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(2) That the parties who had loaned money upon the said notes as collateral, and to the extent such money had been paid by the legatees of the original decedent, are entitled to be subrogated to the rights of the latter, less the sum paid on the notes by the parties originally liable thereon, and interest.

(3) That the legatee and executor of the original decedent, having had no authority to invest in the business of the firm the interest of his sister and the children of his deceased brother in the proceeds of the notes, the latter cannot be held liable for the debts of the firm, and the administrators of the estate of the original decedent are entitled to all the fund in court except the onethird going to the estate of the legatee and partner in the debtor firm, under the will of the original decedent.

(4) That the defendants are entitled to subject to their claims against the firm the interest which the estate of T. T. Renick may have in the proceeds of the notes, but to the extent only that the money borrowed on the Harvey notes, as collateral, was applied to debts of that firm for which T. T. Renick was responsible.

Bill and Cross-bill.
Miller, Lewis d Bergen, for complainants.
Goudy & Chandler, for defendant.

HARLAN, Justice, (orally.) The present bill and cross-bills are the outgrowth of certain suits commenced in this court, decided in the supreme court of the United States, and reported in 101 U.S. 320, under the title of Smith v. Ayer. As stated in the opinion of the supreme court, their object was to compel the delivery to the administrators de bonis non of Renick Huston of two promissory notes, each for $39,250,—one of which had been delivered to and was held by J. C. Ayer & Co. as collateral security for a loan by them of that amount to the firm of B. F. Renick & Co., and for which they held the note of that firm; and the other held by the First National Bank of Westboro, Massachusetts, as collateral security for a loan by it to the same firm of $30,000, and for which they held that firm's notes. The notes of $39,250 were each executed by J. D. Harvey, and were made payable to Thomas T. Renick, of whose estate B. F. Renick was executor. Thomas T. Renick was one of the legatees, as well as the executor of the estate of Renick Huston. After the death of the latter, Thomas T. Renick purchased an interest in the firm of Tower, Classen & Co., using for that purpose certain funds derived from Renick Hu. ston's estate, one-third of which belonged to him, (T. T. R.,) one-third to a sister, now deceased, and one-third to the children of a deceased brother. The interest so purchased stood in the name of T. T. Renick. Under the arrangement made by him when he entered the firm of Tower, Classen & Co. he became liable with the other partners for its debts then existing, as well as those created during his life-time. B.F.


Renick, executor of T. T. Renick himself, after the death of his testator became a member of that firm, and subsequently, and in pursuance, as he supposed, of authority conferred by the will of his testator, he not only permitted the interest in that firm, standing in the name of T. T. Renick, to remain, but, upon the basis of the Harvey notes as collateral security, negotiated the before-mentioned loans with Ayer & Co. and the Westboro bank. He borrowed the money chiefly for the purpose of using, and he did chiefly apply it, in the business of Tower, Classen & Co., except the sum of $10,000, which was paid through Fay to Smith, one of the personal representatives of Renick Huston, and was by the latter divided equally among the before-mentioned legatees of Renick Huston. The supreme court decided that the Harvey notes, although payable to T. T. Renick, belonged to the estate of Renick Huston, and that Ayer & Co. and the Westboro bank could not hold them as against the representatives of that estate. Upon the return of the cause a decree in pursuance of the mandate of the supreme court was entered, requiring the surrender of the Harvey notes to the personal representatives of Renick Huston, and they were so surrendered by Ayer & Co. and the bank.

The present suit was instituted by the personal representatives of Renick Huston to enforce the payment to them of the amount due on the Harvey notes, and to protect their rights to the proceeds against adverse claims asserted by others to an interest therein. In the progress of the suit the entire amount due on both of the Harvey notes was paid into court_$106,686—all in cash, except $21,980, which was in the form of a certificate of deposit. It was paid into court to be disposed of as the court might adjudge was proper. No formal opinion has been prepared, but after a patient examination of the case I have reached these conclusions :

1. The cases of Smith v. Ayer determined that the Harvey notes constituted a part of the assets of Renick Huston's estate, and that the personal representatives of that estate were entitled to the possession of them.

2. The decree in that case has been fully executed by the surrender of the notes to the personal representatives of Renick Huston.

3. The opinion in Smith v. Ayer, construed in the light of the opinion subsequently delivered by the supreme court upon an application for rehearing, does not prevent Ayer & Co. and the bank from asserting, in this new and independent suit brought by the personal

representative of Renick Huston, any equity they, or either of them, may have, for their debts to be paid out of the proceeds of the notes.

4. Of the money received by B. F. Renick from Ayer & Co. the sum of $10,000 was paid by him through Fay to Palmer C. Smith, one of the administrators of Renick Huston, and was by him paid over to those entitled to it under the will of Renick Huston,-onethird to T. T. Renick, one-third to Mrs. Gregg, and one-third to the Renick children. To the extent of $10,000, and such of the interest thereon as constitutes a part of the fund in court, Ayer & Co. are entitled to be subrogated to the rights of the legatees who had received the benefit of the money obtained from Ayer & Co.; but out of this sum the parties originally liable on the Harvey note held by Ayer & Co. are entitled to the sum of $3,140, which was paid through Fay to Ayer & Co. on that note, and interest thereon from the date of such payment, so far as that interest has been paid into court.

5. As there is no ground to suppose that T. T. Renick had authority to invest in the business of Tower, Classen & Co. the money going, under the will of Renick Huston, to his sister, and to the children of his deceased brother, their interest in the proceeds of the Harvey notes cannot be held liable for the debts of that firm. Consequently the administrators of Renick Huston are now entitled to receive all of the fund in court except the one-third going to the estate of Thomas T. Renick as a legatee under the will of Renick Huston.

6. If upon the settlement of the estate of Renick Huston it is found that the estate of T. T. Renick is entitled to receive any money from that source, Ayer & Co. and the Westboro bank will be entitled to be paid out of the proceeds of the respective notes surrendered by them which may remain in court, such sum as will be equal to the aggregate of the debts of Tower, Classen & Co. for which the estate of Thomas T. Renick was responsible, and which were liquidated by the money obtained from them respectively on the faith of the Harvey notes as collateral security. In other words, they are entitled to subject to their claims against B. F. Renick & Co. the interest which the estate of T. T. Renick may be ascertained to have in the proceeds of the Harvey notes.

7. The court is not bound to send the parties to another state to litigate their rights in and to the fund which will remain here under this order. It is competent to give in this suit all the relief to which any of the parties are entitled. The complainants have leave to amend their pleadings so as to bring all necessary parties before the court.

8. In reference to the question of interest raised by counsel for Harvey and others, the court is of the opinion that Harvey and those united with him are bound for interest at the rate of 8 per cent. from maturity of the note until the money was paid into court. Interest stopped when the money was so paid. If interest has been paid in excess of the amount here indicated it will be refunded.


(Circuit Court, E. D. Pennsylvania. July 1, 1881.)


It is sufficient ground for equitable interference that complainant, who is a stockholder of a corporation, alleges that the officers of the corporation, who are members of one family and own a majority of the stock, have combined to appropriate the profits of the corporation in the form of salaries, and through a contract with a firm of which they are members, and have also combined to keep complainant in ignorance with regard to these transactions. Demurrer to Bill in Equity.

This was a bill by George H. Sellers against a corporation known as the Phønix Iron Company, and against its officers and directors individually. The allegations of the bill were in 'substance:

That the Phønix Iron Company was originally organized out of the firm of Reeves, Buck & Co., which was composed of David Reeves, Samuel J. Reeves, Robert S. Buck, and Samuel A. Whitaker, and that at the time of the incorporation the said Robert S. Buck withdrew, the stock being divided among the remaining members of the firm, wiệh the exception of a few shares transferred to employes to provide for filling the offices and the board of directors; that David and Samuel J. Reeves afterwards died, but that their stock continued to be held, and was still held, by their families; that complainant had become the owner by purchase of the stock originally owned by Samuel Á. Whitaker, but that all the other stock was held by the families of said David and Samuel J. Reeves, most of it, amounting to a large majority of the whole capital stock, being held or controlled by David Reeves, son of Samuel J. Reeves, and by William H. Reeves, either in their own names or as trustees under the will of Samuel J. Reeves; that said David Reeves was president of the corporation, and William H. Reeves one of the directors; that the business of the corporation was extensive and prosperous, but that the profits were absorbed by excessive salaries to the officers; that instead of making it3 contracts for bridge building, which was an extensive branch of its business, directly with its customers, the corporation had entered into an agreement with the firm of Clarke, Reeves & Co., of which firm David Reeves and Will

*Reported by Frank P. Prichard Esq., of the Philadelp ia bar.

iam H. Reeves were partners, the terms of which agreement were concealed from complainant, but which obliged the corporation to take all contracts for bridge building in the name of the firm, and to divide the profits with the firm in a proportion not known to complainant; that the corporation had spent large sums in unnecessary and costly improvements; that although it had made large profits the dividends declared were very small; that complainant was refused all information with regard to the affairs of the corporation, and denied access to the books and papers; and that although he had attended the meetings of the stockholders and endeavored to obtain information, he had been defeated by the majority of the stock controlled by the Reeves family.

The bill prayed

(1) For an account of the assets and liabilities of the corporation and of the receipts and disbursements since complainant became a member; (2) that the president and board of directors he compelled to divide the profits pro rata among the stockholders; (3) that they be enjoined from expending in capital improvements sums which ought to be divided as profits; (4) that they make discovery by production of the books and papers of the corporation; (5) that the sums improperly drawn from the corporation might be returned; (6) that disclosure be made of all sums made out of dealings with the corporation by any firm of which its directors were partners; (7) that all dealings between the corporation and such firm be enjoined; (8) that all moneys due by the president or directors be paid to the corporation.

To this bill respondents demurred.
Samuel W. Pennypacker and John G. Johnson, for complainant.

Carroll s. Tyson, R. C. McMurtrie, and Wayne MacVeagh, for respondents.

BUTLER, D. J. While the bill in this case is inartificially and loosely drawn, and contains much irrelevant and impertinent matter, it substantially charges that the stock of the corporation, in which the plaintiff is a shareholder, is mainly owned by the members of one family, who combine to manage the affairs of the corporation in such way as to subserve their own individual interests, to the prejudice of the plaintiff's rights; that David Reeves is president, and William H. Reeves, Carroll S. Tyson, Charles R. Scull, and John Griffin are directors; that the directors pay to themselves large and excessive salaries as officers of the company; that notwithstanding the chief business of the corporation is, or was intended to be, the building of bridges, the president and directors have entered into an agreement with the firm of Clarke, Reeves & Co., under which agreement contracts for bridges are taken in the name of the firm, and the benefits divided between it and the company, in proportions unknown to the plaintiff; that a majority of the members of said firm are

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