74 N.J. Eq. 457 | New York Court of Chancery | 1908
This is a motion, made under rule 213, to strike out and dismiss the bill of complaint upon grounds that may be summarized thus: (a) want of equity, (b) res adjudicóla, (c) laches.
The general object of the bill is to restrain the defendant, a corporation of the State of New Jersey, from prosecuting two actions in equity heretofore brought by it against the complainant, a resident and citizen of Massachusetts, in the supreme judicial court of that commonwealth, in which the complainant has answered and a hearing has been had upon the merits, resulting in certain findings of facts upon which money decrees have been entered against him, and from these decrees both parties have appealed to the full bench of the supreme judicial court, which is the court of last resort in the commonwealth.
Upon the filing of the present bill, and before the making of this motion, the bill, with accompanying affidavits, was presented to Yiee-Chancellor Walker upon an application for a temporary injunction. After hearing argument, the vice-chancellor, without undertaking to decide the merits, but leaving the
The present motion is in effect a demurrer to the bill, and affords a proper opportunity to deliberately determine the merits. Grey v. Greenville and Hudson Railway Co., 59 N. J. Eq. (14 Dick.) 372, 377; Stevenson v. Morgan, 63 N. J. Eq. (18 Dick.) 707. Vice-Chancellor Walker sat with me upon the argument, and has received and considered copies of the very elaborate and voluminous printed arguments that were submitted to me. I have had the benefit of conferences with him before reaching a conclusion, and he concurs in the result now reached and in the grounds of. decision.
Shortly stated, the object of the Massachusetts actions is to recover certain large profits (aggregating, with interest, about $2,000,000) alleged to have been secretly and improperly acquired from the company by Mr. Bigeíow and one Leonard Lewisohn, since deceased, who resided in the State of New York, while they were jointly acting as promoters and fiduciary agents of the defendant company.
Manifestly, the only ground upon which this court can properly be asked to restrain these actions must be that tire defendant is acting contrary to equity and good conscience in prosecuting them.
The present bill first sets forth what complainant avers xo be the true history of the matters out of which the Massachusetts litigation arises. It then sets out the actions instituted against him by defendant company in Massachusetts, shows that after-wards similar actions were instituted against the executors of Lewisohn in the circuit court of the United States for the southern district of New York, and gives the history of these litigations. Copies of the record in the Massachusetts suits are annexed to the bill as part thereof, and we are thus informed of the facts alleged by the present defendant against Bigelow, -the findings of fact of Justice Sheldon, before whom the actions were tried, the decrees thereupon made against Bigelow, and the grounds of the appeals taken by the present defendant from
It is clear that the fate of the present bill must depend not upon the question which party has the right of the controversy pending in Massachusetts, but upon the question whether there is any sufficient occasion for this court to interfere in that controversy. For this reason, in summarizing the historical statement contained in the. bill, I shall endeavor to place in juxtaposition what the present defendant has alleged in the Massachusetts actions concerning the same transactions, and what Mr. Justice Sheldon has found the facts to be.
The present bill alleges that in the spring and- early summer of the year 1895 Mr. Bigelow, acting in conjunction, with Leonard Lewisohn, of the city of New York, procured options, one from the Simpson estate (of Boston), and one from a Mr. Keyser (of Baltimore) for the purchase of all the capital stock of a Maryland corporation known as the Old Dominion Copper Company of Baltimore City (otherwise referred to as the Baltimore company). This company was the owner o'f mines and mining claims in Arizona. The par value of its stock was $500,000; the purchase price was $1,000,000. By agreement between Bigelow and Lewisohn, their interests in the several stock purchases were so arranged that, as between themselves, the former was to have twenty-three forty-seconds, and the latter nineteen forty-seconds of the benefit of the entire purchase. The purchase was completed on or about June 20th, and the control of the Baltimore company was turned over to Bigelow and Lewisohn on that day, a new board of directors being chosen in their interest, of which they were members. Meanwhile, having ascertained that Keyser held the legal title to four mining claims and a certain parcel of land in Arizona (which may for convenience be called the “outside properties”) in trust for the Baltimore company, Bigelow and Lewisohn insisted that these properties should follow the ownership of the stock. This was assented to by Keyser, the Simpson executors and the Baltimore company, and for this purpose Keyser subsequently made a deed conveying the “outside properties” to Lewisohn (but,
The narrative portion of the bill, without expressly alleging the fact, leaves it to be understood that the price of the Simpson and Keyser stock was paid by Bigelow and Lewisohn with their own funds, and that the purchase was made for their sole benefit.
In the Massachusetts suits, however, the present defendant averred in its bills of complaint that the purchase was made with moneys subscribed and contributed by a syndicate organized for the purpose by Bigelow, either alone or in conjunction with Lewisohn; that it was known as the “Old Dominion Syndicate,” and contributed approximately $1,000,000 to purchase the Baltimore stock. Bigelow’s answers in Massachusetts admit such a syndicate was formed about May 24th, 1895, and afterwards enlarged, but aver that it was the understanding and agreement of all parties that Bigelow and Lewisohn, having purchased and paid for the shares of the Baltimore company with the money thus subscribed, and holding them in their own names, should deal with them as to them should seem best,
“and that the associates in the syndicate should receive so much only of the profit realized in the enterprise as Bigelow might deem it fair and proper to distribute among them, and that the remaining profit should be retained by Bigelow to his own use.”
This statement as to the understanding with the syndicate members is negatived by the findings of Mr. Justice Sheldon, as will appear hereafter.
The bill herein avers that at the time they acquired the stock of the Baltimore company, and obtained control of that company, Bigelow and Lewisohn had no definite plan with respect to the disposition thereof, and that it was not until afterwards that the formation -of a new company was determined upon. (This is negatived by the findings, as appears below.) That thereafter they determined to form a New Jersey corporation with a capitalization of $3,750,000 divided into one hundred and fifty thousand shares of the par value of $25 each, and convey to it all the 23ro]Derty of the Baltimore company and the “outside
In the Massachusetts actions it is charged by the company that the twenty thousand shares that were placed in Nelson’s name were sold to the public for working capital by the company
The bill sets up that the property turned over to the new company (defendant herein) by the promoters and by the Baltimore company (of which they were in full control) was worth fully as much as $3,250,000, the par value of the one hundred and thirty thousand shares of stock of the new company taken in exchange therefor.
The bills filed by the present defendant in the Massachusetts actions charge, in effect, that the property that stood in the name of the Baltimore company.was worth no more than the price paid for the stock of that company by the promoters and their syndicate, and that the “outside properties” were worth not more than $5,000. Justice Sheldon finds the intrinsic value of the property held in the name of the Baltimore company was not more than $1,000,000, but that its market value at the time of transfer to the new company was seemingly greater than this, “probably due in large part to the skillful manipulations of Bigelow and Lewisohn, and the ingenious manner in which they created a desire on the part of men interested in mines, as investors or speculators, to be allowed to join in the transaction they were carrying out. This market value, however, was less than $2,000,000.” He finds that the market value of the “outside properties” was not exceeding $50,000.
The bill herein avers that the holders and owners of the entire authorized capital stock of defendant company procured and consented to the issue of its entire capital for the consideration above mentioned, and no person who was a stockholder at the time of the consummation of the transaction objected; that subsequent shareholders acquired their shares not from the company, but from Bigelow and Lewisohn.
As already observed, tire Massachusetts bills allege, and Justice Sheldon finds, that twenty thousand shares (par $500,000) were sold for working capital by the company itself, and not by Bigelow and Lewisohn. Besides, these bills allege that during the entire course of the transactions in question, Bigelow and Lewisohn were promoters of the defendant company, and were in complete control of its organization, a large majority of the
Mr. Justieo Sheldon’s findings arc substantially in accord with these contentions. lie finds that Bigelow and Lewisohn were promoters of the new company and in full control of it during all the transactions in question, and dictated whatever was done by the company or in its behalf; that this control continued until April, 1902; that the company had no- directors, representatives or advisers other than the two promoters and their agents, and that they did not disclose to the company any of the pertinent facts; that they did not disclose to it that they had paid only $1,000,000 for the stock representing all the mining property of the Baltimore company, or that they procured the “outside properties” without any other consideration. Nor did they see that the new company had any independent advice
Justice Sheldon also finds that Bigelow did not act towards the members of his syndicate with good faith; that when the scheme Was formed it was the plan and avowed intention of the two promoters to form a new corporation, with a capital stock of $2,500,000, which should take the property of the Baltimore company and the “outside properties” for $2,000,000, and raise $500,000 of working capital with the rest of its stock; this would give to Bigelow stock for the money raised and applied by him at the rate of just $2 for $1, and he expected and stated to the various members of the syndicate that he expected to give to each subscriber thereto cash to the full amount of his subscription and stock at par to the same amount, the cash to be raised by selling the surplus stock, which would produce just that amount. The promoters proceeded, however, to organize the new company under the laws of New Jersey with a capital stock of $3,750,000, being one hundred and fifty thousand shares of the par value of $25 each; that the result of his and Lewisohn’s transactions with the new company was that for the $1,000,000 of their own and their associates’ money which they invested, they received, subject to the payment of legitimate expenses not exceeding $20,000, stock to the par value of $3,250,-000; that Bigelow gave to the members of his syndicate only $2 for $1, either wholly in stock, or half in cash and half in stock, as they elected, and that with a few individual exceptions he did not disclose the facts to them. That the great majority of the members of his syndicate did not become aware of the details of what was done b}' Bigelow and Lewisohn, but accepted the allotment of $2 for $1 in cash or in stock for the several investments that they had made, and contented themselves, in their ignorance, with the fact that they had doubled their money; that the residue of the gain received by Bigelow he dealt with as he chose. Justice Sheldon distinctly finds that it
The learned justice further distinctly negatives the contention of Mr. Bigelow that it was the intention that he and Lewisohn should supply the new company with $500,000 for working capital; that this was actually done; that Bigelow and Lewisohn themselves took the twenty thousand shares which were to be used for raising the working capital, and that the parties who afterwards subscribed for and received these shares really took them from Bigelow and Lewisohn, and not from the new company, and that at the time of the transactions in question Bigelow and Lewisohn became and were the real owners of all the authorized capital stock of the new company. The justice says: “There was some evidence in support of this contention, but I find that the real facts are as already stated.”
The bill herein avers that the transactions concerning the purchase of the property in question by the company and the issuance of stock therefor, were ratified by the stockholders at three different meetings held in the years 1899 and 1901, when neither Bigelow nor Lewisohn controlled the company or the action of its stockholders.
The company, in the Massachusetts action, denied all knowledge on the part of the company until after April 4th, 1902, until which time Bigelow and Lewisohn were in complete control. Justice Sheldon so finds, and further finds specifically the facts and circumstances respecting the so-called ratification by the stockholders’ meetings, from which the inference is that the supposed ratifications were of no effect as against the' company.
The bill then sets up that on October 7th, 1902, the present defendant commenced two separate actions in equity against Mr. Bigelow in the sirpreme judicial court of Suffolk county, in Massachusetts, one relating to the transaction in which thirty thousand shares of stock were acquired by Bigelow and Lewisohn
The bill avers that Bigelow filed a demurrer in the thirty-thousand-share suit, and answered in the one-hundred-thousand-share suit. That the demurrer was overruled (188 Mass. 315; 74 N. E. Rep. 653), and Bigelow then answered in this suit. That the causes proceeded to trial, being heard together before Justice Sheldon of the supreme judicial court; that he decided them in favor of the company and against Bigelow, rendering- judgment in the one-hundred-thousand-share suit for about $800,000, principal and interest, and in the thirty-thousand-share suit for about $1,200,000. That decrees were accordingly entered, from which appeals were taken by both parties.
As already mentioned, copies of the bills and answers in the Massachusetts suits, and the other documents forming the record thereof, including the findings, are annexed to the present bill as part thereof, and are referred to in the bill as thus annexed.
The bill sets up that after the commencement of the Massachusetts suits against Bigelow the defendant company began two suits in equity in the circuit court of the United States for the southern district of New York against the executors of Leonard Lewisohn, who was then deceased; that the bills in these two suits were identical with those filed in Massachusetts, and were_ founded upon the same state of facts. That the executors demurred in- one case and answered in the other. That the demurrer to the bill in the thirty-thousand-share suit was sustained by Judge Lacombe (136 Fed. Rep. 915) and a final decree was
The bill contains certain further averments intended to show grounds for the intervention of this court in the Massachusetts litigation. Mention of these may be reserved until they are reached in their order for discussion.
To complete the recital it should be shown at this point upon what basis Justice Sheldon made up the amounts for which he ordered decrees to be entered against Bigelow. He found that the stock which the promoters took as their profit “was then of fully its par value, due mainly to the skillful conduct and manipulation of Bigelow and Lewisohn, and continued to be so for some time, and until Bigelow had sold out substantially all the stock that he took for his own use.”
Having ascertained that out of the one hundred thousand shares (par $2,500,000) that were issued in payment for the property standing in the name of the Baltimore company, the promoters took for themselves twenty thousand shares (par $500,000) without disclosure either to the company or even to the syndicate associates, and that the market value of these shares was equivalent to par. in the market created by the manipulations of the promoters, and having found also that in truth the property of the Baltimore company was worth .not more than $2,000,000 (or eighty thousand shares at par), which happens to be the exact price at which the associates in the syndicate understood that it was to be valued, Mr. Justice Sheldon charges the promoters, in one of the actions, with $500,000 secret profit, less $20,000 allowed for legitimate expenses of promotion, and for the difference, $480,000, with interest from the time the promoters received the stock, a decree was entered.
In the other action, wherein the company prayed primarily for rescission of the transaction that resulted in the issuance of
Upon the findings Bigelow would have been liable for only about twenty-three forty-seconds of the award, had he been charged with only his share of the profit according to the division made between him and Lewisohn. But Justice Sheldon found that in the formation and execution of the scheme the two promoters were acting together and in concert, each doing his part to carry out a joint scheme for the advantage of both; that the control exercised by them over the company was a joint control, exercised by each for the benefit of both; that a proper disclosure of the real facts by either would have frustrated the schemes of both, and that the equitable tort complained of was the act of both, for which they must be held responsible both jointly and severally. He therefore held Bigelow liable in solido.
Appeals have been taken by both parties to the full bench of the supreme judicial court of Massachusetts, the court of last resort in the commonwealth, which appeals, according to the averments of the bill, have the effect of not merely suspending, but of vacating the decrees; but the findings of Justice Sheldon upon the facts will not be overruled by the full bench unless they are without support in the evidence or are clearly contrary to the weight of the evidence. The full bench has original as well as
Enough has been said of this somewhat complicated transaction to introduce the discussion that follows. Other allegations and findings may be referred to as occasion requires,
I have not the lea§t doubt or difficulty about the power of a •court of equity in one state to restrain its' own citizens, or other persons within the control of its process, from the prosecution •of suits-in other states or in foreign countries. The power pro-needs from the undoubted authority that a court of equity possesses over persons within its jurisdiction to restrain them from doing anything that is contrary to equity and good conscience, to the wrong and injury of others, whether the threatened inequitable conduct consists in the prosecution of an action or whatever it may happen to be.
The court of equity thus appealed to, acts in personam, and it is immaterial whether the threatened inequitable conduct is to be carried on within or without the limits of the jurisdiction. 1 High Inj. § 103; Story Eq. Jur. (12th ed.) §§ 899, 900; Margarum v. Moon, 63 N. J. Eq. (18 Dick.) 586, and cases cited.
But on general principles, equity will not interfere with the right of any person to bring an action for the redress of grievances — the right preservative of all rights — except for grave reasons, and on grounds of comity the power of one state to interfere with a litigant who is in due course pursuing his rights and remedies in the courts of another state ought to be sparingly exercised. The courts of New Jersey ought not to assume, directly or by indirection, any appellate jurisdiction over the courts of Massachusetts, nor proceed in giving judgment here upon the idea that the courts of that commonwealth are in the least degree incompetent or unwilling to do full and complete justice in all cases that are fairly within their jurisdiction.
It is averred in the bill that the actions- now pending before the supreme judicial court of Massachusetts are equitable actions. It is by implication admitted in the bill, and was most fully admitted in argument, that that court has the amplest equity powers, and it is equally clear that the causes there pend
They must be very special circumstances that will justify this court in restraining the prosecution of an equitable action already pending in a court of such ample jurisdiction. I speak % not of any limitation upon the power of this court, but upon the propriety of its exercise in the particular case. Its exercise is not to be properly based upon any theory that this court knows better how to do justice than the court of last resort of that commonwealth; that it can weigh evidence better or more justly apply to the facts any general principle of law or of equity, nor upon the ground that this court recognizes different rules of law or of equity from those which obtain in the commonwealth.
A condition precedent to an application to this court for relief in all ordinary cases is the absence of a full, adequate and complete remedy elsewhere.
And besides, there is the general rule, essential to the orderly administration of justice, that as between courts otherwise equally entitled to entertain jurisdiction, that court which first obtains possession of the controversy ought to be allowed to proceed and dispose of it without interference, a rule established, of course, primarily for the benefit of the suitor, rather than for the protection of the dignity of the court. It was applied by Chancellor Eunyon in Home Insurance Co. v. Howell, 24 N. J. Eq. (9 C. E. Gr.) 238, 241, where suit having first been commenced in this court for relief against certain policies of insurance alleged to have been fraudulently obtained from the complainant upon defendant’s property in Illinois, and defendant having afterwards begun suit upon the policies in a court of that state, which suit had been removed to the federal court, the learned chancellor allowed an injunction against the prosecution of this action, notwithstanding the insurance company might have had complete relief in the federal court either at law or by recourse to its equity side. In his opinion he quoted with approval the remark of Justice Grier in Peck v. Jenness, 7 How. (U. S.) 625, to the effect that the rule giving exclusive jurisdiction to the court which first obtains possession- of the controversy has its foundation not merely in eomitjr, but in necessity;
In Title Guarantee and Trust Co. v. Trenton Potteries Co., 56 N. J. Eq. (11 Dick.) 441, the potteries company having commenced an action at law in the New York supreme court upon a policy of insurance issued to it by the title company, the latter company afterwards filed its bill in this court alleging a mistake in the policy, and praying that it might be reformed, and that the potteries company might be restrained from further prosecuting the New York action, on the ground that if it were permitted to do so before the policy was reformed in such manner as to set out the true agreement of the parties, a judgment would necessarily go against the title company. This court allowed a preliminary injunction, whereupon the potteries company filed its answer setting up that under New York law the title company was entitled to there plead its equitable defence. Upon this answer, and affidavits verifying it, the injunction was dissolved. Upon appeal, the court of errors and appeals affirmed this decision, Mr. Justice Gummere (now chief-justice) saying: “The respondent having selected a court of the domicile of the appellant as the forum in which to try the matters in issue between them involved in the suit brought by it, is entitled to have those matters finally determined in that forum, provided the appellant can in its defence in that suit show the real agreement between the parties as fully as it would be permitted to do in its suit brought here for the reformation of the written contract.”
In Sweeny v. Williams, 36 N. J. Eq. (9 Stew.) 627, 629, Mr. Justice Magie (afterwards chancellor), speaking for the court of errors and appeals, said: “If there exist a concurrent jurisdiction in courts of law and courts of equity, the latter will decline to entertain jurisdiction after the jurisdiction of the courts of law has attached, unless the relief that the applying party is entitled to ask cannot be fully obtained in the court of law.” See, also, New Jersey Zinc Co. v. Franklin Iron Co., 29 N. J. Eq. (2 Stew.) 422, 430; Minchin v. Second National Bank,
I am referred to Dehon v. Foster, 4 Allen 545; 7 Allen 57; and Cunningham v. Butler, 142 Mass. 47; Cole v. Cunningham, 133 U. S. 107. These decisions were based upon the ground of a threatened evasion of the essential features of a local insolvent law. They will be further mentioned in their proper order below. But in Carson v. Dunham (1889), 149 Mass. 52; 20 N. E. Rep. 312, it was held that their authority did not support an application for' an injunction on the ground of conflicting decisions or diversity of law. The latter case was an application for an injunction to restrain the defendant, a citizen of Massachusetts, from prosecuting against another citizen of the same commonwealth a foreclosure suit in a South Carolina court concerning land situate in that state. It appeared that there was a difference of opinion between the supreme court of the United States and the supreme court of South Carolina upon the merits of the controversy. Chief-Justice Morton said (149 Mass. 56; 20 N. E. Rep. 314): “We are then brought to the question whether the fact, if it be a fact, that the supreme court of South Carolina entertains views of the law which govern the rights of the parties differing from those held by the supreme court of the United States, justifies us in restraining Dunham from the further prosecution of the suit in the state court. The law gives the parties a choice of tribunals. Why is not Dunham’s right to choose the South Carolina court as great as the right of Mrs. Carson to choose the United States court or the courts of this commonwealth? Reduced to its elements, the argument of the plaintiff is that we should interfere because there is danger that the supreme’court of South Carolina will not rightly and justly decide the rights of the parties. We cannot yield to such an argument without a violation of every principle of interstate comity. As we have said, the general rule of comity is that the court first acquiring jurisdiction shall retain it. In our judgment, it would be indefensible for the courts of this commonwealth to restrain the prosecution of a suit pending in the court of a sister state, which has jurisdiction of the'subject-matter and of the parties, upon the ground that the decision of that court
The court of appeals of New York has even refused to interfere by injunction to restrain the transfer to a bona fide holder of an obligation held by the courts of that state to. be invalid in the hands of such a holder, and this although such transferee might resort to the federal courts, where a different rule of law prevailed, and to which courts the present holder could not resort. Town of Venice v. Woodruff, 62 N. Y. 462, 468 (1875). Justice Sapallo said: “The real purpose of the litigation seems to be to prevent a resort to the courts of the United States for the collection of these bonds, and the question is whether it is the province of a court of equity in a state to interfere for the purpose of preventing a resort to the federal courts for the enforcement of obligations on the ground that they may be held in those courts to be valid, while according to the decisions of the state courts the same obligations are held to be void. I apprehend that the power of a court of equity to decree the surrender and cancellation of instruments has never before been appealed to or exercised for such a purpose.”
As authority for the proposition that one court of equity may restrain an action pending in another court of equity, I am referred to Erie Railroad Co. v. Ramsey, 45 N. Y. 637. (1871). An examination of the ease shows that it determined only the existence of the power, and not the propriety of its exercise under the circumstances presented. The case is a somewhat notorious one. The company had procured from Justice Barnard, of the supreme court, an injunction restraining Eamsey from proceeding further in an equitable action that he had previously brought in the same court against the company and certain of its directors. Eamsey, on advice of counsel, disobeyed the injunction on the ground that the court had no jurisdiction.to stay his proceeding in another action in the same court.
Thus the question was raised whether he was guilty of contempt. The court of appeals held that he was. In the opinion
In 22 Cyc. 810, the topic is treated as follows, with abundant citation of authorities:
"It is a general rule that a party will not be restrained by injunction from proceeding with a suit in equity, because complainant’s equitable rights can be fully protected in that suit. An order to stay such suit should be obtained by an application in that court itself. It follows that equity will not enjoin a suit to obtain an injunction, or an accounting- or a,receiver. Nor will a foreclosure suit be enjoined for the relief of one who might obtain full relief in that suit itself. However, a court of equity has ‘power’ to enjoin a party from proceeding with other equitable suits, and such an injunction, when issued, is not void and must be obeyed. But the power should be exercised only in extreme cases. The court first acquiring jurisdiction of a case will protect that jurisdiction by enjoining an action by the same parties on the same subject-matter in another court, even though that other court may also have equity jurisdiction. Wherever complainant’s rights cannot be fully protected in the other suit it will be enjoined. An injunction will be granted in actions of interpleader against the further prosecution of suits against complainant, even though one of these suits may be in equity, because of the necessity of disposing of the whole matter in one action. And where equity has undertaken to administer the assets of an insolvent corporation, so far as they are within its jurisdiction, other equitable suits for the same purpose will be enjoined. So a bill of peace lies to prevent a multiplicity of suits, even though the s.uits may themselves be in courts of equity.”
My examination of the authorities convinces me that the reported instances of interference by courts of equity in equitable actions already pending in other courts are all based upon exceptional circumstances and may be classed within a very few
First. In early times in England there was a controversy about jurisdiction between the chancery and the exchequer, the former holding that the latter was a sort of “private” court, its equitable as well as its legal jurisdiction being dependent upon the averment of quo minus, and resting upon the effect of defendant’s act in disabling the plaintiff to respond to the crown, and that the chancery was a court of superior and more general jurisdiction. See Joanes v. Whitney, Cary 161 (1578); 21 Eng. Rep. 60 (but this was an injunction out of chancery to restrain an action at law brought- in the exchequer after the commencement of the chancery suit); Vendall v. Harvey, Nels. 19 (1632); 21 Eng. Rep. 779; S. C., 1 Eq. Cas. Abr. 80 G. 2, and 134 D. 3; 21 Eng. Rep. 893, 939, where the lord keeper (North) overruled a plea that set up- the pendency of a prior equitable action in the exchequer as a bar to a suit in chancerjq on the ground that “the chancery was the highest court of equity, and though the exchequer was an ancient court of equity, yet the same was but a private court, and its jurisdiction properly was only for getting in the king’s revenue, and for the king’s officers, and they ought to keep within their proper bounds.” And see 6 Vin. Abr. "Court of Exchequer,” Q. 2 p. 569.
Second. Interpleader suits are a recognized exception, and where a plaintiff is entitled to interplead defendants, and pays the money into court, other actions against them may be enjoined, whether these be legal or equitable. Warington v. Wheatstone, Jac. 202 (1821); 4 Eng. Ch. 203; 37 Eng. Rep. 826. (Here one of the suits enjoined was legal, the other equitable. See 10 Sim. 480.) So in Crawford v. Fisher, 10 Sim. 479 (1840); 59 Eng. Rep. 701; Richards v. Salter, 6 Johns. Ch. 445 (1822); Sieveking v. Behrens, 2 Myl. & C. 581, 592, 593 (1837); 40 Eng. Rep. 761, 765; Prudential Assurance Co. v. Thomas, L. R. 3 Ch. App. 74 (1867) ; 2 Story Eq. § 808.
Third. Creditors’ suits against executors or administrators for the administration of the estate, may be treated'as an exception, where after (but not before) decree, an injunction has frequently been issued to restrain other proceedings by creditors at law or
Fourth. Prevention of .-multiplicity of suits. On this ground suits in equity may no doubt be enjoined, if necessary to do so, as well as suits at law. Probably Beckford v. Kemble, 1 Sim. & S. 7 (1822); 57 Eng. Rep. 3, belongs in this category; there Vice-Chancellor Leach stayed a foreclosure suit pending in the colonial court of chancery in Jamaica, until an account could be taken in a suit for redemption in England, all the parties being in England, so that the accounts could be more conveniently taken there than in Jamaica.
Fifth. Where a party by fraud attempts to produce an unjust result in a pending suit and consequent irreparable injury to his adversary, he may, of course, be enjoined. In this class lies the injunction granted by Justice Barnard in Erie Railroad Co. v. Ramsey, 45 N. Y. 637, the criticism being that he should have left the company to apply for a stay by motion in the suit already pending.
Sixth. Oppression amounting to fraud may be attempted by suing a debtor outside of his home jurisdiction, in order to gain an unconscionable advantage over him, in which case equity may restrain tire creditor, upon proper terms. Standard Roller Bearing Co. v. Crucible Steel Co., 71 N. J. Eq. (1 Buch.) 61, decided by my predecessor, Chancellor Magie, was a case where both parties were corporations of the State of New Jersey. The defendant had a claim against the complainant of less than $4,000, and notwithstanding it might sue the complainant in the courts of this state, or prosecute its claim by attachment upon a valuable property of the complainant in Pennsylvania (in either case the claim could be prosecuted and defended by proofs and witnesses at hand), the defendant brought three attachment suits simultaneously in Ohio, Michigan and Wisconsin, wherein credits due
Seventh. Cases where a party oppresses his adversary by suing him in a foreign jurisdiction for the purpose of evading some established policy of the jurisdiction where the parties are domiciled.
Since complainant here relies upon certain decisions that, so far as they have any pertinency, belong in this category, they may well be examined at some length. In reading the opinions care should be exercised in distinguishing that part of the reasoning which merely establishes the poiver from that which indicates its exercise in given cases.
Bushby v. Munday, Cloves & Cracroft, 5 Mad. 297 (1821); 56 Eng. Rep. 908. Bushby had given to Munday as trustee for Cracroft a bond to secure a gambling debt, and Munday had assigned it to Cloves. The bond was given in England and was in English form, and was claimed to be void as a gambling debt under an act of parliament. Bushby was a Scotchman and proprietor of real estate in Scotland, but resident abroad. Cloves brought an action in the Scotch court upon the bond, and thereby secured a lien (equivalent to our lien by foreign attachment) upon Bushby’s estates. The latter thereupon filed a bill in the English chancery for the purpose of having the bond delivered up to be canceled, and incidentally to restrain the prosecution of the action in Scotland. The grounds of the application for the injunction were that a bond was an English security, and a discharge from it abroad could not be pleaded in England; that the English chancery might require the bond to be delivered up, while in Scotland no such relief was given; in England discovery could be had by sworn answer of Munday and Cracroft,
Talleyrand v. Boulanger, 3 Ves. 447 (1797); 30 Eng. Rep. 1099, a personal bond was given when obligors and obligee were citizens and residents of France. By the law of France there was no liability to arrest on civil process for such an obligation. Afterwards the parties to the cause emigrated to England, and their property was confiscated. One of the -plaintiffs was an obligor in this bond as surety, and, being about to sail on an expedition which went from England to the coast of Brittany, was arrested at suit of the defendant, and in order to procure his release made a cash payment and gave two bills of exchange payable in a short time, and executed a new bond payable six months after peace should be concluded between France and
This ease was manifestly decided upon the ground of apparent hardship, and in disregard of the rule that the lex fori governs actions for the enforcement of a contract although made in another jurisdiction. Like the case of Melan v. Fitzjames, 1 Bos. & P. 138, decided by the court of common pleas in the same year, it is a plainly erroneous decision, the outcome of the troublous times. Although Lord Brougham cited both these cases with apparent approval in the house of lords forty years latex, yet the decision then made was to the effect that the law of the country where a contract is to be enforced must govern its, enforcement. Don v. Lippmann, 5 Cl. & F. 1, 18 (1837); 7 Eng. Rep. 303, 309. And in Liverpool Marine Credit Co. v. Hunter, L. R. 3 Ch. App. 479, 486 (1868), Talleyrand v. Boulanger was severely criticised. Melan v. Fitzjames was distinctly overruled and the doctrine of the dissenting opinion affirmed in De La Vega v. Vianna, 1 Barn. & Ad. 284 (1830). And so, little, if anything, remains of authority in Talleyrand v. Boulanger.
Lord Portarlington v. Soulby, 3 Myl. & K. 104 (1834); 40 Eng. Rep. 40, an injunction was allowed to restrain defendants from suing in Ireland upon a bill of exchange given by plaintiff for a gambling debt. The ground of the injunction, however, was that the court in which the action was brought was a court of common law, and had no jurisdiction to stop the proceeding on the ground that it was founded upon a gaming transaction.
Carron Iron Co. v. Maclaren, 5 H. L. Cas. 416 (1855); 10 Eng. Rep. 415, rather bears against the complainant. The company
The following cases are typical of the group, and appear to be the principal authorities upon the question of enjoining foreign actions brought to evade the home policy.
In Margarum v. Moon, 63 N. J. Eq. (18 Dick.) 586, creditor and debtor were both citizens and residents of New Jersejq and the debtor under the laws of this state was entitled to $200 exemption from process, and had not personal property of that value. He had a claim for wages against the Pennsylvania Kailroad Company, and his creditor assigned his claim against the debtor to a non-resident, who, in attachment proceedings in the courts of West Virginia, garnished the wages due to the debtor from the railroad company. This court allowed an injunction on the ground that the resident creditor was endeavoring to deprive his debtor of the'benefit of the exemption provided by the law of their common domicile.
Dehon v. Foster, 4 Allen 545 (1862, 1863); 7 Allen 57. A resident of Massachusetts being insolvent under the laws of the commonwealth, and proceedings in insolvency having been commenced there, an injunction was allowed to restrain one of the creditors, who likewise was a citizen of Massachusetts, from proceeding by attachment in another state to divert property from the assignees in insolvency and thereby secure a preference for himself, contrary to the policy of the insolvent law of Massachusetts.
To tire same effect is Cunningham v. Butler, 142 Mass. 47. This case was carried to the supreme court of the United States
Wilson v. Joseph, 107 Ind. 490 (1886); 8 N. E. Rep. 616. Injunction granted to- restrain a resident of Indiana from prosecuting an attachment proceeding against another resident in the courts of another state in violation of an Indiana statute which made it an offence to send a claim_ against a debtor out of the state for collection, in order to evade the local exemption laws.
Sandage v. Studebaker Brothers’ Co., 142 Ind. 148 (1895); 41 N. E. Rep. 380, held that a citizen of one state may be enjoined from prosecuting an action against another citizen of the same state in a foreign jurisdiction for the purpose of evading the laws of his own state.
Miller v. Gittings, 85 Md. 601 (1897); 37 Atl. Rep. 372. The transactions out of which an alleged debt arose occurred in Maryland, and were within the statute prohibiting gambling; both parties were citizens and residents of that state. Held, that a court of equity in Maryland should restrain the creditor from proceeding against the debtor in another state to which the creditor had resorted to evade the Maryland laws prohibiting imprisonment for debt, where the foreign court must, through imperfect methods of proof, ascertain the statute on which the debtor relied to avoid the transactions, and where there must be difficulty and expense in obtaining evidence.
It will be observed that in all of these cases (with the single exception of Bushby v. Munday, where other special circumstances appeared) the party against whom the injunction was issued had either gone himself to a foreign jurisdiction, or had sent his claim there for prosecution bjr his assignee, in order to evade some distinct prohibition of the local law of the common domicile. (In most of them the suit whose prosecution was restrained was an action at law, but I assume that in such a case it would make no difference whether the foreign action was an action at.law or an action in equity.)
But it is important to observe that the public policy, whose attempted evasion was deemed sufficient ground for injunction, was in each instance somewhat akin to a police regulation, being
Besides, this case lacks two of tire elements that were treated as essential in the cases just referred to; there was no common domicile of the parties in this state, and the defendant company did not choose the Massachusetts jurisdiction for the purpose of evading any law, policy or doctrine peculiarly cognizable by the courts of New Jersey, but for the very simple reason that Massachusetts had jurisdiction over the person of Mr. Bigelow, while this state had not.
Mr. Bigelow is sued in personam in his home jurisdiction, in equitable actions, and in a court of full equity jurisdiction; he tests the sense of that court upon the law by a demurrer, and being overruled he answers upon the merits, submits to a healing upon the merits, a finding- of facts is made, and upon it final decrees are made against him. The litigation in that court continues for more than five years. After all this, and pending-appeals taken b3r him and by his adversary to the court of last resort, he comes into the State of New Jersey to have his adversary restrained from further prosecuting the actions in Massachusetts.
He proposes no waiver of his appeals there taken. He offers no security that he will abide by any decree that may be made against him, either here or there. He avers, it is true, that in the Massachusetts actions he “gave a surety bond or bonds, in the sum of $500,000, to indemnify the company," but there is nothing to show that such bonds could be enforced by this court, nor do the specific conditions thereof appear, besides which the amount of them is manifestly inadequate to cover the company’s claims.
He alleges no fraud, mistake, surprise or adventitious circumstances beyond his control that prevent the Massachusetts court from doing full justice.
And he alleges no excuse for failing, to set up in the Massachusetts litigation the special matters that he here relies upon, nor for waiting until five years have gone by and a decision has been rendered against him there, before setting up his special matters here.
Ostensibly his appeal is to the public policy of New Jersey, in certain respects presently to be mentioned. But a large part of the efforts of his counsel have been addressed to convincing me that the supreme judicial court of Massachusetts and Justice Sheldon, the trial .judge, have, improperly determined the questions of law and of fact presented to them. The arguments to this effect are not in the least convincing, but- if they were, I take it that I have no legitimate concern with the merits of the controversy as joined in Massachusetts. The notion is intolerable that this court should, directly or by indirection, assume any supervisory jurisdiction over the courts of Massachusetts.
TJpon the questions of alleged state policy the query at once arises whether Mr. Bigelow, a citizen and resident of the commonwealth of Massachusetts, is entitled to invoke in his protection any rule of public policy that is local to New Jersey. See Bentley v. Whittemore, 19 N. J. Eq. (4 C. E. Gr.) 462, 469, 470; Flagg v. Baldwin 38 N. J. Eq. (11 Stew.) 219, 225; Receiver of State Bank v. First National Bank, 34 N. J. Eq. (7 Stew.) 450, 454; Moore v. Bonnell, 31 N. J. Law (2 Vr.) 90; Barnett v. Kinney, 147 U. S. 476, 483. I have not considered the point,, preferring to rest my decision upon a broader ground.
The first grounds of supposed public policy that are appealed to are that the conduct of the suits in Massachusetts and in New York by the Old Dominion Copper Mining and Smelting Company is a speculation in a law suit, and that those suits are being conducted by wdrat is called a “voting trust.”
The argument to this effect is rested upon certain averments in the bill not as yet adverted to.
The bill alleges that since the Massachusetts actions were begun, the owners of about one hundred thousand out of the total
Annexed to the bill, and by reference made a part of it, are a copy of the agreement referred to, and a copy of one of the trust receipts. Where these differ from the construction placed upon them in the bill, the documents themselves must of course control. It thus appears that the New Jersey company is not at all a party to these transactions. The agreement is dated January 15th, 1904, and is made between the Maine company, as a
Plainly, therefore, what has happened is that after the present defendant company began its actions against Mr. Bigelow in Massachusetts, another company, a corporation of Maine, being the holder of a large majority of the stock of the present company, made an agreement with trustees by which they undertook to sell, or to place in form to be sold, any dividend that may hereafter be declared by the defendant to its stockholders out of the proceeds of the suits against Bigelow and the Lewisohn estate.
It is alleged in the bill that Mr. Bigelow is informed and believes that the voting power on the stock of the New Jersey company held by the Maine company has been (as to the matters referred to in the agreement between the Maine company and Smith and Hoar) transferred to Smith and Hoar, but this does not amount to an averment that such is the fact (even if the
To the argument of complainant’s counsel, based upon the situation thus disclosed, there are several replies.
First. The trust agreement was made January 15th, 1904, more than four years before the filing of the bill of complaint herein, and nearly four years before the filing by Mr. Bigelow of his final answers in the Massachusetts suits; it is not suggested that his knowledge of this agreement and of the situation resulting therefrom is newly acquired, nor is any reason given why, if it is of any concern in the controversy between Bigelow and the New Jersey company, it should not have been set up and relied upon in the Massachusetts suits.
Second. The New Jersey company is not a party to the agreement, either in a legal or in an equitable sense.
Third. The agreement was made not only after the New Jersey company’s cause of action against Bigelow and Lewisohn arose, but after suits thereon were commenced, and so cannot amount to a bar of the causes of action.
Fourth. Neither the law nor the policy of New Jersey prohibits what complainant is pleased to call a speculation in a law suit. In this state we have not adopted the English statutes of champerty and maintenance. Schomp v. Schenck, 40 N. J. Law (11 Vr.) 195; Bouvier v. Baltimore, &c., Railway Co., 67 N. J. Law (38 Vr.) 281, 291. And with us the assignment of choses in action has from an early day been encouraged. Sullivan v. Visconti, 68 N. J. Law (39 Vr.) 543, 549; 69 N. J. Law (40 Vr.) 452. An exception being the right of action for personal injuries. Weller v. Jersey City, &c., Street Railway Co., 68 N. J. Eq. (2 Robb.) 659, 662. Our law, therefore, would not prohibit the present, defendant from thus assigning its right to recover from Bigelow and Lewisohn the moneys claimed to be due from them for breach of trust. And supposing this does not carry with it the right of individual stockholders to thus sell their anticipated participation in the moneys to be recovered, because such participation is contingent upon the declaration of a dividend out of the proceeds, yet in this state we recognize, in,, equity, assignments of contingent and expectant interests, pro
Fifth. In view of the non-adoption in this state of the laws against champerty and maintenance, and of the absence from our Corporation act of any prohibition, I am unaware of anything in the policy of this state to prevent stockholders from agreeing among themselves to aid the company in proper ways in its litigations against third parties, and to use their influence aá stockholders to see that out of the proceeds of the litigation, if successful, the reasonable disbursements made by the stockholders in the company’s behalf shall be refunded, and a special dividend made of the net proceeds if and when that can lawfully be done.
Sixth. But if the New Jersey company (the present defendant) were a party to the Smith and Hoar agreement, and if that agreement were contrary to public policy, I do not see how that benefits the present complainant. The proper result is that the agreement ought to be nullified, not that the company should go without remedy against a third party who defrauded it before the void agreement was made.
Seventh. If Mr. Bigelow desires to uphold the supposed public policy of New Jersey, in the respect that this agreement violates'it, he can easily do so by paying to the New Jersey company what he owes to it, disregarding the claims of the holders of the trust certificates.
Eighth. There is nothing in the nature of a voting trust. Our Corporation act recognizes' that corporate stock may be placed in pledge, and that pledgor and pledgee may agree between themselves as to how it shall be voted. P. L. 1896 p. 290 § 37.
I am referred to what I said in the court of errors and appeals (speaking for myself and one other judge) in Warren v. Pim, 66 N. J. Eq. (21 Dick.) 353, 363, upon the subject of voting
The other matters of supposed public policy to which appeal is made by complainant have reference to the question of his liability, or the extent of his liability, to the defendant company.
In dealing with them it is important to first determine upon what basis of fact we are to proceed.
Notwithstanding the findings against him in Massachusetts, I concede that upon this motion, equivalent as it is to a demurrer to his bill of complaint, the complainant is entitled (saving laches or acquiescence) to have his account of the transactions, as given in his bill, treated as strictly true.
Now, this statement is to the effect that he was entirely blameless in his transactions with the company; that the property which he and his fellow-promoter made over to the company in exchange for $3,250,000 of its stock was in truth worth at least as much as that sum; that full disclosure was made to the owners of every share of the authorized capital stock, not only of the $1,000 that appears to have been actually issued and outstanding when the votes were taken, but also to all members of his syndicate-who with him and Lewisohn received the distribution of $2,000,000 of the stock, and also to the owners of the remaining $500,000 of stock issued for working capital, because, as he says, he and Lewisohn themselves furnished this working capital and were entitled to this stock, and he says the sjmdicate members acquiesced in the withdrawal by himself and Lewisohn of the $1,250,000 worth of stock as a profit.
Taking all this as true, I am unable to perceive the least ground of appeal to this court, for on that basis of fact there is not only no matter of New Jersey state policy involved, but no ground of liability is suggested against him by the present defendant in its Massachusetts actions. What the company alleges and relies upon there is an entirely different state of facts. And complainant’s counsel do not pretend that he is in any danger from the courts of Massachusetts if they accept his view of the facts.
“I am entirely free from blame in tlie transaction, but the defendant company, notwithstanding this, has sought me out in my home jurisdiction, brought actions against me there charging me with wrong-doing, and has actually proved a case against me to the satisfaction of .the trial judge.”
There being no suggestion that the Massachusetts court has not complete jurisdiction dver his person or over the subject-matter, or that it lacks the power to do full and complete justice in the premises, nor that his adversary has obstructed him in the least about producing his evidence, Mr. Bigelow’s plain remedy is to prosecute his appeal before the court of last resort of that commonwealth and procure a, reversal of the findings that have been (unjustly, as lie says) rendered against him.
There is neither reason nor authority for the interference of this court in the premises, if the facts be as complainant alleges them to be. The books, I believe, may be searched in vain for a case where a court of equity has enjoined a proceeding in another court of equity (perhaps I might say, or of common law), on the ground that the court in which the proceeding is pending has made, or may probably make, an erroneous determination of a mere matter of fact.
Perhaps the decision upon the topics remaining to be discussed might be rested here, and the bill dismissed because Mr. Bigelow’s complaint is merely that the trial justice in Massachusetts has mistaken the facts and that there is danger the appellate tribunal there may make the like mistake, an inadmissible ground upon which to rest a prayer for injunction.
I will not, however, rest here, but will consider how Mr. Bigelow’s case will stand if we assume Justice Sheldon’s findings to be true.
Indeed, it seems to me that in a suit like tire present, brought for the sole purpose of removing the controversy out of the Massachusetts jurisdiction and bringing it into this court for determination, on the ground that New Jersey is the exclusive forum for the settlement of the legal questions involved, Mr. Bigelow is now estopped from here setting up that the facts are
The company could not bring Mr. Bigelow into a New Jersey court against his will. If he had “won the verdict” before Mr. Justice Sheldon, this court could not have set it aside. To allow him to here dispute the adverse findings puts the matter in this position: that tire company must win two concurring verdicts in order to ultimately succeed, while he succeeds if he wins either one of two. Assuming the probability of success in a single trial to be equal as between the parties, Mr. Bigelow’s plan would leave to his adversary one-half of one-half a “chance”
I. will, therefore, discuss the arguments of complainant’s counsel on the basis of the facts as found by Justice Sheldon, accepting these as true, not absolutely (for the bill avers a contrary state of facts), but sub modo, either (a-) because with the facts as he asserts them there is no ground upon which this court can properly aid him, or (b) because he is estopped from denying the findings.
Justice Sheldon finds that there was no proper disclosure either to the company or to the stockholders thereof, aside from Bigelow and Lewisohn and their immediate agents and representatives; that $500,000 worth of stock was sold by the company (and not by Bigelow and Lewisohn) to the innocent public for working capital; that even the subscribers to Mr. Bigelow’s syndicate were not made aware of the profit that he and Lewisohn were making out of the transaction above such as was shared in by the syndicate members themselves. He finds that the property for which one hundred thousand shares (par $2,-500,000) were issued was not worth in excess of $2,000,000 and that the property for which thirty thousand shares (par $750,-000) were issued was not worth in excess of $50,000; that Bigelow and Lewisohn were acting in a fiduciary capacity as promoters of the company, so that they owed to it the duty of full disclosure; that there was no disclosure; that they acquired all the shares in excess of tire actual value of the property as a secret profit derived at the expense of their cestui que trust; that in the entire, matter they acted in concert, each doing his part to carry out a general scheme for the advantage of both; that the control exercised by them over the company was a joint control, exercised by each for the benefit of both; that a proper disclosure of the facts by either would have frustrated the schemes of both; that the wrong complained of was the act of both, for which they must both be held responsible, both jointly and severally, and he therefore holds Mr. Bigelow liable for the entire loss-to the company.
It is claimed that under New Jersey law Mr. Bigelow is not liable to the company for the amount ascertained by Justice Sheldon, nor for any amount. But certainly he would be liable as a promoter acting in a fiduciary capacity, if we take Justice Sheldon’s findings as true. The liability of promoters is fully recognized in this state. Plaquemines Tropical Fruit Co. v. Buck, 52 N. J. Eq. (7 Dick.) 219, 230; Woodbury Heights Land Co. v. Loudenslager, 55 N. J. Eq. (10 Dick.) 78; 58 N. J. Eq. (13 Dick.) 556. The decree in this case was affirmed as to liability and reversed only with respect to the amount chargeable against Loudenslager. Arnold v. Searing, 73 N. J. Eq. (3 Buch.) 262. The case of See v. Heppenheimer, 55 N. J. Eq. (10 Dick.) 240; 56 N. J. Eq. (11 Dick.) 453, and 69 N. J. Eq. (3 Robb.) 36, was a receiver’s action against stockholders for unpaid subscriptions, but the doctrine of promoter’s liability entered into the decision.
But it is further argued that, conceding Messrs. Bigelow and' Lewisohn are liable for the undisclosed profits, yet Bigelow is himself liable, according to New Jersey law, for no more than-the profit that he personally realized in the transaction. This argument is rested upon the decision of our court of errors and appeals in the case of Woodbury Heights Land Co. v. Loudenslager, 58 N. J. Eq. (13 Dick.) 556, reversing S. C., 55 N. J. Eq. (10 Dick.) 78. In that case a Dr. Roe was concerned in selling land to the company at a profit to himself. Roe alone-held the options and obtained for the company the title to the lands purchased, and received from it the purchase price. Loudenslager was a party solely because of his agreement with Roe-that Roe should pay him half of the profit as a compensation. See the essential facts recited in the opinion of Mr. Justice-Garrison, 58 N. J. Eq. (13 Dick.) 559. The suit was against Loudenslager alone, and this court held him liable to the company for Roe’s profit as well as his own. The court of errors and appeals held that Loudenslager was not to be held beyond the profit that he himself made, Mr. Justice Garrison saying (at
Whether the evidence in that case would have justified the conclusion that Eoe and Loudenslager were joint promoters, acting in concert in the acquisition of a common profit, which, by agreement, was divided between them, is a question with which I am not concerned. As I understand the decision of the court of errors and appeals, it rests upon the view that in fact Eoe and Loudenslager stood in separate and distinct relations to the company, and that the profit which Eoe derived passed through Loudenslager’s hands, not in his capacity as trustee for the company, but “in an alien capacity.” That the court took this view of the facts is, I think, further manifest from the reliance it placed upon the leading case of Tyrrell v. Bank of London, 10 H. L. Cas. 26; 11 Eng. Rep. 934. In that case one Bead, as well as Tyrrell, was concerned in selling property to the bank at a profit. Tyrrell was solicitor for the bank, but Bead, as held by the master of the rolls, was a stranger, and from this part of the decree there was no appeal. The house of lords held Tyrrell responsible only for the profit that he had gained from the sale of the property to the bank. The pith of the decision is, I think, expressed bjr Lord Cranworth on page 50 of the report, as follows: “Throughout the whole of the dealing and the negotiations for this purchase, Tyrrell represented to his clients, the company, that Bead was the sole owner of this property. To that representation the respondents are entitled to hold him bound, and that being so, the only question is what was the sum
If the court of errors and appeals in the Loudenslager Case had intended to declare that when trustees acting in combination, reap a common profit out of a fraudulent transaction with their ceslui que trust, and then divide the profit between themselves in a proportion, previously or subsequently agreed upon between them, each one is responsible to the injured party only for that which eventually came to him as his personal share, 1 think some attention would have been paid in, the reasoning of the court to the numerous decisions which hold that if joint trustees be guilty of an intentional breach of trust, they are liable jointly and severally, and each one liable in solido, and that it is not necessary to bring them all into court as a condition precedent to relief.
But, finally, if I am wrong in my understanding of the decision of our court of last resort in the Loudenslager Case, if that decision means that where two joint trustees are jointly guilty of a breach of trust and together derive therefrom an illicit profit of $2,000,000 and then divide this between themselves, either one of them can in this jurisdiction be held answerable only for his own share of tire profit, it still does not seem to me to be unconscionable for the party defrauded to insist, in an equitable action brought in the home jurisdiction of one of the guilty parties, that he is responsible for tire entire loss. If the claim is unfounded in equity, it is for the court in which the action is brought to so decide.
At this point I may conveniently deal with certain questions raised by complainant’s counsel, that while, in my view of the case, not necessary to be passed upon, yet have a tendency to confuse the issue unless set in a proper light.
First. It is contended that either upon the basis of Justice Sheldon’s findings, or upon the averments of the bills in the
Second. But even were the property that was made over to the company in fact fairly worth as much as the par of the shares issued against it, this would not be conclusive against the existence of a liability on the part of the promoters, for reasons that will presently appear.
Third. A very considerable part of the argument for complainant is addressed to a discussion of the law of promoter’s liability as applied to the circumstances of this case, not, indeed, upon the basis of the correctness of Justice Sheldon’s findings, but rather upon the supposition that Mr. Bigelow’s account of the transactions is to be taken as true. I do not feel that I am called upon to definitely pass upon the questions thus raised, iror to examine them any further than to determine whether there is any question at issue that is beyond the proper cognizance of the supreme judicial court of Massachusetts. Even were I to reach the conclusion that the company’s case against Mr. Bigelow is ■ unconscionable, yet if the questions raised are
The extraordinary character of the arguments leads me to speak about the law of promoter’s liability to such extent as may be necessary for explaining why I do not think the questions in dispute are of such a character that the court of last resort in the state where the controversy is now pending is unfit to be trusted with their solution. I give my impressions upon the topic without intending to be precise, but with sufficient accuracy, I trust, to show the ground of my decision upon the only point that I decide.
The term “promoter” is a term not of law but of business. A promoter is one who seeks opportunities for making advantageous purchases and profitable investments in industrial or other enterprises, who interests men of means in such a project when found, organizes them into a corporation for the purpose of “taking over” the project, and attends upon the newly-formed company until it is fully launched in business. He may be stockholder, director, officer, or none of these. His services begin before the company is formed, and ordinarily are not concluded until some time after its formation. For what he does and for what he spends in seeking out and bringing together property or opportunity, on the one hand, and men with capital, on the other, he is entitled to reasonable compensation and reimbursement by the new company. But it so often happens that promoters desire to make a profit exceeding mere compensation for their time and legitimate expenses, that what they thus get from the company has come to be called “promoter’s profits.” No rule of law or of equity prohibits such profits, provided they be allowed as the result of a fair agreement amongst all parties concerned. But promoters quite often desire to take their profit immediately upon the formation of the company, while, in a
Fraud or misrepresentation is not required to be shown in order to disentitle the promoter to the secret profit.
Some courts take the practical view that the body of shareholders who are entitled to be consulted, and to whom disclosure should be made, comprises' not only those who are nominally shareholders at the time, but all others who, in pursuance of the original scheme of the promoter, thereafter become shareholders. Thus, in Arnold v. Searing, 73 N. J. Eq. (3 BucH.) 262, Vice-Chancellor Learning held that the subscribers to a syndicate organized for the purpose of taking stock in a new company to be formed were essentially of the body of stockholders entitled to be consulted, although the technical relation of stockholder in the company had not yet arisen. Other courts have sometimes taken the more technical view that the bargain for promoter’s profit is well made if assented to by those who are strictly shareholders at the time.
Saving the question of overvaluation of the property, Messrs. Bigelow and Lewisohn would doubtless have been safe if they had received the assent of all the members of the syndicate to the profit, and if they had sold no stock to the public except under a plan of subscription that would have given to all purchasers fair notice of the circumstances, disclosing the profits that the promoters were making. Or, they might have waited
Where a promoter’s profit is taken in the form of shares that represent no investment in money or in property, and exceed the reasonable services and legitimate expenses of the promoter, the shares are not deemed fully paid within the meaning of a statute that requires money or money’s worth equivalent to the par value of the shares to be contributed by subscribers. And in such event the promoter who takes such shares by way of secret and undisclosed profit while he is acting in a fiduciary capacity to the company, while liable to refund the, shares or the proceeds of sale of them to the company on this account, will be also liable under the statute as for unpaid subscriptions. Of qourse, however, it is not a double liability. If he refunds the undisclosed profit, and thereby in effect satisfies his stock subscription, he cannot be held liable afterwards in an action upon the statute, and vice versa.
On the other hand, the promoter who takes shares as an undisclosed profit may be liable as promoter, but under no liability for unpaid stock subscription. This might happen if he sold property to the company for no more than it was worth, but sold it at a price higher than his fiduciary duty to the company permitted ; that is to say, at a secret profit to himself.
In many eases, promoters in anticipation of the formation of the company themselves, buy property'in order to make it over to the company upon formation. Whether the company in such cases is entitled to claim the benefit of the bargain made by the promoter is often a question of nicety, and may depend upon whether the promoter buys the property with his own money or with money that is in effect subscribed for the share capital. It may be thus in effect subscribed before the formation of the company, as is the case with many syndicates, in which event the promoter may be a trustee with respect to the property for the company thereafter to be formed, on the theory that the property was bought for the company.
In the argument before me, stress was laid upon the fact (averred in the bill) that the stock of the new company has been sold in the market at $100 and even as high as $106 per share, more than four times its par value. These were recent sales, made after the control of a large majority of the stock had been acquired by the Maine company, and perhaps after the New Jersey company had increased its capital and taken in additional properties as above mentioned. But supposing the stock from the beginning had never sold at less than par, my view: is that it does not at all follow from this that the company has not been damnified by the subtraction of a secret promoter’s profit. Because an individual who buys shares at $25 per share, and after-wards sells them out at that price or at a higher price, does not individually sustain a loss, it does not follow that the company, as company, has sustained no. loss in the premises. The error in the reasoning, as I take it, arises from considering corporate shares solely in respect of their secondary and derived function as counters in a speculative game, rather than in their original and legal significance as a right to permanently participate in the business enterprises of the company. In order to. discover whether the company has been damnified, it is safer to take the case of the individual stockholder who becomes such at the beginning and remains such until the expiration of the charter, and who participates in the distribution of assets on dissolution. Such a man would, of course, bear- his share in the impairment of the assets of the company. The man who buys to sell again, buys a property right, including a right to participate in all the assets of the company, including its claims against faithless trustees; when he sells, he passes that same right on to his vendee.
It is, I think, erroneous to deal with the question of non-disclosure or of profits as if it affected only those stockholders who did not know the facts. The duty of faithfully executing the trust is a duty owing to the company; the duty of disclosure is owing to the company. If there be a competent and independent board of directors, disclosure to them is disclosure to
So much for my impressions of the law of promoter’s liability with respect to the questions raised in the present case. All I decide is that it is not a department of the law that is peculiar to New Jersey.
The doctrine of promoter’s liability is not the creature of statute; it is “judge-made” law, in the sense that courts of equity everywhere, recognizing the obligations arising from the fiduciary relation, have applied to it the same principles of equity that obtain in all cases of trust. As stated by Lord Penzance in Erlanger v. New Sombrero Phosphate Co., 3 App. Cas. 1218, 1230 (1878); 6 Eng. Rul. Cas. 777, 788: “The principles of equity to which I refer have been illustrated in a variety of relations, none of them, perhaps, precisely similar to that of the present parties, but all resting on the same basis, and one which is strictly applicable to the present case. The relations of principal and agent, trustee and cestui que trust, parent and child, guardian and ward, priest and .penitent, all furnish instances in which the courts of equity have given protection and relief
No reported decision has been cited to me, and I have been unable to find any, holding that the liability of a promoter is to be determined by the law of the state where the corporation is created, rather than by the law of the state where the transaction occurred or where the action is tried.
But this entire discussion, as it seems to me, is aside from the question. It is all very well to say that the transactions between these parties ought to be governed by the law of New Jersey; a more pertinent question would be, by what law; is Mr. Bigelow to be governed? Government acts in personam, and ordinarily in invitum. The real question in the case is whether the company has acted unconscionably in pursuing Mr. Bigelow in the courts of Massachusetts; that question is .to be determined primarily by the conditions existing at the time its actions were commenced. It could subject him to process in the commonwealth of Massachusetts; it does not appear that it could have reached him elsewhere.
If New Jersey law is involved, it ought to have been, or ought now to be, set up in the Massachusetts actions.
It is said that the Massachusetts court is under no obligation to apply what it may conceive to be the public policy of another state. This may be admitted arguendo, and yet it should be presumed that the courts of Massachusetts would not in comity refuse to recognize the law or policy of another state. Certainly it comes with poor grace for a citizen of Massachusetts to say
Mr. Bigelow, in his answers in the Massachusetts actions, not only raised no question of the applicability of New Jersey law or policy, but on the contrary averred that
“the transactions, matters and contracts complained of in the plaintiff’s bill took place and were made in the State of New York, by the laws whereof said transactions, matters and contracts are valid and cannot be complained of.”
Upon this issue, among others, he went to hearing and submitted his evidence to the trial justice, who found that the directors’ meeting of July 11th, 1895 (which Bigelow claimed was governed by the law of New York), was held in New York City, and that the proposals were made and accepted there; that the company was a New Jersey corporation, and was to have places of business also in Arizona, New York and Massachusetts; that it was the intention of the parties that the agreements should be carried out and consummated by the delivery of the deeds and the issue of certificates of stock in Boston, Massachusetts,
Some of complainant’s arguments proceed upon the theory that the Massachusetts actions are based upon the statutory liability for unpaid stock subscriptions, in which case, of course, the liability would be governed by the New Jersey statute. They are not of this character. If they were, the New Jersey law could be shown by proof there. Actions upon the stockholder’s liability must perforce be brought where defendant resides or can be served with process. An instance in our 'own courts is Grosse Isle Hotel Co. v. I'Anson, 42 N. J. Law (13 Vr.) 10; 43 N. J. Law (14 Vt.) 442.
The fact that the promoters’ share certificates were stamped “issued for property purchased” is not controlling in an action against a participant in an intentional inflation of capital, where there was no independent board of trustees and no bona fide appraisement of the property. Donald v. American Smelting, &c., Co., 62 N. J. Eq. (17 Dick.) 729; Volney v. Nixon, 68 N. J. Eq. (2 Robb.) 605, 609; Easton National Bank v. American Brick and Tile Co., 70 N. J. Eq. (4 Robb.) 722, 728.
It is contended that the general rule that a party seeking relief in the courts may choose his own forum, in any jurisdiction where the defendant may be found, does not extend to corporations ; that these creatures of the law should pursue their rights according to the law of the state of their origin. This is a sufficiently startling proposition, and is, I believe, entirely novel; certainly no authority has been found for its support. It is conceded that there is no statutory prohibition, but it is seriously contended that the supposed limitation of liability laid down in the Loudenslager decision enters so deeply into the policy of this state that, to use the words of counsel, “New Jersey is bound to protect those organizéd under its corporation laws according
The proposed limitation of this right would give to the wrongdoer, not to the party injured, the choice of jurisdictions, and the option would be exercised always to the disadvantage of the company. Delinquent trustees who happened, like Mr. Bigelow, to reside in a jurisdiction whose courts (upon the hypothesis) extend a more ample relief to the company than is extended by the courts of New Jersey, would come to this state for limitation of their responsibility, while those who, like the Lewisohn executors, happened to reside in a jurisdiction where the courts are (supposedly) more lenient to the delinquent trustees than the courts of New Jersejq would find sanctuary at home. If the proposed doctrine is to be applied to promoters, it must, I presume, be applied to other kinds of trustees who may defraud the companjq and thus we should have the New Jersey corporation in á substantial measure left defenceless against its most dangerous enemies. And this novel doctrine is based upon what, after all, is but a fiction of the law — that a corporation organized under the laws of this state, although its actual business is carried on in other states, remains at all times a “resident” of New Jersey. The doctrine, it seems to me, is as unfounded in reason as it is unsupported by authority.
But even if the decisions in Massachusetts and in the federal courts were irreconcilably contradictory upon matters that are dispositive of the case, I cannot see how that raises the least equity for the complainant in this jurisdiction.- It is not pretended that the courts of Massachusetts are, in such a controversy, subordinate to the federal courts, and if they were so, Mr. Bigelow’s plain remedy would be to apply to the Massachusetts
Upon this point I approve of the decision in Carson v. Dunham, 149 Mass. 52; 20 N. E. Rep. 312, above cited.
But further, it is strenuously argued that Mr. Bigelow, if held liable to the defendant company in solido, is entitled to contribution from the estate of Lewisohn; that he will be barred of this right by the failure of the defendant to make good its action against Lewisohn in the federal courts, and that hence the Massachusetts actions should be enjoined and the company required to proceed in this court, with the Lewisohn executors joined as parties.
This argument strikes me as little less than absurd. Upon the face of it, the supposed bar is to arise not because defendant company is endeavoring to recover against Bigelow in Massachusetts, but because, notwithstanding its best endeavors, it seems liable to fail of recovery against the Lewisohn estate. How the company can be held responsible for this result I am at a loss to perceive. Certainly Mr. Bigelow has no apparent right to complain because of the non-success in the Lewisohn suit, for his bill does not allege that he made any offer to aid the company therein, and it is not to be presumed that his assistance would have been declined.
Mr. Bigelow does not join the Lewisohn executors as parties to the present bill, nor show how this court or any other court of this state can get jurisdiction over them, they residing in New York. The bill alleges that the estate of Lewisohn “owns a large amount of property within the State of New Jersey,” but there is no averment of its value, nor suggestion that it is by any means adequate to secure even one-half of the moneys claimed by the company.
But besides, equity does not recognize any right of contribution between joint tort-feasors, the reason being that such contribution must be sought, if at all, by action brought by one
And surely one of several wrong-doers will not be given a better right against the injured party than he has against h'is fellows, else what becomes of the doctrine of clean hands ?
Conceding the general rule to be so, counsel insist that it does not apply to joint trustees who “have merely mistaken their legal rights and have not been guilty of intentional wrong-doing,” and it is gravely argued that' the fact that company promoters have derived a profit improperly from their dealings with the corporation “is not inconsistent with the supposition that they have acted in entire good faith.”
Whether the latter remark can be true in any case of wrongful promoter’s profit, I need not stop to consider, because it certainly cannot be true in Mr. Bigelow’s case, upon the basis of Justice Sheldon’s findings.
Accepting those findings as time, or at least as judicially established- — and we must accept them, else the question of contribution is not raised — the case stands thus: Messrs. Bigelow and Lewisohn buy certain corporate stock for $1,000,000, with the very purpose of causing the property represented thereby “to be transferred to a new corporation, which they should procure to be organized with a much larger capital, for a much increased price.” This property, the property of the Baltimore company,
“was not of the intrinsic value of more than $1,000,000. But its market value at the time of its transfer to the (new) company seems to have been greater than this, probably due in large part to the skillful manipulation of Bigelow and Lewisohn, and the ingenious manner in which they created a desire on the part of men interested in mines, as investors or speculators, to be allowed to join in the transaction they were carrying out.”
They lead their associates in the syndicate — the men who unite with them in raising the $1,000,000 — to believe that the new company is to have a capital of only $2,500,000, taking the property of the Baltimore company and the “outside properties” for $2,000,000 and raising $500,000 with the rest of its stock. In order to carry out their real scheme they make the nominal capital of the new company $3,750,000, sell $500,000 worth at par to
“did not act towards the members of his syndicate with the good faith which they had a right to expect. * * * With a few individual exceptions he did not disclose the facts to them.”
Thus Bigelow' and Lewisohn get (in stock certificates made out in manifest evasion of the New Jersey corporation law) an undisclosed profit of at least $1,230,000. And then, in order to convert their illicit gains into money, they proceed (or, at least, Bigelow does) to unload their fraudulent stock upon the credulous public. For the finding is that
“the stock which they thus took was then of fully its par value, this being due mainly to the skillful conduct and manipulation of Bigelow and Lewisohn, and continued to be so for some time, and until Bigelow had sold out substantially all the stock that he took for his own use.”
Stripped of all disguises, the transaction to be dealt with is this: Of the entire authorized capital, $1,000,000 represents the' cost of the Baltimore property, .$1,000,000 is “water,” representing the manipulated increase in tire value of that property due to the stirring up, by Bigelow and Lewisohn, of a desire on the part of investors and speculators to join them in their scheme, and $1,250,000 (less $20,000 for legitimate expenses) represents nothing more substantial than “wind.” And this latter large block of stock the promoters proceed to. sell to. the unsuspecting public, in a market manipulated by them, at fully its par value. Besides this, they cause' the company to sell $500,-000 to the public for working capital.
When men who are implicitly trusted, by all persons concerned, to fairly organize a new corporation and launch it upon its business career, make use of their temporary control to lift from its treasury, for their oto use, upwards of a million dollars, in par value, of its shares, without mentioning the circumstance to others, who in fact and in law are their business as
But the taking of the secret profit in the form of shares was, of course, but the means to an end, the ultimate purpose being to get a fortune for nothing, and to get it at the expense of their fellow-men by selling these shares to the public as if they had honest value behind them (for they were stamped “Issued for property purchased,” as the bill avers), when, according to- Justice Sheldon’s findings, they represented a deliberate and intentional overvaluation of the property. I do not speak of the sales of the promoter’s stock to the public as the basis of their liability to refund the undisclosed profit to the company, except as those sales go to measure the amount of the liability; I speak now of the moral quality of their acts, the question of intentional wrongdoing, liability having been assumed as tire hypothesis. TJpon this question, the fraud upon tire public is not to be ignored.
The only element of “mistake” that I can discern is that the promoters, assumed that all this wrong could be made unassailable in law, if only they should cause “dummy” directors to go through the form of placing a fictitious valuation upon the property, whereas the law required real value. P. L. 1889 p. 412 § 4; P. L. 1893 p. 444 § 2.
1 am unable to see how such a transaction could be accompanied with an honest belief on the part of the promoters that it was either lawful or right.
Besides, irrespective of wrongful intent, this plain violation of the letter and policy of our own Corporation act, done for the very purpose of acquiring the secret profit that is the basis of the liability to the company, debars either of the participants from resorting to the courts of New Jersey for assistance in recovering contribution from his fellow. In Volney v. Nixon, 68 N. J. Eq. (2 Robb.) 605, our court of last resort held that a contract between two persons that in exchange for their joint property one of them shall procure from a corporation of this state
But, finally, this whole question of contribution, if there be any sort of question about it, belongs in the Massachusetts court, and Mr. Bigelow should apply there for his remedy. The company is already in court, and if equity requires that its actions be stayed, the Massachusetts- court will, of course, stay them.
It is further argued that either the decision of the federal courts in the Lewisohn Case, if affirmed by the supreme court of the United States (and I assume the presumption was, when the present bill was filed, that there would be such affirmance, as in truth there has been), works an estoppel against the company (defendant herein) in favor of Mr. Bigelow, or else that this court should restrain the defendant from further proceeding in the Massachusetts court until a final decision is reached in the Lewisohn Case such as can be availed of by him as estoppel.
The argument made to- show the alleged estoppel is elaborate, voluminous and ingenious. It is rested upon the circumstance-that the so-called “outside properties” which were transferred to the new company in exchange for thirty thousand shares of its-stock, were held in legal title by Lewisohn, but (as is argued) in trust for himself and Bigelow; that Lewisohn was authorized by Bigelow and the syndicate members to do what he did with the property; that the decision in the federal courts in favor of Lewisohn, the trustee, inures to the benefit of' Bigelow as cestui
If I were called upon to pass upon the merits of this argument, I fear I should be constrained to declare it palpably unsound. The theory is that the actions brought by the company have to do only with the title to trust property; that the beneficiaries and parties ultimately entitled to the benefit of the property are not necessary parties ; that the trustee represents the whole interest, and that the determination is binding upon the cestui que trust.
But the actions are in personam, to recover back property wrongfully acquired by the company’s trustees from the company. The circumstance that so far as any consideration passed to the company in the exchange, it was conveyed to it by Lewisohn, acting as trustee for himself and Bigelow, is of no consequence, since they get credit for its value in the accounting.
And how Mr. Bigelow can escape personal responsibility to the company by a decision favorable to Lewisohn in the federal actions, when a decision against Lewisohn in those actions would have imposed no personal responsibility upon Mr. Bigelow, I confess I am unable to perceive.
But it is not for me to determine these questions. The whole controversy belongs in Massachusetts and not in New Jersey. If the decision in the federal courts is an estoppel it should be so alleged in the Massachusetts actions. If it is not as yet a complete estoppel, and equity requires that the company should stay its actions against Bigelow until the final determination of the Lewisohn suits, Mr. Bigelow’s proper course is to apply to the Massachusetts court for a stay.
Mr. Bigelow’s bill here cannot, in my judgment,’ be sustained upon a mere showing (if it were shown) that the cause of action asserted against him in Massachusetts is unconscionable, or that the company is estopped or for any other reason ought to be debarred from its action there. The supreme judicial court of Massachusetts is a court of conscience, and exists for the very
Various other points are raised in support of the bill. Some of them turn upon mere matters of practice or procedure. Others clearly are to be determined according to rules or principles of equity that are prevalent generally where courts of equitable jurisdiction are established, subject only to such variances as are inevitable between the courts of different states. With respect to each and every of them, so far as they may- be well founded, complainant may readily obtain relief upon application to the original or appellate jurisdiction of the Massachusetts court. They require no special mention.
But, finally, it seems to me that the laches and acquiescence of Mr. Bigelow not only estop him in the respects already indicated, but that he is for the same reason foreclosed from practically every ground on which he invoked the jurisdiction of this court. As already mentioned, the Massachusetts actions were begun on October 7th, 1902. His final amended answers were filed as recently as November 6th, 1907. There is nothing to show that he was not then in full possession (or with reasonable diligence might have been) of every fact and of every suggestion of argument upon which he now relies. Upon this point I cannot do better than to quote from the brief of counsel for the defendant:
“Ii the law of New Jersey is the law by which the original merits of the case should be decided, this has been true since the beginning of the suits against Bigelow in 1902.
“If the pendency of the suits against Lewisohn has a bearing upon the suits against Bigelow, their pendency has been a fact since 1903.
“If the decisions in the Lewisohn suits have affected Bigelow’s rights, the fact has been in existence since February 24th, 1905, and December 4th, 1906, respectively.
“If the conflict in the decisions on demurrer between the circuit court and the Massachusetts court is important, it has been so since June 19th. 1905.
“If there is a difference between the law of New Jersey and the law of Massachusetts, it has been apparent at least since June 19th, 1905.
“If a multiplicity of suits can be avoided by this proceeding in New Jersey, this has been true since 1902.
*519 “If the agreement of the Maine company regarding the disposition of any dividends coming to it is of importance, the fact has existed since January, 1904.
“If the recovery against Bigelo'w in Massachusetts would be unconscionable in view of the foregoing things, this has been apparent since the respective dates.”
It is argued, by counsel for the complainant that mere delay, in the absence of detriment accruing therefrom, need not be deemed as a bar to an otherwise equitable claim. I do not think, however, that in such a case as is here presented any substantial detriment to the defendant need be shown. Mr. Bigelow has not merely delayed for a long and unreasonable time before raising the points that he now urges; he has, in the meantime, acquiesced in the jurisdiction of the Massachusetts court, and has sought to take a benefit from it in the form of a decree there that, if it had proved to be in his favor, would have been conclusive against the company. With full knowledge of the facts, he has deliberately consented to the jurisdiction of the Massachusetts court, has submitted his case to it upon the merits, and it is only after he is defeated upon the merits that he comes to this court for relief. In Smith v. Colloty, 69 N. J. Law (40 Vr.) 365, 375, it was declared by our court of errors and appeals that “the rule that defects in the form of process and the manner of its service are waived by making appearance and defence upon the merits is not a technical rule or a rule of mere practice or convenience; it is a rule of jurisprudence, grounded upon the fundamental idea that courts of justice exist for the purpose of hearing and conclusively determining disputes between litigants, from which it results that he who voluntarily comes (whether as plaintiff or defendant) before a court of competent jurisdiction over the subject-matter and there submits to a trial and determination of the merits of his controversy, is bound by the determination that he has thus invoked.”
Nor was Mr. Bigelow’s delay in coming here due to accident or inadvertence. Not only does his bill make no such pretence, but his counsel in their printed brief present his attitude as follows : “The complainant conceives that it was his duty to defend himself as best he might before the Massachusetts court, and thus, if possible, avoid any necessity for invoking the jurisdic
Having considered with patience the voluminous arguments, my conclusions upon the whole matter are:
First. That the controversy between the parties is properly cognizable in the Massachusetts court, where prior actions are already pending.
Secondly. That the substantial controversy is about matters of fact, and not of law or of equity.
Thirdly. That so far as controversy exists about questions of law or of equity, they are questions that are within the cognizance of the Massachusetts court.
Fourthly. That the bill herein does not show that the defendant is acting unconscionably in prosecuting the Massachusetts actions, and therefore complainant is not entitled to have them enjoined.
Fifthly. That the complainant, by laches, acquiescence and waiver, has lost any right he might otherwise have had to invoke the jurisdiction of this court in the premises.
These matters appearing plainly upon the face of the bill, the motion for its dismissal will be granted, with costs.