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to Lake Traverse; then ceup the center of said lake to the southern extremity thereof; thence in a direct line to the head of Big Stone lake; thence through its center to its outlet; thence, by a due south line, to the north line of the state of Iowa."

Under this enabling act the state was organized and admitted into the Union the succeeding year. Breckenridge, the place named as the terminus, is situated at the junction of the Bois des Sioux and Red rivers, and on the western boundary of the state. The land in controversy is west of the Bois des Sioux river, and in the present territory of Dakota. Now, that tried by its letter the grant would include lands west of the Bois des Sioux river and in Dakota is obvious, and that congress has the power to grant to a state lands in another state or territory to aid in the construction of a road wholly within its limits is conceded. But the contention is that "it has been the uniform and settled policy of the government to confine land grants, made in aid of the construction of railroads lying wholly within a given state or territory, to lands lying within the same state or territory;" that congress must be presumed to have legislated in conformity with that policy; and having before it the strong probability, almost certainty, that Minnesota would become a state under the provisions of the enabling act just passed, fixed the western terminus of this road at the western boundary of the proposed state, and thereby limited the grant to such boundary.

Counsel for complainant deny that the cases cited warrant the conclusion as to the settled policy of the government, or that there has been any such settled policy; deny that congress fixed the terminus at the western boundary of the proposed state; and rest upon the letter of the grant. The first case cited is on the construction given to the act of September 20, 1850, (9 St. at Large, 466,) granting lands to the state of Illinois to aid in the construction of what is now known as the Illinois Central Railroad.

The seventh section reads as follows:

"And be it further enacted that, in order to aid in the continuation of said Central Railroad from the mouth of the Ohio river to the city of Mobile, all the rights, privileges, and liabilities hereinbefore conferred on the state of Illinois shall be granted to the states of Alabama and Mississippi, respectively, for the purpose of aiding in the construction of a railroad from said city of Mobile to a point near the mouth of the Ohio river; and that the public lands of the United States, to the same extent in proportion to the length of the road, on the same terms, limitations, and restrictions in every respect, shall be, and is hereby, granted to said states of Alabama and Mississippi, respectively."

A claim of the states of Alabama and Mississippi to a grant proportioned to the entire length of the line from Mobile to the Ohio river was denied, the opinion of the attorney general thus stating the rule:

"The whole length of the railroad through and within the state of Alabama, when actually surveyed and definitely located within that state, under the direction of the legislature thereof, must determine and limit and define the

extent of the grant to that state; and so likewise the whole extent of the railroad within the state of Mississippi, as surveyed and definitely fixed under the direction of the legislature thereof, must determine, limit and define the extent of the grant to that state."

A similar expression of opinion came from the attorney general construing the act of May 17, 1856, entitled "An act granting public lands in alternate sections to the states of Florida and Alabama, to aid in the construction of certain railroads in said states." 11 St. at Large, 15.

On November 24, 1871, in denying an application of the land commissioner of the St. Paul & Pacific Railroad Company for a survey and extension of its grant to these lands west of the Bois des Sioux river, the commissioner of the general land-office ruled that the grant was confined to the limits of the state.

Now, while the prior cases cited may not be strictly in point, yet I think in them is found the rule of the limitation of congressional grants to state lines. While I am not sufficiently familiar with the history of the land department to affirm it as a fact, yet, in view of these rulings, of the confident assertion of counsel, and as no single opposing ruling or action is shown, I think it not improper to assume that the uniform ruling and construction has been as stated. Indeed, when I recall the discussions and controversies which arose in the early history of this nation in respect to claims by certain statesConnecticut, New York, and Virginia-to the ownership of large bodies of lands beyond their territorial limits I do not wonder at such ruling. This very act of 1857 presents other cases in which the very question existed, and the construction given by the department could easily have been shown. I think it obvious that congress had in view the probable organization of Minnesota as a state under the enabling act just passed. It speaks of the future state of Minnesota as though the admission of a state with that name was to be soon expected; and while it may be true that a direct line between the foot of Big Stone lake and the mouth of the Sioux Wood river may cross the state line in two or more places, yet the mention of those places very forcibly suggests that congress was intending thereby to locate the western terminus on the western boundary of the proposed state. If so, was it not legislating in reference to the proposed state, and should its grant not be limited by the ordinary rule? I am aware that in this act provision was made for a road running beyond the western boundary of the proposed state and into the present territory of Dakota, with a grant of adjacent lands, which could be satisfied only by lands in Dakota, and which was in fact so satisfied. But the fact that congress provided for a road outside of the state limits does not make against the claim that it intended only the ordinary provision for a road wholly within the state. I confess that the line of reasoning above pursued is not altogether satisfactory. It seems counter to the plain letter of the statute. But the ruling of the department was

made in 1871. This bill was filed on April 29, 1884. For 13 years. the action of the department has been unchallenged. Interests may have grown up on the faith of it. Indeed, counsel for defendant says that a large and flourishing village, Wahpeton, has been built upon lands whose title is similar. There are some plausible, if not convincing, reasons in favor of the ruling of the department. I am reluctant to reverse such ruling or jeopardize the rights based upon it. I think my duty compels me to sustain it until advised otherwise by the ultimate tribunal, the supreme court; so, without considering the other question, the bill will be dismissed at complainant's costs.

SPRAGUE-BRIMMER MANUF'G Co. and others v. M. J. MURPHY FURNISHING GOODS Co. and others.1

(Circuit Court, E. D. Missouri. February 23, 1886.)

1. CORPORATIONS LIABILITY OF OFFICERS UNDER SECTION 744, REV. ST. Mo.

DISSOLUTION-INSOLVENCY.

Hopeless insolvency works the dissolution of a corporation, and under section 744, Rev. St. Mo., the president and directors of a corporation dissolved by insolvency are trustees of the corporation, and jointly and severally responsible for the misappropriation of assets.

2. SAME-FRAUDULENT CONFESSION OF JUDGMENT.

Where corporate notes are indorsed by the president and directors of a corporation, and, after the corporation is dissolved by insolvency, they confess judgment in favor of the holders of such notes for the purpose of saving themselves from liability as indorsers, and the property of the corporation is levied upon and sold to satisfy such judgments, it amounts to a misapplication of assets.

3. SAME.

In such cases the judgment creditor cannot be compelled to refund the money received, whether he is or is not a stockholder, and whether ignorant of the insolvency of the corporation or not.

In Equity. Creditors' bill. Demurrers to bill.

This is a suit brought by certain creditors of the M. J. Murphy Furnishing Goods Company against said company and Jesse Arnot, Alfred Bradford, George H. Gill, the Continental Bank of St. Louis, the Importers' & Traders' National Bank, and the Fifth Avenue Bank of New York. The allegations of the bill, so far as they need be here stated, are substantially as follows, viz.:

That M. J. Murphy is the president and Jesse Arnot a director of, and George H. Gill a stockholder in, the M. J. Murphy Furnishing Goods Company; that Alfred Bradford is in fact the owner of a large amount of the capital stock of said company, and for many years was a director, and during the time he was a director commenced indorsing notes for the corporation for discount in the Continental Bank; that about March 1, 1885, he transferred his stock to his wife, and ceased to be a director, for the purpose of enabling himself to secure

Reported by Benj. F. Rex, Esq., of the St. Louis bar.

a preference out of the assets of said company in the event of its final failure, which was then anticipated; that the notes upon which he was then liable as indorser were renewed from time to time until the notes were given, upon which judgment was afterwards confessed in favor of the Continental Bank; that Bradford is a son-in-law of Arnot, and exercised the same control over the corporation after the transfer of his stock as before, and that the transfer was only colorable; that Murphy, Arnot, and Bradford, after the hopeless insolvency of the corporation became manifest, confederated together to dispose of the assets of the company, so as to pay in full the notes indorsed by them, and leave the general creditors totally without payment; that in pursuance of this scheme judgments were confessed by the corporation in favor of the Continental Bank, Fifth Avenue Bank, and George H. Gill, holders of corporate paper indorsed as aforesaid, and the property of the corporation was levied upon and sold, and the proceeds applied to the satisfaction of such judgments; and that at the time judgment was so confessed in favor of said Gill he was aware of the company's insolvency.

The bill prays that the corporation be declared to have been insolvent before said judgments were confessed; that the funds and assets in the hands of defendants are trust funds for the benefit of all the creditors; that Murphy and Arnot be removed from their position; and that all the defendants hereto be ordered and directed to turn over all assets of said corporation in their hands, including all funds received by them from the sale of said corporate property, to such trustees as the court may appoint to administer the trust. the defendants except Mr. Murphy demur.

All

Section 744 of the Revised Statutes of Missouri is as follows: "Upon the dissolution of any corporation, already created, or which may hereafter be created by the laws of this state, the president and directors or managers of said corporation, at the time of its dissolution, by whatever name they may be known in law, shall be trustees of such corporation, with full power to settle the affairs, collect the outstanding debts, and divide the moneys and other property among the stockholders, after paying the debts due and owing by such corporation at the time of its dissolution, as far as such money and property will enable them; to sue for and recover such debts and property, by the name of the trustees of such corporation, describing it by its corporate name, and may be sued by the same; and such trustees shall be jointly and severally responsible to the creditors and stockholders of such corporation to the extent of its property and effects that shall have come into their hands."

Mills & Flitcraft, for complainants.

Dyer, Lee & Ellis, for the Continental Bank.
Frank J. Donovan, for Alfred Bradford.
Fisher & Rowell, for Jesse Arnot.

John G. Chandler, for George H. Gill.

TREAT, J., (orally.) Certain propositions have been argued in this case on demurrers as to the respective obligations of parties under the circumstances set forth in the bill, to-wit: The M. J. Murphy Furnishing Goods Company is one of those corporations tolerated by the laws of Missouri, whereby a man, in order to escape his obligations as a private individual, incorporates himself by bringing in just a

sufficient number of others to comply numerically with the requirements of the statute, so that if the business is successful all will be well; but if it is unsuccessful, those dealing with the concern may have no remedies against the only real party who is transacting the business. That class of corporations has been characterized by Brothers MILLER, MCCRARY, and BREWER very emphatically; but as long as it is the law, every man who deals with such a corporation does so with a full knowledge of the opportunities thereby presented to effect a result which may be thought inequitable.

It appears in the case set forth in the bill that the M. J. Murphy Furnishing Goods Company was such an incorporation. Mr. Murphy's father-in-law was Jesse Arnot, and his brother-in-law, Mr. Bradford. They became indorsers on the corporate paper. Mr. Gill held

some of the paper of the company on which Mr. Murphy himself was indorser. Finding that the concern was, as alleged, "hopelessly insolvent," Mr. Murphy, the president of the company, proceeded to the proper court, and confessed judgment in favor of certain banks that held paper on which his father-in-law, brother-in-law, and himself were indorsers, and execution was ordered by him forthwith. The property was sold, and, under the judicial proceedings in the state court, the sheriff was ordered to distribute the proceeds pro rata, which he did. Upon that condition of affairs, this bill is filed, by creditors at large, requiring all these banks that held the paper having indorsers thereon, which received pro tanto on their claims, to refund the same, and also that the indorsers cause the same to be refunded in order that an equal and pro rata distribution may be made.

Now, the first proposition which occurs to the court (but not argued) is this: If an indorser, not being a party to any fraud or fraudulent scheme, being entirely ignorant of it, if there was such, finds the paper on which he is indorser has been paid pro tanto, can he be made liable for the fund or any portion thereof so paid? His liability is only contingent. It is the duty of the maker to pay the debt. Suppose, for instance, as in this case, one of the parties, the Continental Bank, was tendered, as part payment on a note of $10,000, $6,000, and refused to accept it, what relationship would it occupy to the indorser? Could it refuse to accept that part payment, and hold the indorser for the whole amount? Those matters were not presented.

Taking the allegations of the bill as true, which the court must do on demurrers, it is evident that this is one of those peculiar corporations which, in law, exist under the statutes of the state of Missouri, and the court has to treat it as the supreme court of the state treats it. When the president and directors of a company know that the corporation is hopelessly insolvent, and dispose of the assets not in accordance with the statutes, as trustees, whereby every one could pro rata share therein, each director becomes liable-in the language of the statutes, "jointly and severally liable to the parties thereto"

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