The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1899-01-27
KRAG-REYNOLDS TRIAL
THE LITIGATION BROUGHT Up AGAIN
IN THE SUPERIOR COURT.
Opening Statement of the Attorneys
Evidence VIII Begin To-Day
News of the Courts.

The much mooted Krag- Reynolds failure
was up again yesterday in Room 9. Superior
Court. before Judge Carter. to whose court
it was transferred after ]. NJ. feathers was
elected judge of Room 2 in which it origi-
mated, as he had before the election been
interested in the litigation. Most of the
day was taken up with presentations of va
rious phases of the litigation to the court
by most of the prominent attorneys of the
city The trial grows out of the effort of the
First National Bank of Chicago 10 fore
close a mortgage issued in behalf of itself
and other preferred creditors just before the
insolvency of the firm became public. The
bank brought the action against John D.
Reagan, assignee. represented by w II.
Brown, who filed cross complaint for the
assignee, alleging that the first and second
mortgages are both invalid and We're exc
cuted for the purpose of defraudng other
creditors, and asking that the mortgages be
set aside
Lewis G. Walker appears for d. w. Coffin
the receiver. Morris A. Nathan and Lewis
Newberger. c. w. Smith, o. b. Jamison, w.
II. II. Miller, Ferd Winter, Albert Baker,
John NJ. Hoffman, A. c. Harris and others
were present and made statements to the
court. While there are scores of interested
parties, they divide themselves naturally
into two classes. One is composed of those
who are insisting on the validity of the
first mortgage securing notes for Sl29 900, of
which S2S,OO0 was due the Indiana National
Bank, $25,OO0 to the Capital National Bank.
$4,000 to the First National Bank of Chi
cago, $7000 to "Opens Weimer & Smith.
New York; $1,000 to Nicholas McCarty; and
$4,000 to A. B. Gates and Nicholas McCarty
Harrison, whose preferred stock was sur
rendered and the notes issued The other
class insists that the mortgages are invalid.
One contention is that the preferred stock
holders had no right to the payment of their
claims before the other creditors and that
when their stock was surrendered and notes
secured by the trust mortgages issued there
was fraud under the statute if not moral
fraud The main contention seems to be-
however, that when Charles M. Reynolds
borrowed the money it was for his own per-
sonal use and benefit and not for the firm
Besides the first mortgage there was an
other for $4,000 executed later, under which
various creditors are claiming. Their at
torneys, however, seem to be more inter-
ested with the assignee in breaking down
the first mortgage than of establishing the
validity of the second appearing to believe
mat the beSI lHey can nope LOT Is Il general
distribution of the assets
Lewis Newberger, on behalf of the In
diana and Capital National banks detailed
the execution of the mortgage, attempting
to show that on advice the firm decided to
execute the notes to the banks securing
them and others by mortgage, naming La
fayette B. Perkins as trustee under the
mortgage for the creditors. After the mort
gage was executed he took it to Chicago.
exhibited it to the bank there which after
consultation, decided to accept 1T in full
payment of its claim.
Returning to this city, Mr. Perkins notified
M. b. Wilson, of the Capitol National Bank
of the execution of the notes and mort
cages, afterWard repeating the formula. to
the Indiana National Bank. Although there
was no written acceptance he argued that
was formality which the real acceptance
rendered unnecessary. Because Mr.. Wilson.
of the Capital National Bank, suggested
that the mortgage be placed upon record,
Mr.. Newberger argued there could have
been no collision to defraud any creditors.
Even If there had been fraud upon the part
of others to the transaction, he said that
would not affect the validity of the mort
gage so far it applied to those who had
valid claims which they had right to de-
mand should be protected
The contention of other attorneys who
answered Mr.. NeWberger was that the
whole mortgage was invalid because it in
cluded notes to preferred stockholders; that,
as matter of fact, these preferred stock
holders had been in a position to refuse to
consent to the execution of the mortgage
until their stock was taken up by the COM
pany. Cancelled and notes taken in exchange
for 1t, covered by the mortgage, had been
delivered to them 1t was argued that by
this indirect way the preferred stockholders
undertook to create claims which did not
exist, or, at any rate, would not become
payable until after the creditors had been
satisfied. If invalid in one particular, the
attorneys attacking the mortgage claim, it
is invalid throughout and must fall.
To-day the hearing of the evidence will
begin. The book-keeper will he put on the
stand to tell of the general financial condi-
ton of the firm when it failed and A. 3.
Gates will be asked to testify as to how the
preferred stock was Cancelled and the notes
of $4,000 secured by the mortgage were exc
cuted. The attorneys would like to have
Charles Nj. Reynolds appear, but he is not
here and service cannot be had upon him.
He left the city shortly after the failure
Attorneys in the litigation were yesterday
disinclined to credit reports that indictments
had been returned here. If there was a
fraud it was committed in New York.