Court Opinion

ID: 8792731
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:57:40.234741+00
Date Added: 2024-06-11T17:03:27.118811
License: Public Domain

HUNT, Circuit Judge
(after stating the facts as above). At the outset it is to be noted that one of the plaintiffs, Herbert Francis Smith, alleges that he bought shares in the National Steel & Wire Company in 1905, and that he is “still” the owner of the same number of shares that he bought in the holding corporation. It is true that in a subsequent paragraph of the complaint there is an allegation that “all” of the plaintiffs were induced to surrender their certificates of stock and right of voting the same in the holding company to the voting trustees and to convert their holdings into the securities of the National Consolidated Wire & Cable Company. Nevertheless, under the special averment as to Smithj he should be judged as a stockholder in the original holding company and not asking to be restored to the position of stockholder in the holding corporation.
[ 1 ] The suit is not brought by plaintiffs in behalf of themselves and all other stockholders in the holding company who may desire to become parties plaintiff thereto; nor are plaintiffs suing in behalf of the corporation, which is not even a party to the bill. The real object of the suit is to recover the amounts which plaintiffs respectively invested in their respective holdings in the holding company, and in order to get their money they ask the court to remove such impediments as plaintiffs think will be necessary to have removed before they can recover.
The conspiracy charged was a continuing one initiated by arrangement with agents in England whereby stock sales were to be promoted in order to raise money to carry on the business of the holding company and to provide money for paying the defendant Huntington and one Webster an agreed price for their interest in a certain one of the *475subsidiary corporations, and continued always with the purpose of stock selling even until the plaintiffs had converted their stock into securities of the National Consolidated Wire & Cable Company. Reduced to a few words, this was the scheme charged: The conspirators persuaded certain of the plaintiffs as investors to come into the holding company, and when they had been drawn in they deceived them, as well as others who had already bought stock, as to the affairs of their corporation and misled them to such an extent as to induce them to surrender the control of their stock to the conspirators who, by the exercise of such control, carried on the scheme and were enabled to manipulate the concerns of the holding corporation and further deceive plaintiffs to their damage, even in some instances inducing them to invest more money, so that finally they were left with stock in a corporation much impoverished by wrongs of the conspirators.^
Now from such a position plaintiffs wish to be relieved by some decree which will compel defendant Huntington to pay back to them the amounts paid by them respectively for their stock. They want to get out whole. It appearing, however, that some of the plaintiffs bought their stock prior to the 1st of April, 1904, which was before the origin of the conspiracy charged, clearly such persons, in the first instance at least, were not drawn in by the acts of any combination as charged. As to them the conspirators’ wrongs consisted in having persuaded them to enter into the voting trust and thereafter in having deceived them concerning corporate affairs and in having acted as charged under the voting trust. Such persons could not herein recover the amounts paid for their stock upon the ground of false representations made before they bought shares. The relief they ask is plainly based upon a different state of facts from that relied on by those who came in because of fraudulent representations. May the two groups nevertheless unite in one bill claiming relief in equity because all went into the voting trust agreement and were victimized by the acts done by defendant Huntington, and this irrespective of the time when they obtained their shares? In other words, may the bill be sustained in equity as stating grounds for a return of the money paid? We think not, and for these reasons:
[2j The object of the complaint being a recovery of damages specifically named to be the respective sums put in by plaintiffs respectively, an accounting is wholly unnecessary. Nor is it at all necessary that the votes of the trustees under the voting trust should be set aside, or that any conversion of the stock of the holding company be canceled, for if defendant Huntington was guilty of the frauds charged by plaintiffs in fraudulently misrepresenting things after plaintiffs became stockholders, and they relied upon the false representations, each of the plaintiffs can recover damages upon the ground of fraud and his remedy at law is full and adequate. U. S. v. Bitter Root Development Co., 200 U. S. 451, 26 Sup. Ct. 318, 50 L. Ed. 550; Buzard v. Houston, 119 U. S. 347, 7 Sup. Ct. 249, 30 L. Ed. 451. Upon a trial at law for fraud defendant Huntington could not successfully defend upon the ground that the voting trust and his acts' thereunder relieved him, or that any plaintiff’s rights were affected by the con-
*476version of his shares into securities of the consolidated company. The mere charges of fraud will not give equity jurisdiction; nor will averments of conspiracy and violation of trust authorize a court of equity to take jurisdiction when the gist of the action is one arising in tort for which a defendant is liable in damages where the damages can be just as readily ascertained at law as in equity. The familiar rule is well stated in Hipp v. Babin, 19 How. 271, 15 L. Ed. 633:
“Wherever a court of law is competent to take cognizance of a right, and has power to proceed to a judgment which affords a plain, adequate, and complete remedy without the aid of a court of equity, the plaintiff must proceed at law, because the defendant has a constitutional right to a trial by jury.”' Hoot v. Railway Co., 105 U. S. 189, 26 L. Ed. 975; Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358; Cates v. Allen, 149 U. S. 451, 13 Sup. Ct. 883, 977, 37 L. Ed. 804; Walker v. Railway Co., 165 U. S. 593, 17 Sup. Ct. 421, 41 L. Ed. 837; American Publishing Co. v. Fisher, 166 U. S. 464, 17 Sup. Ct. 618, 41 L. Ed. 1079.
.The latest expression of the Supreme Court is to be found in Curriden v. Middleton et al., 232 U. S. 633, 34 Sup. Ct. 458, 58 L. Ed. 765, decided March 16, 1914.
[3] Having shown that an action at law will give to any one of the plaintiffs all the relief that he is entitled to, each plhintiff may for himself begin an action; and, as the defendant Huntington does not ask the court to retain jurisdiction in order to save him from many suits, upon what principle can plaintiffs invoke equity? Not that if plaintiffs sued at law separate actions would have to be instituted, for there is in the action no class, and no representatives of a class are-affected.
It is said that, inasmuch as there are 38 plaintiffs and practically the same evidence wohld have to be produced 38 times with the same questions of law to be determined, the remedy at law would not be as-practical and efficient as this single suit. Along this line-argument is-made that plaintiffs should be properly joined in equity to avoid a multiplicity of suits, and authorities are cited sustaining the rule that Pomeroy lays down in his text (section 245, Pomeroy’s Equity Jurisprudence) to the effect that where a number of persons have separate- and individual claims and rights of action against the same party, but all arise from some common cause, are governed by the same legal rule, and involve similar facts, and the whole matter may. be settled in a single suit brought by all these persons uniting as plaintiffs, or one-of the persons suing on behalf of the others, or even by one person, suing for himself alone, equity will take jurisdiction. But an examination of the authorities convinces us that a mere community of interest in matters of law and fact does not make it admissible to bring all plaintiffs- into one suit in equity in order to avoid a multiplicity of actions.
In Tribette v. Railroad Co., 70 Miss. 182, 12 South. 32, 19 L. R. A. 660, 35 Am. St. Rep. 642, the court said that it never could be established on authority “that a defendant sued for damages by a dozen different plaintiffs, who have no community of interest or tie or connection between them, except that each suffered by the same act, may bring them all before a court of chancery in one suit, and deny them *477their right to prosecute their actions separately at law, as begun by them.” And the court said further, if Pomeroy’s test be maintained, in a -hundred actions for damages arising out of the wreck of a railroad train in some of which executors or administrators, or parents and children, might sue for the death of a passenger, and in others claim might be made for divers injuries, all of such numerous plaintiffs having a community of interest in the questions of fact and law, claiming because of the same occurrence, depending on the very same evidence, and seeking the same kind of relief, could be brought before a court of equity in one suit to avoid a'multiplicity of suits.
The Mississippi case was ’commented on in Southern Steel Co. v. Hopkins, 157 Ala. 175, 47 South. 274, 20 R. R. A. (N. S.) 848, 131 Am. St. Rep. 20, 16 Ann. Cas. 690. In the Alabama case the facts were that 110 persons lost their lives in an explosion in a mine owned by the Southern Steel Company; 110 separate suits were filed by their representatives to recover damages for alleged negligence by the owner of the mine. The corporation, alleging that it had a perfect defense applicable alike to all the suits, filed a bill to enjoin the actions at law until such defense could be determined. Thus the question of jurisdiction was raised, and the court held that, independent of special grounds for proceeding in equity, jurisdiction would be assumed to prevent a multiplicity of suits by settling in a single casca right or transaction which at law involved the trial of numerous cases, entailing loss of time and perhaps ruin in costs. The principle upon which the court sustained the right for equitable interference to avoid a multiplicity of suits was that, where numerous parties are jointly and severally claiming against one, and the same title or 'right of defense will be called in question and will be determinative of the issues for or against all, equity will interpose to avoid a multiplicity of suits and there need be no aid by way of independent equity. The court adverted to the case of Tribette v. Railroad Co. as being directly opposed to the views being expressed. But the Supreme Court of Alabama afterwards in the same case on a second appeal (Southern Steel Co. v. Hopkins, 174 Ala. 465, 57 South. 11, 40 L. R. A. [N. S.] 464) reversed the decision just referred to after stating the question involved in the following manner:
•‘Has a court of equity jurisdiction to enjoin numerous tort actions, brought by different plaintiffs against the same defendant, when there is merely a community of interest in the questions of law and of fact involved, and no common title, no community of interest or of right, in the subject-matter?”
The court discussed the text of Pomeroy and noticed that the Tribette Case has been followed by Bliss on Code Pleading, § 76, Beach on Injunctions, § 543, and High on Injunctions, § 65a, calling attention also to the fact that in the last edition of Pomeroy two new sections are added (section 251% and section 251%), wherein the author is regarded as modifying the views be had expressed in the original text upon which the plaintiffs in the present case rely. The court well states that the distinction between a community of interest in the subject-matter which will support the jurisdiction of chancery to prevent a multiplicity of suits and the common interest in questions of law and *478of fact which will not support it is illustrated in the Tribette Case and is said to be a right enjoyed in common with all the parties and in such manner that the invasion of the right of one is an invasion of the right of all, such as a right of common fishery.
In the Turner Case, 135 Ala. 73, 33 South. 132, the court says that:
“It would seem to be an elementary and fundamental proposition tbat a party who seeks to come into equity must himself have an equity, * * * or he cannot maintain a bill. * * * The wholly fortuitous, accidental, and collateral fact that numerous other persons have like, but entirely independent, * * • legal rights, estates, or defenses cannot upon any conceivable principle invest him with any right, legal or equitable, and that his rights whatever they may be, are precisely the same as if no other person had similar rights.”
The mere fact that a defendant has committed a tort by which he injured one or a hundred parties cannot give him 'an equity to prevent each and every one of the parties so injured from maintaining an action against him to recover damages. If there had been a combination or conspiracy between such numerous parties to vex and harass the complainant by numerous suits, then he would have an equity to enjoin their prosecution, but the mere fact that his tort has injured a hundred persons and that it will save him and the court time and lessen the expense of. the litigation does not give him any equity to come into a court of chancery to enjoin or prevent a multiplicity of suits. We do not find anything in Hale v. Allinon, 188 U. S. 56, 23 Sup. Ct. 244, 47 L. Ed. 380, in conflict with this statement of the rule.
It was said by Mr. Justice Peckham in Equitable Life Assurance Society v. Brown, 213 U. S. 25, 29 Sup. Ct. 404, 53 L. Ed. 682, that it does not rest'with complainant to urge as a foundation for his suit that a defendant may thereby be saved a multiplicity of suits by other parties when the defendant raises no objection to such possible suits and urges no such ground for jurisdiction in equity of the complain- ’ ants’ suit. Boise Artesian Water Co. v. Boise City, 213 U. S. 276, 29 Sup. Ct. 426, 53 L. Ed. 796; Vandalia Coal Co. v. Lawson, 43 Ind. App. 226, 87 N. E. 47; Cumberland Telephone Co. v. Williamson, 101 Miss. 1, 57 South. 559; Illinois Central v. Baker, 155 Ky. 512, 159 S. W. 1169. It follows that the holding of the District Court that the plaintiffs showed no ground for equitable relief must be affirmed.
[4] It being our conclusion, however,-that there is a legal cause of action stated in the complaint, plaintiffs should not be turned out of court, but each should be permitted to alter the complaint by adopting such parts thereof as he may be able to utilize as a basis for his complaint at law. The essentials of the present pleading may be adopted under the suggestion just made. Such a practice does not depart from the text’or spirit of equity rule 22 (198 Fed. xxiv, 115 C. C. A. xxiv). Cherokee Nation v. Kansas Ry. Co., 135 U. S. 641, 651, 10 Sup. Ct.. 965, 34 L. Ed. 295; Schurmeier v. Connecticut Mutual Life Insurance Co., 171 Fed. 1, 96 C. C. A. 107; Dancel v. Goodyear Shoe Machinery Co., 144 Fed. 679, 75 C. C. A. 481; U. S. Bank v. Lyon County, 48 Fed. 632.
The order dismissing the bill is reversed, and the cause is remanded, with directions to transfer the case to the law docket and to permit the filing of an altered complaint by each of the plaintiffs.