HAMILTON
V.
CHOUTEAU.
839
defendant ought not to be permitted, against this showing, to place this structure in the river until its right to do so is definitely ascertained and determined. I am surprised that any person should have the hardihood to undertake such an important enterprise, in the face of the act of February 14, 1859, supra, declaring the river a common highway, and the congressional legislation of the last 15 years upon the subject of bridging navigable waters of the United States, without first obtaining the sanction of congress. Bnt this being a matter of some moment to the defendant, I have concluded to delay the issuing of the injunction until the first day of the next term, April 11th, or as soon thereafter as the circuit judge is present, when the matter. may be further heard, if the defendant desires it; and in the. meantime the defendant will be restrained by order, as prayed in the bill.
HAJnLTON and others
t7.
CHOUTEAU and others. January 17,1881.,
(Oircuit Court, E. D. Missouri.
1.
FEDEBAL JURISDICTION-INSOLVENT RECEIVER OF FRAUD. STATE
LIFE
INSURANCE
COMPANY-
Suit was instituted in a federal court by the policy-holders Of an insolvent life insurance company against its stOCkholders for the fraudulent appropriation of a part of the assets of the company. Held, that such court could not assume jurisdiction when the company was in the hands of a receiver of a state court, who was proceeding to collect and administer the assets for the lJenefit of all the creditors.-[ED.
In Equity. Demurrer. This was a bill filed by the policy-holders of the St. LOUIS Mutual Life Insurance Company for relief against its stockholders. The company, a Missouri corporation, was chartered on the mutual plan, with stock of the par value of $100,000, of which defendants were the owners. Proceedings were commenced in the state court by the insurance commissioner
340
FEDERAL REPORTER.
to wind up the company, after which, on the thirteenth day of December, 1873, its directors, by the sanction of the commissioner and decree of the court, conveyed and delivered the assets of said company to the Mound City Life Insurance Company, a Missouri corporation, in consideration of a covenant on its part that it would re-insure all outstanding risks and pay all liabilities of said St. Louis Mutual Life Insurance Company; and likewise redeem and take up said stock by delivering a like amount of its own stock to the owners, with a right on their part, at any time within one year from the date of said contract of re-insurance, to re'turn said new stock to the Mound City, and receive from it the par value; all of which is alleged to have been done by the defendants, and that defendants received from the Mound City the par , value of their stock, which was paid to them out of the assets received of the St. Louis Mutual Life Insurance Company under this contract of re-insurance. The Mound City Life Insurance Company became insolvent, and was unable to keep its agreements of re-insurance, in consequence of which both companies have been4eclared insolvent by proceedings in the state court, and are now in the hands of their respective receivers, and being wound up nnder the Missouri law. n is further alleged that the contract of re·insurance was fraudulent and void, and that the money of the St. Louis Mutual Life Insurance Company in the hands of the Mound City was cha,rged with a trust in favor of the plaintiffs, and that the defendants fraudulently agreed to this arrangement so as to be able to realize par for their stock, which was worthless, and should in equity account to plaintiffs for the amount received from the Mound City. Bobt. Crawford, for plaintiffs. Chire, Jamison rJ: Day, for defendants. TREAT, D. J. The demurrer in this case is both general and special. By the terms of the bill it appears that the various insurance companies named are in the hands of receivers duly appointed by a state court of competent jurisdiction, and that their affairs are in the course of judicial administration. If the allegations of the bill are true, as
HAMILTON V. OHOUTEAU.
841
by demurrer, said receivers are the proper parties to receive whatever may be due by defendants,so that the same may be distributed pro rata among the creditors. Undoubtedly, if such a fraudulent scheme existed, as is charged, whereby the parties defendant, for their own private gain, caused the plaintiff and other policy holders to be defrauded of their lawful demands, said defendants should, in a proper proceeding, be compelled to refund for the common benefit. It must be observed, however, that the bill, even in that view, is fatally defective, except on one hypothesis, imperfectly presented. The defendants, it is charged, were respectively stockholders in the St. Louis Mutual Life Insurance Company. Each held a different number of shares. It nowhere appears that said stock was not fully paid up, and consequently that the stockholders were liable for the debts of the company. It is alleged, however, that all the assets of said company were, with their connivance, etc., transferred to the Mound Mutual Company, of whose shares of stock they were to receive a like number to those held, in the St. Louis Mutual, subject to be paid off at par by the Mound Mutual; that those shares were so paid off, and the 'defendants became the respective beneficiaries thereof; and' that the only and main source of payme,nt was from, the St. Louis Mutual. Practically, the insolvent St. Louis Mutual, through the fraud charged, secured to these conniving stockholders full pay at par for their worthless stock out of the assets which shoqld have been devoted to the payment of its debts. It is not doubted that under'sufficient averments in a proper state of such a case equity would lay its -hands upon funds thus fraudulently acquired, and apply them for the benefit of honest creditors. But it is averred that the St. Louis Mutual is now, and has been for years, in the hands of a competent receiver, who is proceeding to collect and administer its assets for the benefit of all creditors. Why, then, should this court (the receiver being no party) undertake to collect and administer a fragment of the assets? Will a (lhancery conrt split assets and demands to the extent Of upholding as many suits as there may be creditors or items
342
of assets? Instead of avoiding thereby it would indefinitely create a multiplicity of suits. If this court took charge of this suit it would be compelled to bring in all the parties and take custody of the assets in order that each creditor might receive his pro rata; for equality is equity. The grave question as to jurisdiction remains with ref. erence to the citizenship of the parties. This subject has been considered in several cases this term, and all that need be added now is that the bill is fatally defective. The demurrer is sustained.
GRISWOLD
'D.
BRAGG and Wife.
(Oircuit CQurt, D. Oonnecticut. February 21, 1881.) 1. BETTERMENT ACT-CONN. GEN.
ST. (REV. 18751 p. 362, CONSTRUED. Where a defendant in ejectment, in,.good faith, believing that he had an absolute title to the land in questlOn, has made valuable improvements thereon, before the commencement of the action of ejectment, tiMI judgment will not be rendered for the plaintiff in ejectment until he has paid to the defendant, the value of his improvements, less the sum due by him for use and occupation. Where good faith and belief actually existed,the deeds not showing that an absolute title was not conveyed, and the defendant not being chargeable with laches, he will be allowed the value of his improvements, notwithstanding that he held merely under a quitclaim deed. Mere notice of adverse claim does not forbid the conclusion that such suLsequent improvements were made in good faith.
In Equity. SHIPMAN, D. J. This is a bill in equity, supplemental to a.n action of ejectment in favor of the present defendants against the present plaintiff, and founded upon the statute of this state commonly clI-Hed the "Betterment Act." Gen. St. (Rev. 1875,) p. 362.- The plaintiff in the ejectment suit recovered ." Final judgment shall not be rendered against any defendant in an action of ejectment, who or whose grantors or ancestors have in good faith, believing that he or they, as the case may be, had an absolute title to the land in question, made improvements thereon before the commencement of the action, until the court shall ascertain the present value
GRISWOLD V. BRAGG.
348
a verdict against the defendant for the seizin and possession of an undivided fourth part of a tract of land containing an auger factory and a mill privilege in the town of Ohester. The defendant thereupon filed' a bill praying for the relief provided for by the statute. On May 5, 1845, Joseph C. Dudley conveyed the land in question, and other lands, by warranty to Joshua L'Hommedieu, and on March 28, 1846, the said Dudley, as guardian, appointed by a court of probate in the state of Massachusetts, of his minor children, Orestes Dudley and Cecelia M. Dudley, conveyed to said Joshua and Ezra L'Hommedieu the interest of said minors in all said lands by. virtue of an order purporting to have been made by. the cQurt of probate for the district of Saybrook, wherein said lands were situate. Ezra L'Hommedieu conveyed to said Joshua ,his (the said Ezra's) interest in the land now in controversy, by quitclaim deed dated February 22, 1850. Joseph C. Dudley and his children derived title to these lands from Harmon Dudley by his last will. The devise wasin the following words: "All my real estate not otherwise disposed of in this my last will and testament, of every kind and description, I give, and devise to my nephew, Joseph Cyprian Dudley, the son of my brother Joseph to have and to hold 'the BaIQe as an estate in tail to him, the said Joseph Cyprian Dudley, and to the heirs of his body begotten; it being my expectation and understanding that in the heirs of the said Joseph Cyprian the same will become and be an estttte in fee.simple." By this will an estate in fee tail was vested in Joseph C. Dudley and a fee-simple absolute in his issue. The tenant thereof, and the amount reasonably due to the plaintiff from the defend. ant for the use and occupation of the premises; and if such value of such improvements exceeds such amount due for use and occupation, final judgment shall not be rendered until the plaintill has paid said balance to the defendallt. But if the plaintiff shall elect to have the title confirmed ill the defendant, and shall, upon the rendition of the verdict, file notice of such election with the clerk of 'the court, the court shall ascertain what sum ought in equity to be paid to the plaintiff by the defendant, or other parties in interest, and on payment thereof may confirm the title to ill paying it."
344
/ in tail died on January 15, 1877. A daughter, Ida E. Bragg, one of the plaintiffs in the ejectment suit, was born August 6, 1855. The interest of said Ida in said lands was not conveyed by either deed, and at the death of her father she \)wned an undivided fourth of the land now in question. Joshua L'Hommedieu conveyed said land to the plaintiff and others, his partners in business, by warranty deed, dated December 6, 1850, subject to a mortgage of $450 to the state of Connecticut. This mortgage was quitclaimed on January 8, 1852; the land was remortgaged to the state to secure the payment of the same sum on January 2, 1852; and this last mortgage was quitclaimed on August 10, 1853. On or about August 25, 1863, the plaintiff and his partners conveyed said land to Turner & Day, the plaintiff conveying by deed of warranty. On February 15, 1865, the said Turner & Day and Edward C. Hungerford, who had theretofore become a partner with the other grantors, con· veyed by quitclaim deed the whole of the land in question to the plaintiff, who has ever since been in possession thereof, in the actual and bonafide belief that it was his actual estate in fee-simple. In 1877, Henry W. Ely, Esq., of Westfield, Massachusetts, as attorney for Mrs. Bragg, notified the plaintiff of her claim of title to said property. At or about the same time, similar notifications were given to the other occupants of the land originally conveyed to Joshua L'Hommedieu, and which had now become subdivided, and was owned by 16 or 18 reputed owners. Much of the land was now improved. Dwellings, two factories, and a church were upon the property. These owners held a meeting, and appointed a committee or agent to examine the question of title. He employed counsel, who reported that the claim was entirely without foundation. The plaintiff consulted the same lawyer and received the same opinion. The committee visited Westfield, saw Mr. Ely and the relatives of Mrs. Bragg, and obtained the idea, from these and other conversations, that the claim would not be pursued, and that it was an attempt to extort money without right, and so reported to the plaintiff.
345
The plaintiff's factory was burned on October 15, 1878. He commenced rebuilding on November 1. 1878. The new building was completed about January 1. 1879. Before rebuilding he asked the same counsel whether there eould be any doubt as to the validity of his title. and received answer that Mrs: Bragg had no valid claim. On January 26, 1878, Mr. Ely offered to give a discharge from all the Dudley children to all the owners for $1,400. This offer was declined, and on February 21, 1878, Mr. Ely made a like offer of discharge for $500. On March 2, 1878, Mr. Bragg repeated this proposition, accompanied with the assurance that if it was not accepted suit would be commenced immediately. Suit was commenced on April 10. 1879. Between December 6, 1850, and February 15, 1865, the owners of this property made repairs and some slight improvements thereon, but the improvements are so small that no account is made of them (eicept the portion of the permanent improvements upon the dam which may have been made by Turner, Day & Co.) until after the repurchase by the plaintiff in 1865. Since then the dam has been substantially rebuilt, additional buildings and a store erected, walls and 8. fence built, trees set out, and the brook straightened. After the fire a new building and foundation were built. The testimony leaves no room for doubt that up to the date of the suit the plaintiff continuously believed that he was the absolute owner of said property from and after February 15, 1865, and that he had a perfect title thereto in fee simple, and that the claim of the defendants was without foundation. Neither is there any doubt that the plaintiff and his grantors made alll.heir improvements .upon said property, before the commencement of the action at law, in the like belief of absolute title, and in perfect good faith, in fact, both with themselves and towards any known or unknown claimants. These improvements are valuable, and have a present value in the enhancement of the price of said property. The averments of the bill are found to be true, except as to the value of the betterments, and except as to the averment that a joiner'!;! shop constituted one of the improvements.
346
,FEDERAL REPORTER.
This shop was erected upon the land by license of the plaintiff, with the right to purchase the same. That privilege has not yet been exercised. In addition to the que'stions of fact in the case, the defendants contend: First. That the plaintiff, holding merely undet a quitclaim deed, cannot be a bona' fide purchaser without notice. It is true that in a class of cases in equity no person deriving title merely by a quitclaim deed is considered a bona fide purchaser, (Oliver v. Piatt, 3 How. 333; May v. Le Olair, 11 Wall. 217; Dickerson v. Colgrove, 100 U. S. 578;) but I do not think that this principle or these decisions are applicable to ,this statute. The questions under this statute of good' faith and of belief are those of fact. Were the improvements made in good faith and in the belief of an absolutetitle? If they were in fact so made, the plaintiff is entitled to the remedy. By the words "good faith" I do not think that the legislature had in view an arbitrary rule that a particular kind of conveyance necessarily bars the existence of good faith in the purchaser. The statute was intended to be remedial, and to provide that if good faith and belief actually existed, the deeds not showing upon their face that an absolute title was not conveyed, and the purchaser not being chargJable with laches, then the equitable powers of the courts might be exercised. Second. It is claimed that, inasmuch as the plaintiff rebuilt his burned mill after notice of the claim of Mrs. Bragg, he cannot be considered as having acted in good faith so far as subsequent improvements are concerned. Prior to the Revision of 1875 the belief of good title was alcme required. The statute now provides that ejectment defendant shall also have made improvements in good faith. Mere belief of title is not sufficient. A wealthy occupant is not to make, without good reason, extensive improvements upon land which is to his knowledge earnestly claimed by another. The reputed owner must act in good faith; that ie to say, fairly, considerately, in good conscience, with integrity of purpose, and without rash haste. But it may not be
inconsistent with his good faith that some person had at some time asserted a claim upon his property. The notice of claim may be a circumstance all-important, and it may be of trifling consequence. In this case notice was given in January, 1877, of attack upon all the titles of land in a part of a village. The alleged defect was treated as of no consequence by competent lawyers who were consulted or who professed to give an opinion. The claim was virtually declared to be valueless by near relatives of the claimant. In January, 1878, her attorney offered to give a complete title to all the owners for $1,400, and in the succeeding month he made a like offer for $500. In March, 1878, this offer was repeated, with threat of immediate suit in case of non-acceptance, but no suit had been commenced when the plaintiff rebuilt in the fall and winter of 1878-9. Under these circumstances the plaintiff acted not only in good faith towards the claimant, but he had some reason to believe that she was acting in bad faith towards him. The mere notice of adverse claim is not considered in other states which have statutes of similar general character to forbid the conclusion that subsequent improvements were made in good faith. Harrison v. Castner, 11 Ohio St. 347; WeUs v. Riley, 2 Dillon, 569. By agreement of the parties, the wheel and shaft connected therewith, and main line of shafting, and all machinery, fixed and movable, are excluded from the computation of the value of improvements, and the said machinery, fixed and movable, shafting, shaft, and wheel, are agreed to belong to said Griswold, and not to pass to said Bragg and wife by virtue of any judgment in the ejectment suit. The present value of the improvements upon said land thus made by the plaintiff, excluding the value of the mao chinery by virtue of the foregoing stipulation, I find to be $6,100; one-fourth of which is $1,525. The amount due to the defendants by the plaintiff for the use and occupation of one undivided fourth of the premises for two years, one and {me-half months, was found by the jury to be $112, or at the xate of $4.40 per month.
Let there be a decree for the plaintiff that final judgment shall not be rendered until the plaintiff in ejectment has paid the balance thus found to be due to the ejectment defendant.
WESTPHAL
and others v. LUDLOW. March, 1881.)
(Oircuit Court, D. MinncBota.
The strict rules of law relative to the presentation and notice of tIle dishonor of promissory notes do not prevail when such notes are held as collateral security for a precedent debt. 2. SAME-ORIGINAL DEBT.
The failure to present and protest a note taken as collateral security will not defeat a recovery of the original debt, where the amount of the note was not lost through the negligence of the creditor.-[ED.
This action was tried before the court without a jury. The plaintiffs are citizens and residents of the state of Iowa, and the defendant is a citizen and resident of the state of Minnesota. In the year 1878, and previous to the month of September, the defendant was indebted to the plaintiffs for goods sold, and on the eighteenth of that month he enclosed in a letter to them a note of O. St. John Oole for $325, dated November 14, 1877, payable to defendant's order 12 months from date, and indorsed by him, proposing that they accept the note as payment on his account, the interest being computed to that date. Plaintiffs answered, declining the proposition, on September 11,1878, but saying they would take it for collection, . "applying the proceeds on your [his] account if collected at maturity." Not receiving a reply, plaintiffs, on September 21st, wrote, inquiring whether they should return the note or "send it for collection, applying proceeds on your [defendant's] account." The defendant replied September 27th, according to the plaintiffs' suggestion, requesting them to collect it, and stat-