, FEDERAJ' InEquity. "On demurrer ·tobill.' H; ·L. Lazar'U8 and JiR.Beckwith, for complaimint. 'W. ,W. Howe, a. F. Buck, and' FarrOII' &- Kruttschnit, for Before PARDEE and BILLINGS, JJ :
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PER CURIAM. The matters and things and the reliet prayed for set forth in the bill and amended bill in this case cover three separate matters Of equity cognizance, not 'necessarily blended together, nor arising out of one transaction, to-wit, the alleged illegal issue of preferred stockj the alleged breach' of trust on the part of the original board of directors in fraudulently issuing full-paid, stock for a nominal consideration; lind the alleged illegal pur\!hase of the Biranda lottery grant. The first of these is a matter which may well be tested between dissenting stockholders and the corporation, founded on rights which may be asserted by the stockholders as against the corporation, and to wHich only the corporation is a. neceseary The second is founded on rights which may properly be asserted by the corporation against the delinquent trustees, and to which such trustees are necessary parties. If Buit is brought thereon by a stockholder in the federal court,equity rule No. 94 expressly and in terms applies. The third is also founded upon a right which may be properly asserted by the corporation; and,if action is brought therefor by a stockholder, equity rule 94 applies. If,as counsel for complainant contends, the whole action is one arising out of a series of transactions by the same parties, and is solely for an accounting as against'delinquent trustees, then the .conclusion is inevitable that the case is one of "a bill brought hy one or more stockholders in a corporation against the corporation' and other parties, founded on rights which maybe, properly asserted by the corporation," and is directly within the terms of said equity rule 94. In our' opinion, the bill is multifarious, and in every view6f the case which has been presenfedto us we are of the opinion that the demurrers are well taken, and should be sustained. A decree to that effect and- dismissing the bill Will be entered.
FAIRBANKS'll. AMORKEAG NAT. BANK et ale ,(Oircuit Oourt, D. NeUJ Hamp8hire. April 24,1889"
1.
BAmmuPTcv-COMPOSITION-FRAUP-LIMITATION OF, AC'l'IQNS.
Rev. St. § 5057, provld!s that a Buit between an assignee In bankruptcy and a person claiming an adverse interest concerning the bankrupt's property ill barred in two years after the cause, of action accrued. Act June 22. 1874, provides that ,the time during which' composition belWeeJ;l'tbe' bankrupt and creditors, shall be in forc,e shall be excluded in the computation; A bankrupt a fraudulent:alrl'eement to procure the creditors. WhICh was procured and confirmed by 'lhe coUrt, and, irJpursuthe, property' tQ ance thereof an order to the' assignee to was procured, and the propei'tywas conveyed accordingly. The comprot,nise was afterwards set aside. Held that, where 'less than two years remained
V. AMOSKEAG NAT. BANK.
631
after deducting the time,the, compromise WaS in forcll from the period elapsing betwllen the date of the fraudulent agreement and ilie filing of a bill by tho assignee to recover the property, such bill was not barred. ' 2. SAl,lE.
A bankrupt and defendant, one of his creditors, agreed that, in consideration that defendant shouldpl"ocuro a composition which the bankrupt had ofteredto the creditors, the bankrupt would pay defendant aflpecified sum in .ddition to all disbnrsements. Defendant thereupon bought certain large claims, paying a larger sum for them than the percentage provided for in the COlJl.pOSltion would amount to, and voted such claims in favor of the composition ,as attorney for the original holders of them. concealing the assignment, and, the composition havlng been thuB procured and confirmed, received a transfer of the bankrupt estate. Helil;that the agreement and composition were fraudulent, and the assignee could recover the property.
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' B u t where defendant ball a mortgage, and has been obliged to pay a me'chanlc's lien on certain property. and there is a balance due him thereonj',he may be allowed to retain the rents rece'ived therefrom, and account fOlthe same· on the balance due. ".., BAM:B;
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Defendant may be allowed, to retain dividends received by him. ',.,'
, In Equity. On appealfrom , by Alfred G.
,-a
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682
FEDERAL REPORTER,
vol. 38.
person as the court might appoint, for the reason that said bank and said Varney and others. conspiring and contriving to defraud and cheat thecreditors of said Dunn. entered into a fraudulent agreement with said Dunn. that in consideration that the said bank, through said Varney, should bring about the said compo1iition, the said Dunn should pay to said Varney the sum of six thousand dollars for said bank. in addition to all disbursements made by said Varney in the course of said business. And in pursuance of said agreement the said Varney and said bank and ot,hers bought up and paid for cer. tain large claims a much larger sum than the percentage mentioned in said resolution of compromise; and so being the owner of said claims voted on behalf of said creditors as theirattorneydorsaid resolution of compromise, concealing from the other creditors of said bankrupts the fact of such assignment, which was unknown to the complainant and other creditors of, the. said -ban,krupt for a long time after the 31st day of December, Butno time was stalled in the bill when said fact became known to the complainant, or when the fraud was discovered. The answer denied the fraud and concealment, and alleged that the complainant, at the time he made the deed to said Varney, April 28, 1876, well knE'wof said purchase, and that in many instances, said Varney had paid sums exceeding the composition voted; and that he had full notice and knowledge of the agreement between said Dunn aud said Varney, and insisted that said assigneEl, · having waited so long before any proceedings for the recovery of such property, is barred the statute of limitations respecting suits by or against assignees, the lJiII not having been filed, within two years of the time the cause of action accrued,' and praying that they may have some benel:it·of this objection, as if the same were pleaded in bar of this suIt. Proofs were otferec:l tending to show the acts. alleged to be fraudulent, but there was no proof or evidence of concealment. , on the part of the defendants, further than that some of the transactions' between the respondents and Dunn and creditors were entered into when the complainant was not present, and of which it did not appear he had notice. It did not otherwise appear that these transactions were not known to the complainant at the date of the deed of April 26, 1876. nor, if not known to him at that time, when they became known to him; 1.'he complainant offered no. , proof upon that point; but to the objection set up hy the respondents in their , answer, that this suit is baned by the statute of limitations respecting suits. by or against assignees, (section 5057, Hev. St, 2d Ed.,) the complainant replied in his argument at the hearing: (1) '£hat this proceeding is not such a, , suit as falIl:! within the purview of that statute; and (2) that the cause of action did not accrue until Within two of the bringing of the action, to'Wit, until the fraud was discovered by the complainant; nor until tha Compromise was set aside on the petition of Whittemore, April 6, 1880. ' , "'£he language of the statute is: · No suit, either in law or equity, shall 'be maintainable in any court between an assignee in bankruptcy and a person claiming an adverse interest, touching arty property or rights of property transferable to or vested in su'eh assignee,' unless brought within two years from the time when the cause tifaction accrued for or against such assignee.' Rey., St. § 5057. With the requirement of this statute this suit seems fulIy and literally to compiy. It ,i'8 alluit in eqUity; it is betwetm an assignee in bankruptcy and persons clalmin,lran a(!'verse interest to property transferable to such assignee. The' prayer'ofthe bill is: ,'rhat the bank and the defendants'maybe required to convey to said assignee alI the property of saidDunn;' that is, all the property of saidDunn which came to tht' hands of the assignee, 'transferred or con veyed' to the respondent by deed of April· 28. 1876,' and . ,which the now{l]aim and seek to hold. So fltr the proceeding an8wei's to the of'tM law, and the only remaining question is, when did theeause of action aoorue?Evidently at the time the,deed of, the com- .
FAIRBANKS V. AMOSKEAG NAT. BANK.
633
plainant to the defendants wal;! made, if the fraud 1100 beenor was then known. The fraud, if any, was committed before the deed was executed; but the cause because the comof action could not lJe said to have existed before that plainant up tp Wat time had the property in his,own hands and possession, and could have, maintained no suit, at law or equity against the defendants for its If the complainant had known ofthefraud before the deed of April 28, 1876, had been executed. he probably could have prevented the transfer of the property to the defendants by making known the fraud to the court, and, if he did not know of the fraud at that time, there would seem to be no objection to his recovering it back as soon as he discovered the fraud, after the deed was,made. In Bailey v. Glover, 21 Wall. 042. it 'was held that the clause -limiting the commencement of actions by and against the assignee to two years after the right of action accrues, applies to all judicial contests between the assignee and any person whose interest is adverse to his.' It was also held in the same case that, when the action is intended to obtain redress against a fraud concealed by the party or which from its nature remains secret, the bar does not comlUence to run until the fraud is discovered. So in Moore v. G1'eene, 19 How. 69. But in this case there is no allegation in the bill, nor is there any evidence in lhe case, when the fraud was discovered, so that the court can determine whether the action was seasonably brought, ,or when the bar commenced to run. In stearns Y. Page, 7 How. 819, it was held, · especially must there be distinct averments as to the time when the fraud, mistake, concealment, or misrepresentation was discovered, and what the discovery is, so that the court may clearly see whether, by the exercise of ordinary diligence. the discovery might not have been before made! Same doctrine was held in Moore v. Greene. above cited, · to enable the defendants to meet the fra,ud and the time of its discovery.' In Harwood v. Railroad Co., 17 Wall. 78, it was held that, when · a bill is filed five years after th,e judicial proceedings. which it is sought to set aside have been completed, the cause of so considerable a delay should be specifically set out, and" if ignorance of the fraud is relied on to excuse the delay, it should be shown specifically when knowledge of the fraud was first ohtained.' In this case there is neither allegl\tioll nor proof when the fraud was discovered, and a knOWledge of it obtained, noc is there any allegation or evidence that the complainant did not know of the alleged fraudulent acts of the defendants at the time of the waking of the deed by the complainant to the defendants, April 28, 1876, and, if the case rested he1:'e, the bill would have been dismissed. "But there,1s another provision of the bankrupt act which must be considered, which eontroIs the foregoing consideration. This is a case where the bankrupt offered a composition which was accepted by the creditors and or_ dered to be recorded, and was afterwards set aside by the court; and the statute of June 22, ll:l74, provides that in sllch a case' the time during which such composition shall have been in force shall not be computed in calCUlating periods of time prescribed by the bankrupt act.' 1 Supp. Hev. St. 74. The compromise was ordered to be recorded December 31,1875. It was set aside April 6, 1881; in force four years, three months, and six days. The assignee was appointed August 3, 1875, and the bill of complaint was tiled October 31, U:l81,a period of sil\: years, two months, and twenty-eight days. The alleged fraudulent acts of the respondents were not done until the 11th day of December, 1875, the date of the agreement between Dunn and Varney, and, after reckoning from this day to the date of filing the bill in this case, there isa period of five years, nine months, and twenty days. Deducting four years, three months, and six days,-the time the compromise was in force,-and there remains year, six, months, and fourteen days to be reckoned against the assignee in computing the two years' limitation fixed by section 5057 of the Hevised Statutes. And so the bill of complaint having been brought within the HIll-
vol. 38. -
itationrequii-ed by the it waif riot necessary for the complainant to offer proof'of"the concealment oftha fraud to avoid the limitation. "We'eome now to the consideration of the fraudulent acts alleged to have been committed by the defendants; because, if they have conimittedno fraud they cannot, be disturbed in the possessiouof the property Which was transferred to them by-order of the cOlut,'notwithstanlling the compromise has beenset aside and annulled. The acts complained of in the bill are, that the said bank and Varney, conspiring and contriving to defraUd and cheat the creditors of said Duhn, entered into a fraudulent agreement with said Dunn, that in cODsidl'ratioh that the bank, through said Varney, should bring about the composition which Dunn bad offered, the said Dunn would pay-to said Varney the sum of six thousand de!larsforsaid bank, in additiontaall disbursements madebYilaid Varney in the course of said business, and that in pursuance of said'agreement said Varney and said bank and others bought up al1..i paid for certain large claims, a much sum than the percentage mentioned in the resolution of compromise; 'and' so, being the OWNer of said claims, voted in behalf of said creditors as their attorney for· said' resolution of.compromise, concealing from tbeothercredito1's of said bankrupts the fact of such assignment. The actS 'thus alleged were sUbstantially proved by the evidence. Therewas8uch between Dunn"Rnd Varney In writing. Varney purchased: certain .claims, or procured them to be purchased,paying more for them' than -was offered by DUDli in lils offer of compromise; and voted upon them as attorney 'for theclaimants;thllB aiding to carry the compromise, acting in this as-tbEiagent of the bank. which furnished lJlmthe money in whole or in part, and atterwards securing ,Ii transfer ofthe bankrupts' property,and conveying it to the bank. That -sucliacts Were fraudulent there-can be no doubt. They-in'tluenced the -bankntptcy proceedings., They probably secured toe passage of, thecbmpromise resolution. They secured to one creditor more than to another a greater percentage on .hiS debt. without the knOWledge of such others. They prevented anequal distribution of the bankrnpts' assets;, giVing to sOllie of. the creditors ,than was offered by the compromise. And they tended to prevent a considerable portion of Dunn's assets from being applied to -the payment of his debts. - Oookinham v. M07'gan, 5N. BJ R, 16; McLean v; Bank, 3 McLean, 5B7j Webb v. Sachs, 15 N. B. R. 16B; In re Sawyer, 14 N: B.R. 241 j Ex parteM07'ris, 12 N. B. R. 170; Bean v. Brook'" mire, 7 N. B. R.· 568; -Bean v. Amsink, 8 N. B. R. 228. The compromise being thus affected by fraud, and theconveyanees of the aElSets of the bankrupts to Varney by the Rssignee, and by Varney to the bank, having been induced by sucb fraudulent compromise; must be set aside,' Rndthe respondents ordered to reconvey said assets to the assignee. "The master reports that the bank received from the property of Dunn $5,302.75, but in this he has included $277.42, received from rents from the Concord-Street ptopertyof which they had a mortgage and a claim for a mechanic'slien, whichthey had beEm obliged to pay, and on which a balance was due the bank. 'I'his sum of $277.42, I am inclined to think the bank may retain and account for on the balance dUe them on the property. This should be deducted from the $5,302.75, leaving $5,025.33, wbichsum should be paid to the assignee, and a decree may be entered accordingly. -Sundry di vidends were paid to the bank by the assignee, Which I am inclined to think, so far as now appears, should be retail1edby them. It does not appear thllt the money paid to the batik by Harris was paid' by the 8ssignee,or that the note passed from tbe assilPleeto the bank, thoughit does note belonged to Dunn's estate. The-sum of $530.00, paid to the bank Ofi this note, may rePlain in the hands of the bank, to be accounted for with other questions which will undOUbtedly arise in the settlement of thec}state of the bankrupts by the Rssignee." - . , . . -_ _. - -
EIDW ARDB,
V. HOEF}'INGHOFll'o .
63.5
tiorari, see 32 Rep. 572, 30 Fed. Rep. 602. H. G. Wood; for complainant. C. R. Morrison and H. H. Hun, for defendants.
to dismiss appeal, and on motion. to quash writs of mandamus and cer-
Defendants apPeJLl. i' For :opinions on motion for writ of mandamUs and'
COLT,J.This case oomes up upon appeal from the district court. The record is the same as was before that court. From a careful examination of the record and the briefs of counsel, I am entirely satisfied with the correctness of the conclusions reached by the district judge. Whether intended or not, the evidence shows beyond question the fraudulent character of the compromise effected by these defendants. It is also equally clear that this cause is not barred by the statute of limitations.Agreeing, as I do, with the reasoning and conclusions of the district court, it becomes unnecessary for me to do more than direct that the decree of the district court be affirmed, and the appeal dismissed, Bod it is so ordered.
EDWARDS '11. HOEFFINGHOFF.
Oireuit Court, 8. lJ. Ohio,
w: D.
March 20, 1889.)
CONTRACTS- V AL'IDITY-DEALING IN FUTURES.
In relation to transactions in for future delivery, no matter what colorings'or semblances of reality are thrown about the alleged purchase. if the jury causee that all these forms were mere shams. and that there was infact DO a.ctual bona. fide dealing in the article itself. but that the forms were adopted to evade the law. and as a cloak for gambling, it is their duty to tear away the disguise. and treat the transaction as it is. Though defendant may not have intended to make a bona fide purchase of grain. but only to bet on the rise or fallof the market, and to pay differences, still, if such intention were not known to plaintiff, the commission merchant on the board of trade who acted for defendant, and he executed the orders in good .faith, and bound himself to receive and did receive and pay for. the grain, and. sold it at a loss under the rules, after due notice to defendant, and after defendant's repudiation or failure to comply with the contracts. plain· tiff is entitled to recover his comniissiolIS and losses.
2. SAMIll-INTENTION TO GAMBLE-FACTORS AND BROKERS.
8.
ACCOUNT RENDERED-FAILURE TO OBJECT.
When ",n account current is rendered. and not objected to within a reason· . able time. it has the force of an account stated. But this rule does not apply if, when the account was .rendered, the parties had already come to a disagreement,so that assent from silence could not reasonably be inferred.
At Law. ,Action to recover money on contract. L. H. Bi$bee and Paxton &; Warrington, for plaintiff. Lincoln, Stephens &; Lincoln, for defendant. SAGEiJ., (orally charging jury.) The plaintiff sues to recover from the defendant $15,667.14, with interestfrom July 6,.1887. The petition sets forth thxeedistinct causes of aotion. The general allegations applicable