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Opinion of the Court.

as upon the offer of counsel of Hiles to convey it in case he were paid for the improvements. But if we suppose that Hiles held this land in trust for the benefit of the plaintiffs, and is willing to acknowledge that trust, there is no reason why, in a court of equity, when the complainant asserts his right to the land and claims to recover both the title and possession from his trustee, he should not pay the value of the improvements which that trustee has placed upon it. It is further to be observed that the option is given to complainant to take these improvements with the land or to reject the improvements and take the land without them, in which latter case he is merely required to give the owners of the improvements access to the land for the purpose of removing them. If he desires the improvements he can keep them by paying for them. Hiles paid for the land when he got the title, and we see nothing unjust or inequitable in his receiving compensation for improvements made in good faith upon the land which he is now willing to convey to the company, if the company chooses to take them at their appraised value.

We are urged to consider that if this decree is affirmed dismissing the bill of the railroad company, the defendants will be left in the possession of property fraudulently acquired, of considerable value, for which they gave no consideration. The answer to this is, that such question cannot be raised by the plaintiff in this case, because, having no right to take the property, it is not injured by a decree of the court which fails to grant such right. The other questions must be between the defendants in this case and those from whom they took deeds of conveyance, or such other parties, public or private, as may show that they have an interest in the controversy. The decree of the Circuit Court is

Affirmed.

MR. CHIEF JUSTICE FULLER did not hear this case and took no part in its decision.

Statement of the Case.

RICHARDSON'S EXECUTOR v. GREEN.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF MICHIGAN.

No. 19. Argued October 17, 18, 1889.- Decided January 13, 1890.

While the relations of a party towards a corporation, as a director and officer, or as its principal stockholder, do not preclude him from entering into contracts with it, from making loans to it, and from taking its bonds as collateral security, a court of equity will refuse to lend its aid to their enforcement unless satisfied that the transaction was entered into in good faith, with a view to the benefit of the company as well as of its creditors, and not solely with a view to his own benefit.

In the case of a corporation, as in that of a natural person, any conveyance of its property, without authority of law, in fraud of its creditors, is void as to them.

The capital stock of a corporation, when it becomes insolvent, is, in law, part of its assets, to be appropriated to the payment of its debts, and if any part of it has been issued without being fully paid up, a court of equity may require it to be paid up.

R. loaned to a railroad company $100,000 upon its notes, and received from it 1250 shares of paid-up stock as a bonus, and 200 mortgage bonds of the company, and the practical control of the board of directors of the corporation. After this he demanded of this board 100 more bonds, as further collateral, and they agreed to it. Subsequently he proposed to the board that he would make further advances if they would put 300 more bonds in his hands as collateral, and they assented to this proposal; but he never made such further advances. These 400 bonds, together with other bonds and property of the company, then came into his hands at a time when he was acting as and claiming to be the treasurer of the company. After the insolvency of the company took place, R. claimed to hold these 400 bonds individually, as collateral for his debt; Held, that, as between him and the other creditors of the company, he could not, under the circumstances, hold them as collateral for his debt. At the last term of court motions to dismiss Nelson v. Green and Nelson et al. v. Green were argued at the same time with a motion to dismiss this case, and the motion was granted as to those cases, and denied as to this case. After the entry of judgment counsel in those cases moved on behalf of the appellants that the sum of $450 which had been deposited with the clerk for copies of the record should be refunded; Held, (the judgment being announced in delivering the opinion and announcing the judgment in this case,) that $200 of that amount should be refunded. IN EQUITY. The previous proceedings in this case on a motion to dismiss are reported in Richardson v. Green, 130

Opinion of the Court.

U. S. 104. The case now made, at the hearing on the merits, is stated in the opinion.

Mr. Lyman D. Norris for appellants.

Mr. Daniel P. Hays for Sickles and Stevens, appellees.

Mr. T. J. O'Brien for Sickles, Stevens and the Wrought Iron Bridge Company, appellees.

Mr. J. Hubley Ashton, (with whom was Mr. Henry M. Dechert and Mr. Henry T. Dechert on the brief,) for Bower & Co. and Betz, appellees.

Mr. D. A. McKnight for Thomas W. Ferry, Edward P. Ferry and Nims, appellees.

MR. JUSTICE LAMAR delivered the opinion of the court.

This is a suit in equity, originally brought in the Circuit Court of the United States for the Western District of Michigan by Ashbel Green and William Bond, trustees, against the Chicago, Saginaw and Canada Railroad Company, a corporation organized under the laws of the State of Michigan, to foreclose a mortgage given by that company on all its property and effects of whatsoever description to the plaintiffs, to secure the payment of 5500 of its bonds of $1000 each, payable to said trustees or bearer.

The suit was commenced on the 16th of November, 1876. A receiver was at once appointed. The company made no defence, but numerous parties, holders of the bonds thus secured, and others with claims of various kinds against the company, with leave of the court, intervened in the case, and were allowed to prove their respective claims. The controversy resolved itself into a contest for priority among the respective claimants in the distribution of the proceeds of the sale of the mortgaged property thereafter to be made.

On the 30th of June, 1882, a decree was rendered that the bill was well filed, and that the complainants were entitled to

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a foreclosure.

Opinion of the Court.

The matter was referred to a master to take testimony and report upon the validity, and also the priority, of the various claims filed. On the 6th of November, 1882, the master filed his report, in which he divided the claims presented into four classes, numbered A, B, C and D, respectively. In class C he placed the claims secured by the first mortgage bonds, and the amount of said security. In this class was the claim of Benjamin Richardson for money furnished to aid in the construction of the road, amounting, with interest, to $273,282.87, secured, as the master found, by 200 bonds, amounting to $374,904. Exceptions to this report were filed by nearly all of the parties interested, but, in the main, it was confirmed by the court, and, on the 3d of May, 1883, a decree was entered on the question of priority among the respective claimants in the distribution of the fund arising from the sale of the mortgaged property, which had occurred. This decree, among other things, provided that, after certain expenses and certificates given by the receiver had been paid, the remainder of the fund should be ratably divided among the bond claimants, and where the bonds were held as collateral security no greater amount should be allowed than sufficient to satisfy the debt thus secured.

Benjamin Richardson's claim is in this class. It was for 600 bonds claimed as collateral security for the amount of money advanced by him for the construction of the road, and for 1105 other bonds which he alleged he had redeemed from certain bankers in London; and, in another form, was for 3574 bonds which he had purchased at an execution sale in New York City that was had to satisfy a judgment he had obtained against the railroad company in the Court of Common Pleas for the city and county of New York for the amount of his debt with interest. The decree allowed Richardson's claim as respects 200 of the 600 bonds, but rejected it as to the other bonds claimed by him.

Subsequently, that decree was amended by the decree of October 8, 1883, so as to correct certain mistakes in the calculation of interest upon the bonds. The effect of this latter decree was to reduce Richardson's share of the proceeds by

Opinion of the Court.

$2173.91 from what the original decree of May 3, 1883, had made it; and also to reduce in like manner the share of one of the other intervening parties, the Wrought Iron Bridge Company of Canton, Ohio, by the sum of $183.60.

Four separate appeals were taken from the decree of May 3, 1883, and an appeal was also taken by Richardson and his assignee, Henry Day, from the amended decree of October 8, 1883. At the last term of the court all the appeals were dismissed except that of Richardson and Day from the decree of October 8, 1883. Richardson v. Green, 130 U. S. 104. Before the decision at the last term of the court was rendered Richardson died, and his legal representatives are now prosecuting the appeal. As a decision upon the questions presented by this appeal affects the distribution decreed by the court below of $137,154.94 among the other claimants, it becomes necessary to examine the facts and to give consideration to the equities which relate to the claims of all those parties.

The Chicago, Saginaw and Canada Railroad Company was organized about the 4th of December, 1872, under an act of the Michigan legislature approved April 18, 1871, with a capital stock of $4,200,000, divided into 4200 shares, for the purpose of building a railroad from St. Clair, in the eastern part of the State, to Grand Haven, on Lake Michigan, a distance of about 210 miles.

The original incorporators each subscribed for 210 shares of this capital stock, five per cent of which was paid in. This was all the stock ever subscribed, and all the money paid in on any stock. Nine of those corporators were elected directors, all but three of whom resigned in 1873, transferring their stock, it is supposed, to those three. The stock subscribed and the money paid on it may, for all practical purposes, be considered as having afterwards disappeared from the organization.

For the purpose of raising funds to build the road and equip it the corporation executed a mortgage and issued 5500 seven per cent bonds of $1000 each, due in 30 years, with interest payable semi-annually, and placed them in the hands of its executive committee to be put upon the market. Before selling any of its bonds, however, the corporation borrowed con

VOL. CXXXIII-3

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