A bill in equity was filed in a state court by a creditor of a
partnership to reach its entire property. The prayer of the bill
was that judgments
Page 132 U. S. 572
confessed by the firm in favor of various defendants, some of
whom were citizens of the same state with the plaintiff, might be
set aside for fraud. On the allegations of the bill, there was but
a single controversy, as to all of the defendants. One of the
defendants, who was a citizen of a different state from the
plaintiff, removed the entire cause into a circuit court of the
United States. After a final decree for the plaintiff, and on an
appeal therefrom, this Court held that the case was not removable
under § 2 of the Act of March 3, 1875, 18 Stat. 470, and reversed
the decree and remanded the case to the circuit court with a
direction to remand it to the state court, the costs of this court
to be paid by the petitioner for removal.
In equity. The cause was argued in fall on the merits. The case
is stated in the opinion.
MR. JUSTICE BLATCHFORD delivered the opinion of the Court.
On the 1st of March, 1883, Chester C. Corbin filed a bill in
equity in the Circuit Court of Cook County in the State of Illinois
against William A. Boies, Benjamin B. Fay, Lucius W. Conkey, and
Julius K. Graves, who had composed the limited partnership of
Boies, Fay & Conkey, in which Graves was the special partner
and the three others were the general partners -- the partnership
being formed under a statute of Illinois -- and doing business in
Chicago, as wholesale grocers and importers. The First National
Bank of Chicago, Illinois,
Page 132 U. S. 573
Alvin F. Shumway, the Bay State Sugar Refining Company, of
Massachusetts, the First National Bank of Westborough,
Massachusetts, Walter Potter, James M. Flower, Curtis H. Remy, and
Stephen S. Gregory, the last three being a firm of attorneys at law
under the name of Flower, Remy & Gregory, Seth F. Hanchett,
Sheriff of Cook County, Illinois, and twenty-one other persons and
corporations were also made defendants to the bill.
The bill set out that the plaintiff was the creditor of the said
limited partnership, as being the owner of two promissory notes
made and endorsed by it, and made the following averments: the
limited partnership carried on business at Chicago from March,
1882, until January, 1883, and contracted debts during that time
amounting to about $400,000. On the 13th of January, 1883, its
assets were insufficient to pay more than about 50 cents on the
dollar of its liabilities, and during the time named, it borrowed
larges sums of money, by loans and discounts of commercial paper
made by it. On or about December 2, 1882, the members of the
partnership, knowing it to be insolvent, and with the intent to
hinder, delay, and defraud such of its creditors as they did not
see fit to prefer, and in contemplation of its insolvency, and with
the intent to prefer certain of their creditors or pretended
creditors and to evade the provisions of the statute of Illinois,
pretended to dissolve the partnership, and recorded in the office
of the County Clerk of Cook County a paper purporting to be a
dissolution of it, but the paper was a mere device contrived by
them to evade the provisions of the statute and to give color of
validity to the acts of Fay and Conkey thereinafter set forth in
executing the judgment notes, warrants of attorney, and confessions
of judgment thereinafter described. After the pretended
dissolution, Fay and Conkey pretended to carry on the business
under the firm name of "Fay & Conkey," and assumed to be the
owners of all the assets of the limited partnership. Boies and
Graves pretended to release and convey to Fay and Conkey all their
interest in such assets, but such release was void as against the
creditors of the limited partnership. By the statute of Illinois
under which the partnership
Page 132 U. S. 574
was formed, all of its assets were pledged to the payment of its
debts ratably, and it was the duty of the four partners, when they
first had knowledge of its insolvency or at the time of its
pretended dissolution, to appoint a trustee to take charge of its
assets and convert them into money and distribute the same ratably
among its creditors. Fay and Conkey, on or about the 22d of
January, 1883, in pursuance of said fraudulent scheme, executed in
favor of six of the defendants seven promissory notes, payable on
demand, with warrants of attorney annexed to confess judgment for
such amount as might appear to be unpaid thereon, with costs and
five percent attorneys' fees, the notes amounting to $91,353.18, of
which one note, for $40,000, was in favor of the First National
Bank of Chicago, and one note, for $17,500, was in favor of the
defendant Graves. On the 22d of January, 1883, judgments were
entered in the Superior Court of Cook County, Illinois, against Fay
and Conkey upon each of the seven notes, together with the costs
and five percent attorneys' fees, in favor of the six defendants
mentioned, there being seven judgments in all, amounting in the
aggregate to $95,965.83, of which one judgment was in favor of the
First National Bank of Chicago for $42,000, and one in favor of
Graves for $18,375. On or about the 22d of January, 1883, Fay and
Conkey, in further pursuance of said fraudulent scheme, executed,
in favor of fifteen of the defendants fifteen promissory notes,
payable on demand, with warrants of attorney to confess judgment
annexed, amounting in the aggregate to $120,999.61, of which one
note, for $27,000, was made in favor of Graves; one, for $6,990, in
favor of Shumway; one, for $10,000, in favor of the Bay State Sugar
Refining Company, of Massachusetts; one, for $12,000, in favor of
the First National Bank of Westborough, Massachusetts, and one, for
$4,300, in favor of Potter. On the 22d of January, 1883, or between
that day and the 26th of January, 1883, inclusive, there were
entered in the Circuit Court of the United States for the Northern
District of Illinois judgments against Fay and Conkey, upon each of
the last-named fifteen notes, in pursuance of said warrants of
attorney, together with the costs and five percent, attorneys'
fees, in
Page 132 U. S. 575
favor of fifteen of the defendants, amounting in the aggregate
to $127,044.61, of which judgments one was in favor of Graves, for
$28,350; one in favor of Shumway, for $7,339.50; one in favor of
the Bay State Sugar Refining Company, for $10,500; one in favor of
the First National Bank of Westborough, Massachusetts, for $12,600,
and one in favor of Potter, for $4,515. On or about the 22d of
January, 1883, and immediately after the entry of the judgments in
the Superior Court of Cook County, the defendants Flower, Remy, and
Gregory, as attorneys for the defendants Boies, Fay, Conkey, and
Graves and as attorneys of record for the respective plaintiffs in
those judgments, caused execution to be issued on each of them
against the property of Fay and Conkey, to the Sheriff of Cook
County, who, by direction of the attorneys, seized and levied on a
large quantity of merchandise of the value of about $75,000, part
of the assets of the limited partnership. The levy and seizure were
made in further pursuance of said fraudulent scheme, and with
intent to delay, hinder, and defraud the plaintiff and other
creditors of the limited partnership, and to give a preference to
each of the defendants in whose favor the judgments were entered.
The sheriff has sold the property seized, with the exception of
about $12,000 worth, which was replevied, and has in his possession
about $54,000 as the proceeds of said sales.
Immediately after four of the judgments in the Circuit Court of
the United States for the Northern District of Illinois were
entered -- namely, that in favor of the Commercial National Bank of
Dubuque, Iowa, for $14,962.50; that in favor of Graves for $28,350;
that in favor of the Dubuque County Bank of Dubuque, Iowa, for
$12,495, and that in favor of the Importers' & Traders'
National Bank of New York City, for $16,800 -- the defendants
Flower, Remy, and Gregory, on the 22d of January, 1883, as the
attorneys of Boies, Fay, Conkey, and Graves, and as the attorneys
of the plaintiffs in those four judgments, caused execution to be
issued on each of them, directed to the marshal of the district,
against the property of Fay and Conkey. The marshal, on the same
day, returned those executions
nulla bona. Thereupon,
Flower, Remy, and Gregory, as attorneys
Page 132 U. S. 576
for the plaintiffs in those four judgments, filed a creditors'
bill in the Circuit Court of the United States for the Northern
District of Illinois, alleging divers frauds on the part of Fay and
Conkey, and praying for the appointment of a receiver. That court
appointed as receiver the defendant Hancock, a brother-in-law of
Flower, and the books of account and assets of the limited
partnership were delivered to him by Fay and Conkey, and he has
possession of them, and is collecting them; the drafts, notes,
accounts, and choses in action amounting to more than $210,000.
Immediately after the entry of the judgments in the circuit court
of the United States in favor of seven of the defendants, including
Shumway, the Bay State Sugar Refining Company, the First National
Bank of Westborough, and Potter, Flower, Remy, and Gregory, as
attorneys of Boies, Fay, Conkey, and Graves, and as attorneys for
the plaintiffs in said seven judgments, caused executions to be
issued upon them to the marshal against the property of Fay and
Conkey. The marshal returned them
nulla bona, and
thereupon Flower, Remy, and Gregory, as such attorneys, and on
behalf of the plaintiffs in the seven judgments, filed a creditors'
bill in the said circuit court of the United States alleging that
Fay and Conkey had concealed their property and praying the
appointment of a receiver. Hancock was appointed such receiver or
his first receivership was extended. The judgments in the circuit
court of the United States were rendered in pursuance of the said
fraudulent scheme on the part of Boies, Fay, Conkey, and Graves.
Upon the entry of each of the judgments before mentioned, there was
added to and included therein a sum equal to five percent of the
original demand on which the judgment was rendered, as attorneys'
fees for the entry thereof, the aggregate amount of such attorneys'
fees being $10,657.65. That amount was an excessive charge for the
service, and was charged for the purpose of absorbing to that
extent the assets of the limited partnership, and Fay and Conkey
are interested therein, and have some secret agreement with said
attorneys for a division of that sum. Flower, Remy, and Gregory are
and have been the attorneys of Boies, Fay, Conkey, and Graves, and
are the
Page 132 U. S. 577
attorneys of Hancock, receiver. The plaintiff has applied to
Hancock, receiver, for an examination of the books of the limited
partnership for the purpose of ascertaining what settlement, if
any, Boies, Fay, and Conkey have made with Graves, or what
settlement Fay and Conkey have made with Boies, but Hancock refused
such examination, and said that such refusal was in accordance with
directions given him by Flower, Remy, and Gregory as his attorneys.
The judgments so entered on confession are, or some one or more of
them is or are, fictitious, and rendered for more than was due to
the plaintiffs therein respectively, and his excess is alleged to
exist in regard to twenty-two of the judgments, including the two
in favor of Graves and those in favor of the First National Bank of
Chicago, Shumway, the Bay State Sugar Refining Company, the First
National Bank of Westborough, Massachusetts and Potter. Fay and
Conkey, at the time the notes and warrants of attorney were made
and the judgments were entered, knew that the limited partnership
was insolvent, and they executed the notes and warrants and
confessed the judgments with the intention of paying and securing
to each of the persons in whose favor the notes and warrants were
executed and the judgments were confessed a preference over any
other creditors of the limited partnership. The confessions were
unlawful acts, prohibited by the statute of Illinois, and the
judgments, and all acts done in pursuance thereof, and all process
issued thereon, and all acts done under such process are void. None
of the persons or firms in whose favor the notes were given knew of
the execution of them until after judgment had been entered
thereon, and all of the judgments were entered without the
knowledge or consent of the persons mentioned as plaintiffs
therein. None of the notes was made in the ordinary course of
business, but they were all made with intent on the part of Fay and
Conkey to carry out the said fraudulent scheme, and all of the
judgments were entered by Flower, Remy, and Gregory, by direction
of Fay and Conkey, or of Fay. The property so taken on execution by
the Sheriff of Cook County, and the assets so transferred to the
possession of Hancock, as receiver, constitute
Page 132 U. S. 578
the whole of the assets of the limited partnership, and its
bona fide debts amount to about $400,000.
The bill waives answers on oath, and prays for a decree that the
pretended transfer of the assets of the limited partnership to Fay
and Conkey was fraudulent and void; that each of the judgments so
entered on confession, the executions issued, and the proceedings
thereon or on their return, and everything done under the judgments
and executions or in any suit based on any of the judgments, and
every sale or transfer involving any of them be declared void; that
it be decreed that all of the goods levied upon under the
executions, and the assets taken possession of by Hancock as
receiver are the property of the limited partnership, and as such
subject to the lien, and charged with the payment of the debt due
to the plaintiff and all other debts owed by the limited
partnership, ratably; that each of the defendants be decreed to pay
to the receiver to be appointed in this suit whatever money they
have received by virtue of their respective judgments, or any suit
based thereon, out of said property; that such money and all moneys
realized by such receiver from the assets of the limited
partnership be paid to its creditors ratably; that such receiver be
appointed to convert the property into money and distribute it;
that the defendants Flower, Remy, Gregory, and the sheriff be
temporarily enjoined from paying over to any person any proceeds of
the property of the limited partnership which they now have or may
hereafter receive under any of said judgments, executions, or
creditors' bills, and that such injunction be made perpetual on a
hearing. Boies, Fay, Conkey, the First National Bank of Chicago,
Flower, Remy, and Gregory, the Sheriff of Cook County, and four
others of the defendants were served with a summons. Flower, Remy,
and Gregory entered an appearance in the suit for Boies, Fay, and
Conkey on the 21st of March, 1883, and on the second of April,
1883, also entered an appearance for themselves, the Sheriff of
Cook County, and two others of the defendants. On the second of
April, 1883, Flower, Remy, and Gregory, as solicitors for the
defendant the First National Bank of Chicago,
Page 132 U. S. 579
served on the solicitors for the plaintiff a notice that, on the
4th of April, 1883, they would present to the Circuit Court of Cook
County a petition and bond, on behalf of that bank, for the removal
of the cause to the Circuit Court of the United States for the
Northern District of Illinois, and ask for an order removing the
cause. The petition and bond were presented, both of them dated
April 2, 1883. The petition was sworn to by the defendant Flower,
one of the firm of Flower, Remy & Gregory, who also executed
the bond as surety. The petition is made by the First National Bank
of Chicago, Illinois, and is entitled in the suit, naming as
defendants those against whom the bill prays process. It states
"that the controversy in said suit is between citizens of
different states, and that your petitioner was at the time of the
commencement of this suit, and still is, a citizen of the State of
Illinois; that Chester C. Corbin, the complainant, was then, and
still is, a citizen of the State of Massachusetts;"
that twelve of the defendants "were then, and still are,
citizens of the State of Illinois;" that four of them "were then,
and still are, citizens of the State of Iowa;" that one of them was
then, and still is, a citizen of the State of New York; one of the
State of Ohio; two of the State of Michigan; three of the State of
Wisconsin; one of the State of Colorado;
"that the defendants the Bay State Sugar Refining Company, the
First National Bank of Westborough, Alvin F. Shum way, and Walter
Potter were then and still are citizens of the State of
Massachusetts,"
and that
"in the said suit above mentioned, there is a controversy which
is wholly between citizens of different states, and which can be
fully determined as between them, to-wit, a controversy between the
said petitioner, who is a citizen of the State of Illinois, and the
said complainant, Chester C. Corbin, who is a citizen of the State
of Massachusetts."
No order appears to have been made by the state court on the
presentation of the petition and bond, but the clerk of that court,
on the 9th of April, 1883, signed a certificate, under its seal, to
a transcript of the record in that court, which was filed in the
Circuit Court of the United States for the northern
Page 132 U. S. 580
District of Illinois on the 11th of April, 1883, and the cause
has since proceeded in the latter court.
The cause was put at issue, proofs were taken by the respective
parties, and, on the 17th of November, 1885 a decree was made by
the court, finding as facts that on or about the 20th of August,
1882, the limited partnership composed of Boies, Fay, Conkey, and
Graves was insolvent, and so continued to the termination of its
business, with the knowledge of each of the members thereof; that
with such knowledge, such members continued to do business until
the 22d of January, 1883, when Fay and Conkey, assuming to be
successors of Boies, Fay & Conkey, confessed seven judgments in
the Superior Court of Cook County, one of them in favor of the
First National Bank of Chicago, and one in favor of Graves, and
fifteen judgments in the said circuit court of the United States,
one of them in favor of Graves, one in favor of the Bay State Sugar
Refining Company, one in favor of Shumway, one in favor of the
First National Bank of Westborough, Massachusetts and one in favor
of Potter; that the members composing the limited partnership of
Boies, Fay & Conkey went through the form of a dissolution
thereof for the purpose of defeating the statute of Illinois which
prohibited insolvent limited partnerships from preferring creditors
and to defraud a part of their creditors; that such partnership was
still subsisting at the time of the confession and entry of each of
the judgments; that the judgments were confessed to prefer certain
creditors, but chiefly to save Graves from loss on account of said
partnership or on account of liabilities incurred by him on
commercial paper made by or on behalf of it; that immediately after
the judgments were entered in the Superior Court of Cook County,
Graves and Fay caused executions to be issued thereon to the
sheriff of that county, who levied them on all the stock in trade
and merchandise of the limited partnership, and sold the property
at public sale, and with its proceeds, on February 26, 1883, paid
to the First National Bank of Chicago, on its judgment, $40,000,
and on the same day paid to Graves, on his judgment in the Superior
Court of Cook County, $9,791.18; that the defendants Flower,
Remy,
Page 132 U. S. 581
and Gregory were employed as counsel by the limited partnership,
and by Graves on his own behalf, to enter the judgments by
confession, and to advise and represent the said firm and Graves in
and about all matters and things affecting it and Graves, and
received from them $2,500 for services rendered and to be rendered
in that behalf; that each of the judgments was confessed for the
full amount due the several preferred creditors, and in some cases
for more than was due, and for five percent in addition thereto for
attorneys' fees, which latter amount was intended as a provision
for Flower, Remy, and Gregory out of the assets of the limited
partnership, and that they received, without right, out of such
assets, on account of attorneys' fees, $8,559.80.
The decree further found that Fay and Conkey had each taken from
the assets of the firm and fraudulently appropriated to his own use
certain specified sums of money; that Graves had, on the 21st and
22d days of January, 1883, fraudulently appropriated to his own use
drafts and checks belonging to the limited partnership amounting to
$2,741.38; that on the 22d and 23d days of January, 1883, and after
the levy of the executions aforesaid, Flower, Remy, and Gregory
collected drafts and checks belonging to the limited partnership
amounting to $1,927.96, which they still held; that the judgments
in favor of the Dubuque County Bank, the Commercial National Bank,
and the Importers' & Traders' National Bank were confessed at
the special instance of Graves; that the judgment in favor of the
Commercial National Bank was not an indebtedness due from the
limited partnership to the bank; that Graves owes that partnership
a sum equal to its assets, which had been applied, by his
direction, in payment of the last-named three judgments; that in a
creditors' suit brought by Graves and the last-named three banks
against Fay and Conkey, Hancock, as receiver, and with the funds in
his hands as such, paid to said three banks, in the aggregate,
$41,525.59, and to Graves, on his judgment in the circuit court of
the United States, $27,232.50; that, in a certain other suit by
creditors' bill in said circuit court of the United States, wherein
the Bay State Sugar Refining
Page 132 U. S. 582
Company, Shumway, the First National Bank of Westborough,
Massachusetts Potter, and three other persons were plaintiffs and
Fay and Conkey were defendants, and in which also Hancock was
receiver, he paid, out of the assets in his hands as such receiver,
to the Bay State Sugar Refining Company on its judgment $2,000 to
that company on the judgment in favor of Shumway, $1,398, to the
First National Bank of Westoborough on its judgment, $2,400, to
Potter on his judgment, $860, and, to the other three persons,
$2,060 in all; that the two creditors' bills above named, one
brought by the Commercial National Bank and others and the second
brought by the Bay State Sugar Refining Company and others, were
each brought and prosecuted with the intention of defrauding the
creditors of the limited partnership of their just rights; that Fay
and Conkey consented to the filing of said bills and the
appointment of a receiver thereunder, and that the limited
partnership was indebted to the plaintiff in the sum of $4,359.31.
The decree then proceeded to adjudge that all the property and
effects held by the limited partnership on the 20th of August,
1882, and subsequently thereto, and when the judgments were
confessed, were a special trust fund for the payment of the firm
debts ratably among its creditors; that Graves pay to the clerk of
the court, within 30 days, for the benefit of the plaintiff and
such other creditors of the limited partnership as should prove
their right to share in the distribution of the assets of the firm,
$100,796.71 with interest; that Flower, Remy, and Gregory in like
manner pay to the clerk of the court $9,886.57; that Fay and Conkey
pay in like manner $2,728.92; that execution issue against the
property of such defendants respectively in case of nonpayment;
referring it to a master to take proof of the debts of the
creditors of the limited partnership; charging Graves, Fay, and
Conkey with the costs of the cause, and reserving all matters not
decreed upon, including the right to decree against the creditors
in whose favor the judgments were confessed, with leave to the
plaintiff to apply for such further order as might be necessary in
relation to any matter not finally determined by that decree.
Page 132 U. S. 583
Graves and Flower, Remy, and Gregory prayed separate appeals to
this Court, which were allowed. The appeal of Flower, Remy, and
Gregory was afterwards dismissed while it was pending in this
Court.
On the 23d of January, 1888, the plaintiff and other creditors
of the limited partnership, having proved their claims before the
master to the amount of $125,737.34, and the master having reported
in favor of said claims on the 9th of July, 1886, filed a petition
in the cause stating that Graves had failed to pay any part of the
amount decreed against him; that but very little more had been
realized under the decree of November 17, 1885, than sufficient to
pay the costs, expenses, and solicitors' fees incurred in the suit,
and that the petitioners insisted that under the proofs already
taken, they were entitled to a decree against the First National
Bank of Chicago for $50,000. They therefore prayed for a decree
against that bank requiring it to pay, within thirty days, to the
receiver in the cause $50,000, with interest at six percent per
annum from March 1, 1883.
On the 23d of April, 1888, the circuit court, held by Judge
Gresham, delivered an opinion, 34 F. 692, in which it recited the
grounds on which the decree of November 17, 1885, had been made and
ordered a decree against the First National Bank of Chicago. The
decree was entered on the 3d of May, 1888. It found that on the
judgment for $40,000 in favor of the bank, confessed by Fay and
Conkey as successors of the limited partnership, on January 22,
1883, the bank had, on or about February 26, 1883, received out of
the sale of the assets of that partnership by the sheriff, on an
execution in its favor, $38,708.35; that at the time of the
pretended dissolution of the partnership in October, 1882, and on
the second of December, 1882, and later, the bank knew that such
partnership was insolvent and unable to pay all its creditors, and
knew that the contract for its dissolution was a pretended one and
entered into for the purpose of protecting Graves from liability as
special partner and as endorser for the firm; that the bank
cooperated with the members of the partnership for the
accomplishment
Page 132 U. S. 584
of such purpose, and that the judgment was confessed for that
purpose and to obtain an illegal preference over other creditors.
It decreed that the bank pay to the receiver, within thirty days,
the sum so received, with interest at six percent from February 26,
1883, amounting in all to $50,721.95, and that, if it were not
paid, execution should issue against the property of the bank.
The bank prayed an appeal to this Court. The record on the
appeal of Graves was filed in this Court October 11, 1886, and the
record on the appeal of the bank was filed October 17, 1888.
Both of the appeals have been argued in full on the merits. But
the preliminary question arises as to the jurisdiction of the
circuit court in the case by virtue of the removal of the cause
from the state court on the petition of the bank, and the point is
taken by the respective appellants that the circuit court acquired
no jurisdiction because at the time of the commencement of the suit
and at the time of its removal, as appears by the petition for
removal, the plaintiff and four of the defendants, namely, Shumway,
Potter, the Bay State Sugar Refining Company, and the First
National Bank of Westborough, were all of them citizens of
Massachusetts. The determination of this question must depend upon
whether, at the time of the commencement of the suit, there was a
separable controversy between the plaintiff and the petitioner for
removal, the First National Bank of Chicago. If there was but a
single controversy in the entire cause, of course, there could be
no separable controversy between the plaintiff and the bank.
By section 2 of the Act of March 3, 1875, c. 137, 18 Stat. 470,
under which the removal took place, it was provided that when, in
any suit mentioned in the section,
"there shall be a controversy which is wholly between citizens
of different states and which can be fully determined as between
them, then either one or more of the plaintiffs or defendants
actually interested in such controversy may remove said suit into
the Circuit Court of the United States for the proper
district."
The petition for removal states that in the suit "there is a
Page 132 U. S. 585
controversy which is wholly between citizens of different states
and which can be fully determined as between them" -- namely, a
controversy between the plaintiff and the bank. But we are of
opinion that there was in the suit but a single controversy, and
that that controversy was not wholly between citizens of different
states. There were various branches of the controversy, various
defendants, and various claims by the several defendants; but the
controversy was between the plaintiff, on the one side, and the
defendants who were alleged by the bill to have claims adverse to
the plaintiff against the property of the limited partnership, as a
whole, on the other side.
The case as made by the bill, and as it stood at the time of the
petition for removal, is the test of the right to removal. The bill
was filed to reach the entire property of the limited partnership.
In order to do that, it was necessary to sweep away not some, but
all, of the confessed judgments and all the rights obtained by
executions and levies thereunder, and to restore to the assets and
moneys of the partnership in the hands of the court the assets and
moneys which had been fraudulently diverted therefrom by the
members of the partnership, with the cooperation of the various
defendants. The bill states that promissory notes were given in
favor of the four defendants who were citizens of Massachusetts;
that judgments on confession, in pursuance of warrants of attorney,
were rendered in the Circuit Court of the United States for the
Northern District of Illinois against Fay and Conkey in favor of
the four Massachusetts defendants; that immediately after the entry
of those judgments, Flower, Remy, and Gregory, as the attorneys of
the members of the limited partnership, and as the attorneys of
record for the plaintiffs in those judgments, caused executions to
be issued thereon to the marshal of the district, against the
property of Fay and Conkey; that the same were returned
nulla
bona; that thereupon Flower, Remy, and Gregory, as such
attorneys, and on behalf of the plaintiffs in said four judgments
and in three others, filed a creditors' bill in the circuit court
of the United States to reach the property of Fay and Conkey,
in
Page 132 U. S. 586
which suit a receiver was appointed; that the said four
judgments were entered in pursuance of the fraudulent scheme
alleged in the bill, on the part of the members of the limited
partnership, to hinder, delay, and defraud its creditors and evade
the provisions of the statute of Illinois, and to prefer the
plaintiffs in those several judgments over other creditors; that
the four judgments in favor of the citizens of Massachusetts were
largely in excess of the amount due to them respectively at the
time of the entry of the judgments, and that those judgments are
void. It prays for a decree declaring the four judgments to be void
and directing the payment to the receiver of all moneys received by
such four defendants under the judgments, or under any proceedings
based thereon. These allegations, with the others contained in the
bill, made but a single controversy as to all of the defendants.
The relief asked could not have been granted unless all who were
made defendants were parties. Therefore all of them were necessary
parties.
In
Brinkerhoff v. Brown, 6 Johns.Ch. 139, it was held
that a creditors' bill could be filed against several persons
relative to matters of the same nature, forming a connected series
of acts, all intended to defraud and injure the plaintiffs, and in
which all the defendants were more or less concerned, though not
jointly in each act. The case there arose on a demurrer to the
bill. It was urged that the bill was multifarious in uniting all
the defendants and distinct and unconnected matters. Fraud was
charged against the five trustees of the Genesee Company in
confessing judgments and causing the property of the company to be
sold. There was a charge of a combined fraud, affecting seven of
the defendants, two of whom were not concerned in every part of the
fraudulent conduct. All the acts sought to be impeached were
alleged to have been done with a fraudulent intent as respected
creditors. The court says:
"There was a series of acts on the part of the persons concerned
in this Genesee Company, all produced by the same fraudulent intent
and terminating in the deception and injury of the plaintiffs. The
defendants performed different parts in the same drama, but it was
still one piece, one entire performance,
Page 132 U. S. 587
marked by different scenes, and the question now occurs whether
the several matters charged are so distinct and unconnected as to
render the joining of them in one bill a ground of demurrer."
The court then reviews the leading cases on the subject, and
says that the principle to be deduced from them is
"that a bill against several persons must relate to matters of
the same nature, and having a connection with each other, and in
which all the defendants are more or less concerned, though their
rights in respect to the general subject of the case may be
distinct;"
that the general right claimed by the bill was a due application
of the capital of the company to the payment of the judgments of
the plaintiffs; that the subject of the bill and of the relief, and
the only matter in litigation, was the fraud charged in the
creation, management, and disposition of the capital of the
company; that in that charge, all the defendants were implicated,
though in different degrees and proportions, and that the case fell
within the reach of the principle stated, and the demurrer could
not be sustained.
This ruling of Chancellor Kent was considered, recognized, and
approved by the Court of Errors of New York, without a dissenting
voice, in
Fellows v. Fellows, 4 Cowen 682.
See also
Railroad Co. v. Schuyler, 17 N.Y. 592 and 34 N.Y. 30. The
principle above stated has been applied by this Court in
considering the question of removal in cases like the present.
In
Ayers v. Chicago, 101 U. S. 184, a
bill was filed in a state court of Illinois, by the City of Chicago
against citizens of Illinois, to enforce a deed of trust. A citizen
of Alabama, having a judgment against one of the defendants and
claiming a lien on the property covered by the deed of trust, was
admitted as a party defendant to the suit and filed a cross-bill to
enforce such lien and remove the suit into the federal court on the
ground that in the original suit there was a controversy wholly
between him and the original plaintiff, and that in the cross-suit
the controversy was wholly between citizens of different states.
The cause was remanded, and on appeal this Court affirmed that
decision, saying that the original bill and the cross-bill
constituted one suit; that the intervenor
Page 132 U. S. 588
was allowed to take part in a controversy between the city and
the debtor; that he had no dispute with the debtor and none
separably with the city; that he and the debtor had a controversy
with the city as to its lien on the property; that the debtor, who
was on the same side of the controversy with him, was a citizen of
the same state with the city, and that, such being the case, the
suit was not removable.
In
Fidelity Ins. Co. v. Huntington, 117 U.
S. 280, it was held that a creditor's bill to subject
encumbered property to the payment of the judgment of the creditor
by selling it and distributing its proceeds among lienholders
according to priority created no separate controversy as to the
separate lienholders, parties defendant, within the meaning of the
removal act, although their respective defenses might be separate.
The Court said:
"The suit as brought by Huntington is a creditor's bill to
subject encumbered property to the payment of his judgment by a
sale and distribution of the proceeds among lienholders according
to their respective priorities. There is but a single cause of
action, and that is the equitable execution of a judgment against
the property of the judgment debtor. This cause of action is not
divisible. Each of the defendants may have a separate defense to
the action, but we have held many times that separate defenses do
not create separate controversies within the meaning of the removal
act.
Louisville & Nashville Railroad v. Ide,
114 U. S.
52;
Putnam v. Ingraham, 114 U. S.
57;
Pirie v. Tvedt, 115 U. S.
41;
Starin v. New York, 115 U. S.
248, and
Sloane v. Anderson, 117 U. S.
275. The judgment sought against the Fidelity Company is
incident to the main purpose of the suit, and the fact that this
incident relates alone to this company does not separate this part
of the controversy from the rest of the action. What Huntington
wants is not partial relief, settling his rights in the property as
against the Fidelity Company alone, but a complete decree, which
will give him a sale of the entire property, free of all
encumbrances, and a division of the proceeds as the adjusted
equities of each and all the parties shall require. The answer of
this company shows the questions that will arise under this branch
of the one controversy,
Page 132 U. S. 589
but it does not create another controversy. The remedy which
Huntington seeks requires the presence of all the defendants, and
the settlement, not of one only, but of all the branches of the
case."
To the cases above cited may be added
Plymouth Mining Co. v.
Amador Canal Co., 118 U. S. 264;
Little v. Giles, 118 U. S. 596,
118 U. S. 601;
East Tennessee Railroad v. Grayson, 119 U.
S. 240;
Brooks v. Clark, 119 U.
S. 502,
119 U. S. 511;
Laidly v. Huntington, 121 U. S. 179;
Peninsula Iron Co. v. Stone, 121 U.
S. 631;
Thorn Wire Hedge Co. v. Fuller,
122 U. S. 535, and
Young v. Parker's Administrator, ante, 132 U. S. 267. The
transcript of the record from the state court in the present case
was filed in the circuit court of the United States on the 11th of
April, 1883. The decisions of this Court above cited were all but
one of them made at and after October term, 1884.
There is nothing in the record before us which shows that the
question of the removability of the present case, on the petition
for removal which was filed, was raised in the circuit court either
at the time the transcript from the state court was presented to be
filed or afterwards by a motion to remand except what may be
inferred from a statement in the record in the
Graves case
at the conclusion of the testimony of a witness taken April 6,
1883, that the counsel for the plaintiff stated that he had been
before Judge Drummond in the United States Circuit Court for the
Northern District of Illinois, and the judge had taken jurisdiction
of the cause under the petition for removal. We find reported,
however, the case of
Corbin v. Boies, 18 F. 3 (the present
case), where Judge Drummond, in an opinion which appears to have
been given on an application to order the transcript from the state
court to be filed in the circuit court, and the case to be docketed
in the latter court, held that there was in the case a controversy
which was wholly between the plaintiff and the First National Bank
of Chicago -- namely a controversy as to whether the judgment in
favor of that bank was a valid judgment as against the limited
partnership, and the plaintiff as one of its creditors, and that
the bank was not interested in any controversy
Page 132 U. S. 590
which the plaintiff might have with other creditors of the firm.
But, as already shown, this view was erroneous.
Under the provision of section 5 of the Act of March 3, 1875, 18
Stat. 472, that if, in any suit removed from a state court to a
circuit court of the United States, it shall appear to the
satisfaction of said circuit court at any time after such suit has
been removed thereto that it does not really and substantially
involve a dispute or controversy properly within the jurisdiction
of said circuit court, it shall proceed no further therein, but
shall remand the suit to the court from which it was removed, as
justice may require, this Court has held that when it appears to
this Court that the case is one of which, under that provision, the
circuit court should not have taken jurisdiction, it is the duty of
this Court to reverse any judgment given below and remand the cause
with costs against the party who wrongfully invoked the
jurisdiction of the circuit court.
Williams v. Nottawa,
104 U. S. 209.
This rule has been recognized by this Court to the extent even of
taking notice of the want of jurisdiction in the circuit court,
although the point has not been formally raised in that court or in
this Court, in
Turner v. Farmers' Loan & Trust Co.,
106 U. S. 552,
106 U. S. 555;
Mansfield &c. Railroad v. Swan, 111 U.
S. 379,
111 U. S. 386;
Farmington v. Pillsbury, 114 U. S. 138,
114 U. S. 144,
and
King Bridge. Co. v. Otoe Co., 120 U.
S. 225,
120 U. S.
226.
In
Stevens v. Nichols, 130 U.
S. 230, it was held that if a proper diversity of
citizenship does not appear by the record to have existed both at
the commencement of the suit and at the time of filing the petition
for removal, this Court will remand the cause to the circuit court
with directions to send it back to the state court with costs
against the party at whose instance the removal was made. This same
principle was asserted in
Crehore v. Ohio & Mississippi
Railroad, 131 U. S. 240,
where it was also held that where a suit is entered upon the docket
of a circuit court as removed on the ground of the diverse
citizenship of the parties, and was never in law removed, no
amendment of the record made in the circuit court can affect the
jurisdiction of the state court or put the case rightfully on the
docket of the circuit court as of the date when it was so
docketed.
Page 132 U. S. 591
This same rule was applied at the present term in
Jackson v.
Alle, ante, 132 U. S. 27, where
the judgment of the circuit court was reversed at the cost of the
parties who attempted to remove the cause, and was remitted to the
circuit court with directions to remand it to the state court.
There is nothing in the foregoing views which involves the
decision of this Court in
Barney v. Latham, 103 U.
S. 205, which was to the effect that where in a case
there was in fact an entirely separate controversy between the
plaintiffs and several defendants petitioning for removal, with
which controversy another defendant, a citizen of the same state
with one of the plaintiffs, had no necessary connection, and which
controversy could be fully determined as between the parties
actually interested in it, without the presence as a party in the
cause of such other defendant, not only could there be a removal,
but the removal carried with it into the federal court all the
controversies in the suit between all parties to it.
It is suggested that it is a hardship to the plaintiff to
reverse his decrees for want of jurisdiction in the circuit court
after he has prosecuted his suit in that court successfully on his
being taken into that court adversely more than six years ago. The
answer is that the jurisdiction of this Court in the present case
to review the question of the jurisdiction of the circuit court
could only arise on the hearing of an appeal from a final decree of
the latter court, because, by § 5 of the Act of March 3, 1875, 18
Stat. 472, this Court was authorized to review only an order of the
circuit court remanding a cause, and not one retaining jurisdiction
over it. Even that provision was repealed by § 6 of the Act of
March 3, 1887, 24 Stat. 555, and this Court can now review a
question as to the jurisdiction of a circuit court only in
reviewing a final judgment or decree, although, by the Act of
February 25, 1889, 25 Stat. 693, it may do so in a case not
involving over $5,000.
It results from the foregoing considerations that both of
the decrees of the circuit court as well that against Graves as
that against the First National Bank of Chicago must be reversed,
and the case be remanded to the circuit court with a direction to
remand it to the Circuit Court of Cook
Page 132 U. S. 592
County, Illinois, the costs of this Court to be paid by the
First National Bank of Chicago, the petitioner for
removal.
MR. CHIEF JUSTICE FULLER did not sit in this case or take any
part in its decision.