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In re A. C. WILCOX & CO.

(District Court, S. D. New York. July 15, 1907.) BANKRUPTCY-CLAIMS-PARTIAL ALLOWANCE-LACHES.

Where, after a partial allowance by a referee of a creditor's claim to recover money deposited with the bankrupt prior to the filing of the pe tition, no substantial injury to the estate ensued by the creditor's delay in taking up the referee's report and acting thereon, which was ultimately filed by the attorney for the trustee, the claimant did not lose his right to the amount allowed, because of his laches, at least to the extent of the fund in the hands of the trustee in excess of the cost of administration.

Frank L. Tyson, for petitioner.
James F. Egan, for trustee.

CHATFIELD, District Judge. In this proceeding the trustee in bankruptcy has declared and paid one dividend, and has in his hands sufficient to pay a second dividend, which has been withheld pending a motion by one Carroll D. Parry to recover $715.61, deposited with the bankrupt prior to the filing of the petition. This motion was referred to the referee in bankruptcy as special commissioner, and he has reported that the claim of Mr. Parry should be allowed, and the sum deposited repaid to the extent of $286.38; that Mr. Parry should be compensated for his expenses for the fees of the special commissioner and the charges of the stenographer, but allows him no costs.

The report of the special commissioner was dated February 7, 1907, and the claimant neglected to take up the report or to act thereon. This delay on his part has caused delay in the declaration and distribution of a further dividend. The attorney for the trustee has finally filed the referee's report, and now objects to the confirmation thereof, on the ground that the claimant, by his laches, has lost any right to the amount allowed.

It does not seem to the court that any substantial injury to the estate has ensued from the delay on the part of the claimant. The report of the special commissioner allowed him but a part of his claim, and to have taken up the report would have meant an acquiescence in this disallowance. By the present motion, however, the claimant accepts the special commissioner's findings with respect to the tracing of the various sums.

There would seem to be sufficient funds in the estate, over and above necessary expenses, to pay the sum allowed, and the motion will be granted to pay that amount, together with the special commissioner's fees and the stenographer's charges, out of the estate, to the extent of the fund which the trustee may now have, over and above the cost of administration. If by his laches the claimant has allowed the estate to be distributed, so that after payment of expenses there will be insufficient to cover this claim, the amount which he can receive must be reduced accordingly.

CHRISTIAN V. FIRST NAT. BANK OF DEADWOOD, S. D., et al.

(Circuit Court of Appeals, Eighth Circuit. June 10, 1907.)

No. 2,394.

1. CONTRACTS-EQUITABLE INTERPRETATION.

When a contract is fairly open to two constructions, it is legitimate to adopt the one which equity would favor.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 11, Contracts, $ 734.] 2. SAME-INTERPRETATION WHEN ONE PARTY RESPONSIBLE FOR TERMS EM

PLOYED.

If there be doubt as to the true meaning of a written contract, and one of the parties be responsible for the terms employed, it is both just and reasonable that it should be construed most strongly against that party.

[Ed. Note.--For cases in point, see Cent. Dig. vol. 11, Contracts, $ 736.] 3. BAILMENT-DUTIES OF BAILEE WITHOUT REWARD NOT LIGHTLY EXTENDED

BY INFERENCE.

Courts are indisposed to extend, by inference, the perils of an unprofitable trust; and so it is that every bailee without reward is regarded as having assumed the least responsibility consistent with his actual undertaking.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 6, Bailment, $$ 37–41.] 4. ESCROWS-DUTIES OF DEPOSITARY-CONVERSION.

Three certificates of stock in a mining company, indorsed in blank and representing shares held by several co-owners, were deposited by them in a bank under an option contract of sale (fully set forth in the opinion), containing provisions for the delivery of the stock to the purchaser upon payment of the purchase price, and for the surrender of the stock to the depositors in the event of default in the payment of the purchase price. The purchaser made default, and one of the depositors then called upon the bank to make a distribution or division of the shares represented by the certificates among the depositors according to their respective interests, and to procure from the mining company and deliver to the demandant a separate certificate for his interest. The bank did not comply with the demand, and thereupon the demandant sued it for conversion. Held, upon full consideration of the terms of the contract and of the rules of interpretation before stated, that it did not impose upon the bank the duty of distributing or dividing the stock among the several co-owners, or of procuring for and delivering to each a separate certificate for the shares to which he might be entitled, as between himself and his coowners, and that therefore the bank's failure to comply with the demand did not constitute a conversion of the demandant's interest in the stock.

In Error to the Circuit Court of the United States for the District of South Dakota.

Carle Whitehead (Robert C. Hayes and William B. Shattuc, on the brief), for plaintiff in error.

Norman T. Mason (Eben W. Martin, on the brief), for defendants in error.

Before SANBORN and VAN DEVANTER, Circuit Judges, and PHILIPS, District Judge.

VAN DEVANTER, Circuit Judge. This was an action of trover against the First National Bank of Deadwood, S. D., and the Oro Hondo Gold Mining Company for the alleged conversion of a large number of shares of the capital stock of the mining company claimed by the plaintiff, Thomas Christian. At the trial, which was to a jury, the evidence, without any conflict, established these facts: The plaintiff and 11 other co-owners of less than the entire number of shares, represented by three stock certificates issued by the mining company, deposited the certificates with the defendant bank for the purposes and upon the terms named in the following agreement:

155 F. 45

(1) This envelope contains two million, one hundred and twenty thousand (2,120,000) shares of the capital stock of the Oro Hondo Mining Company, evidenced by certificates as follows, to wit: Certificate No. 19, for five hundred and five thousand (505,000) shares, certificate No. 20 for seven hundred and fifty-seven thousand five hundred (757,500) shares, certificate No. 21, for seven hundred and fifty-seven thousand five hundred (757,500) shares, of the par value of one dollar per share; which said certificates of stock are issued to George M. Nix, and by him assigned in blank.

(2) One million, nine hundred ninety-eight thousand eight hundred and eighty (1,998,880) shares of said stock belong to the parties named below, signing this escrow, and are placed by the undersigned in escrow with the First National Bank of Deadwood, South Dakota, upon the following terms and conditions:

(3) All of said stock may be purchased by said George M. Nix for the sum of ninety-nine thousand nine hundred and forty-four ($99,944.00) dollars, less a commission of ten (10%) per cent. to be paid to said George M. Nix as payments are made upon this escrow.

(4) On or before the 1st day of April, 1903, the said George M. Nix or his assigns must pay all of the parties signing this escrow, except himself, or deposit to their order in the First National Bank of Deadwood, South Dakota, the sum of twenty-two thousand, four hundred eighty-seven and forty onehundredths ($22,487.40) dollars, and shall then have the privilege of withdrawing twenty-five (25%) per cent. of said stock so deposited belonging to the signers of this escrow, four hundred ninety-nine thousand seven hundred (499,700) shares, or certificate No. 19, for five hundred and five thousand (505,000) shares.

(5) Within six months from said 1st day of April, 1903, the said George M. Nix or his assigns must pay thirty-seven and a half (3712%) per cent. of eightynine thousand, nine hundred forty-nine and sixty one-hundredths ($89,949.60) dollars, or thirty-three thousand and seven hundred thirty-one and ten onehundredths ($33,731.10) dollars, and may then withdraw seven hundred fortynine thousand and five hundred and fifty (749,550) shares of said stock, or certificate No. 20 for seven hundred fifty-seven thousand five hundred (757,500) shares deposited in escrow.

(6) Within one year from the said 1st day of April, 1903, said George M. Nix or his assigns, must pay thirty-seven and a half (3742%) per cent. of said eighty-nine thousand, nine hundred forty-nine and sixty one-hundredths ($89,949.60) dollars, or thirty-three thousand seven hundred thirty-one and ten one-hundredths ($33,731.10) dollars, and may then withdraw the balance, to wit: Seven hundred forty-nine thousand, five hundred and fifty (749,550) shares of said stock so deposited in escrow, or the third certificate, No. 21, for seven hundred fifty-seven thousand, five hundred (757,500) shares of stock.

(7) It is understood that the extra one hundred twenty-one thousand one hundred and twenty (121,120) shares of stock deposited in escrow are the property of George M. Nix, the certificates having erroneously been made out for a larger amount of stock than the agreement with the signers of this escrow calls for, by reason of a mistake in the acreage of the ground.

(8) In case said George M. Nix or his assigns does not carry out the conditions of this escrow in reference to work to be done on said ground, as specified in the contract with said signers of the escrow, made on the 18th day of March, 1902, or payments provided for herein shall not be made, then all rights under this escrow shall cease and determine, and said parties depositing said stock may withdraw the same from said First National Bank of Deadwood, and shall be the owners thereof as shown by the schedule marked ‘Exhibit A' hereto free of any option upon the same by the said George M. Nix, or his assigns.

(9) In case any payments shall be made by said George M. Nix or his assigns to the undersigned parties and the future payments provided for herein shall not be made, then all rights of said George M. Nix or his assigns to any future delivery of stock shall cease and the undersigned parties may withdraw said stock from said bank as above provided.

(10) Time is of the essence of this contract.

(11) All moneys deposited with said bank as above provided shall be paid over by the said bank to the several parties entitled thereto as shown by the schedule marked 'Exhibit A' hereto attached and made a part of this agreement.

(12) In case any of said payments shall not be made, the stock shall be delivered to the parties named in said Exhibit A and be the property of said parties; twenty shares of stock to be delivered for each dollar to be paid the said parties. Dated Deadwood, South Dakota, this 16th day of January, 1903.

Exhibit A. Each payment as it shall be made shall be by said bank apportioned and paid over to the following named parties or deposited to the credit of said parties in the following amount to wit: Name of Persons to Whom 1st Payment 2d Payment 3d Payment Payments are to

Less 10%. Less 10%. Less 10%. be Made.

$22,487 40 $33,731 10 $33,731 10 Total. Susie B. Moore..

$ 770 60 $ 1,155 87 $ 1,155 87 $ 3,082 34 Pat J. O'Brien...

770 60 1,155 87 1,155 87 3,082 34 Thomas Burke

770 60 1,155 87 1,155 87 3,082 34 James Cusick

7,419 95 11,129 94 11,129 95 29,679 84 Thomas Christian

6,804 12 10,206 19 10,206 19 27,216 50 B. F. Atkins......

910 25 1,365 39

1,365 19

3,640 85 Charles Hegberg

455 10

682 76 682 77 1,820 63 Ed A. Dryer..

2,518 00 3,777 01 3,777 01 10,072 or Frank Abt .

498 60

747 90 747 90 1,994 40 R. H. Purcell.

498 60

747 90 747 90 1,994 40 A. D. Wilson.

615 83

923 75 923 76 2,463 34 Charles J. Swanstrom..

455 15

682 75 682 75 1,820 65 George M. Nix......

2,498 60 3,747 81 3,747 77 9,994 18

The agreement was signed by the plaintiff and the other co-owners of the shares intended to be sold, but was not signed by Nix, the bank, or the mining company.

In this connection it may be observed that there are several mistakes in the agreement, which, though confusing at first, are obviated when the entire instrument is considered. The number of shares represented by the three certificates is inaccurately stated as 2,120,000, but is shown to have been actually 2,020,000. The number of shares owned by the plaintiff and his co-depositors is stated as 1,998,880 and also as 1,998,800; the former being correct. Nix is spoken of as owning 121,120 shares, but the true number appears to have been 21,120. In Exhibit A, Nix is named as if he were one of those among whom the specific payments of $22,487.40, $33,731.10, and $33,731.10 provided for in paragraphs 4, 5, and 6 were to be divided; but a computation of the amounts there apportioned to the plaintiff and his co-depositors shows that the whole of these payments would be exhausted before reaching Nix's name. As these specific payments were unquestionably the net purchase price of the shares of the plaintiff and his co-depositors, after deducting the commission allowed to Nix by paragraph 3, and as the last line of Exhibit A must be regarded as a mere statement of Nix's commission, the rule stated in paragraphs 8, 9, and 12 for measuring the interests of the plaintiff and his co-depositors in such of the stock as might not be sold is not well expressed, unless it was intended that Nix should have a commission or interest in such shares as he might fail to purchase, which is both improbable and contrary to the provisions of paragraphs 3, 8, and 9. It was doubtless meant that the plaintiff and his co-depositors should own 20 shares of the stock not sold for each dollar of the gross purchase price not paid or earned as a commission.

Pursuant to paragraph 4, Nix paid the first installment of $22,487.40, being 25 per cent. of the gross purchase price, less a corresponding proportion of his commission, and withdrew from the bank certificate No. 19 for 505,000 shares. The time for paying the second installment was then extended to January 1, 1904, when Nix made default and so lost all rights to further avail himself of the option. Thereupon the plaintiff, acting independently of his co-depositors, made a demand of the bank, which, as interpreted by his counsel, called upon the bank to surrender the original certificates, Nos. 20 and 21, to the mining company, to cause new certificates to be issued in such manner as would permit the remaining shares to be divided among their owners according to their respective interests, and then to deliver to the plaintiff a separate certificate for his portion. The demand was not complied with; and, if the bank was obligated to thus divide the remaining shares among the several co-owners and to deliver to each a separate certificate for his portion, the circumstances surrounding the demand were such that the bank was guilty of a conversion of the plaintiff's portion, otherwise compliance with the demand was rightly refused, and there was no evidence of a conversion. As respects the mining company, there was an entire absence of evidence of any act of commission or omission on its part violative of or inconsistent with the rights of the plaintiff.

At the conclusion of the evidence, the court ruled that the terms of the agreement were not such as to obligate the bank, upon Nix's default, to divide the remaining shares among the several co-owners, and to deliver to each a separate certificate for his portion, but merely required it to return the original certificates, Nos. 20 and 21, to the plaintiff and his co-depositors, from whom they were received, and that the plaintiff, acting independently of his co-depositors, was not entitled to the possession of them. Under the court's instruction, the jury then returned a verdict for the defendants, and, judgment having been rendered thereon, the plaintiff sued out the present writ of error.

As Nix, who owned some of the shares represented by the certificates, assented to the terms of the agreement by accepting some of its benefits, and as the bank also assented thereto by accepting the duties of depositary thereunder, the decisive question presented for our consideration is : Did the agreement, rightly interpreted, require the bank, upon the default of Nix, to divide the shares represented by the two remaining certificates among the several co-owners according to their respective interests and to procure for and deliver to each a certificate representing his portion? If it did, it not only enjoined upon the de

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