Mr. Justice Baker
delivered the opinion of the court:
There being some differences in the particular circumstances of the cases made by the executors of Swannell and those made by Dore, Strong and Hooker, respectively, the merits of the case made by each may, to some extent, properly and conveniently be separately considered, — and this may be done without repeating, in respect to each of the cases, facts and rules of law or equity that are stated in regard to one case and that are equally applicable to the cases of some or all of the other appellees.
First — It seems to us that three questions, only, arise in regard to the decree in favor of the Swannells. They are these: Did John G. Cushman hold the title to the property, at the time he conveyed it to appellant, as trustee for William G. Swannell and other bondholders? Did appellant acquire such title from Cushman with notice of this trust, and therefore take the same subject to the equities of Swannell? Was it proper to render a money decree in favor of the executors and against appellant?
John C. Cushman, at the sale made by the master in chancery under the foreclosure decree in the Circuit Court of the United States for the Northern District of Illinois, bid in all the property of the Plymouth, Kankakee and Pacific Railroad Company as trustee for the bondholders, and lie made such purchase in pursuance of a trust agreement made previous to the day of said master’s sale, between him and the holders of 383 bonds out of 398 bonds of said railroad company. In this trust agreement there was embodied a plan of re-organization, whereby the old bondholders were to receive bonds in a new company to be organized by the said Cushman and to be secured on the same property, such bonds to be issued to the extent of $23,000 per mile, the old bondholders simply obligating themselves to pay to said trustee, when called upon, their proportions of the expense and costs incurred in the foreclosure proceeding and in the organization of a new company in the manner provided by the terms of said trust agreement. Nearly all the bondholders signed this trust agreement previous to the sale, and although Cushman bid off the property at the master’s sale as trustee for the bondholders, it appears that a majority of the original holders of said bonds afterwards failed to pay the assessments made upon them for their respective proportions of the costs of the foreclosure sale and re-organization, and it is therefore claimed by appellant that the said Cushman was absolved from the obligation and burden assumed by him under the terms of said trust.
Cushman had a right to abandon the sale and to refuse to complete the same because of the failure of a sufficient number of bondholders to respond to his call for their shares of the assessment. This would have left the mortgaged property still under the lien, and subject to vthe equities of Swannell and the other bondholders. A re-sale could have been had under the decree, and the value of the property thereby applied in payment of their demands. But having, however, bid off the property as trustee for Swannell and others, and having proceeded to complete the purchase made by him as their trustee, he must be held to be absolutely bound by all the terms of said trust until released therefrom by the appellee Swannell and the other bondholders. Swannell entered into this'trust agreement and delivered his bonds to Cushman. He paid all assessments made upon him by Cushman, as such trustee, and the money so paid by Swannell to Cushman was, actually and in fact, retained and used by Cushman to make up the sum of money necessary to complete the purchase made by him at the master’s sale, and Swannell never withdrew his bonds or received back from Cushman any portion of the assessments paid to him as trustee to perfect such sale, and never, in any manner, released Cushman from any of the duties or obligations imposed upon him by the trust agreement entered into between them prior to the day of said master’s sale. Cushman could not, therefore, divest himself of any of the obligations imposed by said trust agreement without Swannell’s consent. ■
The matter of the relation existing between John C. Cushman and Joel D. Harvey, respectively, and the bondholders who had placed their bonds in the hands of Cushman, was before this court in Cushman v. Bonfield, 139 Ill. 219. We there held that Cushman had bid off the property, rights and franchises of the Plymouth, Kankakee and Pacific Eailroad Company as trustee of such bondholders, and that the trust created was impressed upon and followed the title which was subsequently perfected in Cushman by the execution of the master’s deed made in pursuance of such sale, and continued up to the time of the conveyances by which the railroad property became vested in the Indiana, Illinois and Iowa Railroad Company; and also held that it was fairly to be inferred from the terms of the indemnity bonds given by Harvey to Cushman at the time the latter conveyed the property to the Indiana, Illinois and Iowa Eailroad Company, as well as otherwise clearly shown by the evidence, that Harvey had full knowledge of the trust reposed in Cushman and of the equitable interests of Bonfield and the other bondholders in the property, and that said Harvey having in his possession the proceeds of trust property, the law charges him, also, as trustee, and holds him accountable as such. And we may here add, that the case appearing, in this record in favor of Swannell is in all respects like the case made out for Bonfield in the former litigation, the only substantial difference being, that there the relief was granted against Cushman and Harvey, personally, while here the decree went against the appellant corporation.
This brings us to the question whether the Indiana, Illinois and Iowa Railroad Company had notice of the trust, and of the restrictions and limitations upon the title of Cushman, at the time that it received the conveyance of the property from him. The record shows that said railroad company was organized on July 8, 1881; that it was organized by Harvey for the express purpose of receiving from Cushman title to the property, rights and franchises of the Plymouth, Kankakee and Pacific Railroad Company, and that on July 11, 1881, — three days after its organization, — Cushman made to it a quitclaim deed for the same, and on the day the deed was given Harvey executed to Cushman an indemnifying bond in the sum of $60,000, conditioned that he would hold Cushman harmless against all loss, cost, damage or expense to which the bondholders of the Plymouth, Kankakee and Pacific Railroad Company, or any of them, or any other person or persons, may seek to subject him by reason of the conveyance, and pay all judgments, costs and expenses incurred, awarded or rendered against him in any suit or proceeding growing out of the conveyance or his trusteeship for the holders of any of the bonds of said Plymouth, Kankakee and Pacific Railroad Company.
Prom the date of the organization of appellant, and at the time Cushman executed to it the quit-claim deed for the trust property, and for many years thereafter, Harvey was a stockholder in and director of the company, and its president. That Harvey had full — even plenary — knowledge of the trust that was imposed upon Cushman, appears so clearly and in so many different ways in this record that it is useless to waste time in mentioning them. The knowledge of a person who is a director of a corporation and its chief executive officer must be regarded as actual notice to the corporation itself.
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Mr. Justice Baker
delivered the opinion of the court:
There being some differences in the particular circumstances of the cases made by the executors of Swannell and those made by Dore, Strong and Hooker, respectively, the merits of the case made by each may, to some extent, properly and conveniently be separately considered, — and this may be done without repeating, in respect to each of the cases, facts and rules of law or equity that are stated in regard to one case and that are equally applicable to the cases of some or all of the other appellees.
First — It seems to us that three questions, only, arise in regard to the decree in favor of the Swannells. They are these: Did John G. Cushman hold the title to the property, at the time he conveyed it to appellant, as trustee for William G. Swannell and other bondholders? Did appellant acquire such title from Cushman with notice of this trust, and therefore take the same subject to the equities of Swannell? Was it proper to render a money decree in favor of the executors and against appellant?
John C. Cushman, at the sale made by the master in chancery under the foreclosure decree in the Circuit Court of the United States for the Northern District of Illinois, bid in all the property of the Plymouth, Kankakee and Pacific Railroad Company as trustee for the bondholders, and lie made such purchase in pursuance of a trust agreement made previous to the day of said master’s sale, between him and the holders of 383 bonds out of 398 bonds of said railroad company. In this trust agreement there was embodied a plan of re-organization, whereby the old bondholders were to receive bonds in a new company to be organized by the said Cushman and to be secured on the same property, such bonds to be issued to the extent of $23,000 per mile, the old bondholders simply obligating themselves to pay to said trustee, when called upon, their proportions of the expense and costs incurred in the foreclosure proceeding and in the organization of a new company in the manner provided by the terms of said trust agreement. Nearly all the bondholders signed this trust agreement previous to the sale, and although Cushman bid off the property at the master’s sale as trustee for the bondholders, it appears that a majority of the original holders of said bonds afterwards failed to pay the assessments made upon them for their respective proportions of the costs of the foreclosure sale and re-organization, and it is therefore claimed by appellant that the said Cushman was absolved from the obligation and burden assumed by him under the terms of said trust.
Cushman had a right to abandon the sale and to refuse to complete the same because of the failure of a sufficient number of bondholders to respond to his call for their shares of the assessment. This would have left the mortgaged property still under the lien, and subject to vthe equities of Swannell and the other bondholders. A re-sale could have been had under the decree, and the value of the property thereby applied in payment of their demands. But having, however, bid off the property as trustee for Swannell and others, and having proceeded to complete the purchase made by him as their trustee, he must be held to be absolutely bound by all the terms of said trust until released therefrom by the appellee Swannell and the other bondholders. Swannell entered into this'trust agreement and delivered his bonds to Cushman. He paid all assessments made upon him by Cushman, as such trustee, and the money so paid by Swannell to Cushman was, actually and in fact, retained and used by Cushman to make up the sum of money necessary to complete the purchase made by him at the master’s sale, and Swannell never withdrew his bonds or received back from Cushman any portion of the assessments paid to him as trustee to perfect such sale, and never, in any manner, released Cushman from any of the duties or obligations imposed upon him by the trust agreement entered into between them prior to the day of said master’s sale. Cushman could not, therefore, divest himself of any of the obligations imposed by said trust agreement without Swannell’s consent. ■
The matter of the relation existing between John C. Cushman and Joel D. Harvey, respectively, and the bondholders who had placed their bonds in the hands of Cushman, was before this court in Cushman v. Bonfield, 139 Ill. 219. We there held that Cushman had bid off the property, rights and franchises of the Plymouth, Kankakee and Pacific Eailroad Company as trustee of such bondholders, and that the trust created was impressed upon and followed the title which was subsequently perfected in Cushman by the execution of the master’s deed made in pursuance of such sale, and continued up to the time of the conveyances by which the railroad property became vested in the Indiana, Illinois and Iowa Railroad Company; and also held that it was fairly to be inferred from the terms of the indemnity bonds given by Harvey to Cushman at the time the latter conveyed the property to the Indiana, Illinois and Iowa Eailroad Company, as well as otherwise clearly shown by the evidence, that Harvey had full knowledge of the trust reposed in Cushman and of the equitable interests of Bonfield and the other bondholders in the property, and that said Harvey having in his possession the proceeds of trust property, the law charges him, also, as trustee, and holds him accountable as such. And we may here add, that the case appearing, in this record in favor of Swannell is in all respects like the case made out for Bonfield in the former litigation, the only substantial difference being, that there the relief was granted against Cushman and Harvey, personally, while here the decree went against the appellant corporation.
This brings us to the question whether the Indiana, Illinois and Iowa Railroad Company had notice of the trust, and of the restrictions and limitations upon the title of Cushman, at the time that it received the conveyance of the property from him. The record shows that said railroad company was organized on July 8, 1881; that it was organized by Harvey for the express purpose of receiving from Cushman title to the property, rights and franchises of the Plymouth, Kankakee and Pacific Railroad Company, and that on July 11, 1881, — three days after its organization, — Cushman made to it a quitclaim deed for the same, and on the day the deed was given Harvey executed to Cushman an indemnifying bond in the sum of $60,000, conditioned that he would hold Cushman harmless against all loss, cost, damage or expense to which the bondholders of the Plymouth, Kankakee and Pacific Railroad Company, or any of them, or any other person or persons, may seek to subject him by reason of the conveyance, and pay all judgments, costs and expenses incurred, awarded or rendered against him in any suit or proceeding growing out of the conveyance or his trusteeship for the holders of any of the bonds of said Plymouth, Kankakee and Pacific Railroad Company.
Prom the date of the organization of appellant, and at the time Cushman executed to it the quit-claim deed for the trust property, and for many years thereafter, Harvey was a stockholder in and director of the company, and its president. That Harvey had full — even plenary — knowledge of the trust that was imposed upon Cushman, appears so clearly and in so many different ways in this record that it is useless to waste time in mentioning them. The knowledge of a person who is a director of a corporation and its chief executive officer must be regarded as actual notice to the corporation itself. In no better way can notice be imputed to it. The company, then, must be considered to have taken the property covered by the trust With full knowledge of the trust imposed upon it. It had ample notice of the rights and equities of Swannell and the other bondholders, and it cannot now be heard to say that it is an innocent purchaser of the property for value. It took its title under the Cushman conveyance charged with all the conditions and limitations imposed upon it by the trust agreement between Cushman and the bondholders for whom he undertook to act. The railroad company simply stepped into Cushman’s shoes, and Swannell has the right to follow the property and hold the company as his trustee. The doctrine is, that a purchaser with notice of a trust, either express or implied, becomes himself a trustee for the beneficiary with respect of the property, and is bound in the same manner as the original trustee from whom he purchased, — and this even though he is a purchaser for a valuable consideration. 2 Pomeroy’s Eq. Jur. sec. 688; 27 Am. & Eng. Ency. of Law. pp. 251, 265; School Trustees v. Kirwin, 25 Ill. 73; Fast v. McPherson, 98 id. 496; Cushman v. Bonfield, 139 id. 219; Union Mutual Life Ins. Co. v. Slee, 123 id. 57; Phillips v. South Park Comrs. 119 id. 626.
The remaining question in regard to the Swannell claim has reference to the propriety of a money decree against appellant for the value of bonds such as should have been issued according to the terms of the trust agreement. The circuit court first entered an interlocutory decree that appellant, within sixty days from the date of such decree, execute and deliver bonds such as called for by the original plan of re-organization, secured by mortgages as therein provided; but appellant failed and refused to comply with the requirements of such decree, and thereupon the court entered a final decree against appellant for the value of such bonds, as shown by the report of the master and the evidence reported therewith, together'with interest from the date of the report, and awarded execution therefor and for costs, as upon a judgment at law.
Harvey received, as consideration for the transfer of the property, rights and franchises of the Peoria, Kankakee and Pacific Railroad Company to the Indiana, Illinois and Iowa Railroad Company, paid up stock to the amount of $150,000 in the Western Air Line Construction Company, a corporation formed under the laws of the State of Iowa for the purpose of completing the construction of the railroad in question. According to the testimony of Meckling, an experienced railroad builder, who went over the railroad in 1880 or 1881 at Harvey’s request, he and said engineer agreed that the property in its then condition, as left by the Peoria, Kankakee and Pacific Company, was of the value of $900,000. It appears* from the testimony of Harvey that the original capital stock of the construction company was $1,000,000; that he got $150,000 of this stock, paid up, for the property of the old railroad company, and that the other parties in interest paid for the residue of the stock in cash, and that said stock was then worth its par value, but it has since so declined in value as that there have been some sales of it as low as eight cents on the dollar. It would be inequitable and unjust, and a destruction of the contract rights of the bondholders, to now compel them to receive in satisfaction of their claims their respective proportionate shares of said $150,000 construction company stock that is now almost worthless, on the ground that in the plan of re-organization there was direct authority to the trustee to sell and transfer all the right, title and interest in the property of every bondholder becoming a party to such plan of re-organization, and Tinder that authority it was sold and transferred to appellant for §150,000 in construction company stock. The power authorizing the trustee to sell and transfer, “providing he .shall deem it for our interest to make such) transfer,” was coupled with the provision that he should “receive for us, in exchange therefor, such securities as are provided by the plan of re-organization hereto'an-i nexed, for our respective interests in the property pur-. chased.” And the securities for which provision was made in the plan of re-organization were that the bondholders should receive new bonds for the principals of their old bonds, secured by a first mortgage on the railroad property, not exceeding" §23,000 per mile of the main track, and second, mortgage or income bonds for the coupons and accrued interest due on their existing first mortgage bonds.
It is suggested that in Cushman v. Bonfield, supra, it was, in effect, held that the purchase price received by Harvey as the value of the property at the time of the conversion was a trust fund, to be held for distribution among all the bondholders in accordance with their respective equities, and the intimation seems to be that that case is an authority that the particular relief granted in this case is improper. The Bonjield case establishes that a personal decree against Harvey and Cushman was proper relief for a court of chancery to grant, but it was not there held that it was the only relief admissible under the circumstances of the transaction. The beneficiary in a trust is not bound to enforce an individual liability against the trustee, for he has the alternative remedy of following the trust property. (Bradley v. Luce, 99 Ill. 234; Long v. Fox, 100 id. 43; Breit v. Yeaton, 101 id. 242; 27 Am. & Eng. Ency. of Law, p. 261, and authorities cited in note 4.) In the Bonjield case the chancellor granted one mode of relief, while in this case he allowed appellees to follow the property into the hands of appellant.
Second — In the matter of the intervening petition of Patrick Dore, it appears that Dore, the owner of seven bonds, became a party to the trust agreement on November 21,1876, and duly executed and delivered to Cushman a power of attorney authorizing him to act in respect to said bonds in purchasing the property and disposing of the same; that he delivered said bonds to Cushman, and paid to him the two assessments called for, to be used in perfecting title in Cushman for the benefit of the holders, said assessments amounting to $35 and $28, spectively, and Cushman testifies that this money scy received “was used in the costs and expenses of the foreclosure proceedings in the United States court.” The sole and only difference between the case of Dore and that of Swannell is, that on July 9,1881, Cushman handed back to Dore his seven bonds, and took from him a receipt and discharge which reads as follows:
“Chicago, III. , July 9,1881.
“I have this day received from John C. Cushman seven first mortgage bonds of the Plymouth, Kankakee and Pacific Railroad Company, numbered 440, 441, 443, 444, 445, 448 and 449, with interest coupons thereto attached, numbered from 6 to 60, inclusive. And I hereby release said Cushman from all further duty or liability in connection therewith as my attorney or representative, and agree to hold him harmless therein, and waive all rights that I may have attained through or by him.”
It appears that Cushman tried to induce Dore to assign his interests to Harvey for $413, but that Dore refused to accept the offer, saying he would rather lose it all. Cushman told him that he had nothing more to do with the road,- — that he could do nothing more for him, and for him to go and see Harvey, and gave him Harvey’s address. Thereupon Dore demanded his bonds, and they were delivered to him upon his signing the receipt in question. It is manifest from the evidence that when he received his bonds back from Cushman, on July 9, 1881, it was his intention and purpose to insist upon his rights and claim his interest in the property covered by the decree of foreclosure. Even if effect can be given to the release from further duty and from liability, and to the waiver of rights embodied in the receipt, yet such! release and waiver do not affect the equitable rights en-J forced by the decree herein. The relief granted by the court is not a personal decree against Cushman, and is not an enforcement of his personal liability as trustee, and the rights which the decree enforces are not rights or equities which Dore obtained by or through Cushman, but rights and equities which were vested in Dore under! and by virtue of the mortgage and decree of foreclosure.* Wipe out the bid of Cushman and the acts done by him,? yet the equities of Dore in the property of the Plymouth,\ Kankakee and Pacific Railroad Company still exist, and the fact still remains that appellant has converted that? property to its own use with full notice and knowledge of such equities.
The difference between the case of Samuel W. Strong and that of Dore is this: both the assessments paid by the latter were used in perfecting the title in Cushman, while of the two assessments paid by Strong, one, that for $15, was so used, while the other, $12, was returned to Pearre, the agent of Strong. The circumstances under wThich this was done may be stated. Strong gave to Pearre a written order, as follows:
“You will please deliver to L. G. Pearre, Esq., on presentation of this order, which shall be your receipt in full and a complete discharge from all liability, three first mortgage bonds of the Plymouth, Kankakee and Pacific Railroad Company, being numbers 426, 427 and 366, for $1000 each, and coupons thereto attached, together with the power of attorney authorizing you to act as trustee to represent said bonds.”
Cushman swears that he drafted this order, and that Strong had frequently talked with him, and knew that the plan of re-organization had completely failed. Of course, the discharge from liability in this order did not work the result of releasing the equities that Strong, as a bondholder, had in the property and under the decree.
If it be urged that the Swannell suittwas brought only on behalf of himself and such other holders of the bonds of the Plymouth, Kankakee and Pacific Railroad Company as are similarly situated, and that said suit proceeds directly upon the theory of the trust agreement made between Cushman and the bondholders, and that therefore these general equities of Dore and of Strong in the railroad property and under the decree of foreclosure do not arise and are not involved in the original suit of Swannell, and consequently not here enforcible, we may say, that we regard what is hereinafter said in respect to the intervening petition of Henry M. Hooker, and in respect to the cases made on the petitions of Dore and of Strong, as conclusive against any such suggestions or result.
It appears that the Third National Bank of Chicago formerly held the twenty-five bonds which its receiver afterwards sold to Hooker and which Hooker now owns. The bank was a party to the trust agreement, and gave to Cushman a power of attorney authorizing him to purchase the railroad property at the master’s sale for its benefit, and to receive for it new bonds in a re-organized company, and delivered to him said twenty-five bonds. Cushman, on January 12, 1877, acting under the trust agreement, bid §4000 for the property at the master’s sale, that being deemed sufficient to pay costs and expenses, and it was struck off to him as trustee of the bondholders. He bid in the property for the benefit of the bank as well as for the benefit of other stockholders. Neither of the two assessments made on the bank was paid, either by the bank or the receiver. Quite a considerable time thereafter Cushman returned the bonds and the power of attorney to the receiver.
There was no rescission of the trust agreement, either as to the assignor of Hooker or Strong or Dore. Reither the return of the bonds and the powers of attorney to the receiver of the bank, to Strong and to Dore, respectively, nor the restitution to Strong of the $12 received for the last assessment, nor the failure of the bank and its receiver to respond to assessments, nor the release and discharge contained in the order signed by Strong-, nor the release and the.waiver of.rights embodied in the receipt of Dpre, worked such a .rescission as to the rights and interests of either of the interveners. It is a fundamental condition of the law governing the rescission of contracts, that the parties must be restored to their original positions as nearly as possible. Cushman could not retain, his bid made in his capacity of trustee of Dore, Strong, the bank and other creditors, and his claim upon the property of the railroad company obtained by means of the powers of attorney and the trust agreement, and yeti successfully maintain that the contract and agreement1 between him and said bondholders were rescinded and the trust relations existing between him and them at an end.' He could not shake off the trust without abandoning bid and all claim to the property. This he did not but procured a confirmation of the sale to himself, and a vesting in himself of the title to the property which was^ the subject of the trust. If he had thrown up his bid and abandoned all claim to the property, then these intervening bondholders, and the other bondholders in whose interest the mortgage was foreclosed, could readily have procured a re-sale of the property and the application of the proceeds of such sale in payment of their bonds.
The plan of re-organization and the powers of attorney defined the relations between the holders of the bonds and Cushman, and gave Cushman whatever interest had in the property, and whatever power he had in the /event any of the bondholders failed in making payment of assessments for costs, expenses and fees. This plan of re-organization and these powers of attorney made no provision by virtue of which Cushman could forfeit the rights and interests of any of, the bondholders who were parties to the trust agreement. The authority given to enforce payment of assessments is carefully and specifically pointed out in item 4 of the plan of re-organization. It is there provided that the trustee may borrow the pro rata shares of bondholders who fail to pay their shares of the purchase money, “or any other person may provide the same, and any sum so borrowed or provided for such purpose shall be repaid, with interest at the rate of ten per cent per annum, by the bondholders for whose benefit it was borrowed or provided, before he shall be entitled to receive any bonds or other proceeds of such sale from said trustee; and should such sum, with interest, remain due and unpaid for one year from the date of its advancement, said trustee shall, upon demand by the party making such advance, sell the interest of said bondholders in the proceeds of said sale at public auction, giving ten days’ notice thereof in some daily newspaper of the city of Chicago of the time and place of sale, to the highest bidder thereof, for cash, and after paying costs of such sale and the money and interest thereon before advanced, said trustee shall pay the residue, if any,' to said.bondholder or his legal representative on demand.”.
It is claimed that the equities of Dore, Strong and Hooker are not the same as the equitable rights of Swannell, and that therefore they cannot come in under hisi bill and are not entitled to the same relief. We think that the gist of the original bill is the relation of trustee and cestuis que trust that existed between Cushman and the bondholders by virtue of the powers of attorney and the plan of re-organization, the violation of the trust, and the transfer of the property, with notice, to appellant. All the bondholders who were parties to the trust agreement had a beneficial interest in this property— were in equity the real owners of it, and in equity to be regarded as tenants in common. The differences between the cases of Swannell, Dore, Strong and Hooker we regard as simply differences in the immaterial circumstances of each particular case. There is such a community of right and interest among the appellees in the question at issue and in the remedy, as makes it admissible that the intervening petitioners should come in under the original bill of Swannell. Pomeroy’s Eq. Jur. sec. 269; Walker v. Mathew, 58 Ill. 196; N. Y. & N. H. R. R. Co. v. Schuyler, 17 N. Y. 590.
The judgment of the Appellate Court is affirmed.
Judgment affirmed,.