Roberts v. Criss

• Decision Date: 12 May 1920
• Docket Number: 178.
• Citation: 266 F. 296
• Parties: ROBERTS et al. v. CRISS.
• Court: U.S. Court of Appeals — Second Circuit

266 F. 296

ROBERTS et al. v. CRISS.

No. 178.

United States Court of Appeals, Second Circuit.

May 12, 1920

The plaintiffs are citizens of the state of Ohio and residents of the city of Cincinnati, in that state. The defendant is a citizen of the state of New York and a resident of the Southern district therein. The complaint avers: That on January 3, 1905, the plaintiffs and the defendant, together with one Thomas B. Criss, since deceased, entered into a partnership under the firm name of Roberts, Hall & Criss. That the firm was formed to conduct a general brokerage and commission business, with offices in Cincinnati and in the city of New York, and that it carried on such business until June 5, 1912. That the partnership agreement contained a provision that during the continuance of the partnership no one of the firm should engage in speculative contracts or purchases. That at the time when the partnership was formed and ever since, the defendant has been a member of the New York Stock Exchange. That in the month of January, 1910, the defendant, Criss, in violation of his agreement, engaged in contracts of a speculative nature, which resulted in his suspension from the Stock Exchange because of obligations which neither he nor the firm could meet; the firm becoming insolvent, which led to the appointment of a receiver over its assets. That because of the facts above stated the plaintiffs sustained large pecuniary losses, and a large part of the assets of the partnership were used in settlement of the losses resulting from these speculative contracts. That on June 5, 1912, the plaintiffs agreed with defendant, Criss to release him from all their claims against him, the consideration being a new partnership agreement to be entered into between them, by which there should be secured to the plaintiffs for a period of four years all the benefits to be derived from a membership in the New York Stock Exchange through the use of defendant's seat therein: Criss having been restored to his membership in the Exchange. That the new partnership agreement was made and business was carried on under it until January 25, 1915. That shortly prior to that date the plaintiffs were advised by defendant that the partnership agreement of June 5, 1912, had been examined by the Stock Exchange officials, who required it to be forthwith rescinded as in contravention of its rules, under penalty of the suspension of defendant, Criss, from its membership. That thereupon, in order to prevent the suspension of defendant Criss, as aforesaid, the partnership agreement of June 5 1912, was dissolved, and it was agreed that the dissolution should not constitute a release by the plaintiffs of any legal rights to which they were entitled as against Criss.

It is alleged that defendant has failed to perform his agreement to secure to plaintiffs the benefit of his membership in the Exchange, and that by reason of his failure the plaintiffs have been obliged to transact their business as non-members of the Exchange, and have been compelled to pay full commissions on all sales and purchases made for their customers, and that their good will has been impaired and their credit injured and a large amount of business has been diverted from them, to their damage in the sum of $100,000, and they bring suit for the recovery of that amount. At the close of the case defendant moved to dismiss the complaint, and the court granted the motion.

Hartwell Cabell, of New York City, for plaintiffs in error.

N. E. Harby, of New York City, for administratrix of defendant in error.

Before WARD, ROGERS, and MANTON, Circuit Judges.

ROGERS Circuit Judge (after stating the facts as above).

Before considering this case on the merits, there is a preliminary matter to which reference must be made. A brief has been presented to the court which is entitled 'Brief Submitted by Administratrix of Defendant in Error. ' It is signed by counsel, who describes himself as 'Attorney for Administratrix of Defendant in Error. ' The brief contains this statement:

'The defendant died on January 25, 1919; this brief is submitted by his administratrix appointed in New Jersey.'

Counsel who presented this brief was heard upon the argument. There is, however, the question whether the action has abated, and whether there is a defendant before the court.

In Bell v. Bell, 181 U.S. 175, 21 Sup.Ct. 551, 45 L.Ed. 804, the defendant died after argument in the Supreme Court, but before the case was decided. The court affirmed the judgment nunc pro tunc as of the date when the case was argued. As a general rule the death of a party pending a writ of error furnishes no ground for the abatement of the suit. In Green v. Watkins, 6 Wheat. 260, 5 L.Ed. 256, decided in 1821, the court, speaking through Mr. Justice Story, said:

'There is a material distinction between the death of parties before judgment, and after judgment, and while a writ of error is depending. In the former case, all personal actions by the common law abate; and it required the aid of some statute, like that of the thirty-first section of the Judiciary Act of 1789, c. 20, to enable the action to be prosecuted by or against the personal representative of the deceased, when the cause of action survived. * * * But in cases of writs of error upon judgments already rendered a different rule prevails. In personal actions, if the plaintiff in error dies before assignment of error, it is said that by the course of proceedings at common law the writ abates; but, if after assignment of errors, it is otherwise. In this latter case, the defendant may join in error, and proceed to get the judgment affirmed, if not erroneous; and he may then revive it against the representatives of the plaintiff. * * * '

Rule 19 of this court (150 F. xxx, 79 C.C.A. xxx) provides that whenever, pending a writ of error or appeal in this court, either party shall die, the proper representatives of such deceased party may voluntarily come in and be admitted parties to the suit, and thereupon the case shall be heard and determined as in other cases. In this case that course was not pursued, and the executrix has not been admitted as a party to the suit. But rule 19 also provides that, if the representatives of the deceased do not become parties to the action, the other party may suggest the death on the record, and on motion obtain an order that, unless they do become parties to the action within 60 days, the party moving for the order, if plaintiff in error, shall be entitled to open the record and on hearing have the judgment reversed, if it be erroneous. The executrix of the defendant, Criss, not having asked to be made a party, the plaintiff in error gave her notice that he would move for an order requiring her to become a party within 60 days, and that, if she did not, he would be entitled to a hearing and have the judgment reversed, if it should be found to be erroneous. This court granted the order on November 18, 1919, over the objection of the executrix, who appeared specially and denied the jurisdiction of the court to make the order 'or continue the cause against me as executrix of my said husband or otherwise. ' But, as the executrix never complied with the privilege accorded to her to become a party within the specified period, or for that matter at any time since, she is not now and never has been a party to the action, and her counsel was without right to file a brief or to be heard on the argument, and she is without right to costs, if the court concludes that there is no reason why the judgment should be reversed.

At the conclusion of the plaintiff's case the defendant's motion to dismiss on the merits was based on two grounds:

(1) Because it appeared that the plaintiffs and defendant knew at the time that the last copartnership agreement was made that it violated the rules of the New York Stock Exchange; that two parties have no rights, one against the other, if they depend upon a contract which at the time of its making is known to be in violation of some other contract which is obligatory.

(2) Because plaintiff testified that he refused to make the new contract with the defendant, which would have given the plaintiff the right to do business on the New York Stock Exchange, although defendant was ready, willing, and able to make the contract according to his agreement.

The court granted the motion and directed the jury to render a verdict for the defendant. 'The case,' said the court, 'therefore, seems to come down to this: The plaintiffs, with knowledge that the defendant was a member of the New York Stock Exchange and bound by its rules-- in other words, that he had a contractual relation with the Exchange to obey these rules-- entered into a contract with the defendant in violation of these rules. This was a contract to commit a tort and can form no basis for recovery in his action.'

The agreement of January 3, 1905, and that of June 5, 1912 provided for the formation of a 'partnership' to carry on a general brokerage business in stocks, bonds, and other securities; but neither agreement in fact or in law created a partnership. Under the terms of these agreements there was to be no division of assets or profits. Criss was to carry on his business in New York as a member of the New York Stock Exchange, and was to retain all his profits arising therefrom. The plaintiffs were to carry on their business in Cincinnati, and were to retain all the profits arising therefrom. It was also provided that the death of any of the parties should not work a dissolution of the firm, and that the surviving 'partners' should enjoy the benefits accruing from the...