not entitled to enforce payment, equity will interpose, and cancel the instrument. Pom. Eq. Jur. §§ 221, 911. I do not, at this stage of this case, deem it necessary or proper to determine whether or not these bonds, in the hands of innocent purchasers for value, would be enforceable against the complainant company. The question should be reserved for further argument, and careful consideration. But if the defense of the complainant company would be cut off, in case these bonds should pass into the hands of bona fide holders, it is clear that equity should interpose, and enjoin such transfer, and cancel the guaranties indorsed upon them. Upon another ground, altogether, I am of opinion that equity has jurisdiction to maintain this bill, and that is to prevent a multiplicity of suits. Exclusive of the bonds heretofore canceled, the complainant's guaranty appears upon some six or seven hundred bonds, of $1,000 each. It would become liable to suits upon coupons upon each bond as it matures. It is obvious that in course of time these bonds might pass into the hands of hundreds of persons, and the complainant company thus be subjected to a ruinous number of actions. A judgment in its favor, as between it and a particular holder, would not conclude any other holder. If the defenses to these bonds be treated as purely legal, and the remedy sought a legal remedy, the jurisdiction would exist. "It is not essential that the remedy sought shall be purely an equitable remedy. The very fact that a multitude of suits are to be prevented constitutes the very inadequacy of legal methods and remedies, which calls the concurrent jurisdiction of a court of equity into being, under such circumstances, and allows it to adjudicate upon purely legal rights, and confer purely legal reliefs." 1 Pom. Eq. Jur. § 243. There has been much conflict of authority as to the circumstances which will justify a court of equity in taking jurisdiction to prevent a multiplicity of suits; but an examination of numerous authorities brings me to the conclusion that where a complainant may be subjected to a multitude of separate suits by separate claimants, and the judgment in one case would not be conclusive in others, a case arises for equitable jurisdiction, if the defendants have a community of interest in the questions at issue, and in the kind of relief sought, by reason of the common origin of their several claims. This conclusion has the support of Mr. Pomeroy, who, after an elaborate consideration of this question, says: "Under the greatest diversity of circumstances, and the greatest variety of claims arising from unauthorized public acts, private tortious acts, invasion of property rights, violation of contract obligations, and notwithstanding the denials of some American courts, the weight of authority is simply overwhelming that the jurisdiction may and should be exercised, either on behalf of a numerous body of separate claimants against a single party, or on behalf of a single party against such a numerous body, although there is no common title, nor community of right, nor of interest in the subjectmatter, but because there is merely a community of interest among them in the questions of law and fact involved in the general controversy, or in the kind and form of relief demanded and obtained by or against each individual " com member of the numerous body. In a majority of the decided cases t munity of interest in the questions at issue, in the nature and kind of relief sought, has originated from the fact that the separate claims of all the individuals composing the body arise by means of the same unauthorized, unlawful, and illegal act or proceeding. Even this external feature of unity, however, does not always exist, and is not deemed essential. Courts of the highest standing and equity have repeatedly appeared and exercised this jurisdiction where individual claims were not only legally separate, but were separate in term, and arose from an entirely separate and distinct transaction, simply because there was a community of interest among all the claims at issue, and in the remedy." Pom. Eq. Jur. §§ 222, 911, et seq. The case of Railway Co. v. Schuyler, 17 N. Y. 592, is an interesting and instructive case. In that case it appeared that spurious certificates of stock in a railroad corporation had been issued by an officer having apparent authority to do so, and undistinguishable on their faces from certificates of genuine stock, and were outstanding in the hands of numerous holders. The holders of such spurious certificates were made parties defendant to the bill filed by the railroad company. After an elaborate consideration of the question, as to whether or not the bill would lie, that court maintained its jurisdiction, and held that the false certificates having a common origin and common ground of invalidity, though the holders became such under different circumstances and conveyances, and claimed different rights, yet they were all properly joined as defendants, and the bill maintained as a bill to prevent a multiplicity of suits. In Supervisors v. Deyoe, we find a similar case. The treasurer of Saratoga county, under an authority to issue notes for money advances to the county to the amount of some $20,000, issued 73 notes to the amount of $138,000. These notes were held by 53 persons, many of whom had brought separate suits upon their notes. The supervisors filed a bill in equity against all the holders of said notes, including those who had brought suits at law. Upon demurrer to the bill it was held that upon the facts a case was made, entitling the plaintiff, upon equitable principles, to implead the holders of the notes, for the purpose of having their respective rights, and the liability of the company, determined in one action; that the claims were of the same general character; and that the action was maintainable for the purpose of preventing a mul tiplicity of suits, and to protect plaintiff against the hazard of a double recovery. 77 N. Y. 219. The case of Waterworks v. Yeomans, L. R. 2 Ch. App. 11, was this: A very large number of persons held separate claims against the waterworks company. The claims were for damages originating in an inundation resulting from the breaking of a reservoir. Under a special act commissioners were appointed to inquire into and assess these damages, and issue certificates upon the several claims. The waterworks claimed that the power of the commissioners had expired, and that a large number of these certificates were in consequence invalid. A bill by the company, against a few, as representing the whole number, was filed, and a demurrer sustained. The court held that as the rights of all depended upon the same question, and that although the defense. could be made at law, it was "a very fit case, by analogy, at least, to a bill of peace, for a court of equity to interpose, and prevent the unnecessary expense and litigation which would be thus occasioned, and to decide once for all the validity or invalidity of the certificates upon which the claims of all persons depend." See, also, Black v. Shreeve, 7 N. J. Eq. 440. The demurrer must be overruled. One of the defendants has a suit pending in a state court against the complainant company upon matured coupons. The motion to discharge the injunction against the further prosecution of that suit is disallowed. TOD et al. v. KENTUCKY UNION LAND CO. et al. 1. CORPORATIONS-POWERS-GUARANTYING ACCOMMODATION PAPER. 3. SAME-POWERS-RULE OF CONSTRUCTION TION HAS BENEFITED. · CONTRACTS BY WHICH CORPORA The rule that the charter of a corporation is to be construed strictly against the grantee does not apply to a case where the corporation seeks to repudiate contracts whereof it has enjoyed the benefits, or where such contracts are attacked by creditors after the corporation becomes insolvent. Chicago, R. I. & P. Ry. Co. v. Union Pac. Ry. Co., 47 Fed. Rep. 22, followed. 4 SAME-ACCOMMODATION PAPER-BONA FIDE HOLDERS. A corporation empowered to issue bonds or execute promissory notes is liable upon its accommodation paper in the hands of persons without notice that such paper was not executed for value. 5. SAME CONSOLIDATION OF CORPORATIONS-GUARANTY OF BONDS OF ANOTHER CORPORATION. A land company empowered to form a "temporary or permanent consolidation" with any railway company, in furtherance of its general powers, may purchase all the stock of a railway company, and thereby control the same, if such control is in furtherance of the general powers of the land company. 6. SAME-GUARANTY OF SECURITIES OF ANOTHER CORPORATION. A land company thus empowered was authorized to open and develop mining and timber lands, and to condemn a right of way for the export of its products. Held, that the land company had power to guaranty the bonds and the interest on the preferred stock of the railway company, in order to complete the railway, and thereby secure a market for the products of the land company. 7. SAME AMENDMENT OF CHARTER-RETROACTIVE EFFECT. While this temporary consolidation existed, the railway company issued and delivered to the land company second mortgage bonds on account of its indebtedness to the land company. The clause in the charter of the land company permitting a consolidation with a railroad company was 1 subsequently repealed. Thereafter, the land company guarantied the bonds, and hypothecated or sold them to bona fide pledgees and purchasers. Held, that the repeal did not prohibit the land company from continuing its union with the railway company, or from binding itself by the guaranty. 8 GUARANTY OF DIVIDENDS-AMOUNT OF GUARANTOR'S LIABILITY. A land company, in the lawful exercise of its powers, guarantied indeflnitely a semiannual dividend of 2% per cent. on the preferred stock of a railway company. Thereafter both companies became insolvent. Held, that the holders of such stock, in the absence of evidence showing the value of such security to be greater or less than par, were entitled to prove claims against the guarantor to the amount of the par of their stock. 9. INSOLVENCY-RIGHTS OF LIEN CREDITORS AND HOLDERS OF COLLATERAL. In insolvency proceedings under Gen. St. Ky. c. 44, art. 2, creditors hav. ing liens or collateral securities (in all cases not expressly excepted by the statute) are entitled to dividends on their whole debts, and not merely on the balances after deducting the value of their securities. 10. FEDERAL COURTS-FOLLOWING STATE PRACTICE. In the absence of special provisions in the insolvency laws of a state, a federal court is not bound to follow the state courts as to the right of a creditor holding collateral security to a dividend on the full amount of his debt. In Equity. Bill by J. Kennedy Tod, Hugh Oliver Northcot, and William Stewart Tod, the Central Trust Company of New York, and the Columbia Finance & Trust Company against the Kentucky Union Land Company and others for the appointment of a receiver, declaring an assignment under the law of Kentucky, on account of the debtor having made preferences, and sale of respondents' property. Decree was rendered for complainants, and a reference ordered. The commissioner now submits to the court questions as to the validity and priority of certain claims. Olin, Rives & Montgomery, Butler, Stillman & Hubbard, and Humphrey & Davie, for complainants. St. John Boyle, for J. W. Gaulbert and others, holders second mortgage bonds. William Lindsay, Dodd & Dodd, and Grubbs & Moraney, for general creditors. Before LURTON, Circuit Judge, and BARR, District Judge. LURTON, Circuit Judge. The Kentucky Union Land Company made a conveyance operating as a preference to certain of its creditors. This conveyance was assailed as a fraudulent preference in contemplation of insolvency, and prohibited by article 2, c. 44, of the General Statutes of Kentucky. Under the proceedings instituted in this court a decree was entered December 1, 1891, adjudging the said conveyance to be a preference, within the meaning of the said act, and that the same operated as an assignment, as of the 6th of February, 1891, of all of the property and effects of the Kentucky Union Land Company for the equal benefit of all its creditors, according to the provisions of said act; and a receiver was appointed, as required by the Kentucky act, and the cause referred to the master of this court to advertise and receive proof of debt against said company, and to report who were creditors of the said company on the 6th of February, 1891, and the amount of the debts due to them, respectively, whether such debts were matured, and whether absolute or contingent. He was also directed to report what, if any, securities are held by any of the creditors of the land company. Among other creditors filing claims with the commissioner, or intervening by petition, were: (1) The holders of the first mortgage bonds of the Kentucky Union Railway Company, the principal and interest of which had been guarantied by the Kentucky Union Land Company. These bonds amount to $2,625,000, and the owners and holders are represented by J. Kennedy Tod, who stands for and represents the class with respect to the questions arising as to the validity of the guaranty of the land company. (2) The holders of $800,000 of second mortgage bonds of the Kentucky Union Railway Company, the principal and interest having been guarantied by the Kentucky Union Land Company. These bonds are represented by J. W. Gaulbert, in respect to the question made as to the liability of the Kentucky Union Land Company as guarantor. (3) The claim of the Central Trust Company. The Kentucky Union Land Company guarantied a 5 per cent. dividend upon stock of the Kentucky Union Railway Company, to the extent of $500,000. The land company agreed that, if the railway company and the land company should both fail to pay said dividend, then the Central Trust Company should be authorized to sue for same. and distribute the recovery among the holders of the guarantied stock. The commissioner, finding the validity of the guaranty as to both bonds and stocks challenged by the other creditors and by the land company, has submitted to the court the questions arising upon the defense interposed, and has also asked directions as to how a debt should be reported when the creditor has more than one security, or when the debt is due from more than one creditor. The matters upon which the commissioner asks instruction are those stated by him in his report to the court, as follows: "The questions which your commissioner has, after advising with and obtaining the consent of counsel in this case, determined to submit to the court in advance of making a complete report, are these: "(1) Was the guaranty of the Kentucky Union Land Company of the principal and interest of the first mortgage bonds of the Kentucky Union Railway Company within the power of the Kentucky Union Land Company. And, if within its power, was such power executed in a legal and binding way, sc as to make such guaranty an obligation of the Kentucky Union Land Company? "(2) Exactly the same question as arising upon the guaranty of the second mortgage bonds of the Kentucky Union Railway Company by the Kentucky Union Land Company. "(3) Was the transaction set out in the claim of the Central Trust Company herein, and which pertains to the guaranty by the Kentucky Union Land Company of dividends upon certain stock of the Kentucky Union Rail v.57F.no.1-4 |