Union Pac. Ry. Co. v. Schiff

The agreement of December 14, 1891, provides “that the Union Pacific Kailway Company may substitute other securities- satisfactory to Messrs. Kuhn, Loeb & Co., or an indemnity bond, if satisfactory to them. The protection is against claims, all suits and expenses.” The complainant now proposes to take the substituted securities from the possession of Kuhn & Co. and put nothing in their place, in short to ignore the agreement and proceed in all respects as if it had never been executed. The complainant insists that upon thepayment of the sterling notes the title of Kuhn & Co. to the collaterals was transferred to and vested in the complainant; that as matter of law the complainant took the title of the bankers and that the delivery of the collaterals could have been compelled by a judgment of the court. It is not thought necessary to decide what might have been the legal status had the complainant decided to rely upon its strict legal rights. It did not do so. It preferred to resort to negotiation. The result was the agreement of December 14th. This agreement was made intelligently and deliberately. There was no mistake of law or fact. It was made after the entire situation had been surveyed by eminent counsel whose ability to protect their clients’ interests no one can dispute.

By the agreement of December 14th the complainant recognizes two propositions: First, that adverse claims to the collaterals might arise; and, second, that the bankers might be held liable. It is too late now to recede from this position. By recognizing the right of Kuhn & Co. to a reasonable indemnity the complainant obtained possession of the bulk of its securities it cannot now ignore the obligations thus imposed. The covenant to give a bond is as sacred as the bond itself and it will hardly be contended that had the complainant obtained possession of the collaterals by giving an indemnity bond, the court would release the sureties less than six years thereafter upon the doubtful theory that the bond was unnecessary. In short, the cour.t is perfectly clear that the agreement of December 14th is a valid instrument which cannot be ignored. It must be dealt with in determining the rights of the parties.

*677. Tlie complain! alleges no offer to give a bond but simply a naked demand for the delivery of the substituted securities and its refusal. The only allusion to the subject in the proof relates to the informal negotiations between counsel in which (he complainant contended that the proposed bond should be limited as to time and amount and the bankers insisted that it should be as broad as the agreement of December 14th. The court is of the opinion that this question should be disposed of in limine. If Kuhn & Co. are entitled co retain the securities it would seem an inconsequential proceeding to pass upon the rights of the other par-ties to the action. Obviously the first step is to get securities in a position where' they can be taken fairly and legally from the possession of the bankers. Having reached this point the court deems it prudent to take the suggestion of counsel as to (he future course of the litigation. If, as the court assumed at the argument find still assumes, counsel are animated by a desire to waive technicalities there should be no great difficulty in arriving at a fair solution of the problem. It may conduce to this end if the court stales its present impressions as to the manner in which this may be brought about.

It must be apparent to all that the danger of any claim, other than those represented in this suit', being made against the bankers is almost infinitesimal. No one here asserts any personal liability against them. If, then, they are released from ali liability by the complainant and the other defendants and their costs and expenses paid it would seem that a bond sufficient to secure them from future attacks -would be sufficient. Such attacks are so improbable that they may be regarded as well-nigh impossible. It is true that the contract provides that the security shall be satisfactory to the bankers, but this provision must have a reasonable construction. The bankers ought not to demand a bond absurdly out of proportion to the risk. A bond limited as to time and amount will, in (he circumstances, indemnify against every conceivable claim, and more than this the bankers ought not to require.

Nnough has been said to indicate the difficulties which seem to prevent a satisfactory decision of the cause unless, by the assistance of counsel, the court is enabled to remove them. If the court can be assured that upon the final decision being rendered the various parties will release Kuhn & Co. from all claims and that the plaintiff has agreed with Kuhn & Co. as to the bond to be given it will proceed and determine the other questions involved. Counsel may be heard, orally at Canandaigua on the 16th inst., at Utica on the 23d Inst., or at New York in October, or they may submit their views in the form of short printed briefs at any time within two weeks from the date of the filing of this decision.