Sidebilder
PDF
ePub

upon the issues involved in this suit and af. I foundation of any action or application for[144) ter the decision of the other case in this any relief whatever between the parties court, in March, 1891, holding the lease ille- thereto. And this respondent submits that gal and void, the complainant herein, on the the rule which precludes the granting of re25th of April, 1891, applied to the court for lief by any court of either equity or law, leave to dismiss its bill at its own cost. This upon a contract void for contravention of application was opposed by the defendant, public policy, forbade this circuit court to alwho, on the same day, moved for leave to file low such affirmative relief upon this cross a cross bill, in which it said it would avail bill which asserts no claim of right not itself of the tenders of relief made by the founded directly upon the express undertakcomplainant in its bill, and that it would ings of this contract of lease, held void by pray such relief in its cross bill as might be this court itself and by the supreme court pertinent to the case made by the bill. In for the reasons aforesaid." The Pullman December, 1891, complainant's motion for Company therefore denied that it owed any leave to dismiss ite bill was denied, and the duty to the cross complainant which was endefendant's motion for leave to file a cross forceable at law or equity to return to the bill was granted. Thereupon the cross bill Central Company the property assigned unwas filed, in which the Central Company ac- der the lease or to account for any profits deknowledging, under the decision of this rived under and by reason of any property

court, that the lease in qu tion was void, delivered to it under the agreement [143]*claimed to avail itself of the tenders made in Testimony was taken under these plead

complainant's bill upon the subject of the re- ings, and the case came before the circuit turn of its property and compensation for court for final bearing, and that court held that which it was impossible to return, and that the cross complainant made out a case claimed, among other things, that the Pull- for an accounting by the cross defendant for man Company should account for all the the value of the property when received, toprofits which it had derived since the making gether with its earnings since, less the of the lease by the use of the property trans- amount paid as rent. The court therefore ferred to it under the agreement, and that referred it to a master for the purpose of asthe amount found due should be paid to the certaining the facts, with directions to report Central Company, and that the Pullman within the time named in the order of refer. Company should be adjudged to be a trustee ence. Under this order testimony was taken for the Central Company of all the contracts and the master reported in favor of the Cen. for transportation, whether original, new or tral Company, and the exceptions filed havrenewals, held by the Pullman Company ing been overruled, judgment was entered in with railroad companies with which there favor of the Central Company for the sum of were contracts of transportation with the $4,235,044, together with costs. From this Central Company at the time of the making judgment the Pullman Company appealed of the lease in February, 1870, and that the directly to this court. It also appealed to Pullman Company should be adjudged to the circuit court of appeals. The case was pay the Central Company all such sums as there argued upon a motion to dismiss the should be due to it by the Pullman Company appeal, and the motion denied, and the furas such trustee, and that defendant should ther argument was postponed until some disin the future from time to time account for position was made of the appeal taken di. the sums which should be due by reason of rectly to this court. 39 U. S. App. 307. A future operations under those contracts. motion has also been made to this court to It also prayed for a discovery and an ac- dismiss the appeal, and thereupon an applicacounting by the Pullman Company of its use tion was made to us for a writ of certiorari and disposition of the property turned over to the circuit court of appeals for the third to it by the Central Company.

circuit, and on account of the peculiar cir. To this cross bill the Pullman Company cumstances it was granted, and the record filled three demurrers, the first being a gen- has been returned to this court by virtue of eral demurrer on the ground that the cross that writ. bill was filed contrary to the practice of the court, and also that it appeared that the M88re. Edward S. Isham, Joseph H. court had no jurisdiction of the case; the seco Choate, A. H. Wintersteen, and Robert T. ond demurrer relatei. to the portions of the Lincoln for appellant. cross bill praying that the cross defendant Me-878. Frank P. Prichard and John might be regarded as a trustee and decreed G. Johnson for appellee. to account accordingly; the third demurrer related to that part of the cross bill which Mr. Justice Peckham delivered the opinasked for an account of profits since the ion of the court: making of the lease and for future profits. The motion to dismiss the appeal in this

The demurrers were overruled with leave to case is now before the court. present the questions on final hearing, and Counsel for the Pullman Company took the Pullman Company then answered the the appeal directly from the circuit court to crosu bill. Among other things it set up this court on the theory that the case in. that the agreement in question was void, volved the construction or application of "and that being null and void between the the Constitutio:1 of the United States, beparties hereto because of such character of cause of the holding of the court below that the agreement, it cannot be made the lawful I the cause of action alleged by the Central

Company in its cross bill was under the cir- | the impossibility of returning a large portion cumstances a proper subject of equitable cog- of the property which it had received; it an nizance, and counsel claimed it was really nounced its willingness to make substantial nothing but a legal cause of action in regard performance of its contract contained in the to which the cross defendant was entitled to lease, and it asked the court to aid it therein a trial by jury under the Constitution of the by decreeing exactly what it should do for United States. There being room for doubt the purpose of carrying out equitably and in regard to the soundness of such conten- fairly its obligations incident to its termination, the counsel also took an appeal to the tion of the lease under the clause above mencircuit court of appeals, and we think that tioned. The other theory rested upon what by this action he did not waive any right of was a substantial allegation of the invalidity[147, appeal which he would otherwise have had. of the lease as having been made without auWhichever route may be the correct one, thority of law, and therefore in violation of either directly from the circuit court or the corporate duties of the Central Company, through the circuit court of appeals, it is un- and on that account not enforceable against necessary to decide, because the case is now the Pullman Company beyond the obligation properly before us either by appeal or by the of the latter company to make return of just writ of certiorari; and we therefore proceed compensation for the property demised. Upto determine it upon the merits. on that theory the bill asked, not that the court should set aside or cancel the lease, but that it should aid the parties by decreeing just what relief should be given by the complainant to the lessor in the execution of its duty to make some compensation for the property it received and which it stated its willingness to make, and to that end, that an accounting might be had and the amount ascertained that should be paid to the Central Company in discharge of the obligations of the complainant in that behalf. Thus the Pullman Company came into a court of equity and in substance alleged that the lease had been terminated by it under the eighth clause, and it also alleged that the lease was void as ultra vires, and in either event it tendered such relief as the court might think was proper and fair under the circumstances.

The Pullman Company, complainant in the original suit, insists that it had the right to discontinue that suit at its own cost before any decree was obtained therein, and the refusal of the court below to grant an order of discontinuance upon its application is the first ground of objection to the decree herein. The general proposition is true that a com[146]plainant in an equity *suit may dismiss his bill at any time before the hearing, but to this general proposition there are some well recognized exceptions. Leave to dismiss a bill is not granted where, beyond the incidental annoyance of a second litigation upon the subject-matter, such action would be manifestly prejudicial to the defendant. The subject is treated of in City of Detroit v. Detroit City Railway Company, in an opinion by the circuit judge, and reported in 55 Fed. Rep. 569, where many of the authorities are collected, and the rule is stated substantially as above. The rule is also referred to in Chicago & Alton Railroad Company v. Union Rolling Mill Company, 109 U. S. 702 [27: 1081].

From these cases we gather that there must be some plain, legal prejudice to defendant to authorize a denial of the motion to discontinue; such prejudice must be other than the mere prospect of future litigation rendered possible by the discontinuance. If the defendants have acquired some rights which might be lost or rendered less efficient by the discontinuance, then the court, in the exercise of a sound discretion, may deny the application. Stevens v. The Railroads, 4 Fed. Rep. 97, 105. Unless there is an obvious violation of a fundamental rule of a court of equity or an abuse of the discretion of the court, the decision of a motion for leave to discontinue will not be reviewed here.

Upon an examination of the facts relating to the motion, we think the circuit court was right, in the exercise of its discretion, in denying the same. The original bill was framed really on two theories: One, that by reason of an election male under the eighth clause in the lease, the Pullman Company had terminated the lease, and it was therefore bound under its provisions to return the property which it had received from the Central Company. It stated in its bill

A large amount of proof had been taken under the issues made in this original bill and the answer thereto, and before the case was concluded the decision of this court was made in which the lease was declared to be void. The only obligation left under the original bill of complainant after the decision of this court was the obligation to return such portion of the property received by it as the court should determine to be right, or to make some compensation to the Centrai Company for the same. And this obligation it had offered in the original bill to carry out.

The Pullman Company had also obtained an injunction in the original suit, restraining the Central Company from commencing further legal proceedings to recover rent under the lease, and after obtaining this injunction and taking the testimony relating to the subject-matter of the original bill, the complainant should not be permitted under these circumstances to dismiss that bill and thus withdraw the whole case from the jurisdiction of the court, and thereby blot out its *tenders of[148] relief contained in its original bill grounded, among others, upon the allegation that the lease was void, and asking the aid of the court to decree the precise terms upon which its obligations to the Central Company might be fulfilled.

The denial of the motion was made in connection with the application of the Central Company to file a cross bill in which it would

seek to avail itself of the tenders made by the because in unreasonable restraint of trade, Pullman Company in the original bill. Such and werefore contrary to public policy. Lo an application for leave to file a cross bill making the lease the lessor was certainly me seeking affirmative relief, while at the same much in fault as the lessee. It was argued time availing itself of those tenders of relief on the part of the Central Company that even made by the original coinplainants, would if the contract sued on were void, yet that furnish additional ground for the exercise of having been fully performed on the part of the discretion of the court in refusing to the lessor and the benefits of it received by grant the application for leave to discontinue the lessee for the period covered by the dec. We think there was no error committed by laration in that case, the defendant should the court below in refusing the leave asked be estopped from setting up the invalidity for.

of the contract as a defense to the action to The further objection is made by the coun. recover compensation for that period. But sel for the Pullman Company that it was er. it was answered that this argument, though ror to allow the cross bill to be filed in this sustained by the decisions in some of the case. Counsel for the Puiiman Company as states, finds no support in the judgments of sert that the cause of action for a return of this court, and cases in this court were cited the property is a purely legal one of which a in which such recoveries were denied. court of equity has no jurisdiction, and that It is true that courts in different states it can acquire none simply by the filing of a have allowed a recovery in such cases, among cross bill. Whatever may be the original the latest of which is the case of Bath Gas character of the liability of the Pullman Com. Light Company v. Claffy, 151 N. Y. 24 [36 pany to return or make compensation for the L. R. A. 664), where Chief *Judge Andrews of[150 property, we are of opinion that under the the court of appeals examines the various facts above set forth it cannot object to the cases, and that court concurred with him in filing of the cross bill, or to the determina permitting a recovery of rent upon a voic tion of the amount of its liability by a court lease where the lessee had enjoyed the benoof equity. It had itself voluntarily appealed fits of the possession of the property of the to the jurisdiction of such a court for the pur- lessor during the time for which the recovery pose of obtaining its aid in decreeing the of rent was sought. terms upon which its obligations to the Cen- But in the case of this lease, now before tral Company might be fulfilled and the lease the court, a recovery of the rent due thereterminated, either under the eighth clause in under was denied the lessor, although the the lease or because of its invalidity as being lessee had enjoyed the possession of the propultra vires. Having thus appealed to equity erty in accordance with the terms of the for its aid and the lease having been conclu- lease. It was said (page 60 of the report in 139 sively -letermined to have been void, we think U. S. [35:69]): "The courts, while refus. it was within the fair discretion of the court ing to maintain any action upon the unlawful to retain jurisdiction of the cause and of the contract, have always striven to do justice original complainant, and to permit the Aling between the parties so far as could be dono of a cross bill in which the cross complainant consistently with adherence to law, by per

might seek affirmative relief, and at the same mitting property or money parted with on 149 time avail *itself of the tenders made by the the faith of the unlawful contract to be reromplainant in its original bill.

covered back or compensation to be made for The facts which were set up in the cross bill it. In such case, however, the action is not e'losely affected one of the theories upon maintained upon the unlawful contract nor which the original bill was filed, viz., the in according to its terms, but on an implied validity of the lease. They were relevant to contract of the defendant to return, or fail. the matters in issue in the original suit, and ing to do that, to make compensation for the in seeking affirmative relief the cross com- property or money which it had no right to plainant is but amplifying and making clearer retain. To maintain such an action was not the foundations for the intervention of equity to affirm, but disaffirm, the unlawful con. which had been appealed to by the Pullman tract." And the opinion of the court ended Company, and the continued intervention of with the statement that, "Whether this which would greatly speed a final termination plaintiff could maintain any action against of all matters for litigation between the par- this defendant, in the nature of a quantum ties The court below did not err in permit- meruit, or otherwise, independently of the ting the cross bill to be filed.

contract, need not be considered, because it This brings us to a discussion of the prin is not presented by this record and has not ciples upon which a recovery in this case been argued. This action, according to tho should be founded. The so-called lease men. declaration and evidence, was brought and tioned in this case has been already pro- prosecutell for the single purpose of recovernounced illegal and void by this court. 139 ing sums which the defendant had agreed to U. 8. 24 (35:55). The contract or lease was pay by the unlawful contract, and which, held to be unlawful and void, because it was for the reasons and upon the authorities beyond the powers conferred upon the Cen- above stated, the defendant was not liablo tral Company by the legislature, and because for.” it involved an abandonment by that company The principle is not new; but, on the conof its duty to the public. It was added that trary, it has been frequently announced, there was strong ground also for holding that conimencing in cases considerably over a hunthe contract between the parties was void Idred years old. It was said by Lord Mang171 U. S. U. S., BOOK 43.

113

[ocr errors]
[ocr errors]

field in Holman v. Johnson, 1 Cowp. 341, decided in 1775, that "the objection that a contract is immoral or illegal as between the plaintiff and defendant sounds at all times very ill in the mouth of the defendant. It is [151]not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this: Ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.'

The cases upholding this doctrine are numerous and emphatic. Indeed, there is really no dispute concerning it, but the matter of controversy in this case is as to the extent to which the doctrine should be applied to the facts herein. Many of the cases are re: ferred to and commented upon in the opinion delivered in the case in 139 U. S. 24 [35: 55], already cited. The right to a recovery of the property transferred under an illegal contract is founded upon the implied promise to return or make compensation for it. For illustrations of the general doctrine as applied to particular facts we refer in the margin to a few of the multitude of cases upon the subject.†

or paid for. The former is impossible. The
property has substantially disappeared. It
has become incorporated with the business
and property of the plaintiff, and cannot be
separated. Compensation must therefore be
made. What, then, is the measure of com-
pensation? Clearly, we think, the value of
the property when received, together with
its earnings since, less the amount paid as
rent. In ascertaining the value the annual
rental may be considered, but it does not af-
ford a conclusive nor an entirely safe measure
of value because the unlawful consideration
(that the Central Company would abstain
from exercising its franchises) entered into it.
For the same reason the earnings cannot be
measured by the rent. The value of the
property and earnings must be ascertained
from a careful examination of the property,
the business. and its earnings at the time
they passed into plaintiff's hands and subse-
quently. It is not their value to the plain-
tiff we want, but to the defendant; in effect,
what is lost by parting with them. The
value of both property and earnings may
have been worth more to the plaintiff with
the business united, but this cannot be con-
sidered."

Acting under these directions of the court,
the master in his opinion said:

"Passing to the consideration of the main ex-question raised in the present reference, viz., what the Central Transportation Company lost by the transfer of its property to the Pullman *Company, the measure of damages[153] as determined by the court requires the mas

"(1) What was the value to the Central Transportation Company in 1870 of the property transferred?

"(2) What was earned by the Pullman Company between January 1, 1870, and January 1, 1885, from the use of the property transferred?

They are substantially unanimous in pressing the view that in no way and in no channels, directly or indirectly, will the courts allow an action to be maintained for the recovery of property delivered under an illegal contract where, in order to maintain such re-ter to ascertain: covery, it is necessary to have recourse to that contract. The right of recovery must rest upon a disaffirmance of the contract, and it is permitted only because of the desire of courts to do justice as far as possible to the party who has made payment or delivered property under a void agreement, and which in justice he ought to recover. But courts [152]will not in such endeavor permit *any recovery which will weaken the rule founded upon the principles of public policy already noticed. We may now examine the record herein and learn the grounds for the recovery which has been permitted, and determine therefrom whether the judgment in favor of the Central Company should be in all things affirmed or if not, then how far the liability of the cross defendant extends, and, if possible. what should be the amount of the judgment against it.

In referring the case to the master for the purpose of taking the account between the parties the learned district judge stated the principle upon which the liability of the cross defendant rested. He said:

"(3) The difference between the amount so received by the Pullman Company and the rental paid by it to the Central Transporiation Company for the above period.

"(4) The total amount to be paid by the Pullman Company, as of January 1, 1885, deduced as above, together with interest thereon from January 1, 1885, to date of final decree.".

The master proceeded to determine the value in 1870 of the property then transferred. In ascertaining it he said:

"The value of the stock on the street is a positive indication of the estimate placed on the property by the public. That it is not entirely a satisfactory measure of value must be conceded, but in the judgment of the master, supported as it is by the best inde"The property must therefore be returned pendent estimate that the evidence affords, Coppell v. Hall, 7 Wall. 542 [19:244]; Con- | Insurance Company v. Caldwell, 3 Wend. 296; gress & E. Spring Company v. Knowlton, 103 Atcheson v. Mallon, 43 N. Y. 147 [3 Am. Rep. U. S. 49 [26:347]; Logan County Nat. Bank v.678]; Leonard v. Poole, 114 N. Y. 371 [4 L. R. Townsend, 139 U. S. 67 [35:107]; St. Louis, V. A. 728]; Spell v. Dwight, 120 Mass. 9: Davis v. &T. H. Railroad Company v. Terre Haute & Old Colony Railroad Co. 131 Mass. 258 [41 Am. I. Railroad Company, 145 U. S. 393, at 408, 409 Rep. 221]; Holt v. Green. 73 Pa. 198 [13 Am. [36:748, 754, 755]; Manchester & L. Railroad Rep. 7371; Johnson v. Hulings, 103 Pa. 498 [49 Company v. Concord Railroad Corp. 66 N. H. Am. Rep. 131]; Thomson v. Thomson, 7 Ves. 100 (9 L. R. A. 689, 3 Inters. Com. Rep. 319]; Jr. 470; Sykes v. Beadon, L. R. 11 Ch. Div. 170; White v. Franklin Bank, 22 Pick. 181: Utica Brooks v. Martin, 2 Wall. 70 [17:732).

[ocr errors]

|

it should be accepted as the fairest criterion | man Company, nor were the shares of the
of value."
capital stock of the Central Company, all of
which remained in the hands of its original
owners. The probable prospective capacity
for earnings also enters largely into mar-[155]
ket value, and future possible earnings again
depend to a great extent upon the skill with
which the affairs of the company may be
managed. These considerations, while they
may enhance the value of the shares in the
market, yet do not in fact increase the value
of the actual property itself. They are mat-
ters of opinion upon which persons selling
and buying the stock may have different

"It is the value of the property at the time it should have been returned that the Pull-views. A liability to return or make comman Company should be charged with. In-pensation for property received cannot be asmuch as this value would be difficult of properly extended so as to include other conascertainment by the transportation com-siderations than those of the actual value pany except by reference to the value in of that property. 1870, it was considered proper to direct the In this particular case a consideration eninquiry to the latter date. Presumably the tering into the market value of the shares value increased; the evidence fully justifies must have been the probability or possibility the presumption. If it decreased, the Pull-of renewals of the contracts owned by the man Company could and should have shown company for the use of its cars upon the [154]it. The master's *valuation in 1870 is there- railroads of the companies with which it had fore to be taken as the value in 1885, when such contracts and the possibility of extendthe property should have been returned. The ing its business in the future under contracts payment of this sum, with interest from Jan- with other railroads. These considerations, uary 1, 1885, seems necessary to a just set- while they affect more or less the value in tlement, treating the value of the use and the market of the shares of a corporation, do the rents paid prior to that date as balancing not constitute the value of the property each other. A decree may be prepared ac- which a party impliedly promises to pay for cordingly, dismissing the exceptions and con- upon the agreement being determined void firming the report." under which the property was received. The faith which a purchaser of stock in such a company has in the ability with which the company will be managed, and in the capaci ty of the company to make future earnings, may be well or ill-founded. It is but mat We are of opinion that the court erred in ter of opinion which in itself is not property. the manner of ascertaining the value of the While the value of the property is one of the property transferred by the Central Com-material factors going to make up the marpany. The market value of its stock was ket value of the stock, yet it is plainly not not a proper measure of the value of the the sole one. Mere speculation has not unproperty, and such error resulted in largely commonly been known to exercise a potent increasing the supposed value of the property influence on the market price of stock. The which the cross defendant was under liability capacity to make any future earnings in this case by the lessee arose out of the transThe capital stock of this corporation had fer of the property to it and grew out of the been increased from an original amount of lease itself, and that capacity would there$200,000 in 1862 to $2,200,000 in 1870. Dur-fore be partly founded upon the illegal coning this time it had been doing an increasing tract and could not otherwise exist. and a profitable business, and it was supposed that such business might increase in the future. The market price of the shares of stock in a manufacturing corporation includes more than the mere value of the property owned by it, and whatever is included in that price beyond and outside of the value of its property is a factor which in a case like this cannot be taken into consid-ket value of the shares of this stock as a

Judgment based upon the value of the property at $2,552,000 on the 1st of January, 1885, with interest from that time, was therefore entered, and it amounted, as stated, to the sum of $4,235,044.

to account for.

As the market value of the shares of this
stock was made up to some extent, at least,
of certain factors which the lessee cannot,
under the rules of law, be held responsible for
in this case, it follows that such value cannot
furnish a safe guide in measuring the respon-[156]
sibility of the lessee in an utterly void lease.
The court therefore erred in taking the mar

proper or just measure of the value of the
property transferred.

eration in determining the liability of the
cross defendant. Whatever that something
may be it is not that kind of property which
was delivered or that can be returned or
compensation made in lieu of its return. It
is not property at all within the meaning of
the word as understood in such a case as this.
The value of the franchise for one thing en-
ters into the computation of market value.
This was, of course, not assigned to the Pull-the use of its cars on their roads; (c) patents

We must therefore take the property that
actually was transferred and determine its
value in some other way than by this resort
to the market price of the stock. The prop-
erty transferred consisted (a) of cars, bed-
ding, etc.; (b) contracts which the Central
Company owned with railroad companies for

He accordingly reported the value of the property when received as $58 a share (the par value being $50 per share or a total par value of $2,200,000) making the total market value of the shares $2.552,000, which sum he reported as the value of the property trans

ferred.

When the report came before the court, exceptions having been taken, among other things, to the findings of the value of the property when delivered, the court said:

[ocr errors]
« ForrigeFortsett »