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sue the injunction. The jurisdiction of that court in this case is conferred by the "law relating to proceedings in bankruptcy;" and we think the injunction was authorized by that law. The court of bankruptcy was authorized, by section 40 of the act of 1867, (section 5024 of the Revised Statutes,) where a petition in involuntary bankruptcy was filed, to restrain all persons by injunction from interfering with the debtor's property. The jurisdiction of suits in equity, given to the circuit court by section 2 of the act of 1867, (section 4979 of the Revised Statutes,) was given to it concurrently with the district courts. It must be held that congress, in authorizing a suit in equity, in a case like the present, has, in order to make the other relief granted completely effective, authorized an injunction, as necessarily incidental and consequent, to prevent further proceedings under the levies already made and new levies under the judgment. But for the supposed inhibitory force of section 720, a court of equity, in granting on the merits the other relief here granted, would necessarily have power to award the injunction. We think the circuit court was authorized to award it here, within the exception in section 720.
It is urged that the plaintiff should have made himself a party to the proceedings in the state court, and have contested the matter there, under the authority given to him by section 14 of the act of 1867, (section 5047 of the Revised Statutes,) to defend suits pending against the bankrupt at the time of the adjudication. As the assignment in bankruptcy was not made till October 1, 1874, and the judgment and the levy under the first execution were in May, 1874, we do not think the assignee was called upon to take any steps in the state court, after the assignment, to obtain relief. He was entitled to pursue the remedy he did.
The cases of Krippendorf v. Hyde, 110 U. S. 276, S. C. 4 SUP. CT. REP. 27, and Covell v. Heyman, 111 U. S. 176, S. C. 4 SUP. CT. REP. 355, are relied on by the appellant to show that the decree in this case was erroneous. The view urged is that, by virtue of the levy by the sheriff, the state court acquired custody, control, and jurisdiction of the property, which could not be disturbed by the circuit court. But the doctrine of those cases has no application in favor of the appellant in a case like the present. In the first case it was held that after property had been attached by a marshal of the United States, on mesne process from a circuit court of the United States, a third person, claiming its ownership, could, without reference to citizenship, come into the circuit court for redress, by ancillary proceedings. In the second case it was held, in pursuance of the decision in Freeman v. Howe, 24 How. 450, that possession of property by a marshal of the United States, under a writ of execution from a circuit court of the United States, could not be dis turbed by virtue of a writ of replevin from a state court, issued by a third person. E converso, as was held in Taylor v. Carryl, 20 How. 583, property seized by a sheriff, under process of attachment from a state court, cannot be taken from the sheriff by initial admiralty process, issuing from a district court of the United States. But those were none of them cases where, under the bankruptcy act, an assignee in bankruptcy claimed a paramount title, and resorted to regular judicial proceedings to first vacate and declare void the adverse title, and sweep it away, and then have such final process in regard to the subject-matter of the title as should be necessary to make the decree effective. And in Covell v. Heyman, the court, speaking by Mr. Justice MATTHEWS, after explaining the point of the decision in Freeman v. Howe, says: "The same principle protects the possession of property, while thus held by process issuing from state courts, against any disturbance under process of the courts of the United States, excepting, of course, those cases wherein the latter exercise jurisdiction for the purpose of enforcing the supremacy of the constitution and laws of the United States." This exception includes the present case. The bankruptcy proceeding dissolved the state
attachment, and the bankruptcy act conferred on the assignee a paramount title, which he was empowered by that act to enforce, by proper equitable remedies, in the circuit court, against the adverse title set up by virtue of the suit in the state court. Decree affirmed.
(114 U. S. 138)
FARMINGTON VILLAGE CORP. v. PILLSBURY.
1. REMOVAL OF CAUSES-ACT OF 1875-COLLUSIVE ACTS IN ORDER TO GIVE JURISDICTION. In order to protect courts as well as parties against frauds upon the jurisdiction of United States courts, the act of 1875 made it the duty of a federal court, at any time when it satisfactorily appeared that a suit did not really and substantially involve a dispute or controversy properly within its jurisdiction, or that the parties had been improperly made or joined for the purpose of creating a case cognizable under that act, to proceed no further therein, and to dismiss the suit, or remand it to the state court from which it had been removed.
ASSIGNMENT OF BONDS TO CITIZEN OF ANOTHER STATE.
A federal court will not entertain a cause brought by a resident of Massachusetts to recover upon a bond given by a corporation in Maine, when it appears that the bond had been previously assigned to plaintiff by its bona fide holder, a resident of Maine, in order to give jurisdiction of the controversy to such court.
In Error to the Circuit Court of the United States for the District of Maine. Wm. L. Putnam, for plaintiff in error. Chas. F. Libby, for defendant in
WAITE, C. J. This was a suit upon coupons for semi-annual interest on the bonds of the Farmington Village Corporation, and among the defenses set up was one to the effect that the plaintiff was not a bona fide holder of the coupons in suit, but that they were placed in his hands merely for the purpose of bringing a suit in the circuit court of the United States. The case was tried by the court without the intervention of a jury, and comes here with a special finding of facts, and a certificate of division of opinion between the judges holding the court upon certain questions arising at the trial. Among the questions certified was this: "Whether the plaintiff can maintain an action in this court upon the coupons declared upon, the bonds or instruments to which they were attached not being assigned to him, but having been issued to and always held by citizens of Maine.'
The facts applicable to this question, which appear in the special findings, are these:
*The bonds from which the coupons were cut were issued by Farmington village under a private statute passed by the legislature of Maine authoriz ing the village corporation to raise money to aid in the extension of the road of the Androscoggin Railroad Company to some point within or near the limits of the village. The bonds were issued by the assessors and treasurer of the village to a committee of citizens, who were authorized to sell and dispose of them for the purpose mentioned in the statute. Before the committee received any of the bonds from the assessors and treasurer, and before July 1, 1870, which was the date of the bonds, Jonas Burnham and 11 others, all citizens, owners of property subject to taxation, and tax-payers in the village corporation, filed a bill in equity in the supreme judicial court of the state of Maine, in Franklin county, against the railroad company, the assessors and treasurer, and the committee of the village, to enjoin them from issuing the bonds, on the ground of a want of authority of law for that purpose. This suit was entered at the July term, 1870, of the court, and held under advisement until the third of August, 1872, when the bill was dismissed without prejudice. After this, on the twelfth of August, 1872, other tax-payers filed another bill of the same general character against the same
defendants and the village corporation to obtain substantially the same relief. To this bill the village corporation filed an answer, and the railroad company a general demurrer. The case was heard by the court at the July term, 1873, and kept under advisement until August 27, 1878, when a decree was rendered sustaining the bill and granting the injunction prayed for. The opinion of the court is reported in 70 Me. 515, and is to the effect that the statute authorizing the village corporation to aid the extension of the railroad was unconstitutional and void. This opinion was concurred in by only four of the eight judges composing the court at the time of the hearing. One judge, who sat in the cause, died while the opinion was in his hands for examination, and his death made the four judges a majority of the court at the time of the decision.
Notwithstanding the pendency of the original suit, the bonds were put out, and, with the exception of a few only, were bought by citizens of Farmington and members of the village corporation. The coupons in suit were collected from various holders of the bonds, all residents of Farmington and citizens of the state of Maine, about May, 1880, and transferred to the plaintiff, a citizen of Massachusetts, separate from the bonds. The plaintiff gave his note and agreement for these coupons to the agent of the holders who had taken them to dispose of, as follows:
BOSTON, May 5. 1880.
"For value received I promise to pay to P. Dyer five hundred dollars in two years, with interest. E. F. PILLSBURY.” "BOSTON, May 5, 1880.
"Whereas, I have this day bought of P. Dyer, of Farmington, coupons of the Farmington village corporation to the amount of $7,922, and given him my note for the same; as a further consideration for said coupons, I agree that, if I succeed in collecting the full amount of said coupons, I will pay him fifty per cent. of the net amount collected above said five hundred dollars, and pay him as soon as I collect the money from said corporation.
This suit was begun July 1, 1880.
"E. F. PILLSBURY."
By the original judiciary act of September 24, 1789, c. 20, (1 St. 73,) it was provided (section 11) that no district or circuit court should "have cognizance of any suit to recover the contents of any promissory note or other chose in action in favor of an assignee, unless a suit might have been prosecuted in such court to recover the said contents if no assignment had been made, except in cases of foreign bills of exchange.' The same act provided (section 12) for the removal of suits from a state court to the circuit court by a defendant, and he was required to file his petition for such a removal at the time of entering his appearance in the state court.
By the act of March 3, 1875, c. 137, § 1, (18 St. 470,) section 11*of the act of 1789 was changed so as to provide that the circuit and district courts should not have cognizance of any suit founded on contract in favor of an assignee, unless a suit might have been prosecuted in such court to recover thereon if no assignment had been made, except in cases of promissory notes negotiable by the law-merchant and bills of exchange. By the same act, sections 2 and 3, removals could be effected by either party, when the necessary citizenship existed, if a petition was filed therefor in the state court, before or at the term at which the cause could be first tried, and before the trial thereof. This last act also contained this provision, (section 5:) "If, in any suit commenced in a circuit court, or removed from a state court, * * * it shall appear to the satisfaction of the circuit court, at any time after such suit has been brought or removed thereto, that such suit does not really and substan. tially involve a suit or controversy properly within the jurisdiction of said
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 be tween 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 satisfactorily appeared that a suit did not "really and substantially involve a dispute 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 defendint; 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