Sauter v. First Nat. Bank

• Decision Date: 28 September 1925
• Docket Number: No. 3528.,3528.
• Citation: 8 F.2d 121
• Parties: SAUTER v. FIRST NAT. BANK OF PHILADELPHIA et al.
• Court: U.S. Court of Appeals — Seventh Circuit

8 F.2d 121 (1925)

SAUTER v. FIRST NAT. BANK OF PHILADELPHIA et al.

No. 3528.

Circuit Court of Appeals, Seventh Circuit.

July 1, 1925.

Rehearing Denied September 28, 1925.

David E. Keefe, of East St. Louis, Ill., for appellant.

Bruce A. Campbell, of East St. Louis, Ill., for appellees.

Before ALSCHULER, EVANS, and PAGE, Circuit Judges.

ALSCHULER, Circuit Judge (after stating the facts as above).

It is contended for appellant that the pleading of appellee bank was not a cross-bill or counterclaim under rule 30 of the federal Equity Rules, which is in part, "the answer must state in short and simple form any counterclaim arising out of the transaction which is the subject-matter of the suit, and may, without cross-bill, set out any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him, and such set-off or counterclaim so set up shall have the same effect as a cross-suit so as to enable the court to pronounce a final judgment on the same suit upon both the original and cross-claims."

In Amer. Mills Co. v. Amer. Surety Co., 260 U. S. 360, 43 S. Ct. 149, 67 L. Ed. 306, the court said of the rule that it "should be liberally construed to carry out its evident purpose of shortening litigation." And in Kishi v. Oil Co., 298 F. 218 (5 C. C. A.), it was said, "An answer seeking affirmative relief by the new equity rules, occupies the position of a cross-bill under the old practice." But it is urged that the affirmative relief demanded by the bank in its answer was in fact only the statement of a defense to the bill, and was not the "subject of an independent suit in equity" against appellant. The bank had the undoubted right to proceed in equity to foreclose its lien, notwithstanding its contractual right to realize on the security by making a sale of it under the terms of its collateral note. 21 R. C. L. 695; Guaranty Trust Co. v. Green Cove R. R. Co., 139 U. S. 137, 11 S. Ct. 512, 35 L. Ed. 116.

Whether under rule 30 this would give appellee bank the right to proceed by cross-bill or counterclaim in appellant's action to foreclose the lien created by its codefendant, Armstrong, we need not consider. Armstrong is making no complaint of the decree of foreclosure against him. But from the wording of the rule it would seem that the cross-bill or counterclaim must be such as would be the subject of an independent suit in equity against the appellant. It is apparent that appellant was making definite claim of his ownership of the stock upon which the bank asserted its lien through the loan made to Armstrong upon the security of the stock certificates which Armstrong delivered to it. One need but to examine appellant's bill to know that his assertion of title in himself, to the exclusion of the bank's lien, was thus definitely and formally put forth. Such an undertaking is of necessity more or less influential in beclouding the title to the property, and it conferred upon the bank the right to proceed in equity against appellant to have determined and settled the validity of the claim thus made. This would constitute a right of action in equity by appellee bank against appellant, which, in our judgment, would bring it within the purview of rule 30. In our view, under the facts set up in the pleadings, the undertaking to foreclose the bank's lien directly involved the question of superiority of title to the shares of stock as between appellant and appellee bank, and, in foreclosing its lien, the bank may properly have, as an incident thereto, the affirmative relief against appellant which it might have had if appellant had been made defendant in a suit in equity by the bank to obtain against him similar relief.

Regarding the bank's pleading as properly a cross-bill or counterclaim under the rule, was appellant entitled upon his motion, opposed by appellee bank, to have his bill dismissed without prejudice? In Illinois there is a statute preventing dismissal of plaintiff's bill after cross-bill is filed. No such statute is applicable to the federal courts. There are many decisions touching more or less directly upon the subject, which we will not undertake to review nor cite. It was recently stated by the United States Supreme Court in Ex parte Skinner & Eddy Corp., 265 U. S. 86, 44 S. Ct. 446, 68 L. Ed. 912:

"It is ordinarily the undisputed right of a plaintiff to dismiss a bill in equity before final hearing. * * * The right to dismiss, if it exists, is absolute. * * * The usual ground for denying a complainant in equity the right to dismiss his bill without prejudice at his own costs is that the cause has proceeded so far that the defendant is in a position to demand on the pleadings an opportunity to seek affirmative relief and he would be prejudiced by being remitted to a separate action. ...