Columbia-Knickerbocker Trust Co. v. Abbot

• Decision Date: 20 December 1917
• Docket Number: 1210-1222.
• Citation: 247 F. 833
• Parties: Columbia-knicker BOCKER TRUST CO. v. ABBOT.
• Court: U.S. Court of Appeals — First Circuit

247 F. 833

Columbia-knicker BOCKER TRUST CO. v. ABBOT.

Nos. 1210-1222.

United States Court of Appeals, First Circuit.

December 20, 1917

On Petitions for Rehearing, March 7, 1918.

On Petitions for Rehearing.

Robert M. Morse, of Boston, Mass., and Julien T. Davies, of New York City (John R. Lazenby, of Boston, Mass., and Harold C McCollom, of New York City, on the brief), for plaintiff in error.

Moorfield Storey and R. G. Dodge, both of Boston, Mass. (E. H. Abbot Jr., of Boston, Mass., on the brief), for defendants in error.

Before DODGE and BINGHAM, Circuit Judges, and ALDRICH, District Judge.

DODGE Circuit Judge.

Of the thirteen cases brought before us by these writs of error, seven are suits at law brought in the District Court by the Trust Company, here plaintiff in error, a New York corporation, against various defendants, Massachusetts citizens, here defendants in error. The remaining six cases are suits at law brought in the District Court by all but one of the defendants above referred to, against said company, in which it is here also plaintiff in error and they defendants in error.

All the above suits are based on written subscription agreements further described below. In each suit brought by the Trust Company it seeks to recover from the defendant, a subscriber, the amount of an unpaid subscription. In each suit brought as above against said company, the subscriber seeks to recover back from it an amount paid to it on account of a subscription made. Under one of the subscription agreements referred to no partial payment was made, and therefore no suit brought to recover back such payment. This was the subscription by Evans, upon which his estate is sued in No. 1213. The seven subscription agreements were signed by the various subscribers, here defendants in error, upon various dates in 1906 and 1907.

The parties to each said agreement were the subscriber and the Northeastern Cuba Development Company, a Maine corporation, hereinafter called Development Company.

In each, the subscriber agreed with said Development Company to buy bonds and stock to a specified amount, of the Northeastern Cuba Railroad Company, another Maine corporation, to pay at once a certain part of the stipulated price, and to pay the balance in installments to be called for as in the agreement provided.

In each, the subscriber agreed to make said payments to the Knickerbocker Trust Company, the name at the time of the company here plaintiff or defendant in error (hereinafter called Trust Company), to the credit of said Development Company.

In each it was agreed that said Development Company might, instead of calling for said balance, borrow the same for a year or more upon pledge of the agreement and all rights thereunder to the securities subscribed for; the subscriber guaranteeing, in that event, to the lender, payment to the amount of said unpaid balance with interest.

It is undisputed, in each suit, that the Development Company had borrowed from the Trust Company the unpaid balance of the subscription. The suits brought by said Trust Company are based upon the subscribers' above guaranties of payment to the lender.

The defense asserted against each suit brought by the Trust Company was, that the subscription had been obtained--

'by false and fraudulent representations made by the plaintiff (and by one H. W. Bennett to the knowledge of the plaintiff).'

And, after specifying said representations, that--

'the plaintiff was aware when said agreement is alleged to have been signed * * * that each such representation had been made and was false, and that if the defendant entered into said agreement he had been induced to do so by said representations, and all the acts of the plaintiff alleged were performed with such knowledge.'

The subscribers' suits against said Trust Company to recover back what they had paid to it under said agreements were based upon the same grounds.

1. Upon the subscribers' motion, the District Court ordered the thirteen cases tried together, to the same jury. This was done against objection on the Trust Company's part, which contends here that the order was erroneous. It was made, according to a memorandum accompanying it--

'in view of the extensive identity in issues and evidence between these cases, of the statement of counsel for the (subscribers) that the misrepresentations relied on are the same in all the cases, of the fact that the cases have been tried together before the auditor, and of the large saving in the time of the court which will be effected by trying the cases together before the jury.'

Whether to make such an order or not was within the court's discretion. Rev. Stats. Sec. 921 (Comp. St. 1916, Sec. 1547); Mutual, etc., Co. v. Hillmon, 145 U.S. 285, 292, 12 Sup.Ct. 909, 36 L.Ed. 706. Although, as stated below, the seven subscription agreements were not identical in their terms, the differences between them appear to have been in matters of entirely subordinate importance upon the main issues to be determined. Although the alleged representations relied on by the subscribers, whether written or oral, did not appear by the evidence to have been made at the same time or place to all the subscribers, or to have been identical in their terms as made to each subscriber, the Trust Company fails to satisfy us that the differences between the several cases in these respects were such as made the order an abuse of discretion; and we are unable to hold that the District Court erred in making it. No case is found wherein a judgment has been reversed merely because issues so nearly alike as those presented in these cases were submitted to the same jury in one trial. The record shows that the trial lasted from November 19 to December 30, 1914. It is clear that seven separate trials, the evidence in each of which would have been so largely a repetition of that given by the same witnesses in the other cases, were to be avoided, in the public interest, if this could be done without unduly prejudicing the company's rights. We are unable to believe that it has suffered any material injustice merely in having to try the cases together, as had been done without objection before the auditor, instead of separately. Each of the six cross-actions by a subscriber would of course be properly tried together with the action brought against such subscriber.

2. At the trial, due execution of all the subscription agreements having been admitted, the Trust Company offered proof of the respective amounts loaned by it to the Development Company in accordance with the terms of said agreements. The amounts paid to the Trust Company on account of each subscription and the amounts due upon each said loan made by it thereon having then been agreed, the Company rested. In opening the subscribers' cases it was then stated that they proposed to show all the agreements to have been obtained upon the fraudulent representations set forth in the pleadings.

The Trust Company then moved for directed verdicts in its favor, on the ground that the subscribers' allegations regarding false and fraudulent representations presented equitable defenses not available to them because the court had no jurisdiction thereof. This motion was denied.

The Trust Company then moved to strike out that portion of the auditor's reports dealing with said alleged equitable defenses, which motion was also denied. The auditor's reports in each case had been filed July 21, 1914, and on September 16, 1914, the company had moved to recommit them with instructions to exclude all evidence on the issues of false and fraudulent representations. These motions had been overruled by the court October 19, 1914, on the ground that said representations were admissible in evidence.

The subscribers thereupon read the auditor's reports in all the thirteen cases, from which it appeared that he had found for the defendant in each suit brought by the Trust Company, and for the plaintiff in each suit brought against it to recover back what a subscriber had paid it; having found on the evidence that each subscriber had been induced to sign the agreement sued on by false and fraudulent representations as to the material facts made with the knowledge and acquiescence of the Trust Company, which was aware that they were not true.

In each of the seven cases wherein the Trust Company was plaintiff, its assignment of error 2 complains of the denial of its above motion to recommit said reports; its assignment 3, of the above refusal to direct verdicts in its favor; and its assignment 4, of the above refusal to strike out so much of said reports as dealt with said alleged equitable defenses. It is contended here that said defenses could be availed of by the subscribers only in suits in equity seeking cancellation of their agreements, and that the court had no jurisdiction to entertain them in suits at law upon said agreements-- no fraud touching the execution of the instruments themselves being asserted.

Had said agreements been under seal, these contentions must have prevailed, at the time the above rulings were made, according to the rule then undoubtedly established as to sealed written agreements. George v. Tate, 102 U.S. 564, 26 L.Ed 232. But none of the agreements were under seal, and although, upon the question whether or not the above rule applies in suits at law upon unsealed agreements, there has been conflict in the decisions of the inferior federal courts, we hold, in view of Insurance Co. v. Bailey, 13 Wall. 616, 20 L.Ed. 501, and Cable v. U.S. Light, etc., Co., 191 U.S. 288, 24 Sup.Ct. 74, 48 L.Ed. 188, that said equitable defenses were open to the subscribers in these cases. No decision by the Supreme Court requiring a contrary conclusion...