POST et al. v. BEACON VACUUM PUMP & ELECTRICAL CO. et al., 89 F. 1

PUTNAM, Circuit Judge. The appellants have filed a petition for a rehearing, in which they claim that the conclusions of the court in this case related to matters which had not been argued by either party. Consequently we deemed it proper to direct the filing of briefs in support of the petition, and in reply thereto, and we now deem it also proper to notice in this way the positions taken in them.

With reference to our conclusions as to the effect of the subscriptions to the capital stock of the new corporation, the appellants fail to give full weight to the distinction between equitable estoppel and estoppel at common law.

As the relief asked for might involve fellow shareholders in losses much greater in proportion than the injury sought to be remedied, and as the complainants (now the appellants) are asking an equitable remedy, equity requires a strict application of the rule- that, for a bill of this nature, the complainants should have maintained that consistent position necessary to relieve them against equitable estoppel. This at times amounts, in effect, to laches. In the case at bar it is so strictly analogous to laches that it might well have been so described.

However it may be in some of the state courts, federal courts may consider defenses of this kind when assigned oi’e tenus under a general demurrer, and even sua sponte. This follows from the fact that matters of this character sometimes involve questions of public policy. Badger v. Badger, 2 Wall. 87, 95; Sullivan v. Railroad Co., 94 U. S. 806, 811; Wollensak v. Reiher, 115 U. S. 96, 101, 5 Sup. Ct. 1137; Mackall v. Casilear, 137 U. S. 556, 566, 11 Sup. Ct. 178; Galliher v. Cadwell, 145 U. S. 368, 373, 12 Sup. Ct. 873; Story, Eq. Pl. (10th Ed.) §§ 503, 815, and notes.

The position taken by the appellants with reference to Bule 11 of this court, touching assignments of error on appeals and on writs of error, has no relevancy to the questions before us. That rule has no relation to assignments of grounds of demurrer, and it required no duty of any kind from the appellees. The appellants’ discussion of the effect of their subscriptions to the stock of the new corporation fails to appreciate that they were accomplished facts. Being such, they, of course, override any mere matters of intention on the part of the complainants.

There is a possibility (about which the court cannot now judge) that clear and specific allegations that the subscriptions had not been accepted by the defendants below, or recognized by them, or that they took action which positively annulled them, if there had been such, might have had some favorable effect in behalf of the complainants; but there is nothing of this nature in the bill. The discussion of the appellants with reference to certain theories of equity pleading does not help us, as both their theories and the authorities cited by them are ignored by the federal courts.

It is distinctly held in Wollensak v. Reiher, 115 U. S., at page 101, 5 Sup. Ct. 1137, and Hardt v. Heidweyer, 152 U. S. 547, 558, 14 Sup. Ct. 671, that when a bill alleges matters detrimental to the complainant’s case, which it might have left to be set up in the answer, such allegations, unless explained, may be taken advantage of by demurrer. This follows from the fact that in the federal practice the general replication is the only one, and there are no such special replications as are referred to in the authorities cited by the appellants. The above disposes of the only points which we decided.

But the appellants’ brief refers to what was said by us with reference to their 'various prayers for relief.

As to this, they could not have read our opinion understanding!}', because we referred thereto, not for the purpose of stating, as the appellants seem to suppose, that a bill might not have been framed which would entitle the complainants to relief by way of an account and compensation, but merely as showing that the complainants, by the very form of their bill, had demonstrated That (hey did not object to being put into contractual relations with the new corporation; thus meeting the objection which was the real basis of ihe judgments of the supreme court in Clearwater v. Meredith, 1 Wall. 25, and in Mason v.

Mining Co., 133 U. S. 50, 10 Sup. Ct. 224. The appellants insist that costs are not to be allowed when the bill is disposed of on new grounds of demurrer assigned ore tenus. This is probably a frequent practice in the courts of the first instance.. Story, Eq. Pl. (10th Ed.) § 464. But on this point, as also with reference to what the appellants maintain as to other matters in this connect ion, they have confused the equitable powers and practice of courts of the first instance with those of appellate tribunals.

It does not: follow that, because the appellate court maintains a decree of the court below on grounds other than those assigned by the latter court, the appellees are not entitled to their costs on appeal, especially where, as in the case at bar, the appellate court has not found it necessary to go to the extent of considering' the reasons for which tiie court below decided the case. Non constat, if we had gone to the extent of considering them, wTe should still have found for the appellees. The defendants below filed a general demurrer, and assigned want of equity as one ground thereof.

Equitable estoppel, appearing on the face of the bill, was within the limits of this assignment. Therefore, when the complainants appealed, and sought to reverse the decree below, they took their chances, so far as the matter of costs is concerned, witli regard to that ground of demurrer, although alleged generally. Willi reference to (heir petition for leave (o amend in this court, the appellants must have overlooked the fact that very lately, in Railroad Co. v. Nichols, 85 Fed. 869, 29 C. C.

A. 464, we noticed that the supreme court holds that amendments of the character sought by these complainants cannot be made in an appellate court without the commit of the adverse party. As to their motion for leave to reserve a right to move the court below to allow amendments, this question has come up in this court in the following cases: Watson v. Stevens, 3 C. C. A. 411, 53 Fed. 31, 34, decided Oct. 29, 3892; Smith v. Weeks, 3 C. C. A. 644, 53 Fed. 758. 763, decided Jan. 10, 1893; Woodward v. Machine Co., 11 C. C. A. 353, 63 Fed. 609, 611, decided June 23, 1894; American Bell Tel. Co. v. 17. S., 15 C. C.

A. 569, 68 Fed. 542, 570, decided May 18, 1895; Cash-Carrier Co. v. Martin, 18 C. C. A. 234, 71 Fed. 519, decided Dec. 30, 1895; In re Gamewell Fire-Alarm Tel. Co., 20 C. C. A. 111, 73 Fed. 908, decided April 23, 1896; The Horace B. Parker, 20 C. C. A. 572, 74 Fed. 640, decided May 22, 1896. The decisions may be said not to be uniform in all respecis, as decisions which depend on the exercise of equitable discretion are very apt not to be, and especially so when, in the earlier cases, all tiie practical effects of certain rules are not foreseen.

It however appears from these cases that there is no formal rule, necessary to be complied with, for calling into action the equitable powers of the court in this particular, and that, indeed, it may be exercised at times on the mere suggestion of counsel, in connection with what appears in the record. Nevertheless, no case has gone so far as to grant a petition of this character when the equities in its favor are so weak as they are in the present instance.- The observations made by this court in Cash-Carrier Co. v. Martin, at page 235, 18 C. C. A., and at page 520, 71 Fed., fully meet the case at bar.

The court said that “the distinction must be kept clearly in view between amendments allowable before an appeal, and those for which a cause is to be kept along thereafter.” And the court cited from American Bell Tel. Co. v. U. S., at page 597, 15 C. C.

A., and at page 570, 68 Fed., where it is said, among other things, as follows: “To grant this motion would, under the circumstances, violate all thp rules requiring diligence from parties complainant.” Moreover, in the present case we are dissatisfied, as our opinion shows, with the bill throughout; and to ask us to undertake to determine whether or not it can be so amended as to be of any avail would throw upon us the burden of going over the whole case for the purpose of considering several important questions urged upon us by the defendants below (now the appellees), and not decided, and also of scrutinizing the sufficiency of the allegations of the bill at several points.

But, however this may be, for the court to grant this motion would be merely to permit a continuance of litigation when there are no apparent equities sufficiently strong to justify it. Our opinion on this appeal may have been too positive in its assumption that the bill sets out the best case the complainants could make, and wet have now concluded that it is. equitable to so amend our judgment that the bill shall be dismissed without prejudice. Hyer v. Traction Co., 168 U. S. 471, 481, 18 Sup. Ct. 114, 118. Ordered: The appellants’ petition and motions filed March 7, 1898, are all denied.

The judgment entered January 19, 1898, is revoked, and the following judgment is entered: The decree of the court below is affirmed, with a modification amending it so that the dismissal of the bill shall be without prejudice, — the appellees recover the costs of this court, — and the case is remanded to the circuit court for further proceedings accordingly. Ordered, further, that a mandate issue forthwith.