Walker v. Brown, 375.

• Decision Date: 10 September 1894
• Docket Number: 375.
• Citation: 63 F. 204
• Parties: WALKER et al. v. BROWN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

63 F. 204

WALKER et al. v. BROWN et al.

No. 375.

United States Court of Appeals, Eighth Circuit.

September 10, 1894

Henry S. Robbins, for appellants.

N. T Guernsey, for appellees.

This is a bill which was preferred by the appellants, composing the firm of James H. Walker & Co., of the city of Chicago against the appellees, as administratrix and administrators respectively, of the estate of Tallmadge E. Brown, deceased, to enforce an alleged equitable lien upon certain bonds of the city of Memphis, tenn., aggregating in amount the sum of $15,000. The bill charged that prior to May 9, 1889, the deceased, Tallmadge E. Brown, was a stockholder of the Lloyd Mercantile Company, be having theretofore transferred the bonds now in controversy to said corporation in payment for stock therein by him purchased; that on the 1st day of August, 1889, Brown became anxious to withdraw his capital from the Lloyd Mercantile Company, whereupon a partnership was formed by J. Collins Lloyd and Copley Lloyd, under the name of Lloyd & Co., which latter firm bought all of the assets of the Lloyd Mercantile Company, except the Memphis bonds aforesaid, which were at that time surrendered to said Brown, and also assumed to pay all of its debts, including a debt in the sum of $1,524, which was then due from the Lloyd Mercantile Company to the appellants. The bill further charged: That on the 20th day of September, 1889, the firm of Lloyd & Co., applied to the firm of James H. Walker & Co., to make a purchase of merchandise on credit, whereupon said Tallmadge E. Brown, for the purpose of inducing the appellants to extend such credit, executed the following agreement, in the form of a letter, to wit:

'Chicago, September 21, 1889.

'Messrs. James H. Walker & Co., Chicago, Ill.-- Gentlemen: I beg to advise you that the loan of fifteen thousand dollars, Memphis bonds, made by me to Mr. J. C. Lloyd for the use of Messrs. Lloyd and Company, Ellensburg, Wash. Ter., is with the understanding that any indebtedness they may be owing you at any time shall be paid before the return to me of these bonds, or the value thereof, or that these bonds, or the value thereof, are at the risk of the business of Lloyd and Company, so far as any claim you may have against said Lloyd and Company is concerned.

'Yours, truly,

T. E. Brown.'

That, in reliance on the agreement evidenced by the aforesaid letter, Walker & Co. thereafter extended credit to Lloyd & Co. in the sum of about $13,000, between August 20 and December 11, 1889. The bill further alleged in substance that Lloyd & Co. failed on December 25, 1889, owing Walker & Co. at the time about $13,000, no part of which has yet been paid; that prior to said failure Lloyd & Co. surrendered and returned to said Brown, without consideration, the Memphis bonds aforesaid; and that on the death of Brown, in the month of May, 1891, they passed into the custody of his administrators, as assets of his estate.

The answer of the defendants denied, among other things, that Tallmadge E. Brown, in his lifetime, was a stockholder of the Lloyd Mercantile Company, or that he had transferred the Memphis bonds in question to that corporation

in payment for stock, as was alleged in the bill, or that he was in any wise responsible for any of the debts of the mercantile company when it ceased to do business, and when the firm of Lloyd & Co. was formed. It averred in substance that prior to the 9th day of May, 1889, Brown loaned the bonds now in controversy to the Lloyd Mercantile Company to enable it to raise money, and that said company, prior to May 9, 1889, pledged said bonds to secure a debt which it then owed in the city of Chicago; that the bonds remained pledged to secure said indebtedness of the mercantile company on the 21st day of September, 1889, when the aforesaid letter was written by Brown to James H. Walker & Co.; that Lloyd & Co. failed to pay this indebtedness when they were called upon to pay it, and that Brown paid the same in the month of November, 1889, and received said bonds from the pledgee; and that he afterwards, before his death, made a valid gift and delivery of the bonds to his wife, Anna L. Brown, one of the appellees, who was the owner of the same in her own right when the bill was filed. On the filing of the answer, which disclosed the fact that Anna L. Brown had become the owner of the bonds by a gift made in the lifetime of her husband, the appellants amended their bill of complaint by making the said Anna L. Brown a defendant in her own right.

The circuit court appears to have dismissed the appellants' bill of complaint upon the ground that the aforesaid agreement of September 21, 1889, did not create an equitable lien upon the bonds, and that no other matters were stated in the bill or proven on the trial which rendered the case one of equitable cognizance. Vide Walker v. Brown, 58 F. 23.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER Circuit Judge, after stating the case as above, .

The first question presented for consideration by this court is whether the letter of T. E. Brown to James H. Walker & Co., of date September 21, 1889, had the effect of creating an equitable lien upon the Memphis bonds therein referred to, in favor of James H. Walker & Co., which lien a court of chancery will enforce. In his work on Equity Jurisprudence, Mr. Pomeroy says, and the authorities cited by him undoubtedly support the proposition--

'That every express executory agreement in writing, whereby the contracting party sufficiently indicates an intention to make some particular property, real or personal, or fund, therein described or identified, a security for a debt, or other obligation, or whereby the party promises to convey or assign or transfer the property as security, creates an equitable lien upon the property so indicated, which is enforceable against the property in the hands, not only of the original contractor, but of his heirs, administrators, executors, voluntary assignees, and purchasers or incumbrancers, with notice. Under like circumstances, a merely verbal agreement may create a similar lien upon personal property.' 3 Pom.Eq.Jur. 1235, and cases there cited.

The question arises, therefore, whether there is to be found in the letter in question, viewed in connection with the circumstances under which it was written, an expression of an intention on the part of T. E. Brown, now deceased, or a promise on his part, to make the particular bonds referred to in the letter a security for whatever credit the firm of James H. Walker & Co. might thereafter extend to Lloyd & Co. This letter appears to have been written by an agent of James H. Walker & Co. at the city of Chicago, and to have been sent to the deceased at his residence in the city of Des Moines, Iowa, where it was signed by him, and returned through the mail to the appellants. The record shows in substance that Lloyd & Co. applied to the appellants to purchase certain merchandise on credit, and, at the time of such application, made a statement of the firm's assets and liabilities. At this interview the fact was disclosed to the appellants, and they appear to have been aware of the fact before the disclosure was made, that Lloyd & Co. were indebted to T. E. Brown in the sum of $15,000 for bonds of the city of Memphis which he had loaned to the firm, and which were then hypothecated to the Union National Bank of Chicago to secure a loan for that amount, which the firm of Lloyd & Co. was obligated to pay. The appellants refused to extend credit to Lloyd & Co. unless T. E. Brown, the owner of the bonds, would sign an agreement with respect to the return and surrender of the same which was satisfactory to the appellants. Thereupon, at the suggestion of Lloyd & Co., Mr. William A. Mason, in behalf of the firm of J. H. Walker & Co., dictated the aforesaid letter, as containing such an agreement as would be satisfactory to his principals, and would induce them to extend credit to Lloyd & Co. With reference to his motive in formulating the letter which was subsequently signed by the deceased, Mr. Moore testified, in behalf of the appellants, as follows:

'We understood that Mr. Brown was a partner in the Lloyd Mercantile Company, or held stock in the Lloyd Mercantile Company, and that in making this change from the Lloyd Mercantile Company to Lloyd & Co., he had become a creditor, instead of a stockholder, and we insisted that he must take the same position that he had before, so far as we were concerned; that the capital of Lloyd & Co. must be fifty thousand dollars, or about that, the same as of the Lloyd Mercantile Company.'

We think that the letter of September 21, 1889, when considered by itself, without the aid of parol testimony, is fairly susceptible of but one itself, without the aid of parol testimony, is fairly susceptible of but one interpretation which is well stated in the foregoing extract from the testimony of the person by whom the letter was drafted. The appellants were advised that Brown had loaned Lloyd & Co. the sum of $15,000 in Memphis bonds, which was being used by the firm as a part of its capital. They were willing to extend credit to the firm to a certain amount, if Brown would agree that the money thus loaned should not be withdrawn until the indebtedness of Lloyd & Co. to the appellants was paid, and that until such time the loaned capital should remain at the risk of the business of Lloyd & Co. The only undertaking on the part of the defendants' intestate that can fairly be extracted from the letter is a promise on his part that the capital loaned to Lloyd & Co. should not be withdrawn until the appellants' debt was paid. It is manifest, however, that the decedent did not intend to give the...