City of Eau Claire v. Payson

WOODS, Circuit Judge, after making the foregoing statement, delivered the opinion of the court. The objections to the jurisdiction of the court below over the city of Eau Claire as a defendant seem to he insuperable. The demand against the city is a purely legal one, upon the contract made with the water company. The trustee in the deed of trust has no title to that contract, or right to sue for money due upon it, except as assignee of the waterworks company; the assignment being by force of the trust deed,” which in terms conveyed and assigned to the trustee “rents, revenues, income” then owing, or thereafter to be acquired, “and all rights” of the water company “to collect all tolls, rent, and water rates.” The water company, being a corporation of Wisconsin, could not have sued the city upon the contract in a federal court, and the assignee can therefore have no better right to sue in that court. Besides, if the jurisdiction were otherwise unquestioned, there was no necessity for a resort to equity. The assignee of a chose in action, or any cestui que trust, cannot sue in equity merely because his interest is equitable. If it be conceded that the trustee in this case acquired the legal title, and had a right in his own name to sue the city upon the contract, it was a right to sue at law, and not in equity. It is true that tlie bill asks to have declared a lieu upon the fund, hut, under the circumstances, that is not a matter of substance. It is not alleged that the right of the trustee to whatever should be found due from the city for water rentals had been or was disputed. The contrary is apparent. There was in fact no fund subject to the alleged lien, and it is not to be permitted that a right of action at law can be made cognizable in equity by praying equitable relief, which is not essential to the ultimate remedy sought. The opinion in New York Guaranty Co. v. Memphis Water Co., 107 U. S. 205, 2 Sup. Ct. 279, 27 L. Ed. 481, is in point upon both phases of the question. The objection there made that the assignee of the water company could not sue in the circuit court, that company being a citizen of Tennessee, wras declared conclusive if the jurisdiction depended on citizenship alone; and in respect to the jurisdiction in equity, which was recognized as maintainable against “the waterworks themselves, and all the property comprised in the mortgage which is susceptible of actual possession,” the court said; “But the claim against tlie city does not lie in possession, but in contract alone. Tlie contract itself may be subject to sale as part of tlie mortgage assets; but the proceeds of tlie contract, the ihoney alleged to be due from the city to the water company under it, has never been reduced to posses^ sion, and the city of Memphis denies its liability to pay it. In order to reduce to possession the money claimed to be due, and subject it to the control of the court, tlie ordinary mode of enforcing the contract must be resorted to. It may be that the circuit court had the-power to direct such-a proceeding — 556 — to be bad as ancillary to its administration of the mortgage fund; but it must be a proper proceeding, adapted to the nature of the demand. If a promissory note were included in the mortgage fund, and the parties liable upon it should refuse to pay it, the circuit court might probably order the trustees of the mortgage to bring an action on the note; but a bill in equity would hardly be considered a-proper proceeding for enforcing its collection. * * * Whether the contract is or is not a valid one, and, if valid, what are the obligations of the city under it, and the damages for the breach thereof, are pure questions of law, which the city cannot, under ordinary circumstances, be compelled to litigate with any other party than the water company or its legal assigns. If the parties having the legal interest refuse to sue, those having the beneficial interest will be authorized to use their names on giving them proper indemnity against costs. The city has a right to be confronted with those who have the legal interest m the contract, unless they absolutely refuse the use of their names, or special circumstances exist which would prevent or greatly embarrass the prosecution of the suit. It does not lose its right to a trial at law by any pledges or assignments which the water company may make of its interest in the 'contract. Such .pledges or assignments may create equitable rights in regard to that interest, as between the water company and the assignees; but the contract, so far as the city is concerned, remains a matter of legal cognizance. If a merchant should pledge his bills receivable as security for a loan, any equitable rights which arise between him and his pledgee may be adjudged in equity, but the makers and acceptors must be sued thereon at law. And so here, while the equities between the water company as mortgagor and the mortgagees, or those claiming under them (such as the right of redemption, etc.), may be determined by a court of equity, the legal demand against the city on the contract is cognizable at law, and should be prosecuted in the ordinary courts of law, as was done in the action brought in the name of the water company against the city. * * * We have lately decided, after a full consideration of the authorities, that an assignee of a chose in action, on which a complete and adequate remedy exists at law, cannot, merely because his interest is an equitable one, bring a suit in equity for the recovery of his demand. Hayward v. Andrews, 106 U. S. 672, 1 Sup. Ct. 544, 27 L. Ed. 271. He must bring an action at law, in the name of the assignor, to his own use. This is true of all legal demands standing in the name of a trustee, and held for the benefit of cestuis que trustent.” It follows from all this that the court ought not to have undertaken to determine, before a proper action had been brought, whether there was due from the city any sum which ought to be paid over upon the contract. The necessary meaning of the order is that in the opinion of the court it was safe, without determining definitely what was due, to require that two-thirds of the sum demanded be paid at once to the receiver, who by virtue of his appointment represented the trustee and the bondholders. Even in a proper case, without question of the jurisdiction of the court over the party, there could be no warrant for such a proceeding before issue joined and a trial of the rights involved. No fund had been set apart as a trust fund, and, even if there had been, the receiver could claim of it only so much as should be found due upon the contract, and, in the absence of averment of danger to the fund by reason of the insolvency of the city or for other cause, there could be no justification for an order requiring partial payment .before it had been regularly determined whether anything was due. That the order was appealable there should be no serious doubt. To the extent of the payment required, it was essentially a final decree. It was made without jurisdiction over the party affected, com — 557 — pelled the immediate surrender of a large sum of money, and made no provision for its safe-keeping or return in ease a return should be found necessary. It was not ordered into the hands of the receiver to be held for future disposition. If that had been intended, the registry of the court would have been the appropriate depositary. There was no necessity for the order except to supply the receiver with money to he used in the performance of his trust, and that he might so use it seems to have been the purpose of the petition in seeking, and of the court in entering, tiie order. If mere custody of the money was intended, it should have been explicitly so stated. The supreme court has not placed upon the words “final decree,” respecting the right of appeal, a strict and technical sense, but has given them a liberal and reasonable construction. Forgay v. Conrad, 6 How. 201, 12 L. Ed. 404; 4 Notes U. S. Rep. 628. See, also, Potter v. Beal, 2 C. C. A. 60, 5 U. S. App. 49, 50 Fed. 860; Trustees v. Greenough, 105 U. S. 527, 533, 26 L. Ed. 1357; Williams v. Morgan, 111 U. S. 684, 699, 4 Sup. Ct. 038, 28 L. Ed. 559; In re Farmers’ Loan & Trust Co., 129 U. S. 206, 9 Sup. Ct. 265, 32 L. Ed. 656; Stovall v. Banks, 10 Wall. 583, 19 L. Ed. 1036. The order is reversed, and the cause remanded for proceedings not inconsistent with this opinion.