Opinion of the Court. Boston, Massachusetts, holding for himself and others a major ity in amount of the capital stock of the Rapid Company. That agreement referred to and recited the terms of the agreement of August 28, 1883, before mentioned; that the Bankers' Company was desirous of exchanging the whole or a large portion of the $3,000,000 of bonds for the capital stock of the Rapid Company; and that Bullens, acting for himself and associates, was willing to make such exchange. It then provided as follows: (1) The Bankers' Company obligated itself, as soon as it received the $3,000,000 of bonds of the Rapid Company, under the agreement of August 28, 1883, to deposit the same forthwith in the hands of Bullens, as trustee, and under a letter of instructions to him to hold them for exchange, dollar for dollar, with himself or others, for the stock of the Rapid Company, said stock, as soon as received by the trustee, to the extent of 51 per cent, to be handed over at once to the Bankers' Company; the balance of such stock, so received in exchange for bonds, or the balance of the bonds, if any, not exchanged, was to be held by Bullens, as trustee, until the completion of the lines of telegraph agreed to be built by the Bankers' Company under the agreement of August 28, 1883, and until the payment of the floating debt of the Rapid Company, and then handed over to the Bankers' Company; and the latter was to authorize Bullens to continue the exchange of bonds for stock up to, but not beyond, sixty days from August 29, 1883; (2) Bullens agreed to deliver to himself as trustee, for the purpose of exchanging for the bonds, not later than ten days from August 29, 1883, at least 51 per cent of the total stock of the Rapid Company, then outstanding. The Rapid Company had been formed for the construction and operation of a system of telegraph lines. By the summer of 1883, it had constructed and equipped lines from Boston, Massachusetts, to Cleveland, Ohio, and Washington City; but, although its receipts from business then exceeded its outlay for operating expenses, it found that it needed extensions to Chicago, Cincinnati, St. Louis and Louisville, and the intermediate points. It turned its attention to the Bankers' Com VOL. CXLVII-28 Opinion of the Court. pany, which, though having only a line from New York to Washington City, was doing a good business, and had in it men of means. It was supposed by both companies that each had something of advantage to offer to the other. Accordingly, the agreement of August 28, 1883, was made, to connect Buffalo with Chicago, Pittsburg with St. Louis, Terre Haute with Chicago, and Cincinnati with Louisville. The agreements of August 28 and 29, 1883, were forthwith acted upon. The mortgage of the Rapid Company to secure the $3,000,000 of bonds was made September 15, 1883, to the Boston Safe Deposit and Trust Company, a Massachusetts corporation, (hereinafter called the Boston Company,) as trustee, and by its terms covered all the property of the Rapid Company, as incorporated by Massachusetts, Connecticut, New York, New Jersey, Pennsylvania, Maryland and Ohio, or which might thereafter be acquired by those corporations, together with the lines of telegraph intended to be constructed or acquired for the Rapid Company, so as to connect Buffalo with Chicago, Pittsburg with St. Louis, Columbus with Cincinnati, and Louisville and Terre Haute with Chicago, and all property then owned or thereafter acquired for use in connection with said lines or property, or any of them. The $3,000,000 of bonds were issued to the Bankers' Company, and it transferred them at once to Bullens. Bullens exchanged them for the stock of the Rapid Company, so far as the holders of such stock elected to make the exchange, and transferred the 51 per cent of the stock to the Bankers' Company, retaining the remainder of the exchanged stock and all the unexchanged bonds. The Bankers' Company entered at once upon the performance of its part of the agreement of August 28, 1883, made a contract with telegraph constructors to build the new lines, and sent out men to locate those lines, under the supervision of Frederic H. May, who was the general manager of the Rapid Company. All went on smoothly until May, 1884, when the Bankers' Company became financially embarrassed. At that date the line from Cleveland to Chicago had been substantially completed. The line between Freeport, Ohio, and Hammond, on Opinion of the Court. the State line between Indiana and Illinois, had been built by contract with Baldwin & Miller. The line between Cleveland and Freeport, Ohio, was built by a contractor named Farnsworth; and the line between Hammond and Chicago was built by employés of the Bankers' Company, without the intervention of any contractor. The four wires called for by the agreement of August 28, 1883, were connected through the different parts above mentioned, and the line was inspected and found to be complete. The line ran into the city of Cleveland over the poles which carried out of that city the line of the Rapid Company to Pittsburg and the East, and the two lines met and were connected by the same switch-board in the Cleveland office. In June, 1884, returns were made to New York of the business done by the offices between Cleveland and Chicago. The four wires above mentioned were working through to New York, and so continued to do, with the exception of a brief interval in August, 1884, down to December 30, 1887, when the suit now before us was commenced. In July, 1884, the line between Pittsburg and Terre Haute was nearly completed, but there were gaps in it in various places, and it had not been connected with the Rapid Company's system at Pittsburg. The work upon it, so far as it had progressed, had been done by Baldwin & Miller, before mentioned, who stopped work in July or August, 1884. Between the date of the agreement of August 28, 1883, and the month of July, 1884, the Bankers' Company or its stockholders acquired a majority in the board of directors of the Rapid Company, and elected or appointed the officers and managers of the Bankers' Company to the corresponding positions in the Rapid Company. Thus, the same men controlled the corporate machinery and property of both companies. A practical union of the two properties was expected to result from the complete performance of the agreement of August 28, 1883, and hence the Bankers' Company proceeded to string additional wires over a large part of the original lines of the Rapid Company, the receipts of the business of both companies went into a common treasury, and their operating ex Opinion of the Court. penses were paid from the same source. A considerable sum, also, was spent in the repair and improvement of the original lines of the Rapid Company. The mortgage by the Rapid Company for $3,000,000 was recorded in Ohio between October 12 and December 22, 1883. On November 24, 1883, the Bankers' Company, as a New York corporation, and as a New Jersey corporation, and as a Pennsylvania corporation, and as a Maryland corporation, executed a mortgage to the Farmers' Loan and Trust Company, a New York corporation, as trustee, to secure $10,000,000 of bonds of the Bankers' Company, and conveying all its property, including its "stocks of other companies" and "situate within the States of New York, New Jersey, Pennsylvania and Maryland, the District of Columbia, and within any other State or Territory of the United States," then owned or which might be thereafter acquired. Default was made in the payment of the interest coupons which became due September 15, 1884, on the $3,000,000 of bonds of the Rapid Company. By the terms of the Rapid Company's mortgage, however, no proceedings for foreclosure could be begun until the default had continued for six months. On March 23, 1885, the Boston Company, trustee under the $3,000,000 mortgage, filed a bill in the Circuit Court of the United States for the District of Connecticut, for the foreclosure of that mortgage. One Austin G. Day having recovered a judgment in the Supreme Court of New York against the Bankers' Company, sequestration proceedings followed, and on September 23, 1884, Richard S. Newcombe and James G. Smith were appointed by that court receivers of the Bankers' Company in New York. Those receivers were permitted to assume possession and control of the entire property of the Rapid Company, including the new line between Cleveland and Chicago, which was then in full operation as a part of the Rapid Company's system; and they were permitted to do so without any remonstrance from the officers of the Rapid Company, those officers being in fact the officers of the Bankers' Company and wholly in its interest. Smith, one of the receivers, was assistant general Opinion of the Court. manager of the Bankers' Company and also assistant general manager of the Rapid Company. In the foreclosure suit in Connecticut, the Boston Company applied for the appointment of a receiver of the Rapid Company's property. That application was opposed by the receivers of the Bankers' Company, and by Edward S. Stokes, as the holder of receivers' certificates issued by them, and also by the Rapid Company, represented by the same officers who had suffered those receivers to take possession and control of the property of the Rapid Company. In spite of this opposition, the Connecticut court appointed Edward Harlan receiver of the property of the Rapid Company, and his receivership was extended over the whole property of that company by the courts of the other jurisdictions through which that property ran. Newcombe and Smith were succeeded as receivers by one James B. Butler, and he by John G. Farnsworth, who was appointed May 1, 1885, in an action brought by the Farmers' Loan and Trust Company to foreclose the $10,000,000 mortgage made by the Bankers' Company. In the latter suit, a foreclosure sale was had July 31, 1885, and Stokes bid the sum of $500,000 for the property of the Bankers' Company. By his direction, that sale was completed by a conveyance of the property to the United Lines Telegraph Company, a New York corporation, the deed of the referee being dated August 10, 1885, and acknowledged and recorded November 14-16, 1885. The suit now before us was brought in the Circuit Court of the United States for the Southern District of New York, December 30, 1887, by the Boston Company against the Bankers' Company, the United Lines Company, Newcombe, Smith, Butler, Farnsworth, Stokes and the Rapid Company, as a Connecticut corporation. It is founded on the fact that there were conflicting claims to the title to the property covered by the terms of the $3,000,000 mortgage, and is brought in aid of the original suit in Connecticut, to determine those claims and ascertain what property was included in the mortgage. It embraces issues as to the right and title of the Rapid Company, and of the plaintiff, as trustee under |