CITY OF TRINIDAD V. MILWAUKEE & TRINIDAD SMELTING & R. CO.
: TBEl MARY LENAHAN; DOHERTY v. McWILLIAMS et at (Olrcult Court of Appeals, Third Circuit. No.4'Appeal from the District Court' oftha United States for the District of New Jersey. This was a libel by Charles McWilliams and Daniel McWilliams against the canal boat Mary Lenahan, her tackle, etc. (Patrick Doherty, claimant), for materials useil and labor expended in making certain repairs. The district court rendered a decree for libelants, GREEN, District Judge, delivering the following opinion; January 23, 1894: "The evidence in this cause is very conflicting, the only undisputeO fact being that the libelants did repair the boat in question. After a careful consideration of the whole caSe, however, I have reacheil the conclUsion that the 'libel should be sustained." The claimant thereupon appealed. Stewart & Macklin, for appellant. John Grifiln, foc appellees. Before SffiRAS, Circuit Justice, and ·ACHESON and DALLAS, CIrcu1t Judges. DALLAS, Circuit Judge. By the asslgnn:ents of error, It is aJleged, In general terms,' that the decree of the court below is erroneous. This allegation hM not been sustained. No question of law Is presented by the record, or is suggested by the argument which has been submitted on behalf of the aI!pellant The district court, upon the conflicting evidence which was before it, reacheil the conclusion that the libel should be sustained, and our own, examination of that evidence satisfies us that this conclusion Ia correct Therefore, the decree is afilrmed with costs. November 1, 1894.)
CITY OF TRINIDAD v. MILWAUKEE & TRINIDAD SMELTING & RlIFINING CO. (Circuit Court of Appeals, Eighth Circuit. No. 401. L The citizens of a certain city, and their committee, agreed .with a smeltIng company to donate to It certain Umd for a smelter, on condition that It wcmld erect thereon a smelting plant costing $50,000. The land was bought by such citizens, anll deeds taken III the name of one of them as trustee. Afterwards the company erected thereon a smelter costing $80,000, and complied with the contract, and such trustee conveyed to it the land. The city council, on the petition of citizens, appropriated $17,500 for the ostensible purpose of straightening iI. stream running through the city. but intending to use the money for ,the purpose of paying for the land purchased as a site for a smelter, and It was ,so used. The company's representatives dealt entirely with the citizens and their committee. and had no actual knowledge of the manner in which the land was paJd for. Held, that the fact tha.t the land was deeded to andb;y such citizen as trustee did not charge the company ,with constructive notice of the fraudulent use of the city'S money, in the purcha.se of the land, and did II,ot entitle the city to a lien thereon'for such sum. , I. B u r B . ' " 'rhe rules relauu. to constructive notice, applicable to, thfa.eue, stated.
DONATION BY CITY TO MANUFACTURING COMPANY-FRAUD-CONSTRUCTIVJI NOTICE TO COMPANY.
October 15, 1894.)
Appeal from the Circuit Conn of the United States for the District of Colorado. This was a bill by the City Of Trinidad, dolo., against the Milwau· kee & Trinidad Smeltifig & Refining Company, to 'establish and en· force a lien on land donated to defendant, and paid for by an city. From a of the. circuit appropriation of the fup-ds court dismissing the bill, cdmplainant appeals. . Affirmed. .:Everett Bell, for Edward L. Johnson, for appellee. Before CALDWEL4SANBORN, and THAYE.R,dircuit Judges. ,
.. Qircult . This is a suit hequity brought by the appellant, the city of Trinidild, against the appellee, the Milwaukee & Trinidad Smelting & Refining Company. (hereinafter called the "smelting company"), a corporation chartered under the laws of the state of WisconsiJlJ.:to establish and enforce a lien for $17,500 on the land upon which the smelting company has erected its smelting works. The theory of the bill is that the city council of Trinidad fraudulently used that sum of )Iloney to purchase the land for the use of tA'esmelting companY,and that the smelting company took title with notice, either actual or constructive, of this fact. There is no contention over the fact that the land was originally purchased with money raised by the sale of city warrants issued for that purpose; but the sweIting company denies that it had notice, actual or constructive, of the fact, and pleads that it is a bona fide purchaser for value, without notice; and the material and contested issue in the case arises on this plea. '. In June, 1889, Johne.Hoffman and other stockholders of the Oopper King Mining, Smelting & Refining Oompany of New Mexico, a corporation of Wisc<;msin, which afterwards changed its name, and became the Milwaukee & Trinidad Smelting & Refining Company, the appellee in this case, left Milwaukee, for the mining regions of the Southwest, with a ·view of locating and erecting smelting and refining works at someplace in that region. .They expected. to go to New Mex.ico, but at Denver they met Mr. Floyd, who induced them to visit Trinidad, with a view of locating their works there. Mr. Floyd preceded them to that place, and, immediately upon their arrival at Trinidad, several. of the property owners and business men of the place met them,and expressed an earnest desire to have them locate the proposed smelting works in that t9wn, and, to bring their readiness to raise them about this desirable result, a reasonable donation 01' bonus. After tbe citizens had shown differ· .ent sitesJm:'a smelter,:tlJ,e repreElentatives of the smelting company smelter was afterwards and informe<l' theclbzensof the clty,)Vhowere anxious to know what would thew.id: 'l.>Wld .tbe '$1Il,elter in Trin14ad, that if .the citizens would procure for them the site they selected, free of cost, they would. Elrect "ai .&melter thereon. ",The proposition was eagerly accepted by the citizens, and a public meeting of the citizens WlliJ
held, at which a committee was appointed to raise the funds, and do whatever was necessary to procure the title to the site selected. Shortly thereafter, the committee purchased several parcels of land the site, and had them conveyed to "E. D. Wight, trustee;" and on the 28th of August, 1889, Wight, trustee, conveyed the same, by warranty deed, to John C. Hoffman, a representative of the smelting company; and on the same day, asa part of the same transaction, Hoffman entered into a contract with Wight, who was trustee for, and acting on behalf of, the citizens, whereby Hoffman, on behalf of the smelting company, in consideration of the execution of the deed by Wight to him for the site of the smelter, agreed to erect thereon a smelting plant of the capacity and dimensions de· scribed in the contract. Very soon thereafter the smelting company began the erection of a smelter on the land, which was completed within the time provided by the contract, and complied in all reo spects with the requirements of the contract. How fully the smelt· ing company complied with its obligations to the citizens is shown by the following communication from the committee representing the citizens to their trustee, Mr. Wight:
"Edward D. Wight, Esq., Trinidad, Colo.: The undersigned, acting as a -committee in'.behalf of the citizens of Trinidad, pursuant to the conditions under which certain real estate lying contiguous to said city was donated 41 the Copper King Smelting and Refining Company for the purpose of the construction and operation of a smelting plant by said company, have visited and inspected the buildings, machinery, and other appliances erected by said -company on the land referred to, for the purpose of determining whether the company has complied with the terms of the agreement under which the property was' donated by the citizens of Trinidad. We take pleasure in stating that the company, under the direction and superintendence of Mr. 'Thormeier, its general agent and financial manager, has complied in every particular with the conditions named in the agreement He has done more than merely comply with the agreement, and has expended a sum of money very considerably in excess of the amount required to be expended by the company before it should receive a clear title to the pl'operty donated. The -company has not only already expended a sum considerably in excess of $50,000, but has under way additional structures and appliances, which it is intended to complete at an early day, that will require the expenditure of a still further sum of money. We have been much gratified at the absolute good faith manifested by the company, through its legal representative, Mr. Thormeier, and the correct business principles upon which this enterprise has been condu.cted from its inception; and we feel justified in the prediction that this plant, when in operation, will materially add to the prosperity Qf the community. As such committee, we advise that you execute to the company such release as may be necessary to vest in it a clear title to the property donated. Caldwell Yeaman, "John Conkie, "M. Beshoar. ·'E. B. Sopris. "a E. Mulnix, "Committee. "Trinidad, June 11, 1890."
The, total cost, of the sm.elting plant erected on the land was about $80,000. When the site was selected, it comprised several tracts owned by different persons, all of whom conveyed to Wight, trustee;, representing the people of Trinidad. The total cost of the land was about $17,000.
appears; that the 'land was procured' ia,'fbisway:; on'the 11th day of';0"1I1Y,lS89; some of the citizens of thentit, of Trinidad presented rothe Mty petition forr am. a:ppropriation of $17,500' purpose of straightening the Las Alnt1Jaas river, which runs'thOOughthe city. :Ther(iupon, the city counbil,il!JYl :resolution,authorized the mayor toappl)i'J'lt a committee, to .be: composed of ,threemembe-rs from thedity' .council and five citizens of the City; with power fu contract for the straightening of the' 'r1tVefithrougltlthe city, and to expend $17,500 fer that purpose. The mayorappoimrt:ad, the committee. . On the 7Ith'of August, 1889, '. at am(3etingof the city coUlJicil, the committee .reported that they' had contracted with. pel'so'hs,. whoseniUtle13were given, for straightening 1:he;river througbthecity; that the :COntract price for the.:w(trk"was$l")l5'OO; and thaiU tbe oontractorll had performed the irerel entitled to bepaid'that sum. Thereupon, the city council,aUowed the 'contractors$l7,500, for whiclicity warrants anddeli1i"ered to the committee previously appOinted by the mayor to contraC'!:for straightening the river, ;whd immediately sold them, and witb: t1ie :money demvedfrom the sale Jvaf.!'antli,the land selected.as a site for ,the. smelter was of purel1ased and, paldfor, 'and. d'eedsthel'efor executed :by-the .,No contract was 'into tm:' 'the ,river, and was not straight· . ened. .,It,.waswell wderstood by t)lemayor and city council and the appeinted' by the, mayor that the $11;500 'was not to be tlJ:e ri'yer, put tqr bie in mg fo.r WhatwRSsaId an4,«l9,ue about straIght· ening Wat.ll. llleredevice to make itappeav upon the record that thewarrantll4 iSsUed fora. laWfUl purpose. '. The authorj.Zedreprese:p,ta.tivesdf c0!lipl}Il,ywere not parties to,. and,J:!;adlio know'lMge pf, this, n-a,uQulentsGpg;me. From inceptiop:otthebua.mo2s to its .close,they deaU',exclusively with the citizens and 'the citizens' committee,'. They 'had no' communication or &¢oity, or the coi:Q.tnittee of citizens and oouncilmep,app<)iPite(l by the mayor. It is apparent iJIat the members pf the city cOUJloil, and the acting in concert with them, . who conceived and carried out thisn:u)nstrousfra.ud 'the city, . not the kn0"\Vlellge' of their action was fJ,'o;m 1;he representativesofthe smelting company. PubhClty would have defeated the scheme.,Thewarrantscould not have been sold, and it is highly company would have declined to accept the probable land if ithAAkn.()wpit was acquired by any such fraudulent devices. We that, at no time before the smelting company erected its plant on the land, were any of its officers or ,agefitsadvised that the .10 tlIe rllised, shtted. In its smelte;r sIte therefor. .There in'Tl'1liillan, tlJ.edtlZl:!nS agreed to aonate wa$nothing' the part of. the sweltihg complUiy:;' 'The' donlltiOn"of a site tojpduce the location ,
CITY OF TRINIDAD V. MILWAUKEE & TRINIDAD SMELTIXG & R.
of a large manufacturing plant like this, by the property owners and business men of a new and growing town, was not a suspicious circumstance, or one which would impose on the donee the obligation to inquire the donors got the money to purchase the land. Donations of this character are of common occurrence. The smelting. company believed, and bad reason to believe, that the citizens with whom it dealt had acquired the title to the land which had been conveyed to Mr. Wight, their trustee, in a legitimate mode. Certainly, the smelting company, in the absence of express information on the subject, could never have conceived or suspected that the city council would have given its sanction to any such extraordinary scheme as that by which the city was made to pay for the site. Such action by a city council is believed to be unprecedented, and, before this precedent, would have been regarded as incredible. But it is earnestly contended that, if the officers and agents of the smelting company did not have actual notice that the city's money wasused to purchase the land, they are chargeable with constructive notice of that fact. This contention is rested on the word "trustee," following the name of Wight, in the deeds made to him by the different persons who conveyed to him the several parcels of land comprising the site, and also in the deed made by him to Hoffman for the land on the 28th of August, 1889, and the agreement between the same parties of that date, heretofore mentioned, showing the conditions upon which the deed was rriade. It is said in the brief of the learned counsel for the appellant that "unless the word 'trustee,' after the name of Wight, may be regarded as mere descriptio personae, and rejected as a nullity, there was a plain and actual notice of a trust of some description." The trust was not declared in the deeds, but in the light of the agreement between Wight and Hoffman, of the 28th of August, 1889, which expressed the understanding previously agreed upon between Hoffman and the citizens' committee, there could be no doubt as to what it was. Wight had no connection with the city. He was acting for and on behalf of the citizens' committee. That committee agreed with Hoffman to purchase and pay for the land, and cause it to be conveyed to the smelting compan.y. Through the agency of this committee, it was conveyed by the former owners to Wight upon the trust that he would hold the title for the committee, and convey the same to the smelting company upon its agreeing to erect its smelting plant thereon. Wight was not a trustee for the former owners. They received their purchase money, and made absolute and unconditional conveyances. All the circumstances, within the knowledge of the smelting company, were calculated to satisfy anyone that the trust relation occupied by Wight was none other than that we have indicated. The company expended $80,000 on the land without a suspicion of the existence of the facts upon which the alleged trust set up in the bill is predicated. 'When it is sought to bind a party by constructive notice, "there must appear to be, in the nature of the case, such a connection between the facts discovered and the further facts to be discovered that the former mav be said to furnish a clue-a reasonable and natural clue -to the latter." Birdsall v. Russell, 29 N. Y. 220, 250. In this case
connection between what!the smelting knew, or had reaflon to suspect, and the claim ndwset:'lip,bythe city. The rules'l1pon constructive notice in this class of cases are well settled. In Jones v.Smith;l Hare, 43, the vice chancellor states the rule thus:
"If there Is no .fraudulent turning away from a knowledge of the facts which the l'0S' gestae would suggest to a prudent mind; if mere want o·f cl\ution, as distinguished from fraudulent and willful. blindness, Is all that can be imputed to the the doctrine of constructive notiCe will not apply; then the purchaser wlll, in equity, be consIdered, as In fact he Is. a bona fide pul"chl1Ser without notice."
In: Ware v. Lord Egmont, 4 De Gex, M. & G. 473, the lord chancellor said ., . . '
"Where a person has actual notice of any matter of fact, there can be no danger of doing InjUstice If he is held to be bound by all the consequences of that which he 'knoW's to exist. But where he has not actual notice he ought not to be treated as if he had notice, unless the circumstances are such, as to enable. the court to say, not only that he might but also that he ought to have acquired, the notice with which It Is sought to affect, him; that he would have acquired it, but fM his gross negligence In the conduct of the business in question. The question, when it is sought to affect a purchaser with constructive notice, is not, whether he had the means of obtaining, and might, by prudent caution, have obtained, the knowledge in question, but whether the not obtaining it was an: act of gross' or negligence."
This statement of the rule is approved by the supreme court in Wilson v. Wall, 6 Wall. 83, where that court says: ,"'oA. chancellor will not be . astute to charge a constructive trnst upon :Upon the facts, as we find them! the appellee is not chargeable with actual or. conliltructive notice of the claim set up by the city; and the decree of the circuit court, dismissing the bill for want of equity, is affirmed.
FOWLER et aI. v. JARVIS-CONKLIN MORTG. CO. (CircultCourt, S. D.New York. September 22, 1894.)
one who has acted honestly, and paid a full and fair. consideration without "
"It is nQ ground of rem()vaI of receivers of a mortgage company that they are as selling Ments of trustees of mOrtgages executed by the company to secure its d.ebEfntures;the power to sell the mortgages resting with the trustees, and not being' eOntrolled by the court or receivers as SUCh. '
is not ground for ,removal that, a 1-'ece1vea,o of a corporation. has be. ,come ,8. member of a re.organization but where a conflict, over the plan of reorganization Is foreshadowed the receiver w1ll be required to resign from membership of the committee.: , 'rhe mere whose business was complicated, IntrICate, and widely extended. with millions of dollars invested upon small mortgages through several states,. were imprudent in Investing its money, is Dosufflcient ground for selecting as receivers strangers entirely unfamUlar ,with the assets, or the machinery , for their collection.
OF '. OFFICERS· OlJ! ,CORPORATION.