Excelsior Pebble Phosphate Co. v. Brown

SIMONTOX, Circuit Judge (after stating the facts as above). The case comes Itere with numerous assignments of error. They present these questions: First, as to the order made 28d November, 1895, by which a temporary injunction was granted, and a time fixed for hearing a motion for the appointment of a receiver; second, to the bill as amended, and the decree of November 26, 1895, upon the ground that the circuit court of the United States for the district of West Virginia could not take jurisdiction of the cause as amended; nor could it appoint a receiver therein. With regard to the first question: Inasmuch as the complainants in the original bill were citizens and residents of the state of Pennsylvania, and the defendant corporation was a citizen, and therefore a resident, of West Virginia, the court had jurisdiction between the parties. The bill was filed by stockholders and creditors. It is nol within the inhibition of equity rule 94. That rule applies to a bill brought by one or more stockholders against the corporation and other parties, founded on rigiits which may properly be asserted by the corporation. The present is a suit against the corporation itself, dominated by a president and board of directors, who are charged with wrecking the corporation for their own private ends. The purpose of the bill is to rescue the corporation. To assimilate; that to the case provided for in rule 94, and to require the complainants to show that they had .exhausted all effort in inducing the directors to convict themselves of fraud, is absurd. Hawes v. Oakland, 104 U. S. 450; County of Tazewell v. Farmers’ Loan & Trust Co., 12 Fed. 752; Ranger v. Cotton-Press Co., 52 Fed. 615; Heath v. Railway Co., 8 Blatchf. 347, Fed. Cas. No. 6.306. The facts stated iu the bill, if true, called for prompt and energetic interference by the court, to prevent the destruction of (he corporation and the absorption of its assets by unfaithful conduct upon the part of the president and directors; and, at that stage of the case, these facts must have been assumed to be (rue. The; wide scope of the injunction was called for by these facts. There was no error in granting it. The amended bill has changed the entire aspect of the case, and the decision of this court must rest upon its scope and effect. “Although it is the practice to call a bill tima altered [by amendments] an ‘amended bill,’ the amendment is in fact esteemed but as a continuation of the original bill, and as forming part of it, for both the original bill and amended bill constitute but one record; so much so that, when an original bill is fully answered and amendments are afterwards made to which defendant does not answer, [324] the whole record mav be taken pro confesso generally.” 1 Daniell, Ch. Prac. & Pl. (3d Am. Ed., by Perkins) 403; French v. Hay, 22 Wall., at page 246. As to the second question: Could the circuit court of the United States for the district of West Virginia take jurisdiction of this bill as amended, and make the decree therein appointing a receiver and granting the injunction? The complainants are citizens and residents of the state of Pennsylvania, and the defendants are, one of them a corporation of the state of West Virginia, and the other a corporation and resident of the state of blew York. Railroad Co. v. Koontz, 104 U. S. 5; Ex parte Schollenberger, 96 U. S. 377. No federal question is involved, and the jurisdiction depends upon the citizenship of the parties. The act of 1887, as corrected, but not altered, by the act of 1888 (24 Stat. 552; 25 Stat. 433), provides, among other things, as to the jurisdiction ot circuit courts, as follows : “When the jurisdiction is founded only on the fact that the action is between citizens of different states, suit shall be brought only in the district of the residence, either of the plaintiff or the defendant.” In Strawbridge v. Curtiss, 3 Cranch, 267, Chief Justice Marshall says: “Each distinct interest should be represented by persons, all of whom are entitled to sue or may be sued in the federal court.” This case is affirmed in New Orleans v. Winter, 1 Wheat. 91. In Coal Co. v. Blatchford, 11 Wall. 172, these two cases are construed by the supreme court thus: “In other words, if there are several co-plaintiffs, the intention of the act is that each plaintiff must be competent to sue, and, if there be several defendants, each defendant must be liable to be sued, or the jurisdiction cannot be entertained.” The same idea is expressed by the. present chief justice in Anderson v. Watt, 138 U. S. 702, 11 Sup. Ct. 449: If “each of the indispensable adverse parties is not competent to sue or be sued, then the circuit court cannot maintain cognizance of the suit.” In Shaw v. Mining Co., 145 U. S. 444, 12 Sup. Ct. 935, in an action brought by a citizen of Massachusetts in the circuit court of the United States for the Southern district of New York, against citizens of New York and a corporation of the state of Michigan, it was held that a corporation incorporated in one state only could not in that suit be compelled to answer in a circuit court of the United States held in another state, even though it has there its usual place of business, to a civil suit at law or in equity, brought by a citizen of a different state.” This case was affirmed in Pacific Co. v. Denton, 146 U. S. 202, 13 Sup. Ct. 44; Railway Co. v. Pinkney, 149 U. S. 194, 13 Sup. Ct. 859. Clearly, therefore, the court had no jurisdiction over the case as amended. The learned counsel for the complainant say that the Central Trust Company is neither an indispensable nor a necessary party, and that the presence of that company cannot oust the jurisdiction. Horn v. Lockhart, 17 Wall. 570; Walden v. Skinner, 101 U. S. 577. But can the complainants, who made the motion, and who asked the court to amend the bill, in order to make this corporation a party, now say that such an amendment was improper or unnecessary? They prayed for an injunction, and the presiding judge granted it, including'the Central Trust Company by name in its provisions. Parties [325] cannot be permitted to induce action in the court below, and repudiate it in this court. The decree in this case was on demurrer to the amended bill. It is not a final decree. Equity rule 34 provides that, upon the overruling- of any plea or demurrer, the defendant shall be assigned to answer the bill, or so much thereof as is covered bv the plea or demurrer, the next succeeding rule day, or at such other period as, consistently with justice and the rights of the defendant, the same can, in the judgment of the court, be reasonably done. The case is here solely upon the order for injunction. It will be remanded to the circuit court, where, perhaps, the complainant may cure theses difficulties by amendment. Conolly v. Taylor, 2 Pet. 564. Ho much of the decree below as overrules the pleas to the jurisdiction, and grants the second injunction, is reversed, and the cause is remanded to the circuit court for such other proceedings as may be proper.