Meddaugh v. Wilson

• Decision Date: 22 January 1894
• Docket Number: No. 10,10
• Citation: 14 S.Ct. 356,38 L.Ed. 183,151 U.S. 333
• Parties: MEDDAUGH et al. v. WILSON
• Court: U.S. Supreme Court

151 U.S. 333

14 S.Ct. 356

38 L.Ed. 183

MEDDAUGH et al.

v WILSON.

No. 10.

January 22, 1894.

Statement by Mr. Justice BREWER:

This was a suit brought in the supreme court of the District of Columbia by the appellants, seeking to charge the defendant as trustee for them of 897 shares of the capital stock of the Lake Superior Ship-Canal, Railway & Iron Company. The bill was filed June 6, 1881; the answer, September 13, 1881. Proofs were taken, and on April 5, 1881, a decree was entered dismissing the bill, which decree was affirmed by the general term on March 3, 1888. From that decree of affirmance an appeal was taken to this court.

The following are the undisputed facts in the case: The Lake Superior Ship-Canal, Railway & Iron Company was a corporation organized under the laws of the state of Michigan. On July 1, 1865, it issued bonds to the amount of $500,000, secured by a mortgage upon its property and franchises. Subsequently, and on July 1, 1868, it issued another series of bonds amounting to $500,000, also secured by mortgage, all of which two series of bonds were outstanding in the hands of bona fide holders at the date of the decree hereafter mentioned.

On the 1st day of July, 1870, it issued a third series of bonds, amounting to $1,250,000, also secured by mortgage; $250,000 of which bonds were retired, and only $1,000,000 thereof were outstanding at the time of said decree. On May 1, 1871, it executed to the Union Trust Company, as trustee, a mortgage deed to secure a further issue of bonds to the amount of $3,500,000, of which, however, only $1,300,000 were issued, and the remainder were in the custody of the Union Trust Company at the time of said decree.

Suits were brought to foreclose these several mortgages. While these suits were pending, and in August, 1872, the company mortgagor was adjudged a bankrupt in the district court of the United States for the eastern district of Michigan, and George Jerome and Fernando C. Beaman were appointed assignees, and the plaintiffs, Meddaugh & Driggs, their counsel. These assignees never took possession of any property, for all of it was in the hands of a receiver appointed by the circuit court in the forcelosure suits. They, however, through their counsel, appeared in and contested the foreclosure suits. They also filed a bill in the nature of a cross bill. Litigation was carried on for some years. On February 12, 1877, the several suits having been consolidated, a single decree was entered, foreclosing all the mortgages. Pending the foreclosure proceedings, as appears from the terms of the decree, the receiver had, under the authority of the court, issued receiver's certificates to the amount of $625,300.

The principal creditors and security holders were J. C. Ayer & Co., J. Boorman Johnston & Co., Theodore M. Davis, as receiver of the Ocean National Bank, and James C. Ayer and George C. Richardson, jointly. Certain English capitalists entered into negotiations for the purchase of the property. Don M. Dickinson was acting for the corporation, and interesting himself to bring about a closing of the litigation, and a sale of the property to these English capitalists. On September 24, 1875, the four principal creditors above named entered into a written agreement with Dickinson, in which the amounts which each creditor was willing to accept were named, which provided that the parties should consent to a decree of fore- closure, and an order for the sale of the mortgaged property as an entirety; that the securities should all be deposited with Messrs. S. G. and G. C. Ward, with instructions to deliver them to Dickinson on his making payment of the aggregate amounts due the creditors as provided, this payment to be in four equal parts at intervals of 60 days each,—the entire contract being conditioned upon the ability to purchase the property named, which included all the property covered by the mortgages and certain other lands and stocks, at a gross price not exceeding $2,250,000. It is stated that there was, on the same day, another agreement entered into between Dickinson and the owners of the balance of the property for its purchase, but that agreement is not in evidence. Also, on the same day, a contract was made between Dickinson and the defendant, by which Wilson agreed to assist in perfecting the title to the property and carrying through the prior agreements, and which, contemplating that, by the use of bonds and receiver's certificates, the entire purchase might be made at a sum less than that named, $2,250,000, stipulated that whatever of surplus there might be should be paid over to Wilson. The negotiations for the purchase by the English syndicate were continued from time to time, but, for reasons not disclosed, the matter was never consummated. On February 27, 1877, another agreement was prepared for execution by the creditors aforesaid and Don M. Dickinson, which, referring to the prior argeements, and also to the fact a of a decree having been entered, stipulated that the securities belonging to the creditors should be placed under the control of Albon P. Man, of New York, and the defendant, as trustees; that such trustees should attend the foreclosure sale or sales, and, to the extent of the means furnished them for that purpose, bid in the property; that, the title being vested in them, they should organize a new corporation with a capital stock of $8,000,000, to which corporation they should convey the property they had purchased; that the corporation should, besides issuing the $8,000,000 of stock, also issue bonds to the amount of $4,000,000, properly secured by deed of trust, which stock and bonds and deed of trust should be deposited with Drexel, Morgan & Co., with directions to deliver all to Don M. Dickinson, or such person or persons as he should designate, on his or their depositing, on or before the 1st day of June, 1887, to the credit of the said trustees, the sum of $1,886,251.40, which moneys the trustees were to dispose of—First, in paying the expenses of the sale, purchase, reconveyance, and issue of certificates of stock and bonds, and the formation of the corporation; second, in the payment of any moneys that should be furnished them for the purpose of enabling them to perfect the title to said property; third, in the payment of the sums due to the creditors under the agreement of September 24, 1875, amounting to the sum of $1,296,103.41. The fourth stipulation in reference to the disposition of the money was as follows:

'Any balance remaining in the hands of said trustees shall be delivered to Nathaniel Wilson, and his receipt therefor shall be a full discharge to the said Albon P. Man of all liability therefor; and the said Nathaniel Wilson shall not be liable to account to the parties hereto, or any of them, in respect to the moneys so paid to him as aforesaid, and, upon the payment of said moneys to said Wilson, the terms and conditions of the trust hereby created shall be considered satisfied.'

It was further provided that in case the sum named was not paid on or before June 1, 1877, Drexel, Morgan & Co. should redeliver to the trustees the stocks, bonds, and securities deposited with them by the trustees, and that thereupon the said trustees should transfer and deliver to Dickinson, or to such person or persons as he should direct, in writing, one full tenth part of the stock and bonds, and to the creditors, in such manner as they might in writing appoint and direct, all the residue and remainder of said stock and bonds. That agreement was signed by Man and Wilson, who accepted the trust created by the instrument, and agreed to perform its duties, and also by Dickinson, J. Boorman Johnston & Co., and Theodore M. Davis as receiver, but not by the Ayers. It was, therefore, not a fully executed agreement. It is significant, however, as expressive of the intent of the parties signing, and as showing the relations of Wilson to the transaction. But on April 9, 1877, two contracts were entered into, executed by all the creditors above named, together with Albert G. Cook, also a creditor, as well as by Dickinson, Man, and Wilson, the first of which contained provisions for the disposition of the moneys in case Dickinson should make the payment to Drexel, Morgan & Co., similar to those found in the contract of February 27th; the stipulation as to the payment to Wilson being in those words:

'Fourth. The balance, if any, remaining after the payments aforesaid, shall be paid to and retained by said Nathaniel Wilson, his personal representatives or assigns, discharged from this trust, and shall be held, used, and disposed of by him or them without accountability therefor to the parties aforesaid, or any of them, by reason of anything herein.'

The other provided that, if Dickinson should not make the payment at the time specified, the trustees should take the bonds and stock, cancel all the former, and issue to Dickinson one-tenth of the shares, and then, after a sale of a portion, should distribute the balance as follows: To the creditors, respectively, in the proportion which the sums of money they would have received, in case the English sale had been consummated, bear to $1,693,311.74; and to Wilson as follows:

'To the said Nathaniel Wilson, his personal representatives or assigns, the same proportion of said shares remaining as aforesaid which the sum of three hundred and ninety-five thousand dollars is of one million six hundred and ninety-three thousand three hundred and eleven dollars and seventy-four cents, ($1,693,311.74.)'

The agreement contained also this stipulation:

'And the said Wilson, in consideration of the interests secured to him by the said indenture and this agreement, doth hereby agree unto and with the said parties of the first part, and each of them, that, in the event of the purchase of said property by said trustees, (Man and Wilson,) or the survivor of them, he will indemnify said partie...