Brown v. Guarantee Trust Safe-Deposit Company

This litigation arose from a creditor's bill filed in one of the courts of Illinois by Edward R. Knowlton against the City of Joliet Water-Works Company, W. Starr, and Harriet Brown, for the enforcement of a judgment against the first-named two defendants; for the appointment of a receiver of the property used by that company in its business; and for an accounting with the remaining defendant, Harriet Brown, who, it was alleged, asserted a vendor's lien upon some of the property of the water-works company, sold by her to Starr, and by him to that company. The Guarantee Trust & Safe-Deposit Company, a corporation of Pennsylvania, being made a defendant, the cause, upon its motion, was removed to the United States circuit court for the Northern district of Illinois, upon the ground of the diverse citizenship of the parties. Subsequently, that company filed its cross-bill for a foreclosure of a mortgage held by it upon the property of the water-works company, and for specific performance by Harriet Brown of her contract of sale to Starr. The corss-bill alleges, in substance, that by certain instruments in writing, bearing date, respectively, the 15th and 17th of June and the 9th of October, 1880, Starr undertook with the city of Joliet to construct and maintain a system of water-works for that city and its citizens, in consideration of which it agreed to grant to him and his successors certain franchises, rights, and rentals connected therewith; that on the 4th of October, 1880, he entered into a written agreement with Harriet Brown, by which, in consideration of $1,000 to be paid to her, she agreed to convey to him a certain parcel of land in Joliet; that subsequently he entered into a verbal agreement with her for the purchase of other parcels of land, making, in all, 9.60 acres, for which he was to pay a total price of $4,800; that on the 10th of December thereafter, Mrs. Brown, by warranty deed, conveyed all of said parcels to Starr, placing the deed in the hands of one Hobbs for delivery to Starr upon the payment of the balance of the purchase money; and that, on the 3d of November, Starr paid to her, on that purchase, the sum of $500, and on the 17th of February, 1881, the further sum of $1,000.

It was also alleged in the cross-bill that immediately after said agreements, all with full knowledge and consent of Mrs. Brown, Starr took actual and open possession of all the premises so purchased, and immediately began to make permanent and expensive improvements thereon for water-works purposes; that he and his assignee, hereinafter mentioned, continued to make such improvements, at a cost of about $50,000, and remained in uninterrupted possession of the premises until they were delivered to the receiver appointed in this litigation,-all this within the daily sight of Mrs. Brown, and without objection or molestation on her part; that to supplement his individual resources, which were insufficient to carry out his agreement with the city, Starr resorted to the plan of creating a corporation, under the local laws of the state, and by means of its negotiable bonds and stocks raising money sufficient to complete said water-works; and that, to accomplish this purpose, the City of Joliet Water-Works Company was organized, with a capital stock of $200,000, of which amount Starr subscribed for $195,000 in his individual name. It is further alleged in the cross-bill that immediately upon the organization of that corporation, and on the 9th of December, 1880, Starr conveyed to it and its assigns his contracts with the city of Joliet, as well as the rights, franchises, and property, real and personal, connected therewith, including the property purchased from Mrs. Brown, and agreed with the company to complete the system of water-works contemplated by his contract with the city, and deliver them to the company within a reasonable time; that, by the agreement last mentioned, the company, Starr being a director and the principal manager, as well as the subscriber for all of its capital stock except $5,000, agreed to credit him forthwith with $195,000 on his subscription to its capital stock, and to deliver to him its bonds to the amount of $140,000, par value, and also to secure their payment, by executing to the complainant in the cross-bill a mortgage upon all the property, rights, and franchises then owned or thereafter to be acquired by it; that said bonds were accordingly delivered to Starr, and the mortgage was duly executed to the complainant in the cross-bill; that, after getting the bonds in his hands, he forthwith placed them upon the market, and they are now held by a large number of persons and corporations; that the water-works company has made default in the payment of the interest coupons due on said bonds, and for more than four calendar months has continued to make default; and that, in obedience to the request made to it, according to the terms of the mortgage, by a majority in interest of the holders of bonds, the complainant in the cross-bill, as trustee, files its cross-bill for foreclosure. The bill still further avers that, in consequence of the assignment of Starr to the water-works company, and the execution of said mortgage, the trustee was invested with the right, upon the payment of the purchase money due to Mrs. Brown, with interest thereon, to demand of her a specific performance of her agreement with Starr; that, as such mortgagee, the Guarantee Trust & Safe-Deposit Company has always been willing to perform the agreement of Starr, and to pay his vendor the residue of the purchase money due to her, with interest, on having a proper deed of conveyance, and is still ready and offers to pay the said residue; and that the water-works company is hopelessly insolvent, having no property, except that covered by the mortgage. The bill prays for a foreclosure and sale; that the proceeds thereof, after paying certain fees and current expenses, may be distributed in payment of said bonds and coupons; that an account may be taken of the amount due on account of the purchase money due to Mrs. Brown from Starr; and that she be decreed to specifically perform her agreements to convey, so that said mortgage shall be a valid and first lien on the property.

Mrs. Brown filed a demurrer to the amended cross-bill, alleging specifically that the same was multifarious. This demurrer having been overruled, she thereupon answered, averring her ignorance of the contracts between Starr and the city; admitting the entering into the written contract with Starr, but alleging that it was thereafter wholly and completely abandoned by him, and that neither he nor any person or corporation had ever offered or claimed the right to carry out that contract; admitting that he afterwards verbally negotiated for the purchase of a larger tract of land, but alleging that said negotiation, as a contract, was void, under the statute of frauds; that by its terms the payment of the entire purchase price was a condition precedent to the vesting in him of any title whatever; that the possession and the improvements were made without her consent, express or implied, and with his eyes open, and that she is entitled to the whole, augmented in value, as it is, by the improvements; that she had made a great many efforts to secure the balance of the purchase money due from Starr, but had been unsuccessful; that the negotiation and transaction, so far as he and those claiming under him or acting with him were concerned, had been a fraud upon her; that by reason of such failure on his part, and that of his successors and assigns, to comply with the terms of her contract with him, it had become broken, and was void; and that the amended cross-bill was multifarious; and praying the same benefit of her answer as if she had specifically demurred to the bill. To this answer a replication was filed. Pursuant to a decree of the court on the 31st of March, 1883, upon the petition of John D. Paige, receiver, all the property and effects of the water-works company which it obtained from Starr, and all the rights accruing to it by virtue of the contract with Mrs. Brown, were sold, and bought by Joseph H. Foster, of Portsmouth, n. H. On June 9, 1883, a decree of foreclosure was entered upon the cross-bill against the fund realized by the sale. After some other proceedings, not necessary to be stated, a further decree was entered, August 12, 1883, adjudging that there was justly due to Harriet Brown, on account of said purchase money of the premises sold to Starr, including interest, the sum of $3,964, and that her said agreement with Starr be performed and carried into execution. From this decree Mrs. Brown prayed, and perfected the appeal which brings her case here.

Monroe L. Willard, for appellant.

[Argument of Counsel from pages 408-410 intentionally omitted]

James L. High, for appellee.

Mr. Justice LAMAR, after stating the facts as above, delivered the opinion of the court.