Hitchcock v. Hustace
Hitchcock v. Hustace
Opinion of the Court
OPINION OF THE COURT .BY
The complainants brought a bill in equity, the main allegations of which were as follows: that on or about the 8th day of May, 1899, the respondent corporation was organized with a capital stock of one million dollars divided into fifty thousand shares of the par value of twenty dollars each, that the said shares were purchased by a large number of persons residing in the Hawaiian Islands and elsewhere, and that the complainants became and are stockholders in the corporation; -that the respondents Hustace, Egan and Foster were the promoters of the corporation; “(é) that on or about the 20th day of April, A. D. 1899, and before the incorporation of the said company the said defendants as such promoters held out and proposed to the said plaintiffs and their associates that a corporation
“(5) That the said defendants Frank Hustace, John J. Egan and Erank H. Eoster did unlawfully combine conspire confederate and agree together to cheat and defraud the stockholders of the said Kamaio Sugar Company Limited and the said Kamaio Sugar Company Limited out of the sum of thirty-five thousand ($35,000.00) dollars, and accordingly on the 31st day of May A. D. 1899 and after the receipt of further assessments the said defendants granted bargained sold and con*643 veyed the said lands and premises so purchased by them as aforesaid to the said Kamalo Sugar Company Limited for the sum of sixty thousand ($60,000.00) dollars and did make and execute a deed for the consideration of sixty thousand ($60,-000.00) dollars to the Kamalo Sugar Company Limited which said deed was acknowledged on the 3rd day of June A. D. 1899 and recorded in the said Registry Office on or about the 10th day of June A. D. 1899 to which said deed the plaintiffs crave leave to refer and introduce in evidence hereafter.
“(6) That the said defendants after having entered into said conspiracy to cheat and defraud the Kamalo Sugar Company Limited and the stockholders therein falsely fraudulently and corruptly representing to the said stockholders of the said Kamalo- Sugar Company Limited that they had paid the said H. McCorriston and D. McCorriston the- sum of sixty thousand ($60,000.00) dollars for the said lands and premises [and in accordance therewith they caused to be inserted in the said deed from H. McCorriston and D. McCorriston to- them the said defendants as a consideration for the purchase price of said lands the sum of sixty thousand ($60,000.00) dollars]” (the words in brackets were, on motion of complainants, stricken out after the close of the evidence for failure of proof) “whereas in truth and in fact they had only paid the sum of twenty-five thousand ($25,000.00) dollars for the said lands and premises and by means of the false fraudulent and corrupt statements they obtained from the said Kam'alo Sugar Company Limited the sum of sixty thousand ($60,000.) dollars as the purchase price for the said lands and premises; and the said defendants Frank Hustace, John J. Egan and Frank H. Foster entered into an agreement and arranged that the- said lands and premises so purchased from H. McCorriston and D. McCorriston should be charged to the Kamalo Sugar Company Limited at sixty thousand ($60,000) dollars and it was so charged and entered upon the books of the said corporation and that the surplus of thirty-five thousand ($35,000.00) dollars, should be divided between them the said Frank Hustace, John J. Eg-an and Frank H. Foster and the- said money was so- divided among the said*644 defendants Frank Eustace, John J. Egan and Frank E. Foster. That the said lands and premises so- purchased from the said E. McComstan and D. McCorriston was not worth more than the sum of twenty-five thousand ($25,000.00) dollars and the sum of twenty-five thousand ($25,000.00) dollars is and was more than its market value; that the said plaintiffs and other stockholders believing the statements and representations of the defendants Frank Eustace-, John J. Egan and Frank E. Fosr ter as to the value of said lands and premises and that they had paid the sum of sixty thousand ($60,000) dollars therefor relied thereon and subscribed for the shares of stock now held and owned by them in the said Kamalo Sugar Company Limited.
“(J) That the said defendants Frank Eustace, John J. Egan and Frank E. Foster paid to the said E. McCorriston and D. McCorriston the sum of twenty-five- thousand ($25,000.00) dollars in cash out of the money paid into the treasury of said company by the plaintiffs and other of the stockholders thereof as aforesaid and did also falsely wilfully and corruptly issue and deliver to the said E. McCorriston and D. McCorriston paid up stock of the- par value of twenty thousand ($20,000.00) dollars the property of the said Kamalo Sugar Company Limited which said twenty thousand ($20,000.00) dollars in cash and twenty thousand ($20,000.00) dollars in paid-up stock was the actual amount paid for the said lands and premises so- purchased from the said E. McCorriston and D. McCorriston as aforesaid.
“(8) That the said twenty-thousand ($20,000.00) dollars of paid-up stock so issued and delivered to said E. McCorriston and D. McCorriston as aforesaid was not the property of said defendants Frank Eustace, John J. Egan and Frank E. Foster and they had no lawful right or authority to issue and deliver the said paid-up- stock to the said E. McCorriston and D. Mc-Corriston as aforesaid and they the said defendants wilfully and corruptly and with intent to cheat and defraud the said Kamalo Sugar Company Limited and the- stockholders thereof issued and delivered the said stock secretly well knowing that the-y had no lawful right or authority so to do.”
The prayer was for an injunction to restrain the threatened sale of delinquent stock, “and further that the said defendants Frank Hustace, John J. Egan and Frank H. Foster be declared trustees for the Kamalo Sugar Company, Limited, and that they be ordered by this Honorable Court to pay into' the treasury of the said Kamalo Sugar Company, Limited, the sum of thirty-five thousand ($35,000.00) dollars with interest thereon for the use and benefit of said corporation,” for appointment of a Receiver pendente lite, for the removal of Hustace and Foster from office, “and for such other and further relief in the premises as and under the circumstances of this ease may require and as to your Honor and this Honorable Court may seem meet.”
The respondents in their answers severally denied the truth of the charge, as made in the bill, that they had fraudulently converted the sum of thirty-five thousand ($35,000.00) dollars to their own use and averred the truth to be that prior to the incorporation of the company they held and controlled certain valuable lands, leases and options, that upon such incorporation they conveyed and assigned to the corporation all of such lands, including the MeCorriston lands referred to in the bill, leases and options for the consideration of sixty thousand ($60,000.00) dollars in cash and seven thousand (Y,000) shares of the non-assessable stock of the corporation, and that out of the money and stock last mentioned they paid and transferred to the Me
Hpon this state of the pleadings, the trial was had. After its conclusion, the court orally announced from the bench that it was its finding from the evidence that the three respondents had perpetrated fraud, both actual and contractive, upon the corporation and that judgment would be rendered against them for the sum of thirty-five thousand ($35,000.00) dollar’s fraudulently converted to their own use, further stated that the evidence plainly showed ’that the three respondents had fraudulently converted to their own use one hundred and twenty thousand ($120,000.00) dollars of the paid up- stock of the corporation, and, of its own motion, called upon, counsel to argue the question as to whether or not under the bill as it was originally filed the court had power and authority to render judgment against the respondents for such paid-up stock. After argument, the court ruled that under the bill it had no such power or authority. Counsel for the complainants thereupon asked for and obtained leave to amend the bill by adding the following allegation: “8 (a) that the said defendants Erank Hustace, J. J. Egan and Erank H.' Eoster did unlawfully combine, conspire, confederate and agree together to cheat and defraud the stock-holders of the said Kamalo Sugar Company Limited and the Kamalo1 Sugar Company Limited out of the paid-up stock of the said corporation of the value of one hundred and twenty thousand ($120,000.) dollars and they the said Erank Hustace1, J. J. Egan and Erank H. Eoster did accordingly fraudulently, wilfully and corruptly take and convert the said property and said paid-up stock of the Kamalo Sugar Company Limited of the value of one hundred and twenty thousand ($120,000.) dollar’s to their own use,” and by adding to the prayer, “and further that the said Erank Hustace, John J. Egan and Erank H. Eoster be declared trustees for the said Kamalo Sugar Company, Limited, and that they may be ordered
The order allowing these amendments was dated November 2, 1900, and filed November 8, 1900. On the 5th of the same month a stipulation was filed by counsel allowing respondents five days from November 3rd within which to' file a motion for leave to answer the bill as amended and to introduce evidence under such answer, and on November 8th a motion to that effect was filed, supported by affidavit. On November 10th counsel for the eomplainütnts agreed in wilting “that, with the consent of the court, defendants herein may have until November 30th, 1900, to answer to the amendments to' plaintiffs’ bill of complaint.” Of this agreement the court said: “I cannot approve this stipulation. I do not think that any further or other answer will subserve the ends of equity. The amendment to the bill was allowed so that the allegations might conform to the proof. The opinion of the Court has been rendered though not actually reduced to writing.”
Subsequently, however, the court permitted the respondents to file answers to the bill as amended. In these answers the respondents denied the truth of the charge of fraud contained in the amendment and averred that the allotment of paid-up stock made to them was not made secretly, fraudulently or unlawfully and that the complainants before they became stockholders in the corporation had notice that tire stock had been allotted to the respondents. Respondent Foster also prayed in
Thereafter the respondents offered to introduce evidence in support of the averments contained in their answers to the amendment to the bill, but the court declined to> permit them to introduce such evidence, “for the reason that the entire matter of the conversion of the stock was gone into with as much detail and deliberation as the question of-the conversion of the thirty-five thousand ($35,000.00) dollars was gone into upon the hearing.” After hearing some evidence on the subject of the market value of the stock -at the time of its alleged conversion, the court signed a decree adjudging that the respondents Eustace, Egan and Foster fraudulently converted to their own use the sum of thirty-five thousand ($35,000.00) dollars in cash and six thousand (6,000) shares of the paid-up stock of the corporation and requiring said respondents to pay said sum of money and deliver said stock to the clerk of the Court for the benefit of the corporation, or, in default of such delivery, to pay to the clerk for the benefit of the corporation twenty dollars in cash for every share of stock not so delivered. From this decree the case comes to this court on appeal.
The first question which arises, and the only one thus far argued, is whether or not the court below erred in refusing to receive evidence in support of the respondents’ answers to the amendment to the bill.
The allowance of amendments to pleadings is a matter, perhaps, largely within the discretion of the court. Such amendments should not be allowed, however, except under such cir
The amendment to the bill raised a new and material issue. It was therein for the first time charged that the receipt by the respondents of the one hundred and twenty thousand ($120,-000.00) dollars of stock was, fraudulent and that said stock should, in equity, be returned by them to the corporation. It is not sufficient or correct to say, in support of the ruling excluding the evidence offered, that the amendment introduced a change in the value, merely, of the property alleged to have been fraudulently converted. The amendment not only charged a conversion of different property but also charged a conversion by fraud other than that specified with reference to the thirty-five thousand ($35,000.00) dollars. An entirely new and distinct issue is presented by the amendments to' the pleadings. Nor is it sufficient or correct to say that all the matters involved in the amendments were fully investigated at the trial" and that evidence was adduced thereon and that the respondents had an opportunity at that time to present their whole defense. While some evidence was adduced on the subject of the receipt by the respondents of the sixty thousand ($60,000.00) dollars in cash and seven thousand (1,000) shares of stock, still that subject was entered upon, as in the original answer, only so far as was necessary to rebut the specific charge of fraud originally made. It was not the duty of the respondents to deny or disprove any
Whether or not it is correct practice to entertain, under the circumstances of this case, the motion presented in this Court to remand the cause for the introduction of further evidence, is a question which has not been raised by counsel and which is for the first time suggested in the dissenting opinion. We deem the question immaterial in this case and a decision thereof unnecessary, because the issue of law presented by the motion is one which was preserved and brought up by the general appeal itself and may be considered under that appeal irrespective of the motion. In other words, the specific motion was unnecessary. Nor has it been contended by counsel that this Court is without power to remand the cause for the introduction of further evidence or that it is incorrect or improper practice to hear argument, under the general appeal, upon one only of the questions thereby raised and to determine the same before proceeding to a consideration of the other questions presented. The power to reverse, on appeal, a decree of a Circuit Judge in chambers and to remand for new hearing, either in whole or in part, is specifically conferred upon this Court by Section 1434 of the Civil Laws, the language of which is, in part, “In case of such appeal to the Supreme Court from a decision, judgment, order or decree of a Circuit Judge in Chambers, the Supreme
To the objection that parties should not be permitted to- present their appeals by sections or to- argue and submit for decision but one of the questions involved, the simple answer is that in the case at bar the question argued -and submitted, is, in the natural order of things, preliminary and requires a decision before the other issues involved in the appeal can properly be considered by this Court. Moreover, this Court, for its own convenience, at the time of the argument acquiesced in the course adopted by counsel in presenting • at this time the preliminary question only.
In our opinion, the respondents have not had their day in court as to the new issue raised by the amendments. The decree appealed from is reversed and the case is remanded to the Circuit Judge of the Eirst Judicial Circuit with instructions to receive suck evidence as may be offered under the amendments to the pleadings and for such further proceedings, consistent with the foregoing views, as may be proper.
Dissenting Opinion
DISSENTING OPINION OF
I do not approve of the practice recognized by i;he majority of the court in this cause-. A decree was entered against the
It was urged in support of the- motion that the amendment of the pleadings presented a new issue-; that they offered evidence in support of this issue; that the offer was denied; that in refusing to admit the evidence offered the Circuit Judge committed error.
By the motion the court is asked to single out this one alleged error and segregate it from the- rest of the cause and without considering the appeal as a whole or hearing argument on the merits to do- what the eo-urt is only authorized to do- after a full and complete hearing -of the- cause appealed.
Presumably the object of the appeal was to invoke the power of this court as an appellate tribunal — a court of review. This power is prescribed in section 1434 C. L. and is as follows: “In case- of such appeal to the Supi’eme Court from a decision, judgment, order or decree of a Circuit Court in chambers the Supreme Court shall have power to review, reverse, affirm, modify or remand for new hearing, in chambers, such decision, judgment, -order or decree in whole or in part, and as to any or all of the parties.”
In equity appeals the whole record is before the court for review and ought to be considered together.
This court ought not to be asked to- exercise its power as a reviewing court except after a full and complete hearing of the entire case on its merits.
A practice that permits parties to present their appeal by sections, or in parts, certainly tends to prolong litigation and is reprehensible in many ways even if it can be said to be authorized by statute.
In passing on this preliminary motion I do not feel called npon to express an opinion on the merits of the appeal. I am clearly of the opinion that the motion should have been denied and the respondents pressed to hearing on the merits of their appeal where all of the alleged errors of the trial court could have been presented for review together and the powers of this court exercised strictly in the manner prescribed by law.
Reference
- Full Case Name
- HARVEY R. HITCHCOCK, LAWRENCE H. DEE, HARRY L. EVANS and CHARLES J. FISHEL, on behalf of themselves and all other stockholders in the Kamalo Sugar Company, Limited v. FRANK HUSTACE, JOHN J. EGAN, FRANK H. FOSTER and THE KAMALO SUGAR COMPANY, LIMITED
- Status
- Published