Denver City Waterworks Co. v. American Waterworks Co.

' The status of the complainant to move the court on its petition for the relief now sought is questioned in limine upon the ground that it has no interest to protect, and therefore is a mere volunteer. I think it sufficiently appears that the complainant is still the owner or holder of shares of stock in the defendant, the American Waterworks Company, and if so, there can be no question of its right to prosecute this matter. Besides, it is the complainant in the suit in which the receiver .was appointed, and it comes with ill-grace for him to say that the proceeding in which he was so appointed is irregular, because he thus casts a reflection upon his own title. I hold, therefore, that the petitioner may properl}' take the proceeding now pending.

The first ground alleged on behalf of the motion is that there lias already been an adjudication against the receiver on the same question, and this must be true if, as a matter of fact, the remedy now sought in the suit pending in the United States district court is the same sought in the previous Colorado suit. But it is urged that there are new matters alleged in the present suit which were not alleged or dealt with in the first suit. I have-failed to find any such new matter, but if it exists, I do not see how under the rules of law, and the allegations in these pleadings, such new questions can be availed of by the receiver. The rule undoubt*144edly is that it is the duty of one who brings a suit to include in it every cause of action available to him, which is consistent with the general purpose of his bill, and the same rule must, from the nature of things, apply to defences. It is the duty therefore of every defendant to set up and prove every defence which he may have to the claim, and if either complainant or defendant shall omit to allege or prove any available claim or defence;, such claim and such defence are lost to him forever. I had occasion to examine this question in the case of Rosenstein v. Burr, manuscript opinion filed June 14th, 1912. That was a suit to compel the specific performance of a contract to convey lands. Previously, the defendant brought a suit in this court to cancel the contract on two grounds — first, that it had been obtained by fraud, and second, that it was executed in Connecticut on Sunday, and that it was void because violative of the Connecticut Sunday laws. The bill was eventually dismissed, and its prayer denied. In defending the suit for specific performance the answer denied the due execution of the so-called agreement and the tenders of performance charged in the bill. On the hearing other defences were interposed. One was that the agreement relied upon was invalid for lack of assent, and the other was that there was a stipulation that the agreement should not be binding until it should have been made tire subject-matter of a formal document, to be drawn by a scrivener and formally executed. These new defences were rejected upon the ground that they were available to the defendant as weapons of attack and defence in the first suit, and that having neglected to use them thus they were lost to him forever.

In New York Life Insurance Co. v. Bangs, 103 U. S. 780, the facts were that an action at law was brought against the life insurance company on policies of life insurance in which the plaintiff recovered. Subsequently, the company brought suit in equity to set aside the policies on the ground of fraud, to which the former recovery was pleaded as a defence. The court said: “The judgment in the action at law was a bar to this suit. Its recovery concluded all matters which might have been urged as a defence to the policies. A fraudulent purpose in procuring them, subsequently carried into execution, would have been a *145good defence. It was, in fact, originally pleaded and afterwards withdrawn. Its' withdrawal did not authorize a suit in another forum for its establishment against tire demand of the plaintiff. When an action at law is brought upon, a contract, the defendant denying its obligation, either from fraud, payment or release, or any other matter affecting its original validity or subsequent discharge, must present his defence for consideration. A recovery is an answer to all future assertions of the invalidity of the contract by reason of any admissible matter which might have been offered to defeat the action.”

The point is likewise well illustrated by the cases of Fourniquet v. Perkins, 7 How. 160; N. P. R. Co. v. Slaght, 205 U. S. 122; United States v. Cal. & O. Land Co., 192 U. S. 355; Beloit v. Morgan, 7 Wall. 619; Cromwell v. Sac County, 94 U. S. 351, which latter case has been followed in this state in Paterson v. Baker, 51 N. J. Eq. (6 Dick.) 49; Clark Thread Co. v. William Clark Co., 55 N. J. Eq. (10 Dick.) 658; Mercer County Traction Co. v. United Railroads, 64 N. J. Eq. (19 Dick.) 588. This point would seem to be decisive of the status of the domestic receiver and to be sufficient to justify granting the motion. It may well be that in the receiver’s present suit the defendant might plead the former adjudication against him, and it would seem that such a plea, under the authorities above cited, would necessarily prevail. What the practice and procedure on such a plea would be in Colorado we do not know, but it certainly would eventuate in some sort of hearing to determine its validity, and 1 see no reason why the parties should be put to the delay, trouble and expense of such a hearing. The remedy now sought by this motion goes to the root'-of the whole matter and obviates the necessity of further expense and delay. *

In addition to the adverse judgment in the Colorado court there is also an adj udication of distinct weight on the same subject-matter in this court. It appears that application was made here in 1895 for an order permitting or directing the receiver to take proceedings to set aside the foreclosure transaction, which proceedings, of course, must have been brought in Colorado, where the property lies ; that the matter was referred to William H. Corbin, who inquired into it, and béfore whom witnesses were *146sworn.' He made his report to the court; the court refused to make the order sought, which I take to be an adjudication on the exact situation that is now presented.

There are, however, other grounds equally .cogent upon which the decision of this motion may rest. The receiver is an officer of this court; he has certain statutory duties to perform, but he is at all times subject to this court’s jurisdiction. He was. a party to a suit in Colorado in which an injunction was issued against him enjoining him from doing the very thing which he subsequently did. To allow such a proceeding after it has once been brought to the attention of this court is for this court to allow one of its officers to affirmatively violate an injunction order made by a competent court of a sister state and affirmed by its highest court of appeals. There could be no justification for any such action on the part of this court, and it will not permit itself or its officers to be put in a position of antagonism to final decrees made in foreign jurisdictions, thus violating the spirit of the “full faith and credit” clause of the federal constitution, but more especially as the domestic receiver can only obtain admission to the courts, of the foreign state upon the ground of state comity, the extent of which is clearly set forth in National Trust Co. v. Miller 33 N. J. Eq. (6 Stew.) 155; Falk v. Janes, 49 N. J. Eq. (4 Dick.) 484, and Irwin v. Granite State Provident Association, 56 N. J. Eq. (11 Dick.) 244. It is there stated that independent of statutory provision and simply as a matter of comity, the court will extend its aid to the receiver of a foreign corporation for the purpose of enabling him to get possession of property which should in equity be applied in payment of its debts. Such an attempt was made in the Colorado suit. It failed, and I am constrained to hold that upon this point alone the receiver has exhausted his right to appeal to state comity on this question. It may well be that this objection might be urged in the 'present pending suit, but I make the same remark concerning that suggestion that was made in deciding the first point...

Lastly, it is urged that the receiver is not prosecuting his present suit in good faith on behalf of creditors and stockholders, but is merely lending Ms name and authority to a scheme devised *147by Vernier for speculative purposes. The affidavits on this point are meagre and consist principally of innuendo and argument, so that I am unable to say whether the point is well taken in fact or not. If the suit is indeed a mere speculative one, and is being prosecuted as a mere stock jobbing operation, or for the purpose of extorting money, this court ought not to allow its receiver to have any hand in it.

The proceedings in the foreclosure suit which are attacked were wound up and ended nearly twenty years ago, and if the plea of former recovery were not sufficient to oust the jurisdiction, it might be thought that the domestic receiver by his long delay had forfeited all right to take the affirmative action which he has taken in the present suit.

I am, therefore, of the opinion that the domestic receiver should, with all convenient speed, relieve himself of the burden of the prosecution of his present cause of action and cease to be its magister litis. There can be no objection, however, to his assisting any interested parties in procuring someone to take his place, or in changing the form of the suit to meet the necessity of his retirement, and to take such time therefor as may be reasonably necessary, and to this end he should perhaps render all assistance that may be reasonably required to reach the end in view.

' There is one other branch of the motion which has not yet been mentioned. The petitioner seeks to have the domestic receiver file his account and be discharged from the further performance of his trust. It appears that he has never received any assets, and it would seem useless to continue a receivership which is now over twenty years old and which has not yet brought any benefit or advantage to the company’s creditors. When the receiver shall have discharged himself from all duties and obligations in his present pending suit the question of his discharge will then be taken up.