Ritchie v. McMullen

• Decision Date: 08 February 1897
• Docket Number: 344.
• Citation: 79 F. 522
• Parties: RITCHIE et al. v. McMULLEN et al.
• Court: U.S. Court of Appeals — Sixth Circuit

79 F. 522

RITCHIE et al. v. McMULLEN et al.

No. 344.

United States Court of Appeals, Sixth Circuit.

February 8, 1897

This is an appeal from a decree of sale entered upon two creditors' bills consolidated. Samuel J. Ritchie was the owner of a large amount of the stock of the Canadian Copper Company, an Ohio corporation, engaged in the mining of nickel and copper at Sudbury, Ontario, in Canada. He was also the owner of a large amount of the stock of the Anglo-American Iron Company, another Ohio corporation, organized to do a mining business in Ontario, Canada, and possessing extensive tracts of iron, copper, and nickel mining lands in that region. Ritchie also owned many of the bonds and shares of preferred and common stock of the Central Ontario Railway Company, a company owning and operating a railway in Ontario Canada. He became indebted in a large sum to Henry B. Payne and secured the debt by depositing, as collateral, large blocks of stocks of the two mining companies, and of the bonds and stocks of the railway company. He also became indebted to Stevenson Burke, and secured the loan by similar collateral. He also became indebted to Thomas W. Cornell, and secured him in the same way. Included in the collateral pledged to Thomas W. Cornell were 901 shares of Canadian Copper stock, and 1,939 shares of the Anglo-American Iron stock, which belonged to Sophronia J. Ritchie, but which she had authorized her husband to pledge for this Cornell debt. James B. McMullen and George W. McMullen, citizens of Illinois and residents of Ontario, obtained a judgment against Ritchie, in Canada, for a large sum in a court of Ontario in 1888, and obtained a judgment in the circuit court below, on the law side of the court, based on the Canadian judgment, in February, 1890, for the sum of $265,307. Execution was issued, and returned nulla bona. The McMullens then filed two creditors' bills, the object of which was to subject to the payment of their judgment the interest of Ritchie in the collateral pledged by him to Payne, Burke, and Cornell, after satisfying the debts for which it was pledged. The first bill was filed October 1, 1891, by the McMullens against Payne, Burke, and Cornell, then in life, the Canadian Copper Company, the Anglo-American Iron Company, and the Citizens' Savings & Loan Association, all citizens of Ohio. After making the necessary averments concerning the recovery of the judgment against Ritchie and the nulla bona return, the bill set forth debts owing by Ritchie to Payne Burke, and Cornell, respectively, together with the bonds and stocks pledged to secure each. The bill averred that, in the case of each loan, the value of the collateral was largely in excess of the amount of the debt. The bill prayed that an account might be taken between Ritchie and his various creditors; that the stocks and bonds might be sold at a judicial sale; that the receiver might be appointed to collect the interest and dividends; and that the Anglo-American Iron Company and the Canadian Copper Company which were made parties defendant, might be enjoined from transferring the stocks on their books until such sale. On the 30th of October, all the defendants and Ritchie entered their appearances, and Ritchie entered his appearance upon the 2d of November. On the 5th of December, 1891, Cornell, Payne, and Burke filed separate answers to the bill. Cornell answered, averring that Ritchie's indebtedness to him was about $151,776, with interest; that it was secured by $558,900 par value of Anglo-American Iron stock, by $90,100 par value Canadian Copper stock, and by $12,000 of the Central Ontario bonds; that $1,000 of the total amount due to Cornell was secured by $160,000 par value of the coupons cut from the bonds of the Central Ontario Company; and that the marshal of the court had seized the box, and taken it away, without the consent of the defendant, under the process issued by the complainants in this cause. Payne's answer, after setting up an indebtedness from Ritchie to him aggregating $477,397.63, with interest, averred that it was secured by $300,000 in Canadian Copper stock, by $753,000 of Central Ontario stock, by $80,000 of the preferred stock of the Central Ontario Railway Company, and by $12,000 in the common stock of that railway. Burke answered, averring that the indebtedness of Ritchie to himself was $214,964.31, and that it was secured by $105,000 par value in the Canadian Copper stock, $400,000 in the Anglo-American Iron Company stock, and $225,000 in the bonds of the Central Ontario Railway Company. These three defendants consented in their answers to the sale, under the decree of the court, of the various securities respectively held by them, and to the application of the proceeds of the sales to their debts. Upon the 15th of September, Sophronia J. Ritchie, wife of Samuel J. Ritchie, applied to the court to be made a party defendant, representing that the was the owner in her own right of a large amount of the stocks and securities set forth in the separate answer of Cornell. On the 11th of January, 1892, Mrs. Ritchie was made a party, and in her answer she averred that she was the owner of 901 shares of the Canadian Copper stock, and 1,939 shares of the Anglo-American Iron Company stock, mentioned in Cornell's answer as held by him; that the copper stock was pledged for the indebtedness of her husband to Cornell for not exceeding $40,000; and that the Iron Company stock was pledged for a debt of $14,508; and that Cornell knew of the facts with reference to her ownership of the stock, and the limitation upon her husband's authority in pledging the same. She alleged that Cornell had a large amount of other securities from her husband, which should, in equity, first be subjected to the payment of his debt, and that her stock should not be taken until Ritchie's securities were first exhausted. She prayed an accounting between her and her co-defendant T. W. Cornell, and between Cornell and her husband.

By supplemental bill, the complainants had set up the fact that the Canadian Copper Company and the Anglo-American Iron Company were largely indebted to Ritchie for services rendered by him to them, and sought to subject to the payment of their debt the amounts thus alleged to be due. Ritchie, in his separate answer, filed December 19, 1891, to the bill and supplemental bill, denied that he was insolvent; denied that he was indebted to any of his co-defendants in the amounts alleged in the bill of complainants; admitted that his co-defendants Payne, Burke, and Cornell held the stocks and securities mentioned in the bill; and denied that the beneficial interest in all of them, after paying the debts for which they were pledged, belonged to him, but averred that a large part thereof belonged to Sophronia J. Ritchie, who had pledged her part of the same as collateral security for a portion only of said indebtedness, and as surety only. He further admitted that the copper company and the iron company were indebted to him for services rendered and for money expended, but averred that he was unable to state the amount which was in dispute between them, for the reason that they had never come to an accounting in relation thereto. He joined in the prayer that an account be taken of the amount due to the complainants, and of the amounts due from each of the two companies to him. He also prayed that the respective interests of the said owners of said stocks and securities should be worked out in accordance with their respective rights and interests, and that such order be made in the premises as to justice might pertain. On the same day he filed what he called a separate answer to the answers of Cornell, Payne, and Burke. He denied that he was indebted to them in the amounts claimed by them. He averred that he was entitled to a credit of $60,000 from Payne on his indebtedness. He averred that Cornell and Burke had promised to carry him financially, and to aid him in maintaining the market value of the stocks of the mining companies, and in consolidating the mining companies and the railway company, in consideration for which he had delivered to each large blocks of the stock in each company, and that they had broken their promises; that he was therefore entitled to compel them to account for the stocks thus given them, because the consideration had failed. He also charged that, in the purchase of the stock of the Vermillion Mining Company, for the Copper Company, Cornell had received, as trustee for Ritchie, $8,750 in copper stock, which he had converted to his own use, and should account for the same. He prayed an accounting with all the defendants.

On February 16, 1893, complainants, on leave of court, dismissed their bill as against the executors of Thomas W. Cornell deceased since the filing of the bill, and the defendant Sophronia J. Ritchie. On May 11, 1893, the executors of Cornell were allowed again to become parties, and to file an answer in which, at the request of Ritchie, and, upon his statement of the facts, they averred that in January, 1890, Ritchie assigned to Cornell, as collateral security for the indebtedness existing between Ritchie and Cornell, the securities which were then held by the Citizens' Savings & Loan Association of Cleveland, Ohio, and which since had been transferred to Payne; that they had not found among the books and papers of the said Thomas W. Cornell, which came into their hands or under their control as said executors, any reference to or memorandum concerning said assignment which said defendant Ritchie so claimed to have been made, as aforesaid; and, for want of such information, they were unable either to affirm that such an assignment was made, or to deny the fact of its being made; but that averred...