Goffe & Clarkener v. Lyons Milling Co.

• Decision Date: 08 June 1928
• Docket Number: No. 398.,398.
• Parties: GOFFE & CLARKENER, Inc., v. LYONS MILLING CO.
• Court: U.S. District Court — Panama Canal Zone

26 F.2d 801 (1928)

GOFFE & CLARKENER, Inc., v. LYONS MILLING CO.

No. 398.

District Court, D. Kansas, Second Division.

June 8, 1928.

Justin D. Bowersock, of Kansas City, Mo., and A. L. Berger, of Kansas City, Kan., for plaintiff.

Long, Houston, Cowan & Depew, of Wichita, Kan., and Ryland, Boys, Stinson & Mag, of Kansas City, Mo., for defendant.

McDERMOTT, District Judge.

The plaintiff, a grain broker, brings this bill in equity for an accounting with one of its customers. The bill alleges complicated and confusing transactions running over a period of about nine months, all arising from the execution and closing of trades on various lots of grain bought or sold, with a profit or loss on each trade, and alleges payments and advances made by both parties on the account. In short, it is the ordinary business relationship between a member of a board of trade and its country customer.

The motion to dismiss suggests several points, only one of which is pressed, and that is that equity cannot decree an accounting in this situation, the remedy at law being exclusive. The point is close, and not free from doubt, and the court is indebted to counsel for concise, but exhaustive, briefs. It is conceded that, where a fiduciary relationship exists, or where there are mutual accounts, equity may decree an accounting. Both are well-recognized bases of equity jurisdiction. 4 Pomeroy, Eq. Jur. (4th Ed.) p. 1421.

I do not find any fiduciary relationship here. The obligations of principal and agent are not correlative. Ordinarily a principal imposes a trust in the agent, which the agent need not impose in the principal. Accordingly, it has been ruled that an agent may not require an accounting of his principal because of the relationship, while a principal may always seek the aid of equity in calling his agent to account. Padwick v. Stanley, 9 Hare, 627, 41 Eng. Ch. 627; Smith v. Leveaux, 67 Eng. Ch. 1, 46; 4 Pomeroy, Eq. Jur. (4th Ed.) 3370; 2 Sturgis, Eq. Jur. (14th Ed.) Sec. 617; Badger v. McNamara, 123 Mass. 117; California Raisin Growers' Association v. Abbott, 160 Cal. 601, 117 P. 767; Gee v. Pendas, 66 App. Div. 566, 73 N. Y. S. 247; Davis v. Marshall, 114 Va. 193, 76 S. E. 316, Ann. Cas. 1914B, 1025.

The rule is concisely stated in Davis v. Marshall, 114 Va. 193, 76 S. E. 316, Ann. Cas. 1914B, 1028: "The authorities generally support the view that the mere relation of an agent to his principal is of itself insufficient to entitle the agent to maintain a bill for an accounting against the principal."

There may be cases where in fact the principal has assumed a relation of trust with his agent, as, for example, where a salesman is entitled to a percentage of collections made directly by his principal, where the principal keeps the books and the agent has no knowledge, or means of knowledge, as to the time or amount of such transactions. But that is not this case. The agent here knows all about every deal. As a matter of fact, the actual relationship here is more nearly akin to that of a merchant and his customer. An accounting here, as incidental to the enforcement of an equitable remedy against a fiduciary, cannot be had.

Nor are the accounts mutual. It is true that there are credits as well as charges alleged, but the credits are but payments on a single running account. It is also true that advances were probably made by the defendant to margin future purchases, and credit extended by the plaintiff to carry open trades. To-day the defendant might owe the plaintiff; the fluctuations of the market may make the plaintiff the debtor by to-morrow; but there is never but one balance, for there is never but one account. "Mutual accounts" means two accounts. The decisions as to what constitute "mutual accounts" are gathered in Words and Phrases, First and Second Series, under that title, and need not be copied here.

This brings us to the pivotal question: May equity decree an accounting, where there is but a single account, which is long and complicated and confusing? It is entirely clear that mere difficulty of proof does not confer jurisdiction upon equity. In suits upon promissory notes, the notes may be ever so many, the payments trivial and frequent, the computation ever so difficult, but the remedy is exclusively at law. Suits upon fire insurance policies, especially covering stocks of merchandise, often involve examination of inventories, and records of purchases and sales covering indefinite periods; the action is still at law to recover the amount of the damage. The Supreme Court has said:

"The principal ground upon which it is claimed that the remedy at law is inadequate is really nothing more than a difficulty in proving the case against the defendants. The bill shows that whatever was done in the way of cutting the timber and carrying it away was done by the defendants as tortfeasors, and the various devices alleged to have been resorted to by the deceased, Daly, by way of organizing different corporations, in order to, as alleged, cover up his tracks and to render it more difficult for the complainant to make proof of his action, does not in the least tend to give a court of equity jurisdiction on that account. It is simply a question of evidence to show who did the wrong, and upon that point the fact could be ascertained as readily at law as in equity. The complainant is entitled in an action at law to an inspection of the books and records of these various corporations, and it has the same power to obtain the facts therefrom in that action as it would have in this suit in equity." United States of America v. Bitter Root Co. (1906) 200 U. S. 451, 26 S. Ct. 318, 50 L. Ed. 550. "It is said that the facts are complicated, but they are not so on the allegations of the bill, which merely disclose a series of acts alleged to have been parts of the plan to deceive; and, further, mere complication of facts alone and difficulty of proof are not a basis of equity jurisdiction." Curriden v. Middleton et al. (1914) 232 U. S. 634, 34 S. Ct. 459, 58 L. Ed. 765.

This does not, however, answer the proposition proposed. This is not a suit upon a policy of insurance, nor upon promissory notes. It is still a suit on an involved, complicated, although one-sided, account. And the courts have spoken on that proposition.

The Supreme Court has squarely rested equity jurisdiction on this ground. In a case involving a one-sided, but complicated, account, jurisdiction was primarily held on account of the complication, and secondarily on fraud. The case is Kirby v. Lake Shore & M. S. Railroad, 120 U. S. 130, 7 S. Ct. 430, 30 L. Ed. 569, the court said:

"The case made by the plaintiff is clearly one of which a court of equity may take cognizance. The complicated nature of the accounts between the parties constitutes itself a sufficient ground for going into equity. It would have been difficult, if not impossible, for a jury to unravel the numerous transactions involved in the settlements between the parties, and reach a satisfactory conclusion as to the amount of drawbacks to which Alexander & Co. were entitled on each settlement. 1 Story, Eq. Juris. § 451. Justice could not be done, except by employing the methods of investigation peculiar to courts of equity. When to these considerations is added the charge against the defendants of actual concealed fraud, the right of the plaintiff to invoke the jurisdiction of equity cannot well be doubted."

In Gunn v. Brinkley Car Works, 66 F. 382, the Circuit Court of Appeals of this circuit, speaking through Mr. Justice Sanborn, said:

"To deprive a court of equity of jurisdiction, the remedy at law must be plain and adequate — `as practical and efficient to the ends of justice and its prompt administration as the remedy in equity.' Boyce's Ex'rs v. Grundy, 3 Pet. 210, 215 7 L. Ed. 655; Oelrichs v. Spain, 15 Wall. 211, 228 21 L. Ed. 43; Preteca v. Land-Grant Co., 4 U. S. App. 327, 330, 1 C. C. A. 607, 50 F. 674; Foltz v. Railway Co., 8 C. C. A. 635, 641, 60 F. 316, 322. An action at law in a federal court does not furnish such an adequate and efficient remedy for the examination of a long, confused, and complicated mutual account like that disclosed in this bill."

It is true that in the above case the account is a mutual account, but the reason for the ruling quite covers a single account.

In Lewis Publishing Co. v. Wyman (C. C. A.) 182 F. 13, the suit was on a one-sided account, covering many items and a long period of time. The majority of the court disposed of the action on other grounds. In a carefully prepared dissenting opinion, Judge...