Williams v. GREEN BAY & W.

• Decision Date: 30 September 1946
• Parties: WILLIAMS et al. v. GREEN BAY & W. R. CO.
• Court: U.S. District Court — Southern District of New York

68 F. Supp. 509

WILLIAMS et al. v. GREEN BAY & W. R. CO.

District Court, S. D. New York.

September 30, 1946.

Unger & Pollack, by Milton Pollack, all of New York City, for plaintiffs.

Cadwalader, Wickersham & Taft, by Merrill M. Manning and Walter Bruchhausen, all of New York City, for defendant.

BONDY, District Judge.

Plaintiffs and defendant seek summary judgment.

Plaintiffs allege in their complaint that they bring this action "on behalf of themselves and of all other holders of Class B Debentures of defendant Green Bay and Western Railroad Company who may elect to join in the prosecution of this action and contribute to the expense thereof," that the "question which is the subject of this action is one of common and general interest to all holders of Class B Debentures of the defendant, Green Bay and Western Railroad Company," and that the defendant, contrary to its agreement with the Class B Debenture holders, failed to distribute net earnings in certain years commencing with 1924 to and including 1943. Plaintiffs demand judgment:

"(1) That the rights of plaintiffs and of all other holders of Class B Debentures in and to the net earnings of the defendant be determined;

"(2) That this Court decree that the holders of Class B Debentures of defendant are entitled to receive pro rata the sum of $809,618.15, with appropriate interest, as their share of the annual net earnings of defendant for the years 1924 to 1943, inclusive, in lieu of interest on said debentures;

"(3) That this Court direct the defendant to pay and distribute such sum among the holders of its Class B Debentures pro rata."

The issue now presented is whether a judgment entered on May 13, 1946, in the case of Biltchik et al. against this defendant, in the Circuit Court of Brown County in the State of Wisconsin, in which the defendant was incorporated, dismissing after trial a suit brought by other holders of Class B Debentures on behalf of themselves and all other holders of said debentures, from which an appeal is now pending undetermined, is res judicata of plaintiffs' rights.

The complaint in the Wisconsin action sought payment of net earnings for years commencing with 1903 to and including 1944. It stated that: "the question in this action is one of common or general interest to all owners and holders of such debentures and it would be impracticable to bring them all before the Court. Plaintiffs, therefore, bring this action for the benefit of all holders of said Class B Debentures of the corporation." The complaint demanded judgment:

"A. Directing the individual defendants herein, who are directors of the corporation, to fix and declare, and the corporation to pay, pro rata to the plaintiffs and all other holders of Class B Debentures the sum of $1,229,248.61 plus such amount as the court may find to be due and owing for the year 1944."

The effect of the Wisconsin judgment must be determined by reference to the law of Wisconsin. A judgment of a state has only that effect given to it by the court of the state in which it was rendered. Wright v. Georgia Railroad & Banking Co., 216 U.S. 420, 429, 30 S.Ct. 242, 54 L. Ed. 544; Oklahoma Packing Co. v. Oklahoma Gas & Electric Co., 309 U.S. 4, 8, 60 S.Ct. 215, 84 L.Ed. 537. The Wisconsin action was a class action brought by representatives of Class B Debenture holders on behalf of all such holders as is expressly authorized by Section 260.12 of the Wisconsin Revised Statutes which provides that "* * * when the question is one of a common or general interest of many persons or when the parties are very numerous and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole." This statute merely reenacted the rules which prevailed in equity. Day v. Buckingham, 87 Wis. 215, 220, 58 N.W. 254; Frederick v. Douglas County, 96 Wis. 411, 416, 71 N.W. 798. In a true class suit, where parties sue upon a common right, where all are interested in the result and where the complaint asks relief to which the whole body only is entitled, all will be bound by the result. Cawker v. Milwaukee, 133 Wis. 35, 39, 42, 113 N.W. 417; Smith v. Swormstedt, 16 How. 57 U.S. 288, 303, 14 L. Ed. 942; Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356, 41 S.Ct. 338, 65 L. Ed. 673. See Linden Land Co. v. Milwaukee Electric Ry. & Light Co., 107 Wis. 493, 508, 83 N.W. 851.

The Class B Debentures provide that the face amount thereof is payable "only in the event of a sale or reorganization of the Railroad and property of said company, and then only out of any net proceeds of such sale or reorganization which may remain after payment of any liens and charges upon such railroad or property, and after payment of Six hundred thousand dollars to the holders of a series of debentures known as Class A, * * * and the sum of Two Millions five hundred Thousand Dollars to and among the stockholders of said company." They further provide: "The said Railroad Company Hereby Agrees that until such payment, the holders of this Series of Debentures shall in lieu of interest thereon participate in the distribution of annual net income to the following extent only viz.: So much of the annual net earnings of the said Company in any year as would be applicable to the payment of dividends on stock shall be...