122 U.S.

1
7 S.Ct. 1043
30 L.Ed. 1128

BARNES, Trustee,
v.
CHICAGO, M. & ST. P. RY. CO.
May 23, 1887.

Page 2 Francis Fellowes and Wm. Barnes, for appellant.

John W. Cary, for appellee.
WAITE, C. J.

This is a suit by William Barnes to foreclose a mortgage made to him, as

trustee, by the La Crosse & Milwaukee Railroad Company, hereinafter
designated as the La Crosse Company. The record shows that this company
was incorporated by the legislature of Wisconsin on the eleventh of April,
1852, to build and operate a railroad in that state between La Crosse, on the
Mississippi river, and Milwaukee, on Lake Michigan, a distance of about 200
miles. The road was originally regarded by the company and treated as
consisting of two divisions,one, called the 'Eastern Division,' extending from
Milwaukee to Portage City, a distance of 95 miles; and the other, called the
'Western Division,' extending from La Crosse to Portage City, a distance of 105
miles. The Eastern division was incumbered by three mortgages, as follows: (1)
The Palmer mortgage, so called, to secure an issue of bonds to the amount of
$922,000; (2) a mortgage to Greene C. Bronson and James T. Soutter, to secure
bonds to the amount of $1,000,000; and (3) a mortgage to the city of
Milwaukee, to secure about $314,000. The Western division was likewise
incumbered: (1) By a mortgage to Greene C. Bronson, James T. Soutter, and
Shepherd F. Knapp, known as the land-grant mortgage, to secure bonds to the
amount of $4,000,000; and (2) by a mortgage to Albert Helfenstein, to secure
bonds for $200,000. >>Judgments had also been rendered against the company
prior to June 21, 1858, as follows: (1) One in favor of Selah Chamberlain, in
the circuit court of the United States for the district of Wisconsin, on the
second of October, 1857, for $629,089.72; (2) another in the same court, on the
seventh of October, 1857, in favor of Newcomb Cleveland, for $111,727.31;

(3) another in the circuit court of Milwaukee county, in the spring of 1858, in
favor of Sebra Howard, for $25,000, and (4) another in the last-named court in
favor of the Mercantile Bank of Hartford, Connecticut, on the twelfth of June,
1858, for $25,000.
2

On the first of June, 1858, the company being embarrassed by a large floating
debt, and by its obligations to persons who had mortgaged their farms to aid in
building its road, determined to issue other bonds to the amount of $2,000,000,
and secure them by another mortgage on its entire line of road between La
Crosse and Milwaukee, subject to the prior mortgage incumbrances.
Accordingly the mortgage now in suit was executed to William Barnes, trustee,
on the twenty-first of June, 1858, to secure such an issue. It covered 'all the
property, real and personal, of said railroad company to be acquired hereafter,
as well as that which has already been acquired, together with l l the rights,
liberties, privileges, and franchises of said railroad company in respect to said
railroad from Milwaukee to La Crosse, except its land grant, but subject to all
the prior mortgages above referred to. Afterwards, on the eleventh of August,
1858, a mortgage supplemental to this was executed by way of further
assurance. The mortgages thus executed contained a provision that if there
should be default in the payment of interest for the space of 15 days the
principal should become due, and the trustee, on the request of the holders of
bonds to the amount of $100,000, should advertise and sell the mortgaged
property.

Afterwards the following judgments were recovered against the company,

namely: (1) One in favor of Edwin C. Litchfield, in the district court of the
United States for the district of Wisconsin, October 5, 1858, for $26,353.51; (2)
another in the same court, April 5, 1859, in favor of Nathaniel S. Bouton, for
$7,937.37; (3) another in favor of Philip S. Justice and others, in the circuit
court of the county of Milwaukee, for $2,035.33; and (4) another in the
lastnamed court, in favor of E. Bradford Greenleaf, September 10, 1858, for
$840.86.

At the time when the mortgage to Barnes was executed, the Revised Statutes of
Wisconsin, 33, c. 79, provided that, in case of any sale of a railroad 'on or by
virtue of any trust deed, or on any foreclosure of any mortgage thereupon, the
party or parties acquiring the title under any such sale, and their associates,
successors, and assigns, shall have and acquire thereby, and shall exercise and
enjoy thereafter, all and the same rights, privileges, grants, franchises,
immunities, and advantages in and by said mortgage or trust deed enumerated
and conveyed which belonged to and were enjoyed by the company,' so far as
they relate to the property bought, in all respects the same as 'such company

might or could have done therefor had no such sale or purchase taken place.
Such purchaser or purchasers, their associates, successors, and assigns, may
proceed to organize anew and elect directors, distribute and dispose of stock,
take the same or anoter name, and may conduct their business generally under
and in the manner provided in the charter of such railroad company, with such
variations in manner and form of organization as their altered circumstances
and better convenience may seem to require.'
5

Afterwards, on the eighth of February, 1859, an act supplementary to chapter

79 of the Revised Statutes was passed, by which it was provided that, in case of
any sale of a railroad in the state under a deed of trust, or on a foreclosure, if no
one bid an amount equal to 75 per cent. of the mortgage debt, the trustee might
bid that amount or more, in his discretion, to the full amount of the debt and
interest due, if competition should make it necessary; and that the estate so
acquired by the trustee should 'be held in trust for the holders of the
outstanding bonds or obligations in the same manner as if they had become the
purchasers in proportion to the amount of such bonds or obligations severally
held by them.' Laws Wis. 1859, c. 10, p. 13.

On the eleventh of the same month of February holders of the bonds secured by
the mortgage in favor of Barnes, to the amount of more than $100,000,
presented to him their request in writing that he proceed to sell under his trust,
and that he purchase the property at the sale for the bondholders at the price of
75 per cent. of the outstanding bonds and past-due interest, and more if
necessary, not exceeding the full amount of the debt, principal and interest.
Accordingly he advertised the property for sale pursuant to the provisions of
his mortgage, and on the twenty-first of May, 1859, bought it under the
authority of the act of February 8, 1859, and the request which had been made,
at the price of $1,593,333.33, for the benefit of the bondholders. Two days
afterwads he united with certain persons representing themselves to be the
owners of bonds o the amount of $1,302,850 in the organization of the
Milwaukee & Minnesota Company, hereafter called the Minnesota Company,
under section 33, c. 79, Rev. St., to own and operate the railroad, and by the
same instrument be transferred his purchase to the company. The capital stock
was fixed at $2,500,000, and the articles of organization contained the
following provisions in reference thereto:

'Art. 4. The stockholders of the said Milwaukee & Minnesota Railroad

Company are the holders of the said bonds, secured by the said mortgages or
trust deeds, for whose benefit the said sale and purchase was made by the said
William Barnes, and such other persons as shall hereafter associate themselves
with them by subscription to the said capital stock or other proper means. Each

holder of the said bonds, upon surrendering his bonds to the proper officer of
the said Milwaukee & Minnesota Railroad Company, shall be entitled to
receive a certificate of stock in the company hereby organized of an equal
amount with the principal of the bonds so surrendered by him, subject,
nevertheless, to the payment in money of the pro rata share of the costs,
charges, and expenses of the said sale, and of the organization and of carrying
the same into effect, being the proportion of the whole of such costs, charges,
and expenses as the amount of stock so to be issued shall bear to two millions
of dollars.
8

'Art. 5. the payment of the said pro rata share of such costs, charges, and
expenses is hereby declared to be a charge and lien upon the stock to which
each holder of the said bonds is entitled. And the board of directors of the said
Milwaukee & Minnesota Railroad Company shall have power to declare the
right to such stock forfeited by the non-payment of such pro rata share of such
costs, charges, and expenses in such manner as the said board of directors shall
determine.'

On the fifth of December, 1859, a bill was filed in the district court of the
United States for the district of Wisconsin, by Bronson and others, trustees,
against the La Crosse Company, the Minnesota Company, Helfenstein, trustee,
and Cleveland and Chamberlain, judgment creditors, to foreclosure the landgrant mortgage on the Western division; and on the ninth of the same month a
like bill was filed in the same court against the same parties by Bronson and
Soutter, trustees, to foreclose the mortgage to them on the Eastern division.
Under the bill for the foreclosure of the land-grant mortgage, the Western
division was sold April 25, 1863, to purchasers who organized themselves
selves pursuant to section 33, c. 79, Rev. St., into a corporation by the name of
the Milwaukee & St. Paul Rail way Company, to which the property so
purchased was duly conveyed. This company will be hereafter referred to as the
St. Paul Company.

10

In the suit for the foreclosure of the mortgage on the Eastern division such
proceedings were had that a receiver was appointed, who took possession of the
mortgaged property under an order of the court, and caused it to be operated by
the St. Paul Company in connection with the Western division. Afterwards, on
the eighteenth of July, 1865, it was adjudged in this suit that the Minnesota
Company, upon the payment of the amount ascertained to be due on the
Bronson and Soutter mortgage for interest, be permitted to redeem and take
possession of the Eastern division, and the rolling stock which belonged to it.
On the twenty-eighth of September, 1865, a decree was entered finding due
upon the mortgage $1,000,000 of principal and $454,937.39 of interest, and

ordering a sale of the mortgaged property for its payment, but saving the right
of the Minnesota Company to redeem in the manner specified in the order of
July 18th. On the third of January, 1866, this company paid into the registry of
the court the amount of money required to make the redemption. Thereupon all
further proceedings under this suit for foreclosure were stopped, and on the
twentieth of January, 1866, the Eastern division and its rolling stock were
handed over by the receiver to the possession of the Minnesota Company.
11

On the eighteenth of April, 1866, Frederick P. James, claiming to be the

assignee of the judgment against the La Crosse Company in favor of Newcomb
Cleveland for $111,727.71, which had been recovered prior to the execution of
the mortgage to Barnes, commenced a suit in equity in the circuit court of the
United States for the district of Wisconsin against the Minnesota Company, to
enforce the lien of that judgment on the Eastern division, as being superior to
the title acquired by the company through the sale under the Barnes mortgage.
Such proceedings were had in this suit that on the eleventh of January, 1867, a
decree was entered finding due to James on this judgment $98,801.51, and
ordering a sale of the Eastern division for its payment, subject, however, to the
liens of the mortgages prior to that of Barnes, and to the lien of the
Chamberlain judgment. Under this decree the property was sold and conveyed
to the St. Paul Company, March 2, 1867, for $100,920.94, and from that time
that company has been in possession, claiming title adversely to to the
Minnesota Company and to the Barnes mortgage.

12

On the twentieth of April, 1863, while the suit for the foreclosure of the
Bronson and Soutter mortgage was pending, and a few days before the sale of
the Western division under the foreclosure of the land-grant mortgage,
Frederick P. James and Abram M. Brewer, claiming to be the assignees of the
judgments in favor of Edwin C. Litchfield and Nathaniel S. Bouton against the
La Crosse Company, which had been recovered after the execution of the
Barnes mortgage, and Philip S. Justice and others, and E. Bradford Greenleaf,
also judgment creditors, brought suit in the circuit court of the United States
against the La Crosse Company, the Minnesota Company, and Selah
Chamberlain, to set aside the mortgage to Barnes and his foreclosure
thereunder, and to have the property sold free of that incumbrance for the
payment of their judgments. In that suit a decree was rendered July 9, 1868, in
accordance with the prayer of the bill, save only that the mortgage was
adjudged to be valid to the extent of the bonds that had been actually negotiated
by the company to bona fide holders. No further proceedings have been had in
that suit, and no attempt has ever been made to carry the decree into execution.

13

Such being the conceded facts, Barnes, as trustee, brought this suit in the circuit

court of the United States for the Eastern district of Wisconsin, on the sixth of
June, 1878, against the St. Paul Company, which had changed its name to that
of the Chicago, Milwaukee & St. Paul Railway Company, the La Crosse
Company, and the Minnesota Company, for the foreclosure of his mortgage. In
his bill he alleges, as to the first foreclosure First, that it had been actually
adjudged in the suit of James and others to have been fraudulent and null and
void, and that the St. Paul Company is estopped from asserting to the contrary,
because that suit was brought by its procurement, and was in fact prosecuted by
it and in its behalf, although in the names of James and his associates; and
second, because the bondholders insist that the deeds of trust, 'and the powers
in trust conferred thereby, remain unimpaired and as they were before said
proceedings for sale were had, * * * because they say: (1) The said estate was a
trust, and a trust can never be terminated without the consent of the cestuis que
trust, except by its due execution; (2) because the powers of sale granted by
said deeds to your orator are powers in trust, and, not having been executed in
conformity with the requirements of the deeds by which they were granted,
remain unexecuted; (3) because the said act, chapter 79, being repugnant to the
constitution of the United States, no proper and legal execution of said powers
could be made under its authority; (4) because the terms and conditions r
escribed by the act were not complied with, and therefore, even if the act were
valid, the said powers still remain powers in trust unexecuted;' and it was
insisted 'that no number of bondholders, less than the whole number entitled to
the estate granted to your orator by said deeds of trust as security, could, under
section 33 of the statute laws of Wisconsin aforesaid, legally organize a
corporation, and vest in it the title to said estate, and so deprive bondholders not
consenting thereto of their security; and that, inasmuch as bondholders to a
large amount did not consent to the said sale and organization, the same were
null and void.'
14

As to the proceedings in the suits for the foreclosure of the land-grant

mortgage, and for the enforcement of the lien of the Cleveland judgment under
which the St. Paul Company acquired title, the material averment, in the view
we take of the case, is that 'the said Minnesota Company, so called, had no title
to said estate, called the third mortgage, conveyed to him (Barnes) by said
deeds of trust, which could be barred by decree of foreclosure of said landgrant
said decree of foreclosure of said landgrant in the name of said James, upon the
said Cleveland judgment; and that your orator retaining his title to said estate,
and not being a party to said foreclosure sales, the said estate has ever
remained, and now remains, in him, for the benefit of said cestuis que trust,
said decrees and said pretenses of the said defendants notwithstanding.'

15

To this bill the St. Paul Company filed a plea, setting up the original

foreclosure, 'with the knowledge, consent, and approval, and at the request, of
the bondholders;' the purchase at the sale by Barnes in trust for the
bondholders, in accordance with the provisions of the act of February 8, 1859;
the organization of the Minnesota Company for the purposes and with the
powers above stated; and the transfer of the property thereto. The plea then
proceeds as follows: 'That thereupon said bondholders surrendered their said
bonds to said corporation to be canceled, and the same were so canceled, and
the said corporation thereupon issued to said several bondholders, in exchange
for their said bonds, the corporate stock of said Milwaukee & Minnesota
Railroad Company to an amount equal to the principal of said bonds so
urrendered in pursuance of said articles of organization, and which said stock
was so received by said bondholders in full satisfaction and payment of their
said bonds, and that all of the bonds issued by said La Crosse & Milwaukee
Railroad Company under said mortgages or trust deeds were then, at the
organization of said Milwaukee & Minnesota Railroad Company, or
subsequently thereto, so surrendered to said corporation to be canceled, and
were canceled, and stock of said company issued therefor, that by the
proceedings aforesaid the said mortgages or trust deeds so as aforesaid given to
said William Barnes were foreclosed, and the right of redemption theretofore
existing in the said La Crosse & Milwaukee Railroad Company to redeem said
property from the lien of said mortgages or trust deeds was thereby barred and
foreclosed, and the said mortgage interest so as aforesaid conveyed by said
mortgages or trust deeds to said William Barnes became an absolute estate in
fee-simple to all of the property covered by said mortgages or trust deeds in the
said Milwaukee & Minnesota Railroad Company, subject to the prior liens
thereon, and that thereby the trust relation to said property created by said
mortgages or trust deeds between the said William Barnes and the holders of
the bonds issued under said mortgages or trust deeds ended, and that no trust
relation in respect to said property now exists, or has existed, since the filing of
said articles of organization between said William Barnes and said
bondholders.'
16

It is then alleged that the Minnesota Company was made a party to the several
suits under which the St. Paul Company claims title; that it appeared therein and
'was recognize and treated as the owner of the equity of redemption of said
property by virtue of the aforesaid proceedings;' and that, 'by means of the
proceedings aforesaid, the said William Barnes ceased to have any right, title,
or interest as trustee as aforesaid in, to, or upon or under the said alleged
mortgages or trust deeds, and his said bondholders ceased to have any right,
title, or interest in, to, or upon the premises described therein and purporting to
be affected thereby; and at the time of filing said bill of complaint the said
William Barnes had no right, title, estate, lien, claim, demand, or equity of

redemption, as trustee or otherwise, of, in, to, or upon the premises described in
the said mortgages or trust deeds.'
17

This plea was set down for argument, and sustained by the court, whereupon a
replication was filed and proofs taken. After hearing, an interlocutory decree
was entered April 21, 1882, finding that $1,010,400 of the bonds had been
actually exchanged for stock in the Minnesota Company; that $693,000 had
either been canceled by the company before their issue, or had been surrendered
by their owners for cancellation, and had actually been canceled after being
issued; and that $37,400, belonging to the St. Paul Company, were then in
court, and for which no claim was made under the trust. The total amount thus
accounted for was $1,740,880, and as to these it was adjudged that they
constituted no valid claim against the La Crosse Company under the mortgage,
and that, so far as they were concerned, the plea of the St. Paul Company was
sustained, and Barnes was entitled to no relief. As to the remaining $259,200 of
bonds provided for in the mortgage, a reference was made to a master to inquire
and report what, if any, were justly due and in equity entitled to payment out of
the mortgage security. Under this reference the master took testimony, and
reported in favor of the following persons and for the following amounts:

18

1. Matthew H. Robinson, 1 bond, $100, on which was due,

19

for principal and interest,.......... $ 417 55

20

2. Frederick Van Wyck, assignee of William H. Sisson, 2

21

bonds, $1,000, on which was due, for principal and

22

interest,............................ 4,175 50

23

3. A. S. Bright and A. C. Gunnison, 22 bonds, $10,900, on

24

which was due, for principal and interest,. 45,512 95

25

4. Andrew J. Riker, 8 bonds, $800, on which was due, for

26

principal and interest,.............. 3,340 40

27

5. August F. Suelflohn, 4 bonds, $800, on which was due,

28

for principal and interest,.......... 3,340 40

29

6. M. M. Comstock, 2 bonds, $200, on which was due, for

30

principal and interest,................ 835 10

31

7. Mary Christie Emmons, 2 bonds, $200, on which was due,

32

for principal and interest,............ 835 10

33

8. Reid & Smith, 19 bonds, $6,400, on which was due, for

34

principal and interest,............. 26,723 20

35

9. J. H. Tesch, 11 bonds, $1,100, on which was due, for

36

principal and interest,.............. 4,593 05

--------37
38

In all, bonds, $21,500, due,........ $89,773 35 To this report exceptions were

filed, which the court, after hearing, 'being of opinion that said claims do not
constitute under the mortgages * * * a valid lien upon the property,' sustained
and dismissed the bill. From a decree to that effect this appeal was taken.

39

The ultimate question for determination is whether Barnes, the trustee, and the
bondholders secured by the mortgage to him, are bound by the decrees in the
suits for the enforcement of the prior liens, namely, the land-grant mortgage
and the Cleveland judgment, to which the Minnesota Company was a party.
That depends on the legal effect of what was done by Barnes in 1859, for the
purpose of foreclosing his mortgage and organizing the Minnesota Company to
take the property, under his purchase at that sale, in trust for the bondholders. It
is now alleged that this was all null and void: (1) because it has been so
adjudged in the suit brought by James and others; and (2) because the act of
February 8, 1859, under which Barnes acted in buying at i own sale and
organizing the company, was unconstitutional in its application to his mortgage,
which was executed before its passage, and the bonds secured thereby. The
claim is that a purchase by Barnes himself at his own sale, without the payment
of his bid in money, could not operate as a foreclosure of the mortgage, except
with the consent of all the bondholders, which was never given.

40

The sufficiency of the first of these objections is to be determined by the

averments in the bill, taken in connection with the exhibits to which they relate.
As to the second, the St. Paul Company pleads, in substance, that Barnes, in
foreclosing his mortgage and in organizing the Minnesota Company after his
purchase, acted 'with the knowledge, consent, and approval, and at the request,
of the bondholders.'

41

1. As to the decree in the suit of James and others. The copy of the bill in that
suit, which is one of the exhibits in this case, shows that it was filed by certain
judgment creditors of the La Crosse Company to collect their judgments. It is a
creditors' bill, pure and simple, brought by James and his associates, 'on their
own behalf, and in behalf of all the creditors of the La Crosse & Milwaukee
Railroad Company who have or claim a lien upon the railroad of said
company,' and 'who shall come in and seek relief by and contribute to the
expenses of this suit,' to obtain a sale of 'all of the property, real and personal,
franchises and privileges, of the La Crosse & Milwaukee Railroad Company, or
which was theirs at the time of said sale by Barnes, May 21, 1859,' 'subject to
the prior claims' described in the mortgage to Barnes, 'and that the proceeds of
said sale be brought into court, to be divided according to the legal priorities of
your orators and the other claimants thereto.' It alleges, in substance, that the
mortgage to Barnes was executed 'for the purpose and with the design of
bringing about a speedy sale of said road and its franchises, and cutting off the
stockholders in said company, and to hinder, delay, and defraud the creditors of
the said La Crosse * * * Company, and passing the property in or to the road
and its franchises to some of the directors of said company and their friends.'
The La Crosse Company, although nominally a party to the suit, did not appear,
and did not ask relief, and there is no pretense that the complainants either did
or could prosecute the suit in behalf of the stockholders. If, as is alleged, the St.
Paul Company was the promoter as well as the real prosecutor of the suit, it is
bound only to the extent it would be if it had been actually the complainant.
The most that can be claimed in this behalf is that it stands in the place of the
complainants named in the bill, and is bound as they are bound; no more, no
less.

42

The decreewhich, with the opinion of Mr. Justice NELSON, announcing the
judgment of this court in James v. Railroad Co., 6 Wall. 753, is one of the
exhibits in this caseadjudges that the mortgage to Barnes was good and valid
'as a security for the bonds issued under it in the hands of bona fide holders for
value without notice,' which, it was found, did not exceed $200,000; that the
foreclosure and sale be 'set aside, vacated, and annulled,' and the Minnesota
Company be 'perpetually restrained and enjoined from setting up any right or
title under it,' because it was made in pursuance of a notice claiming that

$2,000,000 of bonds had been issued, and there was default in the payment of
$70,000 of interest when less than $200,000 had ever been negotiated to bona
fide holders, and the foreclosure proceeding was in other respects irregular and
fraudulent; and that all the right, title, interest, and claim which the La Crosse
Company had in the railroad from Milwaukee to Portage City be sold to pay the
judgments in favor of the complainants, 'unless, prior to such sale, the
defendants pay to said complainants' the amounts due thereon.
43

Every decree in a suit in equity must be considr ed in connection with the

pleadings, and, if its language is broader than is required, it will be limited by
construction so that its effect shall be such, and such only, as is needed for the
purposes of the case that has been made, and the issues that have been decided.
Graham v. Railroad Co., 3 Wall. 704. Here the suit was by and for creditors to
set aside the mortgage to Barnes, and the foreclosure thereunder, bacause made
and had to hinder and delay them in the collection of their debts. The decree,
therefore, although broader in its terms, must be held to mean no more than that
the foreclosure was void as to these creditors, whose claims were inferior in
right to that of the mortgage, and that the Minnesota Company was restrained
and enjoined from asserting title as against them; and also that, if they
undertook to sell the property to pay their judgments, the mortgage to Barnes
should stand only as security for such bonds as had been actually negotiated by
the La Crosse Company to bona fide holders.

44

Such, also, was the judgment of this court in Railroad Co. v. Soutter, 13 Wall.
517, which was a suit brought by the Minnesota Company, June 4, 1869, to
recover back the money it had paid to redeem the mortgage to Bronson and
Soutter of the Eastern division, for the reason that the foreclosure of the
mortgage to Barnes was fraudulent, and it had been so adjudged in the James
suit. In announcing the opinion of the court, Mr. Justice BRADLEY said, (page
523:) 'Who are the complainants? Are they not the very bondholders, selfincorporated into a body politic, who, through their trustee and agent, effected a
sale which was declared fraudulent and void as against creditors, and made the
purchase which has been set aside for that cause? * * * But the complainants
are wrong in asserting that the property was not theirs. It was theirs. Their
purchase was declared void only as against the creditors of the La Crosse &
Milwaukee Railroad Company. In other words, it was only voidable, not
absolutely void. By satisfying these creditors, they could have kept the
property, and their title would have been good, as against all the world. The
property was theirs; but, by reason of the fraudulent sale, was subject to the
incumbrance of the debts of the La Crosse Company. This was the legal effect
of the decree declaring their title void. Therefore they were, in fact, paying off
an incumbrance on their property when they paid into court the money which

they are now seeking to recover back.'

45

46

This being the extent of the legal effect of the James decree, it follows that, if
the proceedings by Barnes in 1859 for the foreclosure of his mortgage were
sufficient in form, the Minnesota Company represented that mortgage, and the
holders of the bonds secured thereby, in the suits to which it was a party
brought to enforce the prior liens under which the St. Paul Company claims
title, and that both Barnes, the trustee, and the bondholders are bound by the
decrees therein. The La Crosse Company has never disputed the title of the
Minnesota Company, and the prior lienholders recognized it as good when they
proceeded against the company to enforce their respective rights. The property
has been lost, not because the foreclosure was invalid, but because it was all
needed to satisfy liens which were prior in right to that of the Barnes mortgage,
under which alone the company claims title. When the creditors in the James
suit undertake to carry their decree into execution, it wil be time enough to
consider how far they are bound by the decrees in the suits for the enforcement
of the prior liens which were all obtained and executed pending their litigation
with the company. We are now dealing only with Barnes, and the bondholders
claiming under him.
2. As to the plea. The bill in effect concedes, as is necessarily true, that if all the
bondholders consented to a foreclosure under the act of February 8, 1859, the
purchase of the property by the trustee for thei benefit, and the transfer of title
by him to the Minnesota Company as their representative, would be good, even
though without such consent it might be bad. The plea alleges such a consent,
and also an actual exchange of all the bonds for stock in the company. The
material question thus presented is whether the bondholders consented to what
was done by the trustee in their behalf. If they did, it matters not that some have
omitted to surrender their bonds for cancellation, and take certificates of stock
in exchange. If they assented to what was done, they became in law purchasers
at the foreclosure sale, and, as such, stockholders in the company which was
organized under the statute in their behalf to take the property from their
trustee, and that, too, without any formal surrender of their bonds. Their stock
was bound for the payment in money of their respective pro rata shares of the
costs, charges, and expenses of the sale, and of the organization of the
company, and of carrying the same into effect. If they wanted certificates of
stock, they were required to surrender their bonds, and pay what was due from
them on this account but as bondholders, purchasing through their trustee, they
became, by the express terms of the articles of organization, stockholders in the
new corporation, with a lien on their shares for their proportion of the expenses,
etc. The averment in the plea of an actual surrender of bonds for cancellation,
and an issue of stock in exchange therefor, presents an immaterial issue. The

voluntary exchange of bonds for stock would show a positive assent to the
foreclosure, but a failure to do so would not necessarily imply dissent.
47

The exact issue to be tried, therefore, is whether the necessary consent was
actually given. The enabling statute was approved February 8, 1859, and on the
eleventh of the same month, only three days afterwards, the requisite amount of
bondholders presented their request to Barnes that he proceed to foreclose the
mortgage, and buy the property for the bondholders under the authority thus
conferred on him for that purpose. In accordance with this request, he
advertised the sale, and made the purchase May 21, 1859. Two days afterwards
he organized the company, under the statute, to take the title from him as
trustee for those in whose behalf he bought. From that time forward, during all
the protracted litigation which ensued, this company claimed to own the
property, subject only to the incumbrance of prior liens, and neither Barnes nor
any bondholder, so far as this record discloses, ever asserted the contrary until
after the James suit was decided, when the St. Paul Company was in possession
under its purchases upon decrees for the enforcement of the prior liens in suits
to which the company was a party. During all this time the Minnesota
Company was active in asserting its title, and its litigation with the prior
incumbrancers was constant and energetic, as the records of this court show in
Bronson v. La Cross R. Co., 1 Wall. 405, and 2 Wall. 283; Railroad Co. v.
Soutter, 2 Wall. 440, and Id. 510; Graham v. Railroad Co., 3 Wall. 748;
Railroad Co. v. Soutter, 5 Wall. 660; Railroad Co. v. Chamberlain, 6 Wall.
748; Railroad Co. v. James, Id. 750; James v. Railroad Co., Id. 752.

48

The amount of bonds authorized by the mortgage was $2,000,000. The proof is
abundant that of this amount $1,010,400 were actually converted into stock,
and that $730,400 had either been surrendered for cancellation because they
had never been issued, or because the holders made no claim against the La
Crosse Company on their account. The findings of the court below show the
particulars as to the whole of these two amounts, and we are entirely satisfied
with the correctness of the conclusions there reached. Some of the holders
claim that they were persuaded against their own judgment, and, perhaps,
against their will, to make the exchange, but still their bonds were actual y
surrendered and certificates of stock taken in exchange therefor. They kept
silent during all the time the litigation with the Minnesota Company was going
on, and uttered no complaints until after the James suit was decided against
their interests then represented by that company.

49

There remained, however, at the time of the rendition of the interlocutory

decree below, $259,200 of bonds unaccounted for, and a reference was made to
a master to receive claims therefor, and to take testimony and report thereon.

Under this reference, bonds to the amount of $21,500 were presented to and
allowed by the master. None of these bonds had been actually surrendered to
the company and exchanged for stock, but, after a careful examination of the
testimony, we have no hesitation in deciding that, at the time of the foreclosure,
they were held and owned by parties who in law consented thereto, and that the
present holders took them with full notice of that fact.
50

Of the amount allowed by the master, Bright & Gunnison alone represent
$17,300, although Reid & Smith have a claim on $6,400 thereof for money
advanced. Both Bright and Gunnison were officers in the Minnesota Company,
and at times very active in the management of its affairs. Of the bonds which
they represent, $7,500 were owned by William E. Cramer at the time of the
foreclosure, and he signed the request to Barnes that he sell the property, and
buy it for the bondholders under the statute. These bonds were bought by
Bright & Gunnison, or some person whom they represent, after this suit was
begun, Cramer receiving for them $900. The rest of the bonds which they
present were undoubtedly owned by them while they were acting as officers of
the company, and as such defending the suits for the enforcement of the prior
liens, if not at the time of the original foreclosure by Barnes.

51

Suelflohn, who presents a claim for $800, actually owned his bonds at the time
of the foreclosure, and signed the request that was presented to Barnes.
Robertson, who claims $100, was a clerk in the office of Barnes when the
bonds were issued, during the foreclosure, and for many years afterwards. He
received his bond for services in connection with this business. Mary Christie
Emmons claims $200 for bonds she got from her father, one of the original
organizers of the company, and named in the articles of organization as one of
the directors, a position which he occupied for several years afterwards. Maria
M. Comstock's claim is for bonds she got from her father, Leander Comstock,
who held them at the time of the foreclosure, and who then did and ever since
has resided in Milwaukee, and presumably had knowledge of what was being
done. Frederick Van Wyck, who claims $1,000, is a son-in-law of Bright, and
the bonds he presents were bought by him at the suggestion of his father-in-law
from William H. Sisson for a small sum after they had been filed as a claim by
Sisson himself. Sisson was a lawyer in Chicago, but whether he owned the
bonds or held them for others does not appear. Andrew J. Riker, who claims
$800, was a broker in New York at the time of the foreclosure, and before and
after. He owned the bonds he now presents at that time, and must have been
familiar then with all that occurred, for he held land-grant bonds also, and says
that after the foreclosure of that mortgage he laid them aside as of no value,
because he 'thought the thing was all closed up.' John H. Tesch, who claims
$1,100, held his bonds at the time of the foreclosure. He resided then and since

in Milwaukee, and was familiar, in a general way, with all that was done. He
knew of the Barnes foreclosure, though he says: 'I did not know that my bonds
had anything to do with it. I did not follow that up. It was a common report
mentioned in the newspapers, but did not know it concerned me.' But before
that he had been informed by his counsel that they were good for nothing, and
would not be paid.
52

Under these circumstances, we cannot do otherwise than decide that the silence
of the holders of these few bonds, during all the time the Minnesota Company
was acting in their behalf, is equivalent to actual consent to the sale under
which the company got the right to represent their interests in the litigation with
the prior lienholders. They are the only persons, so far as the record discloses,
who did not actually surrender their bonds, and take certificates of stock
therefor, and it is now too late for them to say that what their trustee did in their
behalf was without authority. There cannot be a doubt that they knew of the
foreclosure at or near the time it took place. If the purchase was not made for
their benefit under the act of 1859, the trustee was accountable to them in
money for their proportion of what he bid for the property. For this they never
applied, and it must therefore be assumed that he bought for their account, as
well as that of the other bondholders, and that they assented thereto.

53

It follows that the plea has been sustained by the evidence, and this necessarily
disposes of all the other questions in the case. The sale by Barnes to the
company under the foreclosure divested him of title, and of his right to bring
suit in behalf of bondholders. The decree in the James suit did not dissolve the
Minnesota Company. It simply established the right of the judgment creditors
who brought that suit to redeem the Barnes mortgage, by paying the amount
due for bonds that had been actually negotiated by the La Crosse Company to
bona fide holders, and to have the mortgaged property sold subject to such a
lien. The company still continued in existence, and still owned the property that
had been bought, subject only to the inferior liens of the creditors whose rights
had been established. Neither can Barnes now take advantage of the alleged
frauds or irregularities in the foreclosures of the prior liens. He not only has no
title under which he could proceed for that purpose, but all such questions were
settled and finally disposed of in the decrees to which the Minnesota Company
was a party. So, also, of the claim which was made before the master to recover
back the money paid to redeem the Bronson and Soutter mortgage. That money
was paid by the Minnesota Company, and that company alone can sue for its
recovery. Such a suit was once brought and a decree rendered against the
company.

54

The decree of the circuit court dismissing the bill was right, and it is

consequently affirmed.