Schultz v. Highland Gold Mines Co.

WOEVERTON, District Judge (after stating the facts as above)The present hearing is upon the demurrer to the bill, and, upon looking further into the cause-of suit as exhibited by such bill, I am now '-of the opinion that the motion was improperly denied, in so far as it pertained to the defendants Diehl and Grabill,-who -are shown to be •citizens of the state of Pennsylvania. I then entertained the view that the suit was one for the removal of cloud from title, and hence local in its nature, which would give jurisdiction to bring in parties not -citizens of the state where the suit was instituted by publication, but it cannot be so maintained. True, the'prayer of the bill is for a vacation of the judgment made and entered in the state court, but this court is without power or authority to make such an order, because that would be in.effect to nullify and stay the proceedings of a state ■ court, in violation of the provisions of section 720, Rev. St. (page 581, U. S. Comp. St. 1901). It may, however, through the injunctive process, restrain the plaintiff in a judgment from enforcing the same, and thereby prevent perpetration of a wrong upon the judgment debtor, for in such case the process operates upon the person, and not against the state officers, or any authorities thereof. National Surety Co. v. State Bank, 120 Fed. 593, 56 C. C. A. 657, 61 L. R. A. 394. See, also, Arrowsmith v. Gleason, 129 U. S. 86, 9 Sup. Ct. 237, 32 L. Ed. 630, and Marshall v. Holmes, 141 U. S. 589, 12 Sup. Ct. 62, 35 L. Ed. 870. But such action of the court is not effective to remove a cloud from title to realty cast by reason of the judgment, for the judgment still remains, although the plaintiff will not be permitted to -enforce it. Back of this, however, the bill of complaint does not state •a cause for such relief. It nowhere describes' the realty clouded, nor does it proceed in theory for the removal of any incumbrance. Two purposes stand paramount: One to obtain the appointment of a re■ceiver, with authority to appear in the action in the state court and there obtain relief against the judgment, with injunction against further interference with -the mining property; and the other to secure an accounting as to the, stock alleged to have been pledged by Soren-son for the indemnity of the company.- All other matters of averment are merely subordinate, so that the suit cannot be held to be local in character, warranting service on defendants not citizens of the state by publication. It was contended at the hearing of the motion that there was not proper diversity of citizenship upon which to sustain jurisdiction. Citizens of three states have combined in a suit against citizens of two states, and the suit has been instituted in one of the latter states. I am of the opinion that jurisdiction attached as it respects all the complainants, and all the defendants who are citizens of the state of Oregon, wherein suit was instituted, but not as it respects the defendants who are citizens of another state. Under the statute of March 3, 1887 (24 Stat. 552, c. 373), as amended by .the act of August 13, 1888 (25 Stat. 433, c. 866 [U. S. Comp. St. 1901, p. 508]), where the suit .is founded upon diversity of citizenship only, it may be brought in [341] the district of the residence of either the plaintiff or the defendant. McCormick Harvesting Machine Co. v. Walthers, 134 U. S. 41, 10 Sup. Ct. 485, 33 L. Ed. 833. It seems to me that it can be no objection that citizens of different states, other than the state in which the suit was instituted, have combined as co-complainants in the suit. But, unless the suit is local in its nature — that is, brought for removing a cloud or incumbrance, or the like — there may be valid objection-interposed to combining as defendants parties other than citizens of the state in which the suit is instituted. The case of Smith v. Lyon, 133 U. S. 315, 10 Sup. Ct. 303, 33 L. Ed. 635, is relied upon as opposed to the first proposition, and as authority against the maintenance of this suit while citizens of two or more states, other than the state in which the suit is instituted, remain combined as co-complainants. I do not so read it, however. Mr. Chief Justice Fuller, in his opinion rendered in the case of McCormick v. Walthers, supra, has this to say: “We held [referring to the case of Smith v. Lyon] that where there were two plaintiffs, citizens of different states, the defendant, being a citizen, of another state, could not bo sued in the state of either of the plaintiffs.” If the suit had been laid in the state of the citizenship of the defendant it is very probable from this statement of the eminent chief justice that the ruling would have been different. The exact question, however, has been resolved in the case of Jackson & Sharp Co. v. Burlington & L. R. Co. (C. C.) 29 Fed. 474, wherein it was held proper that citizens of other states than the one in which suit was laid should be brought in as parties complainant, but that citizens of the state wherein the suit was instituted could not be properly so made parties complainant. This was a case local in its nature, it is true, but that circumstance does not alter the essentiality of a diversity of citizenship in order to confer jurisdiction. As to the latter proposition, that citizens of other states than those of the state wherein suit is instituted in causes not local should not be joined as defendants, the authorities seem to concur in its support. But the joinder is not jurisdictional, unless the noninhabitant shall see fit to make it so. He may waive the question of his being thus sued, and, if he does, the court has competent authority to proceed against him. Smith v. Atchison, T. & S. F. R. Co. (C. C.) 64 Fed. 1. This brings us to a consideration of whether the bill states facts sufficient to constitute a cause of suit. Without going into the subject in detail, or at length, it is sufficient to say that I am impressed, after a careful study of the bill, that it conforms in substance and effect to the requirements of equity rule 94, relating to suits instituted by stockholders in a corporation. This rule is evidently the outgrowth of the doctrine established by the Supreme Court of the United States in the case of Hawes v. Oakland, 104 U. S. 450, 26 L. Ed. 827, and the bill is supported by that case also. This, however, as it relates to the bill, in so far as it sets tip fraudulent transactions of the directors and officers of the mines company. The right of accounting must depend entirely upon whether the Sorenson stock was pledged for the indemnity of the mines company against its liability upon the Knapp mortgage. If the mortgage is held to be invalid as against the com [342] pany, then there could be no basis for the accounting, because the stock is alleged to be the individual property of Sorenson. But, however that may be, the allegations of the bill must be taken as true when challenged by demurrer. The demurrer will therefore be overruled, and such will be the order of the court.