CEN'fRAL TRUST CO. OF NEW YORK 11. MARIETTA.& N. G. RY. CO.
851
AppeaHroln the Circuit Court of the United States for the Northern District of Georgia. ' Bill in equity by the Central Trust Company of New York against the Marietta & North Georgia Ruilway Company, to foreclose a mortgage made by the railroad company. 'fhe Hiawassee Company intervened, clairning title to certain rolling stock in the possession of the receiver appointed in the suit. Decree for intervener. Plaintiff appeals. Reversed. Act Congo March 3, 1891, c. 517, § G, provides that the circuit courts of appeals established by the ad shall exercise appellate jurisdiction to re,":iew any "final decision" in the district court and circuit courts, in all cases except as otherwise provided. STATEMENT BY PARDEE, J.
On the 17th March, 1891, the Hiawassee Company filed a petition, as an intervpntion, in the suit of Central Trust Company of New York v. Marietta & North Georgia Railway Company, for the foreclosure of pending in the circuit court of the United States for the northern'district of Georgia, wherein a receiver had been appointed and put in possession of the railway property. Intervener claimed certain railway equipment, then in l'ossession of J. B. Glover, receiver of the Marietta & North Georgia Railway, as follows: One Brooks locomotive, 5, railroad No. IS; four Baldwin locomotives, Nos.H, 12.14. Rnd 15: two combination mail, baggage, and express cars, Nos. 11 and 12; 'two first-das!:! passenger-carl:l, Nos. 13 and 14. 'fhis petition was demurred to by Central Trust Company of New York, and thereupon was amended on 28th March. 1891, making the claim as follows: "'l'.he propprty descrilled and claimed by it Was purchased by the North Georgia Improvement Company from original owners. It WM placed !Spou the line Or the M. &, N. G. H. H. Company by the North Georgia. Improvenlent 'COlilpany, through the instrumentality of Geo. R. Eager. who was largely interested in both companies, but without any contract of purchase or lease lIy M. & N. G. R. H. Company, and has been paid on the railroau company. nor has it any claim of any kind 011 said propsame by erty. 'fhe rilCht of Ilossession to all of said property is in the H.awassee Company,'and thetitla to all of said property has vested in it. except the title to engines Nos. 14 and 15. 'fhese engines were bouKht from Burnham. Parry, Williams &, Co·. ' All of tIlt' purch'lst"rnoney has been paid on the same except six notes dated May 30, '89, for $lHS.OO each. due', rellpectively. 1'7.20, 21.22. 2::l..alid24 'months fl'om date. Upon the lJa)'ml'nt of these the tilletusaid engines also will vest in the Hiawassee Company." noted that the intervener, in its amended petition, alleges the title to two of the locomotives. Nos. 14 and 15. is in Burnham, Parry,:Williams & Co. ' The intervention, without being put in issue, having 'been referred to a special master in chancery, the testimony of R.,Eagerand J. B. GIQver, receh'er, was taken. This testimony, exhibits introduced by intervener, shows substantially tbe followillgfllCts: That R,. Eager was the contractor to bt;lild the thatl;le and a
852
FEDERAL RE'PORTER,
vol. 48.
large stockholder in a company organized under the laws or New Hampshire, known as the North Georgia Improvement Company,with its headquarters in Boston, Mass.; that said Eager,as contractor, was to receive stock and bonds of the Marietta & North Georgia Railway for its construction; that said Eager procured the North Georgia ment Company to purchase and pay for the whole equipment .'hereinbefore stated, except the sum of $4,908, the balance due Burnham, Parry, Williams & Co., of Philadelphia, for engines Nos. 14 and 15, which amount was' evidenced by six notes outstanding, not produced at the hearing of the cause, presumably in the hands of the payees; and that the Hiawassee Company was organized under the laws of MaiM, and was, among other things, authorized to invest in stocks, bonds, and real estate; that the said equipment was purchased from various original vendors, was marked In name of said Marietta & North Georgia Railway Company, and put in the possession,., custody, an,d control of said,cQmpanY"the Marietta& North Georgia Railway Company, by said Eager,oontractor and president, as aforesaid;. ,that by the executed,by Burnham, Parry, Williams. & Co. and t,heNortb, Improvement Com pany, the title was reserved until full and the locomotives are stated to pe loaned to the lessees"to "upop their railroad," etc.; that by writing execuood between Jackson&Shlj1tp,Corppany and North Georgia Improvement Company,.itis stlJ:ted thatthl'l cars are to be used On the M!1rietta & North Georgia"Railwaypompany; that for the engine pought fr.om S. W. Groome ,tlJere, ,was no w,ritten agreement; that the Marietta &; North Georgia Railway had been in, possession of locomotive engines 14 and 15 since about May, upon which was still due the sum of $4,908 to Burnham, Parry, & Co., .represented,by six notes still held anQ, owned by them; that the raihyay company had been in possession of the two first-class 14 and 15, one combination mail, baggage, and express Gar, n,umbered 11, and one combination mail, baggage, and express car"numbered 12, April'l.7, 1889, and that said company had been in possession of JocomotivEl!3ngines Nos. 11 and 12'since about 20th day of December, . , 1888. George R. Eager testifi,ed, as is shown on pages 17, anli 18 of the transcript of the recoro, as follows: ' "Question. What was ,your'plan, Mr. Eager, in regard to thepurchaseof this rolling stock? 'DidyOll control a majority of toe 'stock of the M. & N. Gi Ry.? An$wer. Yes; I and my friends controlled three-fourths of it. Q. What was your/plan withl'egard to this rolling stock.......in. ·regard to the fut,ure? A. OUf plan was, when we got the road fully completed, it would improve our mines, and we bought as much rolling'stock as we should'warit for the immediate present; that we would: endeavor to arrange equipment. and issue equiplllentbonds for sufficient amount to cover'all the rolling, stock, and to secure all the rolHngstock we thought it WOUld. be necessary'to .have. Q. Up to time no contract between theM, &. N. G. Ry. and the orth Georgia Imprevement Company w3s,m'ade? A. No; sir; Done whatever. ,Q. ther,e aqy agreement, VE'l'bl\1 oi'ot/lel'wise, between the'impro'vement tb,e railway company: as to the improvement company furnish. ·l.\o, sir I' noagre.ementin,'any shape. 'ing stock t6'ttle: railway company
CENTRAL TRUST CO. OF NEW YOR}!;: 11. MARIETTA
N. G. RY. 00.
853
The rolling stqck.was,sent down there with the idea that the railway company very soon would be done, and would make a car trust.-get somebody to let them have money, and make a car trust." It further appeared from the exhibits introduced-First, that Burnham, Parry. Williams & 00., of Philadelphia. had contracted with the North Georgia Improvement Company concerning the two locomotives, 14 arid 15, whereby the title was reserved until they were paid for; but this contract, althoug}:l dated 13th May, 1889,was not proved until the 19th January, 1891, and was never recorded at all; second, that on the 27th day of January, 1891, more than a week after the Marietta & North Georgia Railway was placed in the hands of the receiver, the North Georgia Improvement Company executed a paper purporting to be an absolute sale to the Ilillwassee Company of all the railway equipment hereinbefore set forth . ·On this testimony the special master found in favor of the interveners. "as iollows:, , . "I do therefore respectfully report that the inter¥ener, the Hiawassee Companr.nasl\yalid daim and title to all of said property. except to and 15 Bald win locomotives, and upon payment of balance d,ue oli said two locomotive!! will have a valid title to them; and that the present' value ·o£all saidrolliug stock, including interest at six per cent., calculated up to April 7.1891" is .$64,653.03·. I further report that said rolling stock is abso-· lmely necessary;to the operation of the said Marietta & North Georgia Railway, and, that itis advisable that the receiver be to purchase all of .' ;said rolling stock at the sum of $64.653.03; that the said outstanding I}.otes for n><!dwin 10cotnotivesNos. l4and be paid Ollt of this amount." . To this rE)port exceptions were duly filed, which, on hearing. the court ·ordered"(1) That the cai:1e be resubmitted;to the master, to take evidence and report upon the;ql1estion of the value of the, eqnipment mentioned in said intervention on the 19th of January, 1891, whenthe receiver was appointed. (2) To take evidence and report upon the relations existing between the Marietta and North Georgia Railway Company and the North Georgia Improvement Com-. pany, by. contract or otherwise, and. the relations existing hetween said two ,companies and George H. Eager, and the relations existiug between ,said two and ,said Eager and the Hiawassee Company, so far 3ll they throw or ll;ffect this case." . light , After, the first hearing before master; and prior to a sel.'ond hear- . lng, the CeI;ltral,TrustCompany filed in the court certain answers, setting up defense substantially as follows: (1) A general d;enial of the statements made in the original and amended intervention. , (2) Averment as to the ,appointment of receiver on 19th January. 1891, and that Burnharp, Parry, Williams & Co. were still due the sum of $4,908, bal.ance upon two locomotives, Nos. 14 and 15. and that the North Georgia Improvement Company had paid in full to parties from whom it was purchased, for all the other equipment mentioned in said petitions. upon such payment full right and title to saidequipIPent vested iIJ,said & North Georgia Railway Oompllny, without any lien .or.re:ser.yat,jon of title on the part:of the North Georgia if any SUIQ. for sllchequipmenh
854
UIlERAL REPORTER,
for by sai'd North GeorgiaImprovement Company, 'it was only an open account debt, and that said, equipment was purchased by said North Georgia Irpprovement Company, and placec1 in the possession !:Lnd control of said Marietta & North Georgia Railway Company for its special use and benefit, and becam'e and was subject to the lien of the mortg;age now being foreclosed. . (3) Setting forth that the North Georgia Improvement Company on the 27th of January, 189], undertook to sell and to convey to the Hiawassee Company said equipment, and controverting the right of said improvement company to make such sale as to the two 14 arid 15, because the title was in Burnham, Parry, Williams'&: Co. !;lsto them, and as to the other equipment, because, it having been fully paid for by the North Georgia Improvement Company, the tide was in the Marietta & North Georgia Rail way Company. (4) That when the Hiawassee Company, on the 27,th of January, 1891, accepted from the North Georgia Improvement Company the writing undertaking to convey the title to said equipment, said Hiawassee Company knew,· or 'was bound to.know, all that the North Georgia Improvement or its offic'ers, knew in relation to said equipment. (5) That GeorgE! R.'Eager negotiated for all of said equipment, and at the time was pl'esident of. the North Georgia Improvement Company, and was a very large stockholder and controlling spirit therein, and had absolute control of said company in every way; and that tbe deed of trust securir.g the bonds'ofsaid tllihvay, delivere{i to said Eager, as contractor, recited that, th¢:ywere for purpose of. improving, completing, und equipping saidraHwllY. (6) That, the information and knowledge of ;as tatbe purchase of' said equipment, was legal and actual notice to the North Georgia Improvement Company. (7) That the title to the two locomotiVes, 14 and 15, was in Burnham, Parry, WilliBlllS & Cq,', etc, ,That the title, to the of said equipment, paid rorbythe .North Georgia Improvement Company, was in.the Marietta &, NOTthGeorgia RailwayOompany, etc. And, further, that the Hiawassee Corllpany.is composed of stockholders who holdclainlsand debts due to them by the North Georgia Improvement Comylfl.ny, and occuf:\y'iiltimate and confidential relations with said company, and as such they were put upon notice and bOund to know the North Georgia Improvement the relations existing between Company, ll.tldth'e Marietta &; North Georgia Rll.ilwayCompany. (9) Caning attention to the provisions in the deed of trust now being foreclosed, as to how the bonds shottldbe issued, and that the railway should be eonstrueted ancl equipped out of the proceeds of said bonds, etc.' (10) That the North Georgia Improvement Company or Eager caused saideqniplnent to be delivered to the Marietta. & North Georgia Railway, asEager,as contractor, \VRsin duty bound to do, and without any reservatibn and title thereto,Rtld thereupon Eager procured the Marietta & North Gt:orgia: Railway COmpany t6 execute, in accordance with the m61'tgagenow befng fotE!elosed, certificate, or certificates, that tb'e railway had bpen eompletedandequipped, to the pxtent to authorize thp. issuing of said' bonds, which t)ertificate Eager caused to be deliv-
CENTRAL TRUST CO. OF NEW YORK V.MA.RIETTA & N. G. RY.
co.
855
ered toCentral Trust Company of New York,and thereupon procured the issue by, said Central Trust Qompany to Eager, as contractor, of the bonds of said Marietta & North Georgia Railway Company. Upon the resubmission, the only witness examine,d in this intervention was J. B. Glover, the receiver, whose testimony shows substantially as follows: That all the railway equipment set forth in the Hiawassee intervention was placed upon the road by George R. Eager, and marked with the name ofthe Marietta & North Georgia Railway Company, and went into theeustody, control, and use of said railwa)',the same beihg Glover, who was then said railway; That at that time Eager was the contractor, part of the Marietta & North -Georgi"" Rail WilY, and broadening the gauge of other parts. Eagerwas the chiefstockholder in said railway, was the president andgeneral controller of the North Georgia Improvement Company, and his sister, H.A. Eager, was treas\lrer, with at BostOD, Mass. 'rhatJn addition to the duties of superintendent of railway, said Glover was the agent of Eager, receiving a salary oU75 a month. That, the line ofrailway" wRsconstructed, the North Georgia Improvement COIOpany paid lOany of .the bills due for such construction. That the North Company would frequen:t1Y furnish to Glover, as agent oiEager, money with which to pay claims. due laborers under Eager, as. contractor, E,lnd also freight on rolling· !rl;ock coming to the North Georgia Improvement Company or to Eage!-" and which Eager caused to be the. Marietta & North Georgia. Railway. That whenever the Marietta. & North. Georgia Railway woulc;ipay claima agaJ.?st or agjl.inst Improvement Company, Gloverv&s agent for Eager, ,would, then send the bU\s to H. A. Eagllr, the Georgia Improvement Company ,at Boston. That if tl)ere was ,any charge for freight upon locomotive or. passenger equipment consigned to or l"ecei;ved by the Marietta &. No.rth. Georgia Railway, a chfU'ge would be mac;ie up Eager, and sent to B.A. Eager,. treasurer of the . North; Georgia. Improvement Company, and that drafts would be <,'lntwn on H.A. Eager,as such.treasurer, to these i accounts, allP·. the. vouchers. would_b,e sent to her. That .thereWerll three ways;that Glover, as agent for Eitger, oqtained qloney fOl"claiIpS due laborers for construction or for f'rejght upon the railway equipment. furnished. tn.e Marietta &; ,North Georgia Railway: (1) . By <:lrawing,op H. A. Eager, treasurerj(2}by checks .drawn by George;&. EageruPQn some.bank in Boston or New York; ,(3) by drafts drawn by Geqrge, R. Eager on H .. A. Eager, treasurer,-that is,whatever was paid of the funds of the.Marietta & North Georgia Railway Company»y Glover, as sup(printendent, for debts. due by George R. Eager, as con,. .tractor,Ql" fo.r.debts due by GeorgeR. Eager or the North Georgia lmCompany for freight on raUWUY, equipment sent to the Ml¢,. etta & Nqr,th Georgia Railway, Wai! reimbursed in one of the threew:ays above mentioned. That George R. Eager was contractor, Jl!lt only to build -widen the gauge. of. the Gl;Wrgia RailwlJ.Y in .tPe .apd, No.rth buthe'was .at the ti;me
856
,'.i"
FEDERAL REPORTER,
contractor to build the Knoxville Southern Railroad, then being constructed in the state of. Tennessee, and which was afterwards consolidated with the Marietta & North Georgia Railway, under that name. There wall alSo introduced on said second hearing documentary evidence, to-wJt: "This is to certify that the Marietta & North Georgia Railway has been completed' - - - miles, and is now ready for 0pllration - - miles of the flame between--- and - - , and that there has been delivered and in good, working order upon said railway an amount of rolling stock and eqUipment bearing the same prQportion to the whole rolling stock and equipment for the' proper and efficient Working of the railway as the number of mileS completed at the date of this certificate bears to the total mileage of said railway, and that the stations included in the sections herein certified have been fully and completely equipped wUhall usual and necessary appliances, and furniture." An agreement was made on 25th August, 1888, between Hambro &. Son, <if England j Marietta & North Georgia Railway Com pany, George R: Eager, conttlictor, and Knoxville, Cumberland Gap & Louisville Railway Complt lly,·whereby the said Hambro & Son were, among other things, to;plil.ce $1,000,000 of the consolidated mortgage bonds of the Marietta. & North' Georgia Railway Company, now being' foreclosed in the main terms, conditions, promises, and agreements set forth in Sliid,contract. This agreement was signed by, George R. Eager, as 'general 'ltmnager fot the Marietta & North Georgia Railway arid by,George R. Eager, contractor,ahd by George R. Eager lis general manager of the Knoxville, Cumberland Gap & Lottisville Railroad, and for the C1:lmberland Gap Construction' Company. Further, there was an indorsement- upon this contract by which George R. Eager signed his. naIile,and also signed as' attorney in fact for Royal M. Pulsifer, and guarantied that the contract between iInmbro & Son and others should be carriad into effect, and the completion of the Marietta & North Geor'giaRliilway,assured, by Eager and Pulsifer, at their own cost and expense, if the pr'ooeOO.sof the sale of the mortgage bonds were not sufficient ful' 'the purpose. ' This contract recites "that it has been agreed, forthe purposes of this agreement, completed sections shall consist of not less than fivetiiilesj with the corresponding proportion of rolling stock and equipment;" arid therein it is agreed by the Marietta & North way Company that no certificate of completion shall be given until thereshall be :delivered and in good working order an alnount of rolling stock, etc; This contract and agreement also had attached to it authority from the Marietta & North Georgia Railway Company, giving George R. Eager the power to enter into such agreement with Hambro & Son; and it appears that thereafter the form of the certificate was changetl so as show completed sections fully equipped with rolling stock. Also threeseparate contracts and agreementS: (1) Contract made between the Marietta & North Georgia Railway Company by .Toseph Kinsey, its presi'deht, and George R. Eager, whereby Eager was employed as contractol' to do certain work on that railroad, and the company w:as to furnishcer, lain cen'vi,ctsandmake certain payments to Eager. This contemplated
own
CENTRAL TRUST CO. OF NEW YORK 11. MARIETTA & N. G. RY. CO.
857
only a narrow-gauge road. (2) Agreement between Eager and the Marietta & North Georgia Railway Company, made on the 4th of August, 1881, whereby Eager was employed as contractor to build certain line of railroad for said company. (3) Another contract between George ;It. Eager and the Marietta & North Georgia Railway Company, whereby Eager was to broaden the gauge of the said line of railway i was to put downsteel rails not lighter than 56 pounds to the yard, and was to do oth(jr things therein set forth, upon the consideration of receiving certain bonds and stock and $3,000 a mile in cash. In said contract the following language is u s e d : ' "The party of the first part agrees. [that is, George R. Eager,] whenever requested to do so by the party of the second part. to survey and layout its road or roads as hereinbefore agreed to be constructed and equipped. and to acquire by purchase, condemnation. or otherwise. such rights of way." etc. There was also used at the hearing of the intervention of the Hiawassee Company. under the agreement of counsel, the testimony of C. R. Walton, chief engineer of the Marietta & North Georgia Railway Com,;, pany, which testimony is substantially as follows: That he was chief engineer of the Marietta & North Georgia Railway Company,and the officer ofthat road who sent on the certificates, as the road was cornpleted, the Central Trust Company of New York. That there were 20 of these certificates which were forwarded to Royal M. Pulsifer, president of the railway company, Walton, as chief engineer, having made one copy of such certificates, and forwarded to Pulsifer, and another copy handed to Hammett, l"ecretary of the company at Marietta. That the said certificate was as follows: ' "This is to certify that the Marietta & North Georgia Railway'Coinpany bave completed and in operation one hundred and eleven fifty-two one-hun. dredths miles of railro,ad'between Marietta. Ga., and Murphy. Carolina.
to
p.
,This was addressed to the Central Tru'3tCompany of New York. The first was, in substance, like the second, except in mileage; being for 99 . The first ceJ;'tificate was d,ated June 17, 1887, and the second May 19, 1888., Thatthe certifica.tes, after the first two sent by him, as i.:hief engineer, to the Central Trust Company of New York, contained the following language: .. And there has been delivered and in good working order upon said raUwayan amount of rolling stock and equipment requisite for the proper and working of the railway. as the number of miles completed at the date -(If thiscertiflcate bears to the total mileage of said railway." -And that this form of certificate was used in order to get bonds on that portion of the road lying between Blue Ridge and Knoxville, Tenn., as well as on the other parts of the line. That the form of certificate ,was adopted unanimously by the board of directors on the 8th of April, 1889, as the form to be signed by him as chief engineer. and that such form, so adopted by the board of directors, he continued to send to Cen,tral Trust Company, and upon which the bonds were obtained. It was, conceded a.t, the. hearing bef9rethe coun . . . that pr . "',
858
FEDERAl, REPORTER,
deed of tJ;'ustgiven by the Marietta & North Georgia Railway Company to Central Trust Company of New York, under which bonds were issned upon certificates of completion and equipment, contained the following: "And whereas, the said party of the first part is desirous of borrowing money for the purpose of paying off and discharging all of said mortgage indebtednesBof said Marietta & North Georgia Rail way Company, and for the further purpose of constructing, imprOVing, extending, completing, and equipping it$ railway, and proposes, in conformity with the laws of said "tates. to issue its bonds therefor, and to secure the payment of the same by the mortgage of its rail way, equipment. and franchise, and all of its other property. whether now in possession or hereafter acquired." -And that the said mortgage or deed of trust covered. all after-acquired property appurtenant to the railroad and its branches· .It further appeared in evidence thatnbout the times the certificates of completed sections, with rolling-stock equipment, ",.ere made, other (besides the (mas ip questi()t;J., here) conditional purchases of rolling stock Com pany, were negotiated .1)y. Eager and the North Georgia resulting in 1'0U,ing stock being placed upon the Marietta &.North Georgia Railway, to justify the certificates, and that of all the rolling stock found on the Marietta & NorthGeorgia Railway, 231 mileslong, at the time the receiver was appointed, outside parties claimed the ownership, except of two IOQ9rnotives. By agreement, a report of a meeting of North Georgia Railway for rebondholders o(tha organization purposes, held after the appointment of a receiver, was put in evidence, showing the adoption of a report of a·committee, of which George R. Eager was one, recommending the purchase of rolling stock in use on the xnilwaYi care to be taken that the ,railroad shall acquire a perfect title to theproperty,-amoul1t stated .at $291,933. The second report of the master was subEtantially as follows: ."(1) As to the value of said rolling stock on the 19th January, 1891, the ml\Ster fOllndthe total aggregate value olthe same to be $55,993.59, to which Ilhould be added interest at tberate of 7 per cent. per.annum from the 19th January. 1891.. . . _"(2) shpws tthat the North Georgia Improvement Company In 1888 und 1889 qought all of this rolling stock, and placed the same on the :Marietta & North Georgia Railway Company. The con'tract between the North Georgia Improvement Company and the original owners of said foiling lltock was in writing'; the contract in each case being a conditional sale. with tItle rl'served until fUlly paid ,for. These contracts Were all dUly executed, 'but none of them have ever been recorded. The North Georgia Improvement Company placed aU·of said rollmg stock ion said Marietta & North Georgia without lJ.ny contract or agreement, either oral or written, with said ·company. The evldl'nce shows that the North Georgia Improvement Company has fully paid 'for all of said rolling stock, except six notes. aggregating '84,908. payable to Burnham. Parry, Williams & Co. The proof shows that tbeNorth Georgia ImlJrovement Company. on the 27th day of J!lonuary, 1891, .duly transferred and assigned .a11 its right, title, and in,terest in and to said .rolling stock to the B.iawassee Company, the intervener in this case. The master is of the opinion that these contracts, reserving title between the original owners and the North Georgia Improvement Company, are goad except as to subsequent purchasers or creditol's without notice; and. when the
CENTRAL TRUST CO. OF'NEW YORK "'. MARIETTA &: N. G. BY. CO.
859
North Georgia Improvenient Company had fully paid for said rolling stock, it acqllireda valid title, which it could legally transfer. The master is of 0t>inion that, when said stock was placed on said Marietta & North Georgia Railway without any contract, the legal effect was to create a bailment, subject to the termination at option of either party, and thattht'refore this property was held by the & North Georgia Railway Company as bailee. CounseUor the Central Trust Company further contend that George R. Eager was under written contract to equip said railway with rolling stock; that said Eager was really the North Georgia Improvement Company: and that, when said company placed said rolling stock upon said railway, it did so in purimanceofS<lid Eager's contract to eqUip said railway, al)<\,therefore it becafQe the property of said railway, and became sl1uject to the mortgage execllteclr by said railway to securl' the payment of its bonds. The master does not tbinkthat this position is sustained by the evidence. In his opinion, a care-, ful tlxamiuation of the contract made between Eager and, the rail\\>ay com... pany, tbe original railroad company, the .certificates of C. R. Waitun. chief contract with Hambro & Son, of London, will show that George R.Eagt'r was not to eqUip the rood with rolling stock. In the opinion of the master, the intervenel', the Hiawassee Company, bas a valid Litle to all of said tolling stock, and has a good title to all of said property, except ,as to Nos. 14 and 15. Baldwin locomotives, upon which thel'e ,is still due the sUm of The evidence shows that this rolling stock is essential to the operation:ofthe railway by the receiver, and I therefore recommt'nd that he be au· thorized to purchase the same at its value on the 19th of January, 1l:l91, with 7 percent. per annum interest frOID said date; the $4,908 balance due to be included in the amount. As to the ability of the receiver to pay cash for this rolling stock. the master refers to his report filed on June 6th, in the inter· vention of 8amnel W. Groome. "(3)'fhe master finds that George R. Eager was and is the largest stockbolder in the Marietta & North Georgia Railway Company, and that be was the contractor to construct said rail way; that said George R. Eager was, untilncently. president of the North Georgia Improvement Company. 'fhe evidence further shows that the only relation eXisting between the Marietta & :North Georgia Railway Company and the North Georgia Improvement Company, by contract or otherwise, was In reference to this rolllDg stock, and, in opinion of the master. was that of bailor and bailee. Tha evidence does not show any connection between said two companies and George R. Eager and the Hiawassee except the by the said .North Georgia Improvement Company to the said Hiawassee Compal'y of all its right, title, and interest to the rolling stock covered by this intervention." Tbe Central Trust Company filed elaborate exceptions to the master's report, mainly on the line of the answer hereinbefore given in substance; the important ones being as follows: "Because it is shown by the evidence that there was nothing whatever dne by the North Georgia Improvement Company to the original vendOr for the aforl'said property, except $4,908, dne to Burnham,'Parry, Williams & Co. as a balance upon locomotives 14 and 15, and that there was no reservation of title or lien upon these locomotives by the original vendor, or anyone else,as against the ){arietta & NOlth Georgia Railway Company. but that all of said property has been paid for, except as above stated. and had been placed by George R. Eager, president of the North Georgia Improvement Company, upon the Marietta & North Georgia Railway Company, three·fourths of the stock of which he and his friends control. with the distinct understanding. at the time that said !'olling stock was placE'd upon said line of railway, and that the railway company wastbereafter to pay the said North Georgia
FEDER,AL
REPORTER, vol. 48.
fuent; COmpany for the sarna by issuing equipment bonds j but that the said was only on the, 'part of the said Eager, as president of said improvemeht company, and without any contract or agreement to the effect being agreed to on the part of the railway company, who took said rolling stock. and USed it as its own, unincumbered by any reservation of title or any contract other than the law implies to pay for the same. .. Because the special master 'did not tlndand report that George R. Eager, thecohtractor to build the Marietta & North Georgia Railway, was under obligationooadeqllately equip said railway with rolling stock; and fmther, special master did not find and report that the relations between said GeorgeR. Eager,tlontractor, and as president of the North Georgia Tmprovein:entCompany, and: as controlling more than three-fourths of the stock oUhe sAid'Marietta & North Georgia Rail'l\'ay Company, was such that any debt and demand due to the' Hiawassee Company by the Marietta & North qeorgia Rail}Vay Complmy grounded upon rolling stock furnished said railway'c.ompany, 1lhdpitfdforby said North Georgia Improvement Oompany, should not again be paid for to the Hiawassee Company; but thatsllch claim of the Hiliwassee Companywasvoidandin"alid against said railway company, because of the relations existing between that company, George R. Eager,the North Georgia Improvement Company, and the Marietta & North Georgia Railway Company." The court on hearing having overruled the exceptions and confirmed the 'master's report, and having further rendered final decision that the receiver should purchase the i'a.ilroad equipment mentioned in the interby giving notes due in six months from date, with interest at 7 per cent. per annum fro111 January 19, 1891. theCentl'al Trust Company appealed to,this court, assigning, substantially, as error the same points Il'lRde: in the answer and in the exceptions to the master's report. On the'hearing ibthiscourt counsel for appellee filed a motion to dis· miss the of prematurity, no final decision having tnajncase pending in the court below. , H. B. Tomp,k.i,'fJ,8,.for appellant. Huke Smilh, fOl'appellee. Circuit Judge, and LOCKE and BRUCE,;District Judges. . Before PARDEE,J.,(ajter stating the cMe.) The decision int4ecourt below the intervept,ion oLtpe.HiawasseeCf.?mpany was ,d,ecision upon from the. general subject in litig\ltio,n. , Central TrWJ.t Co. v. Grant Locomotive Works, 135 U. ,S. 207, 10 Sup.. Ct. Rep. 736. As a final qirectly within the jurisdiction given to the lfircuit courtaoflfppeal in the sixth slIction of the act, approved March 3, 1891, entitled "An act to establish circ'Q,it .courts of appeal," etc. While perhaps the court may , for its own protectiOlJ, hereafter be compelled to insist that causes pending in the circuit and district courts; shall not be brought to thiseourt foneview piecemeal, we are not inclined to enforce such a rule in thiscase,eyen if we have authority so to do. The motion to. dismiss, .the therefore, be overruled. 'fhemortgage gl.Yen byJhe Marietta,& North Georgia Railway pany, suit for foreclosure. of VII hich is now pending in the court below, covers fully all after.acquired. ,property appurtenant to the. railway, and it gJ}
will
CENTRAL TRUST CO. OF NEW YORK
v.
MARmTTA & N. G. RY. CO.
861
conteinplatedthat a fully constructed and equipped railroad should be provided with the proceeds of the bonds. Apparently, however, all the bonds, or the proceeds thereof, under contracts thereto made, were to go to the contractor, who was not in terms, and perhaps not by implication, bound to equip the road. The Hambro agreement more fully and ex" plicitlyprovided for an equipped railroad. Apparently the process of issuing the bonds upon certificates of a completed road-way ready for the passage of trains was not satisfactory, and the agreement expressly recites:' . . "It been agreed for the purposes of this agreement completed sections shall cOllsist of not leas than five miles, with a corresponding proportion of rolling stock and eqUipment." "-And then provides as follows: "Tbe'Marietta'& North Georgia Railway Company undertakes and agrees that on the date of this agreement every section of completed railway, the subject of,every sworn certificate. as aforesaid; shall for the pose ofthjs,a,greement comprise not less than five miles of railway; and no such sw;orn certificate shall be given unless and until there shall be deliv.. ered good working order upon the said railway an amount of rolling stock and equipment' bearing the same proportion to the whole rolling stock and equipment requisite for the proper and efficient working of the rail way as the number of miles completed at the date of such celtificate shall bear to the total mileage ofllaid railway." , It is tol;>e noticed hete that Eager acted for the companies in making the;conti'a¢,t, andwh,s a party himself thereto as the contractor.' The & North Georgia Railway Company had previously iJ;l the fullest manner authorized Eager to contract with Hambro & Son lor and sale of the boIlds,-price, terms, and commissions at Eager's ,therailway dorripany immediately ratified the' contract by ,l'irec'ting'nia't thereafter theJorm of certificate to the trust cornpaliy; upon which bonds were to issue, should be as provided therein, and from thltt :'date every cettificateupon which bonds were issued by Jihe trtistcompany to the contractor or his assigns, for constructing the road, contaihedthe statement"That 'there ,had been delivered. and in good workIng order, upon said tail.. wayan ainotintof rolling'stock and equipment bearing the same proportion tothe and equipment requisite for the proper and efficient working of the railway as the number of miles completed at the date of this bears to the total mileage of said railway." The Hali'lbro contract· that rolling stock and equipment should be deliverlld in good working order and in requisite quantity fOr the proper and efficient working of the railway evidently contemplated that' the rolling stock and equipment so delivered should be rolling stock itnd equipment belonging to the road by some title of owner'ship,so Jaa' to make the same a better security for the bonds than the railroad without rolling stock and equipment would be. Therefore, the agreElrbent'precluded a mere teIIJporary gratuitous loan of the rolling BWck roll tble'purposesof thecertincate.Eager was the contractor can;. structing,tlle,lailroad, 'and ,'w hile he had not in termS' bound himself.as
862
,,: <'.ll:,EDE:RAL Jl,EiJ,>ORTER,
vol. 4.8. ,:.
contractor railway (only the company so binding itself,) yet Eager, under the.terrml;l of the Hambro contract, could obtain no bonds fOl1dQnstruotio(l until the rolling stock l$hould: be delivered in 'good working order and in requisite quantity upon the road. The North Georgia ImprovernentQompany, a New Hampshire corporation, owning mining. interests along the lineQf the road,and to some extent a holder of the bonds ()f the raUway, of which c.ompany Eager was president and general manager, through Eager, bought the rolling stock in question, and delivered it upon the railroad and bad it marked in the name of the though .it was the property of ,said railway, and thesil.Ine went by consent of. all parties into the custody and control of said railway. The question for our determination is whether the transfer of the rolling made.as aforesaid, was a mere,temporary gratuitoQB,!oan or sale. As Eager negotiated the whole business for the improvement company. president of the irilprovementcompany and the apparent controller the railway'company, the question is reduced to this: Did 1ntelld a temporary gratuitous ioan or a sale? The elements of a 5l,l,1E10the thing, the price, delivery-are there j and the sale was complete,ifthere was the necessaryconsf'D.;t. As recited in the statement of faots. Eager testifies in relation to thisroatter: "Our plan was when we got the road fully completed it would improve our minps, and we bought as, much rolling.stock as we should want for the immediate pr!!lIent;thatwe would endeavor to arrange and issue e<;l.uij.Jment b()nlls for sufficient amount to cover all the rolling stock, and secure all the rolling stock we thought it would be necessary to have-" Again: . "'rlle,rolling stock sent down ,tl:lere with the idea, that the raUway company very soon would be done. and would make a car trust,-get 80me,body to let them have money, and make a cal' trust." This evidence shows that it was contemplated by Eager that the Marietta & North GeQrgia Railway Company Wl\8 to ,have and keep the rolling stock, and was to pay for it thereafter either by raising money on equipment bonds or through a car trust. The destination and the future use and control of the rolling stock was thul;l ,fixed in the Marietta & North Georgia Railway Company. and that by the consent of all the parties. When. in addition to this, it is considered that upon a delivery with apparent title in the' railway company of such rolling stook, the bonds of the railway company were tQ :be and were issued, of which was a beneficiary. in the light of honest can any other conclusion be reached than that Eager. acting for all parties. (himself included.) intended a sale of the rolling stock to the railway company, rather than a temporary gratuitous loan. which would have -operated a frat;tdupon the persons dealing in bonds on the faith of the Hambro agreement? . Counsel for appellee urges several points in this connection.-that, as under the Hambro agreement, the rolling stock ,was only to be delivered llpon the railroad, and was not required to be owned by the railway
of
CENTRAL TRUST CO.
NEW yOltK fl. MARIETTA" N. G. RY. 00.
863
company. and as Hambro & Son knew that Eager was not bound under his contract for construction to furnish equipment, and understood that the money from the bonds would not pay for equipment, therefore it was not contemplated that the milway company should be the owner of the rolling stock, but that it had the right to furnish equipment through a car trust. The answer to this seems plain, so far as rolling stock in issue in this intervention is concerned. The railway company did not create a car trust, but it took the property as apparent owner. It is further urged that, when 'thereceiver'wasappointed in the main suit, in his first report he declared this rolling stock to be owned by the persons now; claiming it, and that subsequently to such report the bondholders held a meeting, and elected a committee of five to represent them in connection with the management of the road; and that this committee reported ".:with regard to 15th item, rolling stock now in use, your recommend payment, with the remark that special care be taken that the railwayshall acquire'a perfect title to property," and that this .recommendation \Vas subsequently reported back to a meeting of the bondholders. who indorsed it. . Counsel states. although it does not appear in the evidence, that a representative of Hambro & Son constituted one of the committee, and that on the subsequent vote all of Hambro & Son's bonds were voted in favor of the resolution. It does appear that Eager was one of the committee. and one of the bondholders voting in the affirmative. There is nothing to show that the bondholders were fully advised of the actual state of the rolling stock, and the presumption naturally is raised that they acted in the light of Eager's statement and explanations. Besides this, it is be noticed that the recommendation of the bondholders is· for payment as though the contract of purchase had been completed. It is not tobe presumed from what the bondholders did do that there was any ifitention to subordinate the lien of the mortgage to any claim for equipment. The case, however, 8S we understand it. does not require that we should find that there was an actual sale of the rolling stock to the railway company. Under the circumstances. as to the placing of the rolling stock on the railway for use by the railway company apparently as owner, the issuance of bonds by the trust company on certificates, in accordance with the Hambro contract, based upon this rolling stock and the beneficiary result thereof to Eager, both Eager and the North Georgia Improvement Company are estopped in equity from attacking the milway company's title to the rolling stock in question as against the interest of the bondholders. As to Eager, this estoppel ought not to be questioned,andwe are of opinion that it is equally clear as to the North Georgia Ilnpr,()vement Company, for it was charged with full notice of all the citcumstances as fully as Eager himself was informed, and yet, as a volunteer,aided Eager in obtaining the rollinp; stock, and in delivering it upon the railroad, which otherwise he might not have been able to do,:and',th4lreby obtainedtbe issuance of bonds based on delivery of
864
. FEDERAL REPORTER, vol. 48.
the rolling stock on the railroad in good working order,etc·. /Tbe im.. provement company occupies the same position as the owner who stands by in silence while another sells his property· .It is conceded that the intervener, the Hiawassee Company, stands in the shoes of the North Georgia Improvement Company I so far as ·the rolling stock is concerned, and can assert no better title thereto. thll.n the improvement company could have asserted had no transfer been made. These views require the .reversal ofthe decree appealed from, and the remanding of the ease to the circuit court, with instructions to dismiss . the intervention of the Hiawassee Company, with costs. And it is so ordered.
CENTRAL .
TRUST
Co. OF NEW YORK 11. MARIETTA (GRoOME, Intervener.)
"
G. Ry.Co., . '1' .
(Circuit Court
at Appeals, Fifth
Circuit.
December 7,1891.) OF VENDOR.
t.
FORBOLOBt1Ril: 01l' RAiLROAD MORT.GAGE-CONDITIONAL
Tbevl'lndor of rolling BtQck to an improv\lmentpompany. by of sal!! reserved title thereto until paymento,f the purchase money.. The' iniprovement company supplied the rolling'stock to a railroad company in 9rder.to enable the latter to raise money onbo.n4s Beduredbymortgage ,on and equipments. HeW, in a suit to foreclOse such mortgage, that the ori'ginalvendor, having no notice of equities existing ·between thCpurchascrs ofthellolids of the l'ail;road companyand company, WII.lI entitled to thepo$SeBSio!l of stock, .title to whlCh be had retained. . .., . . '.. . But in BuclI.case, tbe Improvement co:r;npll.1ly being estOPPIlU ·froma.ettil:jg,llIl titJ.ll thll bondbolders by tbe fact that .the b.onds of theraUroal1 company were placed through its instrumentality, the original vendor could take nothing by a 1'6sale to him :by the improv:ement company of such rolling Btook. ,.: .
'9.8AME-EsTOPPEL. ..
. from' tha CirCUit Court oLthe.United District of Georgia. ,: . .. ., .· Bill in equity; by the Central Trust CQmpany of New York agairist;the Marietta & NOl'th Georgia Railway COlDpany to ,foreclose a mortgag{;l made by the railroad company. Samuel W. Groome claim.ing title to certain. rolling stock in the possession of therec<liver appointed in the suit. Decree for intervener. Plaintiff appeals. Reversed. H. B.Tompkina, for appellant. Hoke Smith, for appellee. Before PARDEE, Circuit Judge, and LOCKE and BRUC£, District Judges. PARDEE, J. The case on this intervention is the same in pleadings, master's report, exceptions, and assignments of errors as the case of Central Trust Co. v. Marietta & N. G. Ry. CO. (Hiawa88ee Co., Intervener,) 48 Fed. Rep. 850, (just decided,) except that the appellee, Groome, was the original vendor of the rolling stock in question to the North Georgia Improvement, Company, and in his contract retained the title until pay-