The Portland daily press., 1894-12-29
EASTERN FORGE COMPANY.
A Proceeding in Equity Brought by
the City Bank Of Gloucester.

A Proceeding in Equity Brought by
the City Bank of Gloucester.
Some Fine Points of Law Involyed-A
Misapplication of Bonds Claimed-A
Receiver Asked for the Forge Company
An Injunction Prayed for.
| A case of great Importance was brought
| before Judge Webb of the United States
| Circuit court yesterday. 1t is proceeding
in equity and involves many points of cor
poration law. 1t was brought by the City
| National bank of Gloucester against the
| Eastern Forge company and others, of this
city. being against said corporation, and
| George T. Morse of Portland, and Vim. N.
| Fisher of Gloucester, managing direci ors
and assignees The first bill brought by the
| complainant corporation was objected to by
the Portland Trust company and Eastern
| Forge company and was amended. the
| pending proceedings being on the amended
| bill.
| The complaint sets forth that the COM
| plainant corporation is the owner of a note
1 for $4,000 given by the Eastern Forge COM
pany, signed by NJ. Z. Denham, treasurer.
( payable to the order of ourselves. endorsed
| by Mr.. Denham, and W. N. Fisher. the lat
| ter waving demand and notice, which note
| is still unpaid. The complaint further
alleges that at meeting of the stockhold-
| ers of the Eastern Forge Company, July TO-.
| 1895, it was voted by the stockholders to
authorize the issue Of bonds. secured by a
| first mortgage on the plant and machinery,
| then owned or to be thereafter acQuil I'D by
| the company. The bonds and mortgage
were to be for the purpose of providing
! funds to complete the building then under
construction and to equip the same with
machinery and fixtures. 1t was voted to
| uthorize the directors, If in their judge
ment it should be for the best interest Of
| the corporation. to pledge such funds or
\ any portion of them collateral security
\ for the notes of the company. instead OF
| making sale of the bonds. The directors SO
| voted and did raise bonds to the amount of
| SIS, 600 and executed such mortgage.
'That having in the manner aforesaid ex-
| ted the power granted by the vote OF the
| stockholders, the directors of the company
| did wilfully and frauduleutly and without
authority issue to themselves, the said
| directors, as individuals the bonds author
| ized, not for the purpose set forth IN the
| vote of the stockholders, authorizing the
| issue, but for the purpose OF securing Tor
! themselves .preexisting loans and debts
| made for said company,s benefit, and
| further says that this issue of bonds to the
| above directors was not for the purpose
authorized by the vote OF the stockholders,
but was unlawful and in fraud of the
creditors of said company
The usual request was then made for an
| order from the court to tho directors that
| they make true. dire ct and perfect answers
| to the above. The following request being
| then made: "And your petitioner prays that
| the MOI tgage bonds fraudulently issued. be
| cancelled and that the PoI tland Trust CON-
| pany be decreed to discharge such mortgage
| of record, and that the court appoint re-
| ceiyer to take charge of the assets, to con-
| vert the same into money, and to divide the
| same pro rata, among the creditors OF the
company. joining in this action under the
| further direction of this court
| 10 this hill of complaint the Portland
| Trust company filed demurrer that, the
/ bank did n Il allege that it had been refused
| payment of the note and that it did not
allege it had exhausted itslocal remedies for
| the collection of such debt, that by the
| complainants, own showing the directors
| as individual holders of the bonds alleged
| to have been issued, are necessary as Ind1-
| yidual parties to the bill, but have not been
| Joined as parties; that the bill contains no
| allegation that the bank was stockholder
| In said CORPORATION at the time of the tran
| saction of which it complains or that its
| charges have devolved upon itself by opera
| tion of law, or that the suit is not collusive.
| to confer on a court of the United States
| jurisdiction of case of which it would not
| otherwise have cognizanCe. Nor does it set
| forth the efforts, if any, of the complainant
| to secure such action as it desires on the
| mart of the managing directors or trustees.
| TIL. demurrer is signed by Vim. g. Davis,
| president, Charles E. Libby, solicitor for the
| company.
| To this bill the Eastern Forge company
| files a demur1 er that the trustees are not
| Joined as parties, that the corporation
BIZ Dug hit its bill both as creditor and stock
holder and that its remedies are not the
| same in each capacity and that the two
grounds OF complaint cannot be joined with
| out detriment to the rights of defendants
| This demurrer is signed by A. W. Coombs,
| clerk, and B. D. and II. NJ. Ve1rill, attor-
neys.
| The orig mai bill is furth her amended and
! the bank admits hat it did hold and still
| holds stock of the company to the face
value of $4,000, that the suit is not collu-
| sive and that before this suit was brought.
| the complainant stated to the president and
treasurer of the company that the issue of
| bonds herein complained of was fraudulent
and requesting them to procure the cancel
| Iation by the directors of said bonds held by
them, but that no action had been taken by
| them.
| Jaquith & Rigelow of Gloucester and ".
! A. Pew, pleared for the bank. Gen. J. j.
| Lynch appeared for James Cunningham.
| one of the bond holders. B. ID. Verrill and
A. ". Coombs for the others. The case Was
argued by Mr.. Libby for the Trust company
and by Mr.. Bigelow for the bank.
Judge Webb, after the arguments. tooa
| the case under Amusement.
The case of Samuel Bradlee of BOSTON
| against the Eastern Forge company, was
| then taken up This 10 brought to prevent
the parties named in the bill of complaint
from disposing of their bonds. Mr.. Bradlee,
- l.