Schaefer v. Gunzburg

• Decision Date: 26 April 1957
• Docket Number: No. 15208.,15208.
• Citation: Schaefer v. Gunzburg, 246 F.2d 11 (9th Cir. 1957)
• Parties: George J. SCHAEFER, Appellant, v. Milton J. GUNZBURG, Natural Vision Corporation, Natural Sound Corporation, Natural Vision Theatre Equipment Corporation, Vera Gunzburg, Julian Gunzburg, Samuel Gunzburg and Rose Berch, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

246 F.2d 11 (1957)

George J. SCHAEFER, Appellant, v.Milton J. GUNZBURG, Natural Vision Corporation, Natural Sound Corporation, Natural Vision Theatre Equipment Corporation, Vera Gunzburg, Julian Gunzburg, Samuel Gunzburg and Rose Berch, Appellees.

No. 15208.

United States Court of Appeals Ninth Circuit.

April 26, 1957.

Harry L. Gershon, Beverly Hills, Cal., Fitelson & Mayers, New York City, for appellant.

Mitchell, Silberberg & Knupp, Arthur Groman, Los Angeles, Cal., for appellees.

Before STEPHENS, FEE and BARNES, Circuit Judges.

JAMES ALGER FEE, Circuit Judge.

There is but one question in this case.Plaintiff contends he was deprived of a jury trial, to which he was entitled in virtue of the Seventh Amendment to the federal Constitution.The cause was tried in the District Court upon specified issues by the judge alone, sitting without a jury.The judge entered findings of fact and conclusions of law in favor of defendants and against plaintiff, and dismissed the suit on the merits.Before this Court, plaintiff emphatically states:

"On this appeal, it is not contended that the evidence is insufficient to support the pertinent Findings of Fact or that such Findings of Fact are clearly erroneous."

Baldly, plaintiff contends that, although there was a perfectly fair and impartial trial, where he was allowed to present all the evidence he desired on the segregated issue, and where he lost, the whole trial must be held again before a jury.Since trial by jury is guaranteed by the federal Constitution, in "actions at law"we must perforce deal with the ancient distinction between such actions and "suits in equity,"¹ notwithstanding the fact that, for purposes of pleading and procedure in the federal courts, the distinction has been nullified.

The parties are in agreement that this question can be determined at the threshold on the face of the complaint.

If this be the test, the trial court was exact in striking out the demand for jury trial, and the decree must be affirmed.Plaintiff set out a perfect bill in equity under code procedure or the modified chancery practice prevalent in this country for the last fifty years at least.To this, plaintiff appended the utterly misleading caption, "Complaint for Breach of Contract — Demand for Jury Trial," which is belied by practically every phrase in the bill and the prayer.The demand for jury trial at the conclusion is an anomaly.These factors could only lead to confusion.

There has been great debate in the settlement of the questions as to (1) whether the body of the complaint, without the prayer, should be the basis for determination, or (2) whether the complaint should be considered as a whole.²Either method leads to exactly the same result in this case.

The body of the complaint pleads the existence of a partnership between Schaefer and Gunzburg.It sets up the acquisition of certain properties, rights and various assets, tangible and intangible, to be held for the benefit of the alleged partnership.It is pleaded in the form and style of a code bill in equity.It complains, partially by positive allegations but generally on information and belief, of violation of rights of plaintiff.But the whole tenor of the document is to treat the alleged partnership as a continuing and going concern where one of the partners is concealing and secreting the assets and acquisitions from the other.Specifically, the body of the complaint contains no allegation that the breach of the partnership relation "caused damage to plaintiff in the sum of $3,500,000.00."³Such an allegation is the traditional and accepted earmark of an action at law.It is alleged in the body of the complaint, "Forty-fourth: Plaintiff does not have any adequate remedy at law," which is the traditional and accepted earmark of a suit in equity.⁴

It may be observed that such reasoning is abstruse and technical.But the demand of plaintiff is technical.The matter can only be solved by a technical analysis of the complaint in the light of the distinction between law and equity.Since plaintiff has appealed to the sword of technicality, he might find a sword may deal blows as well as parry them.

Plaintiff insists that the prayer be not considered.There are expressions in the books, especially modernly, that the prayer is no part of the complaint.Under the federal rules, the prayer is usually of slight consequence, since the court is entitled to give whatever relief to which the plaintiff may be entitled.⁵The chancery courts acted similarly if the orator included a prayer with exactness, as plaintiff did here, that it be adjudged that Schaefer "shall have such other and further relief as shall be just and proper in the premises."⁶

Since this is a technical field, this Court must consider the prayer, as the books of that antique era say, "for the purpose of characterizing the declaration or bill."The prayer of a declaration at law consisted of a "demand" for a specific sum in dollars as "damages."This complaint does not do so, but prays for damages as an incident of numerous forms of purely equitable relief, namely, that it be adjudged that (1)"Schaefer is a partner""entitled to share equally""all profits and proceeds and assets, including the goodwill and name, Natural Vision, of such partnership enterprise,"(2) that he is "the true owner of one-half" of the stock of various corporations, (3) that the partnership and all these alleged corporations be adjudged dissolved and the assets of all be sold, (4) that Gunzburg "should account to" Schaefer, (5) that Gunzburg and other individuals and corporations are "trustees ex maleficio in respect to any and all assets," etc., "which have been wrongfully diverted to and received by each" and "shall render full accounting" therefor, (6) that such persons and corporations "restore and pay over to such Natural Vision partnership enterprise any and all assets, profits and all effects wrongfully diverted to and withheld from such Natural Vision partnership,"(7) that "the properties and profits of this partnership enterprise, after payment of the partnership debts and liabilities, be divided equally between"plaintiff and Gunzburg, "according to their respective interests,"(8) that interest shall be paid to plaintiff"on all sums found, upon such accountings, to be due and payable to plaintiff,"(9) that Gunzburg "pay plaintiff damages in the sum of at least" $3,500,000.00 with interest from March 30, 1953, (10) that defendants be enjoined, pending trial and permanently thereafter, from disposing of the assets "of such Natural Vision partnership enterprise, including any secret gains,"(11) that a receiver of the assets be appointed pending trial and thereafter "of such Natural Vision partnership enterprise," and, finally, (12) that plaintiff Schaefer "shall have such other and further relief as shall be just and proper in the premises."

It only remains for this Court to compliment counsel for plaintiff for this exposition of perfect mastery of the lost art of pleading in chancery.

There are certain other features upon which rulings should be made.Neither party is entirely disingenuous in the suggestion that the decision should be made on the face of the complaint.Each has another string to the bow.Plaintiff claims the court segregated legal issues alone and tried these, and therefore must have called a jury in accordance with his demand.Defendant, in addition, claims that, even if there were a right to trial on certain legal issues, plaintiff waived this right by later conduct.

The question of whether the prayer for relief can be used to characterize the nature of the complaint as legal or equitable has already been considered.A variation of the argument that the complaint may contain legal and equitable claims is now urged by plaintiff.It is contended that, if any legal causes of action were included, these must have been segregated and tried by jury.In certain cases, this principle has been applied.But, in the cases where chancery assumed jurisdiction because the main complaint required equitable relief, that tribunal traditionally awarded damages as incident thereto.⁷This rule has not changed.As pointed out above, the damages prayed for were incidental.

In cases which arise from a petition for a declaration of rights, the plaintiff cannot force a defendant to try a cause of action at law which he possesses before a court without a jury simply because the petition asks equitable relief.⁸In the former practice in equity, the court could not have tried such issues of law as it can now.Such actions of law might have been enjoined temporarily or permanently.But, if tried, these must necessarily have been tried by a jury in another court.The same principle is recognized today, but the one court may now dispose of legal and equitable causes.Therefore, if a defendant has such a legal right, the court, after the equitable issues are disposed of, proceeds to trial of the legal issues with a jury, or perhaps tries both simultaneously.

Likewise, a joinder of legal claims with equitable claims will not deprive plaintiff of a right to trial of the former by jury.But there are many situations such as we have here, where an issue such as the existence of a partnership might lie at the basis of an action at law for damages or a suit for equitable relief, such as injunction, receivership and accounting, to the partnership or reclamation of the partnership property from one of the alleged partners.

This Court is firmly committed to the doctrine that the constitutional right to jury trial should not be eroded by a flow of decisions giving force to dubious waivers and rationalized construction of the Federal Rules of Civil Procedure.⁹However, it is not the purpose to expand the strict concept of a law action by rationalization beyond that covered by the constitutional guaranty.

The technician who drew the complaint in this case had the...