The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1898-07-23
SALE NOT JUSTIFIED.
West PuilmaR Bond Transaction Is
Passed Upon mt Last.

West Pullman Bond Transaction Is
Passed Upon mt Last.
The supremedcourt yesterday decided
that the action Of. the Minneapolis
Trust company, as receiver Of the
Northwestern Guaranty Loan and
Trust company, nzdisposing of a large
block of West Pullman bonds at 10
cents on the dollar, as authorized by
the lower court. could not be justified
by the court without further .investi-
cation. NJ;
In an opinion written by Judge
Mitchell, the order of the Hennepin
county district court, authorizing the
the bonds at 10 cents on the dollar is
reversed and a rehearing granted.
L. F. Menage, the former Minneapo-
lis capitalist, was the organizer of the
West Pullman company, and also in
terested heavily in the Northwestern
Guaranty Loan and Trust Company
Of Minneapolis. In 1892, Menage deIV-
cred bonds of the West Pullman COM
pany to the Guaranty Loan company
amounting to $4,000 to liquidate a
large number of,notes made by outside
parties, for which he was; responsible
as grantor. These notes were held
largely by the Guaranty Loan COM
pany, and AMOUNTED to about 100000
Z After the Guaranty Loan company
became ipsolVent, and the Minneapolis
Trust, company was. appointed as re-
ceiver, a petition was made the Hen
nepin county district court by the
trust company praying for an order
from the court authorizing the sale
of the West Pullman bonds for 10 cents
on the dollar. Due notice was given
of the hearing, and no one appeared
r .OnnOGn ND
ton was sanctioned by the district
court ';
The trust company later filed it's re-
port and claim for allowance and fees.
and the La Sale National Bank of Chi
cago, through it's attorneys in Minne-
apoiis. filed objections to the claim. and
alleged that the bonds had been fraud-
ulently disposed Of and charged the
trust company with fraud, as thew
claimed the bonds should have been
sold nearly at par rather than merely
nominal consideration.
The syllabus is as follows:
minneapolis Trust Company. Receiver of N.
w. Guaranty Company, respondent. vs.. T,
f. Menage ct al, defendants =
Syllabus-One Mepase had delivered to the
Guaranty Loan company large amount CT the
second mortgage bonds of the West Pullman
association in trust to secure the payment Of
large number OF promissory notes which he
nag nesotlated to- a large number of persons
and en- which he was liable as guarantor
The GUARANTY Loan company having become
lnsolvent the court appointed the Minneapo,is
trust company trustee in its place to dIsnose
of the bonds to the best advantage and dis
tribute the proceeds among the holders of the
notes. - '--e
The trust company petitioned the court for
authority to sell the bonds for ten cents on
the fhe dollar ores to aos syndeste which had offered
given to the holders of sthe notes by mailing
to each Of them. nine days before the hear.
ing. copy of the petition and of the order
OF court fixing the time and place of hear
ing. on the day OF hearing, no one opposing
the court granted the petition and the trus,
tee sold the bonds for the price offered. When
the trustee filed its report for approval and
allowance one Of the note holders on behalf
of himself and all others filed objections to
the allowance OF the account. charging that
the trustee in making the sale was guilty of
fraud and positive bad faith and sacrificed
the bonds for a nominal consideration when
they were worth nearly par. The court found
that the trustee had acted in good faith and
approved and allowed its account. in which
actually received for the bonds.
Held, First. That Notwithstanding that
the note holders had not appeared and OPP
posed the granting Of the order authorizing
the sale of the bonds, they had right to
surcharge the account OF the trustee il they
could show that it was guilty of fraud and
bad faith in making the sale.
Second. That while the rule applicable to
ordinary civil actions, that an appellate court
will not disturb the findings of the trial court
port them, applies to this case. yet, as the
highest degree Of good faith is required of q
trustee. the evidence should be very closely
scrutinized public policy demands that
court should require Of trustees especially
those of its own appointment. the utmost good
faith in the execution of their trusts, and ex-
act of them clear and satisfactory exnlana-
tions of any acts on their psrt rea orally tend
ing to cast suspicion upon their fidelity to
their trusts: and the more numerous and sus-
picious circumstance are the more clear and
satisfactory ought the explanations to be-
Third. While there may be no evidence that
the directors of the truFt COMPANY were guilty
of any personal ffaud pr bad faith, the dac-
trine of respondent SUPERIOR applies and the
trust company would be. liable for any fraud
or bad faith on the part Of its agent. to
whom tho directofs had entrusted the bust
f FSooiurth-Evideocgg,, cobsside-sa and held that
the account and eSnIa1aton of the trustee Of
its official copductIsr nat sufficiently satisfac-
tory to Justify thes ccuJt; without further in
vestigation. ii playing flf seal of It's approval
uron the conduct CT its trustee.
Order reversed and a,rehearine grantad