White v. Ewing
| Decision Date | 15 July 1895 |
| Docket Number | 212. |
| Citation | 69 F. 451 |
| Parties | WHITE et al. v. EWING. |
| Court | U.S. Court of Appeals — Sixth Circuit |
John W Yoe, John F. McNutt, and Tully R. Cornick, for appellants.
Pritchard & Sizer (Clark & Brown, of counsel), for receiver.
Before TAFT and LURTON, Circuit Judges, and SEVERENS, District Judge.
Each of the appellants was a purchaser of a town lo in the town of Cardiff, in Tennessee, from the Cardiff Coal & Iron Company and paid the consideration therefor,-- one-third in cash, and the balance in two notes payable in one and two years after date. A lien was reserved, in favor of the company, to secure the purchase-money notes. The sale at which these purchases were made took place at Cardiff in April, 1890, and the purchasers went at once into possession. On May 21, 1891, a creditor's bill was filed by one Bosworth against the company, alleging its insolvency, and asking the appointment of a receiver, the collection and sale of its assets, and a distribution among its creditors. A receiver was appointed and he was directed, by ancillary proceedings in the same cause, to proceed to collect the purchase-money notes due to the com/any for the sale of its town lots at Cardiff, from the makers thereof, and to subject the lots sold to the payment of them. Accordingly, an ancillary bill was filed by the receiver, making all the makers of the unpaid notes parties; and those who were nonresidents of the district were served by publication, under section 8 of the jurisdiction act of 1875. At a former hearing of this cause in this court the jurisdiction of the circuit court to hear such an ancillary bill, where the amount involved in each case did not exceed $2,000, was challenged, and the question thus made was certified to the supreme court for instructions (13 C.C.A. 276, 66 F. 2), and the consideration of all other questions in the case was stayed until the question should be answered. We have now received from the supreme court the instruction that the circuit court, in such an action, had the jurisdiction to entertain the bill, an ancillary to the main controversy, and to render decrees against all the debtors of the company on whom it could obtain lawful service, either personal or substituted. 159 U.S.--, 15 Sup.Ct. 1018.
There remains now to be considered only the question raised upon the merits. Many of the defendants filed answers and made defense. The only defense really pleaded in the answers was that the purchase of the lots and the execution of the notes had been induced by false representations made on behalf of the company. The evidence introduced to make this defense was very unsatisfactory, and entirely inadequate to sustain it. The prospectus of the company was wholly promissory, and did not state falsely any existing fact. Other statements contained in the daily press in regard to the company, its condition, capital, and prospects, are not traced to the agents of the company. Slight as the evidence is, it shows clearly enough that no one made any money out of the enterprise, but that the projectors, as well as the lot owners, were all disappointed in their expectations. It was an enterprise made possible by the speculative fever so widespread at the time. Its disastrous failure was quite like that of a hundred others of like character, and is not evidence per se, of a conspiracy to defraud on the part of the promoters, but only of a buoyant self-deception in respect to the material possibilities, and an unreasonable blindness to material difficulties. All who took part in the scheme knew its speculative character, and cannot escape liability on the obligations they assumed, unless they can put their fingers on false statements of material and existing facts which induced them to make the venture. This they have utterly failed to do.
One answer of the many raises another objection. It is that the title acquired from the company is likely to fail because the entire town site is incumbered by a lien for the purchase money due from H. C. Young, vendor of the company, to Hembree, Young's vendor. The deed from Young to the company contains a covenant that the land is free and unincumbered. The record does not disclose, and it is not averred, that the lot owners had in their deeds covenants of general warranty of title from the company. If they did not it is difficult to see how they could object to the payment of a...
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