Opinion
No. 44/558.
06-10-1918
FOWLER et al. v. WESTERHOFF BROS. CO. et al.
McDermott & Enright and John M. Enright, all of Jersey City, for complainants. Forster W. Freeman and William B. Gourley, both of Paterson, for defendants.
Bill in equity by George Fowler, individually and as trustee, and another, against the Westerhoff Bros. Company and others. Hearing on bill, etc. Injunctive feature of bill held open for further showing.
McDermott & Enright and John M. Enright, all of Jersey City, for complainants. Forster W. Freeman and William B. Gourley, both of Paterson, for defendants.
LANE, V. C. In 1905 the complainant Thomas S. Napier commenced a suit in the Supreme Court of the state of New York, in equity, against Peter D. Westerhoff, Henry Westerhoff, Harris J. Westerhoff, and Westerhoff Bros. & Napier Company. The suit was removed to the federal court for the southern district of New York. Testimony was concluded some time in 1912; final judgment was rendered, against the plaintiff; this judgment was affirmed by the Circuit Court of Appeals for the Second Circuit; the opinion of the court is in 233 Fed. 398, 147 C. C. A. 334. A judgment for costs against Napier for a sum somewhat less than $3,000 was entered. Subsequent to the judgment, legal title to the Napier stock became vested in George Fowler, trustee. The charge of the plaintiff in the New York proceeding was substantially that, although the business was being conducted in corporate form, the business should be administered as if it was conducted by a partnership. The New York court found that the partnership agreement had not continued after the formation of the corporation. This finding necessarily resulted in a dismissal of the bill. On March 2, 1918, George Fowler, individually and as trustee, and Thomas S. Napier, commenced suit in this court against Westerhoff Bros. Company, a body corporate (the name of the corporation having been changed), Peter D. Westerhoff, Henry Westerhoff, Jacob Westerhoff, and Harris J. Westerhoff. The bill prays for an investigation of the conduct of the business of the corporation, alleges mismanagement upon the part of its directors and officers, prays an accounting from them, alleges an improper withholding of dividends, and asks for a decree directing the directors to declare dividends. It also asks for the appointment of a receiver. Subsequently proceedings were commenced upon the judgment of the federal court in New York. The complainants move for an injunction restraining defendants from proceeding upon their New York judgment until a decree can be obtained in this court, so that wherever sums may be found due complainants from defendants may be offset against the judgment obtained in New York; a counter motion is made by defendantsto stay the pending suit until the judgment in New York is settled by the complainant Napier.
First. The motion of the defendants will be denied. The argument is that the cases are so similar as that the judgment in New York is res adjudicate in the pending suit, and that the pending suit is to all intents and purposes a renewal of the litigation in New York. To what extent the judgment in New York is conclusive upon the issues in the pending suit it is not necessary for me to determine. It is quite apparent that it is not conclusive upon some of the issues presented. No authority has been brought to my attention which would warrant the court in staying the pending suit as prayed for by the defendants.
Second. The defendants have a valid subsisting judgment of the federal court, in equity, of the Southern district of New York, against complainant Napier, and the attempt of complainants is to enjoin proceedings to enforce that judgment until a decree here, which complainants hope will result in their acquiring sufficient moneys to pay the New York judgment. The jurisdiction of this court is not questioned by defendants. That it is not free from doubt will be demonstrated by a consideration of the following cases: McKim v. Voorhies, 7 Cranch, 279, 3 L. Ed. 343; U. S. ex rel. Riggs v. Board of Supervisors of Johnson County, 6 Wall. 166, 18 L. Ed. 768, at page 776; Davenport v. Lord, 9 Wall. 409, 19 L. Ed. 704, at page 707; Central National Bank v. Stevens, 169 U. S. 432, 18 Sup. Ct. 403, 42 L. Ed. 807, at page 818; Marshall v. Holmes, 141 U. S. 589, 12 Sup. Ct. 62, 35 L. Ed. 870; Wonderly v. Lafayette, 150 Mo. 635, 51 S. W. 745, 45 L R. A. 386, 73 Am. St. Rep. 474.
Complainants rely upon the analogy of the present application to applications to courts of law to offset judgments and to stay proceedings upon executions until suits between the same parties in the same or other jurisdictions may ripen into judgments, so that they may he offset, and they cite Hendrickson v. Brown, 39 N. J. Law, 239, Blackburn v. Reilly, 48 N. J. Law, 82, 2 Atl. 817, and Phillips v. Mackay, 54 N. J. Law, 319, 23 Atl. 941. But Justice Garrison, in Phillips v. Mackay, said:
"The practice requires that the application be made in the court whose judgment is against the party applying for the set-off; but it has never been required that the court in which the remedy is sought should have control over the judgment used as a set-off."
And in Brookfield v. Hughson, 44 N. J. Law, 285, Justice Reed, speaking for the Supreme Court, held that the motion should be made in the court where the judgment against the moving party is obtained.
Irrespective of the power of the court, the application is one that is always addressed to the sound discretion of the court. It seems to me that this court ought not at the present time attempt to interfere with the proceedings in New York. The complainant may, I think, obtain complete relief, if entitled to any, by application to the New York court. I will permit the injunctive feature of the order to show cause to remain in force until they may have an opportunity to do so. I need hardly say that I express no opinion upon what the action of this court would be if the application were to enjoin the defendants, pending this suit, from assigning or otherwise disposing of the judgment obtained by them in New York, or if the action sought to be enjoined was designed to destroy the basis of this suit by obtaining, through the use of the New York judgment, title to the Napier stock, and it were made to appear that equitable considerations required that, pending the determination of this suit, the title should not be disturbed. These questions are not before me.
Settle order on notice.