Brown v. Pegram

• Decision Date: 30 October 1903
• Docket Number: 46.
• Citation: 125 F. 577
• Parties: BROWN et al. v. PEGRAM.
• Court: U.S. Court of Appeals — Third Circuit

125 F. 577

BROWN et al. v. PEGRAM.

No. 46.

United States Court of Appeals, Third Circuit.

October 30, 1903

Reynolds D. Brown, for plaintiffs in error.

Richard C. Dale, for defendant in error.

Before ACHESON and GRAY, Circuit Judges, and McPHERSON, District judge.

J. B McPHERSON, District Judge.

This case was tried without a jury, and the following facts were found by the court:

'The plaintiff adduced in evidence a promissory note dated December 12, 1902, for $20,000, payable June 10, 1902, at 817 Drexel Building, Philadelphia, signed, 'American Alkali Company. A. K. Brown, President. Clayton E. Pratt Treasurer.' This note was payable to the order of the American Alkali Company, and was indorsed by the same officers of that company who had signed it. It was protested upon June 10, 1902. The plaintiff also adduced in evidence a like note for $30,000, bearing the same date and payable at the same time as the note above mentioned, and in like manner executed, indorsed and protested. By this proof the plaintiff established a prima facie right to recover the amount of said notes, with interest and costs of protests. This is not questioned, and, as respects the defense it is said in the defendant's brief, that 'the plaintiff's requests for findings of fact cover the material facts in the case, and defendants concede them all,' with two 'qualification,' which, as they do not challenge the correctness of the statements of fact to which they relate, but merely present the claims of the defendants as to their effect, need not at this point considered. I accordingly find the following facts:

'(1) The American Alkali Company is a corporation organized under the laws of the state of New Jersey, and has its principal office in the city of Camden, N.Y. It also maintains an office in the Drexel Building, in the city of Philadelphia.

'(2) By agreement in writing dated May 6, 1899, the American Alkali Company agreed to purchase from the Commercial Development Corporation, Limited organized under the laws of Great Britain, letters patent of the United States Nos. 608,300 and 501,783, dated respectively August 2, 1898, and July 18, 1893, and also letters patent of Canada No. 61,363, and to pay in consideration for the assignment therefor four hundred and seventy-nine thousand nine hundred and sixty shares of the common stock of the American Alkali Company, full paid and nonassessable, and $1,000,000, payable as follows: One accepted bill at not to exceed one hundred and eighty days for $100,000, a note or notes made by the company to its own order and indorsed by the company, and at not later than June 1st, and for $500,000, and four accepted drafts at not to exceed twelve months for $100,000 each.

'(3) Among the accepted drafts thus given was one for $100,000, dated May 18, 1899, payable twelve months after date. When this matured, $50,000 in cash was paid on account and two new drafts were given, one for $32,000 and another for $20,000. These matured in May, 1901, and were renewed by two drafts of like amount, which were the drafts hypothecated by the Commercial Development Company to the plaintiff on November 5, 1901. These were not paid at maturity, but were renewed by the drafts in suit, which bear date December 12, 1901, and matured June 10, 1902.

'(4) The contract of May 6, 1899, was executed at the office of the American alkali Company in Philadelphia, and the drafts and notes were there executed. In the negotiations the Commercial Development Corporation, Limited, was represented by A. R. Harvey, its attorney in fact, and a managing director specially authorized to act in the premises. Authority for the execution of the contract and the issue of the drafts referred to therein was given at a meeting of the stockholders of the American Alkali Company held May 5, 1899, at its office in Camden, N.J.

'(5) About the 1st of November, 1901, Thomas Pegram, residing in Liverpool, England, was requested to make a loan to the Commercial Development Corporation, Limited, of 10,000 pounds. The application was made through a solicitor, Mr. Alderman Fred Smith, senior partner of the firm of Grace, Smith & Hood, and a magistrate of Liverpool. The statement was made that the loan of 10,000 pounds, was but for a short time, and that as collateral Mr. Pegram should receive the rights of the Commerical Development Company under a contract with a firm named Perrins, Limited, any funds coming to the Commercial Development Company from the flotation of certain Spanish tin mines, and the American Alkali bills for $52,000. After a negotiation lasting a few days, on November 5, 1901, the plaintiff loaned the Commercial Development Corporation Company, Limited 10,000 pounds, giving them his check for that amount on Lloyd's Bank, Limited, of Liverpool, which check was forthwith presented and paid in due course. To secure the loan the Commercial Development Company, Limited, executed a writing under date of November 5, 1901, reciting that in consideration of the sum of 10,000 pounds paid them they hypothecated in favor of Pegram, first, the sum of $52,000, payable in respect of the two bills of exchange dated the 15th April, 1901, for $32,000 and $20,000, respectively, payable to the order of the American Alkali Company and endorsed by it, and, second, the moneys payable to us in respect of the flotation of the Spanish Tin Mining Company, and undertaking to pay the said sum of $42,000, and the said moneys payable in respect of the flotation of the said Spanish Tin Mining Company immediately upon receipt of the same to the extent of 10,500 pounds.

'At the date of this transaction the Alkali bills of exchange above mentioned were in the possession of Messrs. Chapman & Co., bankers of New York, for the account of the Commercial Development Company. On December 10, 1901, $2,000 was paid on account thereof by the American alkali Company to Messrs. Capman & Co., and the notes in suit were given for the balance of $50,000. Mr. Pegram received no part of the $2,000 which was paid by Chapman & Co., to the Commercial Development Company. Subsequently, upon hearing of these facts, the plaintiff took the notes in suit out of the hands of Chapman & Co., and placed them in the hands of the Canadian Bank of Commerce, to be held for his own account.

'In making the loan to the Commercial Development Company the plaintiff had no notice or information that the consideration for the American Alkali bills was the assignment of the letters patent above mentioned. The loan was made in good faith, and with nothing to impair the plaintiff's rights as a purchaser for value without notice.

'(6) Under date of December 5, 1901, A. R. Harvey executed a writing in favor of the plaintiff, in words following:

''In consideration of your not requiring payment forthwith of the sum of 10,500 pounds due to you from the Commercial Development Corporation,, Limited, I hereby guarantee the payment by them to you of the said sum of 10,500 pounds on the fifth day of January, 1902.'

'On January 9, 1902, a further writing as follows:

''In consideration of your not requiring payment forthwith of the sum of 10,500 pounds due from the Commercial Development Corporation, Limited, to you, I hereby consent to your extending the time for payment of the said sum and to the corporation giving you further security for the same.'

'And on April 29, 1902, a further writing as follows:

''In consideration of your extending the time for payment by the Commercial Development Corporation, Limited, of the sum of 11,000 pounds to the 7th proximo I hereby guarantee the payment by them to you of the said sum of 11,000 pounds on the 7th proximo, but this guarantee is not to be enforced before the 12th day of June next.'

'And on April 30, 1902, Ruth L. Harvey, the wife of A. R. Harvey, executed writings in words following:

''In consideration of your extending the time for payment by the Commercial Development Corporation, Limited, of the sum of 11,000 pounds to the 7th proximo I hereby charge all my interest in 'Ramleh' (exclusive of the charge of 4,500 pounds already upon it), and also the furniture and fixtures upon which there is not charge. I also undertake that no charge will be made upon 'Ramleh,' or upon the said furniture and fixtures, and that I will not remove or disturb anything at Ramleh between the present date and the 12th day of June next.'

'In consideration of your extending the time for payment by the Commercial Development Corporation, Limited, of the sum of 11,000 pounds on the 7th May, 1902, I hereby guarantee the payment by them to you of the said sum of 10,750 pounds on the 7th May, 1902, but this guarantee is not to be enforced before the 12th day of June, 1902.'

'(7) In June, 1902, the Commercial Development Company was placed in the hands of a receiver and liquidator, and out of that receivership the realized ninety pounds on account of the indebtedness. As against the amount thus realized he paid out in sundry expenses connected with the receivership and keeping the corporation in life 400 pounds.

'In September, 1902, the plaintiff received the check of Mrs. Ruth L. Harvey for 6,000 pounds on account of her guaranty. In part, at least, this represented the proceeds of the sale of certain chloride shares which the plaintiff had obtained from W. W. Gibbs on account of an obligation of W. W. Gibbs to A. R. Harvey which had come into the plaintiff's possession in the course of the

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