620
I'El>ERAL BEPORTER,
vol. 41.
relief sought. :It follows :that the demurrer must be overruled and disallowed on both grounds. It is accordingly so ordered and adjudged, at the cost of defendants. It is further ordered that an injunction issue restraining and enjoining the defendant the Glasgow Railroad Company, and its directors, 'or their successors in office, from making any other or further applications of the corporate funds of said company, however derived, to the payment, liquidation, and discharge of the bonds here.. tofore issued by said town of Glasgow and precinct No. 1 of Barren county, Ky., in payment of their subscriptions to the capital stock of said Glasgow Railroad Company; such injunction to continue in full force till the further,order of this oourt in the premises. The defendants will be allowed until the October 1'ules, 1888, to file their answers to the bill.
WALL 11. THOMAS "r.:.,
et al. 4, 189O.};
Oourt,i S.D. NeliJyork.
FEDEnAL COURTIl;...PUTrBs.....TnuBTS-AoTION8 AGAINsT'TnusTIIIIII.
" of Rev. St. U. ,So S 781, where tnere : ' several ,soIlle ,of whom are not found in the district and do not appear, 1, , the court may prl>cead to trial betweetr'We parties properly be-fore it, 'but the decree , sRlI-'lnot prejudice 1)holle, npt sllrved or appearing, t!).e cpurt, cannot proceed to ,' final decree in a suit b1 a beneficiary against foUr of nine trustees of an unincorpo'rated,association, ohargIng an abuse of their powe1'S, and seeking to restrain an ai, leged attempt to windpp the trUst.
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In, Equity. : lor. injunction. there are several defendants in , Rev.l!)t. p'. 8.§ 737, is as follows: anysu.it at or. in eqUity, and onll or more of them are. neither inhabitants or nor found within the in whic,h tbesuit is brought, and do not voluntarily 'the cotirt may ,entertain jurisdiction, and proceed to the trial and adjudicatiot1 of the 'suit between the parties who are properly before it; but the or decree rendered therein shall not conclUde or prejUdice other palties Iiot regUlarly: ser,ved with process, nor volulltilrily appearing to nQn"jQinder ,of"partieil who are not inJuwitantsof nor found 'Yit.hin the,dlstrict, as shall not constitute qlatter, of abatement or the suit."· ..',' , " . . Strong &' Mathew8on, foS: cotnplainap.t· .· $ttllivan &' OrfHnwell. for defep.dap.ts. .,' , 'I
On
,WALLACE,
J.' The amendinents to this bill, made since the hearing
oUbe. motion for an injunction,eliminate from the case the question requisite.. ,diversity of citizenship to give this court jurisdic-' tio,J,l exists' between' the, parties. In its present form, the bill is· One brQ'qgM:bYft and 'resident of Virginia against four defendants, and'l'esidentS of this i stata. The defenda.nts are four of the trustees of theCotton Oil Trust, an unincorporated associatioD, ppssessing property of largeva]qe, situate in several states, the
title and management of which is vested· nine trustees, having powers and dnties defined by a trust agreement. The trust was constituted by the owners of various business concerns who desired to consolidate their properties under one management. The agreement placed the title to the· properties in the trustees, and authorized them to carry on the business of these concerns, and distribute the dividends arising therefrom according to the interests of the beneficiaries, as represented by certificates showing their respective interests. The complainant is a certificate holder, and alleges in his bill that the trustees have wasted Ia-rge sl,lms of money by extravagant and' corrupt management; that in other respects they have abused and disregarded the trust agreement; and that they are now threatening to dissolve and wind up the trust, in violation of the terms of the agreement. The prayer of the bill is that the .ants" 'as trustees and individually, be restrained from dissolving Or winding up. the trust, or from disposing of ltny of the property or assets of the trust with that view, or with a a new reorganization of the as{Iodation. . Upon the present bill, the only question for consideration at this time is whether the court has jurisdiction to proceed to l:!- decree .in a suit brought against four of nine trustees by abeneficiary \vho has an inter': in the trust fund, in which the are charged with an'abuse their. powers, and the relief sought is that the defendants be restrained from d(jing specified acts in alleged violation of the authorized powers of the trusteelil. If the five not, sued are indispensable parties'to the controversy. the. court cannot proc'eed until they are brought in, and :should refuse a preliminary injunction. They are indispensable parties if their interest in the subject-matter of the 8uit,and the relief sought, :{lre such that a final decree cannot be made without either affecting that interest,or leaving the controversy in such a condition that its final determinatibtf'11lay be wholly-inconsistent with equity and good conscience. If the suit were brought to charge the defendants merely with personal liability for their fraudulent acts, it would be free from difficulty. The rule is well settled that in such a case a cestui que trust may join all the 'trustees who have participated in the fraudulent acts of which he· complains, or'r'ilay proceed against one or inore of them severally at hiselEiOo; tion. The right pf action in such a case arises delicto, and in equity, ;as well as at ·law,· the tort may be treated as several· or joint, at the eleetion of the injured' party., Such a case, supplies an exception to the rule ihat, in a suit againsttrustees. all of the tru8tees must be made parties. Gill, 19 Fed. PeU,5 Paige, 607; Heath 'Y. Railway Co., 8 Blatchf. 347; Pranco v" Jitanco. aVes. 75; Wilkinson v. Parr'y, 4 Russ. 272. '' . . The obNct of the present snit, however,is to restrain the defendants from participating in acts ,Which they and their. co-trustees are about to perform. If the, defendants are enjoined,' their: co-trustees .will to that -extent be crippled, and may be wholly prevented t'romdoing th,ey propose. What is proposed to be dorie may be lawful and· authon,zed, ;and indeed essential to the protection of the great interests' with· the
in
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:Wh.ll;t t.h.e . . rq.p, .... t.q. d. <>.' i.S rin . ...d .. a. 0. 4.ul1.l.a ...w.IUI. Wh1Je. tbe absent would not be .bound by such a decree, 1t could not be ... emba,r;rassing contemplated it would depl'lve the41 of the ,?o:pperatlOn, of tbeir ·. the court in, Barney v. BaltimOre City" 6 Wall. 280 1 ·.a:pp'1icahle: ,"If.a deqrEle is, made which is .jntimded tp. bind, wheJJ, ,they are not,partiell wthesuit"and, opportumty to be heard., 13ut,as the decree t.hat afford the re1i?f q l'ISk . .to t pe._, :o,t .l' . ... . ·. .... 1t., lS....ob . . the.1 e.£·. o.ow.sou.gh.tl,8 .,eh. . 91 extepphll.t.1twi,ll :pr,9cp,¢liijl:)gs of the 'absept .ff;:W?twitbstandipgan.m. defenda.nt>sXrom; tllEl trU!ltee& It defendants, the complainant' getlulthing by the injunction. On the a..n.,. i.nj.p.l1pti()D wou.,.Jd,'l+l'.,.e.,.ven.t..tb 3P5e11t ... . t{Jesfrom po w1tb,?ut giving to, be . .The, all byindi,reqtiol1 · to contt:OJ, trust, someofthQse duty Of right to be heard. , Tbe
It is that, these,thmgs are unauthorIzed, and a rightto be beas cannot be to.be}rue liS for faecree t,hose: Who have a tQchallenge them h,lJliv.e been yen, ,an opportumty t6 do so,, A in the, ofa min()rity. Qf unfaithful tmst ea,J;>y;ci0ll,usi0n with, interests wight not lie with o(oth.er beQeficlaril*l' to the' performance of legHimate and dutiei;l,by '. . ". ,. ,. '. of the llnited States 8tatqtes affect the that the court make no deer .. }.,.he. r.1.'gn.,ts f.. all a.b.,s.ent perao.n, ,and. none bet.w .. ..een the p. artiea whic;h,sO far invplves and depenos upon the rights of an absent cannot be' done betwee,n the parties preselltwltbo\ltaffectipgtbQse rights. Shield8 v. Barrow, 17 How. 130. If i(were adjudged in this suit that the de'fendants have been guilty of brea,ep.oftrust, and that, what theY-,propose to do is a violation of the tfllStagreenlElD,t,it, might also, be.' in another'. suit brought tqepresent were guilty of Ii. cO',operate with tbe1r, co-trustees in the .· j And if a, isu,it were to :be brought by those !lere, tqe, dElf¢ritlnnts, to, charge them with bility: b,ecallse duty, ,the decree in the . prqtect' ':. stated. the court.' is uP<>Q Jp o,n1y that. treir trpst, pltvepoue so, .and to decree that ()f whicp. Stqyording to the li!:;p,l.'t!ach :Qftrust, beC!1use,the g.
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W'Y'LIE ro,
ft. MISSOURI PAC.
RY;:Co,.' ,
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(Of,rew!t Oourt, S. D. New York. FebruMiy 18/1800.) ,,/
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,"Certain negotiable bonds.i>art of a large is!lue mad6 by a railroad corporation, and numbered consecutively, owned by the plaintiff, were stolen; ,the numberi al,: I!laturity !/ondforvalue bya pur,In a ,SUit ,against to re60yertM amount of the bonds by tbe, or,,igtnal oW,ner. held: (1), T,bat, i.,h,e Origin,aI, ow,n,e,r" ,CoD,1,d not recov,e,r l,'ft,hi:l,' in :tlj.e of a purcha,ser wp-o .acquired good them,. :(2) 'l'hat the obligation represented by the bonds was not annulled by the alterM;ion of the serial numbil1'!l' made'by a' the privity of the as the numbers were a matter to pontr9,Ct, and not,s teriil part thereof. ' , , , ·. , : ' ; f)
BONDS-SBltUL, NUMlIERt-:-ALTEJUTION AND, SALE
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'wsa aI1l1.ction fltoiigblby Wylie agi1.irist !the MissouriPaeitib Raihyay 'CQm,pany, to 'recover'rnoneydlleoncertain bonds stoleI1lrom plain.tiff.' '" ' ,' ',' , , Artem.1l8 Holml?8,' for lllaihtiff. !/ WinBlOw S. Pierce, for defendant. ' i'
At' Uw. ,Action
',:'
'" WA:t¥ACE, J.; In January: 1876, certain 'rlegdtianle bonds, forttJOOO rllJ¥1e by the CoIlipanr partdfah 7,000 bonds ot'Hke tenor, then QwnecFby 'th.e plliintiff, were stolen 'from a vault of the "Northampton NlI.ti6nal :Bahk,whel'eshe had left them for safe-keeping. , The bonds, like'l,tll of tHe issue, were numbered.' The defendiinthas' succeeded ,tothe:liability of the 'Pacific Raihoad. of Missouri" all'd' 'starids in the positidn'.of the original obligor (or the payment of the bonds. The plaintiff, na"ing tendered as,uBicient tne defendant, againSt it to recover the amount ofth'e Dimds. 'fhe defenqatit hllS'provedthttnne bonds are in thehl\ocls' cifa'bona fide holder; :who' purchased fore'iliatu'rity and 'for after they were stolen, butafter' tHe'Dumberson thehonds had altered byera5u,re and a, substitution 'of other :nulIlbers. As no one, except the thief orsorhe confederate 'could have hfidahy 'object in making the alterations,'it is reasonable to asthis was done, .bY some person particeps etiminu;inorder to instrumentawith less risk. ,The' alterations werasa skillthittthey'cou'1dnot be detected, by: the purchaser."It is 'plain thatiftpe purchaseraoquireda valid title to the bonds 'as against t'he plaintiff, 'she has no cause of action against the defendant,l:lecause all her rights have vested in' the purchaser, and the defendant is liable .to him upon the defendant· cannot be liable,both to 'the ,purchaser 'and to ,the .plaintiff. , The bonds being negotiable, the promi,a,e to,p8X 'runs, to th(nbider, and, ifhebM' acquired t,heth btina fide and f9"f p!AiI/-tiWs gone,. aj):d the:pr9mi!!e' by JheMy.xnept; to holdl'll'liL.cCordtng to , . ", " " It is fafu.iUnr law\hat, a alteratioQi ipifll'lgotiable intentionally by the owner, avoids the obligation. An alteration, although in a material part, made by a stranger without ,the ! pri\TItt of