Post v. Beacon Vacuum Pump & Electrical Co., 216.

• Decision Date: 14 June 1898
• Docket Number: 216.
• Citation: 89 F. 1
• Parties: POST et al. v. BEACON VACUUM PUMP & ELECTRICAL CO. et al.
• Court: U.S. Court of Appeals — First Circuit

89 F. 1

POST et al. v. BEACON VACUUM PUMP & ELECTRICAL CO. et al.

No. 216.

United States Court of Appeals, First Circuit.

June 14, 1898

This was a bill in equity by Louis Post and others, as stockholders of the Beacon Vacuum Pump & Electrical Company against such company and the Beacon Lamp Company, to rescind a transfer of the property of the former corporation to the latter. In the circuit court, demurrers to the bill and to the amended bills were sustained, and the cause dismissed. The complainants took an appeal to this court, which on January 19, 1898, filed an opinion affirming the decree below. 28 C.C.A. 431, 84 F. 371. Thereafter the appellants filed in this court, a petition for rehearing, and a motion to amend the bill in this court, and an alternative motion that leave be reserved to the court below to hear a motion to amend the bill. The petition and motions are here set out in full:

Petition for Rehearing.

Now come appellants, and ask for a rehearing upon the following grounds: (1) That the subscription for stock 'only under protest' should not be regarded in equity as an estoppel the bill further alleging that it was made, and the property transferred, 'while your orators were taking every means known to protect their rights in the premises,' which allegation, without express innuendo, refers to the objections, protests, litigation to prevent the plan, and notification that the litigation would be continued previously set forth in the bill, in view of which concurrent protests, litigation, and notification the said subscription was not a consent, and defendants had no right to rely upon said subscription 'only under protest' as a waiver and, further, the bill does not show or suggest any reliance upon said subscription under protest, nor was the same made a ground of demurrer or argument by defendants, whereby the case affirmatively indicates that defendants did not at all rely upon any supposed consent by complainants to said transfer of assets. (2) That complainants' real grievance is not that they could not have lamp company stock on better terms than co-stockholders, but that, by a plan ultra vires, against their consent, they were forced into new contractual relations and financial burdens; and to either pay $2,580, or lose a part of their share of the pump company property. Against such grievance they are entitled to equitable relief,-- if not by rescission, then by an accounting and payment to them for their converted share of the pump company property. (3) That under all the circumstances of the case, and the demurrer having been allowed for causes not stated on its face, appellants should be relieved from paying any costs in this court.

Motion for Leave to Amend in This Court.

And now come said Louis Post et al., complainants (appellants) and ask for leave to set forth more precisely the case intended to be made by the bill, by adding the following amendments, and for a hearing on the same, viz.: Article 1, line 18, between 'were' and 'shown' insert the words 'were and,' and at end of article 1 add: 'That, as your orators are informed and believe, March 1, 1895, and from thence to the sale thereof hereinafter set forth, the said assets of the said pump company consisted of: Machinery, $88,714.83; cash and debts receivable, $28,014.52; manufactures, merchandise, material, and stock in process of manufacture, $13,429.22; being $130,158.57,-- together with patent rights represented by $860,000 of stock issued at par, which your orators allege were of great value, covering important inventions in the manufacture of electric lamps, but the exact value your orators are unable to set forth, and that its debts then payable were $22,194.38, being $5,720.14 less than its cash and debts receivable, and its bonds, payable in 1902, were $38,400. That by and in a certificate signed and sworn to by said pump company's vice president, treasurer, and three (being a majority) of its directors, and on the 4th day of May, 1895, by them filed with the secretary of the commonwealth of Massachusetts, and approved by the commissioner of corporations, said assets and liabilities were scheduled and stated, as of March 1, 1895, to be of the character and amount aforesaid. ' And article 7, line 15 (record, page 6), adds: 'That from the invention of said plan, Exhibit A, to and at the time said subscription 'only under protest' was made, and including the time when the transfer of property was made, your orators continuously made and were making many verbal and written protests and objections to said illegal plan, Exhibit A, and the sale of said assets as therein set forth, and, at the time of said subscription and transfer of assets, had begun and were prosecuting litigation as aforesaid to prevent the accomplishment of said plan, all which was well known to both said defendant corporations and their officers both prior to and at the time of said subscription 'only under protest,' and the transfer of property to said Beacon Lamp Company. That the protest accompanying your orators' subscription under protest was intended by your orators to be, and in fact was, a part of the said protests, objections, and litigation; and, upon information and belief, your orators allege that both said defendant companies and their officers well knew and understood that such was the meaning of said expression 'under protest,' and knew that it was made and intended only to preserve the rights of your orators to continue to maintain litigation for relief from said illegal scheme, and to prevent any relinquishing of any rights by an unconditional subscription, and that neither of said defendant companies nor their officers took any action, or refrained from taking any action, in the premises because of said subscription under protest, nor was said transfer of assets made by reason thereof or in reliance thereon.'

Motion for Leave to be Reserved to the Court Below to Hear a Motion to Amend Said Bill.

And now come Louis Post et al., complainants (appellants), and move that if this court deny complainants' petition heretofore filed for rehearing, and also overrule complainants' motion heretofore filed for leave to amend in this court, then that the court will reserve leave to the court below to entertain a motion by complainants for leave to amend their said bill.

Edward P. Payson, for appellants.

William H. Dunbar, for appellees.

Before COLT and PUTNAM, Circuit Judges, and BROWN, District Judge.

PUTNAM Circuit Judge.

The appellants have filed a petition for a rehearing, in which they claim that the conclusions of the court in this case related to matters which had not been argued by either party. Consequently we deemed it proper to direct the filing of briefs in support of the petition, and in reply thereto, and we now deem it also proper to notice in this way the positions taken in them.

With reference to our conclusions as to the effect of the subscriptions to the capital stock of the new corporation the appellants fail to give full weight to the distinction between equitable estoppel and estoppel at common law. As the relief asked for might involve fellow shareholders in losses much greater in proportion than the injury sought to be remedied, and as the complainants (now the appellants) are asking an equitable remedy, equity requires a strict application of the rule that, for a bill of this nature, the complainants should have maintained that consistent position necessary to relieve them against equitable estoppel. This at times amounts, in effect, to laches. In the case at bar it is so strictly analogous to laches that it might well have been so described. However it may be in some of the state courts, federal courts may consider defenses of this kind when assigned ore tenus under a general demurrer, and even sua sponte. This follows from the fact that matters of this character sometimes involve questions of public policy.. Badger v. Badger, 2 Wall. 87, 95; ...