Hackner v. Morgan, 325.

Decision Date04 August 1942
Docket NumberNo. 325.,325.
Citation130 F.2d 300
PartiesHACKNER et al. v. MORGAN et al. EASTMAN v. GUARANTY TRUST CO. OF NEW YORK et al.
CourtU.S. Court of Appeals — Second Circuit

Meyer Abrams, of Chicago, Ill., and Bennett I. Schlessel, of New York City (Shulman, Shulman & Abrams, of Chicago, Ill., of counsel), for appellant.

Davis, Polk, Wardwell, Gardiner & Reed, of New York City (Ralph M. Carson and Francis W. Phillips, both of New York City, of counsel), for defendants-appellees.

Before CHASE, CLARK, and FRANK, Circuit Judges.

CHASE, Circuit Judge.

This suit was originally brought by three plaintiffs, Hackner, Bowman and Ballinger, as a class action for themselves and others similarly situated as one-time holders of 6% Gold Notes of the Van Sweringen Corporation. The complaint alleged that the plaintiffs had been wrongfully induced to accept an offer of the Van Sweringen Corporation made on October 29, 1931, to exchange their notes which will be described more fully below. The relief sought was an accounting, damages for the losses sustained and a receiver to distribute the proceeds to the rightful claimants.

The present plaintiff, Eastman, was not one of the original plaintiffs, but she entered the suit later upon the solicitation of Hackner. Jurisdiction was based upon diversity of citizenship, and the defendants moved for dismissal asserting that less than $3,000 was involved in the claims of each of the three original plaintiffs. This motion was granted by the District Court and was affirmed by us as to all except the present plaintiff, in an opinion pointing out that this was not a true class action. 117 F.2d 95, certiorari denied 313 U.S. 559, 61 S.Ct. 835, 85 L. Ed. 1520. Thereupon the complaint was amended to conform to that decision and to eliminate all reference to a class suit. After the service of the answer and the filing of requested admissions, answers to interrogatories and a deposition of plaintiff, the defendants moved for summary judgment under Rule 56, Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. Plaintiff countered with a cross-motion for summary judgment based upon defendants' motion papers. The District Court granted the defendants' motion and dismissed the case upon the merits.

Plaintiff has appealed and in connection with the appeal has moved that two of the original plaintiffs, Hackner and Ballinger, be allowed to intervene as appellants and that the record be amended to include Senate Report No. 714 Part 3, 77th Congress, 2d Session. This motion is denied in its entirety. Aside from other possible objections to the admission of the Senate Report on motion for summary judgment, the plaintiff has shown no reason why it, or the testimony upon which it was based, could not have been presented to the lower court for inclusion in the record. The intervention of additional parties as appellants under Rule 21 is improper unless they are directly affected by the judgment. Here the summary judgment was rendered only against Eastman, and in view of our former decision that this was not properly a class suit the other defendants were not prejudiced thereby, but might still attempt to show injury to themselves under the different circumstances surrounding their acceptance of the offer.

The gravamen of the complaint is the inducement of Eastman to exchange her $10,000-worth of Van Sweringen Corporation notes for 50% cash and 50% common stock of that company. These notes were part of a $30,000,000 issue of five year 6% Gold Notes sold to the public in May, 1930. They were secured by a "Trust Indenture" naming defendant Guaranty Trust Company as trustee and providing among other things that until half the issue was retired and cancelled, the Van Sweringen Corporation would maintain "segregated assets" free from lien or pledge equal to at least 50% of the face value of the outstanding notes. The indenture further recited a contemporaneous agreement that in the event that the value of the "segregated assets" declined below the 50% level, Messrs. O. P. and M. J. Van Sweringen would deliver to the Van Sweringen Corporation marketable securities of sufficient value to make up the necessary 50%. These were called "assigned securities" and were to be held by the Corporation in trust for the note-holders.

As the trough of the 1929 depression deepened the entire Van Sweringen system began to weaken, and by October, 1930 new loans were needed. Accordingly J. P. Morgan & Co., Guaranty Trust Company and other banks made loans of $16,000,000 and $23,500,000 respectively to Vaness Company, which owned directly or indirectly all the stock of Van Sweringen Corporation, and to Cleveland Terminals Building Company, which was in turn wholly owned by Van Sweringen Corporation. One purpose of these loans was to prevent a default in the 6% note issue because of the decline in the value of the "segregated assets" and the "assigned securities." It was therefore provided in the loan agreement that $15,000,000 of the money loaned was to be substituted for the "segregated assets" either in the form of cash or of United States Government Bonds, and this was done. As business conditions grew worse it became apparent that Van Sweringen Corporation would be unable to meet the November 1, 1931 interest payment on the notes. It also appeared that as the market price of the notes declined the corporation had been buying them up and had already acquired over 10% of them. If 50% were bought and retired, the entire amount of the "segregated assets" would have been released.

In the face of this situation the defendants determined that the best thing to do would be to have Van Sweringen Corporation offer the...

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7 cases
  • York v. Guaranty Trust Co. of New York
    • United States
    • U.S. Court of Appeals — Second Circuit
    • May 25, 1944
    ...the district court entered a summary judgment for the defendants (Eastman v. Morgan, 43 F. Supp. 637) and we affirmed; Hackner v. Morgan, 2 Cir., 130 F.2d 300, certiorari denied Eastman v. Guaranty Trust Co., 317 U.S. 691, 63 S.Ct. 266, 87 L.Ed. 553. In our opinion (based on the same affida......
  • Guaranty Trust Co of New York v. York
    • United States
    • U.S. Supreme Court
    • June 18, 1945
    ...suit was denied, Hackner v. Guaranty Trust Co., 2 Cir., 117 F.2d 95, and summary judgment in favor of Guaranty was affirmed. Hackner v. Morgan, 2 Cir., 130 F.2d 300. After her dismissal from the Hackner litigation, respondent, on January 22, 1942, began the present The suit, instituted as a......
  • Driscoll v. Fitch
    • United States
    • U.S. District Court — Southern District of New York
    • April 6, 1943
    ...resolution with a request by one of its designated officers and an opinion of counsel selected by the issuing company. Hackner v. Morgan, 2 Cir., 130 F.2d 300, certiorari denied, Eastman v. Guaranty Trust Co., December 14, 1942, 317 U.S. 691, 63 S.Ct. 266. Under the escrow agreement, the on......
  • Grandy v. Luther
    • United States
    • Washington Court of Appeals
    • January 10, 1975
    ...a trustee to whom the fund has been turned over for administration. Solomon v. Boschulte, 200 F.2d 482 (3d Cir. 1952); Hackner v. Morgan, 130 F.2d 300 (2d Cir. 1942); Edisto National Bank v. Bryant, 72 F.2d 917 (4th Cir. 1934); In re United Cigar Stores Co. of America, 70 F.2d 313 (2d Cir. ......
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