Galbreath v. Metropolitan Trust Co.
Decision Date | 12 March 1943 |
Docket Number | No. 2616.,2616. |
Citation | 134 F.2d 569 |
Parties | GALBREATH v. METROPOLITAN TRUST CO. OF CALIFORNIA et al. |
Court | U.S. Court of Appeals — Tenth Circuit |
McDougal & O'Dell, of Denver, Colo., for appellant.
Lee, Doud & Griffith, of Denver, for appellee.
Before PHILLIPS, BRATTON, and MURRAH, Circuit Judges.
Appellant, Charles A. Galbreath, as receiver for The Union Deposit and Savings Company, appeals from an order of the District Court of Colorado sustaining a motion to dismiss his petition of intervention, and from the final judgment of the court in this case. It is the contention of appellant that the petition of intervention states a cause of action on which relief can be granted, hence the trial court erred in sustaining a motion to dismiss under Rule 12(b)(6), Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.
Generally, a motion to dismiss on the grounds that a petition does not state a claim on which relief can be granted, admits all facts well pleaded, and the legal question presented thereby is governed by the facts as pleaded. Eberle v. Sinclair Prairie Oil Company, D.C., 35 F.Supp. 296; Leimer v. State Mutual Life Assurance Company, 8 Cir., 108 F.2d 302, 305; Gallup v. Caldwell, 3 Cir., 120 F.2d 90; Cohen v. United States, 8 Cir., 129 F.2d 733; Continental Collieries, Inc., v. Shober, 3 Cir., 130 F.2d 631; Polk Company v. Glover, 305 U.S. 5, 9, 59 S.Ct. 15, 83 L.Ed. 6. It is also equally true that one who intervenes in a suit in equity thereby becomes a party to the suit, and is bound by all prior orders and adjudications of fact and law as though he had been a party from the commencement of the suit. Swift v. Black Panther Oil & Gas Company, 8 Cir., 244 F. 20; Commercial Electrical Supply Company v. Curtis, 8 Cir., 288 F. 657, certiorari denied 263 U.S. 709, 44 S.Ct. 36, 68 L.Ed. 518; Rector v. United States, 10 Cir., 20 F.2d 845, 859; Central Republic Bank & Trust Company v. Caldwell, 8 Cir., 58 F.2d 721; State of Kansas v. Occidental Life Insurance Company, 10 Cir., 95 F.2d 935; Godfrey L. Cabot, Inc., v. Binney & Smith Co., D.C., 46 F.Supp. 346; United States v. California Cooperative Canneries, 279 U.S. 553, 556, 49 S.Ct. 423, 73 L.Ed. 838. A proper understanding and consideration of the precise issue presented by the petition of intervention and the order of dismissal, requires a recurrence to the pleadings and proceedings which preceded its filing. In brief outline, they are as follows.
The Union Trust Company, herein called the Trust Company, the Union Deposit Company, herein called the Deposit Company, and the Union Deposit and Savings Company, herein called the Savings Company, were interlocking corporations, organized by P. H. Troutman, who acted as the president of each. The Deposit Company and the Trust Company were organized for the purpose of creating, issuing, and selling securities to the public in the form of installment trust certificates. On August 1, 1930, and January 1, 1931, respectively, the Deposit Company and the Metropolitan Trust Company, herein called Metropolitan, entered into what is known as an investment trust indenture, by the general terms of which the Metropolitan agreed to act as trustee for the purchasers and holders of certain investment trust certificates, which the Deposit Company proposed to create, issue and sell to the public. The agreement dated August 1, 1930, covered the issuance and sale of Union Trust Certificates, Series C, and the agreement of January 1, 1931, covered the issuance and sale of Union Trust Certificates, Series E, but the agreements and trust certificates are not materially different in form. The certificates were to be sold to the public by the Deposit Company for the sum of $800 each, payable in one hundred and fifty equal monthly installments. The first eighteen installments in the amount of $96 were to be used to purchase what was known as a participating share in the investment plan. The remaining one hundred and thirty-two payments, aggregating the sum of $704, were to be applied to the full payment of the trust certificate, and were to be used by the Deposit Company as and when paid for the purchase of stock in certain specified companies, the earnings of which were to be used for the purpose of paying six or seven per cent preferred dividends on the trust certificates. Upon maturity of the trust certificates, one hundred and fifty months after date of purchase, the investment in the stock so purchased was to be liquidated and the entire purchase price of the certificate in the sum of $800 returned to the registered certificate holder, plus the six or seven per cent dividends provided to be paid on the investment in the specified stocks. In addition, the indenture and certificate provided that the excess earnings from the stock investments, above the six per cent preferred dividends, were to be equally divided between the Deposit Company and the certificate holders in proportion to the amount invested.
The purpose of the trust indenture with the Metropolitan was to designate the Metropolitan as a trustee for the certificate holders, and to insure the faithful performance of the conditions of the trust certificate. The trust indenture with the Metropolitan recited the issuance of the trust certificates and the terms thereof; it bound the Deposit Company to invest the installment payments in the stocks specified in the certificate within the calendar month after the receipt of the payment, and to deliver the same to the Metropolitan as trustee, to be held by it for the benefit of the certificate holders. The trust indenture further provided that upon the maturity of the trust certificates, the Metropolitan would proceed to liquidate the trust estate, consisting of the stock in the specified companies, return the certificate holders their original investment, plus the stipulated preferred dividends, and fifty per cent of the excess earnings on the stock investment. The remaining fifty per cent of the excess earnings was to be delivered to the Deposit Company, or its order, all in accordance with the terms and conditions of the trust certificates, Series C and E. The Trust Company guaranteed the faithful performance of the terms and conditions of the trust indenture by the Deposit Company, and the indenture was signed by the Deposit Company, the Trust Company, and the Metropolitan, and the parties entered upon its performance.
In October, 1934, the Metropolitan commenced this suit against the Deposit Company and the Trust Company, in which it pleaded the trust indenture in detail, and the issuance and sale by the Deposit Company of trust certificates covered thereby. It alleged that the Deposit Company had withheld stock investments in the sum of $11,973.34, which it had not delivered to the Metropolitan as trustee, and as required by the terms of the certificates and the indenture. It prayed for an accounting under the trust indenture, and that the Deposit Company be restrained from collecting or receiving any further monies on the purchase price of the certificates, or from disposing of any monies or securities held by it, belonging to the certificate holders. The Deposit Company and the Trust Company answered, denying any defalcations or breach of the trust indentures. Among other things, it was alleged that the Metropolitan had been removed as trustee and the Trust Company selected as successor trustee in accordance with the trust certificates and indentures, and that the Metropolitan had refused to perform the duties imposed upon it by the terms of the trust indentures, as a result of which each of the companies had been damaged in the sum of $15,000, for which each prayed judgment against the Metropolitan. Issues on the counterclaim were joined by reply of the Metropolitan, in which it was alleged that its purported removal was in fraud of the investors, and had been so adjudged by a court of competent jurisdiction in the State of California.
Before the trial of the issues raised by the pleadings, and on January 24, 1936, the parties entered into a settlement agreement, by the terms of which it was agreed that the Metropolitan would proceed to liquidate the trust estate consisting of the stock purchased by the proceeds derived from the sale of the certificates. Upon liquidation of the trust estate by the Metropolitan within six months from the date...
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