This suit was begun by filing a bill in the circuit court of the United States for the southern district of New York, seeking an injunction restraining the defendants, Spencer Trask & Company, from selling certain shares of capital stock of the Rio Grande & Western Railway Company to the Denver & Rio Grande Railway Company, unless a sufficient sum of money was deposited to indemnify the complainant upon the demand hereinafter set forth.
It appears from the allegations of the bill that Nathaniel W. Raphael, since deceased, now represented by Martha Raphael as administratrix, on January 7, 1901, filed a bill in the United States circuit court for the district of Utah against the Wasatch & Jordan Valley Railroad Company and the Rio Grande & Western Railway Company and the Union Trust Company of New York, the object being to foreclose a mortgage given by the Wasatch & Jordan Valley Railroad Company, and to redeem from two independent mortgages certain branch railroads in the possession of, and claimed to be owned by, the Rio Grande & Western Railway Company.
While that suit was pending the present action was begun. The bill averred that the defendants, composing the firm of Spencer Trask & Company, had undertaken to obtain stock of the Rio Grande & Western Railway Company, and to sell the same to the representatives of the Denver & Rio Grande Railway Company, which company was proceeding to acquire the railroad of the Rio Grande & Western Railway Company by acquiring the common and preferred stock of that company.
It is averred that Spencer Trask & Company, while negotiating the sale of said stock, learning of the foreclosure proceedings commenced by Raphael in the Utah court, made the following public advertisement:
'Since the commencement of the negotiations one Raphael has instituted in the United States circuit court of Utah a suit against the title of the Western Company to the Bingham and Alta spurs of its railroad; and in making the contract for the vendors our firm gave its personal guarantee against any liability of the company in that suit. Although the company's solicitors are confident of success, it is proper that our guarantee be ratably shared by all who avail themselves of the contract made by us for the vendors. From the $80 per share and interest mentioned above, we shall, therefore, deduct such amount per share as counsel shall advise us will amply protect us upon such guarantee. Such amount will be held in a special trust.'
The bill further avers:
'That the members of said firm of Spencer Trask & Company are not parties to the suit pending in Utah, and that there is no agreement existing between complainant and the other holders of the outstanding bonds similar to complainant's bonds, and Spencer Trask & Company, by which the said proposed 'fund' shall be applied toward the satisfaction of complainant's bonds and the other outstanding bonds.'
There are further allegations that the complainant—
'Is informed and believes that if said consolidation, as set forth in the scheme contemplated by the advertisements referred to, is allowed to be carried out, without some stipulation between your orator and the members of the said firm of Spencer Trask & Company, as to the custody of the said fund, proposed to be created as aforesaid, the rights of remote purchasers of the mortgage premises, upon which complainant claims a lien, will have intervened pending complainant's suit in Utah, so that, if complainant succeeds at the final hearing of his suit in Utah, it will require the bringing into the suit, as defendants, such remote purchasers as the Denver & Rio Grande Western Railway Company and their proposed successors.'
The prayer for relief is:
'That a preliminary injunction be issued restraining the said members of the firm of Spencer Trask & Company from selling the said shares of the capital stock of the Rio Grande Western Railway Company to the Denver & Rio Grande Western Railway Company, as set forth in the said advertisements of Spencer Trask & Company, and which injunction your orator prays may be made perpetual upon the final hearing of this suit, unless the firm of Spencer Trask & Company shall agree to turn over to some trust company in the city of New York, at and before the completing of said sale of said shares, a sum of money which may be determined by this court, out of the proceeds of said sale, as will be sufficient to satisfy complainant's claim and the other outstanding bondholders, similar to his own, upon the final hearing of complainant's suit in Utah.'