INVESTORS'GUARANTY CORPORATION v. Luikart

• Decision Date: 14 April 1925
• Docket Number: No. 6747.,6747.
• Citation: 5 F.2d 793
• Parties: INVESTORS' GUARANTY CORPORATION v. LUIKART et al.
• Court: U.S. Court of Appeals — Eighth Circuit

5 F.2d 793 (1925)

INVESTORS' GUARANTY CORPORATION v. LUIKART et al.

No. 6747.

Circuit Court of Appeals, Eighth Circuit.

April 14, 1925.

W. C. Mentzer, of Cheyenne, Wyo., and H. C. Brome and Thomas M. Hyde, both of Basin, Wyo., for appellant.

A. C. Allen and O. N. Gibson, both of Riverton, Wyo., for appellees.

Before STONE and KENYON, Circuit Judges, and SCOTT, District Judge.

KENYON, Circuit Judge.

This appeal is from the order of the United States District Court for the District of Wyoming, dismissing a certain amended bill of complaint brought by the Investors' Guaranty Corporation against Edwin H. Luikart, Oscar W. Nicholson, and the Farmers' State Bank of Riverton, Wyo. The bill is voluminous and involved. It was stipulated between the parties that the case should be set down for hearing and determination upon the point of law raised by the first defense set up in the amended answer, which is that the amended bill of complaint fails to state facts sufficient to constitute a valid cause of action in equity. A hearing was had upon this question, and the court held that the bill of complaint failed to state facts sufficient to entitle plaintiff to the relief sought in equity, and disclosed that plaintiff had an adequate remedy at law. The question here is therefore reduced to narrow limits, but requires a review of the amended bill.

Appellant is a corporation of the state of Utah, and will be herein designated as plaintiff. Defendant Farmers' State Bank of Riverton is a banking corporation, organized under the laws of the state of Wyoming, and will be herein designated as defendant bank. The other defendants, Edwin H. Luikart and Oscar W. Nicholson, are citizens of Wyoming, and will be termed defendants. Briefly the allegations of the amended bill are:

That plaintiff was a corporation dealing in real estate mortgages, stocks, bonds, etc., and during the latter part of the year 1917 or the early part of 1918 acquired the stock of defendant bank, and became the owner of it; that it was the owner of about 4,000 acres of agricultural land in the vicinity of Riverton; that during the period of time in which the transaction complained of took place Luikart was the managing officer of both corporations, being Western manager of plaintiff and president of defendant bank. The bill claims that he did not faithfully serve both masters, but that with defendant Nicholson he conspired in January, 1921, to fraudulently purchase the defendant bank; that he managed the matter as far as plaintiff was concerned; that he advised the directors and stockholders to make the sale, and that through his advice and manipulation the defendant bank was sold to Nicholson, he to pay plaintiff $5,000 in cash, and to deliver to it 50 shares of its common and 200 shares of its preferred stock; that he was also to assume stockholders' liabilities and the rediscounts of the bank; that plaintiff on its part guaranteed certain bills receivable of the bank, amounting to about $93,000, all of which was set forth in a schedule attached to the complaint; that, at the time when plaintiff owned the capital stock of the bank, defendant Luikart exchanged a note of approximately $17,000, belonging to the defendant bank, for notes of an equal amount belonging to plaintiff; that the note belonging to the defendant bank was worth only $4,000, while the notes belonging to plaintiff, for which it was exchanged, were worth their face value. Other transactions in the exchange of notes were carried on by Luikart.

It is alleged that the other notes exchanged by the bank for the notes of plaintiff were worthless, while the notes secured in the exchange were worth their face value; that Luikart took from the treasury of appellant a certain hotel bond of the value of $3,000 and placed it among the assets of the bank; that he also placed on the notes set forth in Schedule B (being a large number) an indorsement of plaintiff guaranteeing payment, and it is claimed that, while he had express authority to make indorsements for rediscount purposes, he had no authority to make the same for any other purposes; that such indorsements were made without authority, or without consideration, or without the knowledge or consent of the officers or stockholders of plaintiff, other than Luikart and Nicholson, and that they were made in pursuance of the conspiracy to secure the bank; that in March, 1922, the defendant bank instituted in the district court of Fremont county, Wyo., 18 separate suits against plaintiff, aided by attachment, and levied on its real estate before referred to. All of these suits, excepting one, were founded upon the contracts of guaranty in question. Fifteen of them have been tried, and judgments obtained against plaintiff. Appeals were taken, but no supersedeas bond was given. Executions have been issued and the real estate of plaintiff sold upon execution.

The amended bill further alleges that the judgments in these suits aggregated approximately $55,000, and the prices paid at sheriff's sale under execution were $53,395; that two of the suits originally instituted in the District Court were transferred to the United States District Court for the District of Wyoming, and judgment rendered against plaintiff. In one of these suits plaintiff admitted liability on the note, but by way of counterclaim asked to recover from the defendant bank the value of the securities alleged to have been wrongfully transferred to it. The court rendered judgment against plaintiff on this counterclaim. The amended bill further alleges that on October 10, 1923, defendant bank instituted another suit against plaintiff in the district court of Fremont county, Wyo., to recover the sum of $15,000 on account of other alleged contracts of guaranty indorsed upon notes of third parties held by the defendant bank; that since filing the original bill of complaint defendant bank has commenced 5 additional suits on notes, alleged to be guaranteed by plaintiff, seeking to recover approximately $17,500; that since June 9, 1921, Luikart and Nicholson have owned all the stock of the bank and have been in exclusive control of its affairs; that no record on the books of plaintiff was ever made of the contracts of guaranty; that the various suits are based upon contracts of guaranty made by Luikart purporting to act for the plaintiff, but that he was without authority so to do; and that it was all done to permit Luikart and Nicholson to defraud appellant.

The bill alleges that plaintiff has no plain, adequate, and speedy remedy at law; asks for an accounting to be had and a multiplicity of suits avoided; alleges that Luikart and Nicholson should be required to pay what may be found due from plaintiff to the bank; and the bill concludes: "Wherefore plaintiff prays that an accounting be had between said plaintiff and said defendant bank and defendants Luikart and Nicholson; that the amount, if any, due and owing from this plaintiff to said bank be ascertained; that the defendants Edwin H. Luikart and Oscar W. Nicholson be required to pay said sums and all thereof; that the said defendants Edwin H. Luikart and Oscar W. Nicholson be further required to reimburse this plaintiff for all expenses or liabilities incurred in and about the defense of the several suits brought by said bank against said this plaintiff; that the defendant bank be decreed to have no interest in or claim upon the real estate hereinbefore described or the shares of stock of the Arapahoe Ranch Company hereinbefore described, but that said property and all thereof be decreed to be property of this plaintiff; and that plaintiff have such other and further relief as may be just and proper in the premises."

We have endeavored to analyze this lengthy and involved amended bill, to discover the basis for the claimed equitable cognizance of the suit. Evidently there is an attempt to state several grounds for equitable relief, viz.: (a) An accounting; (b) the prevention of a multiplicity of suits; (c) fraud; (d) quieting title to real estate, or removal of cloud thereon. The burden was on plaintiff to show that it had no plain, speedy, and adequate remedy at law. The distinction between legal and equitable actions is preserved in the federal courts, necessarily so by virtue of the constitutional requirement of the Seventh Amendment giving the right of jury trial in certain cases.

Section 267 of the Judicial Code (Comp. St. § 1244) is as follows: "Suits in equity shall not be sustained in any court of the United States in any case where a plain, adequate, and complete remedy may be had at law." This statute is merely declaratory of long-established principles of equity jurisprudence. 21 C. J. p. 41, § 16; Hipp et al. v. Babin et al., 19 How. 271, 15 L. Ed. 633; Alger v. Anderson et al. (C. C.) 92 F. 696.

Equity has no jurisdiction where "complainant has a full and adequate remedy at law for the wrongs complained of." United States v. Bitter Root Development Co., 200 U. S. 451, 472, 26 S. Ct. 318, 50 L. Ed. 550. 21 C. J. p. 40, § 15, states the doctrine as follows: "But, even in this common field, it is in the sound discretion of the chancellor whether or not he will assume jurisdiction in a particular case, and, as a rule, he will not do so if the remedy at law is plain, adequate, and complete, unless there are some features of the case which make it more appropriate for a court of equity than a law court to handle. This is practically and peculiarly so in those cases where the only thing sought is a pecuniary recovery." Buzard v. Houston, 119 U. S. 347, 7 S. Ct. 249, 30 L. Ed. 451; Scott v. Neely, 140 U. S. 106, 11 S. Ct. 712, 35 L. Ed. 358; Curriden v. Middleton, 232 U. S. 633, 34 S. Ct. 458, 58 L. Ed. 765; Security Savings & Loan Ass'n v. Buchanan et al., 66 F. 799, 14 C. C. A. 97.

This remedy at law must be as certain, prompt, and efficient to attain the ends of justice as that afforded by equity. Williams et al....