In a proceeding commenced in a court of the State of Washington
under the statutes of that state by filing a petition to set aside
a judgment charged to have been obtained there through fraud and
collusion between the plaintiff's attorney of record and the
defendant's attorney of record
Page 159 U. S. 570
and against the plaintiff's instructions touching a pretended
compromise, and removed on the defendant's motion to the circuit
court of the United States for that circuit, it is
held
that the cause, although in the nature of a bill in equity,
remained, so far as the rights of the plaintiff were concerned, a
special proceeding under the territorial statute, and that the
powers of the federal court in dealing with it were gauged not
merely by its general equity jurisdiction, but by the special
authority given the state courts by statute.
Federal courts may enforce on their equity or admiralty side new
rights or privileges conferred by state or territorial statutes as
they may enforce new rights of action, given by statute, upon their
common law side.
The averment in such a petition that the case was a case of
fraud within the provisions of the statute of the state was
sufficient to give the federal court jurisdiction to act under the
statute, and such jurisdiction could not be defeated by proof that
no fraud was actually committed, but the plaintiff would be
entitled to recover if he were able to show that he never assented
to the pretended compromise, or that he repudiated it, and revoked
the authority of his attorneys.
The case having been removed to the federal court upon the
defendant's petition, it does not lie in its mouth to claim that
that court had no jurisdiction of the case unless the court from
which it was removed had no jurisdiction.
This was a proceeding originally instituted in the District
Court of the Fourth Judicial District of Washington Territory under
a territorial statute, to set aside a certain judgment rendered in
a case brought by the railroad company against the appellant,
Cowley, in the same court.
The facts of the case were substantially as follows: in 1886,
the railroad company began an action against the appellant to
recover possession of 120 acres of land within the limits of
Spokane Falls. In answer to the complaint in that action, Cowley
set up a contract of purchase of the land between himself and the
railroad company, alleging that he had complied, or was ready to
comply, with the terms of his contract, had gone into possession of
the land pursuant thereto, and had made valuable improvements
thereon to the amount of $1,500, and demanded a specific
performance. This answer or counterclaim was denied by the railroad
company in its reply, and the case, being thus at issue, was
referred to a referee to take testimony. The case was set for
hearing by the referee on May 10, 1888, and was afterwards
adjourned to May 11.
Page 159 U. S. 571
On the day originally set for the hearing, the land agent of the
railroad company made an oral offer to appellant's attorneys, who
were to receive one-quarter of the proceeds of the action, to
compromise the suit by the payment to appellant of $8,000 in cash,
and the conveyance of seven and one-half acres of the land in
question, the company to retain the remainder of the land. This
offer the appellant's attorneys, Messrs. Ganahl & Hagan,
advised him to accept. There was some dispute as to whether it was
actually accepted or not, but the court found that it was. The
allegation of the petition in this connection is
"that, after full and mature consideration of said proposition,
said Cowley decided to reject the same, and so notified his
attorneys, Messrs. Ganahl & Hagan, and being very anxious about
having said cause prosecuted to a final and successful issue in the
courts, and being desirous of having his case tried by attorneys
having confidence in the merits thereof, he determined to associate
other counsel with said Ganahl & Hagan in the defense of said
cause, and so notified them, asking that such other counsel should
take an equal share with said Ganahl & Hagan in the conduct and
defense of said cause."
If the proposition was accepted, as claimed by the railroad
company and found by the court, there is no doubt that it was
subsequently repudiated by Cowley, who informed his attorneys that
he was dissatisfied with it and desired to employ other counsel
with them, to which they refused to consent except upon payment of
their fees. There is no doubt that appellant also telegraphed the
general land agent of the railroad company that he must have
additional time to consider the proposition of compromise, to which
the land agent replied that there was nothing to consider, the
settlement having been made and the papers and money sent. The
president of the First National Bank of Spokane Falls, to whom the
money and papers were sent by the railroad company on May 16th,
took them to the office of appellant's attorneys, and informed them
that, on the execution of a quitclaim deed by appellant and his
wife, the money would be paid over. But it seems the appellant
refused to execute the deed, and has
Page 159 U. S. 572
ever since refused, and the money has ever since been in the
hands of the president of the bank, ready to be turned over.
On the following day, May 17, appellant wrote to the attorney of
the railroad company, and to its general land agent, that the offer
was not accepted; that Ganahl & Hagan were no longer his
attorneys, and that all further communication should be made
through his attorneys, Messrs. Blake & Ridpah. These letters
were received about May 18, and were answered to the effect that,
until other attorneys were regularly substituted by an order of
court, Messrs. Ganahl & Hagan would still be recognized by the
company as appellant's attorneys. On the same day on which
appellant wrote these letters, he also wrote Ganahl & Hagan
stating that he discharged them as his attorneys, and that he had
employed other counsel, to which they made reply that they demanded
$4,000 for their fee, and would take nothing less, and that they
had, on motion, set the case down to take testimony on Monday, May
21. On May 18, the referee set down the case to take testimony on
May 21, and notified the attorneys for the respective parties.
Appellant telegraphed the attorney of the railroad company that he
could not go on upon that day, as he had employed new counsel, to
which the attorney replied that he had made no arrangements for
taking testimony, having supposed it would be unnecessary, and
that, at any rate, he could not go on until the general land agent
of the company was able to attend.
On May 31, which was the first day of the May term of the court,
the attorney for the railroad company and Ganahl & Hagan, as
attorneys for Cowley, entered into a stipulation to the effect that
the case had been settled and compromised on the terms above
mentioned, and that judgment should be entered for the plaintiff,
the said railroad company, for the restitution of the premises
demanded in the complaint, denying the relief prayed in defendant's
answer, with costs against the plaintiff. Ganahl & Hagan also
executed a receipt for the papers and money then in the First
National Bank, though, in fact they never received the money, which
is still in the bank on deposit. Upon this stipulation and receipt,
judgment
Page 159 U. S. 573
was accordingly entered that the plaintiff railroad company
recover of the defendant the possession of the premises described
in the complaint, that a writ of restitution issue, that the relief
prayed in defendant's answer be denied, and that plaintiff pay the
costs. Defendant did not know that the stipulation had been made,
or the receipt given, or judgment entered, until it had been done,
and upon hearing of it, he protested against it.
Thereafter, and without taking any further proceeding in the
original suit, appellant instituted this proceeding to set aside
the judgment in the former case upon the ground of fraud and
collusion between Ganahl & Hagan and the attorney for the
railroad company and as being entered without authority. The
proceeding was begun in the district court of the territory, and
was afterwards proceeded with in the Superior Court of Spokane
County, in the State of Washington. It was then removed into the
circuit court of the United States, which rendered a decree
dismissing the bill, from which decree Cowley took this appeal. The
opinion of the circuit court is reported in 46 F. 325.
Page 159 U. S. 575
MR. JUSTICE BROWN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The referee, to whom this case was referred by the district
territorial court, found as matter of fact that Cowley did not
directly authorize Ganahl & Hagan to enter into the stipulation
and to consent to judgment, but that the stipulation and judgment
were only incidental to the contract of
Page 159 U. S. 576
settlement, and substantially embodied in the same terms, and
that by reason of such settlement, and the general powers of
attorney therein, and the power of attorney executed and given to
Hagan, and their general powers as attorneys in the case, they were
authorized to act in the manner they did notwithstanding their
agency was revoked and notice given to the railroad company. He
also found as conclusions of law that the plaintiff was not
entitled to the relief asked, and that the order and decree in the
original case should be declared to stand and remain in force.
On August 6, 1889, motion was made by Cowley to set aside this
report, defendant making a counter-motion to confirm it except as
to certain findings of fact. Washington was admitted as a state by
proclamation made November 11, 1889. The case was transferred to
the Superior Court of Spokane County upon the admission of the
state, and on January 6, 1890, was removed, upon the petition of
the railroad company, to the Circuit Court of the United States for
the District of Washington, in which court it appears to have been
docketed as a case in equity. The motion to set aside the report of
the referee coming on to be heard before the circuit court, that
court struck out the paragraph of the referee's finding above
cited, and found that the agreement for a compromise was
"only an understanding between the parties as to the terms upon
which the contract would be concluded, and that there was not a
contract actually made and concluded."
It further found that this agreement, even if it were binding in
law and equity upon Mr. Cowley, had never been executed or carried
into effect, that it had never been performed on defendant's part
so as to entitle it to any judgment in the district court in the
original case, that the stipulation signed by Ganahl & Hagan,
as attorneys for Cowley, was not only not authorized, but was made
in defiance of his known whishes in the matter, and hence that the
judgment upon such stipulation was improperly rendered and was
unjust.
It was found, however, that the proceeding was in equity, and
that it was not according to equity practice to decree that a
judgment be vacated or annulled, or to act directly upon the
Page 159 U. S. 577
case in which an unjust or void judgment has been rendered, that
the plaintiff should have applied by petition or motion in the
original case, and that, his remedy at law being adequate, the suit
must be dismissed.
At the time this proceeding was instituted, the following
provisions of the Territorial Code of Washington were in
effect:
"Section 436. The district court in which a judgment has been
rendered, or by which, or the judge of which, a final order has
been made, shall have power after the term at which such judgment
or order was made to vacate or modify such judgment or order."
"1. By granting a new trial for the cause, within the time and
the manner, and for any of the causes prescribed by the sections
relating to new trials."
"2. By a new trial granted in proceedings against defendant
served by publication only as prescribed in section
sixty-seven."
"3. For mistakes, neglect, or omission of the clerk or
irregularity in obtaining a judgment or order."
"4. For fraud practiced by the successful party in obtaining the
judgment or order,"
etc.
Section 437 provides that
"When the grounds for a new trial could not with reasonable
diligence have been discovered before, but are discovered after the
term at which the verdict, report of referee, or decision was
rendered or made, the application may be made by petition filed as
other cases not later than the second term after the discovery, on
which notice shall be served and returned, and the defendant held
to appear as in an original action."
This manifestly refers to applications under the first and
second subdivisions of section 436.
Section 438 requires that "the proceedings to correct mistakes
or omissions of the clerk, or irregularity in obtaining the
judgment or order, shall be by motion," etc. This evidently refers
to the third subdivision of section 436.
Section 439 requires that
"The proceedings to obtain the benefit of subdivisions four . .
. shall be by petition, verified
Page 159 U. S. 578
by affidavit, setting forth the judgment or order, the facts or
errors constituting a cause to vacate or modify it, and the facts
constituting a defense to the action, if the party applying was a
defendant, and such proceedings must be commenced within one year
after the judgment or order was made unless the party entitled
thereto be a minor or person of unsound mind, and then within one
year from the removal of such disability."
The judgment in the original case was entered up on May 21,
1888, and the petition in this case was filed on June 26 of the
same year. It does not appear, however, whether it was at the same
or a subsequent term of the district court.
Section 440 provides that
"In such proceedings the party shall be brought into court in
the same way, on the same notice as to time, mode of service, and
mode of return, and the pleadings shall be governed by the
principles and the issues be made up by the same form, and all the
proceedings conducted in the same way, as near as can be, as in an
original action by ordinary proceedings, except that the defendant
shall introduce no new cause, and the cause of the petition shall
alone be tried."
Other sections provide that the judgment shall not be vacated
until it is found that there was a valid defense or a valid cause
of action in the original suit, and that all liens and securities
obtained under it shall be preserved to the modified judgment; that
the court may first try and decide upon the grounds to vacate or
modify the judgment before deciding upon the validity of the
defense or cause of action; that an injunction may issue suspending
proceedings, and prescribing the form of judgment to be finally
entered.
The petition was in the form of an independent complaint by
Cowley against the Northern Pacific Railroad Company, setting forth
certain facts which he alleged made it a fraud upon his rights for
his attorneys to agree to the judgment which was entered up in the
original case against himself, and praying that the decree in that
case be set aside, that he be allowed to defend the action, and
that he have judgment for costs. The complaint appears to have been
drawn in substantial
Page 159 U. S. 579
conformity with the territorial statute, although it is not
entitled in the original cause, but has an independent entitling of
its own. The defendant appeared in answer to a summons issued under
section 440, demurred to the complaint, and, upon the demurrer's
being overruled, filed an answer, to which plaintiff replied as in
an original action. The difficulty in the case seems to have arisen
from the fact that, after the removal of the case to the circuit
court of the United States, it was treated as a suit in equity,
subject to all the limitations attaching to the equitable
jurisdiction of the federal courts, instead of a special proceeding
to obtain the benefit of the statute, the court holding that the
assistance of equity could not be invoked so long as the remedy by
motion existed. The court declined to consider it as a proceeding
under the Code, saying that the rights of the parties and the
limitations of their rights in such a statutory proceeding were
quite different from the rights and limitations and the rules which
must govern the decision in a suit in equity, and that the effect
of a decision or judgment was entirely different.
It would appear, however, in view of section 440 of the
Territorial Code (providing that the parties shall be brought into
court in the same way, on the same notice as to time, mode of
service, and mode of return, that the pleadings should be governed
by the principles, and the issues made up in the form, and all the
proceedings conducted, as in an original action by ordinary
proceedings) that there was no impropriety in filing this petition
or complaint as an original proceeding or conducting the case in
the ordinary method.
In the case of
Gaines v. Fuentes, 92 U. S.
10, which was an action to annul an alleged will,
brought under the laws of Louisiana in the district court of the
Parish of Orleans and removed to the circuit court of the United
States, it was held that the suit was in effect an action between
parties, and that the federal court had jurisdiction. It was said
that if the suit could be maintained in a state court, it might
also be maintained by original process in a federal court where the
requisite diversity of citizenship existed.
In the subsequent case of
Barrow v. Hunton,
99 U. S. 80, a
petition
Page 159 U. S. 580
was filed in the same state court of Louisiana praying for a
decree of nullity of a judgment recovered against the petitioner,
setting forth as his grounds for such relief that the judgment
complained of was void because it was founded on a default taken
and no lawful service of the petition and citation in the suit had
ever been made upon the petitioner. This case was also removed to
the circuit court, where plaintiff, by leave of the court, amended
his petition to conform to the equity, practice, converting it into
a bill in equity containing substantially the same averments and
praying the same relief. It was said by Mr. Justice Bradley, in
delivering the opinion of the Court, that the question presented
was whether the proceeding was a separate suit or a supplementary
proceeding so connected with the original suit as to form an
incident to it and substantially a continuation of it.
"If the proceeding is merely tantamount to the common law
process of moving to set aside a judgment for irregularity, or to a
writ of error, or to a bill of review, or an appeal, it would
belong to the latter category, and the United States court could
not properly entertain jurisdiction of the case. . . . On the other
hand,"
said he,
"if the proceedings are tantamount to a bill in equity to set
aside a decree for fraud in the obtaining thereof, then they
constitute an original and independent proceeding, and, according
to the doctrine laid down in
Gaines v. Fuentes, the case
might be within the cognizance of the federal courts. . . . In the
one class there would be a mere revision of errors and
irregularities, or of the legality and correctness of the judgments
and decrees of the state courts, and in the other class, the
investigation of a new case, arising upon new facts, although
having relation to the validity of an actual judgment or decree, or
of the party's right to claim any benefit by reason thereof."
As the judgment complained of was sought to be impeached simply
because the defendant had never been lawfully summoned and the
decree was taken by default against him, it was held that the
proceeding was one that affected the mere regularity of the
judgment. "In the common law practice, it would have been a motion
to set aside the judgment for irregularity, or a writ of error
coram vobis." It
Page 159 U. S. 581
was further said that although the fact that the action of
nullity can only be brought in the court that rendered the
judgment, as in the present case, was entitled to some weight in
determining the question, the court was not disposed to allow this
consideration to operate so far as to make it an invariable
criterion of the want of jurisdiction in the courts of the United
States.
"If the state legislatures could, by investing certain courts
with exclusive jurisdiction over certain subjects, deprive the
federal courts of all jurisdiction, they might seriously interfere
with the right of a citizen to resort to those courts. The
character of the cases themselves is always open to examination for
the purpose of determining whether,
ratione materia, the
courts of the United States are incompetent to take jurisdiction
thereof. State rules on the subject cannot deprive them of it. The
classification of the causes of nullity in the Louisiana Code into
causes relative to form and those relative to the merits is nearly
coincident with the classification above suggested, of cases which
are and cases which are not cognizable in the courts of the United
States. Causes of nullity relating to form would fall in that class
of cases which could not be brought in these courts or be removed
thereto. The present case is one of that character."
The distinction between the two cases above cited is that in the
latter case, the judgment was impeached for a matter of form, and
in the former case for the falsity and insufficiency of the
testimony upon which the will was admitted to probate -- in other
words, for a fraud connected with the probating of the will. The
case under consideration, being for an alleged fraudulent practice
on the part of the attorneys, falls obviously within the class of
cases of which
Gaines v. Fuentes, rather than
Barrow
v. Hunton, is an example. So far as the right of the court to
deal with this petition is concerned, it makes no difference that
the court found that there was no fraudulent conduct on the part of
the attorneys, since the petition averred a case of fraud within
the fourth subdivision of section 436. This was sufficient to give
the court jurisdiction to act, and such jurisdiction would not be
defeated by proof that no fraud was actually committed, and the
plaintiff
Page 159 U. S. 582
would still be entitled to recover if he were able to show that
he never assented to the compromise, or repudiated it, and revoked
the authority of his attorneys. In this particular, the case
resembles one wherein the plaintiff claims an amount sufficient to
give the circuit court jurisdiction, but fails to prove such
amount. If the claim be made in good faith, the court does not lose
jurisdiction, but may proceed and enter judgment for the amount
actually due.
But while, after the removal of the case to the circuit court of
the United States, it might properly be docketed and tried by the
court as an equity suit, it still remained, so far as the rights of
the plaintiff were concerned, a special proceeding under the
territorial statute, and the powers of the court in dealing with it
were gauged not merely by its general equity jurisdiction, but by
the special authority vested in its own courts by the statutes of
the territory. Had the case never been removed to the circuit
court, it would have proceeded in the state court as a special
proceeding under the territorial statute, and we are of opinion
that upon its removal to the circuit court, petitioner lost no
right to which he would have been entitled had the case not been
removed. Even if it were treated as in form a bill in equity, the
right of the complainant would be gauged as well by the statute
under which the bill was filed as by the general rules of equity
jurisprudence. If any action or proceeding in a state court were
subject to be defeated or impaired by one of the parties exercising
his statutory right to remove it to a federal court, no one would
be safe in instituting such a proceeding in any case wherein, by
reason of diversity of citizenship or otherwise, it might be
subject to removal. While the federal court may be compelled to
deal with the case according to the forms and modes of proceeding
of a court of equity, it remains in substance a proceeding under
the statute, with the original rights of the parties unchanged.
Although the statute of a state or territory may not restrict or
limit the equitable jurisdiction of the federal courts and may not
directly enlarge such jurisdiction, it may establish new rights or
privileges which the federal courts may
Page 159 U. S. 583
enforce on their equity or admiralty side precisely as they may
enforce a new right of action given by statute upon their common
law side. Thus, in
Ex Parte
McNeil, 13 Wall. 236, a statute of the State of New
York giving to the pilot who first tendered his services to a
vessel and was refused a right to half pilotage was held to be
enforceable upon the admiralty side of the district court.
See
also the cases of
Broderick's
Will, 21 Wall. 503,
88 U. S. 520,
and
Clark v.
Smith, 13 Pet. 195,
38 U. S. 203.
So, in
Reynolds v. Crawfordsville Bank, 112 U.
S. 405, a bill in equity under a statute of Indiana,
which averred that a deed was void upon its face was held
sufficient to support the jurisdiction of the circuit court of the
United States in that district to quiet the title of the
complainant as against such deed although courts of equity had
generally adopted the rule that a deed void upon its face does not
cast a cloud upon the title which a court of equity will undertake
to remove. It was also said in
Davis v.
Gray, 16 Wall. 223,
83 U. S. 231,
that
"a party, by going into a national court, does not lose any
right or appropriate remedy of which he might have availed himself
in the state courts of the same locality. The wise policy of the
Constitution gives him a choice of tribunals."
Other cases to the same effect are
Holland v. Challen,
110 U. S. 15;
Marshall v. Holmes, 141 U. S. 589;
Johnson v. Waters, 111 U. S. 640;
Arrowsmith v. Gleason, 129 U. S. 86.
The case having been removed to the circuit court upon petition
of defendant, it does not lie in its mouth to claim that such court
had no jurisdiction of the case, unless the court from which it was
removed had no jurisdiction.
As the merits of the case, though appearing upon the record,
were not argued by counsel, the decree will be
Reversed, and the case remanded for further proceedings in
conformity with this opinion.
