The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-10-23
AN IMPORTANT DECISION.
Ruling That Affects Three or -Four
Hundred Banks.

ST LOUIS, Oct. 22-About BAG banks,
scattered over twenty-one States of the
Union, affected by decision just rem
dered by the United States Supreme Court
in the case of Z. S. Hubbard. assignee of
the Union Loan and Trust Company, of
Sioux City, Ia, against j. S. Kennedy, Tod
& Co., bankers, of New York. The Su-
preme Court affirms the ruling of the lower
court, which was that very large amount
of stocks and bonds could be recovered by
the Union Loan and Trust Com
pany from Tod & Co. payment to Tod
& Co. of $1.50O,OCO with interest from Dec.
80, 1892. The case has been before various
federal courts for number of years.
The Manhattan Trust Company, of New
York filed bill Sept. %, 1893, in the United
States Circuit Court for Iowa against the
Sioux City & Northern Railroad Company
asking for receiver to take charge of the
road. The suit was based on a mortgage
made to the trust company in 1890 to secure
81, 920 600 worth of bonds. A few days later
receivers were appointed. and on the same
day E. H. Hubbard, assignee of the Union
Loan and Trust Company, of Sioux City,
Ia, filed an intervening petition asking for
injunction against the disposition of
le,600 shares of the stock of that road and
Western Railroad. These securities were
held by ]. s. Kennedy, Tod e Co., of New
York, bankers The court below held that
the Union Trust Company parted with
the securities to Tod & Co., knowing ii was
intended to rehypothecate them;" and fur
Their. that the sale of the securities by
Tod q Co., under the provisions of the
agreement did not divest the trust COM
pany of its junior liens, and that rights to
redeem remained because the 81 800 600
notes were not purchased in the ordinary
course Of business"
The trust company appealed to the Cir
cult Court of Appeals the ground that
the securities were taken wrongfully; that
defendants were not bona fde holders, and
that the loans were usurious and void. The
Circuit Court of Appeals affirmed the de-
cision of the lower court. The case then
came to the Supreme Court on a writ of
certiorari secured by the trust company
the Union Loan and Trust Company of
Sioux City, Ia, to secure loan, and were
rehypothecated by that company. IN April
1893, the Union Loan and Trust Company
failed. with liabilities amounting 70 about
81. 100000 and available assets of only 81 5O0,-
000 The failure was disastrous un-
expected. as the rating of the company was
such that their paper was held for various
amounts by 346 banks in twenty-one differ
ent States in addition to a large number
of local creditors. After the failure a num-
Der of creditors effected a settlement with
the receiver by accepting a certain per-
centage as payment in full of their claims
but large number of banks which held
what were known as railroad securities held
a number of meetings in Chicago and in
June 1888, organized what was known as
the Credits Communication Company, incor-
porated under the laws of the State Of Iowa
In exchange for stock in this company the
creditors surrendered the notes which had
been negotiated through the Union Loan
and Trust Company.