He knows that ,the price for which the property maybe s61d will represent the value of the property, and will flxthe value of the bonds. He knows that the proceeds of the sale must be used 'to pay bonds, and that they must be applied pro rata upon bonds. He knows, also, that the percentage so to be applied will depend upon the amount for which the property sells, and the amount of the bonds; and knowing further that if the sale is properly conducted and if he is the highest bidder he will get the property, he is left to freely and fairly exercise his judgment as to the sum he will bid. On the whole, myopinion is that the decree is nbt erroneous; and does not, in form or substance, deviate from correct· practice in the particulars which have been 'considered.
4. The petition alleges that the receiver in the foreclosure action has filed a bill in this court, against D. M. Kelly and others, to set aside certain deeds of depot grounds, right of way, and other lands, which, it is claimed by the receiver, belong to the railroad company, and which, it is claimed by the defendants in said bill, belong to them; that the right of the company to said property should be adjudicated in the foreclosure suit; and that the title deeds thereof were of record before the bill in the foreclosure action was filed; and it is further alleged in the petition that the said D. M. Kelly and others, who are defendants in the action brought by the receiver to settle the title of the lands in controversy in that action, were neceSllary parties in the foreclosure suit, and that without their presence in that suit their legal or equitaable rights to the lands cannot be cut off by the foreclosure decree, and a perfect title thereto given to the bidder at the foreclosure sale. r am qnable to see how the rights of the petitioner are injuriously affected by the facts thus alleged. It is apparent, from the allegations she makes, that D. M. Kelly and others are claiming the lands in question as their own under a title advert*! to the railroad company. If they succeed in the litigation with the receiver, they will hold the lands. If they fail, then it will result that the lands fall into the gGneral mass of p.fQperty covered by the mortgages, and the title will pass to the purchaser at foreclosure sale. Such a question of adverse title could not be litigated in the foreclosure suit; and, moreover,.1lhe petitiqner, in my opinion, divests herself of all right to make this objection to the decree and the foreclosure proceedings, because, in connection ;with her allegations on the. subject, she denies that the lands in question are the property of the railroad company, and of course thereby inferentia,lly affirms the right and title to the lands of the defendants in the action brought by the receiver. it is charged in the petition that the action to fore5. close the mortgages in suit was fraudulently and collusively bronght; and in the consideration of this phase of the case it is necessary to take notice of the allegations of the petition.
FARMERS' LOAN & TRUS'!' CO. V. G. B. & M. R. CO.
Those allegations, stated in somewhat condensed fom, are that certain bondholders, including John). Blair and William E. Dodge, caused the foreclosure bill to be filed; that to carry out certain schemes for getting control of the mortgaged property, and to obtain unjust and improper advantages over the petitioner and other bondholders and stockholders, Blair and Dodge retained J. P. C. Cottrill, Esq., as attorney for the railway company; that Mr. Cottrill had never before acted as the general attorney of the company, and that, immediately after retaining him, Blair and Dodge caused the bill in the foreclosure action to be filed, and a subpcena to be issued and served upon said Cottrill, as attorney of the company; that the only service which Mr. Cottrill or his firm thereafter rendered in the case was to file an answer, which had been previously prepared by the counsel for Blair and Dodge and their party of bondholders. It is alleged that neither Mr. Cottrin nor his firm had any personal knowledge of. the facts stated in the foreclosure bill or in the answer thereto, and that they had nothing to do with the drafting of the answer, alid were not consulted or advised with about the subject-n1'atterthereof. It is charged that at the time the said Cottrill was so appointed attorney of the defendant company, William E. Dodge was the president of the company, and that upon his appointment as such attorney Mr. Cottrill went with the solicitor of'the complainant, the Farmers' Loan & Trust 'Company, befote the judge of this court and 'Consented to the appointment of a reMiver'in the foreclosure suit; that 'at the time of his appointment as attorney for the 'company said Cottrill was shown by one of the solicitors for the complainant a letter from Dodge appointing him such attorney, and that he acted under such letter of appointment; that the appointment of said Cottrill was obtained by Blair and Dodge, and those in interest with them, for the fraudulent purpose of obtaining a fraudulent and collusive service of process in the foreelosure suit, and not with, bona fide intent to make him the general attorney of the company to defend its interests. It is then charged; generally, that the appointment of said Cottrill as att0!lley, for the purpose of of subpoona upon
him, was fraudulent as to the stockholders and other bondholders of the company, not parties thereto, and was made by Blair and Dodge, and their associates, for the fraudulent and collusive purpose of obtaining service of the subpama in the foreclosure suit. And so, it is further alleged, that such service was fraudulellt and collusive, alld was a fraud on the eourt, and upon all stockholders and bondholders who did not know or assent to the sa'me, and should tilerefore be set aside, with all proceedings in the foreclosure suit subsequent to the issuing of the suhpama. It is then stated that the complainant, the Farmers' Loan & Trust Company, had knowledge of and colluded with Blair and Dodge in the matter of the appointment of said Cottrill as attorney for the company, and in the service of process on him, and that the petitioner had no knowledge of any of these alleged facts until the seventh day of January, 1881. Many of these allegations are made on information and belief; but, admitting them all to be true, the question is at once suggested, .wherein consists the fraud upon the petitioner, and how is. she injured by the matters complained of? She cannot be he!trd in behalf of stockholders, for. they are not here complaining. cannot. be heard in behalf of other bondholders, for they w;ust speak for themselves if they have been wrcmged. The onlyqu8stion is, wherein has the petitioner been injured or .defrauded by the proceedings mentioned? This was not the case of a fictitious action without a: subject"matter to support it. Here were large mortgages given to secure bOllds, the interest on which was unpaid. The genpinelless of these instruments, and the validity of the debt they represented and secured, are not questioned, By the a,llegations of the bill in the foreclosure suit, which is part of the record, it appears that the amounting to more than oneholders and owners of J,lalfof the entire issue each of the mortgages, requested t,he trustee to iJl.stitute forej3losure proceedings. This is not denied in the present and, if true, it was the duty of the trustee to file the bill in behalf of all the bondholders. It. could not concern b()ndholders how service of process on
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the company was obtained, provided the court :legitimateli obtained jurisdiction of the parties. And why shOllld not the mortgages be foreclosed, provided a reasonable proportion of the holders of bonds requested it to be done ?Certainly the petitioner cannot be heard to say that it was the duty- of the company to resist and obstruct· It foreclosute. ' If the mortgages were valid, and the debt due"and if the company could not make payment,-the eontrary of which the petition' does not allege,-then it was the duty of the company toper-' mit the trustee to foreclose, and the bondholders to realize their money. Nor upon such a state of facts does it seem t6me that it would be a. fraud upon bondholders if the preBident of the company were to employ counsel to act for the company, even iuadvancement of the forealosure. The gist of the petitioner's allegations is th&t· cel'tain bondholders-:-:. one of whom was the president 'of the company-rettiinecl counsel for the company for the purpose of procuring service of process of subpama ina genuine action to foreclose valid mortgages given to secure Sf: just debt. Stockholders being silent, I am unable to perMive hoW' the petitioner can maintain that the proceeding complained of was a fraud upon her, ' or a fraud upon the court. There are allegations to the effect that the object of Blair and Dodge and their associates was to obtain; ultimate con-trolof the mortgaged property. But; the proceedings to close the mortgage were n'eCessarily public. The sale lowing the decree must likewise be· public 'and open to all bidders. Confirmation of th'e sale by .the' court mll'staf necessity also be open to the resil'ltance of any party in inter· est, if the sale should not be fairly conducted, or if there should be such inadequacy of price as might involve 81:lactifiee of the property or injury to parties interested. Consid..; ering this in all the pointe of view Buggested;the manifest infirmity in the petitioner's case, upon·thislJrEtMh ofit, is that she showsnofratldupon her and n\:> injury to Attention was called on the argument to certain contained in the answer of the company filed by Cottrill &i Cary in the forecldsuresllit as prejudicial to the tights ilind
interests of the petitioner;· But it is how or wherein they could operate to her injury; and, moreover, the truthfulness of those admissions is nowhere denied or questioned in the present petition. .I, have examined with care the cases cited by petitioner's counsel: Lord v. Veazie, 8 How. 251; Gaines v. Hennen, 24 HQw. 553; Wood Paper Co. v. Heft, 8 Wall. 334; v. Chamberlain, 1 Black, 419; and Forrest v. M., S.· It L. By. Co. 65 Eng. Ch. Rep. 195. This opinion has been already extended to s1Jch length that I forbear to enter upon a review of those cases further than to say that I deem them upon their facts, and in the principles they involve, inapplicable to the case at bar. 6. Incorporated in the petition is a copy of .the·bondholders' agreement and proposed plan of reorganization of the Green Bay & Minnesota Railroad Company, which, it is alleged, Bla.ir and Dodge and their assooia.tes seek to consummate to the alleged detriment and injury of other bondholders and of stockholders. I have been somewhat at a loss to determine just the extent to which this ext.rinsic matter should be considered by the court as bearing upon the validity of the proceedings in the foreclosure suit, or as affording ground for the petitioner to file a bill of review. Certainly it can only be considered to the extent that the particular interests of the petitioner may be involved. The agreement appears to be a voluntary one, and all holders of bonds, second as well as first mortgage bonds, with certain stockholders of the company, are permitted to participate in it. ,. The provisions are such as,. I believe, are usual in such agreements. The plan of reorganization contemplates the issue of first and second mortgage bonds, and of preferred and common stock, by a new company, and provides for the exchange, on certain terms and at certain rates, of bonds and stock of the old company for bonds and stock of the new. Such equality of footing as may rendersecure the various interests of the parties who may enter into the arrangement, appears to be accorded to different classes of bondholders and stookholders; and on the whole, in considering this branch of the case, I dQ no not think that
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such grounds of objection are presented, or such probable injury to petitioner is shown, as makes the petition sustainable. 7. Finally and generally, it mayre stated that even if the court were in doubt as to the disposition that should be made of the present petition, it would be a serious question whether that doubt would not have to be resolved against the petitioner because of her own laches. As before stated, the bill in the foreclosure suit was filed in January, 1878. Siilcethat time the bill, subpcena, record of service of subpcena, an4 the answer have been on file. The decree was entered in April, 1879. Nearly two years afterwards, and within a few days before the sale was advertised to take place, the present petition was filed. Certainly the delay has been great, and it can hardly be said that it is sufficiently excused by anyaverments to that end contained in the petition. Then it is not certain that the petitioner, as the holder of the bonds described in her petition, has any real interest in the subjectmatter of this controversy. Her bonds are secured by the second mortgage. There is no allegation that they are included in the $850,260 of second mortgage bonds which were issued to take up past-due first mortgage coupons, and which became secured by the first mortgage. Nor is there anyaverment that the mortgaged property is of sufficient value to pay more than the first mortgage bonds. There is, in faQt, no allegation whatever touching the value of the property covered by the mortgages. And in conclusion, upon all the grounds, and for the various reasons stated, the demurrer to the petition will be sustained, and the petition will be dismissed.
" FEDERAL REPORTER.
PHILADEI,PHIA TRUST, SAFE DEPOSIT & INS. Co., Assignee, etc., v. SEVENTH NATIONAL BANK OF PHILADELPHIA.
(Dl8trict Oourt, W. D.
GENERAL AGENCy-POWER OF AT'fORNEy-EVIDENCE.
If there is clear and satisfactory evidence from which a general agency may be inferred, a written power of attorney, conferring upon the agent certain specific powers, will not be construed as restricting the authority of the agent to the particular matters therein specified, if the power of attorney, in its terms, is not exclusive nor inconsistent with such general agency.
The authority of an agent under a written power of attorney may be impliedly expanded by the conduct of the principal in favor of an innocent third party, even where such party,when dealing with the agent, had knowledge of the written power.
If such agent, who, with the· knowledge and of his principal, has habitually exercised authority beyond the scope of the written power of attorney, enters into a contract with a third party, who was induced to believe by the conduct of the principal that he reposed trusts in the agent beyond those specified iIi the written powet, the principal and his voluntary assignee will be estopped from denying the validity of the contract, especially where it enured to the benefit of the principal,' and the other party cannot be restored to his former position.
In.Equity. Sur Exceptions to Master's Report. Henry' J. McGm·thy, Wm. A. Porter, and Wm. Scott, for Trust Company.
'Leonard R. Fletcher, John M. Kennedy, and J. H. Baldlbin, for .the ·Bank. . ACHESON, D. J. This is an interpleader between the Philadelphia Trust Safe Deposit & Insurance Company, assignee under a deed of VOluntary assignment for the benefit of creditors of Henry G. Morris, as plaintiff, and the Seventh National Bank of Philadelphia, as defendant. The controversy relates to a composition dividend amounting to $8,020.43, payable under a composition agreement in bankruptcy made between James T. Wood, surviving Charles A. Wooel, rleccased, bankrupts, and tbeir creditors. The divi-