# Vose v. Bronson

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United States Supreme Court
73 U.S. 452
Vose v. Bronson
APPEAL from the Circuit Court for Wisconsin.
In December, 1856, the La Crosse and Milwaukee Railroad Company, to secure ten millions of dollars in bonds, to be issued by them, executed a mortgage o Bronson, Soutter, and Knapp, as trustees for the bondholders. This mortgage was amended in 1858, so as to limit the issue to four millions. Bonds to that amount were issued, and became a lien on the road. In consequence of the failure of the company to provide for the payment of interest, the trustees, in 1859, instituted proceedings in the Federal court of Wisconsin, to foreclose the mortgage; which proceedings, in 1862, passed to a decree. The road in 1863, was sold. After the decree, but before the sale, one Vose (the appellant), who had not been made a party defendant to the suit of foreclosure, filed a bill against the trustees just named, asking to come in and share in the proceeds of the sale of the mortgaged property in their hands.
The bill set forth that before the execution of the mortgage, but in immediate contemplation of it, the La Crosse Company had agreed to buy a large quantity of railroad iron of a firm to whose rights the complainant had succeeded, giving to them bonds to the extent of about $714,000 in payment, at the rate of eighty cents on the dollar; that it was well understood between the parties that the firm, which was one dealing extensively in railroad iron, took the bonds, not to hold as investments, but for commercial and immediate use; that to guard against loss to the firm by a depreciation in the markets of the bonds thus to be assigned to it, by the company's selling any of those which they yet retained at a less rate than the 80 per cent., it was agreed that if the company should sell any of their bonds to any one during a certain term named, at a less rate than this one, then, that the company should deliver to the firm so many additional bonds as would pay the firm for the iron in full, estimating the bonds already given and those to be given at the lowest rate at which any bonds had been sold. The bill further set forth that the iron (10,474 tons) was delivered to the company, and by them used in making their road, and now formed a material ingredient in the value of the property sold.
Admitting that the company had issued, sold and delivered the whole four million dollars of bonds (so that on the face of the bill it appeared that the company had the control of no more bonds), the bill set forth that it had sold a large amount of them as low as forty cents on the dollar; that the firm, needing to 'realize' on the bonds assigned to them, had been compelled to sell at that same rate, and that the effect of the company's thus selling at 40 per cent. was, that the firm had been paid but half the stipulated price for their iron. It set forth, moreover, that in fixing the claims which the respective bondholders had upon the proceeds of the sale of the mortgaged premises, a portion of the bonds were, by the final decree of foreclosure, cut down from the value apparent on their face to 40 per cent., on account of their having been sold at a discount; and that
The decree of foreclosure having been entered for. $2,794,600
There remained as balance an unappropriated lien of. 1,205,400
Part of the original mortgage for. $4,000,000
That he, Vose, had not been made by the trustees, in their suit for foreclosure, a party defendant as he ought to have been, so that he might have been enabled to set up and insist upon his claim under their bill of complaint; that his claim was accordingly not foreclosed or impeached, and that the decree ought to be so modified as to let it in. The insolvency of the La Crosse Company was alleged, and notice of the contract and of its breach to all the parties in the principal cause. The bill accordingly prayed that as the firm was to be paid only in bonds, and did not receive enough to pay them, that the requisite amount of bonds, that is to say, another $714,000, might be executed and delivered to them, or at any rate that they might stand in the same position as if such requisite number had been executed and delivered to them; and that the decree might be p ened and the complainant let in so as that his equities might be provided for out of the unappropriated lien in the mortgage, which it was stated was sufficient to provide for them.
The bill, on demurrer to it, was dismissed by the Circuit Court. Appeal here.
Mr. E. G. Ryan, for the appellant:
The appellant having delivered his property and received his bonds, finds their value depreciated one-half, by the railroad company's action-fraudulent without doubt-in selling all their bonds of the same issue, at half the price at which he took his, without reserving any whatever to fulfil their contract to him arising in case of a sale of any at such a price. The effect in law (and in fact, also, as the thing proved), was to pay him but half the stipulated price for his iron. The bill seeks payment of the unpaid half.
Will it be urged that our bill is in prejudice of subsequent encumbrancers? It cannot be rightly so urged. Under the mortgages, each bondholder was entitled to his pro rata share of four millions of dollars. But, beyond that, the mortgage gave him no right. And it is unimportant to any bondholder how the rights of other bondholders accrue, provided that the whole principal sum in not swelled beyond four millions of dollars. The mortgage has that capacity. Four millions of bonds were issued. But the decree of the court finds less than three millions due upon the whole issue. And there remains an undisposed principal of upwards of a million of dollars, which the mortgage can cover without wrong to any bondholder under it.
Had the railroad company issued in fact, but $2,794,600 of bonds (the principal sum found due by the decree), the complainant would clearly have had a right to satisfaction until the mortgage was charged with the full principal sum of four millions of dollars. Yet practically, and as judicially decided, that is all that they have issued.
The case is strong in natural equity. In 1857, the complainant furnished all the iron, constituting the track of this railroad, at a cash price of $605,000. In 1863, when, as is matter of common knowledge, the value of such iron had nearly doubled, the road was sold as the fact is for about $2,800,000. It will be hard indeed, if the complainant is to be left remediless for the great loss which he has sustained, and of which the defendants have the whole profit. Yet if the decree be affirmed he will be so left.
Messrs. Cary and Carlisle, contra.
Mr. Justice DAVIS delivered the opinion of the court.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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