Odbert v. Marquet

• Decision Date: 04 November 1909
• Docket Number: 891.
• Citation: 175 F. 44
• Parties: ODBERT et al. v. MARQUET at al.
• Court: U.S. Court of Appeals — Fourth Circuit

175 F. 44

ODBERT et al. v. MARQUET at al.

No. 891.

United States Court of Appeals, Fourth Circuit.

November 4, 1909

Oliver S. Marshall, John Marshall, and Reese Blizzard, for appellants.

J. B Sommerville, Henry M. Russell, and Jno. A. Campbell, for appellees.

Before PRITCHARD, Circuit Judge, and WADDILL and McDOWELL, District judges.

McDOWELL District Judge.

The following statement of facts is taken from the opinion of the trial court (163 F. 892):

'S H. Odbert, Jr., and George T. Odbert, in August, 1906, filed their original bill in this court against William Marquet, and some months afterwards, by leave of court, they, with W. H. Warner and H. S. Odbert, Sr., joined as plaintiffs, filed an amended and supplemental bill in the cause against said William Marquet and the First National Bank of New Cumberland, in which the plaintiffs allege themselves to be citizens of Ohio, the defendant Marquet to be a citizen of West Virginia, resident in this district, and defendant bank to be a corporation under the national banking laws, having its principal place of business in New Cumberland, in this state, and district; that on September 11, 1902, plaintiffs purchased from defendant Marquet 2,000 shares of the stock of the Marquet Coal Company, a West Virginia corporation, at the price of $54 per share, or $108,000; that said stock so purchased was divided between and held by plaintiffs, 360 shares by H. S. odbert, 320 shares by H. S. Odbert, Jr., 320 shares by Geo. T. Odbert, and 1,000 shares by W. H. Warner; that the capital stock of the company was $50,000, divided into 2,000 shares of par value $25 each, and by said purchase they became the owner of all thereof; that at the time of purchase of this stock there existed a deed of trust upon the property of this company for $25,000 in favor of F. W. Stewart, assignee of John A. Campbell, of which sum plaintiffs paid $15,000, leaving $10,000 unpaid, but not yet due; that plaintiffs assumed to pay off and discharge this trust debt as it should become due; that at the time of plaintiff's purchase of this stock defendant Marquet owned the property of the Marquet Coal Company for which company a certificate of incorporation had been obtained, but the stock thereof had not been issued, nor had the property been conveyed to it by Marquet; that issue of stock and conveyance of the property was made after sale to plaintiffs; that for said purchase-money consideration H. S. Odbert, Sr., paid certain sums in cash and executed certain notes, payable in one, two, three, and four years, bearing 5 per cent. interest, to defendant Marquet, payable at the First National Bank of Cleveland, Ohio, and Geo. T. Odbert and H. S. Odbert, Jr., respectively, did likewise, while plaintiff Warner executed certain notes payable in one, two, three, four, and five years, payable with 5 per cent. interest at the Colonial National Bank of Cleveland, Ohio; that the plaintiffs at the time of purchase transferred to Marquet the said H. S. Odbert 220 shares, H. S. Odbert, Jr., 240 shares, Geo. T. Odbert 240 shares, and W. H. Warner 700 shares, of said stock as collateral to secure the payments of said purchase-money notes due from each, respectively, and subsequently H. S. Odbert, Jr., and Geo. T. Odbert renewed their notes, and each transferred 80 additional shares of the stock as additional security; that the property of said coal company consists of the coal underlying 192 acres of land, also under a tract of 40 acres, and the surface of some 60 acres, with buildings and improvements, in Hancock county. W. Va., the tipples, tramways, buildings, machinery, horses, mules, carts, tools, and appliances of all kinds used by the company in mining coal, and a railroad extending from the tipple and mines about two miles to the Pittsburg, Cincinnati, Chicago & St. Louis Railway at New Cumberland, with its locomotives, cars, etc., used in transporting said coal.

'It is then charged in said bills that defendant Marquet in selling said stocks to plaintiffs made false representations, knowing them to be false, touching the property of said coal company; that he represented that the title to the property was good and unincumbered, when, in fact, the railroad was in fact located upon land for which said coal company had no title whatever; that it is located upon lands of Mary A. Stewart, Stewart Bros., and E. D. Stewart for a distance of one mile without any right or title, and the loss of such railroad, it is charged, would render the property almost valueless; that Marquet, knowing it to be false, represented that the coal was continuous, that it ran up and over the hills, did not run out, and that there was but one 'horseback' on the property, while in fact there are over 100 such on it; that a shaft had been sunk upon the property, and thereby it had been ascertained that the coal seam was four feet in thickness, when in fact it was only three feet three inches, he knowing at the time that a seam of three feet three inches could not be profitably mined there; that he had options on 600 acres of adjoining property which he had turned over to the company; and that the coal extended under these 600 acres, when in fact little or no coal extended under these 600 acres as was known by Marquet.

'It is then charged that plaintiffs had no personal knowledge of the facts set out, that they relied solely upon the representations of Marquet, who represented these facts falsely to them, knowing them to be false; that said Marquet having given notice to said H. S. Odbert, Jr., and George T. Odbert of his purpose to sell the shares of their stock held by him as collateral on August 20, 1906, at public auction, they on August 13, 1906, presented to this court the original bill herein, and secured a temporary restraining order against such sale and pending a hearing, which was continued on the return day in September, the defendant the First National Bank of New Cumberland instituted at October rules, 1906, in the circuit court of Hancock county, W. Va., a suit in equity against the Marquet Coal Company, the plaintiffs, and others, alleging it to be the holder of said notes and shares of stock transferred to Marquet as collateral, and praying that a receiver be appointed for said company, and the said stocks be sold to pay said notes. It is then specifically charged in the amended and supplemental bill that the defendant bank was not an innocent purchaser of said notes and stocks, for shortly after the purchase of the property one of the plaintiffs, taking with him a witness, had notified the cashier of said bank not to discount or purchase said notes or any of them, informing him that the property had been misrepresented, and that payment of the notes would be resisted. An injunction was prayed in the original bill against the sale and disposition of the stock and notes by Marquet and in the amended bill against the prosecution of said equity suit, that the damages and loss sustained by reason of the false representations made by Marquet be ascertained and decreed to plaintiffs, and general relief be granted them.

'Restraining orders were granted, and to these bills the defendants Marquet and bank have filed separate answers. In these answers the sale of the stock at the price named in the bill and the execution of the notes therefor are admitted, but all allegations of fraudulent misrepresentations by Marquet as to the property are denied. It is also denied that the title to the railroad is defective or bad, or that the plaintiffs were without full knowledge of the condition and extent of the property and of the seam of coal. It is charged that the bank discounted the notes before due in regular course of business, and without knowledge of any claim of offset or defense by reason of fraud or misrepresentation as charged.

'In addition to filing its answer, the bank, by leave, filed its cross-bill, in which it sets forth its ownership of certain notes of the plaintiff Odberts and Warner and of the stock of the coal company as collateral, and charges that the Odberts and Warner have been operating the mines of the company, have removed large quantities of coal and thereby depreciated largely the value of the property; have improperly operated the mines, to its great injury, so that the value of the property has depreciated from $100,000 to $40,000; and that they are negotiating a sale of the two miles of railroad in order to interfere with and prevent a sale of the property. It is prayed that an injunction be granted against such sale of the railroad, and that a receiver be appointed to operate the property. The injunction prayed for in this cross-bill was granted, and the application for receiver was continued from time to time at the instance of the parties. The Odberts and Warner filed their joint answer to this cross-bill, in which they deny that they have improperly operated the mines and, on the contrary, charge these mines to be in first-class condition, as shown by the reports of the state mine inspector. They deny that the property has depreciated in value; but, on the contrary, charge that they have spent $40,000 in improvements placed upon it, and have purchased and added to it coal under adjoining lands almost equal in amount to that mined by them, and have improved and equipped mines and railroad until they are in first-class order. They deny that they have been seeking to sell the railroad, that Marquet had any authority under the agreement to sell or convey to the bank the stock certificates pledged to him as collateral, and charge that the sum of about $32,000 due upon the unpaid notes will not be sufficient to indemnify them the damages sustained by them by reason of the false and fraudulent representations...