Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1880-05-12
united States Circuit Court.

OES, ana H., ID. CfaluSDa IOT uSI6nudutS.
The complainant, an alien, files his bill
In equity on behalf of himself and other
holders of any of the So, 600 issue of bonds
by the First Division of the Saint Paul & Pa
cifc railroad company of the date of March l.
1864, who shall come in and contribute to the
expenses of this suit. Relief is prayed against
decree, charged to have been obtained in a
State court of Minnesota by the fraudulent
practices of some of the defendants, and sale
hereunder in fraud of the rights of
complainant and others similarly situated.
The bill alleges that suit was brought in the
court of common pleas of Ramsey county,
Minnesota, to foreclose trust deed executed
| by the First division of the Saint Paul d Pa
cifc Railroad company to secure S3,0O0, OOO of
bonds, and on March Oath, 1879, a decree of
foreclosure was entered by consent of parties to
the record in said suit, no answer having
been interposed to the complaint.
| The relief prayed for is substantially, that
| the said mortgage b. declared by the court to
| be subsisting and valid lien upon the pr p
, erty described therein, and the rights of the
| holders of all of said bonds outstanding be
maintained, and they be allowed to prove
| them; that the sale of said property under the
said decree of the said State court, and the
deed executed to the purchaser thereupon, be
| declared to be fraudulent and void, and be set
aside and cancelled; that receiver be appoint
ed to take possession of the property, the
| purchasers at said sale enjYined from interior
ing Herewith and account for the earnings
and income while in their possession, and that
the property be sold under the direction of
this court for the benefit of all
the bona fde bondholders. General relief is
also asked. A demurrer is interposed by the
defendant alleging:
First-Want of Jurisdiction in this court.
| The defendants counsel argue with great
ability that relief should be sought in the court
| 1oriun ho hat
| jurisdiction to interfere with, set aside or an
null the decree of the court of common pleas,
that court pertaining to another sovereignty.
! As understand the rule it is this, that in all
cases where in direct proceeding there are
| parties before court other than that in which
decree has been rendered, and it is charged
| that the decree was fraudulent, the court can
entertain jurisdiction, and if the fraud is
proved can prevent all parties who are before
| it from enforcing the decree, and of course
from obtaining any advantage by virtue of sale
| made hereunder. The court acts upon the de-
cree and sale through the parties who are be-
fore it, not directly upon the decree of the 9TH
| er court, but adjudges that notwithstanding
the decree the partie, who obtained it and those
before the court who claim property by virtue
| of sale under it with knowledge of the fraud,
shall not appropriate to their use the property
thus acquired.
1t is true relief may sometimes be had by
| motion in the same court, or by bill in the
nature of bill in review, but such relief is not
always adequate, and an original bill is q
proper mode of seeking redress against de-
| cree obtained by fraud or GOWN.
The rule is clearly and concisely stated by
| Justice Bradley in Barrow vs. Hunton 60 Otto,
pg. 82). In speaking of the distinction be-
| tween the two classes where an original suit
may he entertained and when the application
| for relief should be made to the court granting
the Judgment or decree, he says: eff the pro-
ceeding is merely tantamount to the common
| law practice of moving to set aside
| a Judgment for irregularity. or to writ
| of error, or to a bill of review, or
an appeal it would belong to the latter cate
| CORY and the United States court could not en-
terrain jurisdiction of the case. =
On the other hand, if the proceedings are
tantamount to bill in equity to set aside q
decree for fraud in the obtaining thereof, then
| they constitute original and independent
| proceeding, and the case might
be within the cognizance of the federal courts.
In the one class there would be mere revision
of errors and irregularities, or of the legality
and correctings Of the judgments and DEGREES
of the State courts. In the other The investiga-
| ton of a new case arising upon new facts,
| taough having relation to the validity of an
1 existing Judgment or decree, or to the right of
| the party to claim any benefit by reason there
| Of"
|
| terrain this suit not doubtful, and the bill
must stand unless there is no equity stated
| therein, and this brings me to the considera-
/ tion of the other ground of demurrer.
| Second-The defendants demur for want of
| equity in the bill
The bill alleges. in substance, that the trustees
| in the deed to secure the 100000 issue of
bonds in May, 1874, at the instance of John s.
Kennedy. one of the defendants in this suit,
and the agent of committee Of Amsterdam
bondholders having in their hands and under
| their control majority of the bonds of this
| SERIES commenced suit against the First Di-
| vision of the st. Paul & Pacific railroad COM
pany and others to foreclose the trust deed
| and that after the commencement of the suit
| Kennedy, the agent, entered into an agreement
with the defendant company for the suspension
of the prosecution of the suit, and the trustees
| who instituted it, at his instance, suspended
| the prosecution of the same for Several years
and until requested by him to proceed; that
sometime in 1878 one of the trustees resigned
and Kennedy was appointed as trustee and CO.
| com plainant in said foreclosure suit, and
| thereafter acted in the capacity of trustee in
said trust deed and foreclosure suit, and as the
| special agent of the committee and of the
| bondholders who had placed their bonds In the
hands of the committee for control and
1 management; that on the 9th of October
| 1876, the trustees, including Kennedy, under
| the authority conferred in the deed of trust
took possession of the railroad appurtenances
and property covered by the trust deed and
operated the road, and that
| in 1876 or 1877, Donald A.
Smith, George Stephen, N. W. Kittson, James
J. Hill and others formed syndicate for the
purpose of acquiring the line of railroad, etc.,
covered by the mortgage under the foreclosure
proceedings and sale, and made proposition
through Kennedy to the committee of Amster-
dam bondholders for the purchase and control
of the bonds in their hands. and that Kennedy,
| the agent of committee of bondholders and
trustee for all the bondholders, entered into an
| agreement with Smith, Stephen, Kittson and
| Hill, for the purchase and control of the bonds
| held by the committee and into negotiations
which contemplated the acquisition of the line
of railroad of the First Division of the st. Paul
| & Pacific railroad company, etc.,
| by purchase at the foreclosure sale
20 be made in said pending foreclosure
| suit and payment therefor in bonds; that the
suit should proceed under the advice and in
| struction of said parties, Smith and others;
that the negotiation for the sale of the bonds
| was contaminated with Kennedy, who ap-
| proved the proposal and recommended its ac-
ceptsnce and that the suit was prosecuted,
conducted and concluded under the advice
and instruction of Smith, Stephen, Kittson and
| Hill, through Kennedy. as agent, and with a
| view to obtain transfer of said road to them,
| under the forms of judicial proceedings, in
| fraud of the rights of bondholders who had
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