Graver v. Faurot

• Decision Date: 05 October 1896
• Docket Number: 217.
• Citation: 76 F. 257
• Parties: GRAVER v. FAUROT.
• Court: U.S. Court of Appeals — Seventh Circuit

76 F. 257

GRAVER v. FAUROT.

No. 217.

United States Court of Appeals, Seventh Circuit.

October 5, 1896

In September, 1888, the appellant, Graver, brought a bill in the superior court of Cook county, Ill., against the appellee Faurot, and one Bailey, charging in substance that the defendants by deceitful and fraudulent practices had induced the complainant to purchase of Bailey 500 shares of stock in the Edwards Oil-Burner Company, at the price of 60 cents on the dollar, when the stock was in fact worthless; that Faurot, who was the president of the Lima National Bank, at Lima, Ohio, where the transaction in question occurred, and with whom the complainant was in confidential relations having a deposit of $15,000 in his bank, was jointly and equally interested with Bailey in the stock, though professing at the time, and by the complainant believed, to be a disinterested adviser, upon whose assurance that the purchase would be a good one the complainant could, as in fact he did, rely. The prayer of the bill was that Faurot, to whom the promissory notes of the complainant, given for a part of the price of the stock, as it was alleged, had been indorsed, be enjoined against selling or disposing of unmatured notes; that the notes held by him be ordered surrendered and canceled; that the complainant be awarded other relief agreeable to equity; and that summons issues commanding the defendants to appear and to answer the bill. Verification of the answer was not waived. Upon the filing of this bill a temporary injunction against the transfer of the notes was issued. In October following, Faurot answered under oath, denying all complicity with Bailey, and all knowledge of fraud in the transaction, and alleging a good-faith purchase of the notes in the ordinary course of business. Bailey also answered, under oath, denying that Faurot was interested in the ownership and sale of the stock, and that deceit was practiced by himself to effect the sale. An affidavit was also made by each of the defendants in support of his answer; it being affirmed by Faurot, among other things, that he was solvent, and had property of the value of $500,000 or more. Upon the bill, answers, and affidavits mentioned, without other evidence, a motion to dissolve the temporary injunction was sustained, and thereupon no further step in the cause was taken until July 8, 1889, when the following entry was made: 'This case coming on to be heard, came the parties hereto, by their solicitors respectively; and the court, having heard the evidence, arguments of counsel, and being fully advised in the premises, finds the equities of this case to be with the defendants. Therefore it is ordered that this case be, and the same is hereby, dismissed at the complainant's costs, for want of equity, and that the defendants have of the said plaintiff their costs in the premises. ' The statutes of Illinois (Rev. St. c. 22, Secs. 28, 29) provide that a replication in chancery shall be filed within four days after service of notice upon the plaintiff or his attorney of answer filed, and that in default of replication the case may be heard upon bill and answer, in which case the answer shall be taken as proof, and no evidence shall be received unless it be matter of record referred to in the answer.

The present bill was brought in the same court January 11, 1894, by Graver against Faurot and Bailey, for the purpose of annulling the decree rendered in the first suit, and particularly for the purpose of enjoining Faurot against setting up that decree in a certain pending action as a final adjudication of the matters so determined. Bailey was not served with process, and did not appear to the suit. The bill, besides setting out the former bill, answers, and the decree, according to their tenor, reaffirms the allegations of that bill, and, after reiterating the charge that Faurot and Bailey were jointly interested in the stock purchased by the complainant, and participants in the fraud by which he was victimized, alleges as ground for annulling the decree that, though the complainant was certain when the first bill was filed that its allegations were true, the proof of the alleged conspiracy was wholly within the knowledge and under the control of the respondents; that the complainant was wholly ignorant that any witness or document could be obtained to establish the fraud charged, or to disprove the statements made in the respective answers and affidavits of the respondents, although, regardless of expense, he made every effort to obtain such evidence; 'that it was solely by reason of the suppression of testimony on the part of said respondents, and by absolute falsehood and perjury on their part in the allegations contained in their respective answers and their respective affidavits, that said bill was dismissed for want of equity, and that the complainant was not able to obtain competent evidence to establish the allegations of his said bill'; that by reason of the premises, and of the fact that the dissolution of the injunction had been put by the court on the ground that there was a complete remedy at law, the complainant was informed by his solicitors, and believed, that it was not necessary for him to pay further attention to the case in court, unless able to obtain evidence tending to establish the bill, and sufficient to overthrow the sworn answers of the respondents. The discovery of the evidence necessary to establish the averments of fraud in the bill, and to show that the answers were false and perjured, it is shown, was made but a few days before this suit was brought, and resulted from a statement concerning the Lima National Bank and the conduct of its president contained in the annual report of the comptroller of the currency, dated December 5, 1892, in pursuance of which, it is alleged, the complainant was able to get at the books of the bank, by which, and by the officers of the bank, and by instruments in writing, he is now able to prove that Faurot and Bailey were the owners of the stock, and agreed to divide between themselves whatever profit they could make from the sale, and that of the proceeds of complainant's notes which were indorsed to the bank they did make such division.

The opinion of the court below is reported in 64 F. 241. After quoting from the opinions of the supreme court in U.S. v. Throckmorton, 98 U.S. 61, and Marshall v. Holmes, 141 U.S. 598, 12 Sup.Ct. 62, the opinion concludes as follows: 'It will be observed that in the statement of general principles of law there is no conflict in the cases. The conflict, if any, is in the application of legal principles to the facts then in point. I have carefully examined the cases which the supreme court refer to in the latter opinion. Each of them was a case where the fraud was extrinsic or collateral to the matter tried, and undoubtedly fell within the doctrine of U.S. v. Throckmorton. As before stated, I am unable to distinguish those two cases upon the facts. The nature of the fraud was the same in both cases. In both the fraud was in the use of forged documents and false evidence offered by the successful party. In the one case the bill was dismissed, and in the other sustained. Both decisions were by a unanimous court. Three of the justices who were members of the court when the former case was decided were members of the court when the latter case was decided, including the justice who . I do not see how both can stand, and yet the former case is approvingly referred to in the latter. Possibly the fault is mine, that I am unable to distinguish them. In the doubtful frame of mind in which I am left by these two apparently conflicting decisions, I might have recourse to the maxim that the greater regard should be given to the later decision, were it not for the fact that in the latter case the former decision is approvingly referred to, and apparently sought to be followed. Under the circumstances, I think it would be a hardship upon the parties to put them to the expense of marshalling their evidence when the right to maintain the bill is thus placed in doubt. It would be the prudent course to first determine the right to maintain the bill on the facts stated, and in that view I have concluded, pro forma, to sustain the demurrer and dismiss the bill; and the complainant, by appeal to the court of appeals, may speedily have the question determined in advance of an issue upon the merits. That court may perhaps be able to reconcile the two cases referred to or, if unable so to do, can certify the question to the supreme court for its solution. ' Recognizing the apparent conflict between the two opinions referred to, and deeming it important to obtain an authoritative solution of the doubt, this court at its January session, 1895, attempted to certify to the supreme court the question whether, the bill being assumed to be in other respects good, the alleged false swearing and perjury in the answers of the defendants in the first suit were available in this suit as ground for annulling the decree thereby obtained; but the supreme court, considering that to answer the question was practically 'to pass upon the whole case,' dismissed the certificate. Graver v. Faurot, 162 U.S. 435, 16 Sup.Ct. 799.

Robert Rae, for appellant.

F. L. Wean, for appellee.

Before WOODS and SHOWALTER,...