Galdi v. Jones , 141 F.2d 984 ( 1944 )

141 F.2d 984 (1944)

GALDI et al.
v.
JONES et al.

No. 269.

Circuit Court of Appeals, Second Circuit.

April 4, 1944.

Maurice J. Dix and Henry W. Pollock, both of New York City (Vincent P. Dooley, of New Haven, Conn., Robinson & Dooley, of New Haven, Conn., and Isadore Chaplowe, all of New Haven, Conn., of counsel), for plaintiffs.

Henry L. Shepherd, of Hartford, Conn. (Hewes, Prettyman & Awalt, of Hartford, Conn., of counsel), for defendants.

Before CHASE, CLARK, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

1. Smythe was not an indispensable party. If such a suit as this had been brought prior to the dissolution vote, it surely would not have been necessary to join him as a director in order to enable the court to grant complete relief. Sections 3470-3475 of the Connecticut statutes do not so substantially add to the powers of the directors as to call for a different result. To be sure, those statutory provisions gave the directors power, on behalf of the corporation, to sell the corporate assets without the consent of the stockholders. But before the dissolution vote, the directors had that same power, provided the requisite number of stockholders validly consented. The liquidation provisions of the statute merely eliminated the necessity of obtaining that consent. That they refer to the directors as "trustees," when acting in connection with liquidating, does not make the directors such in any real sense. United States v. Krueger, 3 Cir., 121 F.2d 842, 844, certiorari denied 314 U.S. 677, 62 S. Ct. 185, 86 L. Ed. 542. While we find no Connecticut decisions directly in point we have seen none which call for a different conclusion.^[2b]

But even if we otherwise interpreted the Connecticut decisions, we would reach the same result. For, in order to enable a receiver appointed by the federal court to liquidate the corporate assets, it will be necessary merely to restrain the majority of the liquidating directors from interfering with the receiver and to order them to refrain from continuing with their liquidation.^[3] Cf. Vreeland v. Irving, 91 Conn. 272, 99 A. 574. As all the other directors were citizens of Connecticut and before the court, Smythe was, therefore, on that ground, not indispensable. See Consolidated Textile Corp. v. Dickey, 5 Cir., 269 F. 942, 945, 946. 2 Moore, Federal Practice, 2154.

Accordingly, the joinder of Smythe as a defendant and the prayer that he be enjoined should have been regarded, for jurisdictional purposes, as surplusage.^[3a] See F. R. C. P. 54(c).

Finally, the death of Smythe renders the matter academic. For patently diversity of citizenship between plaintiffs and all the remaining defendants now exists.

2. Both the "causes of action" are stockholders' actions within F. R. C. P. 23(b) which is, in effect, merely a continuation of former Equity Rule 27, 28 U.S.C.A. § 723 Appendix. The history of 23(b) makes it plain that the requirements of 23 (a) — as to the existence of a numerous class, adequate representation of the class and the like — do not apply to such actions.^[3b] In holding otherwise, the lower court was in error.^[4]

3. So, too, was it in error in its ruling that plaintiffs' allegation as to ownership of their stock was insufficient. That allegation follows the precise language of Rule 23(b)^[5] and that is enough, at least on a motion to dismiss. If defendants wish to obtain a more definite statement — which, should it, by particularizing, show a substantial non-compliance with 23(b) — they can do so under Rule 12(e)^[6] or, preferably, by interrogatories, deposition or discovery.^[7]

4. The allegations as to the reasons for not making a demand for corporate action before beginning this suit were sufficient. Section 3469 of the Connecticut statutes has no pertinence here, since it bears solely on procedure. Tower-Hill-Connellsville Coke Co. v. Piedmont Coal Co., 4 Cir., 64 F.2d 817, 828, 91 A.L.R. 648, certiorari denied, 290 U.S. 675, 54 S. Ct. 93, 78 L. Ed. 582; cf. Alexander v. Hillman, 296 U.S. 222, 224, 234, 237, 56 S. Ct. 204, 80 L. Ed. 192; Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 43 S. Ct. 454, 67 L. Ed. 763.

5. The foregoing shows that the trial court erred in respect of several of the items concerning which he required plaintiffs to amend in order to avoid dismissal. As to the rest of those items, when the case is again in the district court, the trial judge may well consider it desirable not to require such amendments of the complaint, involving evidentiary details,^[8] but instead to allow the defendants to seek the desired information by other means available under the Rules.^[9]

6. Plaintiffs complain that the trial judge, by an ex parte order, enlarged defendants' time to move or plead; but such an order may be made under F. R. C. P. 6(b) "for cause shown," and it does not adequately appear here that no sufficient cause was shown. Plaintiffs also complain that the defendants' notice of motion was defective bceause it failed to specify that they were bringing the motion under Rule 41; but that was quite unnecessary — the motion itself showed clearly that it was brought not only under different subdivisions of Rule 12, but also under Rule 41(b), and no citation of rules by their respective numbers is required. If plaintiffs were surprised, they should have asked for an adjournment. Other objections made by plaintiffs we need not discuss, since, in the light of our decision, they are academic.

Reversed and remanded.

NOTES

[2b] We have examined the following cases, being all those cited by the lower court, appellant and appellee: Barber v. International Company of Mexico, 73 Conn. 587, 48 A. 758; Cogswell v. Second National Bank, 76 Conn. 252, 56 A. 574; New York, B. & E. Ry. Co. v. Motil, 81 Conn. 466, 71 A. 563; Sheehy v. Barry, 87 Conn. 656, 89 A. 259; De Nunzio v. De Nunzio, 90 Conn. 342, 97 A. 323; Vreeland v. Irving, 91 Conn. 272, 99 A. 574; In re Litchfield County Agricultural Society, 91 Conn. 536, 100 A. 356; Willmann v. Walsh, 96 Conn. 79, 112 A. 804; Reilly v. Antonio Pepe Co., 108 Conn. 436, 143 A. 568; Van Tassel v. Spring Perch, 113 Conn. 636, 155 A. 832; Masterson v. Lenox Realty Co., 127 Conn. 25, 15 A.2d 11.

[3] Vreeland v. Irving, 91 Conn. 272, 99 A. 574.

Section 3475 provides that "when the directors have completed their duties" in liquidating the company, a "majority of them" shall sign and file a certificate to that effect.

[3a] Cf. Walden v. Skinner, 101 U.S. 577, 589, 25 L. Ed. 963; Wood v. Davis, 18 How. 467, 469, 15 L. Ed. 460; Waterman v. Canal-Louisiana Bank, 215 U.S. 33, 45, 30 S. Ct. 10, 54 L. Ed. 80; Drumright v. Texas Sugarland Co., 5 Cir., 16 F.2d 657, 658; Anglo-California Nat. Bank v. Lazard, 9 Cir., 106 F.2d 693, 700.

Compare cases where a complaint in a suit quasi in rem under former § 57 of the Judicial Code, now 28 U.S.C.A. § 118, states the facts necessary to maintain such an action, but also seeks relief in personam against non-residents which cannot be granted unless they enter their general appearance; such a prayer for relief in personam, on a motion to dismiss for want of jurisdiction, has been regarded as surplusage. Thus in Jellenik v. Huron Copper Mining Co., 177 U.S. 1, 20 S. Ct. 559, 44 L. Ed. 647, jurisdiction was sustained where the bill sought relief quasi in rem as to property within the district although the bill prayed (177 U. S. at page 7, 20 S. Ct. 559, 44 L. Ed. 647) that nonresident directors, who were not personally served and who did not enter a general appearance, be restrained from intermeddling with the business of the company and that they be decreed to pay damages for losses occasioned by their wrongful acts. See also Thompson v. Terminal Shares, 8 Cir., 89 F.2d 652, 654; Harvey v. Harvey, 7 Cir., 290 F. 653; Sargent & Co. v. McHarg, 42 S.D. 307, 174 N.W. 742, 743; Clark v. Wells, 203 U.S. 164, 173, 27 S. Ct. 43, 51 L. Ed. 138.

[3b] The Committee's comments on 23 (b) state that it is "Equity Rule 27 * * * with verbal changes." Under that former rule, a single stockholder or a few stockholders could sue without any such showing as is required by F.R.C. P. 23(a). Carter v. Carter Coal Co., 298 U.S. 238, 286, 56 S. Ct. 855, 80 L. Ed. 1160; Ashwander v. T. V. A., 297 U.S. 288, 318, 56 S. Ct. 466, 80 L. Ed. 688. (Cf. Case v. Los Angeles Lumber Co., 308 U.S. 106, 114, 115, 60 S. Ct. 1, 84 L. Ed. 110, as to the smallness of a claim by a creditor objecting to a plan of reorganization.)

[4] That plaintiffs themselves called the second "cause of action" a "class suit" is unimportant.

[5] That such an allegation is necessary, see Gallup v. Caldwell, 3 Cir., 120 F.2d 90; Piccard v. Sperry Corp., 2 Cir., 120 F.2d 328.

[6] See Krouse v. Brevard-Tannin Co., 4 Cir., 249 F. 538, 542; 2 Moore, Federal Practice, 2276.

[7] For a searching criticism of the misuse of Rule 12(e), see 1 Moore, Federal Practice, 1942 Supplement, 634-650.

[8] See F.R.C.P. 8(a); 1 Moore, loc. cit., 438-447, 450-451, 546, 554, and 1942 Supplement, 538, 575-582; Clark, Simplified Pleadings, 2 F.R.D. 456.

[9] See footnote 7.