A circuit court can make no decree in a suit in the absence of a
party whose rights must necessarily be affected thereby.
Two attorneys representing two separate parties delivered a
promissory note to a third person as bailee and took his receipt
therefor, in which he stated that he held it subject to their joint
order, and to be dealt with as they might jointly direct. One of
the separate parties filed a bill in equity against the bailee to
compel him to deliver up the proceeds of the note (which had been
paid) without making parties to the bill the two attorneys and the
other party, claiming that he was entitled to do so by reason of an
award in an arbitration that had taken place by which it had been
decided that he should become the owner of the note on the
performance of certain conditions which he had performed.
Held that they were necessary parties to the bill and that
no decree could be made by the court in their absence.
This is a suit in equity brought in the Circuit Court of the
United States for the District of Massachusetts by Charles A.
Gregory, a citizen of Illinois, against William C. N. Swift and
John G. Stetson, citizens of Massachusetts, for the alleged
violation by Stetson of the following contract of bailment, as
respects the $15,000 note therein mentioned:
"Boston, Dec. 24, 1886"
"Received of Thomas H. Talbot, Esq., as attorney for Mary H.
Pike, executrix of Frederic A. Pike, and Francis A. Brooks, Esq.,
as attorney of Charles A. Gregory, two notes of hand made or signed
by W. C. N. Swift, of New Bedford, dated April 20, 1883, one for
$15,000, on two years' time, and one for $20,334.60, three years'
time, payable to Charles F. Jones. Said notes are to be held by me,
subject to the joint order and direction of the said Talbot and
Brooks, and dealt with as they may jointly direct."
"JOHN G. STETSON"
The amended bill filed on the 30th of January, 1889, alleged
that on the 10th of January, 1887, complainant filed a bill in
Page 133 U. S. 580
that court against the defendants Swift and Stetson and one
Thomas H. Talbot, and referred to that bill as in part incorporated
therein. The material allegations of that bill so far as concerns
this case are as follows: that on or about the 16th of December,
1884, complainant filed a bill in one of the state courts of
Massachusetts against the defendant Swift and one Frederic A. Pike,
of Calais, in the State of Maine, to obtain possession of the two
notes heretofore mentioned, then in the possession of Pike, which
suit was afterwards removed into the court below, where it was then
pending and undetermined; that the defendants to that suit filed
their respective answers to the bill, issues were joined, proofs
taken, and the case assigned for final hearing, but was not heard,
for the reason that it was then agreed in writing between Pike and
complainant to refer their controversy to the Hon. E. R. Hoar to
determine the true ownership and rights of possession of the notes
referred to, and in case of the death of either or both of them
their respective legal representatives should be bound by the award
to be made; that soon after the submission to the referee, Pike
died testate, having appointed his wife, Mary A. Pike, executrix of
his will and residuary legatee of his estate, who proceeded in
relation to the matter before the referee in the same manner as if
the submission had been entered into by her personally, and that
the referee after hearing the parties interested made and published
the following award, and delivered a copy of the same to
complainant:
"The undersigned, referee in the matter submitted to him by
Charles A. Gregory and Frederic A. Pike, under the submission, a
copy of which is hereto annexed, having duly heard the parties,
awards and determines thereon, and this is my final award in the
premises, as follows, to-wit: that the said Pike is not entitled to
detain or withhold from said Gregory the two Swift notes mentioned
or described in the submission except for the purpose of securing
the payment of another certain note, signed by G. W. Butterfield
and Charles F. Jones, for the sum of $2,437.50, dated July 26,
1883, and payable to C. H. Eaton, of Calais, Me., or order, a copy
of which is hereto
Page 133 U. S. 581
annexed; that upon or after the said Eaton note, or whatever sum
is now due thereon with interest as stipulated in said note, shall
have been paid by the said Gregory, the said Gregory will be
entitled to the possession of the two Swift notes, one of $15,000,
and one of $20,334.60. He also finds and determines that upon the
payment of said Eaton note by said Gregory, he will be entitled to
a transfer or delivery to himself of said Eaton note, and to the
benefit of any sums which may be recovered of the said Butterfield
and Jones on said note. Dated at Boston, the thirtieth day of
November, in the year one thousand eight hundred and
eighty-six."
"E. R. HOAR"
"On or before January 1, 1884, we promise to pay C. H. Eaton, or
order, two thousand four hundred and thirty-seven dollars and fifty
cents, with interest at the rate of one percent per month from
date. Value received."
"G. W. BUTTERFIELD"
"CHARLES F. JONES"
It was then alleged that afterwards, Mrs. Pike, having examined
the award which had been temporarily returned to the referee for
that purpose, undertook to revoke the power under which the referee
had acted and to vacate and annul the award made by him, whereupon
the referee, upon being waited upon by complainant through F. A.
Brooks, his attorney, accompanied by Thomas H. Talbot, the attorney
for Mrs. Pike, returned the award to complainant and gave the said
notes to said attorneys, who thereupon took them to defendant
Stetson, receiving from him the receipt heretofore set out in full;
that complainant on the 4th of January, 1887, in order to entitle
himself to the sole and exclusive possession of the notes
heretofore mentioned, paid the note of $2,437.50 in favor of C. H.
Eaton, mentioned in the award, whereby he became entitled to
receive from the defendant Stetson the two notes referred to, the
rights of Mrs. Pike and her attorney, Talbot, in and to the same
thus having ceased and become of no effect, and that by an
instrument in writing dated December 5, 1884, Charles F. Jones, the
payee of the two notes
Page 133 U. S. 582
transferred and assigned them to complainant and authorized him
to sue for and collect them, using the payee's name for that
purpose, and to deal with them generally as his own property.
The bill in this case then alleged that the defendants, Swift
and Stetson, each answered that bill, and that issue was duly
joined upon those answers; that on the 13th of June, 1887, while
the defendant Stetson was in possession of the $15,000 note by
virtue of the contract heretofore set out in full, the defendant
Swift filed his petition in the old equity cause of
Gregory v.
Pike and Swift to enjoin the suing out or levying of an
execution upon any judgment that might be rendered upon the law
side of the court upon that note, which had matured and had been
sued upon in the name of the payee Jones, until the final
determination of the rights of the parties to that equity cause;
that on the 9th of July, it was ordered by the court below in the
old equity cause that the defendant Stetson file the $15,000 note
in the action at law of
Jones v. Swift, and that upon the
entry of judgment in that action, the defendant Swift be directed
to pay into the registry of the court the amount of that judgment,
the same to be held subject to the rights of the parties claiming
the note, and to abide the decision of the court in that cause, and
that in obedience to those orders of court, and by the voluntary
procurement of the defendant Swift, judgment was entered in the
action at law against Swift on the $15,000 note, the note was
delivered up by the defendant Stetson and filed with the papers in
that action, and the amount of the judgment was paid by Swift to
the clerk of the court below, who then claimed to hold the same
"subject to the rights of the parties claiming said note and to
abide the decision of the court" in the old equity cause of
Gregory v. Pike et al.
The bill then alleged that all the orders and proceedings
heretofore mentioned as pertaining to that old cause in equity were
irregular, improper, and contrary to law; that at and before the
time of the passage of said orders, the cause in which they were
made had been abated by the death of Pike, one of the defendants
thereto, which fact was suggested to the
Page 133 U. S. 583
court by complainant on the 6th of January, 1887; that
complainant is entitled to the benefits of the action at law
heretofore mentioned, and to the proceeds of the judgment obtained
therein, he having by leave of the court intervened in that action
as a claimant of the note in suit before the entry of judgment upon
it; that the amount of the judgment having been paid over to the
defendant Stetson, as clerk of the court, the same was entered
satisfied by him, and the money so received was deposited in bank,
where it has since remained, the $15,000 note being filed in said
old equity cause, and that the defendant Stetson claims to have
been duly authorized by the aforesaid orders of court to deal with
the note as above set forth, and to be exempted by those orders
from all liability to complainant under the before-mentioned
receipt of December 24, 1886.
The bill prayed that the money paid by the defendant Swift to
the defendant Stetson, as clerk of the court, in satisfaction of
the judgment rendered on the $15,000 note, be remanded to Stetson
in his individual capacity as if no orders, as above recited, had
been passed, and that he be ordered to pay over the proceeds of
that note to complainant, and for other and further relief.
Later amendments to the prayer of the bill were that complainant
be decreed to have become the sole owner of the $15,000 note prior
to July 9, 1887, and that the defendant Stetson's possession of the
same thereafter was that of a trustee holding for complainant's
sole use and benefit, and a further prayer that if the relief
sought against Stetson could not be granted, the defendant Swift be
ordered and decreed to pay to complainant the amount of said
$15,000 note. The defendants filed separate demurrers to the bill,
which were sustained by the court and the bill was dismissed.
Gregory v. Swift, 39 F. 708. The complainant thereupon
prosecuted his appeal to this Court.
Page 133 U. S. 585
MR. JUSTICE LAMAR, after stating the case as above, delivered
the opinion of the Court.
The bill having been dismissed by agreement as respects the
defendant Swift, the only questions in the case for our
consideration are those relating to the demurrer of the defendant
Stetson. That demurrer rests on ten grounds, but the court below
considered only one of them,
viz., the ninth one, which is
as follows:
"This bill is defective for want of proper parties in that if
does not make Mary H. Pike, executrix of Frederic A. Pike, Thomas
H. Talbot and Francis A. Brooks, or either of them, parties
thereto. "
Page 133 U. S. 586
We are of opinion that the decree of the court below must stand.
The rule as to who shall be made parties to a suit in equity is
thus stated in Story's Eq. Pl. ยง 72:
"It is a general rule in equity (subject to certain exceptions,
which will hereafter be noticed) that all persons materially
interested, either legally or beneficially, in the subject matter
of a suit are to be made parties to it, either as plaintiffs or as
defendants, however numerous they may be, so that there may be a
complete decree, which shall bind them all. By this means the court
is enabled to make a complete decree between the parties, to
prevent future litigation by taking away the necessity of a
multiplicity of suits, and to make it perfectly certain that no
injustice is done, either to the parties before it or to others who
are interested in the subject matter, by a decree which might
otherwise be grounded upon a partial view only of the real merits.
When all the parties are before the court, the whole case may be
seen; but it may not where all the conflicting interests are not
brought out upon the pleadings by the original parties
thereto."
See also 1 Daniell's Chan. Pl. & Prac. 246
et
seq.
In the case before us, we are unable to see how any final decree
could be rendered affecting the parties to the contract sued on
without making them all parties to the suit. It is an elementary
principle that a court cannot adjudicate directly upon a person's
right without having him either actually or constructively before
it. This principle is fundamental. The allegations of the bill show
that the contract sued on was made and entered into subsequently to
the termination of the proceedings before the referee. By the terms
of that contract, the note in dispute between Mrs. Pike and the
complainant was to be held by the bailee, Stetson, "subject to the
joint order and direction" of their respective attorneys. It seems
too plain to require argument that complainant Gregory, Mrs. Pike,
Talbot, Brooks and Stetson all had an interest in the subject
matter of the contract -- such an interest, too, as brings the case
within the rule just announced. The point was made in the court
below, and it is also pressed here, that, Mrs. Pike being a
nonresident and beyond the jurisdiction
Page 133 U. S. 587
of the court, it was impossible to join her as a party defendant
to this suit, and that it was therefore unnecessary to attempt to
do so. The court below ruled against the complainant on this point,
and we see no error in that ruling. The general question involved
therein has been before this Court a number of times, and it is now
well settled that notwithstanding the statute referred to and the
forty-seventh equity rule, a circuit court can make no decree in a
suit in the absence of a party whose rights must necessarily be
affected thereby.
Shields v.
Barrow, 17 How. 130,
58 U. S.
141-142;
Coiron v.
Millaudon, 19 How. 113,
60 U. S. 115,
and cases there cited.
But even admitting the complainant's contention as regards the
making of Mrs. Pike a party to this suit, it does not follow that
Talbot and Brooks should not have been made parties. As we have
shown, they had a substantial interest in the subject matter of the
contract sued on, and they should have been made parties to the
suit.
We see no error in the decree of the court below prejudicial to
the complainant, and it is therefore
Affirmed.