author: LETTS, District Judge.

text:
    CORTES v. BALTIMORE INSULAR LINE, Inc.
    District Court, S. D. New York.
    April 14, 1934.
    Jesse L. Rosenberg, of New York City, for plaintiff.
    Hunt, Hill & Betts, of New York City, for defendant.
   LETTS, District Judge.

There is before the court a motion to dismiss the complaint which was timely interposed by counsel for the defendant at the conclusion of all testimony. As the ease then stood the question raised by the motion was one of law and of such a character that decision thereon was reserved, to the end that the jury might be permitted to pass upon the issues of fact and in event of a verdict for the plaintiff the matter left in such manner that if the motion be granted the appellate court, in event of differing with the trial court upon the legal question raised, could in the correction of any error have the full matter before it for final disposition. This practice, I take it, is clearly permissible under the New York Civil Practice Act (section 459) and appears to be recognized as proper in the United States District Court sitting in this state. Italian Star Line v. United States Shipping Board E. F. Corp. (C. C. A.) 53 F.(2d) 359, 80 A. L. R. 576.

With the determination of this motion held in abeyance, the ease was submitted to the jury and a verdict for the plaintiff returned. To clarify the issue raised by the motion, the facts and travel of the ease to this point will be briefly stated.

The plaintiff is the administrator of one Victor Manuel Santiago, a seaman, who shipped on the defendant’s vessel for a voyage from the harbor of New York to Boca Grande, Fla., and return, in October, 1928. On the homeward voyage Santiago fell ill with pneumonia and died in the Staten Island Marine Hospital the morning after reaching the home port. The diagnosis made at the hospital disclosed that he was then suffering from lobar pneumonia with consolidation of the lung cells on both sides. The administrator brought suit to recover damages for his death which, in the complaint, was charged to have been caused by the failure of the master of the ship to give proper care in fulfillment of the obligation to provide proper maintenance and cure.

The case has now been twice heard. Following the first trial, which resulted in a verdict for the plaintiff, the judgment was reversed by the Circuit Court of Appeals [52 F.(2d) 22] on the ground that the seaman’s right of action for negligent care or cure was ended by his death and did not, under section 33 of the Merchant Marine Act of June 5, 1920, known as the Jones Act (46 USCA § 688), accrue to the administrator for the benefit of next of kin. Upon this issue the case was taken on certiorari to the United States Supreme Court, which reversed the Circuit Court of Appeals and held that 'the action would lie under the Jones Act. 287 U. S. 367., 53 S. Ct. 173, 177, 77 L. Ed. 368. In remanding the cause to the Court of Appeals for further proceedings, the Supreme Court said: “The Court of Appeals in its reversal of the District Court assumed without deciding that the care of the seaman had been negligent and that there was a causal relation between the negligence and the death. * * * These issues of fact being still open and undecided should be disposed of by the court below.”

Following the receipt of this mandate, the Circuit Court of Appeals [66 F.(2d) 526] wrote another opinion remanding the cause to the District Court for a new trial.

I have before me the transcript of record of the first trial. Its perusal discloses that the testimony then presented in regard to the care and attention given the seaman was substantially the same as the evidence presented at the second trial. The Circuit Court of Appeals in its second opinion [66 F.(2d) 526, 528] said: “* * * Although the ship’s officers cannot be held to the skill of expert physicians in the matter of diagnosis, we think there was evidence which justified submitting to the jury the question whether they used reasonable care in looking after the sick seaman. ° * * ”

Under the circumstances in which the ease is now before us, that expression of view would seem controlling ánd leaves as the sole matter of law yet in doubt the sufficiency of the proof of causal relation between the established negligence of the defendant and Santiago’s death. In commenting upon the medical testimony presented at the first trial upon this point, the Court of Appeals [66 F.(2d) 526, 528] had this to say: “It is true that Dr. Kienzle answered ‘Yes’ to the following question: ‘Would you say, Doctor, that if Victor Manuel Santiago had been given reasonable medical treatment by the officers on board that ship after the 17th of October 1928, that his chance of surviving would have been greater than his chance of dying?’ But this is scarcely equivalent to testimony that with reasonable certainty the defendant’s neglect can be said to have caused the seaman’s death. “ *

In addition, the doctor’s opinion is subject to criticism because his entire testimony fails to show the type of pneumonia from which the seaman was suffering. Without medical testimony that it was one of the relatively less dangerous types, the jury could only speculate which it was, and, as we have already said, if it was the Friedlander type, a finding that death resulted from inadequate treatment could not be sustained.”

Had the medical testimony presented at the second trial been identical with that at the first, I should feel compelled to accept the foregoing as an expression on the part of the Court of Appeals that causal connection between the negligence of the defendant and the seaman’s death had not been sufficiently established to support jury finding of a causal relationship. The testimony did, in my opinion, sufficiently vary on the occasion of the second trial to justify its reconsideration de novo.

True, there was no positive testimony and obviously from the circumstances of the case none could be presented establishing, with certainty, the type of pneumonia from which the seaman died. There was, however, some testimony, apart from the matter of percentages of occurrence of the several types, which would justify the jury in concluding with reasonable probability that it was not the most dangerous Friedlander type. I am mindful that even if we accept the premise that the jury was justified from the evidence in that finding, still it is clear that no doctor could testify and no jury could find, with certainty, that had the most skillful treatment been available the seaman would have lived. It can only be said that had the ship’s officers given to Santiago considerate and reasonable care within their limited knowledge and power to act, or had themselves, or with the assistance of the Coast Guard, put the patient ashore for hospitalization at a point en route instead of keeping him on board until their return to New York, his chance of recovery would have been substantially greater. It is obvious that in a trial of most issues between litigants more conclusive and satisfactory proof of causal connection than this would be required. The law must, however, to do justice between parties, recognize different degrees and standards of proof varied somewhat by the character, possibilities, and circumstances of the cause involved. Where one is fatally injured, no one with certainty can know what the individual’s life’s span would have been, but the law recognizes that the larger measure of justice is accomplished by assuming that the deceased had the average expectancy as established by the mortality tables. So we here do not know that the seaman would have lived had the defendant’s negligence not intervened. We know only that from usual experience the wrongful act of the defendant substantially lessened his chance. Inconclusive and unsatisfactory as this kind of proof may be, there intrudes upon our consideration the query in a ease of this character : Is not greater justice done by resting the burden of that uncertainty upon the wrongdoer, rather than the one wronged? My own mind is drawn to that view.

In this case when before the Supreme Court on the question of right to sue under the Jones Act, that court at page 375 of 287 U. S., 53 S. Ct. 173, 176, said: “* * * This court has held that the act is to be liberally construed in aid of its beneficent purpose to give protection to the seaman and to those dependent on his earnings. “ ” And again at page 378 of 287 U. S., 53 S. Ct. 173, 176: “* * * Congress did not mean that the standards of legal duty must be the same by land and sea. Congress meant no more than this, that the duty must be legal, i. e., imposed by law; that it shall have been imposed for the benefit of the seaman, and for the promotion of his health or safety. * * * ”

If in this ease we accept as established the fact of negligent conduct of the defendant and deny recovery on the ground of insufficient proof of causal connection with death, there will be left open a class of cases under a statute intended for the protection of the health and safety of seamen where neglect of duty can be admitted with impunity. The spirit of our jurisprudence, while fostering eonelusiveness and certainty, does not look with favor upon nurturing wrongdoing and denying a remedy. The nearest approximation to reasonable justice in this case necessitates the denial of the motion to dismiss.

Motion denied.


source: Caselaw Access Project

author: NORTHCOTT, Circuit Judge.

license: Public Domain

text:
    BUCKLAND et al. v. LEE, Atty. Gen., et al.
    No. 2916.
    District Court, S. D. West Virginia.
    Oct. 16, 1931.
    Pierce, Smith & Spilman, of Charleston, W. Va., for plaintiffs.
    Howard B. Lee, R. Dennis Steed, and W. Elliott Nefflen, all of Charleston, W. Va., for defendants.
    Before PARKER and NORTHCOTT, Circuit Judges, and McCLINTIC, District Judge.
   NORTHCOTT, Circuit Judge.

This is a suit praying that the provisions of sections 3, 4, 5, 6, 7, 8, 9, 17, 18, 19; 20, 25, and 30 of article 6, of chapter 17, of the Code of West Virginia, in so far as the same purport to apply to certain motor vehicles operated in the transportation and delivery of newspapers, published by one of the plaintiffs, the Charleston Mail Association, a corporation, be declared to be invalid as violative of the Constitution of the United States and the amendments thereto. The vehicles in question are operated by the other plaintiffs, who carry and deliver newspapers by private contracts with the newspaper company over certain routes.

The bill also prays for a preliminary injunction, and, after hearing, for a permanent injunction against the defendants, who are' officials of the state of West Virginia, of the various counties in which the motor vehicles are operated, and members and employees of the. State Road Commission of West Virginia, enjoining them from enforcing against the plaintiffs any of the provisions of the sections of the state statute above enumerated, and further enjoining them from prosecuting the plaintiffs under the statute.

The judge of this court, on the filing of the bill, convened a three-judge court, to hear the matter, under section 266 of the Judicial Code as amended (USCA title 28, § 380). Owing to an agreement between counsel that nothing would be done until the hearing, no restraining order was entered.

A hearing was had before this three-judge court, at Charleston, W. Va., on July 28, 1931, and the cause submitted, on the pleadings and an agreed statement of facts, both as to the application for the preliminary and the permanent injunction.

Finding of Facts.

•It appears that the plaintiff the Charleston Mail Association is a corporation engaged in the business of publishing “The Charleston Daily Mail,” a daily newspaper of Charleston, W. Va., and the other plaintiffs are engaged in delivering said newspaper under private contract with the newspaper company, over certain fixed routes daily.

That the carriers do not engage in the business of carrying either passengers or freight for hire for the public, and that approximately 40 per cent, of the circulation of the “Mail” is delivered by the plaintiff carriers.

That the plaintiff carriers own their own automobiles and trucks in which the deliveries are made. Some of the carriers using automobiles and others using trucks.

That the carriers had been for some time prior to the institution of this suit operating under the same licenses from the State Road Commission of West Virginia, as are issued to private individuals for automobiles and trucks used solely for private purposes, the classification for automobiles being “A,” and for trueks “B.”

That the classification for motor vehicles used commercially is class K, vehicles in which class pay a fee double that paid for trueks in class B.

That in making application for the licenses, under which they operated their vehicles, the carriers did not state to the Road Commission for what purpose the vehicles were to be used.

That prior to the institution of this suit some of 4ho carriers were threatened with arrest, and others arrested by members of the West Virginia State Police for operating their vehicles without having secured the proper license therefor. That at conferences had with the Road Commission and the heads of the state police (Department of Public Safety), attorneys for the plaintiffs were informed that licenses would have to be applied for by the carriers under class K, and a larger sum paid for the license than was paid, under classes A and B, and that unless the carriers did apply for the proper licenses and secure a certificate of convenience and necessity they would be prosecuted.

That later, on April 22, 1931, and prior to the bringing of this suit, counsel for the plaintiffs had a conference with various officials of the State Road Commission, including defendant F. O. Saunders, Supervisor of Transportation, at which conference the proposed bringing of this suit was discussed, and that the said Saunders then stated to counsel for the plaintiffs that said motor delivery carriers would be permitted to secure class K licenses by paying the tax required for that class, and without securing a certificate of convenience or necessity, and without complying with certain provisions applicable to public or common carriers. On the occasion of this conference Saunders informed counsel that the Road Commission might hereafter, if it SO' desired, require the carriers to secure certificates of convenience, and might, if it so desired, regulate them as common carriers. After tliis conference this suit was instituted.

Conclusions of Law.

The first question to be considered is whether the present road statute of the state of West Virginia, properly construed, requires the plaintiff carriers, who are admittedly private carriers for compensation, to apply for certificates of convenience and submit themselves to be regulated as common carriers. In other words, does the statute require the private carrier to become, in effect, a common carrier? We do not think the statute can be so construed.

Under the decisions of the Supreme Court, it seems clear that if it required a private carrier to become a common carrier the statute would he unconstitutional. Michigan Public Utilities Commission v. Duke, 266 U. S. 570, 45 S. Ct. 191, 69 L. Ed. 445, 36 A. L. R. 1105; Frost v. Railroad Commission of State of California, 271 U. S, 583, 46 S. Ct. 605, 70 L. Ed. 1101, 47 A. L. R. 457; Smith v. Cahoon, 283 U. S. 553, 51 S. Ct. 582, 75 L. Ed. 1264, United States Supreme Court, decided May 25, 1931.

In these eases the state statutes clearly required the private carrier to become a common carrier, or at least to apply for a certificate as such, and to submit to be regulated as a common carrier. Such a situation does not, in our opinion, exist here.

Section 1, art. 6, chapter 17, Code of 1931 (West Virginia), reads as follows: “§ 1. License for Motor Vehicle Required; Application. — No motor) vehicle shall be driven upon the public roads, or upon any road or street within any incorporated city, town or village within the State, until the owner first shall have obtained from the state road commission, as herein provided, a license or certificate of registration therefor. An applicant desiring such license or certificate may obtain the same by filing with the commission, by mail or otherwise, a statement setting forth the character of the motor vehicle to be licensed, including the name of the manufacturer, the style, color of body, motor number, type and factory number of such vehicle, the character of the motor power, the name, age, residence and business address of the owner of such vehicle, and the name of the county in which he resides, and shall state whether such vehicle is or is not to be used in the public transportation of passengers or property, or both, for compensation, and, if so used or to be used, the applicant shall so certify, and shall, as a condition precedent to the securing of such license or certificate of registration, obtain a certificate of convenience from the state road commission in the manner hereinafter provided. (1921, c. 112, § 76 ; Code 1923, c. 43, § 76; 1923, c. 6, § 76; 1925, c. 17, § 76.)”

It will be noted, by reference to the prior act (section 76, c. 17, Acts 1925), that the word “public” is inserted in the 1931 act, thereby clearly relieving those engaged in the private transportation of passengers or property for compensation from the necessity of securing the certificate of convenience required in the case of common carriers.

Section 26 of the same article is as follows: “§ 26. Class K. Fee for Motor Vehicles Operated for Transportation of Property, Not Running Over a Regular Route or Between Fixed Termini. — Motor vehicles operated for transportation of property, not running over a regular route or between fixed termini, shall each be charged and pay a fee of double that of trucks not used commercially. (1923, c. 6, § 82, Class H-4; 1925, c. 17, § 82, Class H-4.)”

Statutes must be construed as a whole and where possible must be so interpreted as to give effect to the intention of the Legislature. Here it seems evident that owners of vehicles of the class operated by the plaintiff carriers were not intended by the Legislature, as that intention is expressed by the language of the act, to be compelled to secure certificates of convenience.

It seems plain that the plaintiff carriers cannot lawfully operate under the licenses held by them and for which they applied, that is, under classes A and B, for these classes only include vehicles operated privately, and not for compensation. That class K is the proper class in whieh the vehicles operated by the plaintiff carriers should be placed, is evident. It is manifestly just that the vehicles operated by these plaintiffs, using the roads as frequently and as constantly as they do, should pay a greater license fee than those properly in classes A and B.

It is true that section 3 (Code 1931, 17-6-3) provides that a certificate of convenience and necessity will be required when the motor vehicle shall be operated over any public road or highway for the transportation of property or passengers for compensation; but section 3 goes on to say that “such classification shall include public livery vehicles, cars for hire or for rent, taxicabs, bus lines, truck lines, and any other transportation of passengers or property for compensation, without regard to whether such operation is between fixed termini or over regular routes or otherwise.” In accordance with the well-recognized rule of interpretation, general language coming after a specification of particulars is limited by such specification to things of like character; and when this rule is applied here, the other transportation of passengers or property for compensation means such transportation as public livery vehicles, cars for hire or for rent, taxicabs, bus lines, or truck lines. 25 R. C. L. 996; Swift & Co. v. Columbia Railway, Gas & Electric Co. (C. C. A.) 17 F.(2d) 46, 51 A. L. R. 983. It is true that the holder of a certificate of convenience and necessity is required by section 9 (Code 1931, 17-6-9) to pay the fees prescribed in classes H to K; but it does not follow that every person required to pay the fees in classes H to K is required also to obtain a certificate of convenience and necessity. The correct interpretation of the statute would seem to be that sections 16 to 26 (Code 1931, 17-6-16 to 26), inclusive, prescribe the fees which must be paid for the operation of vehicles; and these sections have no relation to whether a certificate of convenience and necessity is required or not. In determining whether sueh certificate is necessary, the court must he guided hy sections 1 and 3.

If, however, the language of the statute he fraught with ambiguity, tbe court, in interpreting same, must give it such construction as is in consonance with the Constitution. This rule is well settled. 25 R. C. L. 1000. It is clear, therefore, that the statute must be construed as requiring certificates of convenience and necessity only in the case of common carriers. Any carrier, therefore, engaged in transportation of property for hire must pay the fee assessed for class K under section 20; but sueh carrier will he required to apply for the certificate of convenience and necessity prescribed by section 3 only if he is engaged as a common carrier in the public transportation of property.

Again we are not concerned with any differences that may have arisen between representatives of the plaintiffs and employees, officials, or representatives of the road commission prior to the conference of April 22, 1931. At that conference, had with representatives of plaintiffs, it was made clear by the Road. Commission that the plaintiff carriers would not be required to apply for or secure certificates of convenience, nor would they be required to submit themselves to regulation as common carriers. This was the situation at the time of the bringing of this suit, and as we see it tbe rights of the plaintiffs were fully protected.

But even if the statute be construed as requiring a certificate of convenience and necessity from a private carrier and for that reason violative of constitutional provisions, this does not entitle complainants to the injunction prayed. The fee assessed under class K cannot be said to be tied up with any requirement for a certificate of convenience and necessity; and the officials of the state have notified complainants that while they will be required to pay the fee they will not be required to obtain the certificate of convenience and necessity. In other words, it clearly appears from the pleadings and the stipulation as to the facts that the officials of West Virginia are seeking to enforce only the constitutional provision of the statute, and are not seeking to require a certificate of convenience and necessity which would be unconstitutional. It is clear, therefore, that even if the statute requires of private carriers a certificate of convenience and necessity, complainants are not entitled to enjoin the officials of the state, for the good and sufficient reason that the officials of the state are not seeking to enforce sueh unconstitutional provision. The rule is well settled that courts of equity will only grant an injunction to prevent irreparable injury where there is threatened infringement of rights of property on aeeount of unconstitutional legislation. 14 R. C. L. 435; Prosser v. Northern Pacific Railroad Co., 152 U. S. 59, 14 S. Ct. 528, 38 L. Ed. 352; High on Injunctions, §§ 1327 and 1329a. In this case, if the statute be assumed to he unconstitutional, there is no threat of danger or of irreparable injury to complainants, because the officials of the state are not attempting to enforce such provision. As said hy the Circuit Court of Appeals in the recent case of Blease et al. v. Safety Transit Company, 50 F.(2d) 852, 850, “it is elementary that a court of equity will not grant an injunction to restrain one from doing what he is not attempting and does not intend to do.”

Any prior improper construction of the statute, by rule or representation that may have been made, was corrected by the attitude of the Commission at the conference of April 22, and it is in view of the situation as it existed at the time of the application for the injunction that we must pass on the question.

As was said by Mr. Justice Holmes, in the recent ease of Bain Peanut Co. v. Pinson et al., 282 U. S. 499, 51 S. Ct. 228, 229, 75 L. Ed. 482, “The interpretation of constitutional principles must not be too literal. We must remember that the machinery of government would not work if it were not allowed a little play in its joints.”

Having in mind the principle that federal courts will not interfere with the management of the internal affairs of a state by its legislative, executive and judicial departments unless the necessity therefor is clearly apparent and is imperative [Liberty Cent. Trust Co. v. Greenbrier College for Women (D. C.) 50 F.(2d) 424], and the principles that a legislative act will not he held unconstitutional unless.it is clearly so, we are of the opinion that the act in question here, properly construed, is not unconstitutional.

To recapitulate, we are of the opinion that the relief prayed for should be denied for these reasons: (1) Because, properly interpreted, the statute of West Virginia clearly does not require a certificate of convenience and necessity of private carriers; (2) because, if there be ambiguity in the statute, same must be given an interpretation in accordance with constitutional provisions, as it is not to be assumed that tbe Legislature would enact a statute in violation of the Constitution; and (3) because, if the statute be interpreted to require a certificate of convenience and necessity of private carriers, complainants are not threatened with injury on account of this unconstitutional provision, because the officers of the state, prior to the institution of the suit, notified them that no such certificate would be required.

Should the defendants, or any of them, attempt, in the future, to improperly construe the act, the courts would be swift to grant relief.

Application for injunction denied, with costs to be assessed against the plaintiffs.


author: REEVES, District Judge.

text:
    HACKLER et al. v. FARM & HOME SAVINGS & LOAN ASS’N et al.
    No. 2447.
    District Court, W. D. Missouri, W. D.
    Feb. 28, 1934.

      Sam M. Wear, of Springfield, Mo., and R. M. Sheppard, William L. Vandeventer, Walter W. Calvin, Bert S. Kimbrell, and Phineas Rosenberg, all of Kansas City, Mo., for plaintiffs.
    Cyrus Crane and John H. Lathrop, both of Kansas City, Mo., and Boyd Ewing and Lynn M. Ewing, both of Nevada, Mo., for defendants.
   REEVES, District Judge.

The complainants in this ease on specified grounds have asked for the appointment of a receiver to wind up the affairs of the association, sell its assets, and distribute the proceeds as varied and multiple interests might require.

The defendants have moved to dismiss the bill upon the grounds that the complainants do not enjoy or possess the right to maintain the action, and that, moreover, jurisdiction of the subject-matter is vested in a state court.

The complainants are shareholders of the codefendant Farm & Home Savings & Loan Association, a corporation, organized under the provisions of chapter 35 (sections 5576-5628), R. S. Mo. 1929, relating to the subject of building and loan associations. The complainants acquired their stock, or shares, in the year 1923.

In the year 1931 (Laws 1931, p. 141, [Mo. St. Ann. §§ 5576-5628, pp. 773-813]), the General Assembly of the state of Missouri revised the building and loan association laws of the state by imposing additional requirements and providing for additional regulations. Such associations are quasi public, that is, of a public character.

According to the statements of counsel, the defendant association has been but recently released from a receivership in a state court. Such receivership was had in accordance with the laws governing such associations. In a proper proceeding, the building and loan supervisor was appointed receiver, as contemplated and provided by express statute. Reorganization plans were proposed by the association and approved by the court having jurisdiction of such receivership.

Certain shareholders, including the complainants, have appealed from the decree approving said plan. This appeal is pending in the Supreme Court of the state of Missouri for review as to the validity and propriety of said plan. No supersedeas bond was given on such appeal. The court, therefore, ordered the plan into effect and immediate operation. The assets of the association were thereupon restored to the board of directors of the defendant association.

It is the duty of the court to notice the laws of the state of Missouri.

In this case consideration will, of course, be confined to those particular enactments relating to the subject of building and loan associations. The validity of such enactments is not challenged.

It must be conceded that it is within the police power of the state to enact and enforce regulatory measures for the control, management, and direction of its corporate creatures. Such a power is inherent in any government. The chief object of such power is to promote the general welfare of the people. It would render such power nugatory and ineffective if the state should be unable to place appropriate restraints upon the private rights of either persons or property. These are fundamental propositions that cannot be denied. Moreover, such reasonable regulatory measures of a police nature may be enacted and promulgated at such times as the Legislature may deem proper, and private rights must always be subject to the reasonable restraints thereof without being able to assert impingement upon contractual rights.

“It is the duty of the courts to enforce the state’s police regulations enacted by the legislature in good faith and with reasonable and appropriate regard for the protection which the state owes to the life, health and property of her citizens.” 12 C. J. 932, § 443.

It should be added that “the legislature is the sole judge as to,all matters pertaining to the policy, wisdom and expediency of statutes enacted under the police power.” 12 C. J. 932, 933, § 443; Erie R. Co. v. Williams, 233 U. S. 685, 34 S. Ct. 761, 58 L. Ed. 1155, 51 L. R. A. (N. S.) 1097.

The laws relating to the subject of building and loan associations enacted by the General Assembly of the state of Missouri were comprehensive both before the amendment of 1931 and thereafter. It is provided that:

“The supervisor of building and loan associations shall have charge of the execution of the laws relating to * * * building and loan associations.” Section 5579, R. S. Mo. 1929 (Mo. St. Ann. § 5579, p. 774).

This is clearly the exercise of a police power, and reference should' be made to the laws relating to building and loan associations, to ascertain what laws said supervis- or is called upon to execute. Among other powers granted to him is a visitorial one. Under this authority, he may visit and examine extensively into the affairs of building and loan associations. Moreover, he is specifically clothed with power to correct illegal practices committed by the officers of such associations. By section 5624, R. S. Mo. 1929 (Mo. St. Ann. § 5624, p. 808), the duty is placed upon the supervisor to make full and complete examinations of all associations. The nature and character of such examinations is set out in the statute. The same section places restrictions upon the managerial methods of the association. The supervisor is fully authorized to determine what would constitute an illegal practice. In the event of illegal practices or wrongdoing on the part of the officers, the supervisor is directed by section 5626, R. S. Mo. 1929 (Mo. St. Ann. § 5626, p. 809), to discipline the officers of the association and extend to them a limited time within which “to correct any illegal practices.” Failure to obey such admonition would authorize the seizure of the assets by the supervisor. In like manner, section 5627, R. S. Mo. 1929 (Mo. St. Ann. § 5627, p. 811), clothes the supervisor with authority to seize control of the association. If the facts warrant, the state through its Attorney General may proceed for the formal appointment of the supervisor as receiver under the provisions of section 5628, R. S. Mo. 1929 (Mo. St. Ann. § 5628, p. 813).

The complaint in the bill is that the plan of reorganization heretofore mentioned is void as in violation of constitutional rights. This question is now pending in the Supreme Court of Missomi.

The bill further alleges that prior to such plan of reorganization, the relation between the complainants and the association was that of creditors and debtor, and that the plan adopted changes such relationship. According to the allegations of the bill, complainants are simple contract creditors.

It is further alleged that the management of the association is now in bad hands, and that illegal and unlawful practices are being indulged.

There is an averment that these unlawful and illegal acts are dissipating the assets of the association, ahd that there is a partisan discrimination practiced by the officials between shareholders or creditors.

It will be observed from the foregoing that this constitutes one of the exceptional cases where the appointment of a receiver may be made the main object of the bill.

Other facts as they may become pertinent will he stated in the course of this memorandum opinion.

1. If the complainants are and were, as they allege in their bill, simple contract creditors, they would ordinarily have no right to ask for the appointment of a receiver.

The rule is that only judgment creditors, or those holding liens are entitled to ask for so di-astie a remedy. There is an exception to that rule, however. It may be that the allegations of complainant’s bill have brought them within such exception:

“Where the assets of an insolvent corporation which a creditor is entitled to have applied in satisfaction of his demands will probably be lost or fraudulently disposed of by improvident or corrupt officers, and the creditor has no adequate remedy at law, the order will be made.” Lively v. Picton (C. C. A.) 218 F. 401; 14A C. J., § 3176, p. 957.

2. It appears from the foregoing that such proceeding is not permissible if the creditor has an adequate remedy at law.

It has been repeatedly announced that the appointment of a receiver is not strictly a judicial act. In Carey v. Giles, 9 Ga. 253, the court said in reference to the appointment of a receiver by the Governor of that state:

“It was not a ease of controversy between party and party; nor is there any decree or judgment affecting the title to property; it determines no right, legal or equitable. The receiver is merely to collect, hold and disburse the assets of the bank for the benefit of all concerned; and it is in the power of the Courts to direct and control him in the proper execution of his duties.”

This is supported by the Act of Congress in providing for executive receiverships in eases of national banks, and also for certain farm loan companies. See also section 23, p. 79, Tardy’s Smith on Receivers, vol. I (2d Ed.); also the Missouri Insurance Code, which limits the right of appointment.

In the exercise of its police power, the sovereign state of Missomi has undertaken the supervision and regulation of building and loan associations. There has been created the office of building and loan supervisor. Such officer is clothed with express power to inquire, by full and complete examination, into the operation of each of the associations organized within the state and doing business under his supervision. He has authority to correct illegal practices, or, as an alternative, he may take over the management and control of the association. In case of insolvency, and for the purpose of. enabling him to secure an adjudication upon the rights of all interested parties, he could, acting through the Attorney General and in the name of the state of Missouri, procure his own appointment as receiver. This is the remedy provided by the state under its regulatory power for the protection of the rights of all persons whomsoever.

Provision is made for an appropriate adjudication where a controversy arises. The building and loan supervisor is given full “charge of the execution of the laws relating to * * * building and loan associations.” The complainants were chargeable with knowledge of this fact when they became shareholders or creditors of the association. Moreover, they were familiar with the inherent right of the state to modify or amend its police regulations. Such reasonable acts on the part of the state cannot be construed as changing the contract rights of the parties.

The complainants never acquired a right to have the assets of the defendant association administered in the federal court. Such a remedy was wholly separate and apart from the contractual rights existing between them and the association. But even if so, it could be taken away. Bronson v. Kinzie, 1 How. 311, 11 L. Ed. 143; State ex rel. v. Vandiver, 222 Mo. 206, 121 S. W. 45; Bushnell v. Leland, 164 U. S. 684, 17 S. Ct. 209, 41 L. Ed. 598.

By becoming a shareholder of the association, the complainants never contracted away any rights in respect of administering and winding up the affairs of the association. Such a right never attached in their favor. They must have understood that it was not only within the right of the state to put restrictions upon receiverships, but the state might have enacted, as in the ease of national banks and farm loan banks, a law which provided exclusively for an executive receivership.

Neither can it be contended that the complainants have rights equal to that of the building and loan supervisor in bringing about a receivership. It does not seem reasonable that it was the intention of the Legislature to clothe the building and loan supervisor with no greater authority than that possessed by a shareholder or a creditor. It would be unseemly for sucb an officer of tbe state to strive in the race of shareholders and creditors to be first in point of time in asking for a receiver for the purpose of winding up its business.

The Legislature could not have had this limited purpose. We are strengthened in this view by the case of Koch v. Missouri-Lincoln Trust Company, 181 S. W. 44, 48. This was a decision by Division 1 of the Supreme Court of Missouri. In that ease, two of the four judges concurred only in the result. This might be construed to limit the authoritative nature of the opinion. It is held in the opinion that the language of the Legislature in conferring upon the hank commissioner authority to execute the banking laws was a limitation on the remedy by receivership. The language of the statute there under observation was no stronger than that here considered. In reasoning on the matter, the court used this significant language:

“That the Legislature has the power to provide the method by which the affairs of banks may be wound up, and that it may designate a particular officer to initiate such proceedings, is indisputable (People v. Superior Court, 100 Cal. loc. cit. 118, 34 P. 492), and that sound policy dictates the exercise of such power by the Legislature is clear enough.”

The court then quoted from Attorney General v. Continental Life Ins. Co., 53 How. Prac. (N. Y.) 22:

“His (the creditor’s) power to wind it up, in which many others besides himself are interested, is only taken away. When, however, public policy and the interests of all, as well as his, demand its death, * * * the officers of the state alone can take its life and administer its assets. That this policy is better, wiser, and safer for all is most manifest. * * * Rights of stockholders and creditors who have no knowledge thereof should not be jeopardized by suits instituted by any stockholder under the Revised Statutes, and so brought for a fraudulent and wrecking purpose by collusion with the officers of the corporation, which rights can surely be imperiled if the remedies given by the Revised Statutes still exist. The temptation so to do was too great to make every stockholder and every creditor the depositary of so great a power for mischief, and hence, it seems to me that the act of 1853 wisely provided a new method of extinction and administration by which the power which gave the life is alone empowered to take it.”

Judge Bond, one of the judges concurring in the result, acknowledged the right of the Legislature to restrict the appointment of a receiver in administering the affairs of a defunct corporation. He did not believe, however, that the act under inquiry was adequate for that purpose. He said:

“It is an invariable rule that the jurisdiction of equity is not dislodged by the subsequent enactment of a statute providing other methods of redress, unless such statute provides in terms for ousting the previous remedies afforded by equity.”

In this case the aet of the Legislature was one that inhered in sovereignty. Its language has force enough and is comprehensive enough to put a complete restraint upon the administration of the assets of building and loan associations in eases of insolvency. It is enlightening to observe the following language employed by the author of the opinion in the Koch Case, supra:

“This court has repeatedly expressed the hesitation it feels in sanctioning the stockholder’s right, unhampered by statute, to sue to wind up the affairs of his corporation.”

This expresses a judicial policy.

In the federal court, great restraints are placed upon a stockholder by rule 27 of the Federal Equity Rules (28 USCA § 723), which is as follows:

“Every bill brought by one or more stockholders in a corporation against the corporation and other parties, founded on rights which may properly he asserted by the corporation, must be verified by oath, and must contain an allegation that the plaintiff was a shareholder at the time of the transaction of which he complains, or that his share had devolved on him since by operation of law, and that the suit is not a collusive one to confer on a court of the United States jurisdiction of a ease of which it would not otherwise have cognizance.- It must also set forth with particularity the efforts of the plaintiff to secure such action as he desires on the part of the managing directors or trustees, and, if necessary, of the shareholders, and the causes of his failure to obtain such action, or the reasons for not making such effort.”

In view of the repeatedly announced reluctance of the judiciary to sanction the right of a stockholder to sue to wind up the affairs of his corporation, the foregoing statutes and federal rule promulgated by the Supreme Court must be interpreted as a clear and distinct purpose to limit the rights of such shareholder to very narrow hounds.

'It is conceivable that upon the disability of the state supervisor or his -wrongful unwillingness to proceed, a shareholder might, with appropriate averments, obtain the favorable consideration of a chancellor. Sueh was the intimation in Corbett v. Lincoln Savings & Loan Association, 223 Mo. App. 329, 17 S.W.(2d) 275.

From the foregoing, it will be observed that it is not only the tendency of the courts to deny the right of a shareholder under the circumstances here present to sue to wind up his corporation, but that, by statute, the Legislature of Missouri has provided a full, complete, and adequate remedy at law, which according to a reasonable interpretation is exclusive. Even if not exclusive, the complainants in this case cannot properly assert that they are without remedy at law, for the reason that the state has provided a full, complete, and adequate remedy.

The complainants are not asserting a controversy between them and the defendants, but their suit is wholly designed to wind up the affairs of their corporation. The state has amply provided for this with inexpensive facilities.

The attention of the court has been called by complainants to section 5593, R. S. Mo. 1929. This section was brought into that Revision as section 10201, R. S. Mo. 1919. Identical provisions are embodied in the re-enactments of 1931.

The pertinent portion is as follows:

“There shall be issued to every shareholder a certificate signed by the president and secretary of the corporation, and evidenced by its corporate seal, setting forth distinctly and clearly the class of stock for which he has subscribed, the dividends or earnings which it may draw, and the withdrawal value which it may have at any time, and also the time when the said stock shall be withdrawable. Such certificate shall be deemed in all courts of justice to be a contract between the corporation and the shareholder, and shall determine at all times the liability of the corporation to the holders of its shares.” (Mo. St. Ann. § 5593, p. 785).

No point can be made upon this statutory provision. There is no controversy upon the issues here presented but that the contracts or certificates held by the complainants will measure and fix the liability of the association.

The only point here is that the complainants ask this court to wind up the affairs of the corporation and adjudicate the liability of the association upon sueh certificates. The Legislature of Missouri has provided the means whereby this can be less expensively accomplished.

As such means are full, complete, and adequate, the complainants should be s required to resort to them.

3. The complainants allege the invalidity and unconstitutionality of the plan of reorganization provided for by statute and approved by the court in a former proceeding. They have appealed from the decree of the court approving said plan, and sueh appeal is now pending in the Supreme Court of Missouri.

While it is true that this does not debar their right to challenge the constitutional validity of such plan in another court of competent jurisdiction, yet this fact would argue against the necessity for the appointment of a receiver.

Other allegations of the bill pertain to illegal practices and mismanagement by the officers of the association.

The complainants have their remedy through the good offices of the building and loan supervisor. It must be presumed that he will do his full duty and that the identical matters complained about by them will have his attention and that same will be corrected, or that he will utilize the authority of the statute to wind up the affairs of the association. In such event, provision is made for the ascertainment and protection of all the rights of the complainants.

4. It cannot be too often reiterated that the appointment of a receiver, whether ancillary, or otherwise, is a harsh remedy.

In the case of Brictson Mfg. Co. v. Close et al., 280 F. 297, loc. cit. 301, the Court of Appeals for the Eighth Circuit said:

“It is recognized by all the authorities that the appointment of a receiver is a drastic remedy, and is never granted if there be other relief not so severe.”

In the above case the court did not consider the very exceptional eases where a receiver is appointed solely for the purpose of winding up the affairs of a corporation. The latter is a still more drastic remedy.

5. Moreover, the appointment of a receiver under any circumstance is within the sound judicial discretion of the court. This means that it is “not an arbitrary or capricious liberty bounded by no rules and limited only by the varying temperaments of the ephemeral incumbent of the judicial office.” Price v. Bankers’ Trust Co. of St. Louis (Mo. Sup.) 178 S. W. 745, 750.

In the ease last cited, Judge Faris, as a member .of the Supreme Court of Missouri, now Judge of the United States District Court, Eastern District of Missouri, delivered the opinion, and, among other things, he said:

“It is also fundamental that this hand of the court will be laid upon property of the owner and' that owner evicted from possession thereof only to prevent irreparable injury or to prevent justice from being defeated (State ex rel. v. McQuillin, 260 Mo. 164, 168 S. W. 924), and only when there is no other adequate remedy (Blades v. Billings, etc., Co., 154 Mo. App. 350, 134 S. W. 579; Alderson on Receivers, 487). It is also settled, if not fundamental, that this great power of disturbing the possession of the true owner, or of him who is entitled to the possession, ought to be exercised with extreme caution and ordinarily only in cases of imminent danger of loss, or of damage or of miscarriage of justice.”

See, also, Bushman v. Bushman, 311 Mo. 551, loc. cit. 560, and 561, 279 S. W. 122; State ex rel. Hampe v. Ittner, 304 Mo. 135, loc. cit. 151, 263 S. W. 158; State ex rel. v. Calhoun, 207 Mo. App. 149, loc. cit. 156, et seq., 226 S. W. 329.

6. Upon other grounds there is a question as to the right of this court to appoint a receiver.

Heretofore, as it appeared from the arguments of counsel, the building and loan supervisor in a proper proceeding was appointed receiver of the defendant association. He continued in that capacity until reorganization plans contemplated by statute had been worked out and approved by the court.

Although an appeal was taken from the decree of the court approving such plan, a supersedeas bond was not given, and it then became the duty of the court to. permit the promulgation of said plan, and its enforcement by practical operation. If the Supreme Court of Missouri should hold the plan inequitable or invalid, as urged by the complainants in this case (and who are appellants in that ease), such a decision on the part of the Supreme Court would automatically reinstate the receiver and devolve upon him the duty either to provide a valid plan of reorganization or wind up the affairs of the association.

The discharge of the receiver was directed and authorized upon the grounds that an appropriate and valid plan of reorganization had been adopted. Its rejection by the Supreme Court would leave the suit of the state of Missouri by the Attorney General pending in a state court and undetermined.

That suit under the statute contemplates the appointment of the building and loan supervisor as receiver. Such was its entire object. The trial, court would therefore be reinvested with jurisdiction to reappoint the supervisor as receiver under a petition pending at the time this suit was filed.

The conclusion is inescapable, that even if this court could otherwise properly appoint a receiver, the assets of the association are, constructively, if not actually, now in the custody of law.

In view of the foregoing, it must be held that complainants as shareholders or simple contract creditors do not possess the right or have the capacity to ask this court to appoint a receiver.

Moreover, it appears from the bill and the statutes of Missouri that the complainants have a full, complete, and adequate remedy at law. Furthermore, the necessities of the situation do not call for the exercise on the part of this court of so drastic a remedy.

Accordingly, the application for the appointment of a receiver will be denied and dismissed.

It is so ordered.


author: HAHN, District Judge.

text:
    McNARY et al. v. GUARANTY TRUST CO. OF NEW YORK.
    No. 3969.
    District Court, N. D. Ohio, W. D.
    Sept. 12, 1933.
    On Rehearing March 27,1934.

      Tracy, Chapman & Welles, of Toledo, Ohio, for plaintiffs.
    Baker, Hostetler, Sidlo & Patterson, of Cleveland, Ohio, for defendant.
   HAHN, District Judge.

Three motions have been filed in the above-entitled cause: (1) Motion to transfer cause to equity docket; (2) motion of plaintiff for a judgment of default upon petition; and (3) motion of defendant for extension of time to move, plead, or demur.

The ease has been docketed as a suit at law. The plaintiff is a committee acting for the-protection of bondholders of first mortgage leasehold bonds of 269 Madison Ave-hue, Inc. The latter company issued $950,-000 of bonds which have been retired to $851,000 of bonds which axe still outstanding. The committee represents $673,000 of bonds, and by representation undertakes to represent the remaining $178,000 of outstanding bonds. •

Generally speaking, the petition alleges that 269 Madison Avenue, Inc., was the owner of a lease for a period of 63 years on 269-271 Madison avenue in New York City; that it made a sublease of said property to the National Bank of Commerce which, by its terms, might cover the same period as the lease of 269 Madison Avenue, Inc. The sublease provided that a new and improved banking building should be erected on the premises. To secure funds for that purpose, a bond issue was placed upon the lease and the leasehold, and a mortgage and deed of trust was executed to a corporate trustee; the purpose being to apply the net rentals paid by the National Bank of Commerce to the payment and retirement of the bond issue, which was in the amount of $950,000. The National Bank of Commerce was absorbed by the defendant Guaranty Trust Company of New York. It is claimed that it wrongfully procured a release from 269 Madison Avenue, Inc., of the sublease to the National Bank of Commerce; that it brought about, or connived in bringing about, dispossess proceedings, which resulted in the termination of the 63-year lease of 269 Madison Avenue, Inc.

The facts stated axe a form of “milking” which has lately received much attention from the courts. 46 Harvard Law Review, 491. The petition deals with the facts from four points of view and states four separate causes of action. The first cause of action relies upon the sublease as a contract for the benefit of a third party, to wit, the bondholders; the second cause of action alleges waste in bringing about the cancellation of the sublease and the destruction of the leasehold interest; the third cause of action alleges that the parties conspired and connived to destroy the security of the bondholders; and the fourth cause of action alleges that the defendant induced a breach of the contract or contracts for the benefit of the bondholders.

Unless the second cause of action is one for equitable waste, all of the causes of action are causes of action which ordinarily might he maintained in a court of law.

The prayer of the petition is for a judgment for the full amount of the bonds still outstanding, $851,000, and for interest and costs. Although the prayer of the petition is for narrow and limited relief [Parker State Bank v. Pennington (C. C. A. 8) 9 F.(2d) 966, 970], as will hereinafter appear, other relief is necessary for a complete determination of the controversy between the parties because of the representative character of the suit. Moreover, if full and complete relief can he had only in a court of equity, such court will administer causes of action which otherwise would he legal causes of action. In the much-eited case of Holland v. Challen, 110 U. S. 15, 25, 3 S. Ct. 495, 501, 28 L. Ed. 52, Mr. Justice Field said: “It is not an objection to the jurisdiction of equity that legal questions are presented for consideration which might also arise in a court of law. If the controversy be one in which a court of equity only can afford the relief prayed for, its jurisdiction is unaffected by the character of the questions involved.” See, also, New Jersey, etc., Co. v. Gardner-Lacy Lumber Co. (C. C. A. 4) 178 F. 772, 780, and Wehner v. Bauer (C. C.) 160 F. 240, 242.

A part of the fourth paragraph of the first cause of action of the petition alleges: “The owners and holders of the remainder of said issued and outstanding bonds axe numerous. The names and locations of many thereof are unknown to plaintiff and it is impracticable to attempt to make them parties to this action by name. Said owners and holders of the remainder of said bonds have a common interest in this action with plaintiff. This action is brought by plaintiff on its own behalf and also on behalf of the holders and/or owners of all of said issued and outstanding bonds which have not been deposited as aforesaid, (who shall participate herein or benefit in any way by virtue of this action)."

The motion to transfer is based solely upon the ground that a representative suit is maintainable in the federal court only on the equity side thereof. In other words, defendant claims that in the federal courts where, because of constitutional provisions, the distractions between law and equity axe rigidly adhered to, a representative or class suit can be maintained in equity only.

Since the ground of the motion clearly appears from the petition, it cannot be said that the motion to transfer was prematurely made.

No ease has been called to my attention, and I have found none which holds that a representative or class suit is maintainable at law either in the state courts (before the Codes) or the federal courts. Every ease which has been called to my attention which deals with representative suits has been a suit upon the equity side of the court.

It has been said that no rules of common law axe more rigid, technical, or inflexible than those relating to parties to actions (1 Pomeroy on Equity Jur. [4th Ed.] §§ 113 and 114), and a consideration of the limited number of actions maintainable at common law and the character of such, actions would seem to lead naturally and inevitably to the conclusion that common-law actions could be pursued or defended only by parties actually in court.

The equity jurisdiction conferred on the District Courts of the United States by section 11 of the Judiciary Act of 1789 (1 Stat. 78), and continued by section 24 of the Judicial Code (28 USCA § 41), is that of the English Court of Chancery at the time of the separation of the two countries (Matthews v. Rodgers, 284 U. S. 521-529, 52 S. Ct. 217, 76 L. Ed. 447, 454), and state legislation cannot enlarge the equity jurisdiction of the federal courts. The jurisdiction on the law side of the federal courts, except as modified by statute, remains as it was in 1789. No statute of which I am aware has changed that jurisdiction as applied to this ease. The Conformity Act (28 USCA § 724) which applies only to proceedings at law in the federal courts does not effect any change so far as this action is concerned.

Writing in 1818, Sir Thomas Plummer, M. R., traced the origin of the equitable doctrine of virtual representation as far back as 1701. Meux v. Maltby, 2 Swan’s T. (Eng.) 281; Leviness v. Consolidated Gas, Electric Light & Power Co., 114 Md. 559, 80 A. 304, Ann. Cas. 1913C, page 649. This case discusses some of the federal eases which treat the doctrine of virtual representation as a creature of equity. And see an extended note appended to this ease, Ann. Cas. 1913C, page 654.

Statutes enacted in the Code states, where forms of actions have been abolished and the distinctions between law and equity have to that extent been obliterated, are said to crystallize the chancery practice prior to the codes and the state courts in construing such statutes to determine whether or not they apply to different situations, consult the prior chancery practice, Pomeroy’s Code Remedies, 4th Ed., pp. 384, 385; George v. Benjamin (1898) 100 Wis. 622, 76 N. W. 619, 621, 69 Am. St. Rep. 963, it being held in that ease that the “statute has been construed as merely re-enacting the rules which prevailed in equity, and which might otherwise have been held to be abolished by the Code,” Platt v. Colvin (1893) 50 Ohio St. 703, 36 N. E. 735; Tobin v. Portland Mills Co. (1902) 41 Or. 269, 68 P. 743, 1108, and Commonwealth v. Scott (1901) 112 Ky. 252, 65 S. W. 596, 598, 55 L. R. A. 597, which holds that the statute “recognizes and codifies this equitable practice.” And see 21 C. J. 285 ; 47 C. J. 43, and note, 36 Harvard Law Review, 89.

However, this court must follow closely the decisions of the Supreme Court of the United States and those of the Circuit Court of Appeals for the Sixth Circuit, and in this instance must determine the law from the eases of Fletcher v. Burt (C. C. A. 6, 1903) 126 F. 619, and Stearns Coal & Lumber Co. v. Van Winkle (C. C. A. 6, 1915) 221 F. 590. If the first-cited case were the only case decided by that court, it would require the granting of the motion to transfer. It may be that some of the relief asked for in that ease could have been granted only by a court of equity, but the court treated the petition in that ease as being “in the similitude of the common law declaration in an action of trespass on the case” (page 620 of 126 F.), and in that view of the case held that the suit, being of a representative character, was maintainable only on the equity side of the federal courts.

If the second case stood alone, its proper implications would go far to sustain the position of the plaintiff. It, however, would be presumptuous, it seems to this court, for this court, in the absence of express declaration by the higher court, to hold that it overruled the earlier case by implication without any citation or reference whatsoever to the earlier case. The point involved here was not raised by counsel or discussed by tbe court. Counsel did not urge the point, although the report of the case shows that they considered the question of whether the ease was one at law or in equity. In both the state and federal courts it was first docketed on the equity side of the court, and lastly in the federal court it was docketed on the law side (page 592 of 221 F.). It was wholly unimportant whether the case was tried on the law or equity side of the court, for, by agreement of the parties, it was tried by the court without a jury (page 592 of 221 F.). The party aggrieved by the decision of the lower court had an adequate review of the main contention upon which it sought to reverse the decision of the lower court; that contention being that plaintiffs could not' maintain an action in ejectment because they were not the holders of legal title to the property involved (page 592 of 221 F.). A decision on the latter point worked complete justice to all the parties, and it would have been unusual and technical had the reviewing court, on its own motion, noticed whether the action was one at law or in equity, and had made that point in any sense determinative of the case.

A question not argued by counsel has come to the mind of the court. If there should be a recovery in this action for $851,-000, the total amount due on outstanding bonds, to whom would the defendant be required to pay the $178,000 of recovery to bondholders represented before the court only by representation? Would the defendant be required to pay this amount to the plaintiff committee or would it require the interposition of a court of equity to apply such payments to the proper parties to prevent a possible double recovery against the defendant? If the answer to the latter alternative is in the affirmative, does it indicate that this action must be in equity?

It is my conclusion that I am controlled by the decision of Fletcher v. Burt, supra, and that accordingly the motion to transfer must he granted. The granting of this motion makes it unnecessary to consider the other motions above referred to. Plaintiff may amend its petition, if possible, as a petition at law, or the plaintiff may reframe or recast the petition in accordance with equity rules of pleading. The plaintiff may comply with the order of the court in this respect on or before September 30th.

So far as actions at law are concerned, I have heretofore called the attention of the Bar to the doubtful validity of the practice of incorporating an entire cause of action in subsequent causes of action. It is doubtful whether section 11331 of the General Code sanctions such a practice. And see the decision of Judge Killits in Long v. Bowersox, 8 N. P. (N. S.) 249, 19 Ohio Dec. 494.

If plaintiff elects not to amend and to stand upon its present petition, an order may he entered dismissing the petition without prejudice to a new action in equity to the end that the plaintiff may have a prompt review of the present action of the court upon a short record, as in Fletcher v. Burt, supra. Exceptions are allowed to the plaintiff.

On Application for Rehearing.

The plaintiff committee has filed its application for a rehearing of the defendant’s motion to transfer this cause to the equity docket; the opinion of this court having been filed on September 12, 1933.

[8] The plaintiff insists that this suit is maintainable as a representative or class suit and the defendant, by its motion to transfer this suit to the equity side of the court, acquiesces in that view. The court need not, therefore, decide whether this is a true class suit or a spurious class suit.

Likewise, it is unnecessary to inquire if, had a representative or class suit not been brought by the plaintiffs, the defendant might have compelled all of the liability against it to have been litigated by a bill of peace.

In my prior memorandum opinion I proceeded upon the theory that in no ease could a representative action be maintained in a federal court in an action at law, and the argument upon the rehearing has been largely to combat tbe court’s views on that point. I am still of tbe opinion that in tbe federal courts a representative suit is maintainable only in equity. There doubtless are cases where, no objection having been made, pseudo-representative suits (of tbe type we have here) were maintained at law, but it seems to me that all representative suits call for tbe exercise of the equity jurisdiction of tbe court.

Representative or class suits were originally of equitable cognizance only. This was so, not only because of the rigid common-law rules as to parties (see particularly 1 Pomeroy’s Eq. Jur. [4th Ed.] §§ 113 to 116; 1 Freeman on Judgments [2d Ed.] § 154), but because the machinery of a court of law was not fitted or adapted to protect the rights of unknown, unnamed, or nonpartieipating parties whose rights in many instances might be finally concluded by the litigation.

The reason for the rule permitting class suits is stated, and its true source is indicated, in Ashburner’s Principles of Equity (2d Ed.) p. 43:

“Tbe general rule is, that if yon draw the jurisdiction out of a court of law, you must have all persons parties before this court, who will be necessary to make tbe determination complete and to quiet the question.

“The difficulties which arose in equity from the necessity of bringing before tbe court all persons who bad an interest in tbe matter in dispute were diminished by the introduction of representative suits. At common law, a plaintiff before tbe Judicature Act could not sue or be sued in a representative capacity unless be were already a legal representative of another, e. g. an executor or tbe public officer of a bank. In equity, where there was a common interest and a common grievance, a representative suit was allowed from an early time if tbe relief sought was in its nature beneficial to all persons whom tbe plaintiff proposed to represent. Tbe rule was not confined to persons who had a beneficial proprietary interest. Thus an administration suit might be brought by one creditor on behalf of himself and all other creditors. On the same principle, where the defendants were numerous, two or three of a class might always be made defendants to represent the interests of that class.”

Story’s Equity Jurisprudence, § 1981, is as follows:

“The direct and immediate parties having a legal interest are those only who can be required to be made parties in a suit at law. But courts of equity frequently require all persons who have remote and future interests * * * to he made parties. * * * “It is the great object of courts of equity to put an end to litigation and to settle if possible in a single suit, the rights of all parties interested or affected by the subject-matter in controversy. Hence, the general rule in equity is, that all persons are to be made parties who axe either legally or equitably interested in tbe subject-matter and result of tbe suit, however numerous they may be, if they are within the jurisdiction of the court, and it is, in a general sense, practicable so to do. There are exceptions to tbe rule and modifications of it, which form a very important part of tbe practical doctrines of courts of equity on tbe subject of pleading. But they properly belong to a distinct treatise on that particular subject.” And see Wallace v. Adams, 204 U. S. 415, 425, 27 S. Ct. 363, 51 L. Ed. 547; note entitled “Equitable Doctrine of Virtual Representation/’ Ann. Cas. 1913C, page 654; Calvert, Parties to Suits in Equity (2d Ed.) 21 et seq. and 43; 21 C. J. pp. 284 — 297, §§ 284-297 ; 21 C. J. p. 292, § 293.

One of the earliest eases decided by the Supreme Court of tbe United States, sometimes referred to as a leading case, is Smith v. Swormstedt, 16 How. 288, 14 L. Ed. 942 (1853). Tbe Supreme Court of tbe United States quoted from this ease so late as 1921 in the ease of Supreme Tribe of Ben Hur v. Cauble, 255 U. S. 356, 41 S. Ct. 338, 341, 65 L. Ed. 673, as follows: “Where the parties interested in the suit are numerous, their rights and liabilities are so subject to change and fluctuation by death or otherwise, that it would not be possible, without very great inconvenience, to make all of them parties, and would oftentimes prevent the prosecution of the suit to a hearing. For convenience, therefore, and to prevent a failure of justice, a court of equity, permits a portion of the parties in interest to represent the entire body, and the deeree binds all of them the same as if all were before the court. The legal and equitable rights and liabilities of all being before the court by representation, and especially where the subject-matter of the suit is common to all, there can be very little danger but that the interest of all will be properly protected and maintained.”

In every ease which has come to my attention in which the distinctions between legal and equitable procedure were urged upon the court, representative suits were maintained in the federal courts only in equity. However, if it were true that in some ease (no objection having been urged) a representative or class suit was permitted to be maintained on the law side of the federal court, that circumstance would not be determinative of this case. The question is whether this particular representative suit, considered in the light of the allegations of the petition, the character of the parties plaintiff, and the relief prayed for and which may be granted on the facts stated in the petition, may be maintained upon the law side of this court.

The historic distinction between law and equity has been consistently observed by the federal courts since their establishment, and, where an issue with respect thereto is directly presented, as it is'by the motion to transfer, this court is bound to observe that distinction. Whatever practice may be permissible in the state courts, the distinction in the courts of the United States between actions at law and suits in equity is matter of substance and not of form. McKemy v. Supreme Lodge (C. C. A. 6) 180 F. 961, 966. See Thompson v. Central Ohio R. Co., 6 Wall. 134, 136, 137, 18 L. Ed. 765; Courtney v. Pradt (C. C. A. 6) 160 F. 561, 562; Waldo v. Wilson (C. C. A.) 231 F. 654.

It is often true that a particular type of case may be maintained either upon the law and the equity side of a federal court. For instance, in the cases of Turk et al. v. Illinois Central R. Co. (C. C. A. 6) 218 F. 315, cited by plaintiff’s counsel, and Travelers’ Ins. Co. v. Great Lakes, etc., Co. (C. C. A. 6) 184 F. 426, 36 L. R. A. (N. S.) 60, a subrogee was permitted to maintain an aetion at law, but it is true that sueh a suit must sometimes be maintained on the equity side' of the court. See Et. Worth Independent School District v. Ætna Casualty & Surety Co. (C. C. A.) 48 F.(2d) 1, 3, 17 A. L. R. 222. A suit to recover a preference by" a bankrupt likewise may be in equity or at law, depending upon the facts stated in the petition or bill. See the recent ease of Schoenthal v. Irving Trust Co., 287 U. S. 92, 53 S. Ct. 50, 77 L. Ed. 185. There are many other types of eases which may be maintained either at law or in equity, depending upon the facts stated in the petition or bill and the relief demanded.

In New Orleans v. Louisiana Construction Co., 129 U. S. 45, at page 46, 9 S. Ct. 223, 32 L. Ed. 607, it was said: “The rule is thoroughly settled that remedies in the courts of the United States are at common law or in equity according to the essential character of the ease, uncontrolled in that particular by the practise of the state courts.”

It was said in Whitehead v. Shattuck, 138 U. S. 146, 151, 11 S. Ct. 276, 277, 34 L. Ed. 873: “It would be difficult, and perhaps impossible, to state any general rule which would determine in all eases what should .be deemed a suit in equity as distinguished from an aetion at law, for particular elements may enter into consideration which would take the matter from one court to the other;” and in Armstrong Cork Co. v. Merchants’ Refrigerating Co. (C. C. A. 8) 184 F. 199; at page 204, Judge Sanborn said: “As the essential character of a cause of aetion and of the remedy it seeks determines whether it is a cause at law or in equity, neither the parties to it nor the court can by declaration or procedure make a cause of action at law a cause in equity, or vice versa, and when a pleading by the complainant, whether styled a petition, a declaration, or a bill, is filed with the clerk of a federal court which states any cause of aetion, it necessarily states one at law or one in equity, and the facts set forth in the pleading and the remedy sought thereby determine whether the cause of action pleaded is at law or in equity, and whether the pleading filed invokes the jurisdiction of the court at law or in equity.”

It is necessary, therefore, in determining whether this is an action at law or a suit in equity to have in mind what “particular elements” are involved, the character of the parties plaintiff, and the “essential character” of the relief to which plaintiffs may be entitled upon the faets alleged in the petition.

A consideration of the insurmountable difficulties with which a court of law would be confronted in this particular litigation and the facility with which a eourt of equity can fully and finally determine the rights of the parties to this litigation in a single suit still convinces me that this suit is maintainable in equity only.

On its law side, this court has power to enter only a judgment in favor of the named plaintiffs to this action, and that judgment would be enforceable only by execution through the ministerial officers of this court. It has been well said: “In an action at law a general and unqualified judgment only can be given for the plaintiff or for the defendant, without any adaptation of it to particular circumstances; but courts of equity can adapt their decrees to all the varieties of circumstances which may arise, and adjust them to all the particular rights of all the parties in interest.” Eaton on Equity (2d Ed.) p. 14. See, also, Langdell, Summary of Equity Pleading (2d Ed.) p. 32; 1 Freeman on Judgments (4th Ed.) § 2; Lindsay w. First National Bank, 156 U. S. 485, 493, 494, 15 S. Ct. 472, 39 L. Ed. 505.

A law court could not enter judgment for unknown and unnamed parties, and, if it attempted to do so, that judgment would be unenforceable otherwise than by a further proceeding upon the equity side of the court. A eourt of law has no incidental or ancillary jurisdiction to determine the parties entitled to the benefit of such a judgment, nor to make distribution to such parties. McKemy v. Supreme Lodge (C. C. A. 6) 180 F. 961; U. S. v. Wells (D. C.) 203 F. 146, at page 148; Illinois Surety Co. v. U. S. (C. C. A. 7) 226 F. 665, 669. And it is not enough to sustain the jurisdiction at law, it seems to me, to say that the court should proceed to a judgment at law in favor of unknown and unnamed parties and then proceed in a separate suit in equity for the purpose of enforcing that judgment, as was intimated in Stearns Coal & Lumber Co. v. Van Winkle (C. C. A. 6) 221 F. 590, 596. Such a procedure would require this action at law and a subsequent suit or multiplicity of suits in equity, and a controlling reason for the taking of jurisdiction by courts of equity in representative or class suits is to avoid such a multiplicity of suits. If it is necessary to bring a second suit in equity, then also it is clear that the remedy at law is inadequate. See 2 Honnold (Supreme Court Law) p. 901 (2). Further, a court of equity takes jurisdiction in order to protect the parties against further litigation. 41 C. J. 198, note 86; Mr. Justice Story, in West v. Randall, 29 Fed. Cas. at page 721, No. 17424, 2 Mason, 181 (1820).

All of the rights of all of the plaintiffs can be adjudicated in the present action as a suit in equity. If there be a finding that all of the plaintiffs are entitled to recover, or if a part only of the plaintiffs are entitled to recover, or if there be a partial recovery only in favor of all bondholders, a eourt of equity will first enter an interlocutory decree in favor of the plaintiffs who are entitled to recover, as in National Tradesmen’s Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548, at page 551. Upon the entering of such an interlocutory decree, the eourt itself, or through a master, may determine what bondholders are entitled to recover; this applying particularly to the unknown and unnamed bondholders who will be required to prove their title and ownership' of bonds. Any such bondholders participating in the benefits of the decree or perhaps the fund which may be brought into court will be required to pay their equitable share of the costs and expenses of the litigation, including perhaps the payment of reasonable compensation to counsel for the plaintiffs. See Buell v. Kanawha Lumber Corp. (D. C.) 201 F. 762, 768, 769; Meeker v. Winthrop Iron Co. (C. C.) 17 F. 48; Trustees of Internal Improv. Fund v. Greenough, 105 U. S. 527, 26 L. Ed. 1157; Central R. & Banking Co. v. Pettus, 113 U. S. 116, 5 S. Ct. 387, 28 L. Ed. 915; United States v. Equitable Trust Co. of New York, 283 U. S. 738, 51 S. Ct. 639, 75 L. Ed. 1379; and note, 34 Columbia Law Review, 118, 140.

After all of these matters have been determined, the court as a court of equity has power to enter an appropriate final decree adjusting and adjudicating all of the rights of all of the parties to the litigation.

Further, it appears to the eourt that pendente lite the unknown 'and unnamed plaintiffs in this suit in certain circumstances have a right to intervene in this litigation for their protection. See 47 C. J. 51, § 103, notes 40, 41, § 106; 61 Am. L. Rev. 22-27. The possibility that there will be any necessity or propriety for intervention in this particular litigation is extremely remote, but it seems to tbe court that such, right must be preserved. There may be no intervention in a federal action at law. See McKemy v. Supreme Lodge (C. C. A. 6) 180 F. 961 (1); Austin Machinery Co. v. Consolidation Coal Co. (C. C. A. 6) 67 F.(2d) 775, and U. S. v. Wells (D. C.) 203 F. 146 at page 148.

It may be said in passing that so many states have adopted the Code practice that many eases can be found in the reports where the distinctions between legal and equitable remedies have been obscured or disregarded. It is to be expected, therefore, that, unless the distinction between legal and equitable remedies was strongly urged upon the court, often no note was taken thereof, and, indeed, in many of the cases the distinction between legal and equitable remedies was of no practical significance. It is true that the Code practice and the liberal federal equity practice as to parties has had its influence upon the law of parties in actions at law in fed-, eral courts, but not so to the extent of transforming suits in equity to actions at law in disregard of fundamental distinctions between them. Nor does the Conformity Act operate to bring about such transformation. Indeed, that act is not applied at all until it is first determined that an action at law is involved.

Congress has likewise recognized and felt itself bound by the constitutional distinction between law and equity in the federal courts. This distinction was acutely before it when it enacted the Act of March 3, 1915 (38 Stat. 956), Judicial. Code, §§ 274a, 274b, and 274e (28 USCA §§ 397, 398, 399).

The application for a rehearing is denied, and exceptions are allowed to the plaintiff.

       Quære: As to whether or not this cause of action constitutes one for “equitable waste,” see Chafee Cases on Equitable Relief against Torts, 18; Langdell, Brief Survey of Equity Jurisdiction (2d Ed.) 4.

         After the filing of this opinion plaintiff by consent struck out the words in parentheses.

       Quære: Would a representative action' under the Ohio Code be at law or in equity? Would a judgment be reviewable by appeal or error?

       Moon Motor Car Co. v. Moon (C. C. A. 8) 58 F.(2d) 90, 93, 94; Iberville, etc., Co. v. Monongahela Co. (C. C. A. 5) 168 F. 12, 17.

       1 Street’s Federal Equity Practice, p. 342, §§ 547, 548.

       Louisville, N. A. & C. R. Co. v. Ohio Val. Improvement & Contract Co. (C. C.) 57 F. 42, 45 (Lurton, J.), affirmed Louisville, N. A. & C. R. Co. v. Louisville Trust Co., 174 U. S. 552, 19 S. Ct. 817, 43 L. Ed. 1081; Bailey et al. v. Tillinghast (C. C. A. 6) 99 F. 801; First State Bank v. Chicago, etc., R. Co. (C. C. A. 8) 63 F.(2d) 585 (Kenyon, J.); Bills of Peace with Multiple Parties, 45 Harv. L. Rev. 1297; Equity—Jurisdiction, Prevention of Multiplicity of Suits, 16 Minn. L. Rev. 679; Jurisdiction of Equity Relating to Multiplicity of Suits, 24 Yale L. J. 642; Joinder of Parties, 37 Yale L. Rev. 28; see p. 57, especially p. 62; Clark, Code Pleading, pp. 276-282 ; 7 C. J. 1180.

       As to the limited number of actions at common law and the character thereof, see 3 Street’s Foundations of Legal Liability, pp. 99-313; Maitland, Equity and the Forms of Action, 293 et seq.; 1 O. J. 944 et seq.

       As to res judicata, see Adair v. New River Co., 11 Ves. 429, 443 (1805); Tosh v. West Kentucky Coal Go. (C. C. A. 6) 252 F. 44, 47, 48; 44 C. J. p. 102, § 1422; Chand on Res Judicata, 210; Commissioners v. Gellatly [1876] Oh. Div. 610; Malone v. Malone (1841) 81 Cl. & F. 179; In re Calgary, etc., Ltd., v. Company, [1908] 2 Ch. 652; Walker v. Sur, [1914] 2 K. B. 935, and note, 34 Columbia Law Review, pp. 118, 132.

       During this year the distinction between actions at law and suits in equity was abolished in Ohio by adoption of the Code of Civil Procedure, 51 Ohio Laws, 57, 156, 157, March 11, 1853. The Supreme Court of the United States had recognized the jurisdiction of equity in representative suits in the earlier case of Mandeville v. Riggs, 2 Pet. 482, 7 L. Ed. 493 (1829).

       Quasi intervention is sometimes permitted in federal courts at law by way of motion to reclaim property (Van Norden v. Morton, 99 U. S. 378, 25 L. Ed. 453; New Orleans v. Louisiana Construction Co., 129 U. S. 45, 9 S. Ct. 223, 32 L. Ed. 607), and when a state statute permits creditors to prove claims in proceeds of property subject to attachment. Krippendorf v. Hyde, 110 U. S. 276, 4 S. Ct. 27, 28 L. Ed. 145. These exceptional cases do not affect the general rule.

       In Stearns Coal & Lumber Co. v. Van Winkle (C. C. A. 6) 221 F. 590, the action in ejectment might have been maintained by one tenant in common for the benefit of all either under the Kentucky statute analogous to Ohio General Code, § 11257, or under the rules of the common law. Richmond Cedar Works v. Stringfellow (D. C.) 236 F. 264, 268; Gilchrist v. Middleton; 107 N. C. 663, 12 S. E. 85; Horner v. Ellis, 75 Kan. 675, 90 P. 275, 121 Am. St. Rep. 446; Spencer v. Pierce, 172 Ark. 108, 287 S. W. 1019; 19 C. J. 1038. Moreover, so far as the reports of the eases disclose, neither the Stearns case nor Penny v. Central Coal & Coke Co. (C. C. A. 8) 138 F. 769, required the distribution of a fund or moneys obtained as damages, or the assessment of costs and expenses of litigation.

       This influence was noted by Mr. Chief Justice Taft in United Mine Workers v. Coronado Coal Co., 259 U. S. 344, at page 387, 42 S. Ct. 570, 575, 66 L. Ed. 975, 27 A. L. R. 702, when he said: “Equitable procedure adapting itself to modern needs has grown to recognize the need of representation by one person of many, too numerous to sue or to be sued; * * * and this has had its influence upon the law side of litigation.” It is to be observed, however, that he regarded a representative suit as one involving equitable procedure.

       See statement of Mr. Dupre of the Committee on the Judiciary, 63d Congress, Second Session, House of Representatives Report, 162, Part 2, and an article prepared by Dean Roscoe Pound at the suggestion of a committee of the American Bar Association, “Law and Equity in the Federal Courts — Abolishing the Distinction and other Forms,” 73 Central Law Journal, 204. It was said that the earlier cases, announcing the distinction between law and equity in the federal courts, were in the nature of dicta; this cannot be said of the later cases.