McMullen v. Ritchie

• Decision Date: 24 October 1894
• Docket Number: 4,927.
• Citation: 64 F. 253
• Parties: McMULLEN et al. v. RITCHIE et al. [1]
• Court: U.S. District Court — Northern District of Ohio

64 F. 253

McMULLEN et al. v. RITCHIE et al. ^[1]

No. 4,927.

United States Circuit Court, N.D. Ohio.

October 24, 1894

The complainants obtained a judgment on the law side of this court November, 1890, against the defendant Samuel J Ritchie, for $265,370. Execution issued, and was returned nulla bona. Upon this footing they have filed this bill, to reach the interest of their debtor in certain securities held by the other defendants, Payne, Burke, and Cornell, as collateral security for the indebtedness of Ritchie to them severally. The relief sought is that the indebtedness of Ritchie to each of them be ascertained, and that the collaterals held by each be impounded and sold, and that any surplus after satisfying their several debts be applied in payment of their judgment. Two mining corporations are also made defendants, both organized under the law of Ohio, but having their respective plants in the dominion of Canada. Complainants allege that each of these corporations is largely indebted to Ritchie, and they seek to subject such indebtedness to the satisfaction of their judgment. The defendants Payne, Burke, and Cornell answered and filed cross bills, in which they separately set up the debts due them by Ritchie and the collaterals held as security. They ask that they may have decrees for their several debts, and that the collaterals held by each may be sold and applied in discharge of their debts, and consent to the application of any surplus to the satisfaction of the complainants' judgment. Ritchie also answered the several pleadings, and filed cross bills against each of his codefendants, and against the complainants. He attacks the judgment of complainants for fraud, and seeks to set off his liability to Payne, Burke and Cornell, by their liability to him on account of alleged fraudulent conduct in the management of the two corporations issuing the stocks held by them as collateral security for the debts due by him to them, and charges that they have entered into a fraudulent conspiracy with the complainants with the view of squeezing him out of the two corporations in which he is heavily interested. He also sets up claims for services rendered by him to the said two corporations aggregating more than $500,000, and seeks a decree on that account. Under amended and supplemental bills, various other issues were from time to time presented, which need not now be specifically referred to.

Williamson & Cushing, for plaintiffs.

Green Grant & Sieber, Butterworth & Dowell, Shellabarger & Wilson, and W. S. Kerruish, for defendants Samuel J. and Sophronia J. Ritchie.

Burke & Ingersoll, for cross defendants Stevenson Burke, Henry B. Payne, Canadian Copper Co., Anglo-American Iron Co., and Thomas W. Cornell.

Baird & Voris and Squire, Sanders & Dempsey, for cross defendants William McFarlin, John B. Wright, and Charles Baird, executors of Cornell.

Before LURTON, Circuit Judge, and RICKS, District Judge.

LURTON Circuit Judge.

Memorandum for decree: I shall not undertake to make any statement of the case. The record is one of the most voluminous ever submitted to this court. The pleadings are numerous and much complicated. Much bitterness of feeling exists between the parties, and counsel have suffered themselves to participate in some degree in the feeling and opinion of their clients. The record has been fully examined, and counsel heard both orally and by brief at unusual length. I do not deem it necessary to go into the facts any further than shall be found necessary in the statement of such conclusions as will enable counsel to draw a decree.

The questions to be decided will be stated in such order as shall be most convenient.

1. The attack on the judgment of the complainants, McMullens:

McMullens' judgment: At the October term, 1893, application was made for leave to file an amended and supplemental answer and cross bill by the defendant Ritchie, which, among other things, attacked the McMullens' judgment for fraud, in so far as it rested upon $71,250 of Central Ontario coupons, clipped from the bonds of said company. In the said cross bill, Ritchie alleges that these coupons were not valid, because they had been severed from the bonds by the company before the bonds were issued, and that they had been surreptitiously taken from the company's place of deposit by the McMullens, and were not valid obligations of the said railroad company. In January, 1886, the defendant Ritchie contracted to buy from James B. McMullen and George W. McMullen, the plaintiffs in this case, 210 of the first mortgage bonds of the Central Ontario Railroad Company, with past-due coupons, which had matured the 1st of April, 1885, the 1st of October, 1885, and the 1st of April, 1886. Ritchie, by some contract, bought coupons amounting to $71,250, which were described as having matured prior to January 14, 1885. These were detached coupons, and are those now complained of. Ritchie was to pay for these bonds and coupons described as above the sum of $210,000, and also $40,000 in stock of the Canadian Copper Company; payment to be made on or before the 1st of July, 1886. The delivery of the bonds and coupons, and the payment of the consideration, were to be simultaneous acts. Ritchie failed to make payment; was sued in the Canadian court for breach of contract on the 8th day of October, 1887. The declaration filed in that case set up this contract, averred ownership of the bonds and coupons, and readiness and willingness to deliver same in accordance with the terms of the contract. Ritchie entered his appearance by attorney, and put in pleas. Neglecting to further make defense to the suit, judgment was rendered against him, February, 1888, for the sum of $238,000. Afterwards suit was brought on that judgment in this court, in September, 1888. Various pleas were entered by Ritchie, none of which challenged the validity of the coupons in question. The result of the second suit was that judgment was rendered at the November term, 1890, upon the Canadian judgment, for $265,370. That case, upon a writ of error, was taken to the United States supreme court, where it is still pending. No supersedeas having been granted, execution issued from this court, which was returned nulla bona. Upon that judgment and nulla bona return, the present bill was filed, October 8, 1893.

The failure of Ritchie at an earlier date to set up the defense which he now, by amended cross bill, seeks to assert, is fatal to his application. The only reason suggested for failure to make this defense is that he had no knowledge at the time of the rendition of the judgment in Canada, and none at the rendition of the judgment in this court, of the fact that the said coupons were without validity, and that they had been surreptitiously obtained by the said McMullens as before stated. There is no averment of diligence whatever. No reason is shown why he did not earlier acquire the same information upon which he now seeks to attack the judgment. Mr. Ritchie was himself the president of the railroad company at the time the bonds were issued, and at the time the contract of 1886 was made, and has continued to be president of that company down to a very late date. In one of his depositions given in this case, where he touches upon this question and upon the McMullens' judgment and the alleges invalidity of these coupons, he says: 'I am not now able to state to you when I became aware of the fact, but that I did become aware of it, and I promise to take pains to find out exactly. ' The McMullens had, jointly with Ritchie, been the owners of this railroad. The contract for the purchase of these coupons described them as coupons 'maturing prior to January 14, 1885, and stipulated to be delivered to the McMullens by the contract made in January, 1885. ' Under these circumstances, it is very extraordinary that several years should have been suffered to elapse without his discovering any improper thing as to the validity of these coupons, or the title of the McMullens to them. Certainly, it is very essential to the jurisdiction of this court, when it is called upon to go behind a judgment rendered at law, that the facts and circumstances which prevented the complainant from making the defense, which was a legal defense, should be fully and thoroughly stated. It certainly was his right to have examined these bonds and coupons, to have inspected them, to have taken their dates and the number of the bonds from which they were clipped; and, looking to the fact that he was president of the railroad company issuing the bonds, it is impossible for him to escape the charge of very gross negligence in this matter, assuming that the defense which he now seeks to make has any merit in it. The inquiry which he did ultimately make of the McMullens as to the coupons covered by this contract does not seem to have been made until some time in the spring of 1893. The McMullens responded to his letter by stating that these coupons consisted of coupons maturing October 1, 1882, and subsequent dates between that time and 1885. At this stage of this case, he should be remitted to his remedy at law against the McMullens, upon the implied warranty as to the validity of his title to the said coupons.

2. The debts of Ritchie to Burke, Payne, and Cornell:

First. There is no substantial question raised as to the amount due to Burke, and a decree will be drawn for the sums indicated by notes filed by Judge Burke, with interest.

Second. The only controversy as to the debt claimed to be due the Cornell estate is as to a note for $8,000. This note is not produced, nor its loss accounted for. I am convinced that it was taken up, and that the note for $8,640 was given for the old note and interest.

Third. The only...