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(273 F.) change, made by the attorney for the purchaser, was disadvantageous to the ostensible purchaser, and is some evidence that the contract was not what it appeared to be, but a mere cover for an agreement to deliver merchandise in the future for the payment of debts existing and to be assumed for over $21,000, and was made solely in order to make the surety liable for the payment of the debt, either by delivery of merchandise or cash. No other satisfactory explanation is made why a creditor, which did not want to buy goods and did not go to Chicago therefor, should voluntarily change the apparent contract from one which would not require the creditor to make an advance payment to one which did.

The trial judge concluded that the contract in question was a mere blind or fraud to conceal the real agreement, and that the form in question was adopted to conceal the real transaction under the guise of a sale in good faith with an advance payment. Its purpose was plain. It was intended to induce a surety to execute a bond, and by its bond become liable for the payment of a debt then due and to be assumed from the Bag Company to the appellant. It was clear to the trial judge, as it is to us, that the purpose of the parties was to exchange this unsecured claim, which the appellant had of $12,000, plus the $9,225 indebtedness of the appellant to the Credit Company, by virtue of the assignment of the claim, into a claim of merchandise, or money if the merchandise was not delivered in 75 days, and to secure it by a bond of a surety company. What took place at the time of the execution of this contract, together with the explanations as disclosed by the record, satisfy us of the correctness of this finding in the lower court. The appellee executed this bond. After its execution, the correspondence between the parties and their course of conduct verifies the conclusion that it was a fraud attempted to be perpetrated to secure payment to the appellant.

But the validity of the decree below is attacked upon the ground that the District Court did not have jurisdiction. It appears that, after a default was made by the Bag Company in carrying out this contract, the appellant sued the Surety Company in the Illinois state court on the bond, together with the Bag Company, and served both defendants. A few days later it sued in the state courts in Georgia. Process was served only on the appellee, because it could not be served upon the Bag Company in that state. Before answer in either suit, the appellee brought a suit in the New York Supreme Court, alleging fraud in obtaining the execution and delivery of this bond, and asking for its cancellation and surrender. Because of diversity of citizenship, the appellant moved the case to the District Court of the United States for the Southern District of New York. The appellant thereupon interposed an answer, alleging that equity had no jurisdiction, because it had an adequate remedy at law, maintaining that, in actions at law pending in the courts of the states of Illinois and Georgia, it could defend upon the ground of fraud. The appellant also pleaded a counterclaim upon a cause of action at law, and claimed breaches against the appellee, and asked for judgment for $21,050. This was the same sum as

claimed by the appellant in the suits in Illinois and Georgia. The prayer for relief was as follows:

"Wherefore defendant demands judgment dismissing the complaint, with costs, and for affirmative judgment against the plaintiff on defendant's counterclaim for the sum of $21,050, with interest thereon from the 14th of December, 1918, with costs."

A reply was interposed by the appellee to the material allegations of the counterclaim and separate defenses thereto were interposed. A motion was made for judgment on the pleadings, which was denied without prejudice to renewal at the trial. Another application was made for a final decree on the pleadings, on the ground that the admissions in the appellant's answer entitled the appellee to the relief sought. In opposition to this motion, the appellant moved for a dismissal on the ground that equity had no jurisdiction, because the appellee had an adequate remedy at law. This motion was denied without prejudice. On the trial, at the close of the appellee's case, the appellant called witnesses and endeavored to establish the allegations of the counterclaim. At no time during the trial was the application to dismiss renewed upon the ground that the appellee had an adequate remedy at law. The court thereupon indicated its determination to decide in favor of the appellee and against the appellant on the facts, and stated that the only question which it desired to have argueu was on the question of law. Thereupon the appellant urged that there was no equitable jurisdiction, for the reason that the appellee had an adequate remedy at law, and the court ruled that, since the counterclaim was interposed and the appellant asked affirmative relief, it had submitted itself to the jurisdiction of a court of equity, and gave a decree against the appellant.

[2-4] A bill in equity does not lie in any case where a plain, adequate, and complete remedy may be had at law. Singer Sewing Machine Co. v. Benedict, 229 U. S. 481, 33 Sup. Ct. 942, 57 L. Ed. 1288. But the objection to such jurisdiction may be waived. We think equity did not have jurisdiction, but for the waiver of the appellant. Pleading its counterclaim in the answer, and thereafter insisting upon it at the trial, and offering proof to sustain it, constituted a waiver. The equity power having been invoked, the right of the defendant to object because of the existence of a legal remedy can be waived. McGowan v. Parish, 237 U. S. 285, 35 Sup. Ct. 543, 59 L. Ed. 955. The appellee stated and proved its right to equitable relief to prevent being harassed by suits on the bond, which was procured through fraud, and while it had an adequate remedy at law in defending any suit which was attempted to be maintained on the bond, still, appellant having consented by its pleas to remain in the equity court, the jurisdiction to try the case was complete. In McGowan v. Parish, 237 U. S. 285, 35 Sup. Ct. 543, 59 L. Ed. 955, the court said:

"But 'a court of equity ought to do justice completely, and not by halves, and a cause once properly in a court of equity for any purpose will ordinarily be retained for all purposes, even though the court is thereby called upon to determine legal rights that otherwise would not be within the range of its authority. Camp v. Boyd, 229 U. S. 530, 531."

(278 F.) The rule was stated in Southern Pacific R. R. v. U. S., 200 U. S. 341, 26 Sup. Ct. 296, 50 L. ed. 507:

"It is undoubtedly true that a suit in equity cannot be maintained when there is a plain, adequate, and complete remedy at law. Such is the mandate of Revised Statutes, $ 723, as well as the general rule in equity. Lewis v. Cocks, 23 Wall. 466; Killian v. Ebbinghaus, 110 U. S. 569; Litchfield v. Ballau, 114 U. S. 190; Allen v. Pullman's Palace Car Company, 139 U. S. 658. It is also true that this objection need not always be raised by some pleading, but may be presented on the hearing, even in the appellate court, and if not suggested by counsel, may be enforced by the court on its own motion. See authorities just cited. But, on the other hand, it is equally true that where the objection that the plaintiff has an adequate remedy at law is not made until the hearing, and the subject matter is of a class over which a court of equity has jurisdiction, the court is not necessarily obliged to entertain it, even though, if taken in limine, it might have been worthy of attention. Wylie v. Coxe, 15 How. 415, 420; Reynes v. Dumont, 130 U. S. 354, 395; Kilborn v. Sunderland, 130 U. S. 505, 514; Brown y. Lake Superior Iron Company, 134 U. S. 530; Insley v. United States, 150 U. S. 512, 515; Perego y. Dodge, 163 U. S. 160, 164; 1 Daniell's Chan. Pl. & Pr. (4th Ed.) p. 555."

At no time did the appellant raise the objection until after it had pleaded its counterclaim, and while a motion to dismiss the bill was made and denied in advance of trial, this was done without any prejudice to a renewal. In place of renewing at the commencement of the trial, the appellant proceeded with the trial, and offered proof of its counterclaim, and asked for judgment. When it observed that judgment on the facts was going against it, then for the first time during the course of the trial it insisted that the appellee had an adequate remedy at law. We think this conduct at the trial was tantamount to invoking the aid of a court of equity to exercise its jurisdiction in this

Offering proof before the court, without a jury, waived any objection to the jurisdiction of the court in equity to try and dispose of the suit. Merchants' Heat & Light Co. v. Clow & Sons, 204 U. S. 286, 27 Sup. Ct. 285, 51 L. Ed. 488. In that case the court said:

"But by setting up its counterclaim the defendant became a plaintiff in its turn, invoked the jurisdiction of the court in the same action and by invoking submitted to it.

There is some difference in decisions as to when a defendant becomes so far an actor as to submit to the jurisdiction, but we are aware of none as to the proposition that when he does become an actor in the proper sense he submits.

As we have said, there is no question at the present day that, by an answer in recoupment, the de fendant makes himself an actor, and, to the extent of his claim, a crossplaintiff in the suit."

[5] But the appellant insists that, because of rule 30 of the new Equity Rules (201 Fed. v, 118 C. C. A. v), he was obliged to plead his counterclaim and offer proof thereof in this action in equity. Rule 30 in part provides:

"The answer must state in short and simple form any counterclaim arising out of the transaction which is the subject-matter of the suit, and may, without cross-bill, set out any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him, and such set-off or counterclaim so set up shall have the same effect as a cross-suit, so as to enable the court to pronounce a final judgment in the same suit both on the original and cross claims."

*

The courts never intended, nor had they the power, to compel a defendant to plead a purely legal cause of action as a counterclaim to a suit in equity, and rule 30 was never so intended. To do so would be in conflict with the Seventh Amendment of the federal Constitution, which provides:

"In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved."

[6] The facts which might constitute a counterclaim can be pleaded in an equity action as a defense or answer by way of cross-suit, and "so as to enable the court to pronounce a final judgment in the same suit, both on the original and cross-bills.” What the appellant did here was voluntarily—not compelled by any rule—to assert a cause of action at law by way of the counterclaim. This conduct was an election to proceed without a jury. Robb v. Vos, 155 U. S. 13, 15 Sup. Ct. 4, 39 L. Ed. 52; A. Klipstein & Co. v. Grant, 141 Fed. 72, 72 C. C. A. 511. As the cause proceeded, the trial judge had it within his power to dismiss appellee's cause of action (if he concluded it was without merit), and could have retained jurisdiction on the questions presented by the proofs as to the counterclaim, and could have rendered judgment on the merits thereof in favor of the appellant or appellee. The issue as to the counterclaim was presented by the reply to it, and the defenses there interposed. Where a party thus proceeds to trial before the court without objection or exception, he voluntarily waives his right to jury. Kearney v. Case, 79 U. S. (12 Wall.) 275, 20 L. Ed. 395; Perego v. Dodge, 163 U. S. 160, 16 Sup. Ct. 971, 41 L. Ed. 113. We think the court below had jurisdiction under the circumstances, and we agree with the conclusions reached below.

Decree affirmed.

CHAMPION SPARK PLUG CO. V. AUTOMOBILE SUNDRIES CO.
(Circuit Court of Appeals, Second Circuit. April 6, 1921.)

No. 142. 1. Principal and agent Om41—Breach by sales agent held to justify refusal

of principal to perform,

Where a sales agent to sell spark plugs in foreign countries breached its contract by selling plugs delivered to it for export in the domestic market, such breach justified its principal in refusing to fill any more orders,

unless the principal had waived the breach. 2. Principal and agent Cw41–Evidence held sufficient to take to the jury

the question whether the principal had waived his agent's breach.

In an action against a manufacturer by agent for sale in foreign countries, for the manufacturer's refusal to fill the agent's orders, evidence of negotiations between the parties and the filling of subsequent orders, after the manufacturer had charged the agent with breach of contract by selling in the domestic market, held sufficient to take to the jury the

question whether the manufacturer had waived the agent's breach. 3. Contracts w316 (1) — “Waiver" of breach must be intentional.

"Waiver" is an intentional abandonment or relinquishment of a known right or advantage, oversight, carelessness, and thoughtlessness being inFor other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(273 F.) sufficient; so that, to establish a waiver of a breach of a contract, there must appear an intention to relinquish the right to take advantage of the breach.

[Ed. Note. For other definitions, see Words and Phrases, First and

Second Series, Waiver.] 4. Contracts w316 (1)-Waiver does not require new consideration.

Waiver of a breach of an existing contract does not require or depend

on a new contract or a new consideration. 5. Contracts 316 (6)-Waiver of breach cannot be recalled.

Waiver of a breach of a contract does not depend on estoppel, and,

once made, cannot be recalled or expunged. 6. Contracts 322 (3)—Waiver of breach may be proved by express decla

rations or by acts.

Waiver of a breach of contract may be proved by an express declaration of the party charged with the waiver, or by acts or language inconsistent

with the purpose to stand on his rights. 7. Contracts fra 323 (1)-Waiver is question for jury, if facts or inferences

are indisputable.

Waiver of breach of contract is a question of law, if resting on an express declaration, or on undisputed acts or language so inconsistent with the purpose to stand on the breach as to leave no opportunity for a reasonable inference to the contrary; but if the acts or declarations relied on are denied, or if the established facts permit reasonable minds to differ as to the inferences from them, it is a question of fact for the

jury. 8. Appeal and error 1001 (1)-Jury's findings on questions supported by

evidence are controlling.

The findings by the jury on questions of fact, which have some evidence

to support them, are controlling. 9. Principal and agent Ew47–Sales agent's contract held to create relation

of principal and agent, as well as seller and buyer.

A contract whereby a manufacturer appointed a dealer as its exclusive sales agent in foreign countries, and provided for sale of its goods to the sales agent at specified prices, creates the relationship of principal and agent, as well as that of seller and buyer, so that the agent owes

the duty of complete fidelity to its principal. 10. Principal and agent Cw47—Sales agency contract held not to cover

rights to brands subsequently acquired.

A contract by a manufacturer, appointing a distributor as its exclusive foreign sales agent for a specified line of spark plugs, does not give the distributor the exclusive agency of other brands of spark plugs, which were acquired by the manufacturer subsequent to the contract, and

were thereafter manufactured under their original trade-names. 11. Principal and agent Om41-Agent's acceptance of commissions on manu

facturer's sale in agent's territory waives manufacturer's breach by such sale.

The breach of a contract giving a distributor exclusive sales agency in foreign countries is waived, where the agent accepts from the manufacturer commissions on sales made by the manufacturer within its

territory. 12. Principal and agent w41–Exclusive sales agent cannot recover lost

profits, if it could have purchased goods in market.

A sales agent cannot recover from the manufacturer, as damages for breach of the agency contract, the profit which the agent would have made on goods ordered of the manufacturer, and which the latter re fused to ship, where the agent could have purchased the same or similar goods in the open market, and thereby have filled its resale contracts, since the agent was bound to minimize the damages. For other cases see same topic & KEY-NUMBER in all Koy-Numbered Digests & Indexen

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