Слике страница
PDF
ePub

complainant as long as the stock stood in his name on the books of the company. The beneficial interest was all that Brissell obtained by the transfer, but this he did acquire. Black v. Zacharie, 3 How. 482, 511, 11 L. Ed. 690; Leyson v. Davis, 17 Mont. 220, 281, 42 Pac. 775, 31 L. R. A. 429; Becher v. Wells Flouring Mill Co. (C. C.) 1 Fed. 276; Lippitt v. American Wood Paper Co., 23 Atl. 111, 15 R. I. 141, 2 Am. St. Rep. 886. The only rights which complainant has are based upon this assignment from Longabaugh. If the assignment is invalid, he has no interest in the stock, and he cannot maintain this suit, even though Knapp's judgment against Longabaugh was rotten with fraud. On the other hand, if the assignment is valid, and its validity does not appear to be questioned by the demurrer, his beneficial interest is neither increased nor diminished by defendant's subsequent fraudulent transactions. The relation between Longaabaugh and Knapp was that of bailor and bailee, but the relation between Longabaugh and complainant, after the assignment, was that of trustee and beneficiary. In order to secure the legal title, it was essential that the stock be transferred on the books of the company, and to such a transfer complainant was entitled. Mechanics' Bank v. Seton, 1 Pet. (U. S.) 299, 305, 7 L. Ed. 152; 2 Thompson on Corp. $82425, 2430; Cushman v. Thayer Mfg. Co., 76 N. Y. 365, 32 Am. Rep. 315. Defendant, being then vice president of the company, as well as custodian of the stock, refused to permit the stock to be transferred to complainant, and complainant never did secure either the legal title to the stock or the certificates of stock themselves. In the following year, by means of an alleged fraudulent judgment and execution sale thereon, after he had been duly informed of the equitable assignment to complainant, Knapp caused the certificates of stock to be levied upon and sold. He became the purchaser for the amount of his judgment, and later caused the original certificates to be canceled and new certificates to be issued, some to himself, some to his wife, some to his son, and some to other persons in privity with him. It is alleged that all of this stock is still under his control, and that no consideration was given by any of the holders except Knapp himself. These persons are not innocent purchasers. They are apparently holding the legal title to the stock for the use and benefit of Knapp, and are to return it to him whenever he so directs. The effect of the execution sale and reissue of the stock was to take the legal title out of Longabaugh and vest it in Knapp and his friends. Longabaugh has no interest in the stock, either legal or equitable, as against complainant. It does not appear that he claims any, and, if he were to make such a claim against complainant, he would be estopped.

No relief is sought against Longabaugh, and there is no allegation in the bill which would support a decree against him. He is not a necessary party to the cause of action set out in the pleadings, and the demurrer in this respect must be overruled. Mechanics' Bank v. Seton, 1 Pet. (U. S.) 298, 306, 7 L. Ed. 152.

The act of defendant in securing for himself the legal title to the stock when he knew it belonged to another was fraudulent. “The taking of a legal estate after notice of a prior right makes a person a mala fide purchaser (and not that he is not a purchaser for a valuable consideration in every other respect). This is a species of fraud, and dolus malus itself; for he knew the first purchaser had the clear right of the estate, and, after knowing that, he takes away the right of another person by getting the legal estate. Le Neve v. Le Neve, 3 Atk. 619; Hardy v. Harbin, 4 Sawy. 536, 550, Fed. Cas. No. 6,061; Weston v. Bear River & Auburn Co., 6 Cal. 425. Knapp secured the legal title to the stock after it had been assigned to complainant, after he knew of the assignment, by refusing to permit its transfer on the books, and by means of a fictitious claim and a fraudulent judgment against Longabaugh. The beneficial interest held by complainant was not divested by this act. A court of equity will impress upon this stock in Knapp's hands and under his control, and wherever it may be found, until it reaches the hands of an innocent purchaser, a constructive trust in favor of complainant. 3 Pom. Eq. Jur. § 1053; 1 Perry on Trusts, § 166; 1 Pom. Eq. Jur. (3d Ed.) § 155; Eaton on Equity, § 194; Dow v. Berry, 18 Fed. 124.

The fact that the property involved here is corporate stock does not change the rule. “A trust may arise or be created with reference to personal property upon the same facts and circumstances which would give rise to a trust in real estate.” Levi v. Evans, 57 Fed. 677, 682, 6 C. C. A. 500; 4 Pom. Eq. Jur. p. 2763. The doctrine of trusts, and especially of constructive trusts, has been created, interpreted, and enforced by equity, not by the common law. An action at law must be based upon a legal title or a legal right. An equitable title cannot be set up in an action at law, and, when the legal title is held by one person and the equitable title by another, the latter must look to a court of equity for the protection and preservation of his rights. Therefore the subject of trusts naturally falls within the exclusive jurisdiction of equity. Oelrichs v. Spain, 15 Wall. 211, 228, 21 L. Ed. 43; Shainwald v. Davids (D. C.) 69 Fed. 687, 698; Clews v. Jamieson, 182 U. S. 461, 479, 21 Sup. Ct. 845, 45 L. Ed. 1183; 1 Pomeroy, Eq. Jur. § 151. “An element of trust in the case,” says the court in Delrichs v. Spain, supra, “always confers jurisdiction in

“All possible trusts,” remarks Justice Peckham in Clews v. Jamieson, supra, "whether express or implied, are within the jurisdiction of the chancellor.” It is true the federal statute provides that "suits in equity shall not be sustained in either of the courts of the United States in any case where a plain, adequate, and complete remedy may be had at law.” Rev. St. § 723 [U. S. Comp. St. 1901, p. 583]. This, however, is merely a statutory expression of the equitable rule. In no sense does it enlarge or contract the equitable jurisdiction of the federal courts, or exclude them from any recognized field of equitable jurisdiction. Whitehead v. Shattuck, 138 U. S. 146, 150, 11 Sup. Ct. 276, 34 L. Ed. 873; Dow v. Berry (C. C.) 18 Fed. 121, 125. At section 137 of volume 1 of the third edition of his work on Equity Jurisprudence, Prof. Pomeroy uses the following language:

“The exclusive jurisdiction extends to and embraces, first, all civil cases in which the primary right violated or to be declared, maintained, or enforcedwhether such right be an estate, title, or interest in property, or a lien on property, or a thing in action arising out of contract—is purely equitable,

ور

equity.”

and not legal, a right, estate, title, or interest created by equity, and not by law. All cases of this kind fall under the equitable jurisdiction alone, because of the nature of the primary or substantive right to be redressed, maintained, or enforced, and not because of the nature of the remedies to be granted, although in most of such instances the remedy is also equitable. It is a proposition of universal application that courts of law never take cognizance of cases in which the primary right, estate, or interest to be maintained, or the violation of which is sought to be redressed, is purely equitable, unless such power has been expressly conferred by statute."

In Kilgour v. New Orleans Gaslight Co. et al., 2 Woods (U. S.) 144, Fed. Cas. No. 7,764, one of the defendants by fraudulent assessments had secured the transfer to his own name of shares of stock in an incorporated company. The court said:

"It is clear that there is no adequate remedy at law. A money judgment against Attrill for his fraudulent conversion of the stock of complainant would not give complainant the relief he wants. The purpose of the bill is the recovery of complainant's stock, of which he has been fraudulently dispossessed by Attrill, who claims title to it. Clearly this result can only be reached by the decree of a court of equity."

In the case of Hagan v. Continental National Bank, 81 S. W. 171, 182 Mo. 319, where the pledgee of stock had, by means of a fraudulent sale, purchased the stock in his own name, and caused the same to be transferred on the books of the company in the name of other parties, and it appeared that the defendant still controlled and could produce all of the stock, it was held that equity had jurisdiction.

Defendant has cited a number of authorities to the effect ti.at equity will not, in general, "decree the specific performance of contracts concerning chattels, because their money value recovered as damages will enable the party to purchase others in the market of like kind and quality.” This rule is correct, and has been frequently applied to contracts for the sale of corporate stock. Equity has uniformly refused relief, except when it appeared that there was some special and cogent reason why the vendee should have the particular stock contracted for. In such cases the underlying right is legal. It is based on contract, and the common law, as a rule, provides ample and adequate relief for the violation of such a right. But in a case like the present complainant's rights are purely equitable; his title is equitable. The legal title is in defendant. The shares of stock have been transferred on the books of the company, and stand in the name of defendant. The relation between defendant and complainant is that of trustee and beneficiary. The law falls short of the remedy which complainant asks, and to which he is entitled. Equity alone in such cases can afford him ample relief by the restoration of his property. To contend that complainant must resort to an action in damages, as for a wrongful conversion of the stock, is to ignore the facts set out in the bill. If these facts are true, complainant is the equitable owner of the stock, and in equity is entitled to have his property. A court of law cannot decree a return of this stock, and for this reason the legal remedy is incomplete. In Krohn v. Williamson (C. C.) 62 Fed. 869, the suit was between the promoters of a bridge company. The promoters were to receive a certain amount of the stock and bonds of the company for their services. Two of the promoters, however, by indirect means, secured to themselves and in their own names additional stock from the company. It was contended that the complainant had an adequate remedy at law, but it was decided that the defendants held complainant's share of the additional stock as trustees. Judge Taft, at page 877, used the following language:

“It is true that the relief asked is in the nature of a decree for the specific performance of an obligation to transfer personal property, and that ordinarily courts of equity will not afford such a remedy.

* But the controlling reason why, in this case, the delivery of the stock in specie should be decreed, is that the defendants hold it in trust for the complainant.

* The court as a court of equity acquires jurisdiction of the action, not because damages at law would be inadequate, but because it is an action to enforce a trust, and, having jurisdiction on this ground, may give such full relief as the nature of the case requires. Johnson v. Brooks, 93 N. Y. 337; Stanton v. Percival, 5 H. L. Cas. 257; Cowles v. Whitman, 10 Conn. 121, 25 Am. Dec. 60; Kimball v. Morton, 5 N. J. Eq. 26, 53 Am. Dec. 621."

In Pooley v. Budd, 14 Beav. 34, the Ystalyfera Iron Company, one of the defendants, had sold a quantity of iron. The full price had been paid, but afterwards the company refused to deliver the goods. In deciding the case the court held that, inasmuch as the company had received full pay, they had no claim upon or interest in the iron arising from the contract, and that they had become mere trustees of the iron sold for the benefit of the real purchaser, or the person entitled to claim it under him, and that a court of equity had jurisdiction. At page 43 the court uses the following language:

"It is and has long been the law of this court that it will not lend its assistance to enforce the specific performance of ordinary contracts for the sale and purchase of personal chattels, unless, as in the case of Buxton v. Lister, 3 Atk. 383, there be something very special in the nature of the contract. On the other hand, if a trust be created, the circumstance that the subject-matter to which the trust is attached is a personal chattel will not prevent this court from enforcing the due execution of that trust."

To the same effect are the following: Hill v. Bank, 44 N. H. 567; Kimball v. Morton, 5 N. J. Eq. 26, 43 Am. Dec. 621; Young v. Fox (C. C.) 37 Fed. 385.

The fact that complainant asks a judgment for the value of the stock which cannot be returned does not affect the equitable jurisdiction. If the stock in defendant's hands was impressed with a trust in favor of complainant, the proceeds of such stock in his hands were subject to the same equity. This is elementary, and the rule is undoubtedly the same as to stock issued to the wife and son of defendant, even though the title thereto may never have stood in defendant's name on the books of the company. In cases where the wrongdoer has no title originally, equity frequently converts such a party into a trustee, as when a thief sells or exchanges stolen goods for money or securities equity will lay hold of the substituted property in the hands of the thief, or in the hands of his assignees with notice, and treat it as a trust, and the holder as a trustee, whether it be money, stock, chattels, or real estate. Equity will never permit a wrongdoer to profit by his fraud. Wood v. Perkins (C. C.) 57 Fed. 258, 260; Newton v. Porter, 69 N. Y. 133, 25 Am. Rep. 152. The objection that the Tonopah Home Mining Company is an indispensable party to this suit is not well taken. The bill does not show that the corporation has any interest in the stock in question, and no relief is asked against the company. Williamson v. Krohn, 66 Fed. 655, 661, 13 C. C. A. 668.

155 F. 52

The suggestion that, if complainant has a cause of action, it is not against defendant, but against the Tonopah Home Mining Company, is entirely without merit, and the same may be said as to other objections raised by the demurrer and not already discussed in this opinion. The complainant has set out facts sufficient to entitle him to equitable relief.

The demurrer is therefore overruled.

CONKLIN et al. v. R. P. & J. H. STAATS CO.

(District Court, D. New Jersey. July 24, 1907.) WHARVES-NEGLIGENCE-INJURY OF SCOW AT PIER-SUNKEN PILE.

Respondent, as contractor, was constructing the piers of a steamship company at Hoboken to replace others which had burned and had contracted with libelant to furnish crushed stone delivered on scows. It had removed all stubs of piers extending above low water, and an inde pendent contractor had dredged the botton under and alongside the old piers to a depth of 25 feet, and removed all other stubs found, and had also taken proper measures to ascertain that none remained. By agreement libelant left five scows loaded with stone which was to be used by respondent as required during the winter. Respondent caused one of such scows to be moved from one side of a slip to the other, and there made fast to the pier to which others of the scows were also tied up. A very strong wind blowing from the west for two days caused an extraordinary fall of the tide, and as she settled such scow was pierced by an unknown sunken pile, and capsized and injured. The pile or stub appeared to be an old one, but the span alongside the pier had been used by other vessels during the work with safety, and it was shown that respondent had dragged the bottom to discover any obstruction. Held, that conceding that respondent owed the duty of reasonable care to protect the vessel, as bailee or otherwise, such care had been exercised, and that no neg. ligence or fault was shown which rendered it liable for the injury.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 48, Wharves, $$ 36, 37.)

In Admiralty.
Walter L. McDermott, for libelants.
J. D. Beedle and R. S. Hudspeth, for respondent.

CROSS, District Judge. The libel in this case was filed for the purpose of recovering damages for injuries to the scow Sarah while used for carrying crushed stone, also for the loss of her furniture, tackle, cargo, etc. The respondent is a New Jersey corporation, and at the time of the injury to the scow was engaged in building docks and piers for the North German Lloyd Steamship Company, on the Hudson river at Hoboken, to replace docks and piers which had been destroyed by fire. The contract involved work of great extent and importance, and which, although commenced in 1900, was not completed and turned over to the steamship company until 1906. A fire had destroyed all the superstructure of the old piers, but had left the stumps

« ПретходнаНастави »