Sackett v. Beaman
| Decision Date | 05 September 1968 |
| Docket Number | No. 22182.,22182. |
| Citation | 399 F.2d 884 |
| Parties | Sheldon F. SACKETT, and KVAN, Inc., a Washington corporation, Appellants, v. J. Frank BEAMAN, and Fidelity and Deposit Company of Maryland, a corporation, Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Nathan S. Smith (argued), James G. Seely, Jr.; San Francisco, Cal., for appellants.
Everett S. Layman, Jr. (argued), Rudolph J. Scholz, Sedgwick, Detert, Moran & Arnold, San Francisco, Cal., for appellees.
Before HAMLEY, JERTBERG and CARTER, Circuit Judges.
This action, commenced on April 20, 1967, is the outgrowth of a private securities transaction which occurred on November 8, 1961. The plaintiffs are Sheldon F. Sackett and KVAN, Inc., of which Sackett is president, referred to herein collectively as Sackett. They predicate district court jurisdiction, and defendants' liability, on sections 17 and 22 of the Securities Act of 1933, 48 Stat. 84 and 86 (1933), as amended, 15 U.S.C. §§ 77q and 77v (1964), and sections 10 and 27 of the Securities Exchange Act of 1934, 48 Stat. 891 and 902 (1934), as amended, 15 U.S.C. §§ 78j and 78aa (1964).
The defendants are J. Frank Beaman and Fidelity and Deposit Company of Maryland (Fidelity). Defendants moved to dismiss the action for lack of jurisdiction, failure to state a claim, the running of the statute of limitations, laches, and non-joinder of necessary parties. The motion was granted on the ground that the action is barred by the statute of limitations and by laches. The district court thereupon entered judgment for defendants.
Appealing to this court, Sackett argues that: (1) the district court erred in denying leave to file a second amended complaint, (2) the statute of limitations relied upon by the court is not applicable, and (3) assuming that the statute relied upon by the court is applicable, the action is not barred by that statute because (a) the claim was asserted within the statutory period, and (b) alternatively, the operation of the statute was suspended until May 1965.
A rather comprehensive statement of the undisputed facts will facilitate discussion of the legal issues. On November 8, 1961, Sackett entered into a written contract with Beaman and Ernest S. Johnston to purchase from them 2,500 shares of the common stock of News Publishing Company, a Virginia corporation, for approximately $25,000. As a part of the agreement, Sackett also agreed to pay Beaman the further sum of $8,591.50, representing the amount Beaman expended on behalf of News Publishing Company for expenses, fees and services.
Under the terms of the agreement, $1,000 of the $25,000 figure was to be paid in cash upon the signing of the agreement, and the remaining $24,000 thereof was to be evidenced by a promissory note. The agreement called for a $2,000 payment on the $8,591.50 item within fifteen days after the date of the agreement, and the execution of a promissory note in the sum of $6,591.50, due sixty days thereafter.
Sackett made the $1,000 cash payment and executed and delivered the promissory notes as called for in the agreement. The $24,000 promissory note provided for payment in thirteen installments. Johnston thereafter assigned all of his right, title and interest in the agreement and promissory notes to Beaman, and Johnston will therefore not be further referred to in this opinion.
During the negotiations for this contract, Beaman brought to San Francisco, presumably from Virginia, and showed to Sackett, a profit and loss statement which, due to a mathematical error, indicated a net profit in the operation of News Publishing Company of over $5,000 for the period from June 15 to August 24, 1961. In fact there was actually a net loss of over $800 during that period. Sackett alleges that he did not know of this error until about November 30, 1961, when he received a balance sheet showing that News Publishing Company suffered a net loss of $37,612.34 from its inception on May 18, 1961 to October 31, 1961.
About December 30, 1961, Sackett gave Beaman written notice that he rescinded the contract for failure of consideration, and demanded cancellation and return of the promissory notes.
On January 24, 1962, Beaman filed a suit against Sackett in the Superior Court of the State of California for the City and County of San Francisco to recover approximately $10,000, the amount then due on the contract and promissory notes, plus interest. Sackett defended on the grounds of failure of consideration, mistake of fact, fraud and his purported rescission. Sackett also cross-complained for a judicial rescission of the contract, cancellation and return of the promissory notes, and for the refund of $1,000 which Sackett had paid to Beaman.
On May 4, 1965, the Superior Court entered judgment for Beaman in the sum of $10,591.50, plus interest, together with attorneys' fees in the amount of $3,000, and ordered that Sackett take nothing under his cross-complaint. Sackett appealed and execution of judgment was stayed by virtue of an appeal bond in the sum of $20,500 which he obtained from Fidelity. To obtain this bond it was necessary for Sackett to assign to Fidelity, as security, various savings and loan association certificates of deposit totaling $20,500.
This judgment was affirmed by the California Court of Appeal in an unpublished opinion filed on March 22, 1967. Sackett's petition for hearing in the California Supreme Court was thereafter denied and the judgment became final on May 22, 1967. It was paid on July 31, 1967. In the meantime, on December 24, 1965, Beaman filed a second suit against Sackett in the same Superior Court, seeking a judgment in the sum of $22,000, alleged to be the balance due on the $24,000 promissory note, together with interest and attorneys' fees.
On April 20, 1967, while this second state court action was pending in the California Superior Court and the first state court action was pending in the California Supreme Court, Sackett filed his original complaint in the federal action now before us. He alleged that Beaman had offered and sold to Sackett the 2,500 shares of stock of News Publishing Company on November 8, 1961, by means of communications in interstate commerce and by the use of the mails. In connection therewith, Sackett alleged, Beaman obtained money and property by means of untrue statements of material facts and failure to state material facts.
By reason thereof, Sackett alleged, Beaman made the sale of stock by use of a deceptive device, in contravention of section 17 of the Securities Act of 1933 (15 U.S.C. § 77q), and section 10 of the Securities Exchange Act of 1934 (15 U.S.C. § 78j), and of the applicable rules of the Securities and Exchange Commission (Commission).1 Sackett asked for a judgment declaring the contract of sale, and all obligations given by him in connection therewith, null and void, and for a stay of the second state court action pending a determination of the federal action.
On May 3, 1967, Sackett filed an amended complaint in which Fidelity was named as an additional defendant. In three causes of action, Sackett alleged essentially the same basis for relief as in the original complaint. However, he, for the first time, set out the facts concerning the first state action and Fidelity's connection therewith.
He asked for a judgment declaring the contract of sale and all obligations given by him in connection with that contract to be unlawful and void. He also asked that Beaman be restrained from enforcing the judgment in the first state action and from prosecuting the second state action, and that Fidelity be restrained from paying any part of that judgment until this federal suit is disposed of.2
On May 9, 1967, Beaman, directing his attention to the original complaint, moved to dismiss the action on the grounds of lack of jurisdiction and failure to state a claim upon which relief can be granted. On June 13, 1967, Beaman and Fidelity, directing their attention to the amended complaint, moved to dismiss the action on the five grounds stated at the outset of this opinion.3
The two motions to dismiss were heard together on July 25, 1967, at the close of which the district court announced that the action would be dismissed because of laches on the part of Sackett, and asked that a form of judgment be prepared.
Counsel for Beaman prepared not only a form of judgment but proposed findings of fact and conclusions of law. And in the proposed conclusions of law prepared by counsel for Beaman, it was recited not only that the action was barred by laches (the ground relied upon by the district court in its oral decision), but that it was also barred by the statute of limitations and, particularly, section 338(4) of the California Code of Civil Procedure.4
After receiving a copy of the form of judgment and of the proposed findings of fact and conclusions of law, Sackett, on August 2, 1967, filed proposed modifications to the form of judgment and to the proposed findings of fact and conclusions of law.
Sackett proposed to amend the form of judgment by adding a recital to the effect that nothing therein should be deemed to determine the issue of Sackett's right to sue Beaman for damages arising out of the transaction. Sackett desired to amend the proposed findings of fact by striking two paragraphs which set up a factual basis for the conclusion that Sackett had been guilty of laches. He desired to amend the proposed conclusions of law to eliminate all reference to the statute of limitations, insert a savings clause recital of the kind he wished to add to the findings, change "dismissed with prejudice" to "dismissed without prejudice," and eliminate the recital that the issue of attorneys' fees is reserved for future determination.
Sackett's proposed modifications of the form of judgment and the proposed findings and conclusions were accompanied by a statement, memorandum, affidavit and, as an exhibit attached to the...
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Robinson v. City of San Bernardino Police Dept., CV 96-2539-DT (RC).
...586 (9th Cir.1991) ("a district court does not err in denying leave to amend where the amendment would be futile."); Sackett v. Beaman, 399 F.2d 884, 892 (9th Cir.1968) (district court properly denied proposed second amended complaint that was barred by statute of limitations). Similarly, i......
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Korn v. Merrill
...Act of 1933, 15 U.S.C. § 77q(a); Section 20(a) of the Securities Exchange Act of 1934, 15 U. S.C. § 78t(a)); Sackett v. Beaman, 399 F.2d 884, 890 (9th Cir. 1968) (Sections 17 and 22 of the Securities Act of 1933, 15 U.S.C. §§ 77q and 77v, and Sections 10 and 27 of the Securities Exchange Ac......
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Bradshaw v. Zoological Soc. of San Diego
...and this court has previously held that review is available after the final judgment, into which they merge. Sackett & Kvan, Inc. v. Beaman, 399 F.2d 884, 889 n.6 (9th Cir. 1968). The opportunity to amend, if erroneously denied, may be effectively protected after final judgment on the merit......
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Richardson v. United States
...and that the appeal from the order of June 16 properly raises the question of the denial of the three judge court. Sackett v. Beaman, 399 F.2d 884, 889 n. 6 (9th Cir. 1968). In any case, we note that a single judge court's actions after an improper denial of a three judge court are of no ef......