89 F. 397 | U.S. Circuit Court for the District of Eastern Virginia | 1898
The complainant, Thomas F. Ryan, a citizen of the state of New York,‘filed his bill of complaint against the Seaboard & Roanoke Railroad Company and Legh R. Watts, citizens of the state of Virginia, the Raleigh & Gaston Railroad Company, a citizen of the state of North Carolina, and Messrs. Hoffman, McLane, Minis, Nippe, and Fisher, citizens of the state of Maryland. The bill is by a stockholder in the first-named corporation, in behalf of himself and other stockholders. After stating what is the Seaboard & Roanoke Railroad Company, it avers that, it is in the control of eight subordinate railroad companies, constituting with it a system, designated by the style of the “Seaboard Air Line.” Of one of thesé subordinate corporations, the Raleigh & Gaston Railroad Company, it owns a majority of the stock therein, and absolutely controls the election of its directors and other officers, and its operations, policy, income, and assets. The affairs of this Seaboard & Roanoke Railroad Company are managed by a president and six directors, elected by the persons in whose names shares of stock stand on the books of the company, according to a graduated scale of voting, whereby smaller stockholders have a much greater vote, in proportion to their holdings, than larger stockholders. That the annual meeting of the company, at which stockholders elected the president and directors, was approaching. That at the last meeting the defendant Hoffman had been elected president, and Messrs. McLane, Fisher, and Watts, with Moncure D. Robinson, Fuller, and Gordon, directors, of whom Robinson had died. That Hoffman had been continuously president since 1892, owning $20,800 of stock, and that since his election no dividends had been declared, although this had not been the case with his predecessors. That he controlled the elections by the use of proxies, which his position enabled him to solicit and obtain. That Messrs. Watts, McLane, and Robinson had been directors continuously during the presidency of Hoffman; McLane being a relative and occupying the same office room with him, Robinson being the owner of an unremunerative branch railroad, which he desired to lease to the Seaboard system at an exorbitant rental, and in which purpose he had succeeded, and Mr. Watts being the general counsel of the system
Upon these averments of the bill the complainant prayed: (1) That defendants be served with process. (2) That the cancellation of certificate No. 754, for 153 shares, be vacated, that the certificate issued in lieu thereof be erased and canceled, and that complainant be held the true owner of the shares represented thereby. (3) That the pooling agreement be declared null and void; that the pool be wound up; that McLane and Watts be enjoined from exercising any authority by virtue thereof; and, if necessary, that a receiver be appointed to take charge of the certificates lodged with McLane. (4) That the purchase of the 2,000 shares in the name of the Raleigh & Gaston Railroad Company be, declared null and void; that Messrs. McLane and Watts be enjoined from voting on the 153 shares in certificate No. 754; that they be enjoined from voting on any shares in the pool; that they be enjoined from voting on any of the shares purchased in the name of the Raleigh & Gaston Railroad Company, either in the namfe of that company or in the names of the vendors of the stock.
Upon the presentation of the bill, a rule was issued to the defendants to show cause why the injunction prayed for be not granted, with the ordinary restraining order meanwhile. To this order was added:
“It being further made to. appear to the court by affidavits that the complainant herein, as stockholder of the said Seaboard & Roanoke Railroad Company, has been denied the inspection of the corporate books, papers, and accounts, and that the officers thereof refused to voluntarily furnish any information whatever as to such corporate transactions, it is thereupon ordered and decreed that J. Alston Cabell, Esq., be, and he is hereby, appointed special master in this case, with full authority to administer oaths and to take testimony, either within or without the district, upon the application of either party, such testimony to be used upon the hearing of the motion for injunction. The said special master shall have full authority to compel the attendance of witnesses, and order the production before him of all books,, contracts, records, vouchers, papers, and documents appertaining to the allegations set out in the bill. That he give proper notice of references. That he finish the examination with all convenient speed, and file his report.”
This plea to the jurisdiction having been filed, the court directed the special master to suspend his references until the pleas could he heard and determined. They came on to he heard, and on December 4, 1897, a decision was filed. The plea was sustained, and the bill was dismissed as to the Raleigh & Gaston Railroad Company, it being a resident of North Carolina. So, also, the pleas of Messrs. Trippe, Minis, and Fisher were sustained, they being residents of Maryland.
After stating the main facts, the decision of the court goes on:
“So i'ar as the claim for the delivery of the certificate No. 754 is concerned, inasmuch as that is within the district, personal property, the title to which is clouded and possession of which is sought, the bill is within the act of 1875. As Mr. Hoffman is president of the company holding the certificate whose action is necessary to obtaining full relief respecting it, and as Mr. McLano has a certificate issued upon surrender of this certificate No. 754, they are parties who can be served notwithstanding their nonresidence. Tlie pleas based upon their presence as parties are overruled, and the defendants have leave to answer over. The pleas of the other defendants arc' susU-lmd, and the hill as to them dismissed.”
A decretal order was entered accordingly. The defendants, as against whom the hill was retained, were ordered to jilead, answer, or demur on or before the rule day in February (hen next: ensuing. The special master was directed to execute the order of reference which had been susjiended because of the pleas. The 8th of February (the «lay next after the rule day) was fixed for hearing the motion for injunction. On 7th January next after filing the above decision, the defendants filed demurrers and plea to the bill. They will he set out in full hereafter. The complainant did not reply to the plea, or set it and the demurrers for hearing, as required by equity rules Nos. 88 and 33.
In January, 1898, after plea and demurrer, Mr. Crawford, who, up to that time, had been on the record for complainant, informed the judge who had heard the case dial he had ceased to represent the complainant in this court, and that other counsel would he substituted for him. It seems that Mr Elihu Root, of New York, was the substitute of Mr. Crawford, and he retained Mr. Marbury, of Baltimore, Mr. Groner, of Norfolk, and Messrs. Stiles & Ifolladay, of Richmond, as his associates. Nothing of these appears in the records of the clerk’s office. No steps were taken until 19th of July of this year, when the counsel of defendants moved, in open court at Norfolk, for the dismissal of the bill, for the want of observance of rules 83 and 38. This motion was without notice to counsel.. None is required. Mr. Groner, however, was near the court, and, his attention having been invited by counsel to the motion, he asked for time upon it, which was granted, and the 20th September, 1898, was fixed for hearing the motion by his honor, Judge Waddill, presiding.
“Take notice that the undersigned, Thomas F. Ryan, plaintiff in the equity cause depending in the circuit court of the United States for the Eastern district of Virginia, under the short style of Thomas F. Ryan v. Seaboard & Roanoke Railroad Company, will appear before Hon. Charles H. Simonton, one of the circuit judges of said court, at Asheville, N. C., on August 16, 1898, at 10 a. m., or as soon thereafter as counsel can be heard, for the following purposes, namely: (1) For an order directing J. Alston Cabell, Esq., special' master, to proceed immediately to take testimony as directed by the order in the above-styled cause of October 2, 1897. (2) For an order granting plaintiff authority and power, in person1 or by his agents and expert accountants, to examine the stock book, and all books, contracts, records, vouchers, papers, and documents, of the Seaboard & Roanoke Railroad Company, or under its control, which he may deem important to the protection of his interests. (3) For an order vacating, modifying, or changing the order of 10th July, 1898, and disposing of the defendants’ motion on which said order was1 granted, and for an order to set down for argument the demurrers in this case, and for permission to perfect the pleadings, as he may be advised. (4) To set down the demurrers forthwith for argument, if the court should hold that they be heard before taking testimony.”
And an order was made thereon setting the motion for hearing on the day named. This order was made upon the distinct notice that the motion would be heard subject to the motion to dismiss. Judge Waddill having signified his consent that this motion to dismiss should be heard by the circuit judge, anticipating the day fixed for it, the matter comes up now. Under the direction of the circuit judge, the whole question was taken up and argued, first as to the motion to dismiss under rule 38, and in case, after consideration, the court should not grant this motion, then as to the plea and demurrers.
First, then, as to the motion to dismiss under rule 38. Were this rule absolute in its terms, there would seem to be little or no question. It is true that the rule seems to have been very little observed in this district And it is also true that in the clerk’s office there is no book in which to set down formally an order for hearing plea or demurrer under the rule. But the rule nevertheless exists and is so ■of force. Neither counsel nor the court take the rules of practice from the clerk’s office. Nor can the failure of one district to observe a rule make it obsolete even in that district. It may explain the nonobservance by counsel. It can scarcely be said that it can excuse it. The rule, however, is not absolute. It has a qualification,— “the bill shall be dismissed as of course unless a judge of the court shall allow him further time for the purpose.” The omission to observe the rule was not the default of complainant. It must be imputed to his counsel. As soon as Mr. Crawford retired, he at once ■employed Mr. Boot, and he, in turn, without delay, engaged local counsel, both in Maryland and Virginia. These gentlemen have explained their delay.
The gravity of the charges in the bill, against gentlemen of character and standing, naturally and properly induced men of standing in the profession to pause before going into a case in which these charges must be maintained. They felt it due to the defendants, as well as themselves, to examine carefully their ground before undertaking a ■case abandoned by the original counsel in it. This rule was intend
It will also he noted that the hearing of the cause on the injunction was fixed for 8th February, the 7th (rule day) not suiting the convenience of the court. The counsel then in charge of the cause may well have supposed (hat on that hearing the demurrer and plea would be discussed, and the necessity for formally setting them down for a hearing be dispensed with. In the exercise of the discretion allowed by the rule, the bill will not be dismissed.
The plea and demurrers will now he taken up and discussed. The demurrers are by the Seaboard & Roanoke Railroad Company, by Louis McLane, and by R. O. Hoffman. The plea is by Louis McLane. The demurrers are: (1) That there is no equity in the bill. (2) For want of proper parties to the bill, in that the hill seeks an injunction against voting stock standing in the name of certain parties to the aggregate amount of 2,000 shares, charged to have been purchased by the Raleigh & Gaston Railroad Company, and those persons in whose names the stock stands are not made parties to the bill; in that the bill prays an injunction against the voting of the stock in the pool by Louis McLane and L. R. Watts, and the persons holding this stock are not parties to the bill; in that the bill seeks to declare the pooling agreement, absolutely null and void, and to have a receiver appointed for the certificates in the pool, and the pea-sons pazdies to said pooling agreement are not parties to this bill. (3) That the matter in dispute is less than 82,000. (4) R. C. Iloffman and the Beaboard & Roanoke Railroad further demur to the bill as multifarious.
With regard to the objection t.o the bill for want of equity, it is not well taken. The jurisdiction of the court lias been sustained because it seeks to recover a certificate of stock, charged to have been fraudulently surrendered by Louis McLane for cancellation, which was canceled, and a new certificate issued therefor, which certificate is now outstanding. The hill prays that this cancellation he declared illegal; that the canceled certificate he restored; the rights of complainant therein recognized and established; the substituted certificate declared null and void. All these modes of relief are within the peculiar power of a court of equity, and cannot be had in a court of law.
The demurrers for want of parties raise grave questions. As has been seen, the jurisdiction of the court has been sustained because of the controversy over the certificate for 153 shares, No. 754, now lying-canceled in the office of the Seaboard & Roanoke Railroad Company at Portsmouth, Ya., within this district. The complainant avers that this certificate is lawfully his property, purchased by him from Theodore Cook, in whose name it stood; that he is entitled to its possession, so that upon its surrender he may obtain a new certificate in his own name, and be clothed with all the rights of ownership, including the voting power thereon; that he has been obstructed in and deprived of his rights, not only by the illegal act of McLane, in transferring the stock to himself, but also by the provisions of the pooling-agreement whereby the persons in the pool are held bound, unless three-fourths of the stock in the pool consent not to dispose of their stock within five years, and not to exercise the voting power thereon except in person or by McLane and Watts’ proxies named for this purpose. So that it is essentially necessary, in order to give the complainant all that he claims, — the recognition of his purchase from Cook, the transfer of the stock to" him, and the exercise of the voting power thereon, as he may wish, — that the pooling agreement be declared null and void, either ab initio or by the subsequent action of McLane and Watts in purchasing the 2,000 shares in the name of the Raleigh & Gaston Railroad Company. Can this be done without the presence or representation of the persons in the pool as such?
The pooling agreement was made 2d October, 1896. It purports to be by the “undersigned owners and holders of stock” in the Seaboard & Roanoke Railroad Company, covenanting and agreeing, each with the other, for “our” mutual protection. The covenant is that each of them will not for the period of 5 years from that date, or until 30 days after the abrogation of the agreement, by the written consent of three-fourths of the aggregate amount of stock therein, sell or otherwise dispose of their holdings, of any part thereof, or delegate the voting power thereof, to any person not a party to the agreement. This last clause is further qualified by appointing Louis McLane, Moncure Robinson, and Legh R. Watts a committee to represent the poól, to manage and control the shares of stock therein, and the voting power thereof, to the extent that the members of that committee, or such of them as may be present at any meeting of the company, shall have the right to vote at such meeting the shares'of stock held by any
Now, liiis agreement was made by each person in the pool with every other person in the pool, each for himself and his personal representatives. The consideration was for “our mutual protection.” It was to he binding on each one unless three-fourths of the stock in the pool consented to release the person. Every signer, therefore, has a direct, personal, immediate interest in the validity and construction of this agreement. Every one who lias observed its covenants from its date ims the right, if it be valid, to enforce and maintain it; and, under the familiar rule in equity that all persons in interest must be parlies to the suit, each signer of this paper must: be a party in person or by representation. As they must, in the nature of things, be numerous, they can be represented by one or more persons in the game plight and interest as themselves. They are not parties in person in this suit. Are they represented? It is contended that, inasmuch as Messrs. McLane, Watts, and Hoffman are among the signers of this pooling agreement, they can and do represent the others whose names appear to it. But the pooling agreement is attacked and sought to be invalidated because of the wicked and fraudulent purpose underlying it, — the scheme devised by these very persons to perpetuate their own power in the corporation for the purpose of using all the eoiporale powers and opportunities to their own gain and to the great: detriment, and wrong of (he stockholders. More than this, it is charged that the sole purpose of the stockholders who went into this pool was to'secure the advantages of a pending offer of $125 per share for their stock; and that, owing to the fraudulent practice of these tin ee persons, they were inveigled into putting into i heir hands an absolute lease of power for five years, — a power shockingly abused. How, then, can it: be said that Messrs. Hoffman, McLane, and Watts are the representatives of the unfortunate persons in the pool, who are their unwilling victims, whose rights they are defrauding, and whom they have by a trap misled into a surrender of their rights?
It is said that Messrs. Watts, McLane, and Robinson are a committee to represent the pool. But their agency is limited and qualified to this extent: They can vote the stock of those who are absent. Those who are present, have an unlimited vote and an unlimited choice.
It: is said, however, that the complainant does not know who are in the pool, and that such information has been refused to him by Mr. McLane. It does not seem clear that he had the right: to demand or that .McLane was bound to furnish Mm this information. There is. no privily whatever between them. He denies absolutely the validity of McLane’s connection with the pool; the legal existence of (lie agreement; its obligation upon Cook or himself. He makes the most grave charges against Mr. McLane, and seeks this information
The demurrer because of the absence of the parties who are alleged to have sold their stock'to the Raleigh & Gaston Railroad Company is not well taken. The bill alleges, and the demurrer admits, that these persons, named, have parted with all interest in this stock, and that it has been bought in the name of the railroad company. Thenceforward they had no concern in the stock. It makes no difference to them whether this railroad company had or had not power under its charter to buy the stock, — whether or not it made use of its funds or used the money of the Seaboard & Roanoke Railroad Company. Nor does it make any matter to them who owns the stock, what rights are involved in its ownership, and what equities are in it. So far as they are concerned, they are out of the controversy, and no decree for or against them is needed or can be made. In this view of the case, it is clear that, so far as the voting power on this stock is concerned, Messrs. Watts and McLane have ceased to represent the former owners of it. We must assume, from the character of the pleadings, that these 2,000 shares have been sold, and are now in the hands of a purchaser. This revokes all authority heretofore existing from the vendor, and the restraining order in this respect must be continued.
The next ground of demurrer is that the bill is multifarious. This objection is presented by Mr. Hoffman and by the Seaboard & Roanoke Railroad Company. They both of them disclaim any connection with the pooling agreement, and deny the right of the complainant to draw them into this controversy. In the case of Barcus v. Gates, 32 C. C. A. -, 89 Fed. 783, Judge Morris says:
“Multifariousness arises from, the fact either that the transactions which form the subject-matter of the suit are so dissimilar and separate that they cannot conveniently be tried together in one record, or that some defendant is able to. say, as to a large part of the transactions set out in the bill, he has no interest or connection whatever.”
A bill is not multifarious because there are several causes of action. If they all grew out of the same transaction, and if all the defendants are interested in the same rights, and the relief against each of the
In Salvidge v. Hyde, 5 Madd. 146, it is thus put:
“If the object of the suit he single, but it happens that different persons have separate interests in distinct questions which arise out of that single object, it necessarily follows that snch different persons must be brought before the court in order that the suit may conclude the whole object.”
This suit has been sustained because it seeks to obtain possession of, and to remove a cloud on the title of, a piece of personal property,- — a certificate of stock within this district, — the possession • of this certificate being an essential link in the title of the complainant. Incidentally to the removing the cloud on the title comes up the question as to the validity of the pooling agreement under which Cook, the vendor of complainant, agreed not to sell his stock, and under which he had invested Messrs. Watts, McLane, and Robinson with its voting power in case of his absence. But the object of the suit is the possession and control of the certificate No. 754 for 153 shares. That certificate is in the possession of the defendant the Seaboard & Roanoke Railroad Company. To get possession of it, the decree must go to this company. Mr. R. C. Hoffman is president of this company. To afford complainant the attainment of his object, if this relief is given him, the president of the company must direct the return of the canceled certificate, and must issue the new certificate, ' and the decree must go to him also. So, being the president, he is a proper and a necessary party to the suit. The demuirer on this ground is overruled.
The next matter for investigation is the plea set up by the defendant Louis McLane. This plea seis out that on 11th May, 1897, this complainant exhibited Ms bill of complaint in the circuit court of the United states for the district of Maryland, against Mm, Louis McLane, Legh R. Watts, and the administrator of Moncure Robinson, to which bill the defendants had answered and which proceedings are now pending; that the same matters and questions are involved in said proceedings in said circuit court in Maryland as are involved in ihe present bill. By the exhibit filed with the plea, setting out these proceedings, it appears that in them the validity of the claim of complainant to the 153 shares of stock in certificate Ko. 754 is maintained, the pooling agreement is sought to be declared null and void, and the same positions taken thereto as in this bill. It was stated at bar during the argument (hat this bill had been amended, and a copy of the amendment was shown to the court. In said amendment all the allegations of the bill in this case were substantially, if not literally,'inserted.
Is the plea of pendency of a suit in one circuit court of the United States a bar to a suit on the same subject-matter between the same parties in another circuit court of the United States? It was stated at bar, by counsel of learning and research, that no case could be found directly in point on this question. The pendency of a suit in a state court is not necessarily a bar to a suit in the federal court between the same parties and involving the same issues. Stanton v. Embrey, 93 U. S. 548; Gordon v. Gilfoil, 99 U. S. 168; Marks v.
It is ordered that the complainant have leave, if he be so advised, to amend his complaint so as to make the signers of the pooling agreement, or some representative or representatives of them, parties to this suit.' It is further ordered that the proceedings in this cause in this court be stayed until the proceedings in the circuit court of the United States for the district of Maryland, between these parties, be determined in any way.