FEDERAL REPC.UTER,
voL 53.
oon4ttetedmore deliberately and carefully, and no eourtwm refuse a pmoty'lf±meand opportunity to point out idistincdyhi8exeeptions to .befote .the case is '6irtally.given to the jury. He must be afforded 'oppott1ll'1ity to do· this i then,because. he is precluded ftom it aftpt"wa:rds. ':I'here being no error on the face of the record, error saved by the bill of exceptions, the judgment of the circtlit court is.affirmed. ;i i
MER<i:BANWS' NAT. B,A.NK et al. ,. OHAT1'ANOOGA. l;JONSr.rnUCTION CO.
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Courl:,E.: D. Tennessee, S. D. ' :' ",' "'J'
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is diverSe, and plaintiff is ,a resident of the distl.'lct, IUs not necessari that bEl shall also reside 1J1 the 'particular division of !tfieiUstridtwherethe, sultis brought. ',
CITIZENSHIP.
2. SAME-CREDITORS'BI'LLo-JUDGMiNT OF' STATE COURT.
lowed.' So
bill may be maintained in a federal court upon a judgment a differenH!tate from that in which the court sits. Stutz v. Fed. Rep. 537, U Sup. Ct. Rep. 530, and 189 U. S. 417, fol· OF PROCESS.
.
In ¢).'e41tors' suitln,a federal court,based on the judgment of a state court, it was claiinedthat the l8.tter judgment was .void for want of servo ice. It appearerl from the sheriff's return thatde'fendant (Chattanooga "Construction Company) was not found In his county, but there was Indorsedon. the 'process, as of the.day folIc wing the return,the following: ,Copy and process and all turther Service waived. The Chattano(,)ga Construction Co. of West Va. By B. J. Robertson, Pl'esident."'I'he record also shoWed t11at defendant company had recently built a raUroll.d through the county, and there was nothing to show that there :Was' any 1'llult: or failure' in "respect to defendant having been properly brought Inl;ocourt; Held, that the presumption was in favor of the action of state court, and it mw;t be held that defendant was properly 4. CREDITORS' :an.'t":"'EQUITY JURISDICTION. A. creditorS' bill brought against a railroad construction company, among other prayed an injunction, and the aPPointment of a receiver, and alleged ;that the same persons engaged In building the railroad organized the CQI'.structipn company; that nearly all the bonds of the railroad company \vere issued to it; t11at t!,le railroad company was Insolvent, and in _ the hands of, a rerwiver, and a decree of foreelosure had been rendered; that. the ,pro1J1oters of both companies 'lcquired control of large quantities of the, bonds; and in equity held the same as trustees for defendant; that they conlJpired to strip defenchtnt of i1:l:l ,assets, and in, pursuance therrof divp.rted large sums of money from its treasnry. and. pledged its bonds for dl'bts for which it was not liable; and that was Insolvent. Helrl, that these allegations were to sustain equity jurisdiction, although the creditors had not procured judgments as the basis of the suit.
In Equity. Bill by the :Merchants' National Bank and others against the ConstJ,'Uction Company for an injunction, the appointment of a receiver, and tor other relief. Decree for complainants. , Calhoun, 'Kmg & Spalding,J.B. 'Branham, Dabney & Fouche, and Barr & McAdoo,·for plaintiffs. Clark & Brown and Watkins & Bogle, for defendant.
MERCHANTS' NAT."BANK' V; CHATTANOOGA CONSTRUCTION CO.
315
KEY, District Judge. The complaimints aver that they are citizens of this district, and that defenda.ntis acorporation of Viest Virginia. Defendant has filed a plea alleging that complainant Carter is a citizen of Kentucky and that complainant Rogan is a citizen of the northern division of this district, the court for which is held at Knoxville, and that he cannot sue in this division of the district. As to Carter, the testimony satisfactorily 'establishes that he isa citizen of Tennessee; and of this division of this district. There is no dispute as to the fact that Rogan resides in the northern division of the district, and is a citizen of that division. He is a citizen of this district, and the law provides: "But where 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 of either the plaintiff or the defendant." The tel'DlS of the law are clear and unambiguous. The suit must be brought in the district, not in any particular division of the district. This suit is brought in the district of Rogan's citizenship, precisely as the 'law by its words requires. The bill is filed by several parties claiming to be creditors of the defendant. They are creditors at large, without judgments, except Carter & Rog-an, who claim to have obtained judgment in a state court in Georgia. Defendant has not answered the bill, but demurs to it. The material points of the demurrer are: (1) That judgment must be obtained at law before complainants can maintain a bill like the present, and that none of complainants have. such judgments; that & Rogan's judgment is void. (2) That, if it be not void, it is a judgment of a state different from the one' in which this court is held, and that, before a court of equity can lay hold of the case, there must be a judgment in a court of this state. There was no servo ice of process upon the defendant in the state court. The copy of the record shOWR that there were two defendants in the case in the state court, that one of them was served with process and copy on the 22d . of December. 1891, and that the defendant in this cause was not to be found in the county in which the suit was brought; but following the return 'of the sheriff this appears: "Service acknowledged. Copy and process and all further service waived. 12-23-91. The Ohattanooga Construction Co. of West Va. By B. J. Robertson, President." The defendant insists that the record ought to show affirmatively that Robertson was within the jurisdiction of the court, and subject to its process, when he made this acknowledgment, and because it does not so appear the judgment is void. It will be observed that the record shows that the acknowledgment is of the date of the day following the sheriff's return; that the defendant had recently built a railroad through the county in which the court was held; and there is no averment or a word of proof in that court or this that there was any fault or failure in respect to defendant's having been properly brought into court, so that the circumstances well-nigh prove the presence of Rob· ertson within the jurisdiction of the court at the time he acknowledged service. But, aside from this, presumptions, if indulged at all, are in favor of the action and proceedings of the conrt, and not against it. If this be so, the judgment cannot be held void for want of process or its service.
316
FEDERAL REPORTER ,
vol. 53.
As tiO whether this judgment,. as that of a state different from the one in which this court is ,held, is such judgment as will authorize this com to assert and maintain jurisdiction of a creditors' bill, is a serious question. Many ·state courts and some decisions in federal courts have held that jurisdiction does not follow such judgments. I think,' however, that the weight of authority is the other way. In the case of Stutz v. Handley, 41 Fed. Rep. 537"Judge Jackson of this circuitLheldthat the bill. in that case was properly filed under the authority of Hatch v. Dana, 1.01 U. S. 205, and that no valid objection could. be raised to the form of the suit. This case went to the supreme,eour4 and is reported in 139 U. S. 417--438, 11 Sup. Ct. Rep. 530. The bill was filed 'in Nashville, Tenn., and was a general creditors' bill; In Handley v. Stutz, 139 U. S. 419,11 Sup. Ct. Rep. 530, it is, stated' that the bill in that case "averred that the plaintiffs were judgment .' creditors ,of. the company, by judgments obtained in the courts of Kentucky." Here we have a case brought and decided in a circnit court of the United States in Tennessee in behalf of creditors whoserla.imR rested on judgments obtained in Kentucky,--.,a creditors' bllJ,whichwelltto the supreme court of the United States, and that court mainta.ined jurisEliction of the case,.and decided it on its merits. 1'he mithorltyof the learned circuit judge and of the supreme court is control me without searching for further or other reasons. I conclu.de,.therefore, that, sofaI' aB,carter & Rogan are concerned, halta·$. valid judgment, and, founded upon that, have a standing iuthis U<lllrt. even though: no execution had issued thereon.. TbeotheNi0!mplainants have no judgments. Can the" bill be maintained ,as to' them? The bill seeks the :appointment of a receiver, who maytue,.clt1Ulge of th.e:assets of the defendant, and apply them to the debts, of defendant. It alleges, amo:o:g'many other things,. that the same pe:Usol'1s,who were engaged in building the Chattanooga South· ern Blil·ilroad: :from Chattanooga, Tenn., or rather from the line between'l'ennessee and Goorgia, near Chattanooga, through Georgia and Alaba.m.a.,to Gadsden, in Alabama; called into existence the defendant to act as a contractor, and that they might have a legal person absolutelyilubjectto' their domination to whom the bonds of the railroad company. might be isSUed; that said. bonds, except 45, were issued to defendant; that said railroad company is now in the hands of a reoeiVel';tha.t a decree of foreclosure of the mortgage securing the bonds has :been' obtained, providing for the interests of the bondhold· ers in its sale and purchase; that the same persons. were the real owners and controllers of the railroad company and the defendant, and held fiduciary relations to the defendant, and have acquired the controlonarge quantities of said bonds, which in equity they hold as trustees for the defendant; that it has been their effort to strip the de· fendantof its assets, and that it is left without tangible assets, and it is insolvent, and unable to pay its debts, unless the court interposes. It is allegoo that it is the purpose of the parties controlling both the railroad and, defendant to use the bonds of the defendant in a reor· ganization sr-heme by which the bondholders are to purcha.se the road; that large smM belonging to the defendant have beeu diverted from the trea.sury of the defendant, and Ilpp,ropriated to various unau-
MERCHANTS' NAT. BANK V. CHATTANOOGA CONSTRUCTION CO.
317
thorized purposes; that the officers and stockholders of defendant have combined and conspired to strip it of its assets, and leave it in an insolvent condition. Many instances are given in which it is alleged that the bonds of defendant have been hypothecated and pledged for debts for which defendant is not liable. The bill is full of averments, specific in their character, of violations of trust obligations, waste, and dissipation of assets, and acts of fraud, conspiracy, and confederation to defraud the creditors of defendant and to appropriate its means to the use of the officers and stockholders of the concern. This bill is not answered. The demurrer admits its allegations. It seems to me that this bill does not fall within any case in which it has been held that a judgment at law, or return of execution nulla bona, or both, is necessary to maintain the bill. It is not an effort to reach equitable assets merely. It charges violation of trust; the dissipation and concealment of assets. It charges conspiracy, confederation, and fraud for the purpose of despoiling defendant of its assets, and leaving its creditors without redress; and all this is done, it is alleged, by its officers and stockholders, and these allegations are not denied. If a. court of eqUity does not have original jurisdiction of this case, it would be difficult to conceive one in which it has. Bills in equity with far fewer elements of original jiJrisdiction have been maintained. In the case of Stutz v. Handley, 41 Fed. Rep. 537, already referred to, the court says of that suit: "Its object being to reach and subject a trust fund, complainants were not even required to have reduced their claitns to jUdgment, and exhausted their remedy at law, after the insolvency of the company;" citing Case v. Beauregard, 101 U. S. 688--690. Judge Harlan says in Mellen v. Iron Works, 131 U. S. 9 Sup. Ct. Rep. 781: "1'he removal of alleged liens or incumbrances upon property, the closing up of affairs of insolvent corporations, and the administration and distribution of trust funds,are subjects over which courts of equity have general jurisdiction." This quotation · to justify the second headnote of the case, which is criticised,somewhat, in the case of Atlanta & F. It Co. v. Western Ry. Co., 50 Fed. Rep. 790, 1 Co' C. A. 676. I regard the decisions of our circuit judge and the decisions of the supreme court as sustaining original· jurisdiction of a court of equity in cases Which possess fewer attributes of jurisdiction than the ease we have before us has. Defendant's counsel have shown great industry, learning. and ability in the cases cited, arguments delivered, and reasons enforced, but, without entering into any analysis of the cases produced by them or by complainants' solicitors, it is sufficient to say that, in my opinion, this bill is one of original equitable cognizance, and that a receiver should be appointed for the purposes and with the powers prayed for, who will be required to give bond with sufficient sureties in the penalty of $25,000. It is further ordered that an injunction issue as prayed for on bond and surety therefor in the penalty of 110,000.
318 "1,
.. ,FEDERAL REl'OB'.DER,
vol: 53... "I
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,; i'SOU1'l':D!l:a.wP.JNE FIBllE CO. ':;:'(:; "j .\::
AUGTJSTA LA..Nt> ,CO. ' ,,! (,,",
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Attgullta will donateJo rour company 3 acres of: laud; to be selected Jby 1.tr on its property : oppoSMle Augustar ihdhvinpromptlY'build; or caUSe to be built;: to ·the laildso doriated, a side, traek, 'and wlieIJ!'.your factory is commeuccessful[operation, ,:will buy! from you $2,500 of ypPX ,sto\ll{at itl;l,Plll:;value, when your factory is in successful ovel'atl.on,as, aforesaid. The above is conditioned' upon your begtnIiing' "'otilt at onee."', Held, that the completion of the factory was nota) oondltton precedmtt to the buildl.ng of the side track, and that parol that effect should not be admitWd. 2. Sl'EOIFI() f'JlIJ.f,!l'OJUI'ANCE......REQUISITES QFTHE ,CONTRACT.
l10Plpany the land'and subsequently f\.Cquirecl a right of )i\e side 'track. The wll.sbuUt, bUt its machinery prove6.. bUi1ll.elent, and was run from time to time merely to dIscover defects allillimllkeneoessary!improvements. Held, that specUic performance of OQlltr/lct to build, t)1!'l side t11Lck' r;hould be enforced. PERFORHANCE-DAMA,GES. "
8; CONTR4,QTSt+-M.ATTERS
tor delay1Jl. ouil<ling the side track should uQtbe awarded for the the tana company dtd ndt own the right of way, it having used evf!rY effort to acquire, it. '
, In Equity. Bill by the,Southern Pine Fibre Company against the North Auguste. Land QQmpany for ,the Elpecifiaperformance' of a contract. A demurrer to ,the bill was ,overruled. 50 Fed. 'Rep. 26. The ca.se is now on flnalhearing. Decree for complainant. ,Fleming & Alexander,. tor complainant. , 9Uve, JUdge. This case has already been heard on demurrert\) the roll. 50 Fed. Rep. 26. The demllfl'er was overruled, and, the answer having been :filed, the cause comes up on full hear· ing. a location fora factory, and for that purpose its!}lresident vi$itetl several ,of the southerniiltate81. Finally, he met, in Mr. Fatrick Calhoun, president of the North Augusta Land Company; This company was the owner of a body of land opposite the city of Augusta, which they wished to de· velop.At "the instance of Mr. Calhoun, the president of the complainant visited the tract of the land, company, found it in many respects suitable for his purposes, and opened negotiations fora site. The only objection to it was its distance, from a railroad. After correspondence and interviews in which the views of each party were made known, .a proposal was forn:1ulated by the land: shapeoUhe following letter: "New York, June 20th; 1891. "J. B. N. Beri:y, Esqr., Presdt. Southern FIbre Co.-Dear Sir: The North Augul-lta Land Company will donate to your comp:my 3 of land, to be selected by it, on its prope-rty opposite the city of Augusta, and will promptly build, or cause to be built, to the land so donated, a side track; and when your factory is completed, and machinel'Y in snccessful operation, will buy