Johnson v. Lewis

• Decision Date: 01 January 1881
• Parties: JOHNSON v. LEWIS and others.
• Court: U.S. District Court — Eastern District of Arkansas

6 F. 27

JOHNSON v. LEWIS and others.

United States Circuit Court, E.D. Arkansas.

1881

Palmer & Nicholls, Tappan & Hornor, and Charles C. Waters, for plaintiff.

Eben W Kimball, for defendants.

CALDWELL D.J.

The plaintiff was the holder of $10,000 in negotiable bonds issued by the county of Phillips, in this state, which he placed in the hands of W. N. Coler, on the twenty-sixth day of June, 1874, 'to be sold at 60 cents, and accounted for at same, less a commission of 2 1/2 per cent.' Coler sold the bonds to the Municipal Trust, of London, England, in October, 1874, for 85 cents on the dollar, receiving a part of the price agreed to be paid therefor in cash, and the balance in certificates of the trust. Suit was afterwards brought against the county on the bonds, and judgment recovered thereon in favor of the trust, and the judgment assigned to Lewis. Thereupon the plaintiff filed this bill in which he seeks to reclaim the bonds and their proceeds upon the alleged ground that Coler had never accounted to him for the bonds, and that he transferred them to the trust for money and certificates of stock in fraud of plaintiff's rights, of which the agents of the trust had full notice.

The trust was constituted by a deed dated the fifteenth day of December, 1873, which was made between certain parties of the first part, styled 'the trustees,' certain parties of the second part, called 'the committee,' and certain parties of the third part, called 'the covenantees.'

The scheme contemplated subscriptions to raise a fund for the purpose of purchasing bonds of municipalities within the United States. The bonds were to be purchased by 'the committee' named in the deed, and placed in the possession of the banker of the trust by the trustees. Subscribers to the fund received certificates, payable to the bearer, which entitled the holder to participate in the distribution of the profits and proceeds of the trust investments by a drawing in a mode set out in the deed which, in some of its features, closely resembled a lottery. The capital of the trust was fixed by the deed at 350,000 pounds. The committee of the trust purchased from Coler bonds, including those of Phillips county, valued at 217,550 pounds 12s. and 10d., for which he was paid in cash 135,000 pounds 12s. and 10d., and the remaining 82,555 pounds was paid him in certificates of the trust, which two witnesses testify were, at the time, par or a little under. The trust was not a corporation or joint-stock company or partnership, but a trust formed by deed of settlement for the purpose of securing investments. The trustees were the legal owners of the trust property, and the business of the trust was managed by them and 'the committee' created by the deed for the benefit of the certificate holders, who were strangers to each other, and who entered into no contract between themselves, nor with any trustee on behalf of each other, and were not, therefore, partners.

It is a question whether this trust was not obnoxious to the provisions of the English companies act, 1862, and illegal. According to the opinion of the master of the rolls in Sykes v. Beadon, Solicitors' Journal, April 12 1879, p. 464, it was; but in Smith...