required to negotiate, except as the contemplated 16 miles of the road were completed in 5-mile sections, as in the original contract; and on completion of such sections Bullis and Barse were to receive the proceeds of five-sixteenths of the bonds. Of the remaining bonds $125,000 were to be negotiated at once (provided 26,000 acres of timber land was placed under the mortgage), and concurrently with their negotiation Newcombe & Co. were to receive the commissions before mentioned, viz. $40,000 in bonds and $100,000 in stock. The remaining $200,000 in bonds and the like amount of stock were reserved to provide for the building of the 24 miles of additional road. It was agreed Bullis and Barse might contract with the Interior Construction & Improvement Company of New Jersey to perform their covenants. under these contracts. On the same day the construction company mentioned, of which John Byrne was president and principal stockholder, entered into an agreement with the Allegheny & Kinzua Railroad Company of New York to construct its road to the Pennsylvania state line, to acquire the two Pennsylvania companies by merger or consolidation, and construct and complete the consolidated road under directions of the railroad company's engineer up to 46 miles, and, if required, to construct the remaining 24 miles, so that the consolidated company should have 70 miles of completed road at cost not to exceed $7,000 per mile. It further agreed to pay all liens, etc., of the constituent roads, and furnish certain rolling stock. The railroad agreed to increase its capital stock from $80,000 to $390,000, to issue $500,000 bonds secured by mortgage on its property, and that it would pay all of said bonds and stocks to the construction company for its work as above, performed or to be performed, as soon as they could be legally issued. It was further provided the consolidated company to be formed should have a capital stock of $500,000 (made up of the stock of the New York company, $390,000, and the Pennsylvania companies, $110,000), and that it should issue $500,000 in bonds, secured by mortgage on its property, and certain lands in addition, for the purpose of retiring the New York company's bonds, specified above, which bonds, as well as the stock of said company, the construction company had a right to exchange for corresponding bonds and stocks of the consolidated company. On the same day the construction company entered into an agreement with Bullis and Barse in which the foregoing contract was recited and made part thereof. By it the construction company agreed to make the following disposi tion of the stock and bonds of the consolidated company received by it under the preceding contract: To Newcombe & Co., $260,000 bonds, to be sold under agreements of October 8, 1889, and December 9, 1889. To Newcombe & Co., $40,000 bonds, commissions under said agreements. To Central Trust Company, $200,000 bonds, to provide for construction of 24 additional miles of road. To Bullis and Barse, $265,000 stock. To Newcombe & Co., $100,000 stock, for commissions under first agreements. To construction company, $135,000 stock, for its compensation. Bullis and Barse, on their part, agreed to apply the proceeds of bonds sold by Newcombe & Co. to payment of liens upon property covered by mortgage, to carry out the consolida tion, to provide for construction of the additional road to be built under the preceding agreement, to cause the proper amount of timber land to be placed under the mortgage, and save the construction company harmless. The same day the Allegheny & Kinzua Railroad of New York executed the mortgage to secure the $500,000 bonds provided for in the preceding agreement. In pursuance of the agree ments the stockholders of the latter corporation voted to increase its capital stock to $390,000, and applied to the board of railroad commissioners of New York state to sanction their action. On February 24, 1890, that board approved the proposed increase, and an examination of its order shows the contract of the railroad with the construction company, the proposed issue of bonds, the payment of bonds and stocks to the construction company, and the terms of merger with the Pennsylvania companies were all fully set forth and understood by that body. Thereafter the constituent roads were merged and consolidated, the subsisting debts and contracts thereof assumed by the consolidated company, and the mortgage in suit given. Of the $300,000 of bonds issued thereunder, $125,000, as we have seen, went to Woodbury & Moulton, the complainants; $40,000 to Newcombe & Co. for commissions, of which sum Byrne was to get $15,000; and $135,000 are alleged to have been sold, and their proceeds spent in construction. Of the fact that this latter sum was properly expended in behalf of the railroad there is a dispute. Of the Woodbury & Moulton bonds $15,000 were retired under the sinking-fund clause of the mortgage. Whatever contention may be made in reference to the preceding agreements, and to the increase of stocks and issues of bonds in pursuance thereof, it is certain that of the validity of the bonds bought and paid for by the complainants there can be no question. Mr. York, one of the firm, testifies he knew nothing of the previous contracts. It is true, Mr. Woodbury, the other member, was named as a director of the consolidated company, but there is no evidence that he took part in or knew of any of the contracts or proceedings leading to said issues. That complainants received at the time of the purchase of the bonds, as a bonus or inducement to do so, a portion of stock of the consolidated company from Newcombe & Co., the negotiating brokers, does not affect them in any way. They paid full value for their bonds to the trustee, and the money was applied to the payment of the debts of the constituent companies, the validity and legality of which debts are in no wise questioned. These bonds are, therefore, not within the constitutional prohibition that "no corporation shall issue stocks or bonds except for money, labor done, or money or property actually received." Having issued them for a lawful purpose, having negotiated them for full value, and having used their proceeds for the payment of its legal obligations, they were not such bonds as the constitution inhibited, and the consolidated company must pay them. The bonds of complainants being valid, and being secured by the mortgage in suit, why should it not be foreclosed? That disputes may exist between the railroad company, the construction company, and Messrs. Bullis & Barse as to the extent, expense, and details of construction; that questions exist as to the proper application of the proceeds of some of the other bonds; or that their holders are not purchasers for value; or that there is stock outstanding whose legality is questioned,—are questions which do not affect the right of the complainants, who are bona fide holders for value, to have their security enforced by foreclosure. The view we take of this case renders it needless to discuss the many other questions suggested. It is, however, alleged that, even if a right to foreclose exists, the bill is prematurely filed, by reason of the year and a day stay clause of the Pennsylvania state statute of 1705 (1 Smith's Laws, p. 60). We cannot accede to this view. That act applies to a scire facias sur mortgage, and has no application to a bill in equity to foreclose such as the present. It is also contended the lien of the. mortgage was not to cover Mr. Bullis' timber land until 46 miles of road were constructed. Assuming, for present purposes, the 46 miles were not built, the position contended for cannot be yielded. While there is some ambiguity in the description of the lien of the mortgage as given * is in the bonds, viz.: "This bond secured by * mortgage 營 營 * * upon the property and franchises of said railroad company, including thirty thousand acres of timber land, upon the construction and completion of the first fortysix miles of the railroad of said railroad company,"--yet all uncertainty disappears when we turn to the mortgage itself. It contains words of present conveyance, describes lands by metes and bounds, in its seventh clause provides for the further conveyance of the 16,000 acres mentioned in the bond, "in addition to the thirty thousand acres of timber land conveyed to said trustee by this mortgage." If further reason were needed in support of this view it would be found in the third clause of the agreement of Bullis & Barse with Newcombe & Co., of December 9, 1889, that the latter were not required to negotiate the $125,000 lot of bonds until the contemplated mortgage "shall constitute a security upon twenty-six thousand acres of land" and in article 10 of the mortgage, where careful provision was made to enable the trustee to release portions of the timber land from its lien, a provision subsequently acted upon by Mr. Bullis, and money actually paid for such release. We see no reason to depart from the express words of present conveyance of the land in the mortgage, and the presumption of law is that all previous verbal negotiations and understandings were merged in the final writing. On the whole, we are of opinion a right to foreclose has been shown. RHINO v. EMERY et al. (Circuit Court of Appeals, Sixth Circuit. December 11, 1895.) 1. PLEADING-HEIRSHIP. No. 345. An averment that the blood of both the ancestors on the paternal side, in the second generation from one from whom the pleader claims to inherit, as next of kin on the mother's side, is extinct, is a sufficient averment that there is no one of the blood of such ancestors to inherit. 2. EQUITY PLEADING-FRAUD. An averment that one B. was from infancy and during all his life of unsound mind, and incapable of transacting business, and that B.'s mother and her legal adviser fraudulently procured from B. a deed of property, for a grossly inadequate consideration, which was never paid to him nor to any one for his use, is a sufficient averment of fraud in procuring such conveyance. 3. SAME. Complainant's bill alleged that one E. had obtained by fraud a conveyance from her son of certain land devised to him by his father, E.'s husband; that subsequently she had instituted proceedings in a probate court, as executrix of her husband, to procure the sale of the same land to pay the testator's debts, and had obtained an order to that effect, directing the surplus to be paid to herself, under which she had received a large sum of money, such proceedings in the probate court being alleged to be fraudulent. Complainant, claiming to be B.'s heir, sought to set all these acts aside, and hold the representatives of E. as trustees for him. Held, on demurrer to the bill, that it was not necessary that the proceedings in the probate court should be set aside before B. would be entitled to such relief. 4. LIMITATIONS-ACTION TO CONTEST VALIDITY OF WILL. A limitation of time for bringing a suit to contest the validity of a will does not apply to a suit to establish a trust in property which is alleged to have been diverted from its true owners by fraud, and to have passed into the hands of others under sundry conveyances, including a will. Appeal from the Circuit Court of the United States for the Western Division of the Southern District of Ohio. David Stewart Hounshell, for appellant. Before TAFT and LURTON, Circuit Judges, and HAMMOND, J. TAFT, Circuit Judge. This is an appeal from a decree dismissing an amended bill on demurrer. 65 Fed. 826. The bill in general charges the defendants, or some of them, with having obtained title to and possession of the proceeds of a large amount of real property belonging to one James Berry, 2d, by fraud; avers that James Berry, 2d, died May 13, 1891; that the complainant is entitled to a moiety of his estate; and that he is therefore entitled to hold the defendants as trustees for his share of the property described in the bill. The first ground upon which the action of the court is sought to be upheld is one not taken by the court below. It is that the complainant does not show by the averments of his bill that he is the heir and next of kin of James Berry, 2d, according to the laws of Ohio. The property in controversy was real estate be longing to and descended from James Berry, Jr., the father of James Berry, 2d. James Berry, Jr.'s, father was James Berry. His mother was named Rolston. The bill avers that the blood both of James Berry and of the Rolstons is extinct, and that complainant is a first cousin of James Berry, 2d, being the nephew of his mother, Eliza Berry, and is his next of kin. Section 4158, Rev. St. Ohio (the statute of descents), provides that, when there are none of certain relations living, the estate shall pass to the next of kin to the intestate of the blood of the ancestors from whom the estate came, or their legal representatives. Section 4160 provides that, when there is no person to inherit under this clause, the estate shall pass to the husband or wife relict of the intestate as heir; and, if there is no such relict, then it shall pass to and vest in the next of kin of the intestate, though not of the blood of the ancestor from whom the estate came. Now, it is said that the complainant, claiming under this latter section, must show that there is no one of the blood of the ancestor from whom the real estate came who can inherit. He has done so by the averments of his bill, for, after averring that the ancestor from whom the property descended was a son of Berry and a Rolston, he avers that the blood of the Berrys and Rolstons, the ancestors of James Berry, 2d, on his paternal line, became extinct. This certainly excludes the possibility of any next of kin to James Berry, 2d, of the blood of James Berry, Jr., and makes section 4160 applicable. The defendants in the bill against whom relief is asked are William G. Roberts, Sarah A. Weller, Thomas J. Emery, and John J. Emery, and M. E. Sperry. M. E. Sperry is alleged to be a coheir with the complainant, and is made party defendant that his interest may be preserved to him. The bill alleges that James Berry, Jr., died possessed of three valuable pieces of real estate; that he devised this estate to his wife, Eliza A. Berry, for life, with remainder to his two children, James Berry, 2d, and Kate E. Berry, providing that, in case of the death of either of the children before the death of his wife, the entire remainder should pass to the surviving child; that all the debts of the testator were paid shortly after his death; that Kate Berry married, and died without issue; that James Berry, 2d, was from his early infancy and during the whole period of his life a person of unsound mind and of weak understanding, and wholly incapable åt any period of his life of transacting any business by reason of his mental incapacity and imbecility; that upon the death of his sister, in 1882, the defendant William G. Roberts and the mother of James Berry, 2d, Eliza A. Berry, conspired together for the fraudulent purpose of securing the title to the real estate devised to James Berry, 2d, by the will of his father, James Berry, Jr., so that they might appropriate the property to themselves; that at that time Eliza A. Berry was more than 70 years of age, and that her son, James Berry, 2d, was verging to the age of 40 years; that William G. Roberts, the defendant, was the legal adviser of Eliza A. Berry, |
