Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1915-11-05
CHARLES HALL DAVIS
WINS SUIT FOR BONDS
United States Circuit Court Of APP
peals ltevcrscs District Court
at Richmond.
LITIGATION INVOLVES 100000
Petersburg Man Is Entitled to Re-
cover for Bonds Help by Him Pre-
viouS to Consolidation of Street
Railway Properties.

Refusing to dismiss the petition OF
4 Charles Hall Davis. of Petersburg, In
suit against the Virginia Railway
and Power Company, that he be al
lowed to recover the value Of deben-
ture bonds with accrued interest from
July J. 1900, alleged to have been ab-
sorbcd In the merger Of several pubic
service corporations, the Unlted olateS
Circuit Court of Appeals In an opiiioh
handed down by Judge WOODS yester-
day, reversed the decision of District
Judge Edmund Waddill, Jr.. and award
ed the petitioner the value Of the bonds
sued for, amounting, with interest, APP
proximatcly to 100000.
The suit had been pending in the
courts for more than 1--WE years. During
the progress OF foreclosure proceed
ings instituted by trustee under
mortgages Of several corporations. un-
der which receivers We're appointed
and the property Of the Virginia Pass
cngcr and Power Company and those
with which IL had become allied sold,
the Metropolitan Trust Company, Of
New York, trustee under mortgage
securing Sl,J00,0O0 worth Of dcbcnturc
bonds. filed a petition alleging that
the absorption by the Virginia Com
pany of the corporation. whose bonds
IL held, had resulted in practically de-
stroying the Identity OF the absorbed
company, and prayed that the fore
closure proceedings be held OF until
the issues raised, presented for adj
judication to Il special master, could
be passed upon. The court held the
objections insufficient, and, so far as
the metropolitan Trust Company was
concerned, the matter VAS dropped.
WINS HIS CASE IN
COURT OF APPEALS
Mr.. Hall held seventy OF the
bonds in question, each representing
$1,000 par value, and live years after
the rcceivcrship sale resulting In the
organization of the Virginia Railway
ana Power Company, entered suit for
the recovery OF his bonds, making the
same allegations Of entire absorption
as had been made by the trust COM
pany, and refusing TO accept as cquit-
able the provision made FOR the de-
benture Bonds OF tho Richmond Passcn-
ger and Power Company on reorEani-
@ation. Losing his suit in tho United
states District Court, he carried the
case TO tht Circuit court OF Appeals
The objections intcrposcd to the CON
summation OF IN. foreclosure sale
which laid the basis for Inc suit FOR
recovery. were that, after t.ic Virginia
Company secured control OF the Rich
mond Passenger and Power Company
II 80 managed the property OF the alb
fnrbcd company rs TO divert 10 it's own
company; so mingled it's property with
its own as practically To destroy it's
Identity. without AN accounting under
order or court; and converted TO it's
own use lines q! railway conveyed 10
1t by the Richmond Passenger and
Power Company. receiving all income
and profits. without paying either for
the property or it's use
EXCEPTIONS ARE NOTED
TO MASTERS REPORT
The special master. Judge \. L. Hol-
ltday. 70 whom the issues were re-
ferred, found that, If tho Virginia
company sustained no fiduciary relation
to the Richmond company. and the
matter was 10 be considered as de-
pending on n charge of fraudulent
conversion BY on" party OF the prop
erty of another, the burden OF prov
ing the fraud devolvcd upon the Pc
titioncr as condition OF obtaining re-
lief, and that. under this test the
Metropolitan Trust Company had fail
ed to make good it's allegations II
was also found that, If the Virginia
company was tho trustee Of the prom
erty and business OF the Richmond
company. the matter should be in
.tructcd to ascertain and report tho
value Of income. business and prop
crty diverted from the Richmond com
pany TO the Virginia company. and
that relief should he granted In con-
were noted to the masters report by
the interested parties and the decree
OF foreclosure made before the eXccp-
tons were passed upon. the court re-
serving the right to determine the
questions later
Ruling yesterday on the relation tho
Virginia company assumed TO the hold
ers OF the mortgage bonds OF the Rich
mond company when ii took control
of that corporation. the court had this
To say: "On reason and authority the
general rule Is obvious that the mort
eager, or his agents. operating the
property In due course of business il
not technically n trustee for the mort
gagec, and is under no obligation to
pay over the income or profits TO the
MORTGAGE. even when the mortgage
covers income, until demand is made
for the income or for surrender OF the
possession OF the property.
PURCHASER IjiBLE. TO
PETITIONER FOR VALUE
Therefore. as to the income received
III the due course of business the
mortgager corporation sustains no A.
duciary relations to the mortgacce
But 1t seems equally obvious that the
mortgager holds the stable mortgagcd
property under the implied confidence
rcposed and obligation assumed TO pre-
serve it intact as security for the
mortgage debt. If he wa<tes il or con-
verts 1t to his own use, he is liable.
To recover property SO converted, or
master seems to have thought for the