Gambar halaman

10 F.(2d) 272

erly enter judgment against one of the individual defendants on his liability under the contracts proved by him, though as to him no trial amendment of bill to declare on the contract was made.

8. Pleading 236 (5)—Allowance of amendment increasing plaintiff's claim to conform to proof is within discretion of court.

Allowance of amendment increasing plaintiff's claim to conform to proof is within discretion of court.

Appeal from the District Court of the United States for the Northern District of Texas; William H. Atwell, Judge.

Suit by the Southwestern Telegraph & Telephone Company against the Walker Grain Company and others. Decree for complainant (3 F.[2d] 819), and defendants appeal. Affirmed.

E. B. Robertson, of Fort Worth, Tex. (W. E. Spell, of Waco, Tex., and H. T. McGown and P. T. Lomax, both of Fort Worth, Tex., on the brief), for appellants.

[ocr errors]

their claims, the bank accounts of the corporations were kept constantly overdrawn, and the profits as fast as earned were taken by Walker and deposited either to the credit of himself or his wife, and arrangements were made by him with the bank in which the deposits of the corporations were kept to pay any overdrafts which Walker made on behalf of the corporations and charge the same to his individual account. In this way the corporations became liable to creditors in the aggregate amount of several hundred thousand dollars, and were insolvent. J. L. Walker had wrongfully taken and appropriated to his own use large sums of money, many times the amount of appellee's claims, belonging to the corporations. Mrs. Walker was a director in the Walker Grain Company, and Ivy in the Ivy Grain Company, and these individual defendants participated in the fraudulent scheme and practices of J. L. Walker. The accounts of the corporations with appellee were made up of charges for long-distance telephone conversations, and covered a considerable period of time. Defendants claimed there were numerous overcharges and disputed the correctness of each

Stanley Boykin and H. C. Ray, both of Fort Worth, Tex. (Nelson Phillips and C. M. Means, both of Dallas, Tex., on the brief), for appellee. Before WALKER, BRYAN, and FOS- item charged, and for that reason the acTER, Circuit Judges.

BRYAN, Circuit Judge. This is a suit in equity in which appellee recovered a decree fór telephone service furnished to the Walker Grain Company and the Julian A. Ivy Grain Company. Separate accounts were kept, according to which the indebtedness of each company, exclusive of interest and costs, was less than $3,000, but the indebtedness of both companies exceeded that amount.

The original defendants were the two grain companies, J. L. Walker, and his wife, Mrs. M. M. Walker; but by amendment Julian A. Ivy was also made a party defendant. The bill was filed by appellee in its own behalf, and for the benefit of all other creditors who might join in seeking the relief prayed and contribute to the costs of the suit. The case made by it is this: J. L. Walker was engaged in the business of buying and selling grain for future delivery. In order to avoid personal liability, he formed the defendant corporations and subscribed to practically all of their capital stock, and used them as mere dummies. He caused these corporations to enter into contracts for future delivery of grain and to accept or repudiate them according to whether there was a profit to be realized or loss to be sustained. In order to prevent creditors from realizing on 10 F. (2d)-18

counts were complicated and their settlement was properly the subject of inquiry by a court of equity.

During the taking of evidence before a master, defendants introduced two contracts in writing, in one of which the individual defendants bound themselves to pay the amount due upon the account asserted by appellee against the Walker Grain Company, and in the other entered into a like obligation on behalf of the Ivy Grain Company. The contracts were pleaded in the answer of defendants which alleged that the individual defendants, including Ivy, had signed them and thereby appellee was given a full, complete, and adequate remedy at law. After the contracts had been introduced in evidence, appellee filed a trial amendment, in which the contracts were pleaded "for the purpose of making the pleadings of the complainant conform to the evidence introduced herein," but omitted to pray for judgment against the defendant Julian A Ivy. All the other defendants were included in the prayer for judgment. However, the amendment prayed for general relief.

[1] The district judge approved findings of the master to the effect that the corporations were insolvent, but had not been organized for the purpose of enabling Walker to perpetrate a fraud upon his creditors. The mas

ter also found that J. L. Walker had received the sum of $51,500 from the Walker Grain Company and reported that the testimony was conflicting as to whether that company owed Walker anything at the time; but the district judge sustained exceptions to this finding, and held that the said sum of $51,500 belonged to the Walker Grain Company and was wrongfully taken by Walker. The court entered a decree against each of the corporations for the amount found by the master to be due by it, and against the individual defendants for the aggregate amount found to be due by both corporations. The amount of the decree against the Ivy Grain Company was in excess of the amount claimed in appellee's amended bill, but on motion for rehearing submitted by appellants the court permitted appellee to file an amendment claiming the amount found by the master and the court to be actually due. The evidence is not included in the record, and it is therefore to be assumed that the findings of the court upon the facts are correct.

In support of their assignments of error, appellants contend: That the court erred in refusing to dismiss the suit for want of jurisdiction, because, first, the court reached the conclusion from the evidence that the charges of fraud and collusion had not been sustained, and, secondly, because appellee's amendment declaring on the written contracts, by

which the defendants bound themselves to pay the accounts sought to be recovered, constituted an abandonment of the original suit and set up two new and distinct causes of action, upon each of which there was a plain and adequate remedy at law; that, as the averments of fraud and collusion apply only to J. L. Walker, the bill should have been dismissed as to all the other appellants; that the decree against Julian A. Ivy was erroneous, because there was no averment in the trial amendment that he executed either of the written contracts; and that the decree against the Julian A. Ivy Grain Company was in excess of the amount claimed against that company in the amended bill upon which the trial was had.

[2, 3] The charges in the bill of fraud and collusion stated a cause of action against the individual appellants. If they were liable for both accounts, the amount sought to be recovered was within the jurisdiction of the District Court. It was found, upon a consideration of the evidence, that the corporations were not used as dummies in the perpetration of a scheme to defraud. The court reached that conclusion in the exercise of its

jurisdiction. Section 37 of the Judicial Code (Comp. St. § 1019) provides for the dismissal of a suit which does not really and substantially involve a dispute or controversy properly within the jurisdiction of the court. A suit upon a claim made in good faith is not to be dismissed, although the court may decide that the claim is not supported by the evidence. Hart v. Keith Exchange, 262 U. S. 271, 43 S. Ct. 540, 67 L. Ed. 977; Binderup v. Pathé Exchange, 263 U. S. 291, 44 S. Ct. 96, 68 L. Ed. 308.

In Flanders v. Coleman, 250 U. S. 223, 39 S. Ct. 472, 63 L. Ed. 948, it is said: "Whether the District Court has jurisdiction to grant any relief must be determined upon a consideration of the allegations of the bill If there be and the amendment thereto. enough of substance in them to require the court to hear and determine the cause, then jurisdiction should have been entertained." The District Court proceeded to hear the case on the merits, and must have been convinced that appellee's suit was brought in good faith. [4, 5] The amendment to the bill which declared on the written contracts of appellants to pay the accounts of the corporations was not an abandonment of the original suit. The amendment was wholly unnecessary inasmuch as appellants themselves had introduced the same contracts in evidence in an effort to sustain their theory that appellee had a plain and adequate remedy at law. Furthermore, in our opinion the court properly entertained the case on the equity docket, because the accounts were disputed and complicated. Kirby v. Lake Shore R. R. Co., 120 U. S. 130, 7 S. Ct. 430, 30 L. Ed. 569; Walker v. Wilkinson (C. C. A.) 3 F.(2d) 867; 10 R. C. L. 355.

[6] The court found that J. L. Walker had illegally taken $51,500 out of the treasury of the Walker Grain Company. It is hardly open to question that jurisdiction existed for the purpose of compelling an accounting by


upon the suit of creditors. Chicago, etc., Ry. Co. v. Third National Bank, 134 U. S. 276, 10 S. Ct. 550, 33 L. Ed. 900. In view of the fact that the corporations appear to have been insolvent, there existed jurisdiction in a court of equity, although appellee's claims had not been reduced to judgment. Case v. Beauregard, 101 U. S. 688, 25 L. Ed. 1004. Having properly acquired jurisdiction, it was proper to proceed in equity to do full justice without sending the case of the other appellants to be determined on the law side of the court. Equity Rule 23; Ober v. Gallagher, 93 U. S. 199, 23 L. Ed. 829; Camp v.

10 F.(2d) 275

themselves to jurisdiction of District Court as respects such suits.

4. Bankruptcy 252-Bankrupt corporation's stockholders, offering compromise, held entitled to have offer accepted exactly as made, or not at all.

Boyd, 229 U. S. 530, 33 S. Ct. 785, 57 L. Ed. 1317. Therefore it was not error for the court to enter a decree against the other individual appellants, who the evidence shows were also liable for the full amount of the claims against both corporations. [7] Julian A. Ivy was shown to be liable for ing to compromise claims, were entitled to have the contracts introduced in evidence by appellants, and the court therefore had the power to enter judgment against him upon his own showing, and in the absence of the trial amendment.

[merged small][ocr errors]

denied 27 us 677 26 LED. 143 46 2. 97.485. HAMILTON-BROWN SHOE CO. et al. v. BEN L. BERWALD SHOE CO. et al.

In re BEN L. BERWALD SHOE CO. (Circuit Court of Appeals, Fifth Circuit. December 22, 1925. Rehearing Denied January 19, 1926.)

No. 4603.

1. Bankruptcy 440-Order approving offer of compromise held appealable, and proceeding for review not required to be taken within 30 days.

Order approving offer of compromise made by bankrupt's stockholders held to involve controversy arising in bankruptcy proceeding, under Bankruptcy Act, § 24a (Comp. St. § 9608), appealable under the general equity jurisdiction of the court, and not purely administrative order, reviewable under section 24b by petition to revise, required to be filed within 30 days, nor an appeal, to be governed by section 25a (Comp.

St. § 9609).

2. Bankruptcy

252-Trustee may, with approval of court, compromise controversy concerning bankrupt estate.

Under Bankruptcy Act, § 27 (Comp. St. § 9611), bankruptcy trustee may, with approval of court, compromise any controversy concerning bankrupt estate, and for this he represents

all creditors.

3. Bankruptcy 252-Trustee held not authorized to accept offer to compromise claims against bankrupt's officers individually over objections of certain creditors.

Offer of compromise, made by bankrupt's stockholders to take over bankrupt's assets on condition of releasing claims against bankrupt, its officers, and stockholders, could not be accepted by trustee under Bankruptcy Act, § 27 (Comp. St. § 9611), over objection of creditors seeking in state court to hold officers individually liable, where parties had not submitted

Stockholders of bankrupt corporation, offer

offer accepted exactly as made, or not at all.

Appeal from the District Court of the United States for the Northern District of Texas; William H. Atwell, Judge.

In the matter of the Ben L. Berwald Shoe Company, Bankrupt. From an order approving an offer of compromise (1 F.[24] 494), the Hamilton-Brown Shoe Company and others appeal. Reversed and remanded.

R. G. Storey and Fred J. Dudley, both of Dallas, Tex. (Burgess, Owsley, Storey & Stewart, of Dallas, Tex., on the brief), for appellants.

Emil Corenbleth, of Dallas, Tex., for appellees.

Before WALKER, BRYAN, and FOSTER, Circuit Judges.

FOSTER, Circuit Judge. This is an appeal from an order approving an offer of compromise, made by a third party to the trustee on behalf of himself and the others, as well as the bankrupt. A motion was made to dismiss the appeal. It appears that the order appealed from was entered on March 2, 1925, and the motion for the appeal was not filed until June 1, 1925, nearly three months later.

[1] Appellees contend that the case should have been removed to this court on petition to superintend and revise, for which our rules subsequently appear, the case presented is fix a limit of 30 days. See rule 38. As will not purely that of an administrative order, contemplated by section 24b, Bankruptcy Act (Comp. St. § 9608), nor an appeal, to be 9609). For the purpose of jurisdiction, and governed by section 25a of said act (section with regard to the delay allowed for removing it, the case must be considered as involving a controversy arising in a bankruptcy proceeding contemplated by section 24a, Bankruptcy Act, and appealable under the general equity jurisdiction of this court. So considered, the appeal was taken timely. The motion to dismiss will be denied.

Coming, now, to the merits, the material facts are these:

The Ben L. Berwald Shoe Company was

adjudicated bankrupt and during the administration of its affairs Ben L. Berwald, who was the president and principal stockholder of the bankrupt corporation, made an offer in writing to the trustee to take over the assets of the bankrupt for an amount of cash sufficient to pay the unsecured creditors 55 per cent. of their claims. He was careful to stipulate that he did not submit himself to the jurisdiction of the court, and the offer contemplated the compromise of all claims of all unsecured creditors of the bankrupt against himself and the other officers and stockholders of the bankrupt, as well as the claims against the bankrupt corporation. To that effect a clause as follows was inserted:

"This offer is made with the understanding and for the express consideration that each and every unsecured creditor of said bankrupt will release the said bankrupt and all its officers and directors, and each and every one of them, from any and all liability of every character and description growing out of or incident to or connected with the operation of the said Ben L. Berwald Shoe Company prior to its adjudication in bankruptcy."

Before the offer was made the trustee contemplated suits against Berwald and his associates to recover unpaid stock subscriptions amounting to approximately $10,000, and also to set aside a preference of about $6,000. He recommended the acceptance of the offer. A hearing was had before the referee, and 62 out of 66 unsecured creditors agreed to the compromise. Appellants, who are 4 of the unsecured creditors, objected. They had previously filed suits in a state court to recover the full amounts of their claims from Berwald and the other officers and directors, on the grounds that the bankrupt was in reality a partnership, of which the stockholders were members, and was not a corporation, that the stock of the corporation had never been paid in, and that the individual officers were guilty of fraud in securing credit for the corporation. An order had been issued staying these proceedings in the state court. On the hearing before the referee, he recommended the acceptance of Berwald's offer, but certified the question to the District Court. The District Court entered an order approving the compromise and ordering the fund, which had been guaranteed by Berwald, to be distributed pro rata among the creditors.

[2, 3] It may be conceded that the trustee may, with the approval of the court, com


promise any controversy concerning the bankrupt estate, and for this he represents all of the creditors under the law. would be his claim for the unpaid portions of the stock subscriptions and his right of action to set aside a preference. Bankruptcy Act, § 27 (Comp. St. § 9611). The proceedings in this case to that extent are regular, and would be binding on appellants, if that were all; however, the offer in this case goes beyond an ordinary offer of compromise. Appellants are seeking in a state court to hold the officers of the corporation liable as individuals for the full amounts of their claims. These claims were not urged in the bankruptcy proceedings, and could not have been.

We cannot assume that these claims are without substance, and with regard to them the trustee was not authorized to represent appellants. A simple illustration will demonstrate this: It would never be contended by any one that the trustee could compromise the claim of an individual creditor against a third person arising from his indorsement of the bankrupt's note. There is no difference in principle in the case here presented. Furthermore, none of the parties has submitted himself to the jurisdiction of the District Court with regard to these suits, and the District Court was without jurisdiction to bind appellants to the full extent of the compromise offered. The order appealed from goes too far, and is prejudicial to the rights of appellants.

The court expressed the opinion that the state courts would take notice of the bankruptcy proceedings and act accordingly. It is quite apparent that, if the order is allowed to stand, appellants will be greatly embarrassed in exercising their rights in the state court, if not absolutely prevented from so doing.

[4] It would seem that the compromise offered was fair so far as the trustee was concerned, but, on the other hand, it may well be that appellants were justified in rejecting it so far as their individual claims are concerned; however, under the circumstances, it would not do to affirm the order, with a modification reserving the rights of appellants as Berwald and his associates must also be considered. Undoubtedly they intended the acceptance of the offer to end the suits in the state courts, and to settle all claims of any kind against themselves arising from their connection with the bankrupt. They have the right to have their offer accepted exactly as made, or not at all.

[blocks in formation]

1. Trial 139(1)-Scintilla of proof does not B. R. Jouett, of Winchester, Ky., for plainjustify submission to jury. tiff in error.

[blocks in formation]

926(7)-Circuit Court of Appeals will assume physician sufficiently qualified as expert, where no objection was made.

Circuit Court of Appeals will assume that a physician was sufficiently qualified as an expert, where no objection was made, although the mere fact that he was practicing as physician might not be enough.

4. Evidence 555-Opinion based on subjective symptoms stated to doctor to qualify him to testify cannot be received.

[blocks in formation]

Before DENISON, DONAHUE, and MOORMAN, Circuit Judges.

DENISON, Circuit Judge. In the court below Baker recovered against the Mining Company a judgment based on a personal injury. At the time of the trial he appeared to be, and, giving due effect to the verdict, it must be assumed that he in truth was in the condition which is concisely indicated by the term "nervous wreck." He charged this result to his experience in the first half hour of the first and only day that he worked in the defendant's coal mine. It is his theory that he then inhaled a "poisonous gas," which defendant was negligently permitting to exist at the place where he was put to work, and that his final condition was the proximate result of this negligence.

The only question for review is whether there was in the evidence the necessary legal Expert opinion of doctor based in material basis to support each of the three conclupart on statements by plaintiff of the subjec- sions: (1) That plaintiff did inhale gas at

tive symptoms from exposure up to time of statement, for the purpose of qualifying doctor to testify, cannot be received.

5. Evidence 555-Opinion based on subjective symptoms stated to physician to get treatment and cure are admissible.

Opinion of physician, based on subjective symptoms stated to him to get treatment and cure would be admissible in evidence.

6. Damages 208 (2) -Doctor's testimony presenting no professional reasons for conclusion held to constitute only scintilla of proof, not justifying submission to jury of question whether plaintiff's condition of health was caused by injury.

Where doctor's testimony as to injury to mine employé being caused by inhalation of

this time and place; (2) that its presence implied defendant's negligence, and (3) that there was due causal relation between this inhalation and his later serious illness. We pass by, as needing no separate consideration, the fourth question, whether he was at and before the trial really sick, or only malingering.

[1] Appellate courts are constantly deciding whether, in a given case, there was or was not "substantial evidence" to a given effect. Usually it is enough to decide this concrete question, and no more. Occasionally it is worth while for a court to review the fundamental definition, and recall how it has been

« SebelumnyaLanjutkan »