Plews v. Burrage, 1510.

• Decision Date: 26 July 1921
• Docket Number: 1510.
• Citation: 274 F. 881
• Parties: PLEWS v. BURRAGE.
• Court: U.S. Court of Appeals — First Circuit

274 F. 881

PLEWS v. BURRAGE.

No. 1510.

United States Court of Appeals, First Circuit.

July 26, 1921

Sherman L. Whipple and Alexander Lincoln, both of Boston, Mass., for plaintiff in error.

Boyd B Jones and Philip N. Jones, both of Boston, Mass., for defendant in error.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

ANDERSON J.

Plews brings this suit at law on a written contract under which Burrage agreed to pay Plews 5 per cent. of all profits in stock or money accruing to Burrage out of his acquisition of copper properties brought to his attention by Plews. On a record made up of a declaration, answer, replication, and demurrer to the replication, the District Court was of the opinion that the crucial questions were close and doubtful and therefore sustained the demurrer and entered judgment for the defendant. Although this unusual array of pleadings covers about 80 pages, and has been argued by learned counsel at great length, yet, stripped of confusing details and irrelevant issues, the case falls within narrow compass. There is no dispute as to the making, or the terms, or the application of the contract to properties out of the acquisition of which Burrage derived large profits either in January, 1912, or January, 1913. This makes a prima facie case for the plaintiff. But defendant alleges and plaintiff admits that, shortly before February 28, 1912, Burrage personally and through his agent, Ross, paid Plews . . . 500 for a settlement or informal release of Plews' profit-sharing rights under this contract. If valid, this settlement is a good defense. In his replication the plaintiff attacks this settlement as vitiated by Burrage's fraud, and offers to repay the . . . 500. By his demurrer to the replication defendant urges:

(1) That as matter of procedure the action cannot be maintained until by separate proceedings in equity the settlement is set aside.

(2) That the contract created no fiduciary relation, and that therefore Burrage's alleged failure, when settling with Plews, to disclose facts known to him and unknown to Plews, and material to the ascertainment by Plews of the value of his rights under the contract, was no fraud.

(3) That the affirmative oral and written misrepresentations alleged to have been made by Burrage to Plews involved merely matters of opinion, and not actionable fraud.

We think the replication on these points good, and the demurrer bad.

1. The case is as to procedure closely analogous to Manchester Street Railway v. Barrett, 265 F. 557, 559, in which this court recently sustained the District Court of the New Hampshire district in submitting to the jury in a personal injury case the question as to whether the release set up as a bar was voidable for fraud or the incompetency of the deceased victim of the accident. It cannot be successfully contended that such procedure is peculiar to the New Hampshire district, for G.L. Mass. c. 231, Sec. 35, expressly provides for like procedure in this district. It reads:

'The plaintiff may, in reply to a defense alleged by the defendant, allege any facts which would in equity avoid such defense or which would entitle the plaintiff to be absolutely and unconditionally relieved in equity against such defense.'

But, apart from state statutes and local procedure, we are constrained to regard the Act of March 3, 1915 (Judicial Code, Sec. 274b (Comp. St. Sec. 1251b)), as requiring us to approve the procedure here adopted by the plaintiff. That section reads as follows:

'That in all actions at law equitable defenses may be interposed by answer, plea, or replication without the necessity of filing a bill on the equity side of the court. The defendant shall have the same rights in such case as if he had filed a bill embodying the defense of seeking the relief prayed for in such answer or plea. Equitable relief respecting the subject-matter of the suit may thus be obtained by answer or plea. In case affirmative relief is prayed in such answer or plea, the plaintiff shall file a replication. Review of the judgment or decree entered in such case shall be regulated by rule of court. Whether such review be sought by writ of error or by appeal the appellate court shall have full power to render such judgment upon the records as law and justice shall require.' We think the words, 'In all actions at law equitable defenses may be interposed by * * * replication, without the necessity of filing a bill on the equity side of the court,' mean that when, as in the present case, a legal defense is set up in the answer, the plaintiff has by replication the same right to meet such legal defense by equitable reply as a defendant has to set up in his answer an equitable defense to a legal claim set up in the declaration. We cannot believe that Congress intended to prevent circuity of action when a defendant, sued at law, has an equitable defense, and did not intend to prevent circuity of action when a plaintiff needs to interpose a reply grounded on equity in order to meet a legal defense set up in the answer. We are aware that a majority of the Court of Appeals of the Second Circuit reached a different conclusion in Keatley v. U.S. Trust Co., 249 F. 296, 161 C.C.A. 304; but our views as to the scope and meaning of this statute accord with those of Judge Learned Hand, who, dissenting, said:

'It seems to me that we should not construe so narrowly section 274b. The phrase, 'equitable defenses may be interposed by * * * replication without the necessity of filing a bill on the equity side of the court,' can only mean, I think, this: That where the defendant interposes a bar valid at law, the plaintiff may set up in his next pleading facts avoiding the bar in equity. The suggestion is that it might give the plaintiff the right to plead to the defendant's 'equitable defenses' set up in the answer, but that is independently provided for in the fourth sentence of the act. Besides, the defendant's answer to a suit in equity cannot properly be said to be interposed by 'filing a bill on the equity side of the court,' which is the language of the first sentence.

'So far as we may look to the purpose of the section I cannot think there is any doubt. Congress can hardly be thought to have any predilection for plaintiffs' suits in equity rather than defendants', and we must leave a capricious exception in practice, if we do not include a case like this. I agree that the language of the section is not what a Mitford or a Langdell would have used; but the purpose seems to me perfectly plain, and we ought, I think, to try to effect it if we can.'

See, also, the Knickerbocker Trust Case, 247 F. 833, 837, 160 C.C.A. 55.

Defendant's contention that, so construed, the statute is unconstitutional, is plainly untenable. The decision in Scott v. Neely, 140 U.S. 106, 11 Sup.Ct. 712, 35 L.Ed. 358, so far as now pertinent, is merely to the effect that legal and equitable remedies cannot be so blended in equity suits as to impair the constitutional right to jury trial given by the Seventh Amendment. Stockbridge v. Mixer, 215 Mass. 415, 102 N.E. 646, is to the same effect. Compare State v. Saunders, 66 N.H. 39, 76, et seq., 25 A. 588, 18 L.R.A. 646. There is no constitutional guaranty of permanent circuity of action.

Whether issues of fact involved in such equitable relief should be submitted to a jury or determined by the court is, in our opinion, a question of judicial discretion. We are not able to accord with the view that the issue calling for equitable relief must first be tried by the court alone, sitting as a court of equity. Compare Union Pacific R.R. v. Syas, 246 F. 561, 158 C.C.A. 531. While the verdict of a jury may in the equitable issue be advisory only, yet when such issue is, as in this case, simple and one eminently fit for submission to a jury, we think the practice adopted in the Barrett and Knickerbocker Trust Cases, supra, is the preferable practice, and the one most consonant with the spirit and purpose of the statute. The statute is remedial, and should be liberally construed in favor of a single, direct, and speedy trial of all issues involved in the litigation.

We find it difficult to appreciate the importance apparently attached by learned counsel to mere form of procedure in this case; for, even if we were required to sustain the defendant's contention against combining equitable relief in a law suit, the most that could result would be an order made under the provisions of Judicial Code, Sec. 274a (Comp. St. Sec. 1251a), to amend the present law suit into a bill in equity. It seems to us too plain for argument that, assuming such amendment, the plaintiff, on the allegations in these pleadings, would be entitled to a trial of the issue of fraud concerning his settlement with Burrage, and prevailing on such issue, to an account under the contract. Compare Reid v. Shaffer, 249 F. 553, 161 C.C.A. 479, and cases cited.

Shortly stated, Burrage's position is not unlike that of an administrator who, falsely understating the amount of his decedent's estate, has obtained from an heir a receipt in full for his distributive share. It would hardly be contended that such receipt could be successfully interposed as a bar to a suit, at law or in equity, for the balance justly due.

Our views as to proper procedure make it unnecessary to discuss the learned argument of counsel for defendant as to technical rescission in pure law suits. It has no application to the real case before us. Previous tender of the consideration of the settlement is, of course, not necessary in equity. Thomas v. Beals, 154 Mass. 51, 27 N.E. 1004; Twin Lakes, etc., Co. v. Dohner, 242 F. 399, 155 C.C.A. 175.

2. We cannot sustain the defendant's proposition that Burrage when...