Wadley v. Blount

• Decision Date: 31 January 1895
• Citation: 65 F. 667
• Parties: WADLEY v. BLOUNT et al.
• Court: U.S. Court of Appeals — Fourth Circuit

65 F. 667

WADLEY v. BLOUNT et al.

United States Circuit Court, W.D. Virginia.

January 31, 1895

D. F Bailey, Joseph C. Wysor, and Blair & Blair, for plaintiff.

J. A Walker, M. M. Caldwell, and J. L. Gleaves, for defendants.

GOFF Circuit Judge.

This case is before me on motion of defendants to dissolve the injunction granted on the 8th day of June, 1894, as prayed for in plaintiff's bill. In order to fairly understand the questions involved in this controversy, and to appreciate those now disposed of, it is necessary that the main points raised in the case of Paul Hutchinson, administrator of Charles Hutchinson, deceased, et al., against the Wytheville Insurance & Banking Company, and in the petition filed therein in the name of Blount & Boynton and others against said defendant and others, as also in the amended and supplemental bill, in the nature of a cross bill, filed in said cause by Blount & Boynton et al. against H. G. Wadley and others, to all of which reference is made in the pleadings and exhibits of this case,-- it being in fact a proceeding filed in and made part of said original cause,-- should be referred to and briefly set forth. The first-mentioned bill was filed on the 5th day of October, 1893, by Paul Hutchinson, a citizen of the state of Iowa, against the Wytheville Insurance & Banking Company a corporation organized under the laws of the state of Virginia, and doing business at Wytheville, in the western district of Virginia. The object of the suit was to ascertain the liabilities of said company, which was alleged to be insolvent, to secure the appointment of a receiver, and for such action as is usual in what is known as a 'Creditors' suit.' On the 6th day of October, 1893, this court appointed H. J. Heuser receiver of the assets of such company, directing him to take charge of its property, and see to the management of its business; and he duly qualified as such, proceeding with the discharge of the duties assigned him. On the 18th and 19th days of the same month, Blount & Boynton and other creditors of said Wytheville Insurance & Banking Company filed their petitions in said cause, and, at their request, were made parties complainants therein; they claiming that they had valid claims against said company, which were set forth, amounting to many thousands of dollars in the aggregate. They charged mismanagement of the business affairs of the company, asking for the appointment of a master commissioner, the removal of the receiver, and for other action and relief, not required to be fully alluded to here. The court refused to remove the receiver, but appointed Preston L. Gray, as master, with instructions to investigate the conduct of the affairs of said company, in what way it had been managed, and of what its assets consisted; also, that he ascertain in what manner the funds of the company had been invested, and how the same had been disposed of; that he report the liabilities of the company, showing the sums due its policy holders and other creditors, the amounts theretofore paid its officers as salaries, in whose name the funds of the company have been kept, and such other matters relating to the business of said company as any party to the suit might request. The said master, after due notice to the parties, proceeded to execute the orders of the court, for that purpose taking charge of the books, papers, correspondence, and records of the company, and calling and examining as a witness the plaintiff, H. G. Wadley, relative to his management of the business affairs of such company, of which he had been president. The said Wadley was so examined on the 8th day of February, 1894, being fully questioned, by the master, by counsel for said company, and also by his own counsel, as well as those who represented the creditors; the same being in the form of a deposition taken before said master. The object of this examination was to fix an individual liability on said Wadley, by showing the unlawful diversion by him of the assets of the said Wytheville Insurance & Banking Company. The master filed his report on the 27th day of April, 1894, in which it is set forth that Wadley is indebted to the company in the sum of $196,342.24. On the 25th day of May, 1894, the said creditors filed an amended and supplemental bill against such company, Wadley, and others, rendered necessary or advisable, it was supposed, because of the developments brought out by the examination before, and the report made by, the master; the intention being to secure a personal decree against said Wadley for the sum so shown by the master of his indebtedness to the company. On the 29th of May, 1894, on the motion of such creditors, the court removed Heuser, as receiver, and appointed, to succeed him, H. B. Maupin, and also recommitted the report to the master, in order that additional proof relative to certain claims against the company might be taken. Numerous exceptions have been noted to the master's report, all of which are as yet undisposed of. The suit is still pending, and the questions raised by the pleadings and proofs are unadjudicated.

On the 16th day of May, 1894, in the county court of Wythe county, Va., an indictment against said H. G. Wadley was returned by the grand jury then attending that court, in which he was charged with the embezzlement and misappropriation of the funds of the Wytheville Insurance & Banking Company, in the particular instances and amounts as reported by the said master in his report so filed in this court. The bill I now consider was presented on the 8th day of June, 1894, in which, after reciting much of the history of the litigation to which I have made reference, it is charged that the same creditors who so submitted themselves to the jurisdiction of this court, and who so petitioned this court to consider and adjudicate the matters referred to in said suits, are the identical parties who, acting by counsel employed by them for that purpose,-- the same counsel who so represented and now represent such creditors in this court,-- caused said indictment to be instituted, and are now conducting the criminal prosecution founded thereon; and, also, it is charged therein that the same matters, rights, and issues are involved in said criminal procedure, as are set forth in the civil pleadings so theretofore submitted by such creditors to the determination of this court; that Wadley is the same person pursued by them in their proceedings in the civil suits in this court and in the criminal procedure in the county court of Wythe county, Va. It is also alleged that Wadley has been taken into custody by the said county court, and is now held under a bail bond to appear and answer said indictment. And it is further charged that after said master had made up his report, and when the nature of the same and the contents thereof had been communicated to said creditors, they and their counsel, after consultation together, decided to and did offer a proposition for the settlement of the debts mentioned in the report to the said Wadley, they agreeing to accept fifty cents on the dollar in full satisfaction of their said claims, the said offer being communicated to Wadley by a committee of the creditors appointed for that purpose at the consultation alluded to, and being by him promptly rejected; it being set forth in the same, which was reduced to writing, that it was only to remain in force for the period of 10 days. The plaintiff now charges that said offer was intended as a threat, the object being to intimidate him, and force him to pay the debts of said company. The said proposition, showing the terms thereof, the names of the creditors who participated in it, and the counsel who represented them, is filed as an exhibit with the bill, in which it is also charged that after the plaintiff's deposition was taken by the said master, and before the said meeting of creditors was held, and their offer of adjustment made to him, he was threatened by them with a criminal prosecution if he did not settle with them the debts they claimed to be due and payable to them by said company. It is also alleged in the bill that such creditors procured a copy of the report as made by Master Commissioner Gray (the same not having as yet been submitted for the action of this court), and used it as evidence before said grand jury, portions of it having been read for that purpose to such jury by counsel for said creditors, who had caused themselves to be summoned as witnesses, in order to thereby obtain the finding of the indictment against Wadley. It is also charged that they also so used a copy of the deposition of the plaintiff so taken by the master, and now filed in said cause.

The plaintiff insists that his rights as a citizen of the United States were thus violated, as it is provided in the fifth amendment of the constitution that no person shall be compelled in any criminal case to be a witness against himself; and that, in pursuance of this provision, congress has enacted section 860 of the Revised Statutes, prohibiting the use of pleadings and evidence taken in judicial proceedings as testimony in criminal prosecutions. As I dispose of this case on other grounds, I will not discuss the questions relating to the use of copies of the master's report and plaintiff's deposition in the criminal procedure in Wythe county court, in the state of Virginia but, in passing them by, will remark that I cannot conceive of any proper way by which such papers could have been used as evidence before the grand jury of that county, under the circumstances as set forth in the bill and proceedings of this cause; and, but for the uncontradicted testimony of a number of witnesses, I would not think it possible that such action could be...