WOODS, Circuit Judge.
The question to be determined is, whether, on the facts shown by the pleadings and evidence, the. court ought to discontinue the injunction and to discharge the receiver and restore the possession of the trust property to Cureton, the alleged purchaser at sheriffs sale. No objection is made to the receiver appointed by the court or to his management of the property — -which his reports show to be reasonably successful and profitable. In my judgment, the facts abundantly justified the appointment of a receiver in the first instance, as the case was then presented to the district judge. If there was a default in the payment of interest coupons for the period of six months after they fell due, the trustees named in the deed of trust were authorized, upon the request of the holder or holders of any of the bonds, to enter upon and take actual pos - session of the trust property, and to advertise and sell the same. And by the express stipulation of the trust-deed, the Rising Fawn Iron Company reserved the right to the possession [264]*264and management of the trust property only so long as no default should be made in the payment of either interest or principal of the bonds. Cureton, by his purchase at sheriff’s sale on a subsequent incumbrance, could not place himself in a stronger position than the company itself. Suppose there had been no sheriff’s sale, and the company had remained in possession of the trust property, could it have lawfully resisted the right of the trustees to demand and take possession of the trust property after six months’ default in the payment of the principal or interest of the bonds? The right to the possession after such default is as clearly conferred by the trust-deed as the right to payment of the principal and interest on the bonds. If the company could not resist the demand of the trustees to take possession of the trust property after default, neither could it claim that this court could not rightfully take possession on a bill filed by the bondholders to enforce their rights under the trust-deed. If the contingency existed when it wats the right and duty of the trustees, in the execution of their trust, to take possession of the trust property, it was incumbent on the court, upon failure of .the trustees to discharge that duty, to compel them to act or to appoint some one to act in their stead. Independent, therefore, of any jeopardy to the trust property, the company lost, and the trustees acquired, the right to the possession of the trust properly, after six months’ default in the payment of the interest coupons. But the evidence is satisfactory to the point that there had been, at the time of the filing of the bill, serious loss and depreciation of the trust property.
The question on which the motion turns is, has there been any default on the part of the Rising Fawn Iron Company, in the payment of the interest coupons attached to the first mortgage bonds held by complainants? The complainants assert that there has, and the defendants, the Rising Fawn Iron Company and Cureton, assert that there has not. There is no dispute that the interest coupons, due July 1, 1876, on the eight bonds heretofore specified, held by the complainants, were not paid on that day, and have not since been paid. The reply of the defendants to this fact is: First. That there was nothing payable on the coupons falling due July 1, 1876, because the bonds to which they were attached were deposited before July 1, 1876, as collateral security for debts which did not mature until after that date. This ground appears to me to be clearly untenable. By depositing the bonds as collateral security, with all the coupons attached, the company made the pledgee the legal holder, subject only to the rights of the company, on payment of the debt for which they were held as security. If the jiledgee had transferred the bonds to an innocent purchaser, such transfer would have carried with it the legal title. In Georgia, by express enactment, the holder of a note, as collateral security for a debt, stands upon the same footing as a purchaser. Code Ga. § 2788. See, also, Goodman v. Simonds, 20 How. [61 U. S.] 343; 1 Daniel, Neg. Inst. §§ 820-822, 824, 823. When, therefore, the bonds were pledged as collateral security, the pledgee became the legal holder, and he became the holder of all the coupons attached and not due, as well as of the bond itself. The bonds and the coupons were all pledged for the payment of the debt which was secured by the deposit of the bonds and coupons. The fact that the debt secured was not due did not relieve the coupons, any i more than the bond itself, from the effect of this hypothecation. To hold otherwise I would be to hold that if the bonds themselves Ifell due before the debt secured by the (pledge of the bonds, their hypothecation was ¡without any effect whatever. 1 Daniel, Neg. Inst. §§ 825, 826. This is true, where the pledge is made to secure a pre-existing debt. In this case it does not appear that the bonds were transferred to secure a debt already existing. The presumption is. that the creation of the debt and the giving of the security were contemporaneous.
It is clear to my mind that the pledgees of the bonds deposited as collateral security, before July 1, 1876. were legal holders, and had the right to demand and receive the interest due July 1, 1876. This right was a part of their security. Upon the failure to pay the coupons, the pledgee had all the rights of any other legal holder or purchaser of the bonds. And a default, for six months, in the payment of such interest, gave the pledgee the same right as any other purchaser to insist that the principal of the bond had become due in accordance with its terms and the terms of the trust-deed. In short, the collateral holder took the bonds and coupons with all their terms and stipulations, unaffected by the fact that they were held as security for another debt, and that that debt was not due. He had the right to collect the interest on the bond as it fell duo. and to enforce payment of the principal in accordance with the terms of the bond. He only differed from an absolute owner in this, that he was bound to account for any surplus received from the bonds and coupons, over and above what was necessary to the payment of his debt. When the pledgee transferred the bonds to the complainants, they acquired all his rights. The fact, therefore, that the complainants knew' before they purchased the bonds, that they were in pledge, has no effect, for the complainants are claiming no lights which the parties from whom they purchased the bonds did not have.
It is insisted that because the pledgee did not know that he was entitled to collect the interest coupons which fell due before the maturity of the debt secured by the pledge of the bonds, therefore he had no such right. But men’s rights are not lost by the fact that they are ignorant of them, much less can such ignorance destroy the rights of the subsequent holder of the bonds. In my judg-[265]*265rnent, the collateral holder of the bonds, on July 1, 1876, had the right to demand payment of the coupons due on that day, and on :a default of payment continuing sis months, had the right to demand as due, by reason of such default, both the principal and interest on his bonds, and that when he transferred his bonds and coupons, for value, to a purchaser, the transfer carried with it all the rights of the original collateral holder.
But it is claimed, second, by defendants, that there was no default in the failure to pay the coupons due July 1, 1870, because there was no presentation of the coupons for payment.
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WOODS, Circuit Judge.
The question to be determined is, whether, on the facts shown by the pleadings and evidence, the. court ought to discontinue the injunction and to discharge the receiver and restore the possession of the trust property to Cureton, the alleged purchaser at sheriffs sale. No objection is made to the receiver appointed by the court or to his management of the property — -which his reports show to be reasonably successful and profitable. In my judgment, the facts abundantly justified the appointment of a receiver in the first instance, as the case was then presented to the district judge. If there was a default in the payment of interest coupons for the period of six months after they fell due, the trustees named in the deed of trust were authorized, upon the request of the holder or holders of any of the bonds, to enter upon and take actual pos - session of the trust property, and to advertise and sell the same. And by the express stipulation of the trust-deed, the Rising Fawn Iron Company reserved the right to the possession [264]*264and management of the trust property only so long as no default should be made in the payment of either interest or principal of the bonds. Cureton, by his purchase at sheriff’s sale on a subsequent incumbrance, could not place himself in a stronger position than the company itself. Suppose there had been no sheriff’s sale, and the company had remained in possession of the trust property, could it have lawfully resisted the right of the trustees to demand and take possession of the trust property after six months’ default in the payment of the principal or interest of the bonds? The right to the possession after such default is as clearly conferred by the trust-deed as the right to payment of the principal and interest on the bonds. If the company could not resist the demand of the trustees to take possession of the trust property after default, neither could it claim that this court could not rightfully take possession on a bill filed by the bondholders to enforce their rights under the trust-deed. If the contingency existed when it wats the right and duty of the trustees, in the execution of their trust, to take possession of the trust property, it was incumbent on the court, upon failure of .the trustees to discharge that duty, to compel them to act or to appoint some one to act in their stead. Independent, therefore, of any jeopardy to the trust property, the company lost, and the trustees acquired, the right to the possession of the trust properly, after six months’ default in the payment of the interest coupons. But the evidence is satisfactory to the point that there had been, at the time of the filing of the bill, serious loss and depreciation of the trust property.
The question on which the motion turns is, has there been any default on the part of the Rising Fawn Iron Company, in the payment of the interest coupons attached to the first mortgage bonds held by complainants? The complainants assert that there has, and the defendants, the Rising Fawn Iron Company and Cureton, assert that there has not. There is no dispute that the interest coupons, due July 1, 1876, on the eight bonds heretofore specified, held by the complainants, were not paid on that day, and have not since been paid. The reply of the defendants to this fact is: First. That there was nothing payable on the coupons falling due July 1, 1876, because the bonds to which they were attached were deposited before July 1, 1876, as collateral security for debts which did not mature until after that date. This ground appears to me to be clearly untenable. By depositing the bonds as collateral security, with all the coupons attached, the company made the pledgee the legal holder, subject only to the rights of the company, on payment of the debt for which they were held as security. If the jiledgee had transferred the bonds to an innocent purchaser, such transfer would have carried with it the legal title. In Georgia, by express enactment, the holder of a note, as collateral security for a debt, stands upon the same footing as a purchaser. Code Ga. § 2788. See, also, Goodman v. Simonds, 20 How. [61 U. S.] 343; 1 Daniel, Neg. Inst. §§ 820-822, 824, 823. When, therefore, the bonds were pledged as collateral security, the pledgee became the legal holder, and he became the holder of all the coupons attached and not due, as well as of the bond itself. The bonds and the coupons were all pledged for the payment of the debt which was secured by the deposit of the bonds and coupons. The fact that the debt secured was not due did not relieve the coupons, any i more than the bond itself, from the effect of this hypothecation. To hold otherwise I would be to hold that if the bonds themselves Ifell due before the debt secured by the (pledge of the bonds, their hypothecation was ¡without any effect whatever. 1 Daniel, Neg. Inst. §§ 825, 826. This is true, where the pledge is made to secure a pre-existing debt. In this case it does not appear that the bonds were transferred to secure a debt already existing. The presumption is. that the creation of the debt and the giving of the security were contemporaneous.
It is clear to my mind that the pledgees of the bonds deposited as collateral security, before July 1, 1876. were legal holders, and had the right to demand and receive the interest due July 1, 1876. This right was a part of their security. Upon the failure to pay the coupons, the pledgee had all the rights of any other legal holder or purchaser of the bonds. And a default, for six months, in the payment of such interest, gave the pledgee the same right as any other purchaser to insist that the principal of the bond had become due in accordance with its terms and the terms of the trust-deed. In short, the collateral holder took the bonds and coupons with all their terms and stipulations, unaffected by the fact that they were held as security for another debt, and that that debt was not due. He had the right to collect the interest on the bond as it fell duo. and to enforce payment of the principal in accordance with the terms of the bond. He only differed from an absolute owner in this, that he was bound to account for any surplus received from the bonds and coupons, over and above what was necessary to the payment of his debt. When the pledgee transferred the bonds to the complainants, they acquired all his rights. The fact, therefore, that the complainants knew' before they purchased the bonds, that they were in pledge, has no effect, for the complainants are claiming no lights which the parties from whom they purchased the bonds did not have.
It is insisted that because the pledgee did not know that he was entitled to collect the interest coupons which fell due before the maturity of the debt secured by the pledge of the bonds, therefore he had no such right. But men’s rights are not lost by the fact that they are ignorant of them, much less can such ignorance destroy the rights of the subsequent holder of the bonds. In my judg-[265]*265rnent, the collateral holder of the bonds, on July 1, 1876, had the right to demand payment of the coupons due on that day, and on :a default of payment continuing sis months, had the right to demand as due, by reason of such default, both the principal and interest on his bonds, and that when he transferred his bonds and coupons, for value, to a purchaser, the transfer carried with it all the rights of the original collateral holder.
But it is claimed, second, by defendants, that there was no default in the failure to pay the coupons due July 1, 1870, because there was no presentation of the coupons for payment. Generally, a suit may be brought on any commercial paper, payable at a particular place, without demand at that place. Wallace v. McConnell, 13 Pet. [38 U. S.] 136; Montgomery v. Elliott, 6 Ala. 701. The peculiar form of the bond, in this case, it is insisted, takes it out of this general rale. The bond promises to pay the principal and “interest at the rate of ten per cent per annum, payable semi-annually on the first days of January and July in each year, on presentation of the respective coupons hereto attached, both principal and interest being payable at the financial office of said company, in the city of New York.” Neither the act authorizing the company to issue bonds, nor the mortgage nor the coupons themselves, say anything about the presentation of the coupons us a condition of payment. Does the form of the bond require presentation of the coupon and demand of payment before the company can be put in default? It seems to me that it does not. If a cause of action accrues on a coupon in which the words “on presentation” do not occur, as soon as it falls due and is unpaid, without any demand, I do not think the insertion, in the trust-deed, of the words “on presentation of this coupon,” changes the rule. The evident purpose is to indicate that the interest is to be paid on the -coupon, without the production of the bond. 'The words do not change the legal effect of the coupon, for the company is not bound to pay unless the coupon is not only presented but delivered up: Wolcott v. Van Santvoord, 17 Johns. 248; 2 Daniel, Neg. Inst. § 1508. But it is said that if this construction is correct any coupon holder could, by failure to present his coupon for payment when due, cause both the principal and interest on all the bonds to become payable long before the date named for their maturity. No such result would follow if the company could truly aver that it had funds at the place designated for the payment sufficient to pay the coupons if they had been presented. This would be a conclusive answer to the claim that the principal of the bonds had become due. by reason of default in the payment of interest.
It is averred in the bill that no funds were provided for the payment of these coupons on the eight specified bonds which fell due July 1, 1876. This is not denied in any answer or affidavit filed in this case, though it was clearly within the power of the company to prove the fact that it had provided for the payment of these coupons at maturity, if such had been the case, for it is not pretended or claimed that funds were ready for the payment of these coupons, if they had been presented. The defense relied on is the failure to present the coupons for payment at a place, where there was no money provided to pay them. The coupons attached to the eight bonds were due July 1, 1876. They were not paid on that day, nor was any money provided for their payment. No payment was made, nor offered to be made, within six months after the maturity of the coupons. By the terms of the bond and trust-deed, both the principal and interest of the bonds became due. No offer has been made to pay the principal and interest. The company itself has never provided any funds to pay interest, and the interest due January 1 and July 1, 1878, has never been paid by any one. The evidence is overwhelming, that in a commercial sense the company is insolvent. It appears to me, from the facts of the case, that its property, if brought to sale, would not pay the first mortgage bonds and interest. There appears, therefore, no reason why the order of the district judge, in vacation, appointing a receiver, should be revoked. On the contrary, if the case were presented here for the first time, we should feel bound to accede to the prayer of the bill, and allow the injunction and appoint a receiver, as has already been done.
It was suggested in the argument, that the sale of the bonds of the company, which had been pledged as collateral security for the company’s own debt, at a price below par, amounted to usury, and the bonds and coupons were, therefore, void. As this is nowhere set up in any of the answers filed in the case, it is not necessary or proper now to discuss or decide it. It was also claimed, in argument, that some of the judgments on which the Rising Fawn Iron Company’s property was sold were founded on mechanics’ liens, and that they were superior to the lien of the first mortgage bonds, under the constitution of Georgia. This, also, is matter of defense not set up in any of the answers. On the contrary, the answers of the company admit that the first mortgage bonds were the first and highest lien .on the property covered by the trust-deed. It is, therefore, unnecessary at this time, to discuss this question.
The motion to continue the receiver and injunction must prevail.