Ashhurst's Appeal

Judge Strong

delivered the following opinion at Nisi Prius,

“ The complainants are stockholders of the Montour Iron Company, a corporation formed in 1844, for the purpose of making and manufacturing iron. By the provisions of its charter, the capital stock of the company was divided into 18,000 shares, of which the complainants hold 3328. The bill alleges that the' company has had no corporate meeting for several years; that there has been no pretence of an election for officers since the year 1860; that in all respects the stockholders have acted as if the franchises which the company held by its charter had been lost by non-user or abandonment, and that there are therefore no officers who can be called upon to assert the rights of the stockholders. The bill further alleges that of those who were officers of the company, pursuant to the last election, all except Thomas Chambers are dead, and that he cannot be relied upon to assert a claim for stockholders, such as the complainants assert, because it is adverse to his own claims. The case thus being one in which, according to the averment of the complainants, relief cannot be obtained by proceeding in the name of the company, they claim a right to sue directly in their own names, as stockholders.

“The bill alleges in substance that the defendants Waterman and Beaver are trustees for the Montour Iron Company, and thus indirectly for the complainants themselves; that as such trustees they acquired the possession of a large amount of personal property belonging to the company, with the avails of which they have purchased other personalty and also the real estate, including the iron works, foundries, machine-shops, furnaces, &c., which constituted the principal property of the corporation, and that they have rendered no account of the administration of the trust property, or of their acts and doings as trustees. The principal relief sought is that the said defendants may be decreed to account and to convey to the Montour Iron Company the real estate purchased by them as aforesaid. Other relief is asked, the ground for it all being, however, that the defendants Waterman and Beaver are trustees, liable to account.

“ Such is the substance of the bill. The answer denies that any such trust as is charged ever existed, and the case comes before me on the bill, answer and proofs.

“ After a careful examination of the bill I am unable to discover whether it intends to charge a trust in the defendants arising out of fraud in those from whom they obtained the property, or in themselves — that is, a trust ex maleficio — or whether it intends to charge a trust as growing out of a contract. Both it cannot be, and it may be doubted whether, if the bill charges a trust growing out of a fraud, the complainants can assert npw any other title to relief. Certain it is that no express trust is either *310 charged or proved. The defendants have acquired no property of the Montour Iron Company by any instrument that expressly recognised the company as their cestui que trust, and they have made no declaration of trust. If, then, they are chargeable as trustees, the trust must be a constructive or implied one, and this whether it arose ex maleficio or out of a conveyance or contract. The circumstances attending its supposed origin, and the facts out of which it arose, if it ever did arise, are summarily these:— On the 19th day of September 1857, the Montour Iron Company was the owner of certain real estate in Columbia county, consisting of foundries, furnaces and ironworks generally, subject to a mortgage for $600,000, and still other encumbrances. The company also owned personal property, consisting principally of iron ore, and coal on the bank and of manufacturing tools. The appraised value of the personalty was $304,951.66. This was after-wards ascertained to be very much above the real value, at least $40,000. But the company was then hopelessly insolvent. Its debts considerably exceeded $2,000,000. Of these $503,121.99 were secured wholly or in part by the pledge of collaterals. Eor other $596,953.08, Thomas Chambers, Henry M. Fuller, John P. Grove and John Grove or some of them were endorsers or sureties for the company. Beside this, other $391,657.94 of debts were outstanding, secured neither by mortgage nor by collaterals, nor by the suretyship of Chambers, Fuller, or the Messrs. Grove or of either of them. Fuller was also himself a very large creditor, and there was due for wages a isum exceeding $22,000. Judgments had also been obtained against the company, and it is manifest that the company was not in a condition to go on with its business or even to save its property from sacrifice.

“At this time, Messrs. Chambers, Fuller, John P. and John Grove were the president, vice-president, and directors of this corporation. They' had, for some time previous, carried on its business by pledging their personal responsibility. It was in this condition of affairs that a meeting of the stockholders was called, and it was held on the 15th day of September, 1857. On the minutes of the company it appears to have been held pursuant to notice, and the bill, though it sets out the meeting, does not deny that the complainants had notice of it. At the meeting, the only stockholders present were Thomas Chambers, Henry M. Fuller, John P. Grove and John Tucker. But they represented more than two-thirds of the entire stock. The complainants were not present. Yery possibly, perhaps probably, their absence was due to the fact that they had very little interest in anything that could then be done. In the condition in which the company then was, their stock was of absolutely no value, and they were not creditors, unless it may have been under the $600,000 mortgage. Not much was done at this meeting of September 15th, though *311 the financial affairs of the company were considered, and the opinion was expressed that the works could not be kept in operation. An adjournment then was made to the 17th, and again to the 19th of September. On the last-mentioned day, the same stockholders were present, except John Tucker — and Timothy Bryan, Jr., also attended. It was then resolved, that inasmuch as the interests of the company required some prompt arrangement to furnish means to pay its indebtedness, and propositions to purchase the personal property and take a lease of the realty had been made, the directors should be requested and directed forthwith to make and duly execute a bill of sale of all the personal property of every kind belonging to the company, at the price of $304,951.66, to Thomas Chambers, John P. Grove, John Grove and Henry M. Fuller, for their notes upon such terms and for such time as mi'ght be agreed upon. It was also resolved, that the directors be requested and directed to make and execute a lease of all the real estate and works of the company to the same parties, for the term of five years, at the yearly rent of $40,000. The minutes of the board of directors show, that on the same day a meeting was held, at which Chambers, Fuller, John P. Grove and Bryan were present, and at which it was resolved to carry out the instructions given at the meeting of the stockholders. Accordingly a lease was executed for the real estate. A bill of sale of the personalty was also made, and Fuller, the Messrs. Grove and Chambers, gave their notes to the company for its appraised value, to wit, $304,951.66; one note for $265,000, and four others for $9987.91 each. The note for $265,000 was shortly afterwards transferred to P. Choteau, Jr. & Co., who were then creditors of the company for that amount, in lieu of a bond and warrant of attorney for that sum which they held. The company also executed to Choteau & Co., a mortgage in like amount upon the real estate already encumbered by the mortgage for $600,000, and other liens. A mortgage was also made to Fuller, for $477,206.05, upon the same property, doubtless to secure ,the debt due him, and to protect him against the liabilities he had assumed for the company. At once, on the execution of the papers, the purchasers took possession of the personal and real property. They opened a new set of books, and put up a new sign. They made iron until the end of that month (September), when the workmen stopped for want of payment.

“ On the 26th of September the rent reserved in the lease of the real estate was, by an instrument of writing bearing that date, assigned to John A. Lewis, in trust, to pay out of it, First, the interest on the coupon mortgage bonds (secured by the $600,000 mortgage). Second. To appropriate the surplus to the formation of a sinking fund, consisting of $28,000 annually, to be paid into *312 it, as covenanted in the mortgage. Third. To pay any surplus in discharge of the interest upon the debt due P. Choteau, Jr. & Co. Fourth. To apply any surplus to the payment of the principal of the bonds secured by the $600,000 mortgage. Fifth. To pay any remaining surplus upon the principal of the debt due Choteau & Co.; and Sixth. To pay any surplus to the Montour Iron Company. On the same day John A. Lewis accepted the trust, though it is obvious the rent assigned was utterly inadequate to the purposes named in the assignment.

“ I pause here in the statement of the facts as they appear in the cause, intending to continue the narrative hereafter. It is in what has already been detailed, that the complainants insist the origin of the trust is to be found, if I understand their bill and the argument. Though it is not directly charged that the sale of the personal property, and the lease of the realty, were fraudulent as against the company or the stockholders, it is sought to treat them as fraudulent, and for this reason to construe the purchasers and lessees to have been trustees. The argument is, they purchased for themselves from themselves, as directors, under authority given by themselves as stockholders. The consideration for the sale was fictitious. The transfer was of the entire property of an insolvent corporation. It was not a transfer for the purpose of raising means to pay the indebtedness of the company, and therefore was unauthorized by the stockholders’ meeting. Its design and effect were to hinder and delay creditors of the company, and the assignment of the lease was unauthorized by the stockholders. This is the argument, and the deduction is, that equity will hold the purchasers mere trustees for the company. Two of the branches of this argument require little notice. The assignment of the lease to John A. Lewis was an act fully within the power of the directors, without any special authority given by the stockholders. It was a transfer of a chose in action to secure the payment of debts of the company. And if, this were not so, I do not perceive how it could affect any title which the purchasers of the personalty or the lessees of the realty had previously acquired. Nor is it material to this case whether the design and effect of the sale of the lease were to hinder, delay and thus defraud the creditors of the company; for if such was the purpose, it would not make the purchasers trustees for the company or its stockholders. Creditors could have avoided what was done, but the complainants are not claiming as creditors, or through creditors. They are not invested with the rights of any creditors intended to be defrauded. I have very little doubt that one motive for making the arrangement described in the resolutions of September 19th 1857 was to avoid a seizure and sacrifice of the property by creditors of the corporation, and it may be that the assignment of the lease was to prevent possible attach- *313 merits. But it does not necessarily follow that even creditors could have denied effect to them. If the sale was in fact made to procure the means of paying debts; if it was for a fair price, and especially if its proceeds, whether money or notes, were applied to the payment or security of debts, other creditors could not avoid it. And certainly the vendor could not; neither could any stockholder, merely because it operated to hinder some creditors not preferred. And in view of the circumstances under which the sale of the personal property was made, and in view of the nature of the property, I think it would be going far to hold the sale a fraud upon anybody, because it was a transfer of all the personalty. It is manifest that the company was unable to go on with its business. Its insolvency was complete. Loaded as it was with mortgages and other debts, having pledged as collateral what it had to pledge, having nothing left but tools, iron-ore, and coal upon the bank, parting with all the personalty was not breaking up the business. That had been broken up before. It was not a diversion of the property from the legitimate objects of the corporation. The only thing, then, remaining for the company to do was to pay its debts, so far as it had any means of payment. Its obligation was to apply to that end all its personal property. And what it had was of such a kind that it could not be sold well, either in parcels, or to any other persons than those who had a right to make use of it in the furnaces or other works. To lessees of the iron works it was of more value than to any other persons. And I cannot avoid the conviction that a swift sale of the entirety was necessary to save it from sacrifice under executions. My observation has taught me that, for property of such a kind, it is always difficult to find a purchaser. It cannot often be done, unless the purchaser can have the right to make use of it at the works on the bank of which it lies. To such a purchaser a sale of the whole would be comparatively of more value than the sale of a part. And if parting with all the personalty was a necessity, nay, if it was a duty, to enable its application to debts, what difference can it make, that it was sold as one lot, instead of being sold in ten, if an adequate price was obtained ? Beyond doubt the directors might lawfully have sold all the tools and coal to ten different persons by the different contracts, taken the notes of the different purchasers, and used them in settlement of the debts of the company, or in relief of the company’s sureties. No stockholder'would have had a right to complain, in view of its utter inability to prosecute the business for which the corporation was formed. I acknowledge the general rule that directors of a company have no right to do an act which is foreign to the purposes of its creation. They cannot break up its business unnecessarily. But I cannot overlook the situation of the Mon-tour Iron Company when this sale and lease were made. It was *314 not then foreign to the purpose of its creation, or to its duty, to use all its personal property in discharge of its liabilities. It was a necessity.

“ Nor can I convince myself that the sale was merely colorable, or that the consideration was fictitious, rather than substantial. That the price named was adequate and more than adequate, most clearly appears. It was more than $40,000 above the value of the property. The sale was made at cost prices, and the quantity was estimated, the bill of sale being founded upon an estimate and appraisement which proved to be much too large. The notes of the purchasers were given for the price. One of these for $265,000 (which was more than the value of the property according to its real quantity), was transferred to P. Choteau, Jr. & Co., in exchange for a bond and warrant of the corporation for' a like sum, and, as the other evidence in the case shows, it was subsequently satisfied, and not by the company. The other notes (each for $9987.91), at three, six, nine and twelve months, were offered to other creditors but refused, and more than five months after they were given, the company cancelled them, still'retaining a claim for the amount against the purchasers. In view of the deficiency in quantity of the ore and coal, the promissors perhaps had a right to allege that the consideration of those notes had failed. This, however, is immaterial. But what was done five months after they were given, does not show that the consideration of the sale was fictitious. Indeed, I see no evidence that the sale and its consideration were not as real as any sale could have been.'

“ I come then to consider the facts that the purchasers were the same persons as those who as directors sold, and as stockholders authorized the sale. It is often said, and truly, that the same persons cannot be both buyers and sellers in one transaction. They were not strictly in this. All the purchasers were not directors who made the sale. But I make no account of that. Still why may not directors of a corporation sell to themselves ? Each director ¡has an interest distinct and antagonistic to his interest as a mere man. There is identity of person but not of interest. There must be many things which directors can do for their individual benefit which are binding upon a corporation of which they are directors. If they have advanced money I cannot doubt they may pay themselves with corporate funds. If they have become liable as sureties for the corporation they may provide for their indemnity. And though ordinarily the law frowns upon contracts made by them in their representative character with themselves as private persons, such contracts are not necessarily void. They are carefully watched, and their fairness must be shown. But I repeat the question, why may not directors sell to themselves in any case ? It is because of the danger that the *315 interests of stockholders may suffer, if such sales be permitted, for want of antagonism between the parties to the contract. But such sales are supported in equity where the fiduciary relation of the purchaser has ceased before the purchase, when the purchase was made with full consent of the stockholders, or where stockholders have by their acquiescence debarred themselves from questioning the transaction. In the present case, starting from the position that there was no actual or intended fraud (which I think must be assumed), I cannot overlook the fact that the sale to Chambers, Fuller and the Messrs. Grove, precisely as it was made, was authorized by the stockholders at a meeting regularly called, of which I think there is evidence these complainants had notice. I cannot see why the action of the stockholders’ meeting is not binding upon all who then held stock, and who did not dissent. If the company assented to the sale and to its terms before it was made, upon what principle can it complain now ? If the complainants must be held to have assented to what the stockholders’ meeting did (they having had an opportunity to dissent at the time, and not having dissented), how can they afterwards attack the sale, or claim that it did not pass to the purchasers an absolute right to the property ? I can well understand why it may have been that no stockholder objected. The plan of converting the personal property into notes was apparently the best that could have been adopted, and it could not possibly harm any stockholders. They were beyond the reach of additional harm.

“ I do not, however, deem it necessary to decide that the sale in this case was absolutely indefeasible. The utmost the complainants claim is, that it was voidable. Certainly nothing more can be claimed. Let it be, then, that it might have been set aside at the instance of the corporation, or even of a stockholder, as against the policy of the law and constructively fraudulent. Still it was valid in equity as well as in law, unless one or the other chose to avoid it. And in all eases in which an attempt is made to fasten a constructive trust upon a purchaser the attempt must fail, unless made in a reasonable time. Acquiescence is presumed from delay. Lapse of time, indeed, is no bar to the assertion of a direct trust, but not so when the trust is constructive. If a trustee to sell become the purchaser his purchase is generally voidable, but the cestui que trust must move to avoid it within a reasonable time: Campbell v. Walker, 5 Ves. 678; Hawley v. Kramer, 4 Cowen 718; Prevost v. Gratz, 1 Peters’s C. C. Rep. 368; Clegg v. Edmundson, 3 Jur. N. S. 299. This last case is instructive in many particulars. In Beckford et al. v. Wade, 17 Ves. 87, Sir William Grant said: ‘It is certainly true that no time bars a direct trust as between cestui que trust and trustee; but if it is meant to be asserted that a court of equity allows a man to make out a constructive trust, at any distance of time *316 after the facts and circumstances happened out of which it arises, I am not aware that there is any ground for a doctrine so fatal to the security of property as that would be; so far from it, that not only in circumstances where the length of time would render it extremely difficult to ascertain the true state of the fact, but where the true state of the fact is easily ascertained, and where it is perfectly clear that relief would originally have been given upon the ground of constructive trust, it is refused to the party who after long acquiescence comes into a court to seek that relief. In proof of this it is not necessary to produce any other case than than of Bonny v. Ridgard (cited in 4 Brown’s Ch. Cas. 138), in which Lord Kenyon, when Master of the Rolls, on the sole ground of length of time, reversed a decree by which Sir Thomas Sewell had granted relief against a fraudulent purchase, and had declared the purchaser to be a trustee for the plaintiffs in the cause, Lord Kenyon agreeing perfectly that the purchase was originally fraudulent, and that the defendant must have been held to be a trustee if the suit had been brought in proper time.’ See also Hovenden v. Lord Annesley, 2 Sch. & Lef. 633; Wentworth v. Lloyd, 32 Beav. 467, affirmed in the House of Lords, 10 H. L. C. 589. To this effect the cases are very numerous. It would extend my remarks much too far to cite them. They are all sustained by the principle that equity presumes against the existence of a trust unless it be asserted within a reasonable time. The principle is essential to the security of property. It is in harmony with the course of human conduct generally, and it is in most cases accordant with the actual fact. But what is the reasonable time within which a constructive trust must be asserted ? The cases do not clearly define it, and perhaps it is incapable of strict definition. It must vary with the circumstances of each case. Eor myself, I think it may safely be laid down that when a party claims to hold another a trustee of personal property under a constructive trust, he must assert the claim within six years from the time when the trust is alleged to have originated, in analogy to the Statute of Limitations. He cannot be permitted to make the assertion after-wards. This, I think, should be regarded as the general rule. There may be cases when even six years cannot be allowed, as when a party having a right to set aside a transaction, or treat it as a trust, stands by and sees another dealing with the property in a manner inconsistent with any trust and makes no objection: Duke of Leeds v. Amherst, 2 Phill. 123 ; Jordan v. Money, 5 H. L. C. 185. And so when the rights of third persons may have intervened. So also where the property is of a peculiar kind, and the alleged trustee, in ignorance of any intention to hold him to an account, relying upon his ownership, enters upon a hazardous business or incurs large responsibilities. At least this is true when the alleged constructive trust does not grow out of actual *317 or intended fraud. It has often been said that equity obeys the Statute of Limitations, and it has been held that laches for a much shorter period than six years, aided by other circumstances, will bar a right.

“ To apply these principles to the present case. If the sale of the personalty of the Montour Iron Company, on the 19th of September 1857, was a breach of trust, if the purchasers held the property after the purchase, as trustee for the company or its stockholders, if by bill in equity the sale might then have been set aside, the right to apply to a court for relief accrued immediately. It was neither equitable nor consistent with good conscience that the company, or those claiming through it, should wait to see whether the purchasers made money out of the transaction before they began to move. But this bill was not filed until the 12th of January 1865;, seven years and nearly four months after the right of the complainants to sue, if any they had, came into existence. And I cannot doubt that they had knowledge of the arrangement which was made on the 19th of September. Apart from the entries in the minute books of the company, of which they must be presumed to have had notice, and which fully revealed what was done, there is enough to show that they could not have been ignorant. They were large stockholders. The office of the company was in this city, where they resided. The sale and transfer of possession were public and notorious, and they were recorded. They terminated the possibility of the company’s prosecuting business. Beside this, the bill does not deny that the complainants knew what was done. It impliedly admits they had notice, by the very cautious manner in which it speaks. Its language is, ‘ if all the stockholders had notice of the meetings of September 15th, 17th and 19th, and'of the very important business to be transacted thereat, which complainants do not, however, admit, they must have had unusual reliance on their officers, &c.’ There is nothing then to excuse the delay in bringing the suit, and the complainants must bear the full weight of their laches. If there were nothing-more in the case, I should feel constrained to hold that they cannot now be permitted to assert any equity in themselves in the property purchased by Chambers, Fuller and the Messrs. Grove.

“ But there is more. After the purchase and the lease the purchasers went into possession ostensibly in their own right, and went on manufacturing for a few days until the hands stopped work because of the non-payment of their wages. The load was apparently too heavy for the purchasers to carry. In the November following (1857), they attempted to transfer the lease and the personalty to the Montour Iron Works Company, a new corporation organized by themselves, and of which they seem to have been the only proprietors. The Montour Iron Company gave their assent to the transfer of the lease, or rather of the *318 assignment of the term, and also directed another lease, between themselves, and Philip Maus, to be transferred to the same assignees. Nothing seems to have been effected by this plan, and on the 26th of December next following, an agreement made between the purchasers of the first part — the Montour Iron Company of the second part — such creditors as signed the agreement of the third part — Waterman, Beaver and certain other named trustees of the parties of the third part of the fourth part, and the Mon-tour Iron Works Company of the fifth part. I shall not attempt to state all the provisions of this agreement. The material parts were these: Chambers, Fuller, &c., agreed to assign, transfer and deliver to Waterman and others, of the fourth part, or cause and procure such an assignment to be made (they had already assigned to the Montour Iron Works Company), the lease and all the personal property sold to them by the bill of sale of September 19th 1857, and also certain other contracts and other property, some of it being property held by some of the purchasers in severalty. In consideration of these'agreements and of the full execution thereof, the signing creditors of the third part agreed to release, acquit and discharge the parties of the first part, and the firms of which they were members, from all claims, debts and demands, as set forth in schedules. It was agreed the instrument should go into effect when it should be signed by all the creditors who it might be agreed were not secured in full for their debts, or when Chambers, Fuller, &c., should be indemnified against the claims of all such creditors as should not sign it. Power was given to Waterman et al. to arrange with creditors holding any of the debts mentioned in the schedule, so as to procure a release of the said assignors, or to protect and indemnify them, and for such purposes to make contracts in advance of the execution of the agreement. The agreement was to be null unless signed within fifteen days by-all the parties whose signatures were required, or if releases, protection or indemnity were not obtained against all the scheduled debts. The Montour Iron Works Company gave their assent, and bound themselves to do all necessary acts to enable the parties of the first part to carry out the agreement. The Montour Iron Company acknowledged that all the debts mentioned in the schedules (debts of Chambers, Fuller, &c.) were contracted on their account, and that they were bound for the same, and they agreed to remain bound, and that the agreement was made with their consent and approbation, and that it should not operate as a release of the company. They also agreed to reduce the rent of the real estate to a nominal sum. Most of the other provisions relate to the power and duties of the trustees for the scheduled creditors, parties of the third part.

“ After this agreement was written there appears to have been difficulty in procuring the necessary signatures, releases or indem *319 nities to give it effect. Choteau & Co., who held the note of the assignors for $265,000, had failed and made an assignment. The assignee declined entering into the arrangement, and Waterman, Beaver, See., entered into an accord with him to settle the claim on the 3d of February 1858, by which they bound themselves to pay it at the rate of 50 cents on the dollar with railroad iron at $50 per ton. This agreement was complied with. During all this time, while Waterman and Beaver were assuming these large liabilities, and while the creditors, on the faith of a right in Chambers and his associates to sell the property, were releasing their claims, not a sound was uttered insinuating the existence of any equitable rights in the Montour Iron Company or its stockholders. On the 5th of February 1858, another agreement was made between Waterman and his associate trustees and Chambers and his associates. I think it was the consummation of the previous agreement of December 26th. It completely assured the property to the trustees, and it fastened upon them the duties prescribed by that instrument. From that time until this bill was filed they have gone on, first all the trustees in the administration of the trust until September or October 1860, then Waterman and Beaver in their own right, they having purchased the right of the creditors for whom they were at first trustees. Waterman and Beaver also made large advances, not less than from $150,000 to $300,000. In the year 1860 the real estate was sold by virtue of proceedings on the $600,000 mortgage, and the defendants, Waterman and Beaver, became the purchasers. I do not think it necessary to state the facts more in detail. I have referred to all that in my judgment have any bearing upon the question whether Waterman and Beaver are trustees of the Mon-tour Iron Company or of the complainants. It is claimed they are, because Chambers, Fuller and the Groves were, and because they succeeded to the rights of Chambers & Co., with notice of the circumstances attending the purchase from the company. I do not pause to inquire whether they had such notice or not. I may assume for the present they had. No trust was ever asserted until 1865. None was ever hinted at. There is no reason to suppose that Waterman and Beaver ever dreamed there was one. Can the complainants be permitted to assert there was a trust, after having remained quiet and silent, while the defendants were assuming such large responsibilities, investing such sums of money and incurring all the hazards of a perilous business ? Is it equitable for the complainants to run no risk and wait seven years, in order to see whether the enterprise would prove successful, before they- move to redress what they claim was a wrong to them, a fraudulent sale by their agents ? I cannot think it is. Had they moved when they should have done, if the sale to Chambers was voidable, it would have been only just to the purchasers and *320 their transferees, though it could have been of no service to themselves, while it must have resulted in disaster to the creditors of the company of which they were stockholders. Clegg v. Edmondson, 8 De Gex, McNaughton & Gordon 787, is a case of an attempt to set up a constructive trust, with far more reason than I discover in the present case, but it failed because of the laches of the complainants. A number of persons were partners in a mine held by lease, expiring September 29th 1846. In July the managing partners gave notice of dissolution, and in August agreed with the landlord for a new lease. In September they gave the others notice of their intention to apply for a new lease. In December the lease was executed to them in pursuance of the August agreement. The others never assented, but claimed an interest, not, however, filing a bill until 1855. It was held that, having with full knowledge of their rights, founded on a constructive, not express trust, allowed the others to carry on the business so long, they were barred. Here there was an undoubted trust, but the Lords Justices Bruce and Turner considered the laches aggravated, in view of the hazardous nature of the business asserted to have been canned on in trust for the complainants. I would quote at length from the judgment, were it not for the extreme length to which my remarks have been protracted. What was said by the Lords Justices is very applicable to this case. See also Ernest v. Vivian, 33 L. J. Ch. 517, 513. I will refer to no more authorities touching this branch of the case. I have said enough to show that the complainants cannot now be heard to assert that the sale made on the 19th of September 1857 to Chambers, Fuller and the Messrs. Groves, was not what it purported to be — an absolute sale without any trust. Their acquiescence confirmed it, if it needed confirmation, and if, indeed, it may not be held that they had previously authorized it.

“ There remains only to consider the effect of the agreement, dated December 26th 1857. It is alleged, that under this, its parties of the fourth part, including Waterman and Beaver the defendants, became assignees or trustees- for the benefit of all the creditors of the Montour Iron Company, including the holders of the coupon bonds secured by $600,000 mortgage, and that, though the said assignment was voidable by the Montour Iron Company or its creditors (it not having been recorded within thirty days), if not avoided, there was a resulting trust to the said company for the benefit of its stockholders, of the surplus after payment of the debts.

“ I may throw out of this the alleged voidability of the instrument. It can have no bearing upon its construction, though I confess myself unable to see how the Montour Iron Company could have avoided it. Even if it was an assignment for the benefit of the creditors of the company, and made by the com *321 pany, the creditors only could have taken advantage of the fact that it was not recorded as required by law. I have already noticed that the complainants are not clothed with the rights of creditors. They sue as stockholders. But this is immaterial. The agreement never was avoided, and the fact that it was voidable, if such was the fact, sheds no light upon its meaning or nature. Did it then raise a resulting trust for the Montour Iron Company ?

“ I have to remark, first, that it was not intended to be an assignment in trust for the benefit of the creditors of the company, certainly not such a technical assignment as left a resulting interest in the assignors, whoever they were. This appears upon its face. It is expressly so declared. No surplus is spoken of; none appears to have been contemplated. This, it is true, is not conclusive. The character of an instrument is not to be determined by what the parties have called it. I am bound to look to its legal- effect. But this agreement has none of the peculiar characteristics of such an assignment, either in its parties, its subject, or its purposes. It is in form and substance a purchase by the creditors of Chambers, Fuller and the Groves, whose names are signed to it, of the property therein described. ¡jChere are nominally five parties to it, but there are only two who have anything to do with the transfer of property. These are Chambers, Fuller and Messrs. Grove, and the creditors aforesaid represented by their trustees. It is the former who agreed to convey, and it is they alone. There is not a word that questions their title to the property, or intimates that anything more than their title was to pass. The Montour Iron Works Company were made parties manifestly only because the nominal title had been passed to them, and to enable Chambers and his associates to transfer an unclouded right. But the Montour Iron Company undertook to transfer nothing. No mention is made of any interest which it had or may be supposed to have had. It employed no operative words of transfer. Why it was made a party I will consider hereafter.

“ And not only were Chambers, Fuller and the Groves the only parties who undertook to transfer, or cause to be transferred, but the property which was the subject of the contract was theirs. It was described as “ the personal property and effects which were sold and delivered to the parties of the first part (Chambers, Fuller, &c.), by the bill of sale of September 19th 1857, and were afterwards, on the 13th of November 1857, transferred to the Montour Iron Works Company.” It was their right, under that sale, that was intended to be passed, a right which the agreement does not question. I have already shown that the complainants are not at liberty to aver that that sale did not vest the absolute interest in its subject in the purchasers, or that the Mon- *322 tour Iron Company had any interest in the property, either legal or equitable, after the 19th of September 1857. It must be taken as a fact that the personalty and the term belonged absolutely to Chambers and his associate purchasers, or to the Mbntour Iron Works Company, who were but another name for Chambers & Co., when the agreement of December 26th 1857 was made, and when it went into operation. All the other property is described as certain contracts held by the Montour Iron Works Company, or certain rights held by John P. Grove, or by him and John Grove, or stock and rights unquestionably belonging to Chambers et at, or to some of them. No ownership of the Montour Iron Company is intimated, no property right of theirs is described, and no hint is given that any title of theirs was to be ^transmitted. Again, the transaction was, as I have said, in form and in substance a sale and a purchase. The creditors of Chambers & Co. were purchasers for a price, Waterman and Beaver taking the legal right as trustees for them exclusively, doubtless because their number was too great to admit of convenient management by them all. . The consideration for the sale was the release of their claims upon Chambers, Fuller and the Messrs. Grove, and the release of or indemnity against all claims upon the same persons held by those of certain scheduled creditors who did not sign the agreement. This was a substantial consideration, and it was much more than the value of the property, transferred. How, then, could there have been a resulting trust for anybody ? If any, it must have been for Chambers, Fuller and Grooves, not for the Montour Iron Company. If the property transferred did not belong to that company, and if a full price was paid for it, vain must it be to contend that there is any trust in the company, any rights to a surplus.

“Again, not only were the Montour Iron Company not the assignors, not only did the property transferred not belong to them, and not only was it purchased and paid fox’, but Waterman and Beaver, the persons to whom it was transferred, did not take it in trust for any creditor of the company, as such. True, they took it in trust; they were denominated trustees, and such they were. But their trust was clearly and expressly defined. It was not to hold or to manage for the company or its creditors, but to •hold for the creditors of Fuller, Chambers and Groves. The fact that those creditors were also creditors of the company, or that .some of them were, is of no importance to the inquiry whether the agreement raised a resulting trust for the company. The real question is, for whose liabilities was the provision made ? To the .ti-ust defined, it was of no consequence whether the liabilities of the .company were discharged or not.

“ Why, then, was the Montour Iron Company a party to the .agreement ? The answer is obvious. The debts and liabilities of *323 Chambers, Fuller and Grove had been incurred for the company. They consisted in part of endorsements of the company’s paper, in part of personal credit pledged, and in part of drafts drawn by Fuller upon J. P. & J. Grove, and endorsed by Chambers, the company not appearing to be a debtor, though in equity it was. Largely, therefore, Chambers and his associates were sureties. It was the duty of the company to relieve them from their liability as such. The agreement of December 26th 1857 looked to their relief. It may well have been that the creditors whose names were wanted to the agreement hesitated to sign it, fearing that they might thereby release not only Chambers & Co., but also the company. It was plainly to remove such an apprehension that the 17th article of the agreement was inserted, which acknowledged the company’s primary liability, and gave consent to its continuance, notwithstanding the agreement. It was but an act of justice to the creditors as well as to the sureties. It tended to facilitate the arrangement by which the sureties sought relief, while at the same time it parted with no rights of the company, and assumed "no new liabilities. I think this is the whole meaning of the 17th clause of the agreement. To my mind it satisfactorily accounts for the fact that the Montour Iron Company became a party.

“ By the 25th article, it was stipulated that the company should consent to a cancellation of the lease of the realty, and give a new lease to Waterman, Beaver, &c., for a nominal rent, or should agree to its transfer to them, reducing the rent to a nominal sum. It may be remarked, that if the assignment of the rent previously made to John A. Lewis was a real transaction, the stipulation was wholly inoperative. But pass this by. It is impossible to form a correct opinion of any part of the case, without considering the actual condition of the company in September and December 1857. It was hopelessly insolvent, and unable to use the realty for the purposes for which it was intended. Chambers, Fuller and the Groves had failed to carry on the works. The workmen had stopped for want of payment. A foreclosure of the mortgage, or a sale under it, and a consequent avoidance of the lease, were apparently inevitable at an early day. No one would have purchased the ore and coal on the bank, without having the temporary use of the works in which to use up the personal property. The company was in debt to Chambers, Fuller and Groves more than twice the entire rent for five years. This indebtedness might have been defalcated. In these circumstances, it was not unreasonable that the rent should be relinquished, especially as it was manifestly necessary to enable Chambers, Fuller & Co. to complete an arrangement to save themselves from liabilities incurred for the company, and to the amount of $265,000, at least in discharge of the company. It was certainly no wrong to the stockholders. The most that can be said of it, is that it was a release *324 of a chose in action, and how a release of a claim against property held by an assignor can make the assignee of it a trustee for the releasor, I have not been able to discover.

“ Upon the whole, then, I think the agreement of December 26th 1867, consummated by that of February 5th 1858, cannot be regarded as an assignment to Waterman and Beaver, in trust for the benefit of the creditors of the Montour -Iron Company. It left no resulting trust in favor of the company. It is incredible that those who took under those agreements ran all the risks, invested their own money so largely, and assumed such responsibilities, unless it was intended and understood that they took absolutely. I feel that I should be doing great wrong to the parties, were I to decree otherwise. I should be giving an effect to those instruments never contemplated, and raising up a trust in the absence of a single essential to its existence.

“ I might add much more. There are facts upon which I have not remarked, that tend to strengthen the position I take. There are some, supposed by the complainants to have significance, which I have not overlooked, though I say nothing of them now. Of course, after what has been said, it will be plain that in my opinion any claim for liability of the defendants to account for the real estate, must be without foundation. Such a claim can rest only upon the establishment of a trust in the personalty for the Montour Iron Company, and consequently for the complainants, and that has not been established.

“ The complainants’ bill is therefore dismissed with costs.”

The judgment of the Supreme Court was entered February 23d 1869.

Per Curiam.

— After a very careful examination of this ease, with reference to the facts and law involved, and the arguments of counsel, we are unable to discover error in any of the conclusions arrived at by our brother, Strong, J., who heard it at great length at Nisi Prius; we, therefore, affirm the order dismissing the bill of the complainants with costs, for the reasons stated in the opinion of the learned judge.

Appeal dismissed at the costs of the appellants.