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the premises in controversy, or some part of them, under this deed. The complainants pray that an injunction may be issued to restrain the prosecution of the action at law, and for general relief.
Cope ( Boyd and W. W. Crane, for complainants.
FIELD, Justice. The case presented by the bill in equity is sufficient to justify the court in directing a stay of proceedings in the action at law until the plaintiffs therein appear to the suit, and until it is heard and determined. It is brought in aid of the defense to that action, and if the complainants are entitled to a correction of the deed executed to their grantör in 1856, or to a conveyance from the defendants, as purchasers with notice of their equity, it would be inequitable to preclude them from showing the fact and obtaining the relief prayed. In the state courts the complainants here could, as defendants in the action at law, set up in their answer their equitable defense, and obtain a decree upon it before the trial of the issue at law. Arguello v. Edinger, 10 Cal. 159; Weber v. Marshall, 19 Cal. 447. The plaintiffs in that action are allowed, by reason of their citizenship in another state, to institute their action in the circuit court of the United States, but they ought not to be permitted for that reason to deprive the defendants therein, the complainants here, of any just defense to which they are entitled under the laws of the state, although, by reason of the separate systems of law and equity in the federal courts, they are obliged to seek their relief through the more cumbersome and laborious proceeding of an independent suit.
The complainants will be allowed to serve a subpæna upon the attorneys of the plaintiffs in the action at law, and an order will be entered granting an injunction staying proceedings in that action until the hearing and determination of this suit, or the further order of the court, upon the complainants filing a bond, in the usual form in such cases, for damages, if it should be ultimately determined that they are not entitled to the relief prayed, or the suit should be dismissed—the bond to be approved in form and amount by the circuit judge.
Although the attorneys of the plaintiffs in the action at law are not specially authorized, as stated by them, to appear for the plaintiffs in any other case, their original retainer is deemed to extend to such proceedings as immediately affect the right of their clients to recover the property in controversy. The power of a court of equity to authorize substituted service in suits instituted in aid of the defense to an action at law, where the plaintiffs in such action are non
residents and absent from the state, is well established. Says Daniell, in his Treatise on Chancery Pleadings and Practice, which is a work of approved merit:
“ The jurisdiction is most frequently exerted where actions at law are brought by persons resident abroad to enforce demands which, although they have, strictly speaking, a legal right to make, it is against the principles of equity to permit it. In such cases the court will interfere by injunction, served upon the attorney employed in this country to conduct the proceedings at law, to restrain the further prosecution of such proceedings until his employer has submitted himself to the jurisdiction. In order to accomplish this purpose, it is permitted to the plaintiff in equity, in the first instance, to obtain an order directing that service of the subpæna upon the attorney employed in the cause at law shall be deemed good service." 2d Am. Ed. 518. See, also, Burke v. Dickers, 3 Bell, C, C. 23; Stephen v. Cini, 4 Ves. Jr. 359; and Kenworthy v. Accunor, 3 Mad. 550.
The same doctrine is recognized in the courts of the United States. Hitner v. Suckley, 2 Wash. C. C. 465; Read v. Consequa, Id. 174.
Order for an injunction on the bill in equity, and for the service of a subpæna on the attorneys in the action at law, granted.
Dumont and others v. Fry, Trustee, and others.
(Circuit Court, S. D. New York. September 7, 1882.)
1. PRIORITY OF LIEN
The legal title to certain bonds being in C. & Son, bankers of New Orleans, with nothing to indicate the equitable interest of complainants therein, O. & Son, deposited said bonds with S. & Sons, bankers of New York, their correspondents and financial agents in that city, and afterwards C., who was also president of the New Orleans Banking Association, hypothecated a portion of said bonds to S. & Sons in behalf of the banking association to protect S. & Sons against any overdrafts to the extent of $100,000, that might from time to time arise in their dealings with said association. Subsequently C. & Son, the New Orleans National Banking Association, and S. & Sons, failed, and made assignments to trustees in bankruptcy. Held, that the trustee in bankruptcy of S. & Sons had a lien on said bonds to the extent of $100,000 for the unpaid balance due them from the New Orleans Banking Association, and also a bankers' lion on those not so pledged for the amount of the balance of account due them from C. & Son, and that such liens were first to be satisfied out of the interest
of C. & Son in the bonds as between that firm and the complainants. 6. EQUITABLE INTEREST-ATTACHMENT.
Complainants being the equitable owners of a moiety of the bonds in suit, subject, however, to the lien of C. & Son, for any balance existing in their favor in the account relating to the joint purchase of the bonds with the com
plainants, the trustee could acquire a valid lien by virtue of an attachment upon the interest of complainants for the sum which may ultimately be recovered in
his suit against complainants. 3. PRACTICE-ACCOUNTING BY TRUSTEE.
In such a case the trustee must account for the amount of all ccapons col
lected. 4. SAME-REFERENCE TO MASTER-RECEIVER-Costs.
Where the extent of respective interests of the parties can be arrived at without a reference to the master, such reference may be dispensed with upon counsel filing a stipulation to that effect. Under the circumstances the decree will provide for appointment of a receiver to sell the bonds, and to distribute the proceeds to the parties according to their respective rights. Costs will be allowed to the trustee.
Edgar A. Hutchins, for complainants.
WALLACE, C. J. Upon the proofs the complainants are the equitable owners of a moiety of the $275,000 of the negotiable bonds in suit, subject, however, to the lien of Cavaroc & Son for any balance existing in their favor in the account relating to the joint purchase of the bonds with the complainants. As the legal title to the bonds was in Cavaroc & Son, with nothing to indicate the equitable rights of the complainants, the bonds are subject also to the liens acquired upon them by Schuchardt & Sons, through their dealings with Cav. aroc & Son. The present controversy mainly involves the question as to the character and extent of these liens. During the period covered by the transactions in controversy, Schuchardt & Sons were bankers at the city of New York, and were the correspondents and financial agents there of Cavaroc & Son, bankers of New Orleans, and also of the New Orleans National Banking Association of the same city. At the same time the senior member of Cavaroc & Son was the president of the said banking association. The bonds in suit were intrusted by Cavaroc & Son to Schuchardt & Sons, in September, 1870, for the convenience of the former, and in order to facilitate the financial transactions between the parties. On various occasions Schuchardt & Sons obtained loans for Cavaroc & Son, and for the banking association, upon the security of the bonds. On one occasion Schuchardt & Sons loaned Cavaroc & Son $100,000, on the security of the bonds. While there is some evidence that the bonds were kept with Schuchardt & Sons merely as convenient depositories for Caravoc & Son, the fact that they were so frequently hypothecated by the former for the financial transactions of the latter, with their concurrence, indicates quite satisfactorily that they were placed and kept by Cavaroc & Son with Schuchardt & Sons as avail. able securities for the financial exigencies arising from time to time between the parties. The bonds having thus been intrusted to Schuchardt & Sons, in the absence of any special understanding to the contrary, they acquired a banker's lien upon them, except as to those expressly hypothecated for the benefit of the banking association, and as to which the more difficult question arises.
The New Orleans Banking Association dealt largely in foreign bills of exchange, which it negotiated through Schuchardt & Sons. By the course of business, the amount of the foreign bills remitted from time to time by the banking association to Schchuardt & Sons was credited by the latter to the former, and the latter drew upon the former from time to time as funds were required by it. If, as sometimes happened, the bills which had been remitted and credited were not paid by the parties primarily liable upon them, they were charged back by Schuchardt & Sons to the banking association, monthly statements of account being rendered between the two banking concerns. It is in evidence that by the custom of business at New Orleans advances are made by bankers to shippers in anticipation of the actual delivery of the bills and accompanying documents, and the banking association was consequently necessitated to advance funds for that purpose before it could remit the bills and be credited by Schuchardt & Sons with their amount. In order to assist the banking association in this behalf, and undoubtedly for the mutual profit of both concerns, at times the banking association had been permitted by Schuchardt & Sons to draw in advance of remittances. December 4, 1871, such an overdraft was authorized to the extent of $100,000, upon the condition that the drafts should represent exchange actually bought and paid for. The transactions between the banking concerns were large, being sometimes over a million of dollars daily.
These being the relations and course of business between the two concerns, a hypothecation of the bonds to Schuchardt & Sons was made by one of the Cavarocs for the benefit of the New Orleans Banking Association in February, 1873, and the important question in this controversy is concerning the true construction and meaning of that hypothecation. The hypothecation arises from the following correspondence, conducted in the French language. February 6th, 1873, the cashier of the banking association wrote to Schuchardt & Sons:
“Are we still authorized to draw a decouvert $100,000 against purchases of exchange advised by wire."
February 11, 1873, Schuchardt & Sons replied:
“The credit of $100,000 a decouvert was predicated upon the deposit of New Orleans city bonds, and on their withdrawal we supposed the agreement canceled."
February 15, 1873, the cashier of the banking association an. Bwered:
“ Your letter of December 4, 1871, authorized us to draw in advance of remittance to the extent of $100,000, represented by purchases of exchange advised by telegraph. There was no mention of a deposit of city bonds to guaranty such overdraft, and we have been acting ever since under the impression that the credit was still in force. We now note that it is canceled, and beg leave to refer you to the private letter of our president upon the subject."
On the same day C. Cavaroc, the president of the banking associ. ation, wrote Schuchardt & Sons, referring to their letter of the 11th instant:
"I authorize you to consider a portion of the bonds belonging to my firm, which you have in your possession, as collateral security en cas de decouvert."
February 27, 1873, Schuchardt & Sons wrote to the cashier of the banking association :
"In reply to your president's letter of the 15th instant, we take pleasure in authorizing you, in accordance with the terms therein stated, to draw on us a decouvert for a sum not exceeding as maximum $100,000, against exchange purchases."
The New Orleans Banking Association failed on the fourth day of October, 1873, as did also Cavaroc & Son. At the time of the fail. ure Schuchardt & Sons had $232,000 of the bonds in controversy in their possession, and there was due from the banking association to them $4,121.92 in excess of remittances; and there subsequently resulted, by reason of the non-payment of drafts and bills, which had been remitted by the banking association and credited to it, but charged back to its account because uncollectible, the sum of $195,315.63. Upon the account between Schuchardt & Sons and Cavaroc & Son a debit balance arose against Cavaroc & Son of $7,454.22. Subsequently Schuchardt & Sons failed.
It is now insisted by the defendant Fry, who is the trustee in bankruptcy of Schuchardt & Sons, that the bonds thus held by them are subject, not only to a bankers' lien, for their benefit, for the indebtedness of Cavaroc & Son, but also, to the extent of $100,000, were hypothecated, under the terms of the correspondence referred to, to secure Schuchardt & Sons for the payment of all advances made by