Edwards v. Bay State Gas Co.

• Decision Date: 20 March 1911
• Docket Number: 203.
• Parties: EDWARDS et al. v. BAY STATE GAS CO. In re HINCHMAN et al.
• Court: U.S. District Court — District of Delaware

184 F. 979

EDWARDS et al. v. BAY STATE GAS CO.

In re HINCHMAN et al.

No. 203.

United States Circuit Court, D. Delaware.

March 20, 1911

Syllabus by the Court

It is a general rule that, in the absence of an agreement to the contrary, the assignee for value of a note, bill, judgment decree or other evidence of indebtedness, for the payment of which the assignor holds collateral security, is in equity entitled, by virtue of the assignment to him of the principal obligation or evidence of indebtedness, to the collateral as such, although not named in the instrument of assignment, and regardless of his knowledge or lack of knowledge of the existence of such collateral.

Charles H. Burr, for petitioner Hinchman.

Walter H. Hayes, for petitioner Arizona Blue Bell Copper Co.

BRADFORD District Judge.

George W. Pepper as receiver of the Bay State Gas Company hereinafter referred to as the gas company, obtained June 14 1907, in the circuit court of the United States for the eastern district of Pennsylvania a decree against John Edward Addicks for the sum of $1,399,080. This decree remains unsatisfied. Subsequently the Arizona Blue Bell Copper Company, hereinafter referred to as the copper company, at the instance and by the procurement of Addicks who was its president, executed under seal August 2, 1907, an assignment for the considerations therein mentioned to Pepper as such receiver of all royalties or profits which were then or might become payable to the copper company under a certain contract between it and John L. Elliot, dated September 15, 1906, as collateral security for the payment of the above mentioned decree. Charles S. Hinchman, one of the petitioners, made November 13, 1907, the following written offer to the receiver: George Wharton Pepper,

'November 13, 1907.

Receiver Bay State Gas Co. (of Delaware).

Dear Sir: I hereby offer to pay you on or before June 15th, 1908, one hundred thousand dollars in cash for an assignment by you to me, or in accordance with my direction, of the decree entered in your favor against J. Edward Addicks, in the sum of one million three hundred and ninety nine thousand and eighty dollars, on June 14, 1907, by the United States Circuit Court for the Eastern District of Pennsylvania (in the suit of Pepper, Receiver, v. Addicks, Oct. Sessions, 1903, No. 41, In Equity,) and of all claims that you have against the said Addicks. In case you accept this offer it is understood that your acceptance shall be subject to the approval of the United States Circuit Court for the District of Delaware.

Yours very truly,

C. S. Hinchman.'

On the same day the receiver accepted the offer by writing beneath the same as follows:

'To Charles S. Hinchman, Esq.

I hereby accept the above offer.

G. W. Pepper, Receiver.

November 13, 1907.'

This court duly approved this acceptance December 27, 1907, and discharged Pepper as receiver August 1, 1908, before Hinchman had paid the consideration for the assignment to him of the decree against Addicks. The court, however, carefully avoided taking any action which might terminate or injuriously affect any rights or obligations as between Hinchman and the gas company; for in the decree of discharge the receiver was directed, not only to assign and mark to the use of the gas company the decree which he, as its representative, had obtained June 14, 1907, but also to assign to it all his right, title and interest in his contract with Hinchman bearing date November 13, 1907, and approved December 27, 1907, for the assignment to him of the above mentioned decree and of all other claims against Addicks; the learned judge who signed the decree discharging the receiver evidently treating the day of judicial approval of the last mentioned contract as the proper contractual date. Pursuant to the decree of August 1, 1908, the receiver on or about August 5, 1908, assigned to and marked to the use of the gas company the decree of June 14, 1907, and assigned to it all his right, title and interest in and under his contract with Hinchman for the assignment of such decree, but did not assign or transfer to the gas company the assignment executed to the receiver as collateral security as above mentioned by the copper company of its rights under the contract with Elliot. This collateral assignment was withheld by the receiver owing to some doubt he had as to its proper disposition. The gas company October 6, 1908, for the consideration of $100,000, together with legal interest thereon from June 15, 1908, the date on or before which Hinchman was to make payment under his contract with the receiver, assigned to Hinchman that decree and all its rights thereunder and all its claims against Addicks. The assignment from the copper company to the receiver of its interest in the contract with Elliot as collateral security for the payment of that decree was in the possession of the receiver at the time of the assignment of the decree to Hinchman, who filed in this court May 2, 1910, his petition setting forth, among other things, that in November, 1909, he learned of the assignment from the copper company to the receiver of its rights under the contract with Elliot as collateral security as above stated; that he had made demand upon the receiver to assign to him such collateral security; and that the receiver had declined and refused to do so; and praying for an order directing the receiver to assign and transfer the same to him. On the same day the receiver or late receiver filed his answer to the above petition, in which, after giving certain reasons why he did not transfer to the gas company the assignment to him by the copper company of its rights under the contract with Elliot, he stated:

'The said assignment is in my hands as a stakeholder for delivery to Addicks, or to said Bay State Gas Company, or to the said Hinchman, in case the Court shall be of opinion that he is entitled thereto, and I submit myself to your Honorable Court in the premises.'

This court, on the same day, viewing Hinchman's petition as in substance a bill of interpleader, and having grave doubt as to its jurisdictional power by reason of the citizenship of the parties to entertain the proceeding, took no action upon the petition; but on the statement, contained in the answer and made orally in open court by the receiver and his counsel, that he still had in his possession the assignment from the copper company to him by way of collateral security for the payment of the decree of June 14, 1907, and recognizing that the receiver had acquired its possession solely in his representative capacity as an officer of this court and receiver of the gas company, and had been discharged from his receivership with respect to all other matters, made an order authorizing and directing him to assign and transfer the assignment to him from the copper company to the clerk of this court, to be disposed of pursuant to further order or decree, after due notice to all persons claiming an interest therein as should thereafter be directed by the court. In obedience to the above order the receiver, May 9, 1910, assigned and transferred the collateral assignment to the clerk and on the same day an order was made directing notice to be given to all such persons to file proofs of their claims on or before May 23 1910. Notice having been given as directed Hinchman and the copper...