Beers v. Denver & R. G. W. R. Co.

• Decision Date: 15 February 1923
• Docket Number: 5934.
• Citation: 286 F. 886
• Parties: BEERS et al. v. DENVER & R.G.W.R. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

286 F. 886

BEERS et al. v. DENVER & R.G.W.R. CO. et al.

No. 5934.

United States Court of Appeals, Eighth Circuit.

February 15, 1923

John Lee Webster, of Omaha, Neb. (Arthur M. Wickwire and Daniel W Blumenthal, both of New York City, and Arthur Berenson, of Boston, Mass., on the brief), for appellants.

John F Bowie, of New York City, for appellees.

Charles W. Waterman, of Denver, Colo., for appellee Denver & Rio Grande Western Railroad Co.

Before KENYON, Circuit Judge, and POLLOCK and VAN VALKENBURGH District Judges.

PER CURIAM.

This is a companion case to No. 6002, 286 F. 778, and No. 6003, 286 F. 883, opinions in which are this day filed.

Appellants on December 17, 1920, as stockholders of the Denver & Rio Grande Railroad Company filed bill in equity in the District Court of the United States for the District of Colorado against the Equitable Trust Company of New York, as trustee, and the Denver & Rio Grande Railroad Company, Western Pacific Railway Company, Western Pacific Railroad Company, Western Pacific Railroad Corporation, Denver & Rio Grande Western Railroad Company, John F. Bowie, John B. Marsh, and Ralph M. Arkush, asking an accounting as to property and funds of the Denver & Rio Grande Railroad Company (commonly and herein called the Denver Company), which they allege had been taken and misappropriated through connivance of interlocking directorates; also the ascertainment of damages which the stockholders had sustained by reason of said acts, and for general relief.

On the 8th of January, 1921, the Denver & Rio Grande Western Railroad Company entered its appearance and filed motion to dismiss plaintiffs' bill of complaint, setting forth a number of reasons therefor. Before such motion was passed upon by the court, appellants on July 16, 1921, moved for leave to file amended and supplemental complaint which is duly set forth in the record. On July 21, 1921, the court denied the motion for leave to file an amended and supplemental petition in equity and at the same time sustained the motion of the Denver & Rio Grande Western Railroad Company to dismiss plaintiffs' original bill.

A complete history of the litigation leading up to these cases is found in a decision of this court. Levy et al. v. Equitable Trust Co. et al., 271 F. 49. It would be useless to again review this complicated series of transactions, and we content ourselves as to the historical situation by reference to said case.

However this case may be designated, it is an attempt to overcome the effect of numerous estoppels and to continue litigation already long drawn out, and that should for the best interests of all parties, be concluded. Whatever the case may be called, in whatever guise the question may appear, the fundamental of it all is an attack on the judgment against the Denver Company rendered in the Southern district of New York on the 14th day of June, 1917, in a suit brought by the Trust Company against the Denver Company, which judgment subsequently was the basis of the suit in the United States District Court of Colorado, where judgment was obtained against the Denver Company for approximately $36,000,000, representing the amount of the New York judgment and interest, less proceeds derived from sales of property under execution.

Counsel for appellants contend that this not an attack on the New York judgment; that appellants are not seeking to set aside said judgment, but are asking an avoidance of acts done or to be performed over which the United States District Court for the District of Colorado has jurisdiction, and contend that it is within the province of the Colorado court to set aside the judgment there rendered, the appointment of a master, and the sale of the properties of the Denver Company. The Colorado court was required, as a matter of law, to recognize the New York judgment and to grant the necessary process to make it effective. This it did. The argument presented, while not going to the extent of claiming that a court could set a judgment aside where there had been jurisdiction both of the parties and of the subjectmatter, does insist that the court should have no hesitancy in avoiding such judgment. We see no difference in the practical working out of the question between avoiding the judgment or setting it aside.

The New York judgment, as we have pointed out in the opinion in No. 6002 (this day filed) was based upon what is known as contract B, under the terms of which the Denver & Rio Grande Companies had agreed to take care of certain deficiencies of the Western Pacific Railway Company. This judgment is as conclusive against the stockholders as it is against the Denver Company, which represented the stockholders in the New York suit. The Denver Company, of which appellants are stockholders, is now estopped from making any defense as to the New York judgment that it could have made in that suit when tried, barring the question of extraneous or collateral fraud. Hence the stockholders, appellants here, are estopped from maintaining a suit in the Colorado court which practically amounts to a suit for the voidance of the New York judgment, without pleading extraneous or collateral fraud as to the New York case. Levy et al. v. Equitable Trust Co. et al. (C.C.A.) 271 F. 49; Equitable Trust Co. v. Denver & Rio Grande R.R. Co. (D.C.) 269 F. 987; Farmers' Loan & Trust Co. v. Kansas City Co. (C.C.) 53 F. 182, 186; U.S. v. Throckmorton, 98 U.S. 61, 68, 69, 25 L.Ed. 93; Greenameyer v. Coate, 212 U.S. 434, 444, 445, 29 Sup.Ct. 345, 53 L.Ed. 587; Vance v. Burbank, 101 U.S. 514, 519, 25 L.Ed. 929.

The vital point in this case and the two companion cases is the attack on the New York judgment. It avails nothing to claim otherwise. It is the rock upon which the waves of subsequent action continually break. If there was extraneous fraud as to the New York case, then the judgment could, of course, be attacked; but such fraud is only...