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Chas. A. Eldredge and J. C. Cook, for appellants. Geo. C. Morgan, A. 8. Winslow, and L. C. Blanchard, for appellees.
MILLER, J. This appeal is from the order of the circuit court for the Southern district of Iowa, remandinţg to the state court a case which had been removed from the state into the circuit court. The suit was brought originally in the district court of the state by James N. Drennan and others, tax-I nyers of Prairie township, in the county of Mahaska.
The allegations of the bill necessary for our consideration are that on May 11, 1880, the voters of said township voted a tax of 3 per cent. upon the tax. able property of said township to aid in constructing a railroad by a company whose name was afterwards lawfully changed to that of the Chicago, Burlington & Pacific Railroad Company. That by the order and notice submitting the question to vote, it was provided that one-half of the tax should be collected the first year and one-half the second year; the said road to be fully completed and running to a depot within the town of Sharon, in said township, before the tax is due and collectible by the said railroad company; and if not built within two years from the day of the election said tax never to be collectible; that the railroad was not completed to a depot in Sharon within two years from the date of the vote; that it was not completed from Sharon to any other town. That Morgan, president of the railroad company and another director, pending the consideration of the matter by the voters, made false and fraudulent representations to them that the company had arrangements with the Chicago, Burlington & Quincy Railroad Company, and the Chicago, Milwaukee & St. Paul Railroad Company, by which either of these companies would build and equip the road to the town of Sharon as soon as the tax was voted; that the railroad company, by its officers and agents, are demanding of the trustees of the township that they certify to the county treasurer of Mahaska county that the conditions required by said vote have been complied with, and are threatening, by suits against them and otherwise, to compel them to make such certificate, and petitioners fear that said trustees will yield and make the certificate unless restrained by the act of the court. They aver that one Alfred Sully claims some interest in the tax, and ask that he be made a party to the suit so that he may be estopped by tho judgment. They say the tax is illegal and void for many reasons, and pray for an injunction against the trustees from certifying to the county treasurer that the conditions of the vote have been complied with, and the county treasurer, John H. Warren, and his successor in office, and the Chicago, Burlington & Pacific Railroad Company, and Alfred Sully, from in any manner attempting to collect said tax, or from endeavoring to procure said certificate from the trustees of Prairie township.
The notice, which in the Iowa practice stands for the original writ, was returnable to the May term, 1883, and service acknowledged by the trustees and treasurer on the twentieth day of March, and on the railroad company, March 29th. The day required for the appearance and pleading of the defendants was Moy 11th. A temporary injunction was granted September 13, 1883. It seems that on the fifteenth day of May the case was, by order of the judge of the district court, who had been of counsel in it, transferred to the circuit court of the same county, the judge of which granted the injunction. At the October term of this court all the parties, including Sully, who had not been served with notice, appeared. A demurrer was interposed by Sully, and overruled. Many motions were made and decided about the ploadings, and the railroad company, Sully, and Warren filed a joint answer do nying the right to the relief prayed. The pleadings were finally made up at this term. At the next term of that court, in May, the application of Sully to remove the case into the United States court was made on the ground that he was a citizen of the state of New York, and all the other parties were citizens of Iowa. He claimed to have an assignment from the railroad company
of the right to the taxes. The state court refused to make the order, and Sully took a transcript of the record and filed it in the circuit court for the Southern district of Iowa. When the attention of that court was called to the matter, the case was remanded to the state court, and from that order this appeal is taken. - We think the order remanding the case was well made:
1. Mr. Sully is the only defendant who is not a citizen of Iowa. The other defendants, against whom relief is sought, are the railroad company, the trustees of Prairie township, and the treasurer of the county. All of these are proper parties, and are necessary parties, against whom positive and af- * firmative relief is sought. Without deciding whether the railroad company could assign the right to sue for and enforce these taxes to Mr. Sully, it is sufficient to say that the assignment did not carry that right to him discharged of the equities between the company and the tax-payers, as if they had been negotiable bonds. To any suit, therefore, to invalidate this tax the company was a necessary party. It is especially so in equity, where the matter set up to defeat the tax, as in this case, was the failure of the company to comply with the conditions of the vote, and its false and fraudulent representations by which the vote was secured. In such a suit the company has a right to defend against these allegations, and the plaintiffs have a right that the company shall be bound by the judgment in the case. The interest of Sully and the company in this controversy are the same, and are both opposed to the interests of plaintiffs. This railroad company is organized under the laws of Iowa, and is a citizen of that state as well as plaintiffs.
2. The township trustees are also citizens of Iowa. These are not nominal parties, and their interest is not identical with that of plaintiffs. What may be their personal wishes is not known, nor is it material. They are sued in regard to their official position, to restrain them in the threatened exercise of their oflicial authority, to the prejudice of plaintiffs. The exercise of this power lies at the root of plaintiffs' case, and of defendants' rights. The statute of lowa which authorizes this vote by a township declares that the money collected under it shall be paid out by the county treasurer “at any time after the trustees of the township, or a majority of them, shall have certified to the county treasurer that the conditions required of the railroad and set forth in the notice for the special election, at which the tax was voted, have been complied with.” Until this is done, no right to the money accrues to the railroad company, or any one else. The act here required of the trustees is not a mere ministerial one. It requires them to ascertain and ! decide what was required of the company by the notice, with the meaning of a its terms, and, when they have construed these, to ascertain, as a matter of fact, whether they have been complied with.
So important is this action to Sully and to the railroad company, that the bill alleges they are seeking to drive them to make the certificate by threats of expensive litigation, and it is said, in the brief, that Sully has resorted already to a writ of mandamus. Are these trustees nominal parties ? Are they, in their official action, on the same side of this controversy with plaintiffs? If they were, there would be no necessity to sue out an injunction to prevent them from issuing this certificate. If there is any nominal party, or any party unnecessary to the relief sought by plaintiffs, it is Sully, for, if plaintiffs can procure a decree enjoining the trustees from making that certificate, their relief is sufficient, if not complete. So of the treasurer, Warren, who, so far from siding with plaintiffs in the suit, has joined Sully and the railroad company in a demurrer to the bill, and in his answer denies the merits.
The case of Harter v. Kernochan, 103 U. S. 562, is cited in opposition to this view of the case. But in that case negotiable bonds had been issued and were in the hands of Kernochan as a bona fide holder. The case between
him and the township of Harter was a very different one from the present case. In that case the whole right was vested in Kernochan, and the whole matter in controversy could be determined between him and the township. In the suit as brought in the state court in that case the officers who were served with the writ made default, and a notice by publication against the unknown owner of the bonds being unanswered, a default was taken against them, and a decree made enjoining all proceedings to collect the bonds. Under a statutory provision, Kernochan came in due time, and, alleging himself to be a holder of the bonds, the default as to the unknown owner was set aside, and he was permitted to answer. As to the other defendants, they were now out of the case, and Kernochan being a citizen of another state, removed the case into the circuit court of the United States. The difference between the two cases is obvious.
The judgment of the circuit court, remanding the case, is afirmed.
(113 U. S. 293)
SULLY V. MANNING.
(October Term, 1884.) These cases, submitted with the preceding case, (Sully v. Drennan, ante 453,) are governed by the principles announced in it, and are accordingly attirmed.
(113 U. S. 249) CENTRAL R. CO. OF NEW JERSEY and others o. MILLS and another, Sur
viving Ex’rs, etc.1
(January 19, 1885.) REMOVAL OF CAUSE-CITIZENSHIP-CORPORATIONS.
A bill in equity, filed in the court of chancery of the state of New Jersey by citi. zens of that state, stockholders in a New Jersey railroad corporation, against that corporation, and a Pennsylvania railroad corporation, and several individuals, citizens respectively of New Jersey and Pennsylvania, and directors in one or both corporations, alleged that, without authority of law, and in fraud of the rights of the plaintiffs, and with the concurrence of the individual defendants, the New Jersey corporation, pursuant to votes of a majority of its stockholders, made, and the Pennsylvania corporation took, a lease of the railroad and property of the New Jersey corporation; and prayed that the lease might be set aside, the Pennsylvania corporation ordered to account with the New Jersey corporation for all profits received, the amount found due ordered to be paid to the New Jersey corporation by the Pennsylvania corporation, or, upon its failure to do so, by the individual de fendants, and the New Jersey corporation ordered to administer the property in conformity with its charter, and to pay over to the plaintiffs their share of that amount. The defendants answered jointly, denying the illegality of the lease, and removed the case into the circuit court of the United States, under the act of March 3, 1875, c. 137, as involving a controversy between citizens of different states, and a controversy arising under the constitution and laws of the United States. The circuit court, upon the plaintiffs' motion, remanded the case to the state court. Held, that the case was rightly remanded. Appeal from the Circuit Court of the United States for the District of New Jersey.
J. E. Gowan, for appellants. Henry C. Pitney and Barker Gummere, for appellees.
GRAY, J. This is an appeal from an order of the circuit court of the United States for the district of New Jersey, remanding to the court of chan. cery of the state of New Jersey a suit in equity brought by the appellees against the appellants. The case, so far as material to the understanding of the question presented by the appeal, was as follows:
The bill was filed by two citizens of New Jersey, executors of Stephen
1S. C. 20 Fed. Rep. 449.
Vail, and, as such, stockholders in the Central Railroad Company of New Jersey, a New Jersey corporation, against that corporation, and the Philadelphia & Reading Railroad Company, a Pennsylvania corporation, and severa? individuals, citizens respectively of New Jersey, of Pennsylvania, and of Maryland, and directors in one or both of those corporations, to set aside a lease made by the New Jersey corporation of its railroad and property to the Pennsylvania corporation, and for an account of profits received under the lease.
The bill set out the charter of the New Jersey corporation, enacting that its railroad should be operated by directors elected by its stockholders, and that dividends of its net earnings should be mue semi-annually among its stockholders, and alleged that the road was afterwards constructed and operated accordingly; that the corporation, although holding the legal title to all its property, held it as a trustee for the stockholders, and the real, equitable, and beneficial interest in the property, and in all dividends or income accruing or to accrue therefrom, was in the stockholders; "and that any act or thing done, without the consent of all of said stockholders or due process of law, which destroys the powers and control of those trustees to whom the stockholders have confided their* property, or which prevents those trustees from fully and freely performing said trusts, or which, in whole or in part, substitutes new or other trustees for those selected by said stockholders, or which takes from said stockholders their estate or interest in said properties or their control over them and their management, or transfers the possession and management of the property of said stockholders to another corporation or to any other person, or in anywise changes the scheme of said railroad company or the enterprise in which, and to further which, the said stockholders advanced and invested their capital, or which limits the productiveness of their property to them and diverts the earnings, or any part thereof, to other persons, natural or artificial, on any pretense whatever,-is a fraud upon said stockholders, is unlawful as changing the contract between said corporation and said stockholders against their consent, and is absolutely void by the law of the land."
The bill further alleged that the directors of the New Jersey corporation, in accordance with votes of a majority of the stockholders, but without the consent of all the stockholders or of the plaintiffs, executed and delivered a lease of its railroad and all its property to the Pennsylvania corporation for the term of 999 years, and the Pennsylvania corporation entered into possession under the lease; that the lease prevented those trustees from performing the trust reposed in them by the stockholders, and affected their rights and interests in the particulars above set forth, and “was made without any authority of law, and is illegal, inequitable, and void;" that the individual defendants, under cover of that lease, and well knowing its illegality, had been and were actively engaged in furthering the aforesaid invasion of the rights of the plaintiffs as stockholders; that therefore any application by the plaintiffs to the corporation, or to the directors or stockholders, to institute this suit would have been futile, and had not been made; and that consequently the plaintiffs were entitled to bring and maintain this suit in their own name, as well for themselves as for other stockholders similarly situated. The bill prayed for a decree that the lease and the delivery of possession under it were illegal and void, and a fraud upon the rights of the plaintiffs; that the Pennsylvania corporation surrender to the New Jersey corporation the railroad and other property, and account with it for all tolls and profits received; that the New Jersey corporation take possession of the railroad and property, and use and administer it in conformity with the trusts imposed by its charter, and distribute and pay over to the plaintiffs their share of all the money to be found due upon such accounting from the Pennsylvania corporation to the New Jersey corporation; and that, upon the failure of the Pennsylvania corporation to pay back to the New Jersey corporation all moneys taken under
the lease, the individual defendants pay the same to the New Jersey corporation; and for further relief.
The defendants filed a joint answer, admitting the plaintiff's ownership of stock in the New Jersey corporation, the construction and operation of the railroad by that corporation, and the execution and delivery of the lease, and of possession under it; denying the other leading allegations of the bill; averring that the charter of the New Jersey corporation was subject by law to alteration, suspension, or repeal in the discretion of the legislature; that the lease was expressly authorized by the laws of New Jersey; and that, if the bill could be maintained, all that the plaintiffs could claim was the value of their stuck, and damages assessed according to any reasonable anticipation of its productiveness in the future, and such damages the defendants were willing and thereby proffered to pay.
Before the cause could be heard in the state court, all the defendants joined in a petition, under the act of March 3, 1875, C, 137, for its removal into the circuit court of the United States, for the following reasons:
"That the said suit is one instituted by the plaintiffs, who are the executors of one Stephen Vail, and, as such, holders of certain shares of stock of the Central Railroad Company of New Jersey, one of the defendants above named, to obtain a decree requiring the surrender and cancellation, as illegal, void, and a fraud upon the rights of the plaintiffs, of a certain lease of all its railroads and other property, executed by the said*Central Railroad Company of New Jersey to the said Philadelphia & Reading Railroad Company, and the payment over by the said Reading Company to the said Central Company of all rents, tolls, and profits by the former, as lessee as aforesaid, and further requiring that the said Reading Company should cease and refrain from doing any act under the terms of said lease.
“That the defendants, other than the two above-mentioned railroad com. panies, were made parties to the said suit only by reason of their official con. nection with the said two companies, and are not necessary or substantial parties to the controversy, which relates solely, as already mentioned, to the validity of the lease, above referred to, of the railroads and other property of the Central Company to the Reading Company; that the plaintiffs in the suit claim that, as stockholders in the Central Railroad Company of New Jersey, they have the right to institute said suit upon behalf of the said company, to compel the surrender, by the Philadelphia & Reading Railroad Company, of the above-mentioned lease, and an accounting for and return by the latter company to the former of all moneys received as such lessee as aforesaid; and the controversy in said suit is therefore between citizens of different states, as the plaintiffs and the Central Railroad Company are citizens of the state of New Jersey, and the Philadelphia & Reading Railroad Company is a citizen of the state of Pennsylvania.
“That the controversy in said suit is, moreover, one arising under the constitution and laws of the United States, in that the right to make said lease is rested by the defendants upon a certain statute of New Jersey, approved March 11, 1880, [c. 160,] which provides, inter alia, as follows: •It shall be lawful for any corporation incorporated under this act, or under any of the laws of the state, at any time during the continuance of its charter, to lease its road, or any part thereof, to any other corporation or corporations of this or any other state, or to unite and consolidate as well as merge its stock, property, and franchises and road with those of any company or companies of this or any other state, or to do both; and such other company or companies are hereby authorized to take such, and to*unite, consolidate, as well as merge its stock, property, franchises, and road with said company, or to do both; and after such lease or consolidation the company or companies so acquiring said stock, property, franchises, and road may use and operate such road, and their own roads, or all or any of them, and transport freights and passengers