Doyne v. Saettele

• Decision Date: 10 June 1940
• Docket Number: No. 11597.,11597.
• Parties: DOYNE et al. v. SAETTELE et al.
• Court: U.S. Court of Appeals — Eighth Circuit

112 F.2d 155 (1940)

DOYNE et al. v. SAETTELE et al.

No. 11597.

Circuit Court of Appeals, Eighth Circuit.

May 22, 1940.

As Amended on Denial of Rehearing June 10, 1940.

COPYRIGHT MATERIAL OMITTED

James V. Frank and Joseph H. Grand, both of St. Louis, Mo. (Jacob Chasnoff, Taylor, Chasnoff & Willson, and Jones, Hocker, Gladney & Grand, all of St. Louis, Mo., on the brief), for appellants.

George O. Durham, of St. Louis, Mo. (Barker, Durham & Drury, James W. Durham, and Harry C. Barker, all of St. Louis, Mo., on the brief), for appellee Ralph L. Saettele.

Before SANBORN, THOMAS, and VAN VALKENBURGH, Circuit Judges.

SANBORN, Circuit Judge.

This appeal is from a preliminary injunction granted by the court below to protect its jurisdiction over the subject matter of a suit brought by Ralph L. Saettele against Max H. Doyne and others, the purpose of which is to secure a distribution of the assets of C. E. Smith & Co., an unincorporated association, to those who may be determined to be entitled thereto.

In 1927 Charles E. Smith, of St. Louis, Missouri, who had been conducting a successful business in that city as a consulting and supervising engineer under the name of C. E. Smith & Co., was leaving St. Louis to become an executive of an eastern railway company. He had on hand unfinished business. There were eight men in his employ. Of these, Saettele, Doyne, May, Boyles, Kinsey and Nohl were engineers. Beck was the office manager. Thomas was another employee. Smith conceived a plan for continuing the business of C. E. Smith & Co., and outlined this plan in a letter of December 20, 1927, to his employees. It is unnecessary to set it forth in detail. Doyne, Beck and May were to constitute a "Board of Control" and to have full authority to carry on and manage the business and to determine at the end of each year how much of the profits of the business was to be distributed. The distributable surplus as determined by them was to be divided among the eight employees in accordance with certain specified percentages. The employees accepted Smith's plan and proceeded to carry on the business under it.

In April, 1928, Thomas withdrew from the business. This resulted only in a revision upward of the percentage of profits to which each of the remaining associates was entitled. The "Board of Control" made the revision. On October 15, 1935, Boyles withdrew, and on February 27, 1936, he commenced a suit in the Circuit Court of the City of St. Louis for a dissolution of C. E. Smith & Co., the appointment of a receiver, and a liquidation and distribution of its alleged $51,839.31 of assets, upon the theory that the association was a partnership or joint enterprise and that his withdrawal had worked a dissolution of it. The defendants in the Boyles suit were the six surviving associates, including Saettele. Kinsey, Nohl and Saettele joined with Boyles in his prayer for a dissolution of the alleged partnership and a distribution of assets. Doyne, Beck and May, the "Board of Control", resisted. On September 28, 1936, Judge Joynt, of the Circuit Court of the City of St. Louis, upon the pleadings, entered a decree determining that the association was a partnership or joint enterprise which had been dissolved as of October 15, 1935, when Boyles withdrew; that Doyne, Beck and May had in their possession the assets of the association as agents or trustees for all of the parties to the cause; and that an accounting should be had. Paul Dillon was appointed receiver. An attorney and an accountant for the receiver were later appointed by orders of Judge Joynt.

On February 23, 1937, Smith, Doyne, Beck and May, as relators, procured from the Supreme Court of Missouri a provisional writ of prohibition directed to Judge Joynt and Paul Dillon, receiver, requiring them to show cause "why a writ of prohibition should not issue, as prayed, prohibiting and restraining you, and each of you, from taking any further action in a cause entitled Robert M. Boyles, plaintiff, against Max H. Doyne, Martin C. Beck, Samuel B. May, Milton M. Kinsey, Ralph L. Saettele and Frank R. Nohl, defendants, No. 5186, Div. No. 2; and you and each of you * * * are commanded, in the meantime, to take no further steps in said cause until the further order of this court." The petition of the relators upon which the provisional writ was based had charged Judge Joynt with exceeding and usurping jurisdiction in the proceedings before him in the Boyles suit, and had asserted that his orders and decrees were wholly illegal and void on the grounds that the petition filed by Boyles in the Circuit Court of the City of St. Louis failed to state any cause of action; that answers thereto stated a meritorious defense; that the pleadings in the cause had conferred no jurisdiction upon the Circuit Court of the City of St. Louis; and that, in any event, the orders made were in excess of its jurisdiction. To the rule of the Supreme Court, Judge Joynt made a return setting up all of the pleadings filed and proceedings had in his court, which return showed that the facts were as alleged in the relators' petition for the writ. The Supreme Court of Missouri, on April 4, 1939, made its provisional writ absolute. It filed an opinion in which, among other things, it said: "Thus it appears that the only question for determination is whether or not the petition in the Boyles case stated a cause of action. In other words, did the petition, including the admitted facts in defendants' answer, state a cause of action authorizing a receivership and liquidation of the business as a partnership or joint adventure?"

It also said:

"The relationship of plaintiffs and defendants to the business is that of employees. The petition, including the admitted facts in defendants' answer, did not state facts sufficient to create the relationship of either partners or joint adventurers. Furthermore, under the admitted facts, the petition could not be amended to state a cause of action creating such a relationship.

"Respondent judge did not brief the merits. He briefed only procedural contentions. In Laumeier v. Sun-Ray Products Co., 330 Mo. 542, 50 S.W.2d 640, 643, 84 A.L.R. 1435, we ruled as follows: `Absent a cause of action stated in the main case, there is no main case pending, and the court is without power or jurisdiction to appoint a receiver'.

"Furthermore, the judgment and all orders entered by respondent judge in the case are void and of no force and effect. He proceeded in the cause in excess of his jurisdiction, and our provisional rule should be made absolute. It is so ordered." State v. Joynt, Mo.Sup., 127 S.W.2d 708, 709, 714.

A petition for rehearing was denied by the Supreme Court of Missouri on May 2, 1939; but its mandate was stayed to permit application for certiorari to the Supreme Court of the United States. Certiorari was not applied for, and the mandate went down on June 17, 1939.

On June 16, 1939, before the mandate was filed, Saettele filed his bill in equity in the court below, in which he joined as defendants Doyne, Beck and May (the "Board of Control") and Boyles, Kinsey, Nohl, C. E. Smith and Paul Dillon, the de facto receiver appointed by Judge Joynt. Aside from the jurisdictional averments, the bill alleged in substance that the "Board of Control" were trustees of the assets of C. E. Smith & Co.; that they had breached their trust; that the trust estate belonged in equity to the plaintiff and the defendants other than Dillon and Smith; that Dillon had in his possession $26,000 belonging to the trust estate; that an accounting was necessary to ascertain what the trust estate consisted of and to determine the interests of the various beneficiaries therein. His prayer was for an accounting, a liquidation of the assets, and a distribution of the trust estate to those who were entitled thereto, together with such relief pending a trial upon the merits and a final decree as might be necessary to preserve the trust estate, including an injunction against waste and dissipation of the assets, and for the appointment of a receiver. Personal service of process was had upon all defendants except Smith, who was a citizen of Connecticut, and substituted service was had upon him under § 118, Title 28, U.S. C., 28 U.S.C.A. § 118. Smith subsequently appeared and moved to set aside this service. The court below denied his motion and also a motion of the "Board of Control" to dismiss the bill. By subsequent amendments to the bill, the plaintiff brought in as defendants other parties who were in possession of funds or property of C. E. Smith & Co. alleged to be trust assets.

On July 24, 1939, the court below, upon application of the plaintiff, issued a restraining order to prevent interference with its jurisdiction of the subject matter of this suit and of the assets of the alleged trust fund, and directed the defendants to show cause why a preliminary injunction should not be granted. On July 27, 1939, Doyne, Beck, May and Smith filed complete returns to the order to show cause, in which they set up the proceedings had in the courts of Missouri in the Boyles case and the prohibition proceedings. The court below for three days heard testimony and argument. It appeared that Doyne, Beck, May and Smith had procured from judge Joynt an order dissolving all orders previously entered by him in the Boyles case and directing that all assets of C. E. Smith & Co. be turned over to them, the Circuit Court of the City of St. Louis reserving "jurisdiction of the parties and of the cause for such further action as may be proper on the pleadings now or hereafter filed in said cause and with respect to all matters herein not disposed of by the foregoing order"; that armed with this order of Judge Joynt and upon giving to the Mercantile-Commerce Bank and Trust Company of St. Louis an indemnifying agreement signed by counsel for the defendants Doyne, Beck, May and Smith, the "Board of Control" secured $5,000...