Watson v. Huntington

215 F. 472, 131 C.C.A. 520, 1914 U.S. App. LEXIS 1257
CourtCourt of Appeals for the Second Circuit
DecidedApril 7, 1914
DocketNo. 171
StatusPublished
Cited by13 cases

This text of 215 F. 472 (Watson v. Huntington) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Watson v. Huntington, 215 F. 472, 131 C.C.A. 520, 1914 U.S. App. LEXIS 1257 (2d Cir. 1914).

Opinions

HUNT, Circuit Judge

(after stating the facts as above). At the outset it is to be noted that one of the plaintiffs, Herbert Francis Smith, alleges that he bought shares in the National Steel & Wire Company in 1905, and that he is “still” the owner of the same number of shares that he bought in the holding corporation. It is true that in a subsequent paragraph of the complaint there is an allegation that “all” of the plaintiffs were induced to surrender their certificates of stock and right of voting the same in the holding company to the voting trustees and to convert their holdings into the securities of the National Consolidated Wire & Cable Company. Nevertheless, under the special averment as to Smithj he should be judged as a stockholder in the original holding company and not asking to be restored to the position of stockholder in the holding corporation.

[ 1 ] The suit is not brought by plaintiffs in behalf of themselves and all other stockholders in the holding company who may desire to become parties plaintiff thereto; nor are plaintiffs suing in behalf of the corporation, which is not even a party to the bill. The real object of the suit is to recover the amounts which plaintiffs respectively invested in their respective holdings in the holding company, and in order to get their money they ask the court to remove such impediments as plaintiffs think will be necessary to have removed before they can recover.

The conspiracy charged was a continuing one initiated by arrangement with agents in England whereby stock sales were to be promoted in order to raise money to carry on the business of the holding company and to provide money for paying the defendant Huntington and one Webster an agreed price for their interest in a certain one of the [475]*475subsidiary corporations, and continued always with the purpose of stock selling even until the plaintiffs had converted their stock into securities of the National Consolidated Wire & Cable Company. Reduced to a few words, this was the scheme charged: The conspirators persuaded certain of the plaintiffs as investors to come into the holding company, and when they had been drawn in they deceived them, as well as others who had already bought stock, as to the affairs of their corporation and misled them to such an extent as to induce them to surrender the control of their stock to the conspirators who, by the exercise of such control, carried on the scheme and were enabled to manipulate the concerns of the holding corporation and further deceive plaintiffs to their damage, even in some instances inducing them to invest more money, so that finally they were left with stock in a corporation much impoverished by wrongs of the conspirators.^

Now from such a position plaintiffs wish to be relieved by some decree which will compel defendant Huntington to pay back to them the amounts paid by them respectively for their stock. They want to get out whole. It appearing, however, that some of the plaintiffs bought their stock prior to the 1st of April, 1904, which was before the origin of the conspiracy charged, clearly such persons, in the first instance at least, were not drawn in by the acts of any combination as charged. As to them the conspirators’ wrongs consisted in having persuaded them to enter into the voting trust and thereafter in having deceived them concerning corporate affairs and in having acted as charged under the voting trust. Such persons could not herein recover the amounts paid for their stock upon the ground of false representations made before they bought shares. The relief they ask is plainly based upon a different state of facts from that relied on by those who came in because of fraudulent representations. May the two groups nevertheless unite in one bill claiming relief in equity because all went into the voting trust agreement and were victimized by the acts done by defendant Huntington, and this irrespective of the time when they obtained their shares? In other words, may the bill be sustained in equity as stating grounds for a return of the money paid? We think not, and for these reasons:

[2j The object of the complaint being a recovery of damages specifically named to be the respective sums put in by plaintiffs respectively, an accounting is wholly unnecessary. Nor is it at all necessary that the votes of the trustees under the voting trust should be set aside, or that any conversion of the stock of the holding company be canceled, for if defendant Huntington was guilty of the frauds charged by plaintiffs in fraudulently misrepresenting things after plaintiffs became stockholders, and they relied upon the false representations, each of the plaintiffs can recover damages upon the ground of fraud and his remedy at law is full and adequate. U. S. v. Bitter Root Development Co., 200 U. S. 451, 26 Sup. Ct. 318, 50 L. Ed. 550; Buzard v. Houston, 119 U. S. 347, 7 Sup. Ct. 249, 30 L. Ed. 451. Upon a trial at law for fraud defendant Huntington could not successfully defend upon the ground that the voting trust and his acts' thereunder relieved him, or that any plaintiff’s rights were affected by the con-

[476]*476version of his shares into securities of the consolidated company. The mere charges of fraud will not give equity jurisdiction; nor will averments of conspiracy and violation of trust authorize a court of equity to take jurisdiction when the gist of the action is one arising in tort for which a defendant is liable in damages where the damages can be just as readily ascertained at law as in equity. The familiar rule is well stated in Hipp v. Babin, 19 How. 271, 15 L. Ed. 633:

“Wherever a court of law is competent to take cognizance of a right, and has power to proceed to a judgment which affords a plain, adequate, and complete remedy without the aid of a court of equity, the plaintiff must proceed at law, because the defendant has a constitutional right to a trial by jury.”' Hoot v. Railway Co., 105 U. S. 189, 26 L. Ed. 975; Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358; Cates v. Allen, 149 U. S. 451, 13 Sup. Ct. 883, 977, 37 L. Ed. 804; Walker v. Railway Co., 165 U. S. 593, 17 Sup. Ct. 421, 41 L. Ed. 837; American Publishing Co. v. Fisher, 166 U. S. 464, 17 Sup. Ct. 618, 41 L. Ed. 1079.

.The latest expression of the Supreme Court is to be found in Curriden v. Middleton et al., 232 U. S. 633, 34 Sup. Ct. 458, 58 L. Ed. 765, decided March 16, 1914.

[3]

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Bluebook (online)
215 F. 472, 131 C.C.A. 520, 1914 U.S. App. LEXIS 1257, Counsel Stack Legal Research, https://law.counselstack.com/opinion/watson-v-huntington-ca2-1914.