1 Claim 1 makes mention of the display surface on the back of the box, but says nothing about the front. The invention recognized in our prior decision was the production of two display surfaces by glazing and printing upon only one side of the carton blank. No doubt the mechanical features of the Singer box, as covered by claim 1, make it superior to any other box in the prior art, and the defendant uses it for this reason. Still we think no invention is indicated thereby. The process of folding a blank carton into a box has been a gradual one of improving here and there the mechanical details of the original conception. Nor does it involve invention to print an advertisement on the inside of the cover of such a box. We think claim 1 is invalid for lack of invention, and therefore the decree is modified, and the court below directed to pronounce said claim invalid; costs of this court to the appellant. (243 Fed. 289) 69 CHURCH v. SWETLAND et al. (Circuit Court of Appeals, Second Circuit. June 4, 1917.) No. 260. 1. CANCELLATION OF INSTRUMENTS 37(2) - PLEADING EXCUSES FOR LACHES. Where the complainant, in a suit to avoid transactions on the ground of fraud occurring over three years prior to the filing of the bill, had in the meantime filed other bills for relief in which he did not plead fraud, if he did not know of the fraud when they were filed, and subsequently, discovered it, he should have so alleged. 2. CONTRACTS 270(2) - RESCISSION-TIME FOR RESCISSION. A party loses his right to rescind on the ground of fraud by not availing himself of it within a reasonable time after he discovers it. 3. CONTRACTS 270(2) -TIME FOR RESCISSION-LACHES. A party, by waiting over three years before suing to avoid transactions on the ground of fraud, waived his right to complain thereof, especially where, in previous suits attacking the transactions, he did not suggest that they were in any degree affected with fraud. 4. FRAUD 12-REPRESENTATIONS CONSTITUTING FRAUD-FACTS OR PROMISES. As a rule false representations, to constitute fraud, must relate to some material past or existing fact, and not to mere promises or statements of intention. 5. PRINCIPAL AND SURETY 7-INVALIDITY OF PRINCIPAL'S CONTRACT-RIGHT OF SURETY TO AVOID. Complainant held bonds of the W. Co. as collateral security. S. requested him to loan the bonds to the company to enable it to obtain a loan and save it from insolvency, stating that this would liquidate all its pressing debts, and enable it to continue in business, and that if he made the loan he would take charge of the company, keep it on its feet, and not allow insolvency or bankruptcy proceedings to intervene. Complainant accordingly loaned the bonds to the company to be used as collateral for a loan wherever it might be secured. It was not alleged that any promises were made to complainant with no intention of fulfilling them, but it was alleged that thereafter S. made a loan to the corporation on. the security of such bonds, and promised to make other loans necessary to save it from insolvency or bankruptcy on the same security, and that when the loan was made he secretly and fraudulently intended that the note should be immediately called under a provision thereunder making it due forthwith if bankruptcy proceedings should be instituted, and that shortly thereafter he procured a petition in bankruptcy to be filed and asserted the right to declare the note due. Held that, if the representations made with no intention of performing them constitute fraud, it neverthe less was a fraud on the company, and not on complainant, and gave complainant no right to avoid the loan and recover the bonds, as defenses personal to the principal do not operate in favor of a surety. 6. PLEDGES 25-LosS OF LIEN-TRANSACTIONS BETWEEN THIRD PARTIES. Where a corporation, purchasing all of the stock of another company and all of its assets, assumed its debts and obligations, including notes held by a trust company and secured by bonds loaned to the maker of the notes by plaintiff, an agreement of the purchasing corporation that these bonds should be returned to plaintiff could not affect the right of the trust company to hold them until its debt was paid. 7. PLEDGES 19-DEBTS SECURED-RENEWAL OF NOTE. Where property is pledged to secure a note, the extension or renewal of the note does not, in the absence of a distinct agreement, affect the pledge, but it continues as a valid and effectual security until the debt is paid. For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes 8. PLEDGES 19-DEBTS SECURED-RENEWAL OF NOTE. Where a corporation gave notes with bonds as collateral security, a renewal of the notes by a new corporation, which without consideration took over the assets and assumed the debts and contracts and even the name of the old corporation with slight alteration, did not release the collateral, as the new corporation was the successor of the old company, and the case was not one involving a discharge of an old debtor and an acceptance in its stead of a new debtor not otherwise liable. 9. PLEDGES 38-ASSIGNMENTS OF PLEDGE OR DEBT-RIGHTS OF ASSIGNEE. One to whom the holder of notes secured by collateral assigned the notes and the collateral acquired the same rights in all respects as those which the original holder possessed. 10. ASSIGNMENTS78-RIGHTS OF ASSIGNEE IN COLLATERAL SECURITY. Where a pledgee assigns the principal obligation without assigning the pledge, equity will hold it a trustee of the collateral for the transferee. 11. PLEDGES 38-ASSIGNMENT OF DEBT AND PLEDGE RIGHTS OF ASSIGNEE. That a transferee of notes secured by bonds pledged as collateral knew of an agreement by one assuming the pledgor's debts that the bonds should be returned to plaintiff, who loaned them to the pledgor, did not affect his rights in the collateral. 12. PLEDGES 25-LOSS OF LIEN-TRANSACTIONS BETWEEN THIRD PARTIES. The rights of the original holder of the notes and collateral security would not have been impaired in the slightest degree, even assuming that it was fully informed of such agreement. 13. TRUSTS 343-CONSTRUCTIVE TRUST-WAIVER OF RIGHTS. Where complainant loaned bonds to a corporation which pledged them to S. as security for a note on his promise to make other loans and keep it out of insolvency, if such promise was one upon which complainant individually could rely so that a failure to keep it entitled him to have S. declared a trustee for him in the bonds, he waived such right by assigning his interest and equity in the bonds with full knowledge that bankruptcy proceedings had been instituted. 14. ASSIGNMENTS64-RIGHT TO AVOID-FRAUD. Complainant claimed the right to have S. declared a trustee for him in certain bonds. Without fraud and for a valuable consideration he assigned his interest and equity in the bonds to E. He alleged that S. had so complicated the legal situation and his legal rights that he was led to believe that he would be unable to secure possession of the bonds, and would be defeated if he brought action therefor, and that he was thereby induced to consent to the assignment, but it was not alleged that E. led him into any such belief, and it was expressly stated that he was not charged with any fraud. Held that, even though the general rule that misrepresentations of law do not constitute fraud did not apply, complainant had no right to avoid the assignment, nor were his rights enlarged by the fact that E. obtained the assignment with the intention of transferring the title to S., and did assign to S. the interest acquired. 15. PLEADING (15) - CONCLUSIONS-FRAUD. An allegation that an agreement was procured by fraudulent means and devices, without stating what means and devices were resorted to, was a mere conclusion of law, which must be disregarded, as in pleading fraud the facts relied upon as constituting the fraud must be set out, and not conclusions, and general charges of fraud or that acts were fraudulently committed are without avail, unless accompanied by statements of specific facts amounting to fraud. Appeal from the District Court of the United States for the Southern District of New York. For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes Suit by Alfred W. Church against Horace M. Swetland and others. From a decree dismissing the bill as against certain defendants, complainant appeals. Affirmed. See, also, 233 Fed. 891, 147 С. С. А. 565. The complainant is a citizen of the state of Connecticut. The defendants Swetland and Ellis are citizens of the state of New York and are residents of the Southern district. The defendant Sheppard is also a citizen of the state of New York and a resident of the Southern district, and on March 12, 1912, was appointed receiver, and on November 22, 1912, trustee of Wyckoff, Church & Partridge, Inc., hereinafter called the Wyckoff Company. The Commercial Trust Company of New York City, hereinafter called the Trust Company, is a corporation organized and existing under the laws of the state of New York and is a resident of the Southern district of New York. The complainant and the defendant Swetland were members of the board of directors of the Wyckoff Company. The complainant for some time prior to February 14, 1912, is alleged to have been lawfully and legally in possession of $200,000 of first mortgage bonds which he was holding as collateral security. The bonds were issued by the Wyckoff Company, and were secured by a first mortgage upon long-term leasehold property situated in the city and county of New York, and was valued at $400,000. He was also lawfully and legally in possession of $250,000 of the preferred stock and of $450,000 of the common stock of the Wyckoff Company as collateral security for the payment of $450,000 to him by Clarence F. Wyckoff, the possession being pursuant to an agreement in writing dated April 1, 1909. No part of that sum has ever been paid. The District Judge, on motion, dismissed the bill as against all the defendants except Ellis on the ground that it failed to state a cause of action. As against Ellis the cause of action was remanded to the law side. The transactions complained of in the bill and the relief asked for are stated in the opinion of the court. John M. Shedd and Hector M. Hitchings, both of New York City, solicitors for appellant. Parker, Davis & Wagner, of New York City (Arnold L. Davis and N. Raymond Heater, both of New York City, of counsel), for appellee Swetland. Lemuel E. Quigg, of New York City (George H. D. Foster, of New York City, of counsel), for appellee Commercial Trust Co. Hays, Hershfield & Wolf, of New York City (Henry H. Kaufman, of New York City, of counsel), solicitors for appellee Sheppard. Before COXE, WARD, and ROGERS, Circuit Judges. ROGERS, Circuit Judge (after stating the facts as above). The complainant heretofore filed a bill against the same defendants in the same court, which bill related to the same transactions of which complaint is made in the present suit. We dismissed the bill, after a consideration of its merits in a lengthy opinion, which concludes as follows: "The complainant is wrong in supposing that he is entitled to bring one suit in equity and join all the defendants upon the theory that his separate claims arise from the same transaction, the failure of the bankrupt corporation. His claims do not arise from one transaction, as he asserts, but from a number of separate transactions, and they are not so connected with the failure of the bankrupt as to create 'a common right,' or a community of interest, within the meaning of the rule." 233 Fed. 891, 899, 147 С. С. А. 565, 573. The present bill differs from the former not only in the fact that certain persons who were defendants in that suit are not made defend ants in this one, but that this bill makes specific allegations of fraud, whereas the first bill contained no charges of fraud against any of the parties. While all the transactions complained of in the present bill were included in the former one, certain transactions included in that are omitted from this. The bill covers 48 printed pages instead of 34 pages, which in the former suit sufficed to state the wrongs for which complainant sought relief. It is observed, too, that this is the fourth complaint against the respondents in regard to the transactions herein involved. All the previous complaints were dismissed by the court on motion because they failed to state a cause of action either at law or in equity. For the same reason and on motion the court below has dismissed the present bill, except as against Ellis, the cause of action as to him being remanded to the law side, as before stated. [1, 2] The present bill was not filed until November, 1916. It was then for the first time that complainant sought to avoid on the ground of fraud transactions which took place in February, 1912. No excuse is offered for this delay. It is not alleged that complainant did not know of the fraud at the time he filed the former bills, although if he then knew of the fraud he should have alleged it. If he did not then know of it, but has discovered it since, he should have so stated. For it is a principle of equity that a party loses his right to rescind on the ground of fraud by not availing himself of it within a reasonable time after he discovers it. In Grymes v. Sanders, 93 U. S. 55, 62, 23 L. Ed. 798, the Supreme Court declared that: * "Where a party desires to rescind upon the ground of mistake or fraud, he must, upon the discovery of the facts, at once announce his purpose, and adhere to it. If he be silent, ** he will be held to have waived the objection, and will be conclusively bound by the contract, as if the mistake or fraud had not occurred. He is not permitted to play fast and loose. Delay and vacillation are fatal to the right which had before subsisted." In McLean v. Clapp, 141 U. S. 429, 12 Sup. Ct. 29, 35 L. Ed. 804, these words are quoted approvingly by the court, and it was said that, if the plaintiff in that case had the right to repudiate on the ground of fraud a settlement by which certain notes were surrendered, "it was his duty to do so as soon as advised of all the circumstances justifying such repudiation; and he also must have repudiated it in toto." [3] While this case might be disposed of upon the ground that the complainant by his delay had waived his right to complain of fraud, if fraud in fact existed, and especially in view of the fact that in his previous suits attacking the transactions involved herein his failure to suggest that any of the transactions were in any degree affected with fraud might be deemed a waiver, still we are inclined not to dispose of the case upon a technicality, but to consider it upon its merits. 1. The bill asks that $200,000 of first mortgage bonds which complainant loaned to be used as collateral be delivered up to him by Swetland. If the said bonds have been in any way canceled or discharged or their lien value interfered with or destroyed by and through any act of Swetland's, the bill asks that in such case the complainant may be adjudged to have a just, equitable, and valid first lien against the leasehold property mortgaged to secure their payment. And the bill |