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circuit court, or that the parties to said suit have been improperly or collusively made or joined, either as plaintiffs or defendants, for the purpose of creating a case cognizable or removable under this act, the said circuit court shall proceed no further therein, but shall dismiss the suit or remand it to the state court from which it was removed, as justice may require, and shall make such order as to costs as shall be just; but the order of the circuit court, dismissing, or remanding said cause to the state court, shall be reviewable by the supreme court on writ of error, or appeal, as the case may be."
Under the act of 1789, the jurisdiction of the courts of the United States, in suits by assignees of choses in action, was confined within narrow limits, and there was comparatively little danger of collusion, to create a case of that character cognizable by those courts, because, if the owner of the claim could sue in his own name, there would ordinarily be no motive for transferring it to another to bring the action. In that act, promissory notes and inland bills of exchange, the form of negotiable securities most used in the transaction of ordinary business by citizens of the United States, were included in the prohibition of suits by assignees.
*The subject of colorable transfers to create a case for the jurisdiction of the: courts of the United States was presented for the most part in suits for the recovery of real property, when a conveyance had been made by a citizen of the state in which the suit must be brought to a citizen of another state. At a very early day it was held in this class of cases that the citizenship of the parties could not be put in issue on the merits, but that it must be brought forward at an earlier stage in the proceedings by a plea in abatement, in the nature of a plea to the jurisdiction, and that a plea to the merits was a waiver of such a plea to the jurisdiction. De Wolf v. Rabaud, 1 Pet. 498; Evans v. Gee, 11 Pet. 83; Sims v. Hundley, 6 How. 5; Smith v. Kernochen, 7 How. 216; Jones v. League, 18 How. 81; De Sobry v. Nicholson, 3 Wall. 423. And upon the question of transfer it was uniformly held that, if the transaction was real, and actually conveyed to the assignee or grantee all the title and interest of the assignor or grantor in the thing assigned or granted, it was a matter of no importance that the assignee or the grantee could sue in the courts of the United States, when his assignor or grantor could not. A suit by such an assignee or grantee would present, in reality, a controversy between the plaintiff on the record and the defendants. McDonald v. Smalley, 1 Pet. 620; Smith v. Kernochen, supra; Barney v. Baltimore, 6 Wall. 288. But it was equally well settled that if the transfer was fictitious, the assignor or grantor continuing to be the real party in interest, and the plaintiff on record but a nominal or colorable party, his name being used only for the purpose of jurisdiction, the suit would be essentially a controversy between the assignor or grantor and the defendant, notwithstanding the formal assignment or conveyance, and that the jurisdiction of the court would be determined by their citizenship rather than that of the nominal plaintiff. Maxwell's Lessee v. Levy, 2 Dall. 381, S. C. 4 Dall. 330, decided by Mr. Justice IREDELL and PETERS, J., in the Pennsylvania circuit, in 1797; Smith v. Kernochen, supra; Barney v. Baltimore, supra.
Such was the condition of the law when the act of 1875 was passed, which allowed suits to be brought by the assignees of promissory notes negotiable? by the law-merchant, as well as of foreign and domestic bills of exchange, if the necessary citizenship of the parties existed. This opened wide the door for frauds upon the jurisdiction of the court by collusive transfers, so as to make colorable parties and create cases cognizable by the courts of the United States. To protect the courts as well as parties against such frauds upon their jurisdiction, it was made the duty of a court, at any time when it satis-factorily appeared that a suit did not "really and substantially involve a dis-pute or controversy" properly within its jurisdiction, or that the parties "had been improperly or collusively made or joined for the purpose of
creating a case cognizable" under that act, "to proceed no further therein," but to dismiss the suit or remand it to the state court from which it had been removed. This, as was said in Williams v. Nottawa,104 U. S. 211, "imposed the duty on the court, on its own motion, without waiting for the parties, to stop all further proceedings and dismiss the suit the moment a fraud on its jurisdiction was discovered." The old rule established by the decisions, which required all objections to the citizenship of the parties, unless shown on the face of the record to be taken by plea in abatement before pleading to the merits, was changed, and the courts were given full authority to protect themselves against the false pretenses of apparent parties. This is a salutary provision which ought not to be neglected. It was intended to promote the ends of justice, and is equivalent to an express enactment by congress that the circuit courts shall not have jurisdiction of suits which do not really and substantially involve a dispute or controversy of which they have cognizance, nor of suits in which the parties have been improperly or collusively made or joined for the purpose of creating a case cognizable under the act. It does not, any more than did the act of 1789, prevent the courts from taking jurisdiction of suits by an assignee when the assignment is not fictitious and actually conveys all the interest of the assignor in the thing assigned, so that the suit when begun involves really and substantially a dispute or controversy in favor of the assignee for himself and on his own account against the defendant; but it does*in positive language provide that, if the assignment is collusive, and for the purpose of enabling the assignee to sue in the courts of the United States for the benefit of the assignor, when the assignor himself could not bring the action, the court shall not proceed in the case. In this respect it goes further than the rulings of the courts under the act of 1789. Under its provisions the holders of promissory notes, or of foreign or domestic bills of exchange, who are citizens of a state in which the decisions of the courts have been adverse to their interests, cannot, by collusive transfers to citizens of other states, create a case apparently cognizable in the courts of the United States, and have it prosecuted by their assignees in those tribunals for their benefit, in the hope of securing an adjudication in that jurisdiction more favorable to their interests. The courts of the United States were not created under the constitution for any such purpose. Except in certain specified cases they have no jurisdiction of controversies between citizens of the same state.
We are clearly of opinion that this case falls within the prohibitions of the statute. The bonds to which the coupons now in suit were attached, were all bought as early as 1871 or 1872 by citizens of the state of Maine, who held and owned the bonds themselves when this suit was brought. Their purchases were made while a suit was pending in the courts of the state to test the validity of the bonds. On the twenty-seventh of August, 1878, the highest court of the state decided in effect that the bonds were inoperative and void, for want of constitutional power in the village corporation to issue them. Almost two years after this decision these coupons, to the amount of $7,922, were collected from various holders of bonds, all residents of the village of Farmington and citizens of Maine, and transferred, separate from the bonds, to the present plaintiff, a citizen of Massachusetts, under an arrangement by which the plaintiff gave to the agent of the holders of the coupons his non-negotiable promissory note for $500, payable in two years from date, with interest; and agreed, "as a further consideration for said coupons," that if he succeeded in collecting the full amount thereof, he would pay the agent, as soon as the money was got from the corporation, 50 per cent. of the net amount collected above the $500. This suit, begun July 1, 1880, in the name of the plaintiff, is the result of that arrangement. It is a suit for the benefit of the owners of the bonds. They are to receive from the plaintiff one-half of the net proceeds of the case they have created by their transfer of the cou
pons gathered together for that purpose. The suit is their own in reality, though they have agreed that the plaintiff may retain one-half of what he collects for the use of his name and his trouble in collecting. It is true, the transaction is called a purchase in the papers that were executed, and that the plaintiff gave his note for $500, but the time for payment was put off for two years, when it was, no doubt, supposed the result of the suit would be known. No money was paid, and as the note was not negotiable, it is clear the parties intended to keep the control of the whole matter in their own hands, so that if the plaintiff failed to recover the money, he could be released from his promise to pay. In the language of Mr. Justice FIELD, speaking for the court in Detroit v. Dean, 106 U. S. 541, S. C. 1 SUP. CT. REP. 560, applied to the facts of this case, the transfer of the coupons was "a mere contrivance, a pretense, the result of a collusive arrangement to create" in favor of this plaintiff "a fictitious ground of federal jurisdiction," so as to get a reexamination in that jurisdiction of the question decided adversely to the owners of the coupons by the highest judicial tribunal of the state. Hawes v. Oakland, 104 U.S. 459; Hayden v. Manning, 106 U. S. 586; S. C. 1 SUP. CT. REP. 617; Bernards Tp. v. Stebbins, 109 U.S. 341; S. C. 3 SUP. CT. REP. 252. We therefore say, in answer to the first question certified, that the plaintiff cannot maintain the action in the circuit court upon the coupons declared upon.
(114 U. S. 133)
The judgment of the circuit court is consequently reversed, and the cause remanded, with instructions to dismiss the suit for want of jurisdiction and without prejudice.
DETROIT CITY RY. Co. v. GUTHARD.1
(March 30, 1885.)
SUPREME COURT-JurisdicTION-REVIEW OF JUDGMENT OF HIGHEST COURT IN A STATE. In order to give the supreme court jurisdiction to review a judgment of the highest court in a state, it must appear that there has been a decision by such state court of one or more of the questions specified in section 709 of the Revised Statutes, and in the way there mentioned. It is what has been actually decided by the state court that is to be considered, not what might have been considered; and there must appear affirmatively upon the record, not only the question, but the decision.
In Error to the Supreme Court of the State of Michigan. On motion to dismiss.
John C. Donnelly, F. A. Baker, and Geo. F. Edmunds, in opposition to motion. Henry M. Duffield, for motion.
* WAITE, C. J. This is a motion to dismiss a writ of error to the supreme court of Michigan on the ground that the record does not show that any federal question is involved. The case is this:
The Detroit City Railway Company was organized in May, 1863, under a general law of Michigan to provide for the construction of tram railways, passed February 13, 1855, to operate a street railway in Detroit. Article 15, § 1, of the constitution of the state, which went into effect January 1, 1851, is as follows: "Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes. All laws passed pursuant to this section may be amended, altered, or repealed."
Sections 22 and 31 of the law under which the railway company was incorporated are as follows:
"Sec. 22. Each and every railway company formed under this act shall pay to the treasurer of the state of Michigan an annual tax at the rate of onehalf of one per cent. on the whole amount of capital paid in upon the capital stock of said company, which said tax shall be estimated upon the last pre
1 S. C. 16 N. W. Rep. 328.
ceding report of said company, and shall be paid to the said treasurer on the first Monday of July in each year, and shall be in lieu of all other taxes upon all the property of said company."
"Sec. 31. The legislature may at any time alter, amend, or repeal this act, but such alteration, amendment, or repeal shall not operate as an alteration or amendment of the corporate rights of companies formed under it, unless specially named in the act so altering or amending this act, nor shall the dissolution of any such company take away or impair any remedy given for or against said corporation, its stockholders or officers, for any liability which shall have been previously incurred."
Section 22 of this act was repealed March 13, 1882. In the repealing act the Detroit City Railway Company was not specially named. On the fourteenth of March, 1882, a general tax law was enacted. This law provided that all property within the jurisdiction of the state not expressly exempt should be subject to taxation, and that all corporate property, except when some other provision is made by law, should be assessed to the corporation as to a natural person in the name of the corporation. Under the authority of this last law, the city of Detroit assessed a tax on the property of the railway company, and Guthard, the receiver of taxes for the city, on failure of the company to comply with his demand for payment, in regular course of his proceeding for the collection, levied upon 61 horses to sell at public auction and make the money. The company thereupon brought an action of replevin for the recovery of the horses. Upon the trial of this action the only question in dispute was as to the validity of the tax. The supreme court of the state, on writ of error, decided that the tax was valid, and gave judgment accordingly. To reverse that judgment this writ of error was brought.
The rule which governs our jurisdiction in this class of cases is thus stated by Mr. Justice MILLER for the court in Bridge Prop'rs v. Hoboken Co. 1 Wall. 143: "The court must be able to see clearly, from the whole record, that a certain provision of the constitution or act of congress was relied on by the party who brings the writ of error, and that the right thus claimed by him was denied." In Crowell v. Randell, 10 Pet. 398, one of the propositions "established," after a careful review of the cases, was "that it is not sufficient to show that a question might have arisen, or been applicable to the case, unless it is further shown, on the record, that it did arise, and was applied by the state court in the case." And at the last term, in Chouteau v. Gibson, 111 U. S. 200, S. C. 4 SUP. CT. REP. 340, it was said: "From the beginning it has been held that, to give us jurisdiction in this class of cases, it must appear affirmatively on the face of the record, not only that a federal question was raised and presented to the highest court of the state for decision, but that it was decided, or that its decision was necessary to the judgment or decree rendered in the case." Murdock v. Memphis, 20 Wall. 590, 636.
The reason of this rule is obvious. Our jurisdiction for the review of a judgment of the highest court of a state depends on the decision by that court of one or more of the questions specified in section 709 of the Revised Statutes, and in the way there mentioned. If there has been no such decision in the suit, there can be no re-examination of the judgment here. It is what was actually decided that we are to consider, not what might have been decided; and, as our jurisdiction must appear affirmatively on the face of the record before we can proceed, the record must show, either in express terms or by fair implication, not only the question, but its decision. It is not enough to find by searching after judgment that the requisite question might have been raised and presented for decision. It must appear that it was actually raised and actually decided. Brown v. State of Colorado, 106 U. S. 97; S. C. 1 SUP. CT. REP. 175.
It remains only to apply this well-established rule to the facts as they appear
in this record. The claim now is that, under the operation of sections 22 and 31 of the incorporating act, the state entered into a contract with this corporation not to subject it to taxation otherwise than in the way provided in section 22, unless it did so by a statute in which the company should be specially named. The record certainly does not show that any such claim was made in the state courts, or that such a question was raised or presented for decision, or that it was decided. Nothing of the kind appears, either in the pleadings or the findings of fact, on which alone the case was heard in the supreme court. The apparent question presented for decision was whether the state had changed the mode of taxation by what was done, not whether, it was prohibited by the constitution of the United States from doing so without specifying that the repeal of section 22, and the provisions of the general tax law of 1882, were to operate on this particular company, and referring to it by name. No judge, in deciding the case as it came up on the record, would be likely to suppose that, if he gave judgment for the receiver of taxes, he would deny the company any "right, title, privilege, or immunity" "specially set up or claimed" under the constitution of the United States. It is true that such a right might have been set up and claimed, and if the court below had certified in proper form that it was, and that it was denied, we could have taken jurisdiction. The court has, however, not only not made such a certificate, but it has expressly refused to do so upon application specially made for that purpose. All this appears affirmatively in the motion papers.
We are referred to the opinion of the court below, which is found in the transcript, as showing a decision of the federal question involved. The constitution of Michigan requires that the opinion of the supreme court shall be in writing, signed by the judges concurring therein, and filed by the clerk. From the opinion in this case it appears that the point determined, and on which the judgment rested, was that the term "corporate rights," as used in section 31, did not include incidental privileges and immunities, such as a special standard of taxation. No reference whatever is made to any question of charter contract.
On the whole we are satisfied we have no jurisdiction in the case, and the motion to dismiss is granted.
(114 U. S. 176)
CHESAPEAKE & O. RY. Co. v. MILLER, Auditor, etc.
(April 6, 1885.)
1. CONSTITUTIONAL LAW-LAW IMPAIRING OBLIGATION OF CONTRACTS-TAXATION OF RAILROAD COMPANY.
A railroad company, having obtained its charter under a general law, which the constitution of the state granting it declares to be subject to legislative alteration and amendment, and its certificate of incorporation being the conveyance to it by the name it has chosen, as a purchaser at a judicial sale and recorded as required, does not thereby succeed to the exemption from taxation accorded to the company to which it has succeeded by such purchase, so as to put it beyond the legislative power to subject its property to taxation thereafter without impairing the obligation of contracts. 2. SAME
RIGHTS OF ONE RAILROAD COMPANY AS PURCHASER OF ANOTHER.
An exemption from taxation upon certain conditions granted by charter to a certain corporation specifically named, does not necessarily accrue to a new corporation which, under another name, succeeds to the old corporation as purchaser. In Error to the Supreme Court of Appeals of the State of West Virginia. Wm. J. Robertson, Geo. F. Edmunds, and Jas. H. Ferguson, for plaintiff, in error. C. C. Watts, for defendant in error.
*MATTHEWS, J. This writ of error brings into review a final decree of the supreme court of appeals of the state of West Virginia dismissing the bill of complaint filed by the plaintiff in error, the error assigned being that that court gave effect to a statute of the state alleged to be void, on the ground