1. Where a bill does not relate to some matter already litigated
in the same court by the same persons, and which is not either in
addition to or a continuance of, an original suit, it is an
original bill, not an ancillary one.
2. Accordingly, when such bill is between citizens of the same
state, the circuit courts have no jurisdiction.
Page 81 U. S. 70
3. A mere promise, though of the clearest and most solemn kind,
to pay a debt out of a particular fund is not an assignment of the
fund even in equity. To make an equitable assignment, there should
be such an actual or constructive appropriation of the subject
matter as to confer a complete and present right on the party meant
to be provided for, even where the circumstance do not admit of its
immediate exercise. If the holder of the fund retain control over
it, as
ex gr., power on his own account, to collect it or
to revoke the disposition promised, this is fatal to the thing as
an equitable assignment.
Richard Christmas, of Kentucky, on 30th November, 1859, sold to
one Lyons, of Mississippi, an estate there, and received in
consideration therefor his promissory notes, each for $16,666,
payable to him the said Richard or bearer, with interest, with a
mortgage on the estate.
These notes subsequently (May, 1866) passed into the hands of H.
H. Christmas, also of Kentucky, the son of Richard by his first
wife, who, in the following June, had a settlement and compromise
with Lyons, who paid a certain sum in cash, and for the remainder
executed his two promissory notes in favor of said H. H. Christmas,
for $8,339.90 each, one payable December 1, 1866, and the other
February 1, 1868. These notes were to be secured by the mortgage
aforementioned.
The said H. H. Christmas being indebted to Payne, Huntington
& Co., of New Orleans, pledged to them, in February, 1867, the
first of these notes. Neither note being paid, two suits were
instituted on them in the Circuit Court of the United States for
the Southern District of Mississippi; one in the name of H. H.
Christmas, for the use of Payne, Huntington & Co., on the
pledge above stated, and the other in his own name and for his own
use.
A bill was also filed to foreclose the mortgage on the notes, on
which these respective rights were asserted.
On the 1st May, 1868, H. H. Christmas entered into a written
obligation with Mrs. Mary Christmas, the second wife of said
Richard (and like her husband, of Kentucky), in which, in
consideration of her assuming to pay the debt
Page 81 U. S. 71
due to Payne, Huntington & Co., he transferred to her the
note of Lyons, left in pledge with them. She having paid the note
by a sale of her separate estate, made
by Richard, under a
power of attorney executed by his wife, and by a deed executed by
him, as trustee for her, in June, 1868, the bill to foreclose
the mortgage was amended, by showing this transfer and the payment
of the amount due to P., H. & Co., and application was made to
substitute her name for that of P., H. & Co., on the action at
law. On the second of these notes a judgment was rendered on 13th
November, 1868, for $8,868. The other one remained in suit.
So far as to this part of the case. And now the subject matter
changes. It is thus:
On the 25th of May, 1860, one Russell, also of Kentucky, for
himself and other persons there, for whom he sued, obtained a
judgment for about $12,000 against the father, Richard Christmas,
already named. The judgment was brought by writ of error to this
Court, and execution stayed by a supersedeas bond executed by the
said Richard and one Yerger and a certain Anderson, as his
sureties. To induce
Yerger and
Anderson thus to
become his sureties, Christmas had promised them a counter security
of some sort, and he had in fact given them such security -- the
note of one Martin -- which, however, to promote in some way his
convenience, they had surrendered to him. The matter stood thus
until the war of the rebellion closed, A.D. 1865. Christmas had
during the war gone to Texas, and thence went to Havana, and thence
to Europe. On reaching Liverpool, he wrote, October 23, 1865, a
letter to Yerger thus:
"I feel great uneasiness about your liability on the bond in
suit of Russell against me. I have ever held the Lyons note as
sacred for the payment of this debt, and have it now in New
York endeavoring to sell it with the mortgage to pay this debt. I
expect to hear from it daily. If not sold, I will send it to you as
soon as I return."
On the 14th of February, 1866, he wrote again, stating that he
had countermanded the sale of the Lyons note and
Page 81 U. S. 72
that he would make a liberal arrangement with him, and adds:
"I could not safely send you Lyons's note by mail, as it is
payable to me or bearer; hence, if lost, might put me to much
trouble."
On the 20th of February, 1866, he wrote again to Yerger stating
that he had written on the 17th, proposing that if Lyons would take
up Russell's debt, he would allow it as a credit, dollar for
dollar, on the note, but reflecting that the judgment
might not be affirmed in the Supreme Court of the United
States, and that the note was well secured, he requests that no
further action be had until he can be better informed, suggesting
that the rents of the land subject to the mortgage would pay the
amount for which Yerger was surety, and then adds:
"I will hold this note -- $16,666, and many years' interest --
always subject to this debt, provided the judgment is
affirmed, until which time let the matter rest where it is. When a
compromise is made, it must be through you as surety. I am sorry
you told Lyons of our understanding, as he will be apt to let
Russell know, and prevent an advantageous compromise."
On the 21st of February, 1866, he wrote again from Liverpool,
saying, "I wrote you on the 17th and 20th," suggesting that he had
written to Burwell to compromise the Russell debt, and adds:
"You may rest assured I will protect you with the Lyons note. .
. . This fact should not be known, to enable me to make a good
compromise."
On the 12th of May, 1866 -- after the transfer of the notes to
his son, H. H. Christmas, which he says he had been compelled to
make -- he adds:
"In this I hope I have not lost sight of my purpose to protect
you,"
&c.
In this state of things -- and Richard Christmas being now
wholly insolvent -- Russell and the others, for whom he had
Page 81 U. S. 73
recovered the judgment, filed a bill in the same, the Circuit
Court for the Southern District of Mississippi, against Lyons,
still of Mississippi, and all three of the Christmases, father,
wife, and son -- these last three, like himself, as already
mentioned, being citizens of Kentucky -- setting forth the facts
above stated, including the citizenship, and seeking to enjoin
Lyons from paying his notes to either Mrs. Christmas or to the son,
H. H. Cristmas, and seeking to cause the payment (when payment was
to be made) to be made to them on the ground of their
already-mentioned judgment against the father, Richard Christmas
(for the payment of which Yerger and Anderson, his sureties, had,
by the affirmance of the judgment, in this Court, become equally
liable with him), and on the further ground that the said Richard
had made an equitable assignment of the fund to them, and that they
were in equity entitled to enforce the security. [
Footnote 1]
The court below decreed for the complainants, "it appearing," as
it said,
"that the said Richard, with intent to provide for the payment
of the judgment, in case the same should be affirmed, and to induce
the said Yerger and the said Anderson to become his sureties
aforesaid, did agree to provide special indemnity to them; and with
such intent, and to the end that said judgment should be paid, and
his said sureties saved harmless, did assign to them, his said
sureties, the debt mentioned in the complainants' bill, as due from
the defendant, Lyons, to him, the said Richard, . . . and did so
assign and set apart the said debt to the sureties aforesaid, as to
give them a lien upon the said debt, which in equity they are
entitled to enforce for the purpose of paying the said judgment,
and that their lien attaches to and binds the debt due from Lyons,
and not converted by said Harry and Richard, and which debt is
evidenced by the judgments recovered in this Court in favor of H.
H. Christmas, and of H. H. Christmas for the use of Mary E.
Christmas,
Page 81 U. S. 74
and by a decree in this Court against Lyons in favor of said H.
H. Christmas and Mary E. Christmas, foreclosing the mortgage,
executed by said Lyons, to secure the payment of said debt due by
him as aforesaid."
The court accordingly decreed payment to the complainants of the
fund in court, which had been paid by Lyons, $7,873, and that the
said Lyons pay to them $8,192, with interest from the 21st May,
1869.
From this decree the present appeal was taken. The errors
assigned being:
First. That under the Constitution, which declares that
the judicial power shall extend to
"controversies between
citizens of different states," the court below had no
jurisdiction over the defendants, Richard, H. H., and Mary
Christmas, who were stated in the bill to be citizens of
Kentucky.
Second. That if this was not so, and if the court below
had jurisdiction, the evidence did not authorize the conclusion
that there had been an equitable assignment.
Page 81 U. S. 78
MR. JUSTICE SWAYNE delivered the opinion of the Court.
Two questions have been argued and are presented for our
consideration. They are:
Whether the residence of the parties as disclosed in the record
was such as gave the court below jurisdiction of the case? and
Whether William Yerger and Warren P. Anderson had such a lien,
by equitable assignment, upon the fund in controversy as warranted
the decree appealed from.
The solution of these questions requires a brief statement of
the case as it appears in the record
Richard Christmas held three notes of Lyons payable to himself,
all dated November 30, 1859, each for the sum of $16,666.50, and
payable respectively, one, two, and three years from date. Richard
Christmas assigned and delivered them to his son, H. H. Christmas.
H. H. Christmas made a compromise with Lyons whereby these notes
were delivered up to the maker, and he executed to H. H. Christmas,
in their stead, two notes, each for $8,339.90, one payable December
1, 1866, the other February 1, 1868. Both were secured by a
mortgage upon real estate. H. H. Christmas hypothecated one of the
notes to Payne, Huntington & Co., of New Orleans, to secure a
debt which he owed them.
Page 81 U. S. 79
Suits upon the notes were instituted in the court where this
bill was filed. The suit upon one of the notes was in the name of
H. H. Christmas for his own use. The other was in his name for the
use of Payne, Huntington & Co. A bill was also filed in the
same court to foreclose the mortgage. It set out the rights of H.
H. Christmas and of Payne, Huntington & Co. touching the notes.
On the 1st of May, 1868, H. H. Christmas entered into an agreement
with Mary Christmas whereby, in consideration of her assuming the
payment of the debt due to Payne, Huntington & Co., he
transferred to her the note hypothecated to them. Payment to them
was made out of her means, and they delivered up the note. The
foreclosure bill was amended by the substitution of her name for
that of Payne, Huntington & Co., and an application, which is
still pending, was made for the like substitution in the suit at
law upon the note transferred to her. A judgment was recovered upon
the other note.
In this condition of things, the complainants filed their bill.
It alleges the following state of facts:
Russell, now deceased, for himself and the use of the
complainants other than his executors, recovered a judgment against
Richard Christmas, which was taken to the Supreme Court of the
United States by a writ of error. William Yerger and Warren P.
Anderson became his sureties in the error bond. The judgment was
affirmed by this Court, and the sureties thus became liable on
their bond. The sureties executed the bond upon a promise of
indemnity by their principal. He subsequently gave them a lien for
this purpose upon one of the original notes of Lyons. It is claimed
that this lien attaches to the notes taken in substitution for
them. Richard Christmas is hopelessly insolvent, and has gone into
bankruptcy. The complainants seek to be subrogated to the rights of
the sureties and to enforce the alleged lien for the satisfaction
of the judgment. The bill alleges that the complainants are all
residents of the State of Kentucky; that the defendants, Richard,
H. H., and Mary Christmas are all residents of the same state, and
that the defendants, Yerger
Page 81 U. S. 80
and the legal representatives of Anderson and Lyons, are
residents of the State of Mississippi.
No party to the original suits has had any connection with the
filing of this bill. Lyons, the defendant in these suits, asks no
protection against them. He did not answer the bill, but allowed a
decree
pro confesso to go against him. The case which the
bill makes is wholly outside of the litigation in the suits at law.
It is alien to everything involved in those proceedings. It alleges
a lien upon the liability of Lyons, prior and paramount to the
right of H. H. Christmas as plaintiff for his own benefit in one of
the suits at law, and to that of Mary Christmas as
cestui que
use in the other. The controversy is wholly between them and
the complainants. The bill is essentially an original one. In no
sense can it be held to be auxiliary or ancillary to the action at
law. Can such a bill be maintained?
The Constitution, Article III, limits the judicial power of the
United States to "controversies between citizens of different
states." There are exceptions which do not affect this case, and
need not, therefore, be more particularly adverted to. The act of
1789 [
Footnote 2] declares
that
"No civil suit shall be brought . . . against an inhabitant of
the United States by any original process in any other district
than that whereof he is an inhabitant or in which he shall be found
at the time of serving the writ."
The act of 1839 [
Footnote 3]
authorizes the voluntary appearance of parties in regard to whom
there is no inherent and insuperable jurisdictional objection in
suits elsewhere than in the district in which they reside or in
which they may be found.
In the light of these provisions, it is clear that this bill
cannot be maintained as an original one, and we think it equally
clear that it cannot be maintained as an auxiliary or supplementary
bill, because it is not one of that character. The case falls
clearly within the rules laid down by this Court upon the subject
of parties in
Shields v. Barrow. [
Footnote 4]
Page 81 U. S. 81
The several adjudications of this Court upon the point under
consideration have been referred to by the counsel on both sides.
[
Footnote 5] Those cases call
for a few remarks. In the five earliest cases, the defendants in
the suits at law were complainants in the suits in equity. In one
of them,
Dunn v. Clark, a judgment had been recovered
against Dunn and others in the Circuit Court for the District of
Ohio. The plaintiff, who was a citizen of Virginia, had died. The
defendants filed their bill in the same court, praying for an
injunction and a conveyance of the premises. All the complainants
and all the defendants in the chancery suit were citizens of Ohio.
This Court said:
"The injunction bill is not considered an original bill between
the same parties as at law, but if other parties are made in the
bill and different interests involved, it must be considered to
that extent at least an original bill, and the jurisdiction of the
circuit court must depend upon the citizenship of the parties."
It was further said that as there appeared to be matters of
equity in the case which could be investigated by a state court, it
would be reasonable and just to stay all proceedings on the
judgment until the complainants should have time to seek relief
from a state tribunal. The decree of the circuit court was modified
accordingly. [
Footnote 6]
In
Freeman v. Howe, it appears that White had sued in
the Circuit Court of the United States for Massachusetts and
attached certain property of the defendant. The property was taken
from the possession of the marshal by a writ of replevin issued
from a state court. The marshal appeared in that court and set up
as a defense that he held the property when it was taken from him,
by virtue of process issued from the circuit court. This defense
was overruled and the judgment against him was affirmed by the
supreme court of the state. That judgment was reversed by this
Page 81 U. S. 82
court upon the ground that the circuit court, having first
acquired possession of the
res, could not be deprived of
that possession until the litigation there was brought to a close.
This was the only point involved in the case and the only one
decided. The learned judge who delivered the opinion remarked that
the marshal's possession might have been protected by a proceeding
in equity. In that connection, he made certain remarks which were
entirely proper as regards the facts of the case before him, but it
is a misapprehension to suppose they are of universal application
or that they can affect a case of the character of the one under
consideration. [
Footnote 7]
The last of this series of cases is
Jones v. Andrews.
Andrews, a citizen of New York, recovered a judgment in the Circuit
Court of the United States for the Western District of Tennessee
against Reed and Bryson, by default. For the satisfaction of that
judgment he sued out a writ of garnishment to seize in the hands of
the judgment debtors the notes to them of Jones, a citizen of
Georgia. Thereupon Jones filed a bill in equity in the same court,
wherein he alleged that Reed & Bryson had transferred the notes
to Andrews in payment of their debt to him; that they owed Andrews
nothing when he sued them; that the judgment was obtained by
collusion, and that the writ of garnishment was a contrivance to
enable Andrews to avoid the necessity of a direct suit against
Jones, and to deprive Jones of a valid defense which he had against
the notes. Andrews appeared in the case voluntarily. This Court
held that the bill was well brought as an original one under the
act of 1839, and also as one incidental and auxiliary to the
garnishment proceeding. On both points, the judgment was correctly
given. According to the face of the bill, Jones was to be as much
affected by the garnishment proceeding, and a bill was as necessary
for his protection and to the due administration of justice as if
he had been a party to the record in the garnishment case.
The course indicated in
Dunn v. Clark should have
been
Page 81 U. S. 83
pursued in this case. The bill should have been filed in the
proper state court and an application should have been made to the
circuit court to hold the proceeds of the suits at law under its
control until the right to them should have been settled by an
adjudication of the state court between the conflicting claimants.
There would be no more inconsistency or embarrassment in these
different proceedings than there is where a mortgagor resorts in
different courts to the several remedies which he is entitled to
pursue at the same time. He may file a bill to foreclose in one
court, sue at law to recover his debt in another, and bring an
action of ejectment to recover possession of the mortgaged premises
in a third. Each of such courts will see in the end that its
process is not abused and that no wrong is done to the debtor.
The evidence relied upon to support the alleged lien consists,
so far as it is necessary to consider it, of letters from Richard
Christmas to Yerger written before Richard transferred to H. H.
Christmas the notes originally given to Richard by Lyons. In a
letter of the 25th of October, 1865, Richard said:
"I feel great uneasiness about your liability on the bond in
suit of Russell against me. I have ever held the Lyons note as
sacred for the payment of this debt, and have it now in New York,
endeavoring to sell it, with the mortgage, to pay this debt; I
expect to hear from it daily. If not sold, I will send it to you as
soon as I return."
On the 14th of February, 1866, he wrote: "I could not safely
send you the Lyons note by mail as it is payable to me or bearer --
hence if lost might put me to much trouble." On the 21st of the
same month, he said: "You may rest assured I will protect you with
the Lyons note." In the next letter, of the 12th of May following,
he announced the transfer of the notes to H. H. Christmas, and
said: "In this I hope I have not lost sight of my purpose to
protect you." These letters contain no words of transfer, and
nothing which by construction or otherwise can have any effect in
that way. At most, they are only evidence of a promise to pay
the
Page 81 U. S. 84
judgment, if affirmed, out of the proceeds of one of the notes,
and to send the note, if not sold, to Yerger.
An agreement to pay out of a particular fund, however clear in
its terms, is not an equitable assignment; a covenant in the most
solemn form has no greater effect. The phraseology employed is not
material provided the intent to transfer is manifested. Such an
intent and its execution are indispensable. The assignor must not
retain any control over the fund -- any authority to collect, or
any power of revocation. If he do, it is fatal to the claim of the
assignee. The transfer must be of such a character that the fund
holder can safely pay, and is compellable to do so, though
forbidden by the assignor. Where the transfer is of the character
described, the fund holder is bound from the time of notice.
[
Footnote 8] A bill of exchange
or check is not an equitable assignment
pro tanto of the
funds of the drawer in the hands of the drawee. [
Footnote 9] But an order to pay out of a
specified fund has always been held to be a valid assignment in
equity and to fulfill all the requirements of the law. [
Footnote 10] These views are fatal
to the claim asserted by the complainants in behalf of the sureties
on the bond.
Upon both the grounds which have been considered, the decree of
the circuit court must be
Reversed and the bill dismissed. The cause will be remanded
with directions to proceed accordingly.
[
Footnote 1]
Yerger and Anderson, citizens of Mississippi, were also made
defendants. Really, however, they were complainants. Lyons was, of
course, but a stakeholder. The real parties in interest were H. H.
Christmas and the wife.
[
Footnote 2]
ยง 11, 1 Stat. at Large 78.
[
Footnote 3]
5
id. 321.
[
Footnote 4]
58 U. S. 17 How.
130.
[
Footnote 5]
Logan v.
Patrick, 5 Cranch 288;
Simms v.
Guthrie, 9 Cranch 19;
Dunn v.
Clark, 8 Pet. 1;
Clark
v. Matthewson, 12 Pet. 170;
Dunlap v.
Stetson, 4 Mason 349;
Freeman v.
Howe, 24 How. 450;
Jones
v. Andrews, 10 Wall. 331.
[
Footnote 6]
See also Williams v. Byrne, Hempstead 473.
[
Footnote 7]
Buck v.
Colbath, 3 Wall. 334.
[
Footnote 8]
Rogers v. Hosack, 18 Wendell 334;
Hoyt v.
Story, 3 Barbour's Supreme Court 263;
Dickenson v.
Phelps, 1
id. 461;
Clayton v. Faucet, 2
Leigh 19;
Hopkins v. Beebe, 2 Casey 85;
Hall v.
Jackson, 20 Pickering 194.
[
Footnote 9]
Copperthwaite v. Sheffield, 3 Comstock 243.
[
Footnote 10]
Knapp v. Alvord, 10 Paige 205;
Yeates v.
Groves, 1 Vesey Jr. 280;
Row v. Dawson, 1 Vesey 331;
Morton v. Naylor, 1 Hill 585.
