Court Opinion

ID: 9636590
Source: CourtListenerOpinion
Date Created: 2023-08-22 14:34:33.900013+00
Date Added: 2024-06-11T18:09:47.177307
License: Public Domain

DENMAN, Chief Judge
(dissenting).
This appeal is clearly one requiring a rehearing in banc, for the reasons stated in my dissent filed on February 28, 1949, and the further reasons here stated.
(A) The attempt of two judges in a panel of three judges to deny a petition for rehearing in banc violates the law as established in United States ex rel. Robinson v. Johnston, 316 U.S. 649, 650, 62 S.Ct. 1301, 86 L.Ed. 1732, and Textile Mills Securities Corp. v. Commissioner, 314 U.S. 326, 333 et seq., 62 S.Ct. 272, 86 L.Ed. 249.
The order of August 22, 1949, of this panel of this court does not truly describe its action. What it attempts to do is to deny a petition to the court in banc for a rehearing by our whole court of seven judges. The amendment of August 22, 1949, attempts to conceal the fact disclosed in the order as first entered on August 8, 1949. The August 8th order is entitled “Order denying petition for rehearing in banc” and the order of that date reads, “The petition for rehearing en banc is denied.”
In this, the first order followed the wording of the petition to the court in banc reading “Petition for rehearing en banc” which prayed “Appellant respectfully prays that this cause be reheard and considered in banc and prays for a reconsideration of the opinion filed herein of February 28, 1949, by reason of the dissenting opinion likewise filed herein and because of the following points * *
In view of the Supreme Court decisions cited above, it is too obvious to need argument that two judges cannot thus assume to act on, a petition addressed to seven j udges.
. (B) Further grounds of dissent.
■ The court’s opinion establishes for this circuit as proper conduct for an attorney, an officer of the federal courts, here of two widowed women clients, an unethical wrong which stands out like the sore thumb of colloquial speech. By such unethical wrong was prevented a decision of the merits affecting stockholders not joined as parties, for whom Independence was trustee.
The issue presented by the complaint, upon which the challenged judgment rests, is whether the appellees’ stock in Independence entitled them to participate with other Independence stockholders, not joined in the action, in the distribution of the Clayton shares declared as a dividend solely to other stockholders. Some of these other stockholders had received their dividend, others had not. None was joined in the action.
The motion charges that appellee widows and hence appellees’ attorney knew that Independence’s president Keane, the sole manager of the defendant, had embezzled so many óf the Clayton shares that there were not enough left to make a full distribution to the stock of appellees and the other absent stockholders, if the court decided appellees’ stock entitled to participate in the dividend.
With such knowledge it at once became the duty of the attorney for appellees, plaintiffs in the case, to advise the court that Independence, with Keane its sole manager, could not act as trustee for the absent other stockholders in the litigation which, if successful, so affected their right to the insufficient remaining unembezzled shares. The attorney should have asked the court either to substitute some unprejudiced person in Keane’s place or for a joinder of the absent stockholders so known by appellees to have been wronged by Keane.
That Keane realized this is apparent from the desperate means he took to avoid such a disclosure of his crimes. He had one Sekulic advise appellees that if they did not enter into a stipulation by which they received all the unembezzled shares of *993Clayton, he would proceed to embezzle all the remaining shares.
In this situation it became the duty of ap-pellees’ attorney to advise the court at once and procure an injunction against Keane, to protect not only Independence from such threatened last embezzlement of its Clayton shares but also to protect the other stockholders and his own clients.
Instead, the bait of acquiring all the remaining Clayton shares to the exclusion of the other shareholders was too alluring, and Keane’s stipulation was signed by appellees’ attorney and presented to the court. By this conduct he secured for his clients the judgment so depriving the absent stockholders of their day in court as to the conflicting claims of the appellees, and depriving them of the Clayton shares to some part of which they were entitled even if appel-lees established their claim to participate in the Clayton dividend.
It has been suggested that the stipulation by which the appellees acquired the Clayton stock belonging to the unjoined Independence shareholders may be valid because supported by a consideration to Independence consisting of the surrender, by appellees of a part of appellees’ Independence shares.
This suggestion is clearly untenable. The motion to set aside the judgment alleges that the issue of the shares held by appel-lees was fraudulently procured by appellees’ husbands, from whom they acquired their present interest by inheritance. See paragraphs III, IV and V of motion, transcript pages 54, 58. The surrender of such fraudulently procured shares is no consideration to. the company from which they were taken.
Attention is again called to the fact that the cases cited on behalf of appellant, showing the Idaho law controlling in this suit, declaring the trust relationship of a corporation to its shareholders with regard to dividends declared and not distributed, are not only not considered and distinguished, if possible, but also not even mentioned.
Such ignoring of cogent and pertinent contentions seems also to raise a question with respect to the obligation of an appellate court to its litigants.