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the action prescribed by the Minnesota , Rep. 558; Allen v. Alleghany Co. 196 U. S. statute to entitle a vendor to cancel had not 458, 49 L. ed. 551, 25 Sup. Ct. Rep. 311; been taken. The trial court held that the Marrow v. Brinkley, 129 U. S. 178, 32 L. ed. North Dakota law governed; that under it 654, 9 Sup. Ct. Rep. 267. the contract had been “duly and legally The argument of the plaintiff in error is canceled;" that the plaintiff in error hav. seemingly based upon the erroneous theory ing shown no right in the land, title should that his rights were foreclosed by the can. be forever quieted in the defendant in er. celation proceeding, which, lacking the req. ror. This decree was affirmed by the su- uisite notice, deprived him of property preme court on appeal. Wilson v. Kryger, without due process. But the action un29 N. D. 28, 149 N. W. 721. We are asked der the cancelation statute was in no sense to review the case on the ground that the a judicial proceeding. It was simply a state court deprived the plaintiff in error statutory condition with which vendors were of property without due process of law and required to comply before they could take impaired the obligation of his contract, in advantage of a default by the vendee. If holding that the cancelation proceeding, of the contract, properly interpreted, or the which the plaintiff in error had no actual law, properly applied, required that this notice, effectively terminated his rights un. condition be performed in Minnesota, steps der the contract.

taken by him under the North Dakota statIt is apparent from the above statement ute would be ineffective. Whether or not that there has been no lack of due process. proper proceedings had been taken to secure The court below, having jurisdiction of the cancelation could be determined only by a buit to quiet title, was called upon to de- court having jurisdiction; and the North termine the conflicting claims to the land. Dakota court had jurisdiction not only over The plaintiff in error voluntarily appeared, the land, but, through the voluntary apand he availed himself of the opportunity pearance of plaintiff in error, also over to urge his claims to equitable ownership him. His rights have been foreclosed, not under the contract of sale. The court de. by the cancelation proceeding under the cided against him, holding the contract no statute, but by a due and regular judicial longer outstanding. The most that the decree which was based upon the finding plaintiff in error can say is that the state that a default had occurred, of which the court made a mistaken application of doc vendor was entitled to take advantage, hav. trines of the conflict of laws in deciding that ing complied with the proper law. If the the cancelation of a land contract is gov- plaintiff in error had not submitted himself erned by the law of the situs instead of the to the jurisdiction of the court, the decree place of making and performance. But could have determined only the title to the that, being purely a question of local com- land, and would have left him free to as. mon law, is a matter with which this court sert any personal rights he may have had is not concerned. Pennsylvania R. Co. v. under the contract. But, having come into Hughes, 191 U. S. 477, 48 L. ed. 268, 24 court and specifically asked in his cross bill Sup. Ct. Rep. 132; Finney v. Guy, 189 U. that he be declared entitled to the “posses. S. 335, 346, 47 L. ed. 839, 845, 23 Sup. Ct. sion and control of the real estate described such default occurred, and that said con- newspaper published at the capital of this tract will be canceled or terminated, and state for a period of three successive weeks. shall recite in said notice the time when "Par. 7497. Time allowed. Such vendee said cancelation or termination shall take or purchaser, or his assigns, shall have effect, which shall not be less than thirty thirty days after the service of such notice days after the service of such notice. upon him in which to perform the condi

"Par. 7496. Notice, how served.-Such tions or comply with the provisions upon notice shall be served upon the vendee or which the default shall have occurred; and purchaser, or his assigns, in the manner upon such performance, and upon making now provided for the service of summons such payment, together with the costs of in the district court of this state, if such service of such notice, such contract or other person to be served resides within the state. instrument shall be reinstated and shall If such vendee or purchaser, or his assigns, remain in force and effect the same as if as the case may be, resides without the no default had occurred therein. No provi. state or cannot be found therein, of which sion in any contract for the purchase of fact, the return of the sheriff of the county land, or an interest in land, shall be conin which said real estate is situated, that strued to obviate the necessity of giving the such person to be served cannot be found aforesaid notice, and no contract shall ter. in his county, shall be prima facie evidence, minate until such notice is given, any prothen such notice shall be served by the vision in such contract to the contrary notpublication thereof in a weekly newspaper withstanding." within said county; or, if there is no week. The provisions of the Minnesota statute ly newspaper within said county, then in a are substantially to the same effect.

v.

in the complaint herein under a contract of made thereunder. Reversed; judgment of sale,” he cannot now complain if he has trial court affirmed. been concluded altogether in the premises. See same case below, 124 C. C. A. 339, The plaintiff in error relies upon Selover, 206 Fed. 275. B. & Co. v. Walsh, 226 U. S. 112, 57 L. ed. The facts are stated in the opinion. 146, 33 Sup. Ct. Rep. 69. That was a per- Mr. Theron G. Strong for petitioner. sonal action for breach of contract, and not, Messrs. Joseph W. Bailey, Martin W. like the present case, an action merely to Littleton, and Owen N. Brown for respond. determine the title to land; and, as the ent. court found on the facts there involved, that the proper law as to cancelation had been Mr. Justice McReynolds delivered the applied, the case cannot be construed as opinion of the court: holding that an erroneous application there- By an action at law commenced in the of would raise a question of due process. supreme court, Kings county, New York,

The contention based on the contract and subsequently removed to the United clause is equally devoid of merit, for there States circuit court because of diverse citi. has been no subsequent legislation impair. zenship, petitioner, Sim, sought to recover ing the obligation of the contract. Impair- from respondent the amounts paid upon ment by judicial decision does not raise a subscriptions to a syndicate agreement Federal question. *Cross Lake Shooting & which the latter fraudulently induced him Fishing Club v. Louisiana, 224 U. S. 632, and his assignors to make. By stipulation, 56 L. ed. 924, 32 Sup. Ct. Rep. 577.

a jury being waived, the issues were re Judgment affirmed.

ferred to a referee. The reported facts, essential to an understanding of points

now involved, are summarized below. (242 U. S. 131)

While owning the majority stock of JAMES SIM, Petitioner,

United States Iron Company, respondent

and others conceived a scheme to consoli. WILLIAM EDENBORN.

date it with certain coal properties, erect

blast furnaces, engage in smelting and manCOURTS -366(14) FEDERAL COURTS ufacturing iron, etc. He accordingly pre

FOLLOWING DECISION OF STATE COURT,
RESCISSION

RESTORATION OF STATUS pared an agreement, dated April 15, 1902, Quo.

stating generally the ends in view, and in. The Federal Supreme Court, when vited subscriptions. This instrument desig. undertaking to determine rights dependent nated him and two others as "syndicate upon the laws of a state, should follow a managers," and recited there was an opporruling of the highest court of that state tunity to acquire for cash the $1,000,000 that persons induced to subscribe to a capital stock of that company, together with syndieate agreement for the purchase of the capital stock of an existing corporation, to- valuable coal properties, and that the purgether with certain coal properties, through pose was to raise the essential two and a the misleading representations and suppres- half million dollars. It further specified sions of fact of the promoter, whom they that “the syndicate managers hereunder created their agent in the matter, may re- shall have the direction and management scind, upon discovering that he was a ma of the subject-matter of the said syndicate, jority owner of the stock to be purchased, and each subscriber nominates and appoints and recover the amount of their subscrip the syndicate managers his agents and attions, without doing anything more to restore the status quo than to tender the torneys irrevocable, until the termination stock which they had received under the of this agreement, to exercise all the rights agreement.

of the subscribers in and to the properties [Ed. Note. For other cases, see Courts, Cent. proposed to be acquired.” Still other proDig. $ 955; Dec. Dig. 366(14).]

visions conferred upon the managers wido [No. 8.)

discretion and powers of control. Peti.

tioner and his assignors became subscribers Argued May 5, 1915. Reargued October 23, while in entire ignorance of respondent's 1916. Decided December 4, 1916. true position. He represented that it was

proposed to purchase only valuable and N WRIT of Certiorari to the United paying properties; that subscriptions were

States Circuit Court of Appeals for payable in dollars, and not in property; the Second Circuit to review a judgment that he had made a subscription for $500,which reversed a judgment of the District 000, payable in dollars; that the enterprise Court for the Eastern District of New York, was being organized in good faith; that in favor of plaintiff, in a suit to rescind a all, according to their interest, had equal contract for fraud and to recover payments' rights and stood on same basis; that every

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For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

man's dollar was put up against every other, tions involved are of general law, and that

man's dollar; and that there were to be no the state court reached an unwarranted re· special advantages to anyone. In fact, sult, not to be accepted here.

however, he always intended to utilize stock This court has many times considered owned by him in payment of his subscrip- how far Federal tribunals, when undertaktion. The managers changed the company's ing to enforce laws of the states, should name to Sheffield Coal & Iron Company, follow opinions of their courts.

The auincreased the capital to $2,500,000, and thorities were reviewed and rule announced caused it to acquire additional coal proper- in Burgess v. Seligman, 107 U. S. 20, 33– ties. For cash paid to them by syndicate 35, 27 L. ed. 359, 365, 366, 2 Sup. Ct. Rep. members, they delivered an equal amount 10, which declared that, as to doctrines of of stock issued by the corporation. In set commercial law and general jurisprudence, tlement of his subscription (reduced from the former exercise their own judgment, $500,000 to $475,000) respondent surren- "but even in such cases, for the sake of dered the majority stock in United States harmony and to avoid confusion, the Fed. Iron Company, at a valuation of $70 per eral courts will lean towards an agreement share, paid balance in cash, and took new of views with the state courts, if the quescertificates. When he solicited and obtained | tion seems to them balanced with doubt." subscriptions and received payments, he This has been often reaffirmed. Wilson v. knew subscribers were relying upon him Standefer, 184 U. S. 399, 412, 46 L. ed. faithfully to act as their agent. Subse 612, 618, 22 Sup. Ct. Rep. 384; Bienville, quent to the specified transactions peti. Water Supply Co. v. Mobile, 186 U. S. 212, tioner and his assignors discovered re- 220, 46 L. ed. 1132, 1135, 22 Sup. Ct. Rep. spondent's interest, and thereupon promptly 820; Stanly County v. Coler, 190 U. S. 437, elected to rescind their subscriptions, gave 444, 445, 47 L. ed. 1126, 1131, 1132, 23 due notice to the managers, offered to re-Sup. Ct. Rep. 811; Great Southern Fire turn and restore all stock received, and de-Proof Hotel Co. v. Jones, 193 U. S. 532, manded their money.

547, 48 L. ed. 778, 786, 24 Sup. Ct. Rep. Relying on Heckscher v. Edenborn, 203 576; Tampa Waterworks Co. v. Tampa, 199 N. Y. 210, 96 N. E. 441, the referee re- U. S. 241, 243, 244, 50 L. ed. 172–174, 26 ported that Edenborn was liable for amounts Sup. Ct. Rep. 23; Kuhn v. Fairmont Coal paid, with interest, and final judgment Co. 215 U. S. 349, 357–361, 54 L. ed. 228, therefor was duly entered. The circuit (233-235, 30 Sup. Ct. Rep. 140; Ennis Watercourt of appeals declined to follow the state works v. Ennis, 233 U. S. 652, 657, 658, 58 court, and, being of opinion that “it is as L. ed. 1139-1141, 34 Sup. Ct. Rep. 767; condition of rescission that the status quo Moore-Mansfield Constr. Co. v. Electrical shall be restored,” and that no such resto- Installation Co. 234 U. S. 619, 625, 58 L. ration had been offered, reversed the trial ed. 1503, 1505, 34 Sup. Ct. Rep. 941; Lankcourt (124 C. C. A. 339, 206 Fed. 275, 277). ford v. Platte Iron Works Co. 235 U. S. The cause is here upon writ of certiorari. 461, 474, 59 L. ed. 316, 320, 35 Sup. Ct.

Heckscher v. Edenborn arose out of an. Rep. 173. other subscription to the agreement now The conclusions of the court of appeals involved, and the essential facts there and in Heckscher's Case are not in direct conhere are substantially alike. After much Alict with any declared views of this court consideration the court of appeals decided and some expressions in our former opinin favor of plaintiff, Heckscher, holding the ions tend to support them. Veazie v. Wil. agreement was vitiated by fraud because liams, 8 How. 134, 158, 12 L. ed. 1018, Edenborn failed to reveal his interest in the 1028; Andrews v. Hensler, 6 Wall. 254, stock intended to be purchased, and, fur. 258, 18 L. ed. 737, 739; Neblett v. Macfarther, that tender of stock actually received land, 92 U. S. 101, 103-105, 23 L. ed. 471was all the subscriber could do towards | 473. restoring the original position, and consti- Through misleading representations and tuted an adequate preliminary to an action suppression of facts, respondent induced for recovery. The opinion expresses that syndicate subscribers to become parties to court's deliberate conclusion upon the is. an agreement creating him their agent to sues, and is supported by reference to ear. acquire and deal with certain properties, lier decisions of its own and other authori- a position of especial trust and confidence. ties.

His original undisclosed purpose was to Petitioner now contends that the court of obtain their money and appropriate it appeals was correct upon principle, and, toward purchase of something partly owned moreover, that if doubts exist they should by himself. Having led them to intrust be resolved in favor of its opinion. On the their funds to his discretion, he carried out other hand, respondent maintains the ques. | his preconceived plan, and, as a part of it,

§ 285.

caused them to receive an equivalent amount See same case below, 124 C. C. A, 339, of corporate stock. He now seeks to avoid 206 Fed. 275. a judgment, because his own actions have Mr. Theron G. Strong for petitioner. rendered it impossible for him to get back Messrs. Joseph W. Bailey, Martin W. to the beginning point.

Littleton, and Owen N. Brown for respondThis was not a proceeding in equity ad-cnt. dressed to the court's discretion, but a demand at law upon an agent for return of Mr. Justice McReynolds delivered the something improperly received and disposed opinion of the court: of. The defrauded principals tendered back

This cause is similar in all essential reeverything received by them,did all they spects to Sim v. Edenborn, just decided could towards restoring original conditions. [242 U. S. 131, 61 L. ed. 195, 37 Sup. Ct. In such circumstances it is but just and Rep. 36). Accordingly, the Circuit Court of right that any loss should fall on the un. Appeals' action is reversed, and the judgfaithful agent, not on his too-confiding ment of the trial court is affirmed. principals. See Snow v. Alley, 144 Mass. Reversed. 546, 551, 59 Am. Rep. 119, 11 N. E. 764; O'Shea v. Vaughn, 201 Mass. 412, 87 N. E.

(242 U. S. 138) 610; Bigelow, Fr. 430, 431; Whart. Contr.

JOHN G. MCINTYRE, Piff. in Err., We think, in Heckscher v. Edenborn, the

FREDERICK W. KAVANAUGH. Court of Appeals reached a result well supported both by reason and upon authority, PARTNERSHIP C153(1)-INDIVIDUAL REand that the courts below should have fol

SPONSIBILITY FOR FIRM'S TORT.

1. Partners are individually responsilowed it when undertaking to determine ble for torts by the firm when acting withrights depending upon the laws of New in the general scope of its business, whether York. The action of the Circuit Court of they personally participate therein or not. Appeals is accordingly reversed; and the [Ed. Note.-For other cases, see Partnership,

Cent. Dig. $8 274, 276, 277; Dec. Dig. 153(1).) judgment of the trial court is affirmed.

BANKRUPTCY 424 EFFECT OF DIsReversed.

CHARGE-LIABILITY FOR CONVERSION

"WILFUL AND MALICIOUS INJURY TO Mr. Justice McKenna, Mr. Justice Day, PROPERTY." and Mr. Justice Van Devanter dissent,

2. The unauthorized sale by a firm of being of opinion that the questions involved brokers of certificates of stock held by them are of general, not local, law; that there as collateral, and the appropriation of the

avails to their own use, without the knowl. has not been such restoration of the status edge of the owner, is a wilful and malicious quo as is essential to a recovery at law up-injury to property within the meaning of on a rescission; and that, upon the facts the provision of the Bankrupt Act of July specially found by the referee, the decision 1, 1898 (30 Stat. at L. 550, chap. 541), of the Circuit Court of Appeals was right. § 17, as amended by the Act of February 5,

1903 (32 Stat. at L. 798, chap. 487, Comp. Stat. 1913, § 9601), that a discharge in

bankruptcy shall not release the bankrupt (242 U. S. 137)

from liability for wilful and malicious in. THOMAS P. ALDER, Petitioner, juries to the person or property of another.

[Ed. Note.-For other cases, see Bankruptcy, WILLIAM EDENBORN.

Cent. Dig. SS 787, 818; Dec. Dig. 424.

For other definitions, see Words and Phrases,

First and Second Series, Wilful and Malicious This case is governed by the decision in Injury.] Sim v. Edenborn, ante, 36.

[No. 88.]

Argued November 10, 1916. Decided De[No. 9.)

cember 4, 1916. Argued May 5, 1915. Reargued October 23, N ERROR to the Supreme Court of tho 1916. Decided December 4, 1916.

ty of Saratoga, entered pursuant to the O of

N WRIT of Certiorari to the United mandate of the Court of Appeals of that Second Circuit to review a judgment which Appellate Division of the Supreme Court, reversed a judgment of the District Court Third Department, affirming a judgment of for the Eastern District of New York in the Trial Term of the Supreme Court in favor of plaintiff in a suit to rescind a con- favor of plaintiff in an action against a tract for fraud, and to recover payments discharged bankrupt to recover damages for made thereunder. Reversed; judgment of conversion. Affirmed. trial court affirmed.

See same case below, in appellate division, For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

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151 App. Div. 910, 135 N. Y. Supp. 1120;, misappropriation, or defalcation while actin court of appeals, 210 N. Y. 175, 104 N. ing as an officer or in any fiduciary capacE. 135.

ity.” [30 Stat. at L. 550, chap. 541, Comp. The facts are stated in the opinion. Stat. 1913, § 9601.] Mr. Robert H. Patton for plaintiff in This was amended by Act February 5,

1903, so as to read: Mr. Myer Nussbaum for defendant in "A discharge in bankruptcy shall release

a bankrupt from all of his provable debts,

except such as .. (2) are liabilities Mr. Justice McReynolds delivered the for obtaining property by false pretenses opinion of the court:

or false representations, or for wilful and Plaintiff in error was a member of T. A. malicious injuries to the person or propMcIntyre & Company, engaged in business erty of another, or for alimony due or to as brokers. During February, 1908, the become due, or for maintenance or support partnership received certain stock certifi- of wife or child, or for seduction of an cates owned by defendant in error, and un- unmarried female, or for criminal converdertook to hold them as security for his sation; ...or (4) were created by his indebtedness, amounting to less than one fraud, embezzlement, misappropriation, or sixth of their market value. Within a few defalcation while acting as an officer or in weeks, without authority and without his any fiduciary capacity.” [32 Stat. at L. 798, knowledge, they sold the stocks and appro- chap. 487, Comp. Stat. 1913, § 9601.] priated the avails to their own use. Short- The trial court found ly thereafter both firm and its members That on February 5, 1908, McIntyre & were adjudged bankrupts. After his dis- Company by agreement obtained possession charge in bankruptcy this suit was insti- of Kavanaugh's stocks, worth approximatetuted against plaintiff in error, seeking ly $25,000, and held them as security for damages for the wrongful conversion. He his indebtedness, amounting to $3,853.32. set up his discharge and also personal igno- “That almost immediately after taking rance of and nonparticipation in any tor- over said stocks by certificates as aforesaid tious act.

by the said firm of T. A. McIntyre & ComThe trial court held the liability was pany, composed as aforesaid, and for wilful and malicious injury to property mencing on the very next day, said firm of and expressly excluded from release by $T. A. McIntyre & Company (the above17 (2), Bankruptcy Act, as amended in named defendants being members thereof), 1903 (32 Stat. at L. 798, chap. 487, Comp. without any notice to the plaintiff, and Stat. 1913, § 9601), and that the several without his authority, knowledge, or conpartners were liable. A judgment for dam- sent, or demand of any kind upon him, sold ages was affirmed by appellate division (151 and disposed of the identical certificates of App. Div. 910, 135 N. Y. Supp. 1120) anr such stock and scrip so turned over to them court of appeals (210 N. Y. 175, 104 N. E. as aforesaid, and placed the avails thereof 135).

in the bank account of said firm of T. A. That partners are individually responsi- McIntyre & Company to the credit of said ble for torts by a firm when acting within firm. the general scope of its business, whether "That the various stocks aforesaid had they personally participate therein or not, all been disposed of prior to the 18th day we regard as entirely clear. Castle v. Bal. of March, 1908, and that three quarters in lard, 23 How. 172, 16 L. ed. 424; Re Peck, value thereof had been disposed of on or 206 N. Y. 56, 41 L.R.A.(N.S.) 1223, 99 N. prior to February 14th, 1908, or within E. 258, Ann. Cas. 1914A, 798. If, under the nine days after the acquisition of the poscircumstances here presented, the firm in session thereof by defendant's firm as aforeflicted a wilful and malicious injury to said. property, of course, plaintiff in error in- "That the above-named defendants, tocurred liability for that character of wrong. gether with the other members of the said

As originally enacted, § 17 of the Bank- firm of T. A. McIntyre & Company, in disruptcy Act provided :

posing of said stocks aforesaid, without "A discharge in bankruptcy shall release notice to or demand upon the plaintiff, and e bankrupt from all of his provable debts, without his authority, knowledge, or conexcept such as ... (2) are judgments sent, and in depositing the proceeds and in actions for frauds, or obtaining property avails thereof in the bank account to the by false pretenses or false representations, credit of said firm of T. A. McIntyre & or for wilful and malicious injuries to the Company, committed wilful and malicious person or property of another; ... (4) i injury to the property of the plaintiff. were created by his fraud, embezzlement, "That on April 23, 1908, the said firma

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