The jurisdiction of federal courts, sitting as courts of equity,
cannot be enlarged or diminished by state legislation.
Whether such a court has jurisdiction in equity over a
particular case will be determined by inquiring whether, by the
principles of common law and equity, as distinguished and defined
in this country and in the mother country at the time of the
adoption of the Constitution of the United States, the relief
sought in the bill was one obtainable in a court of law or one
which only a court of equity was fully competent to give.
A creditors' bill, to subject property of the debtor
fraudulently standing in the name of a third party to the payment
of judgments against the debtor is within the jurisdiction of a
federal court, sitting as a court of equity, although, in the
courts of the state in which the federal court sits, state
legislation may have given the creditor a remedy at law.
N. and S., being citizens of Louisiana, obtained a judgment in a
court of the state against C., also a citizen of Louisiana, which
they assigned to W, and L., citizens of Missouri. The assignees
thereupon brought suit against C. in the Circuit Court of the
United States for the Western District of Louisiana, putting the
jurisdiction on the ground of diverse citizenship.
Held
that under the provisions of § 1 of the Act of March 3, 1875, 18
Stat. 470, c. 137, which statute was in force when the suit was
commenced, it could not be maintained.
The jurisdiction of this Court in this case is limited by the
Act of February 25, 1889, 25 Stat. 693, c. 236, to the
determination of the questions as to the jurisdiction of the
circuit court.
The facts in this case are as follows: on March 29, 1881, Joel
Wood and William H. Lee, citizens of the State of Missouri,
partners as Wood & Lee, obtained a judgment in the Eighth
District Court of the Parish of East Carroll, Louisiana, against
Simon Cohn, a citizen of the State of Louisiana, for $529.25, with
interest, for goods sold by them to him on October 30, 1880. On
April 2, 1881, S. B. Newman and S. D. Stockman, composing the firm
of S. B. Newman & Co., also obtained a judgment in the same
court against said Cohn for
Page 150 U. S. 203
$24,282.16, which judgment, subject to a credit of $5,452, the
proceeds of certain attachment proceedings accompanying the action,
was duly assigned to Wood & Lee. Newman and Stockman were both
citizens of Louisiana. On November 30, 1885, Wood & Lee filed
their bill in equity in the Circuit Court of the United States for
the Western District of Louisiana against Simon Cohn, his wife,
Fannie Cohn, and his wife's mother, Henrietta Steinhardt, all
citizens of Louisiana, the purpose and object of which was to set
aside as fraudulent a judgment in favor of Mrs. Cohn against Simon
Cohn, and to subject certain property standing in the name of Mrs.
Steinhardt, and alleged to be the property in fact of Simon Cohn,
to the payment of these judgments. On July 11, 1882, the
Mississippi Mills, a corporation organized under the laws of the
State of Mississippi, obtained a judgment in the Eighth District
Court of the Parish of East Carroll, Louisiana, against Simon Cohn
for $751.46. On July 5, 1883, it commenced in that court a suit of
substantially the same nature as that commenced by Wood & Lee.
This suit was duly removed to the Circuit Court of the United
States for the Western District of Louisiana. After such removal,
and on October 29, 1886, these cases were consolidated by an order
of the circuit court, and from that time on they proceeded as one
case. Pleadings having been perfected and proofs taken, the
consolidated case was submitted to the circuit court, and on July
18, 1889, a decree was entered dismissing the bills of plaintiffs
for want of jurisdiction. To reverse this decree of dismissal,
appellants have brought their appeal to this Court.
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, delivered the opinion of the Court.
No appearance has been made for the appellees in this Court, and
we should be at a loss to know the grounds for the decision
Page 150 U. S. 204
of the circuit court were it not for the opinion of District
Judge Boarman, before whom the case was heard, 39 F. 865, which
gives his reasons for entering the decree of dismissal.
It may be premised that no objection arises on account of the
amount in controversy in either suit, for at the time these suits
were brought, the circuit court had jurisdiction where such amount
exceeded the sum of $500. Rev.Stat. § 629. Nor can there be any
doubt of the jurisdiction of this Court over the appeals of either
appellant, treating them as separately appealing, because the case
in the trial court involved the question of the jurisdiction of
that court. 25 Stat. 693, Act of February 25, 1889, c. 236. The
decision of the circuit court was to the effect that no relief
could be had in equity because, under the practice prescribed in
that state, there was a remedy by an action at law. We quote from
the opinion:
"If it be true that Cohn, notwithstanding said purchases,
transfers, etc., were ostensibly made by Mrs. Steinhardt, and the
title of record is in her name, is the real owner of the property
now sought to be subjected to the payment of Cohn's debts, the
complainants have a well known and adequate remedy at law to make
the property liable for their claims."
"The issues made up by the pleadings and evidence involve
fundamentally the title to or the real ownership of the property in
question. The complainants charge that Cohn in fact and law is the
owner thereof. The defendants deny his ownership, and contend that
the sales were real sales to Mrs. Steinhardt. Such issues are not
determinable in this court in equity proceedings. . . . In the view
and purpose of complainants' charges, Cohn now owns the property,
and they have not presented or sought to present such an action as
should be heard in equity, and it is ordered that their suit be
dismissed."
We are unable to concur in these views. It is well settled that
the jurisdiction of the federal courts, sitting as courts of
equity, is neither enlarged nor diminished by state legislation.
Though by it all differences in forms of action be abolished,
Page 150 U. S. 205
though all remedies be administered in a single action at law,
and so far at least as form is concerned, all distinction between
equity and law be ended, yet the jurisdiction of the federal court
sitting as a court of equity remains unchanged. Thus, in
Payne v. Hook,
7 Wall. 425,
74 U. S. 430,
it was said, citing several cases:
"We have repeatedly held"
"that the jurisdiction of the courts of the United States over
controversies between citizens of different states cannot be
impaired by the laws of the states, which prescribe the modes of
redress in their courts, or which regulate the distribution of
their judicial power."
"If legal remedies are sometimes modified to suit the changes in
the laws of the states and the practice of their courts, it is not
so with equitable. The equity jurisdiction conferred on the federal
courts is the same that the high Court of Chancery in England
possesses, is subject to neither limitation nor restraint by state
legislation, and is uniform throughout the different states of the
Union."
And in
McConihay v. Wright, 121 U.
S. 201,
121 U. S.
205:
"The contention of the appellants, however, is that by the
statute of West Virginia, the complaint might have maintained an
action of ejectment. Reference is made in support of this to the
West Virginia Code of 1868, c. 90, to show that an action of
ejectment in that state will lie against one claiming title to or
interest in land, though not in possession. Admitting this to be
so, it nevertheless cannot have the effect to oust the jurisdiction
in equity of the courts of the United States, as previously
established. That jurisdiction, as has often been decided, is
vested, as a part of the judicial power of the United States, in
its courts, by the Constitution and acts of Congress in execution
thereof. Without the assent of Congress, that jurisdiction cannot
be impaired or diminished by the statutes of the several states
regulating the practice of their own courts."
See also Scott v. Neely, 140 U.
S. 106;
Cates v. Allen, 149 U.
S. 451, in which a state statute extending the
jurisdiction of equity to matters of a strictly legal nature was
held inapplicable to the federal courts, and unavailing to vest a
like jurisdiction in such courts sitting as courts of equity.
So, conceding it to be true, as stated by the learned judge,
Page 150 U. S. 206
that the full relief sought in this suit could be obtained in
the state courts in an action at law, it does not follow that the
federal court, sitting as a court of equity, is without
jurisdiction. The inquiry rather is whether, by the principles of
common law and equity as distinguished and defined in this and the
mother country at the time of the adoption of the Constitution of
the United States, the relief here sought was one obtainable in a
court of law or one which only a court of equity was fully
competent to give.
In order to determine this question, a further statement is
necessary of the facts disclosed in, and the exact relief sought
by, the bills. After the allegations in respect to the judgments,
the bills aver that in 1879 and 1880, the defendants entered into a
conspiracy to defraud and despoil the creditors of Simon Cohn; that
he proceeded to carry out this scheme by purchasing from plaintiffs
and others a large amount of goods, on credit, and selling them for
cash at a great sacrifice, and these moneys he had so placed as to
be beyond the reach of his creditors. The means by which these
goods were received and disposed of are stated at some length.
Further, and as is alleged, in carrying out this scheme, he
fraudulently procured his wife to institute a suit for moneys when
none was due from him to her, and he, not defending, to recover a
judgment for $4,000, as her separate estate, by which any property
in his name could be sold and the title transferred to his wife.
Also he executed a mortgage for $5,800 on certain real estate,
to-wit, six lots in the Town of Providence and a fine brick
storehouse thereon, in favor of his brother, a mortgage which was
in fact without any consideration. Thereafter his brother
foreclosed such mortgage, and on foreclosure the property was
purchased in the name of Mrs. Steinhardt, Simon Cohn's
mother-in-law. Other property described was purchased in the name
of Mrs. Steinhardt, although the money paid therefor was furnished
by Cohn, and was part of that realized from the cash sales
heretofore mentioned. All his property had in fact been placed in
the name of Mrs. Steinhardt, and he was carrying on business
ostensibly in her name, though all the while the real owner. The
prayer of the bills is that
Page 150 U. S. 207
the judgment in favor of the wife be set aside as fraudulent,
that the defendant Simon Cohn be declared the real owner of the
properties described, and that they be taken possession of by a
receiver and sold to satisfy the judgments.
It will be seen from this statement that these bills were
substantially creditors' bills to subject property -- in fact the
property of the defendant, but fraudulently standing in the name of
a third party -- to the payment of those judgments, and to remove a
fraudulent judgment which might stand as a cloud upon the title of
the debtor. Such suits have always been recognized as within the
jurisdiction of equity. In 2 Beach on Modern Equity Jurisprudence §
883, it is said:
"A court of equity will aid a judgment creditor to reach the
property of his debtor by removing fraudulent judgments or
conveyances or transfers which defeat his legal remedy at law."
See also 3 Pomeroy's Eq.Juris. § 1415;
Dockray v.
Mason, 48 Me. 178;
Edgell v. Haywood, 3 Atk. 352,
357;
Burroughs v. Elton, 11 Ves. 33;
Hendricks v.
Robinson, 2 Johns.Ch. 283;
Edmeston v. Lyde, 1 Paige,
637;
Beck v. Burdett, 1 Paige 305;
Cuyler v.
Moreland, 6 Paige 273;
Feldenheimer v. Tressel, 6
Dak. 265. It follows from these considerations that the circuit
court erred in dismissing these bills for want of jurisdiction.
It was further held by the circuit court, as appears from the
opinion referred to, that Wood & Lee were not entitled to
relief by reason of the Newman judgment on the further ground that
Newman and Stockman, being citizens of Louisiana, could not have
sued in the federal court, and that Wood and Lee, their assignees,
were equally disabled. This by reason of that clause in the first
section of the act of 1875 conferring jurisdiction on the circuit
courts (which statute was in force at the time of the commencement
of this suit) which reads as follows:
"Nor shall any circuit or district court have cognizance of any
suit founded on contract in favor of an assignee unless a suit
might have been prosecuted in such court to recover thereon if no
assignment had been made, except in cases of promissory notes
negotiable by the law merchant and bills of exchange.
Page 150 U. S. 208
This question has been settled adversely to the appellants, and
in accord with the ruling of the circuit court, by the case of
Walker v. Powers, 104 U. S. 245. That case arose
under the same section. That presented, as this, a suit by the
assignee of a judgment to set aside, as fraudulent, certain sales
and conveyances of real estate made by the judgment debtor, and to
subject it to the payment of the judgment. There were two
judgments, and, after disposing of one, Mr. Justice Miller,
speaking for the Court, said, as to the other:"
"In reference to the judgment in favor of Chester, on which, as
his assignee, Whittemore asks relief, it is urged as ground of
demurrer that, Chester being a citizen of the same state with
Stewart, his assignee is incapable of prosecuting this suit in a
federal court. It was brought in 1876, and the question here raised
must be decided by a construction of the Act of March 3, 1875, c.
137, 18 Stat. pt. 3, p. 470. . . . That judgment is, then, the
foundation of his suit in the circuit court. It is a cause of
action which he holds by assignment from a party who cannot sue in
that court. Without this cause of action, he has no standing in
court, and has no right to ask the court to inquire into the other
matters alleged in the bill. It is as much the foundation of his
right to bring the present suit as if it were a bond and mortgage
on which he was asking a decree of foreclosure.
See Sheldon v.
Sill, 8 How. 441. . . . The circuit court, if the
judgment of Chester had been there recovered, might have
jurisdiction of the case to remove obstructions to the enforcement
of its own judgment, no matter who, for the time being, was its
owner. But where a party comes for the first time in a court of the
United States to obtain its aid in enforcing the judgment of a
state court, he must have a case on which the former court can
entertain original jurisdiction.
Christmas v.
Russell, 5 Wall. 290."
It may be that when the appellants obtain the relief they seek
in respect to the judgments rendered in their own favor in the
federal court, and the property of the defendants has been sold by
a receiver, or otherwise, the owners of this Newman judgment may
intervene in the case, and apply for a share of the funds.
Payne v. Hook,
7 Wall. 425,
74 U. S. 432.
But
Page 150 U. S. 209
that is a question which need not now be considered, and is very
different from the question here presented, of the right of the
assignees of this state judgment to maintain in the federal courts
an independent suit for its enforcement.
The Act of February 25, 1889, which gives this Court
jurisdiction, 25 Stat. 693, provides that
"in cases where the decree or judgment does not exceed the sum
of five thousand dollars, the Supreme Court shall not review any
question raised upon the record, except such question of
jurisdiction."
It follows, therefore, that in this case, our inquiry must stop
with that question of jurisdiction, which we have thus
determined.
The decree of the circuit court dismissing these bills for
want of jurisdiction must be reversed, and the consolidated case
will be remanded to that court for further proceedings in
accordance with the law.