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Coburn v. Cedar Valley Land & Cattle Co., Ltd., 138 U.S. 196 (1891)

Coburn v. Cedar Valley Land & Cattle Company (Limited)

Nos. 139-142

Argued and submitted January 9, 1891

Decided January 26, 1891

138 U.S. 196


A litigation existed between the appellants and the appellee which was embodied in two bills, two cross-bills, their respective answers, and the

other proceedings therein. A correspondence ensued which resulted in a proposition for compromise and settlement on the one side, which was accepted by the other. Subsequently it appeared that the appellee intended and considered the agreement of settlement to embrace a complete relinquishment and discharge of all claims of either party against the other, while the appellants claimed that they were to retain their disputed claims against the appellee. The appellee thereupon filed a petition in each of the causes, disclosing to the court the correspondence and agreement of settlement and praying for a decree that all matters in controversy "had been settled and compromised by the parties and are decreed and adjudged to be finally settled, and ordering that all the cases be dismissed." The court below, after hearing the parties, found that there had been a full compromise and settlement by agreement of the parties, and ordered each of the bills to be dismissed. A motion to vacate these decrees and grant a rehearing was overruled.


(1) That the parties intended to make a full compromise and settlement of all claims and demands on either side, and that the decree of the court below was right, and should be affirmed.

(2) That no objection having been raised, until after decision rendered, to the proceeding by petition instead of by supplemental or cross-bill, the decree should not be vacated or disturbed on that account, especially as the appellants had appeared in answer and opposition to the petitions, and had introduced affidavits to support their contentions.

These cases, as stated in substance by counsel, may be described as follows:

Page 138 U. S. 197

(1) On October 10, 1885, the Cedar Valley Land and Cattle Company, Limited, an English corporation, filed its bill against William N. Ewing and James M. Coburn in the Circuit Court of the United States for the Western District of Missouri alleging that Stewart and others, having ascertained that the defendants were willing, in conjunction with them, to subscribe to the capital stock of the corporation when formed, agreed among themselves to become the promoters of a corporation for the purpose of purchasing a ranch with the cattle and horses thereon, then the property of one Munson, and situated in the State of Texas; that the name of the corporation was to be the Cedar Valley Land and Cattle Company, Limited, and that plaintiff is the identical corporation in contemplation; that the corporation was formed January 7, 1885, and in the preceding December, Stewart, Burnett, Campbell, and Fisher, styling themselves plaintiff's directors and acting as plaintiff's promoters, believing that defendants were willing to undertake and assume the trust in behalf of the proposed corporation, directed and requested defendants to buy the ranch, land, and cattle from Munson for plaintiff at the very lowest terms, and defendants accepted the trust; that on December 31, 1884, defendants, in the name of Ewing, in pursuance thereof, concluded negotiations with Munson for the ranch, and purchased it for plaintiff, and Ewing entered into a written contract with Munson, which is set out at length in the bill; that this contract was made for and in behalf of plaintiff in contemplation of corporate existence, as was the employment of Ewing by the promoters and the contract of purchase, and with the intention that the contract should be adopted by the corporation when formed and inure to its benefit; that said contract was so adopted, and the corporation proceeded to carry the same out, and complied with all the terms and conditions of the contract, including the payment of the sums of money therein provided, being $100,000 remitted December 31, 1884, $140,000 May 5, 1885, and $180,000, June 18, 1885, which moneys were entrusted to the defendants to make such payments, and that Ewing, on the 31st of December, 1884, made a declaration of trust that the $100,000 to be

Page 138 U. S. 198

paid on that day was the property of the plaintiff. Plaintiff further averred that in August, 1885, it learned that in August, 1885, it learned that Coburn and Ewing had secretly agreed with Munson for a commission for selling said property, and had received about $40,000 from him on that account, which was retained out of the moneys remitted, and that defendants agreed to pay Munson for some of his cattle about $18,000 more than he had at first been willing to sell for; and further that defendants, out of the cash sent them by the company with which to pay Munson, had retained the sum of $60,000, and in lieu thereof had conveyed to him a lot and building in Kansas City belonging to them, worth not more than $45,000. The bill prayed for a decree for such amount as defendants might be found to have received, upon an accounting, etc.

The defendants answered, denying that they were promoters of said corporation and alleging that all their agreements and arrangements as to the character in which they should act in the purchase of said ranch property were made with Burnett, one of the persons named as a promoter and director in the bill, and that Burnett knew that the defendants would be paid a commission by Munson, and that the defendants were openly engaged in the business of selling such property for a compensation, and that the services rendered by defendants involved much labor, and were reasonably worth a larger amount than was received. The answer also alleged that plaintiff acquired said ranch for $100,000 less than its actual market value, and that the only connection which defendants had with said corporation was that after it had been organized, Ewing subscribed to its capital stock, pursuant to a contract by which he was appointed its manager for the term of five years.

Exceptions were filed to the sufficiency of this answer, which were referred to a special master for examination and report. This report was made and the exceptions set for hearing. The appeal in this case is No. 139.

(2) On December 8, 1885, Coburn and Ewing filed a cross-bill against the cattle company, by leave, which alleged that they for a number of years had been partners in the business

Page 138 U. S. 199

of selling property as brokers and for a commission, and that at all the times mentioned in the plaintiff's bill, they had the ranch in their charge for the purpose of selling the same under an agreement for a reasonable compensation to be paid them by Munson; that Burnett, knowing this fact, made an agreement with them to procure a purchaser for said property if they would share their commission with him; that afterwards they were directed to Burnett to buy the property upon terms and conditions and at specified prices known to him; that they entered into the contract with Munson pursuant to directions from Burnett, and expended a large amount of time and labor in the transaction, a reasonable compensation for which was alleged to be $50,000, and that some months afterwards, the corporation, having been organized in the meantime, entered into an agreement with Coburn and Ewing that if they would subscribe $100,000 to its capital stock, it would appoint Ewing its manager for the period of five years at a stipulated salary, which proposition was accepted, the sum of $50,000 paid on account of such subscription, and the appointment accordingly made. The cross-bill further alleged that said corporation had attempted to annul the contract so made with Ewing, and without offering to cancel said subscription, or to return any part of the money paid on account thereof, or tendering or offering to pay the reasonable and expected profit arising from said contract, had sought to sequester said stock, and had refused to permit its transfer on its books, and that the market value of said stock was $125,000, and the reasonable and expected profit arising out of said contract was $20,000.

The cross-bill prayed for an answer to certain separate interrogatories directed to matters peculiarly within the knowledge of the corporation, and that upon it appearing to the court that Coburn and Ewing were entitled to be paid a reasonable compensation, and that it was the duty of the corporation to pay the same, the court might decree it to Coburn and Ewing, and that the corporation might be required to pay them the value of their stock less any sum that might be unpaid thereon, and to pay to Ewing the sum of $20,000 on

Page 138 U. S. 200

account of his contemplated profit out of the contract appointing him manager of the corporation, and also for general relief. To this cross-bill the cattle company filed a demurrer. The appeal in this case is No. 142.

(3) On October 6, 1885, Coburn and Ewing filed their bill against the cattle company and George D. Fisher in the Circuit Court of Jackson County, Missouri, which alleged that in March, 1885, Ewing proposed to the defendant company, on behalf and in the name of Coburn and Ewing, to subscribe for 2,000 shares of its capital stock of the par value of $50 each upon the condition that Ewing should be appointed manager of the company for the period of five years; that this proposition was accepted, and Ewing appointed accordingly by the directors of the corporation, and thereupon Coburn and Ewing subscribed for the 2,000 shares and paid $50,000 in full of all assessments or calls which had been made on said stock, and certificates had been issued to them accordingly; that Ewing entered upon the duty of manager and had been continuously employed therein ever since, and that on September 7, 1887, the corporation attempted to cancel and terminate the appointment of Ewing as such manager by written communication, setting forth that, "in consequence of the facts which have come to the knowledge of the board of directors connected with your purchase from Mr. Munson," they had decided to annul his appointment, and that Fiser was authorized to take charge of the company's property, and requested the delivery of the same to him accordingly. The bill also alleged that there were peculiar reasons of fitness, etc., for the employment of Ewing, and that Coburn and Ewing would not have subscribed or taken any shares in the capital stock but for the contract to appoint Ewing manager; that Ewing had faithfully performed all his duties, and had at no time given the company any just cause for terminating his appointment, and that the contract was of great value of Ewing, and would yield him a sum aggregating $20,500 for the unexpired portion thereof. And the bill further alleged that Fisher was undertaking to prevent Ewing from performing his functions as manager, and to take out of his possession

Page 138 U. S. 201

all property in his hands as such without offering to pay or refund the value of the stock to Coburn and Ewing or the reasonable damages accruing to Ewing by reason of the refusal of the company to further perform its contract with him, and without releasing or indemnifying him for certain liabilities he had incurred and for which he was personally liable on account of the company, to all of which compensation, reimbursement, and indemnity Coburn and Ewing alleged themselves entitled before Ewing could be discharged from said appointment and an injunction was prayed accordingly.

This cause was removed to the United States Circuit Court for the Western District of Missouri, and the corporation answered, alleging that no such contract was made for the appointment of Ewing, but that the subscription of Coburn and Ewing to the capital stock was unconditional, and that Ewing was appointed as manager, but as an entirely separate and distinct transaction. It was admitted that said appointment was cancelled and terminated by the notice mentioned in the bill, and the grounds for such action were set forth as resting practically on the same facts alleged in the bill of the company in No. 139. The appeal in this case is No. 140.

(4) On November 23, 1885, the cattle company filed a cross-bill setting forth the alleged employment of Coburn and Ewing on behalf of the intended corporation; the making of the contract with Munson; that Coburn and Ewing had received a commission from Munson secretly; the transactions as to the property in Kansas City, and the alleged overpayment in the purchase of cattle; the cancellation of Ewing's appointment by reason of the premises, and alleging that Ewing had done acts in hostility to the interests of the corporation, which would be imperiled if he were allowed to manage the same. An injunction was prayed restraining Ewing from acting as such manager and in any wise interfering with the property of said corporation. Coburn and Ewing answered, averring substantially the same facts disclosed in their answer in No. 139, their cross-bill in No. 142, and their original bill in No. 140. The application of Coburn and Ewing and of the cattle company for temporary

Page 138 U. S. 202

injunctions came on for hearing in December, 1885, and the circuit court made an order granting the temporary injunction prayed for in the cross-bill of the cattle company. The appeal in this case is No. 141.

The record in No. 141 discloses that upon the cross-bill there was filed an affidavit and exhibits, which showed that a suit had been commenced by Coburn and Ewing against the cattle company in a state court of Texas, and an injunction obtained, which, upon the removal of the cause to the Circuit Court of the United States for the Northern District of Texas, was dissolved by Judge McCormick upon the ground that where it appeared that plaintiffs had been employed to purchase a ranch and cattle, and had secretly received from the seller a commission, and where one of them had afterwards obtained employment from the company as the manager of the ranch and herd without disclosing the facts, the company had good cause for removing him from a position obtained under such circumstances. The opinion is reported in 25 F. 791.

June 19, 1886, the cattle company filed in each of said causes the following "petition for a decree:"

"Now comes the Cedar Valley Land and Cattle Company, Limited, a party to the above-mentioned suits, and petitions as the court to enter an order or decree in each of said cases showing that the matters in controversy therein have all been settled and compromised by the parties, and are decreed and adjudged to be finally settled, and ordering that all the said cases be dismissed, the plaintiff in each to pay costs therein, and that the sureties on the injunction bond given by this petitioner be discharged. And in support of this application the petitioner files herewith true copies of the written correspondence between the parties, embodying their agreement of compromise, and on the hearing of this petition will produce the originals thereof; also affidavit of George Dixon Fisher."

The correspondence was as set forth in the margin. *

Page 138 U. S. 203

The affidavits of Messrs. Fisher, McCrary, and Field were also filed on behalf of appellees.

Page 138 U. S. 204

Fisher stated that about the 29th of April, 1886, he called upon Coburn, and submitted to him the form of a bond to be

Page 138 U. S. 205

given by Coburn and Ewing in pursuance of the terms of the compromise, to bind said firm not to buy up or otherwise

Page 138 U. S. 206

molest any of the range privileges of the company. The form of the bond had been changed by striking out the words "as

Page 138 U. S. 207

part and parcel of the" in the second line, and inserting in place thereof, "in accordance with the terms of our letter of

Page 138 U. S. 208

date February 27, 1886, accepting terms of compromise," and Coburn added the following words: "of all pending litigation."

Page 138 U. S. 209

The first sentence of the proposed bond was therefore amended so as to read as follows:

"That for a good and valuable

Page 138 U. S. 210

consideration, and in accordance with the terms of our letter of date February 27, 1886, accepting terms of compromise

Page 138 U. S. 211

of all pending litigation between us and the Cedar Valley Land and Cattle Company, Limited,"

etc. Affiant added that

Page 138 U. S. 212

he was present as a member of the board of directors of the cattle company when the proposition of compromise was

Page 138 U. S. 213

agreed upon, and that it was intended that the same should be a full and final settlement of all pending litigation between the parties. The original paper referred to was attached.

Mr. McCrary testified that he had principal charge on behalf of the company of the negotiations for compromise and settlement between the parties; that the company and its counsel throughout the negotiations insisted that any settlement made should end the litigation, and the final proposition made by the company February 11th and 12th was not intended to be any departure from this condition, but, on the contrary, was submitted by this affiant as a proposition "to end the litigation," as appears by the letter transmitting the same; that neither he nor the company ever for a moment intended to settle the claims of the company against Coburn and Ewing, leaving their claims against it to be further litigated, and if Coburn and Ewing or their counsel had such an intention, it was unknown to this affiant at the time the settlement was entered into; that as soon as affiant heard an intimation that it might be claimed that the settlement did not cover all the matters in litigation, he wrote Coburn and Ewing the letter of February 27, 1886, which was written the same day the acceptance of the proposition of compromise was received and before any steps were taken on behalf of the company by affiant to carry the same out; that if affiant had then been notified that Coburn and Ewing would insist that only one side of the controversy was settled, he would have tendered back the stock certificate and declined to go on with the compromise, and that, receiving soon after the paper, filed with Mr. Fisher's affidavit, in which Coburn described the proposition accepted as one to settle "all pending litigation," affiant felt free to go on and perfect the compromise, believing that if Coburn and Ewing intended to attempt to reserve any right of action against the company, it must be on some cause of action not involved in the present litigation.

Mr. Field said that he was one of the attorneys of the cattle company, and on the 27th of February, 1886, presented to Mr. Karnes a paper prepared after consultation with his associate counsel, which was destroyed or misplaced by affiant

Page 138 U. S. 214

after Mr. Karnes declined to sign the same; that the principal purpose in presenting such writing was to obtain the speedy and formal discharge of the sureties on the injunction bond, which purpose was explained to Karnes, though such paper did contain stipulations as to dismissing the bills and cross-bills at the costs of each party, respectively, all of which counsel for the cattle company understood was already included in the settlement, and that when such paper was presented to Mr. Karnes, he replied that Mr. Coburn had gone to St. Louis, and that he would make no other agreement of settlement for Coburn and Ewing, but he assured affiant that the sureties on the injunction bond were not to be harmed or disturbed, and affiant dropped the matter, and did not further urge Mr. Karnes' signature to such writing.

On behalf of appellants, the affidavits of Karnes and Coburn were filed. Mr. Karnes stated that on the 27th of February, 1886, Mr. Field brought to his office a statement to the effect that the settlement of that day was to be in full of all claims or demands between the parties, and he distinctly told Mr. Field that such paper would not be signed, but that Coburn and Ewing had settled their matters with the cattle company on the propositions of February 11th and 12th and the unconditional acceptance of these propositions by Coburn and Ewing, and that this settlement would not be supplemented by any further agreement. He further said the letter of acceptance had been prepared with the understanding that the terms of the compromise would be accepted only just in the way they were proposed, and to cover nothing more, and that every letter and paper since, so far as his knowledge extended, had been prepared with the understanding that the settlement of February 27th spoke for itself, and that nothing was to be added thereto or subtracted therefrom. Coburn testified that when the propositions of February 11th and 12th were considered, all previous propositions had been rejected; that the compromise proposed by the company would not have been accepted had it not been supposed that it was left open to Coburn and Ewing to assert any claim they had for services rendered in the purchase of the ranch; that in

Page 138 U. S. 215

the early correspondence, this matter was referred to, but no mention was made in the later correspondence of this compensations, and consequently, to avoid any misunderstanding, the terms proposed were unconditionally accepted; that the letter of Mr. McCrary of February 27, 1886, was received, and submitted to affiant's counsel, who advised him that he had distinctly informed Mr. Field that receipts in full were not to be passed, and that there was therefore no necessity of making any reply to Mr. McCrary's letter, for which reason he did not answer the same; that in every step taken in closing up said compromise, Coburn and Ewing had distinctly refused to sign any receipts in full, or acknowledge any settlement in full, and that in the many receipts passed, language indicating a settlement in full was in each case stricken out, and in lieu thereof it was inserted that the receipt was given on the basis of the letters of February 11th and 12th and the acceptance of February 27th; that affiant had no recollection concerning the interlineation of the paper attached to Fisher's affidavit, but he knew that there was no intention to convey the impression that Coburn and Ewing intended to abandon their claim for services, and that every step taken in the purchase of the ranch was in the utmost good faith, and with strict regard to the interests of the company, and Coburn and Ewing had paid to it more than they ever received from Munson, and had received no compensation whatever for their services in the purchase of the ranch.

A hearing having been had, the court rendered a decree in each of the four cases, finding that there had been by the agreement of the parties a full compromise and settlement of all the matters in controversy in the case, and ordering, in pursuance of the agreement, that each of the bills be dismissed at plaintiffs' costs, to be taxed. The opinion of Judge Brewer will be found in 29 F. 584.

On the same day, Coburn and Ewing moved the court to set aside and vacate the decree entered in each of said causes and to grant them a rehearing, which motions were overruled, the circuit court delivering an opinion reported in 29 F. 586. Thereupon the cases were brought to this Court by appeal.

Page 138 U. S. 216

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