Noyes v. Parsons, 245 F. 689

Noyes v. Parsons

245 F. 689 | 9th Cir. | 1917

MORROW, Circuit Judge

(alter stating the facts as above). [1] This is an action at law, brought under section 7 of the act known as the “Sherman Anti-Trust Act” (An act to protect trade and commerce against unlawful restraint and monopolies, approved July 2, 1890, 26 Stat. 209). The act provides, among other things:

“Sec. 3. Every contract, combination in form of trust or otherwise, or conspiracy in restraint of trade or commerce, in any territory of the United States, ° * * is hereby declared illegal. * * * ”

“Sec. 7. Any person who. shall he injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefor in any Circuit Court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover threefold the damages by him sustained and the costs of suit, including a reasonable attorney’s fee.” Comp. St. 1916, §§ 8822, 8829.

*694The things forbidden and declared to be unlawful by the clause of section 3 of the act quoted above are “every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce, in any territory of the United States,” and any person who shall be injured in his business or property by any person or corporation by reason of any such unlawful act may, under section 7, sue therefor in a federal court and recover threefold the damages sustained by him, and the costs of suit, including a reasonable attorney’s fee. The jurisdiction of the court and the province of the jury in such a case is to inquire whether the complainant has been injured in his business and property by reason of any such unlawful act. If it appears from the complaint, and is proven, that the plaintiff has been so injured, the court has jurisdiction, and upon the verdict of a jury is required to award the damages provided in the act. But if, on the other hand, he has not been so injured, or if he has been injured, but not by reason of anything forbidden or declared to be unlawful by the act, he cannot recover in the action. This statement of. what must always seem to be an obvious rule of procedure appears to be necessary in this case, in order to direct attention to the question whether the matters alleged in the complaint really and substantially involve a dispute or controversy within the jurisdiction of the court.

In Minnesota v. Northern Securities Co., 194 U. S. 48, 65, 24 Sup. Ct. 598, 48 L. Ed. 870, the Supreme Court of the United States, referring to an allegation in the complaint in that case that the combination and consolidation between the Great Northern and Northern Pacific Railway Companies and their control of their affairs and operations by the Northern Securities Company were in violation of this Anti-Trust Act, said:

“An allegation in a complaint filed in a Circuit Court of the United States may, indeed, in a sense confer jurisdiction to determine whether the case is of the class of which the court may properly take cognizance for purposes of a final decree on the merits. Newburyport Water Co. v. Newburyport, 193 U. S. 561, 24 Sup. Ct. 553, 48 L. Ed. 795, and Pacific Electric Ry. Co. v. Los Angeles, 194 U. S. 112, 24 Sup. Ct. 586, 48 L. Ed. 896, decided at present term. But if, notwithstanding such an allegation, the court finds, at any time, that the case does not really and substantially involve a dispute or controversy within its jurisdiction, then, by. the express command of the act of 1875, its duty is to proceed no further” — citing section 5 of the act of 1875 (Act March 3, 1875, c. 137,. 18 Stat. 472 [Comp. St. 1916, § 1019]).

And in Hull v. Burr, 234 U. S. 712, 720, 34 Sup. Ct. 892, 58 L. Ed. 1557, the same court, referring to the jurisdiction of the federal court under the laws of the United States, said:

“The rule is firmly established that a suit does not so arise unless it really and substantially involves a dispute or controversy repecting the validity, construction, or effect of some law of the United States, upon the determination of which the result depends. And this must appear, not by mere inference, but by distinct averments according to the rules of good pleading; not that matters of law must be pleaded as such, but that the essential facts averred must show, not as a matter of mere inference or argument, but clearly and distinctly, that the suit arises under some federal law. Hanford v. Davies, 163 U. S. 273, 279, 16 Sup. Ct. 1051, 41 L. Ed. 157; Mountain View Mining & Milling Co. v. McFadden. 180 U. S. 533, 535, 21 Sup. Ct. 488, 45 L. Ed. 656; Defiance Water Co. v. Defiance, 191 U. S. 184, 191, 24 Sup. Ct. 63, 48 L. Ed. *695140; Arbuckle v. Blackburn, 191 U. S. 405, 413, 24 Sup. Ct. 148, 48 L. Ed. 239; Bankers Casualty Co. v. Minneapolis, etc., Ry. Co., 192 U. S. 371, 383, 24 Sup. Ct. 325, 48 L. Ed. 484; Shulthis v. McDougal, 225 U. S. 501, 509, 32 Sup. Ct. 704, 56 L. Ed. 1205.”

[2] It may be conceded that the agreement of June 6, 1905, between the Fairbanks Banking Company, the predecessor of the Nevada Company, the Washington Company, and the First National Bank of Fairbanks, agreeing to conduct their said three several banking businesses noncompetitively, and fixing the rates to be charged by the three hanks, respectively, for exchange upon drafts, telegraphic transfers, the handling of gold dust, transportation and insurance, collection rates, interest on loans, etc., and fixing a penalty for a departure from such rates by either of the banks, was an unlawful combination and in violation of the Anti-Trust Act. It may also be conceded that the agreement of May 10, 1909, upon the same subject and to the same effect, was unlawful, and in violation of the Anti-Trust Act, and that the consolidation of the three banks was, under the circumstances, open to judicial inquiry in a proper suit. But it is not alleged in the complaint that the Washington Company suffered any injury by reason of these unlawful agreements. The statement and explanation of the plaintiff in error is that the allegations of the complaint respecting these agreements had no such purpose; that they were intended only to serve as matters of inducement, inserted for the purpose of exhibiting the origin and development of the banking business at Fairbanks and the status thereof existing, and the purposes actuating the defendants when the conspiracy and combination of 1909 was entered upon by the defendants and the Nevada Company. We may then dismiss these allegations from further consideration as charging that the Washington Company suffered injuries by reason of these violations of the Anti-Trust Act.

We come, now, to the cause of action upon which a recovery of damages is sought in this case. It is charged that on September 16, 1909, while the directors, stockholders, and officers of the Washington Company were conducting and carrying on a banking business in pursuance of the unlawful combination and conspiracy in restraint of trade and commerce mentioned, in order to effect the absolute concentration and to obtain the absolute control of the banking business in the town of Fairbanks, the Tanana valley, and the country adjacent thereto, and in order to make still more secure and to render permanent the said unlawful restraint of trade and commerce, they sold to the Nevada Company all the capital stock and all the assets of the Washington Company, and the Nevada Company purchased such capital stock and assets, which included one-hall of the capital stock of the First National Bank of Fairbanks; that at that time the Nevada Company was insolvent, which the defendants knew; that its liabilities exceeded its assets in the amount of $535,000. It is further alleged that on January 22, 1910, the directors and stockholders of the Washington Company surrendered their offices as directors of that company to a board of directors selected and controlled by the Nevada Company, and on the 4th day of January, 1911, the Nevada Company, conducting the *696business of itself and of the Washington Company, closed its doors and ceased to do a banking business.

The injuries to the Washington Company resulting from these acts of the defendants as stockholders of that company are specifically charged as follows: That on. May 7, 1909, the Nevada Company and the directors, officers, and stockholders of the Washington Company purchased all of the capital stock of the First National Bank of Fairbanks for the sum of $125,000, each corporation taking one-half of the stock, or $62,500 each. It is alleged in the complaint that there was a loss of the use of this money, which loss amounted to $5,000. This'charge the plaintiff in error states was inadvertently made, and should be rejected as surplusage. The next charge is that, on the 16th day of September, 1909, the defendants, as stockholders of the Washington Company, sold their stock to the Nevada corporation for $250,000. It is alleged that at that date the capital stock of the Washington corporation was worth only $140,000. The difference between the actual value of the stock ($140,000) and the sum for which the defendants sold the stock to the Nevada corporation ($250,000) is the sum of $110,000. This difference of $110,000, it is claimed, was an injury to the Washington Company caused by the defendants as officers and stockholders of the company. The next charge is that the Washington Company was insolvent on January 4, 1911, and was indebted to its creditors on that day for principal in the sum of $378,977.72, and for interest on that sum from January 4, 1911, to the 1st day of June, 1915, at 8 per cent, per annum, the sum of $133,579.45, or a total of $512,-557.17. These four items make a sum total of $627,557.17. Threefold damages — that it to say, three times $627,557.17 — amount to $1,882,-671.51. From this sum must, however, be deducted threefold the damages of $5,000 claimed in the complaint for the loss of the use of the money paid for one-half of the stock of the First National Bank of Fairbanks, which claim this court is asked to reject as surplusage. This deduction leaves the claim of damages amounting to $1,867,671.-51, which it is contended the plaintiff, as receiver of the Washington Company, is entitled to recover of the defendants.

We are of opinion that this statement of the case and the object othe suit as set forth in the complaint is sufficient to show that the case does not really and substantially involve a dispute or controversy respecting the validity, construction, or effect of the Anti-Trust Act, upon the determination of which the result depends. The bank did not fail because of its consolidation with the other banks, or because of its noncompetive agreements with such banks. It failed, notwithstanding the advantage it had in the grossly exorbitant rates it was .able to exact from its customers under the noncompetitive agreements. That it failed from mismanagement is clearly disclosed by the complaint, and the cause of action as stated is in all essential features a suit on behalf of creditors for damages resulting from such mismanagement, and if a recovery could be had in this suit it would be for their benefit.

[3] The argument that the injuries suffered by the Washington Company grew out of the unlawful combination of the defendants in restraint of trade and commerce is not convincing, and the jurisdiction *697of a federal court, limited as it is by law, cannot be made to depend upon argument. The jurisdiction must not be a matter of mere inference, but: must appear by distinct averments according to the rules of good pleading. Minnesota v. Northern Securities Co., 194 U. S. 48, 65, 24 Sup. Ct. 598, 48 L. Ed. 870, and Hull v. Burr, 234 U. S. 712, 720, 34 Sup. Ct. 892, 58 L. Ed. 1557. This conclusion renders it unnecessary to discuss the question whether the receiver of the Washington Company can maintain this suit against its stockholders, or the other question whether the cause of action is barred by the statute of limitations.

The judgment of the District Court is affirmed.

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