Where the circuit judge certifies that he is satisfied that the
suit involves a controversy within the jurisdiction of the circuit
court, mandamus will not issue to compel him to dismiss the case
even if this Court differs with him in his conclusions of law.
Jurisdiction does not depend on motive. Although shares of stock
may have been transferred to a nonresident to enable him to bring
suit in the federal court, if it appears from the record that he is
the absolute owner of properly issued shares exceeding $2,000 in
value, jurisdiction exists.
Jurisdiction of a suit to wind up a corporation having once
properly attached, a receiver appointed, and creditors, as between
whom and the corporation diverse citizenship exists and the
requisite amount is involved, joined as parties, the jurisdiction
cannot be subsequently defeated by denials in
ex parte
affidavits of the jurisdictional facts.
The facts are stated in the opinion.
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a petition for a writ of mandamus commanding the
Honorable Henry H. Swan, sitting in the Circuit Court of the United
States for the Eastern District of Michigan, to dismiss a cause on
the ground that the suit does not really and substantially involve
a controversy within the jurisdiction of that Court. Act of March
3, 1875, c. 137, ยง 5. 18 Stat. 470, 472. The suit in question was
begun
Page 218 U. S. 121
on March 30, 1901, by a shareholder in an insolvent Michigan
corporation, a mutual building and loan association, to have a
receiver appointed and the association wound up. There were
provisions in the Michigan statutes for such cases, but, after
conference with the Secretary of State, now the Governor of
Michigan, the Attorney General of the state, and officers of the
corporation, it was decided that the most saving and beneficial
course would be to have a receiver appointed by the United States
court, the assets of the company being partly scattered in distant
states. As the requirement of proceedings under the state law was
understood to be mandatory upon the Secretary of State, the
beginning of this suit was hastened. To that end Aldrich, who had
been counsel for the corporation and who wanted to be appointed
receiver, transferred and procured to be issued certificates of
stock to a friend of his, Bishop, the original plaintiff, and
Bishop thereupon signed and swore to the bill, alleging the par
value of his stock to be over $2,000. No doubt he intended thereby
to help Aldrich, but he also understood that he was acting for the
benefit of all concerned, and undoubtedly one reason for applying
to him was to save time in getting a nonresident shareholder. It
was for the benefit of all, in fact. The answer to the present
petition states that all the shareholders have come in. Moreover,
although it was disputed at the bar, we see no ground for denying
that, on the face of the bill, the jurisdiction of the court was
established. The laws of Michigan did not exclude it, and the
corporation was not so far in the hands of the state officers as to
prevent action by the court.
See further, Brown v. Lake
Superior Iron Co., 134 U. S. 530.
It is unnecessary to set forth the proceedings under the bill at
length. They have gone on from March 30, 1901. Real estate has been
sold by the receiver, assets collected, and all the debts of the
corporation outside the claims of
Page 218 U. S. 122
shareholders have been paid, except one disputed claim for
$3,000. The main matter outstanding is a suit against directors and
certain withdrawing shareholders for money alleged to have been
paid improperly and upon other claims, which is on the docket for
hearing.
See Aldrich v. Gray, 147 F. 453. It is enough to
say that, after considerable litigation and much expense and
trouble, the proceedings are drawing to a close.
The petitioner never has been admitted formally as a party to
the suit, but he proved his claim as holder of shares of the par
value of $2,000 on May 29, 1902, and while, since that time, he has
been active in trying to have the receiver removed, and in having
him called to account, his various petitions have not been
dismissed by the circuit court on the ground that he had no
standing before it. It may be assumed for purposes of decision that
he has a standing here.
After continuing this activity for years, the petitioner now,
without adequately explaining his delay and change of attitude,
seeks to reduce all the proceedings to naught.
Deputron v.
Young, 134 U. S. 241. His
pecuniary interest in doing so is infinitesimal, even if not
actually contravened. It cannot be believed the motive for the
petition is such as to appeal to the discretion of the court. But,
apart from questions of discretion, so far from its appearing to
the satisfaction of the circuit court, as the statute requires,
that the suit did not involve a controversy within its
jurisdiction, the judge certifies that he is satisfied that it does
involve such a controversy.
Put-in-Bay Water Works, Light &
Railway Co. v. Ryan, 181 U. S. 409,
181 U. S. 431.
On the face of the record, he was right, and the summary remedy of
mandamus would not be proper even if our conclusion from the
evidence were different from his, which is not the case.
In re
Winn, 213 U. S. 458,
213 U. S.
468.
It is said that, on the undisputed facts, Bishop was not
Page 218 U. S. 123
a
bona fide shareholder, and that the proceeding was
collusive. But the first proposition is not true, and the second is
not law. Bishop became the absolute owner of the shares in his
name. The answer to the petition so finds, and there is no question
about it.
See South Dakota v. North Carolina, 192 U.
S. 286,
192 U. S. 310.
Some of these shares had been issued to Aldrich in payment for
service, others were issued by the corporation upon payment of ten
dollars, the proper sum at the start. It is said that, the
corporation being insolvent, the issue of the certificate was a
fraud on the other shareholders. No one complains here except the
petitioner. It seems to have been to the advantage of all.
Certainly it was not necessarily a fraud upon them. As to
collusion, there is nothing unlawful in transferring shares to a
man out and out, for the convenience of immediately beginning a
suit that other shareholders have a right to begin, that all
parties in interest want to have begun, and that the authorities of
the opposing jurisdiction approve.
Perhaps the most plausible ground would have been that Bishop's
interest was not as great as his allegation implied, even granting
his right as a shareholder. But there is no reason to doubt that he
thought that it was.
See Barry v. Edmunds, 116 U.
S. 550. And with regard to this and the objections
previously mentioned, it is enough to quote the language of the
court in
Put-in-Bay Water Works, Light & Railway Co. v.
Ryan, 181 U. S. 409,
181 U. S.
432-433:
"Jurisdiction having attached under the allegations of the
original bill, and the court having proceeded, in a proper exercise
of its discretionary power, to appoint a receiver, . . . and the
court having also, in the exercise of its power as a court of
equity, allowed the intervention of other creditors, as between
some of whom and the defendant company there was jurisdiction in
the court, both as respects diversity of citizenship and amount of
claims, we think its jurisdiction did not fail by reason
Page 218 U. S. 124
of anything that appeared in
ex parte affidavits . . .
denying the truth of the allegations . . . in respect to the amount
in dispute."
Rule discharged.
Writ of mandamus denied.