United States v. Leary/Opinion of the Court
This proceeding began as a suit by the United States to charge the defendant Kellogg with a trust in respect of funds alleged to have been received by him from Greene and to have been obtained from the plaintiff by Greene through his participation in the well-known Carter frauds. United States v. Carter, 217 U.S. 286, 30 Sup. Ct. 515, 54 L. Ed. 769, 19 Ann. Cas. 594. After the evidence had been taken, leave to intervene was granted, on terms, to the administratrix of the estate of James D. Leary, predecessor of the present Leary appellees. 224 U.S. 567, 32 Sup. Ct. 599, 56 L. Ed. 889, Ann. Cas. 1913D, 1029. The fund now in question is four hundred shares of the stock of the Norfolk and Western Railway Company, which the Learys and Kellogg say were held by Kellogg as security to their intestate against his liability upon a bail bond for Greene. A judgment upon the bond has been paid by them. The Circuit Court of Appeals has sustained the Learys' claim and the United States appeals. 229 Fed. 660, 144 C. C. A. 70.

Although Kellogg argues the contrary, it may be assumed for the purposes of decision that the United States traces its money into the stock, since Kellogg makes no personal claim to it. On the other hand it appears that before the intestate Leary became bondsman for Greene on December 14, 1899, Kellogg wrote to him on the same day, stating that Greene had placed in his hands three hundred shares of stock of the Delaware, Lackawanna and Western Railroad Company 'as indemnity to you for becoming his bondsman in the matter of the United States against Greene, Gaynor and others, now pending in the district court' to hold until Leary was released from the said bond or to apply in payment of the obligation. We agree with the Circuit Court of Appeals that neither Kellogg nor Leary had notice of any defect in Greene's title. The only question requiring discussion is whether the present stock is held upon the same terms against a later bond that Leary signed.

The proceedings in which the bond of December, 1899, was given were for the removal of Greene from New York to Georgia. On February 20, 1900, the United States Commissioner found that there was probable cause. Greene was committed to the marshal and the bond was cancelled. On the same day another bond seems to have been given by Leary that was satisfied on May 28, 1901, when the district judge issued a warrant for removal. On May 21 Kellogg wrote to Leary that it would be necessary 'to renew the bail given by you for Captain Greene, and for which I hold security for your protection,' fixing a time, and adding 'This new bond is to take the place of the old one without additional liability.' The bond was given on May 28 and Greene was enlarged. On June 8 Greene was surrendered into the custody of the marshal in New York and a new bail bond was executed by Leary after having received a letter from Kellogg, dated June 6, saying 'I am obliged to trouble you again to renew the bond in the Greene and Gaynor matter' fixing the time and adding 'The reason for the matter is not that you have to incur any additional liability, but simply to enable them to carry their case to the United States Supreme Court.'

The case was taken to this Court and an order of the Circuit Court refusing a writ of habeas corpus was affirmed on January 6, 1902. Greene v. Henkel, 183 U.S. 249, 22 Sup. Ct. 218, 46 L. Ed. 177. Thereafter, on January 20, Leary signed, as surety for Greene, the bond for $40,000, conditioned for Greene's appearance in Georgia, which was forfeited and which the Learys have paid.

More words could not make it plainer than it is made by the letters that the 'matter' was regarded by the parties as a continuing one and that the bond of June 8, 1901, was executed on the agreement that the security also should continue. The only natural inference as to the later one of 1902 that took its place is that the understanding remained in force without the requirement of a repetition of the already repeated assurance. This inference is confirmed by the conduct or Kellogg. He had held stocks and bonds for Greene and settled with him, retaining only this stock. Even if his original answer under oath filed before the Learys intervened is not evidence for them as a statement of facts, it was an act as well as a statement and showed that at that time he asserted that the stock was security given by Greene. It is true that the stock was not the same that was mentioned in the first letter. Greene was allowed to make changes and substitutions. But this and other purchases were made with the proceeds of the sale of the first and other stocks before the letters of May and June 1901 were written, and without considering whether in the interest of good faith the stock retained should or should not be attributed to the portion of the funds coming from that previously pledged, the selection and retention of it in place of the other is enough when taken with the agreement disclosed. See National Bank v. Insurance Co., 104 U.S. 54, 68, 26 L. Ed. 693; In re Hallett's Estate, 13 Ch. D. 696. It seems to us unnecessary to add more to the discussion by the Circuit Court of Appeals. Whether Kellogg should receive an allowance as trustee may be left to the District Court.

Decree affirmed. 

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