The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1868-07-10
UNITED STATES SUPREME COURT.

wall street FUNDS Invested in Western Rail-
road Mortsages-A Fraudulent Operation
to Defeat tho Securlty-The Court Dlsre-
CARDS 1t.
Frederick r. James ct al. u.s. The Mayaubee ana
Minnesota Railroad Companv.-This h an appeal
from the Circuit Court of the United States for the
district Of Wisconsin. The bill before US Is credit
ors BILL fled by four different Judgment creditors
against the defendants to set aside fraudulent and
void against creditors the sale under q mortgage
made to Barnes on the 2lst OF June, 1853 for two
millions OF dollars by the La Crosse and Milwaukee
Railroad Company, which sale took place on the 2lst
OF May, 1852 and under which the defendants CON-
pany was organized and that the company be per-
petualy enJOined and restrained from ex-
ercising any control over the property or
franchises mentioned In said mortgage or
from interfering In any manner Nth the
road or It's franchises; and further, that
the said company be docreed to take nothing under
the SALE and that the property and franchises OF the
La Crosse and Milwaukee Company may be sold and
applied. after discharging all prior liens to the
satisfaction OF the judgments Of the compainants.
The complanants consist Of the Hrm of r. p. James
Il Co., who the owners OF judgment against the
La Crosse and Milwaukee Company for $26, 353 81, re-
covered In the District Court OF the United States for
the district of Wisconsin, the 5th OF October 1862
IN favor OF Edwin q. Litchheld and which came to
the compliments by assignment; Nathaniel 8. BoutOn,
the company for 937 81, on the 9Th OF April,
1859. and which Judgment came to the hrm OF y. p:
oshes who o Tecovefea Judgment ia t the
Circuit Court OF Milwaukee county against
the same company for s2sS SO, and f. Brad
ford Greeneaf Judgment In the same
court against the same company for $40 06. These
Judgments were liens on the La Crosse and Mlwau-
kee Railroad subsequent TO the mortgage to Barnes
already referred to- which with the sale under IL is
sought to be set aside as fraudulent and void against
of an q bonds @ on s
2lst OF June, 1885, and which Issued accordingly
by the president ana secretary, and were made pay
able In thirty years; one thousand bonds OF 81, 900
each, one thousand four hundred OF $500 each, and
three thousand OF 500 EACH interest at seven per
AIRY and July in each year with coupons attached.
The sale under the mortgage took place on default
OF the payment Of the first instalnent OF interest
six months after It was executed. Barnes the mort
gagee, &C ted AZ auctioneer, and bid on the pro-
perry himself trustee for the bondholders. who
soon after organized the Milwaukee and Minnes0 "a
Railroad Company, one OF the defendants in this
suit. As appears from the proofs at the time Of
this sale there mad not been 1900 900 advanced on
the entire issue of the two millions Of bonds indeed
the actual amount u but little over $780, $780, 600
OF the bonds do not appear to have been negotiated
100000 had been returned and cancelled, making In
the aggregate S663,000 $780, 900 were given 70
sa oS Whcn he soS a. auction and WRc were
the dollar. $4,000 Of toe bonds were given 70
secure loan OF $40, 500, and which came Into the
hands OF the persons their friends for about
i've cents on the dollar. II is charged in the bill
aud the proofs are very strong In support Of
it-that this note to Chamberlain for So, 900
and the loan OF 3i6,5o0 to secure the pay
ment Of which these bonds were gtven-t 400, 900
In amount for the first sum- and $500 900 for the
secOnd-were made by the company for the purpose
and with the intention OF obtaining division OF them
among the directors ct merely nominal prices IL Ia
the result Of the transaction. We have looked with
some care into the proofs and into the brief Of the
learned counsel for the Defendants to ascertain the
portion amount OF these bonds or Of
Company, into which some OF them were con-
verted that are now In the hands Of bona
nde holders, and we ind no evidence In the
record tending TO show any amount beyond the sum
already mentioned, less than $500 900. These were
the only outstanding bonds existing at the time Oh
the foreclosure and sale for which value mad been
paid: the remainder of the S2000,O00 were
either In the hands OF the directors or under
their control. and not negotiated, or tiey
were in their hands under the fraudulent
nominal prices. Nor do we lind thai the present
holders Of the bonds or stock OF the COMPANY are In
any better or more favorable condition man those
who organized the defendants. The notice OF safe
set forth that the mortgage debt was SzVOO0O, and
that STO 600 of interest was due IL needs no author
tiles to show that such sale cannot ne Upheld with
out sauctoning the gr0ssost fraud ana injustice tO
the Ia Crosse aud Milwaukee Company the mortgagee
and It's creditors. This deceptive notace was cacu-
lated 20 destroy all competition among the bidders
and indeed TO exclude from the purchase every one,
except those engaged In perpetuation Of the fraud
Tne sale therefore, must be set aside, and the MIL
waukee and Minnesota Company be perpetually en-
Joined from setting up any right or title under IT,
The mortgage 10 remain security for the bonds IN
he hands OF bona de holders for value, and that the
judgement creditors the cOmplalnants, be at liberty
10 enforce their Judgments against the defendants
therein subject 10 all prior liens or encumbrances.