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ATLANTIC DELAINE COMPANY v. JAMES.

October 1, 1876

ATLANTIC DELAINE COMPANY
v.
JAMES.



APPEAL from the Circuit Court of the United States for the District of Rhode Island. The facts are stated in the opinion of the court.

The opinion of the court was delivered by: Mr. Justice Strong delivered the opinion of the court.

Mr. William M. Evarts and Mr. A. Payne for the appellant.

Mr. C. H. Hill for the appellee.

The bill was originally filed by Charles T. James against the Atlantic Delaine Company, George W. Chapin, and Lyman B. Frieze; and, after the death of the complainant, it was revived by his administratrix. Its object is to obtain a cancellation of a release of James's interest in the capital stock of the company, together with a retransfer of the stock, and an account. The history of the transaction sought to be annulled is as follows, so far as it is necessary now to refer to it: On the second day of September, 1851, James made a general assignment of all his property, for the benefit of his creditors, to Lyman B. Frieze. Among the properties thus assigned was an interest in the capital stock of the company, for which certificates had never been issued, but which, it is alleged, in equity belonged to the complainant. The release sought to be cancelled was made by the assignee. It was dated March 2, 1853, and acknowledged on the 11th of the same month. Concurrently with it, the company executed a release to the assignee and to the complainant of all claims and demands, actions and causes of action whatsoever held by it against the complainant or his assignee, or against the assigned estate. These mutual releases were intended as a settlement of mutual claims. The company was a large creditor of General James. It held his mortgages, and among them one upon his right to the capital stock and property of the corporation; and it had other claims against him, and claims also against his assignee, as such, growing out of the assignment. On the other hand, General James had claims against the company, which passed by his deed of assignment to his assignee. An arrangement was then made between the assignee and the company, by which the latter accepted, in full settlement of the claims it held against James and his assignee, a conveyance of all the right, title, and interest which James had at the date of his assignment, and which the assignee then held, in and to the capital stock and property of the corporation; and mutual releases were exchanged. It is this transaction, and the assignee's release, which the complainant seeks to have set aside, alleging that the release and conveyance were obtained by fraud.

It is obvious, at first sight, that most of the allegations of the bill have little, if any, relevancy to that subject. At most, they are matters of inducement, introductory to the one important averment upon which alone the bill can rest. That averment is, in substance, that untrue and incorrect statements of the condition and affairs of the company were exhibited to the complainant's assignee, with intent to deceive him; statements by which he was deceived, and induced to consent to the settlement that was made, and to execute the release of the stock. Unless this allegation has been sustained by proof, the complainant's suit must fail. It is admitted in the appellee's brief that the case turns upon it.

We shall spend no time, therefore, in considering the introductory averments. Most of them are unsustained by the evidence; and, were they all true, they would confessedly be of no importance, if the principal averment is not proved.

The case exhibits but a single statement of the condition and affairs of the corporation, made or furnished to either the complainant or to his assignee, and it is that one which is now charged to have been false and fraudulent. The accuracy and good faith of that alone is assailed. The circumstances that preceded its being furnished to Mr. Frieze, the assignee, were the following: On the 5th of February, 1853, George W. Chapin, the treasurer of the company, and the trustee in the mortgages which James had given to secure the payment of $75,000 borrowed by him, and long past due, by virtue of a power contained in the mortgages, advertised for sale the property described in them, including General James's interest in the capital stock of the Delaine Company. The times appointed for the sales were the twenty-fifth and twenty-sixth days of the same month; but the sale of the stock was advertised for the twenty-sixth. On the 15th of February, Frieze, the assignee of General James, sent the following note to Chapin:––

'PROVIDENCE, Feb. 15, 1853.

'GEORGE W. CHAPIN, trustee for Hill, Carpenter, & Co., and others, and treasurer of the Atlantic Delaine Company:

'DEAR SIR,–I feel it my duty to demand of you a statement of the condition, standing, and accounts of the Atlantic Delaine Company, so that I may be able to represent the delaine stock, &c., which you have advertised, as trustee, to be sold on the 25th and 26th instant, in its true light and value, and make it sell for what it is worth.

Very truly yours,

'L. B. FRIEZE,

'Assignee of Charles T. James.'

The note upon its face explained for what the statement was wanted. It was that the assignee might know, so far as the account would show, the value of the stock, and that he might guide his action by that knowledge. Before, however, any statement was made out and furnished, in answer to this demand, the sale of the stock was enjoined; but, on ...


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