Cock v. Bailey

• Decision Date: 04 January 1892
• Docket Number: 19
• Citation: 23 A. 370,146 Pa. 328
• Parties: H. B. COCK v. J. M. BAILEY ET AL
• Court: Pennsylvania Supreme Court

23 A. 370

146 Pa. 328

H. B. COCK v. J. M. BAILEY ET AL

No. 19

Supreme Court of Pennsylvania

January 4, 1892

Argued October 27, 1891

APPEAL BY DEFENDANTS FROM THE COURT OF COMMON PLEAS NO. 1 OF ALLEGHENY COUNTY.

No. 19 October Term 1891, Sup. Ct.; court below, No. 838 June Term 1889, C.P. No. 1.

To the first Monday of June, 1889, H. B. Cock brought assumpsit against "James M. Bailey, Thomas Fawcett, Samuel S Brown and James L. Marshall, who survive Hugh Lee, deceased late partners doing business under the name and style of the Keystone Coal Company, Limited," upon certain bonds of the Keystone Coal Co., Limited, and certain interest coupons thereto attached. Issue.

At the trial on November 18, 1890, the following facts were shown:

On February 17, 1879, the defendants, with Hugh Lee, executed and acknowledged articles of association for the purpose of forming the Keystone Coal Co., Limited, as a partnership association composed of themselves and organized under the act of June 2, 1874, P.L. 271, and its supplements; the business for which it was formed being the buying and selling of coal lands, the mining, selling and shipping of coal etc., the same to be conducted within the county of Washington, and the principal place of business to be at Hanlin station in said county. These articles of association were recorded in Washington county on October 1, 1879, and in Brooke county, West Virginia, on April 12, 1880. The capital of the association was therein stated to be five hundred thousand dollars, subscribed as follows: James M. Bailey one hundred thousand dollars; Hugh Lee three hundred and seventy thousand dollars; and Thomas Fawcett, Samuel S. Brown and James L. Marshall, ten thousand dollars each. It was set forth, further, that each of said subscriptions was to be paid by the transfer to said association of "real estate, coal property, coal rights and privileges, leases etc.," owned by the subscribers, described in schedules A, B and C, made a part of the articles of association. The aggregate value of the properties described in said schedules, was stated at five hundred thousand dollars; and the respective undivided interests therein owned and controlled by each of the subscribers were specified, together with the valuations at which said interests were contributed by them to the association, but the individual tracts and properties described were not valued separately. ^[*]

The following stipulations for the conveyance of said properties were also set out:

"13. All of said lands, coal properties, coal privileges and leases being in the names of James M. Bailey and Hugh Lee, or James M. Bailey or Hugh Lee, said parties agree to convey to said association said lands, properties, privileges and leases, by deeds with covenants of general warranty, upon the signing and executing of these articles of association, subject, however, to such liens as may be against the same; but, for the protection of said association, a sufficient amount of the stock issued to said contributing members in payment for the same, is to be retained by said association at the par value of the same from said contributing stockholders, in proportion to the amount of the liens upon that proportion of the said lands, coal lands and coal privileges, contributed by each one for the payment of said liens."

No statement of the nature or amount of the liens thus referred to, was made.

Schedules A and B described, by metes and bounds and area, certain tracts of land coal in Washington county, Pennsylvania, and Brooke county, West Virginia. Schedule C specified a "lease of land and water privilege" assigned by Hugh Lee to the Keystone Coal Co., Limited, describing it by giving the names of the parties, the date, the place of record in Brooke county, West Virginia, and the term; and also a "lease of coal, coal rights and lands, underlying certain lands in Jefferson township, Washington county, in the state of Pennsylvania, as described, mentioned, and set out in a certain article of agreement between James Stewart and James M. Bailey, dated June 12, A.D. 1877," assigned by said James M. Bailey to the Keystone Coal Co., Limited.

Among the properties described in schedule B was a tract in Brooke county, W. Va., fronting on the Ohio river, purchased from Judge Mellon of Pittsburgh in the name of Hugh Lee, the use for which it was intended being, as appeared from the testimony, the loading of coal on boats for shipment down the river. At the date of the articles of association, Judge Mellon had not yet conveyed this property to Lee, and no purchase money had been paid to him for it. He had entered into a contract to convey it on a date anterior to April 1, 1879, the purchase money to be paid to him on delivery of the deed; but, on account of his having lost his own title papers, the making of the deed was delayed, and it was not delivered until October, 1879, or perhaps later. A purchase money mortgage was then placed on the property, which was not paid off until some time in 1881.

On April 1, 1879, the Keystone Coal Co., Limited, executed a mortgage to a trustee to secure an issue of bonds amounting to two hundred and seventy-five thousand dollars, of which the bonds sued on by the plaintiff were a part. The mortgage was not printed in the paper-books. The date of its delivery and the dates of actually issuing the bonds were not shown. The bonds were made payable to the Safe Deposit Company of Pittsburgh, trustee, or bearer, on April 1, 1887, and were signed for the Keystone Coal Co., Limited, by Samuel S. Brown as chairman, and J. L. Marshall as secretary. They were sealed with the seal of the Keystone Coal Co., Limited. The interest coupons were payable to bearer, and signed by Thomas Fawcett, treasurer. The plaintiff became the holder of the bonds in suit, for value, before maturity.

The plaintiff having rested, defendants made the following offer:

Counsel for defendants offer to prove that the Keystone Coal Co., Limited, becoming unable to pay its debts as they matured, in the year 1883 elected liquidating trustees, for the purpose of closing out and settling its affairs and going into liquidation; and accordingly proceedings were had to further said litigation in the Court of Common Pleas of Washington county, Pennsylvania, at No. 163 June Term 1883; that, among said proceedings was an order of the said Court of Common Pleas directing the trustees to sell all the real estate owned by the Keystone Coal Co., Limited, subject to the lien securing the payment of the bonds in suit, as well as the other bonds which are referred to in the bonds in suit; that said sale was accordingly held, and at the said sale James M. Bailey, one of the defendants, at the request of certain of the bondholders, purchased said property subject to the payment of the said lien securing said bonds, for the benefit of the bondholders, including the bonds in suit; that, subsequently, the bondholders, including the plaintiff in this case, met and approved the said purchase, so made by the said James M. Bailey as trustee for them, and signed different agreements in reference thereto, among which is an agreement dated Pittsburgh, April 25, 1887, marked exhibit No. 3, and another agreement, dated Pittsburgh, April 25, 1887, marked exhibit No. 4, by which the said bondholders agreed to contribute certain percentages of money for the payment of expenses connected with the said purchase, and appointed James M. Bailey, and with him Joshua Rhodes, to act as trustees for them; that the said H. B. Cock signed each of the said papers; that, subsequently thereto, the said James M. Bailey made a formal declaration of trust in writing signed by him, which declaration of trust is offered herewith and marked exhibit No. 5; and that the said property purchased by him at the trustee's sale, and for which a deed was made to him by the trustee subject to the payment of the said lien securing the payment of all the said bonds, is still held by him as trustee for the bondholders.

Exhibits Nos. 3 and 4 mentioned in the above offer, were in precisely the same form except as to the amount of the contributions therein provided for. Exhibit No. 4, signed by a number of bondholders including the plaintiff was as follows:

"We, the undersigned bondholders of the Keystone Coal Co., Limited hereby agree to contribute to the payment of the taxes and expenses, including the year 1887, as per statement and circular letter of April 16, 1887, of the same by Joshua Rhodes, chairman, pro rata, on the amount of the bonds held by us severally. And we hereby appoint Joshua Rhodes and James M. Bailey to act as trustees for us, to collect said pro rata contribution and pay out the same, and to acquire and hold the title to the estate of the late Keystone Coal Co., Limited, for us as trustees, and hereby confirm their acts as said trustees.

"PITTSBURGH, April 25, 1887."

The offer was objected to for the following reasons: (1) That it is incompetent and irrelevant. (2) That it contains no offer to prove that the plaintiff had notice or knowledge of the defects and false statements contained in the articles of association, making the defendants individually liable. (3) The offer to prove that the purchase, subject to the lien, of the coal property, was at the request of certain of the bondholders, does not contain an offer to prove that the plaintiff was one of these bondholders. (4) That any acquiescence on the part of the plaintiff in such purchase made subsequent to the purchase, would not affect his rights as against the individual members of the company. (5) The papers mentioned in the offer, dated April 25, 1887, show no evidence of any concurrence in the purchase made by James M. Bailey, nor do they...