Harvey v. Harvey

Decision Date03 May 1923
Docket Number3188,3193.
Citation290 F. 653
PartiesHARVEY v. HARVEY et al. SOMERS et al. v. HARVEY.
CourtU.S. Court of Appeals — Seventh Circuit

January 9, 1922, A. J. Harvey, plaintiff below and appellee here filed in the Circuit Court of Milwaukee, Wis., his suit in equity against George A. Harvey, S. S. Harvey, C. W. Somers George N. Sherwin, John Sherwin, A. V. Cannon, F. E. baehr George P. Steele, the First Trust & Savings Bank and the Union Trust Company as its successor, and Plankinton Arcade Company, alleging that the plaintiff is a resident of Milwaukee, Wis., that all of the individual defendants are residents of Ohio, that the First Trust & Savings Bank and the Union Trust Company are Ohio corporations, in Cleveland Ohio, and that the Plankinton Arcade Company is a Wisconsin corporation, owning a long time leasehold of improved property in Milwaukee. The facts as set up in the bill are as follows:

The Plankinton Arcade Company's (hereinafter termed Company) property is incumbered by two trust deeds securing bond issue indebtedness of $600,000, issued December 1, 1915, and $250,000, issued April 1, 1916; the first issue of said bonds maturing, $30,000 on December 1, 1917 and an equal amount each year thereafter until December 1, 1927, when the entire remaining amount becomes due and payable, and the second issue of said bonds maturing the 1st day of April, 1928. The capital stock is $2,800,000 in common and preferred stock, in shares of $100 each. All except 900 shares of said stock has been issued. All stock is entitled to vote, and is owned in certain proportions by the plaintiff, the individual defendants, and certain other persons, Harvey brothers owning originally 7,066 2/3 shares. On the 15th day of November, 1915, a stock deposit agreement was entered into between A. J. Harvey, George A. Harvey, A. V. Cannon, George P. Steele, George N. Sherwin, as trustees, and all stockholders of the Company, whereby the stockholders assigned and deposited with the trustees all issued certificates; the First Trust & Savings Bank of Cleveland, Ohio, being depositary. Each depositor received a certificate of deposit, reciting that the depositor would receive his stock upon payment of the first mortgage bonds or upon termination of the stock deposit agreement, if earlier. The exclusive title to all stock deposited, and all rights thereunder were by said agreement vested in the trustees.

Plaintiff and defendants S. S. Harvey and George A. Harvey were previously partners in Cleveland, Ohio. Plaintiff has removed to Milwaukee, and said copartnership has been dissolved, except as to those matters where a division of property interests has not been made. In 1919 said partners entered into an agreement whereby plaintiff and George A. Harvey each became owner of a one-half interest in all of the stock outstanding in the name of any or all of the partners in the Company. On December 14, 1920, the defendants Somers, Baehr, the Sherwins, Steele, and Cannon addressed a letter, in substance an agreement, to the first Trust & Savings Bank, reciting that they were holders of approximately 11,000 shares of stock, and stating that they had deposited said stock with said Trust Company, with a power of attorney to it or its nominees to vote said stock and transfer said stock to Harvey brothers if they should comply with said agreement, upon condition that said company might designate A. J. Harvey, S. S. Harvey, and George A. Harvey, jointly, to vote said stock, providing said Harveys should not be in default and that said stock should be held until April 1, 1928, at which time the bonds of the Plankinton Arcade Company should be paid, and upon such payment the certificates of stock should be assigned to said Harveys, or their order, provided the said Harveys, within 10 days from the signing of said agreement, should pay $120,000 of bonds, then in default, and all rents, taxes, and expenses of every kind, then due excepting only such part of the taxes of the year 1920 as might by the laws of Wisconsin be deferred for payment to August, 1921, and deposit with said Trust Company on or before January 31, 1921, and on or before the last day of every month thereafter, until said bonds should be paid, the sum of $25,000, which sum was to be used exclusively for the payment of current fixed charges of the Company and said Company's outstanding bonds according to the terms thereof. Should said Harveys at any time fail to deposit the said $25,000 and said default continue for 20 days, the said defendants had the right to terminate said agreement, in which event, if said sum should not be paid within 10 days, the Trust Company was to deliver said stock to said defendants. Each of the Harveys and said Trust Company assented to said agreement in writing.

Various allegations of fraud and conspiracy are set forth, many of which are not material in the present matter. Certain oral statements of George Harvey are alleged to have been false and to have been made with fraudulent intent. Plaintiff alleges that, relying upon said statements, he advanced for the Company $120,000, and received from it a mortgage securing same, subject, however, to the original trust deeds; that he has fully complied with said agreement; that defendant Geo. A. Harvey threatens to procure for himself a proxy to vote at the annual meeting on January 3, 1920, all of the common stock belonging to Harvey brothers and deprive the plaintiff of his management of the property; that the defendants George N. Sherwin, George P. Steele, A. V. Cannon, and S. S. Harvey have conspired with George A. Harvey; that in violation of said last-mentioned agreement the defendants, other than the Harveys, have issued and delivered to defendant George A. Harvey a power of attorney authorizing a majority of the three Harveys to vote said stock, and that said George A. Harvey and S. S. Harvey have threatened they would vote said stock to plaintiff's irreparable injury; that the other defendants are colluding and conspiring with the said Harveys to make such results possible; that at all stockholders' meetings, one of them having been called, the said George A. Harvey would carry into effect his threats, and would vote all of the stock of the Harvey brothers, and thereby irreparably injure the plaintiff and deprive him of his rights.

It is alleged, also, that George A. Harvey has caused to be transferred to himself and others certain shares of common stock, purchased by the brothers from Elmer G. Derr, and 520 shares of stock belonging to Harvey

brothers, in all of which plaintiff alleges that he has a one-half interest, and that by collusion with others George A. Harvey has procured a proxy to vote 850 other shares purchased and owned by the partners; that the defendants George Harvey, Steele, Cannon, John Sherwin, Baehr, and Somers have conspired to claim that plaintiff is in default and have declared a forfeiture; that all of the defendants except the Company have threatened to vote, or allow to be voted, said stock in violation of said agreement in said letter contained, and refuse to allow the plaintiff to have any power of attorney, proxy, or right to vote, jointly or otherwise, on the stock owned by him and his brothers, although under the agreement only a joint power of attorney could rightfully be issued to the Harvey brothers, and that a power of attorney or proxy authorizing a majority of the three Harvey brothers to vote said stock has been issued.

The bill prays that the original stock deposit agreement be adjudged void, and the agreement of December 14, 1920, in full force and effect; that the court decree that George A. Harvey has abandoned all his interest therein, and that the plaintiff has succeeded thereto; that the defendants G. A. Harvey, Steele, George N. Sherwin, and Cannon and their representatives be enjoined from voting any of the stock in which the plaintiff has any interest, either as a member of Harvey brothers, or as owner thereof, and that the defendants the Harveys, the Union Trust Company as successor to the First Trust & Savings Bank, Somers, the Sherwins, Cannon, Baehr, and Steele and their representatives be enjoined from voting or allowing to be voted any of the stock deposited under the agreement of December 14, 1920, otherwise than by joint power of attorney executed to A. J. Harvey, S. S. Harvey, and George A. Harvey, and that the defendant Plankinton Company be enjoined from accepting, receiving, or permitting to be used as votes at any stockholders' meeting any of the said stock mentioned.

Upon the filing of this bill, on January 5, 1922, the circuit court of Milwaukee county entered an order restraining the defendants as prayed in the bill. On January 23, 1922, George A. Harvey, by his separate petition, and he and S. S. Harvey, by their joint petition, caused the suit to be removed to the United States District Court for the Eastern District of Wisconsin. The plaintiff thereafter moved to remand the cause, and this motion the court denied. On March 14, 1922, the court entered an order continuing in force the order entered by the circuit court of Milwaukee county. Thereupon substituted service, under section 57 of the Judicial Act, was secured upon the remaining defendants, except the company, all of whom were residents of Ohio.

The court, on May 31, 1922, after hearing upon bill, affidavits and motions, continued in full force the order of January 5, 1922, except that same was modified in certain particulars and added to in others. Thereafter the Ohio defendants, other than the Harveys, moved to set aside the service of the process upon them. This the court denied, and thereafter, on the 10th day of July, 1922, the same defendants moved to dissolve the order of...

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