224 F.2d 198 (2nd Cir. 1955), 23560, Rieser v. Baltimore and Ohio Railroad Company

Docket Nº:23560.
Citation:224 F.2d 198
Party Name:Norvin RIESER, Milton S. Koblitz, George S. Champlin, E. M. Dart Mfg. Co., Lillian Boehm, Bernard Fein, Kathryn P. Braithwaite and Edward F. Quirke, Plaintiffs-Appellants, and Emanuel Josephson, Rubin Slavsky, Raymond Wiley and William W. Lange, Intervening Plaintiffs-Appellants, v. The BALTIMORE and OHIO RAILROAD COMPANY, Defendant-Appellee.
Case Date:June 09, 1955
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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224 F.2d 198 (2nd Cir. 1955)

Norvin RIESER, Milton S. Koblitz, George S. Champlin, E. M. Dart Mfg. Co., Lillian Boehm, Bernard Fein, Kathryn P. Braithwaite and Edward F. Quirke, Plaintiffs-Appellants, and Emanuel Josephson, Rubin Slavsky, Raymond Wiley and William W. Lange, Intervening Plaintiffs-Appellants,




United States Court of Appeals, Second Circuit.

June 9, 1955

Argued April 18, 1955.

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Louis Boehm and Nathan V. Kogan, New York City (Spencer Pinkham, New York City, of counsel), for plaintiffs-appellants and intervening plaintiffs-appellants.

Abraham K. Weber, New York City, for plaintiffs-appellants Kathryn P. Braithwaite and Edward F. Quirke.

Cravath, Swaine & Moore, New York City (Ralph L. McAfee, Edward C. Perkins, and Jerome T. Orans, New York City, of counsel), for defendant-appellee.

Before CLARK, Chief Judge, and FRANK and HINCKS, Circuit Judges.

CLARK, Chief Judge.

Plaintiffs are bondholders of the Alton Railroad Company, which has recently gone through reorganization pursuant to § 77 of the Bankruptcy Act, 11 U.S.C. § 205. In that reorganization plaintiffs received only 37.5 per cent of the face amount of their claims, and their old bond certificates were cancelled 'except for purpose of evidencing right of the bearer or registered owner to a claim, if any, against the Baltimore and Ohio Railroad Company.' It is this claim which the plaintiffs are now attempting to enforce as unsatisfied creditors. The defendant dominated the debtor corporation through ownership and control of all of its voting stock from 1931 until 1942 and is alleged to have used its position to divert potential profits from the debtor to itself. The defense of the statute of limitations was successfully interposed in the district court, Judge Murphy ruling that all claims accruing before May 7, 1942, were barred by the applicable New York statutes. D.C.S.D.N.Y., 123 F.Supp. 44. On the appeal on the merits plaintiffs intend to contest the appropriateness of this cutoff date which bars the greatest part of their claims. At this juncture, however, we are concerned only with a motion by the defendant to dismiss the appeal for lack of an appealable order below, despite an express determination that there was no just reason for delay and direction for entry of judgment pursuant to F.R. 54(b).

Defendant argues vigorously that in no event can there be an appealable judgment here, because there has been adjudicated only a part of a unitary action by bondholders to recover deficiencies on their bonds. Even under F.R. 54(b), as is now settled, and entire claim must be adjudicated and appeals cannot be taken from an order upon a part of a single claim. See Leonidakis v. International Telecoin Corp., 2 Cir., 208 F.2d 934; Gold Seal Co. v. Weeks, 93 U.S.App.D.C. 249, 209 F.2d 802; Pabellon v. Grace Line, Inc., 2 Cir., 191 F.2d 169, 174, certiorari denied Coston Supply Co. v. Pabellon, 342 U.S. 893, 72 S.Ct. 201, 96 L.Ed. 669; United States Plywood Corp. v. Hudson Lumber Co., 2 Cir., 210 F.2d 462. So an action to enforce a series of overdue interest payments on matured bonds would not state multiple claims merely because more than one payment is owed. The ultimate determination of multiplicity of claims must rest in every case on whether the underlying factual bases for recovery state a number of different claims which could have been separately enforced. See United Artists Corp. v. Masterpiece Productions, 2 Cir., 221 F.2d 213. Here the plaintiffs alleged a series of independent acts of wrongdoing by the defendant, some of which occurred in their entirety before the cutoff date fixed by the district court. These include the alleged misuse of Alton's rolling stock, the wrongful abrogation of contracts favorable to Alton, and the misappropriation of Alton's tax credits for the benefit

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of the defendant. Far from being merely an action by a bond-obligee on his bond, it is actually that of a corporation's judgment creditors who are suing in the right of the corporation to seek redress for a series of torts alleged to have been committed by the defendant against their debtor. This seems to us clearly a case of multiple claims, where Judge Murphy could enter final judgment upon making the appropriate determination.

Defendant also points out that Judge Murphy appears to have expressed a possible doubt as to the validity of the rule and that this issue is now before the Supreme Court by grant of certiorari in the case of Mackey v. Sears, Roebuck & Co., 7 Cir., 218 F.2d 295, which sustained the rule. See Sears, Roebuck & Co. v. Mackey, 348 U.S. 970, 75 S.Ct. 535. Although we have recently reiterated belief in the rule's validity, see, e.g., United Artists Corp. v. Masterpiece Productions, supra, 2 Cir., 221 F.2d 213, and Rao v. Port of New York Authority, 2 Cir., 222 F.2d 362, it seems desirable to make some re-examination of the question here. The substantial importance of the problem, the far-reaching consequences of an adverse holding, the lack of official defenders of the rule-- unlike an Act of Congress, which is supported by the Attorney General under 28 U.S.C. § 2403-- and the normal interest of counsel in their own case, rather than in the rules as such, all suggest the desirability of adducing here such reasons in favor of validity as have seemed persuasive upon a careful study of the matter.

The argument against validity is simple-- indeed quite delusively so. Starting with the principle that mere procedural rules cannot expand a court's jurisdiction, it is then assumed that the assailed judgment was not appealable before the advent of the rules; and the inevitable conclusion then seems to be that the judgment cannot now be made appealable by rule, and particularly by action of the trial judge. But this statement conceals the extent of the assumption made as to the former law and negates the change in law necessarily made (with express authority of Congress) by the advent of the federal rules as a new system of procedure in our courts. For our problem arises because of the merger of law and equity, supplemented by the correlative rules achieving an extremely broad content for the civil action. Hence how can it be patly assumed that an assailed judgment was not appealable before the rules when the then practice did not contemplate such a judgment combining law and equity and other remedies?

The general aspects of these broader questions were indeed contemplated by David Dudley Field and his associates in planning the original law-equity merger in New York in 1848. In the First Report of the Commissioners on Practice and Pleadings 74, 76, 77 (N.Y.1848), the Commissioners recognized three principal difficulties in achieving a uniform procedure in cases theretofore cognizable at law and equity; and of these they stated the form of the judgment and the means of enforcing it as first. (The others were the mode of pleading and the mode of trial.) As they pointed out, chancery granted specific relief to such of the parties as were so entitled, while the law actions gave substitutionary relief by way of money damages, which, in the case of setoffs, would remain only a balance due after deduction of the setoffs. And so the plasticity of the practice in equity might permit of a 'split' judgment or decree awarding varied relief to differing parties. And here, as elsewhere, the Commissioners intended to make the more plastic processes of equity available for the new and combined action. See in general Kharas, A Century of Law-Equity Merger in New York, 1 Syracuse L. Rev. 186, 187-189 (1949); Millar, Civil Procedure of the Trial Court in Historical Perspective 356-361 (1952). And this, too, is just what was planned and done in the original F.R. 54(b), which was soon sustained not only by us, Collins v. Metro-Goldwyn Pictures Corp., 2 Cir., 106 F.2d 83, but by the Supreme Court in Reeves v. Beardall, 316 U.S. 283, 62 S.Ct. 1085, 86 L.Ed. 1478.

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Before we turn to what seems to us the decisive significance of Reeves v. Beardall, it is desirable to note somewhat further the background of the rule. For the problem of the effect of district court rules upon appellate procedure early concerned the Advisory Committee, which gave the most careful attention to it. While the Committee did not plan a revision of appellate procedure as such, yet so much of it depended on district court activity that various incidental appellate practices were necessarily affected. So after intensive study the Committee decided that the Supreme Court under general and historic powers, as well as the specific enabling act, here had the authority to act, although it made the problem clear to the Court in its final Report; and the Court's adoption of the rule after such careful appraisal has been widely considered as approval of the Committee's conclusion as to its validity. This background is set forth, with citations, in Lopinsky v. Hertz Drive-Ur-Self Systems, 2 Cir., 194 F.2d 422, 425-427. The rule here under consideration has independent significance as an expression of finality of court action and only affects appealability and the appellate court's jurisdiction through the operation of a statute based on finality and subject to change as Congress wishes; indeed that body has before it now a proposal of the Judicial Conference which would adapt the plan of the present F.R. 54(b) quite broadly to all federal appeals. See Rep. of the Jud.Conf. of the U.S. 27 (Sept. 1953); Baltimore Contractors v. Bodinger, 348 U.S. 176, 181 note 8, 75 S.Ct. 249, 252.

As a matter of fact, others of the rules-- which have been uniformly sustained-- affect appellate jurisdiction even more directly than does this, e.g., the rule...

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