A township in Kansas delivered twenty-two of its bonds to a
railroad company to aid in the construction of the company's road.
The company contracted with B. to construct the road, and to
receive these bonds in part payment. The bonds were delivered
during the progress of the work to B., and to M., a nonresident of
Missouri, as trustee, jointly, and were by them deposited in a
Missouri savings institution in St. Louis to remain there until the
completion of the work, and then to be delivered to B. Upon the
demand of himself and M., B., claiming that he had performed all
the work under his contract, demanded the bonds. The association
refused to deliver them except upon the joint order of B. and M. B.
brought suit in St. Louis to recover them, making the association
and the company defendants and serving process upon them, and
making M. a defendant and serving upon him by publication. The
township on its own motion intervened and was made party defendant.
The savings association, M., and the township each answered
separately. The railroad company was not served with process and
made no answer. B. and the township then petitioned for the removal
of the cause to the circuit court of the United States, setting
forth that they were citizens of Kansas, that the plaintiff was a
citizen of Missouri, and that the savings association had no
interest in the result of the controversy. The prayer of the
petition was granted, the cause was removed, and it proceeded to
judgment in the Circuit Court.
Held:57
(1) That the savings association was a necessary and
indispensable party to the relief sought for, and as that defendant
was a citizen of the same state with the plaintiff there was no
right of removal on the ground that it was a formal, unnecessary,
or nominal party.
(2) That the removal could not be sustained on the ground that
the controversy was a separable controversy between the plaintiff
and the parties applying for and securing the removal.
The case is stated in the opinion.
MR. JUSTICE JACKSON delivered the opinion of the Court.
The appellant, as the assignee of Edward Burgess, on August 10,
1886, filed his petition in the Circuit Court of the City of St.
Louis, Missouri, against the Union Savings Association, of that
city; the Memphis, Carthage & Northwestern Railroad Company, a
corporation organized under the laws of the State of Missouri; C.
Montague, a nonresident of the State of Missouri, and certain
unknown persons, to recover possession of twenty-two bonds of
Oswego Township, State of Kansas, of the value of $500 each, held
by the Union Savings Association as bailee or trustee.
The petition alleged that the Memphis, Carthage and Northwestern
Railroad Company was empowered to construct, maintain, and operate
a railroad in the states of Missouri and Kansas, through the
Township of Oswego, a political subdivision of the County of
Labette, in the State of Kansas; that said township was authorized
and empowered to vote, grant, and issue to the railroad company its
bonds to aid in the construction of the railroad through the County
of Labette; that after due proceedings had been had the Township of
Oswego voted, issued, executed, and delivered to the railroad
company twenty-two of its bonds, of the value of $500 each, with
interest coupons attached, bearing date September 2, 1872, numbered
from 27 to 48, both inclusive; that the railroad corporation had
previously entered into a contract with
Page 151 U. S. 58
Edward Burgess to construct a portion of its road, and that
Burgess, under this contract, engaged in the execution of a large
amount of such construction work on the railroad; that the railroad
company, under its contract with Burgess, was to pay for the work
and labor performed and to be performed with the bonds of the
township, including the bonds in question; that on September 17,
1873, the company was indebted to Burgess in a large sum of money
for work and labor performed on the railroad under his contract,
which Burgess was still engaged in carrying out; that the railroad
company at the request of Burgess, and in consideration of the work
performed and to be performed by him, delivered to him and to the
defendant C. Montague, trustee, jointly, said twenty-two bonds upon
the agreement and understanding between the railroad company,
Burgess, and Montague that on the completion of the work then in
progress on the railroad, up to the amount of the value of the
twenty-two bonds, Montague would relinquish, for himself and for
all others, these bonds to Burgess, which would then become the
absolute property of the latter, and that, to carry out this
agreement, the bonds, with all the coupons thereto attached, were
placed by Burgess and Montague jointly in the custody of the
defendant the Union Savings Association as trustee or bailee, where
they were to remain until the completion of the work on the
railroad by Burgess, when they were to be delivered by the Union
Savings Association to him or his assigns on the demand of himself
and Montague.
It was further set out in the petition that Burgess duly
performed his work upon the railroad under and in accordance with
his contract, and became thereby entitled to the bonds, and that
Montague ceased to have any right, interest, or claim thereto,
either for himself of for any other person, and that the bonds
became the absolute property of Burgess, who thereafter, for a
valuable consideration, sold and assigned the bonds in controversy,
with all his right, title, and interest therein and claim thereto,
to the plaintiff.
The plaintiff also stated that, after the sale and assignment of
the bonds to himself, he notified the defendant the Union
Page 151 U. S. 59
Savings Association of his ownership thereof, and demanded them,
which the defendant refused to deliver without the assent of
Montague.
The petitioner further alleged that he was informed and believed
that certain persons to him unknown claimed an interest in these
bonds and coupons, but that he could not state the nature of their
interest nor the residence of the claimants.
The prayer of the petition was that the defendant the Union
Savings Association be ordered to deliver the bonds and coupons in
controversy to the plaintiff; that said unknown persons claiming an
interest therein be duly notified by publication of the pendency of
the suit, and be required to answer the same, and that the
plaintiff have all such further relief as might be proper.
Upon the filing of this petition, a summons was issued to the
Sheriff of the City of St. Louis, whose return thereon shows that
the same was duly served upon the Union Savings Association in
August, 1886, and upon the Memphis, Carthage and Northwestern
Railroad Company on October 1, 1886. It further appears that
publication was duly made for the defendant C. Montague, and the
unknown parties having an interest in the bonds in controversy.
On October 11, 1886, the Oswego Township, on its own motion,
intervened in the cause, and was made a party defendant
thereto.
At the October term, 1886, the Union Savings Association filed
its answer to the petition, in which, after stating its want of
knowledge or information as to the incorporation of the Memphis,
Carthage and Northwestern Railroad Company, and the delivery to
that company of the bonds in question, and other general
allegations of the petition, denied that the bonds described, or
any bonds, were placed by Burgess and Montague, jointly, in its
custody, there to remain until Burgess had completed the work on
the railroad, when they were to be delivered to him or his assigns
on demand, but admitted that on December 17, 1873, Edward Burgess
and C. Montague, trustee, deposited with it bonds which it believed
to be the
Page 151 U. S. 60
same referred to in the plaintiff's petition, and that it issued
and delivered a receipt therefor to Burgess and Montague at their
request, which was, in words and figures, as follows:
"Received, St. Louis, Dec'r 17th, 1873, of Edward Burgess and C.
Montague, trustees, ten thousand five hundred dollars of Oswego
Township, Labette Co., Kansas bonds, issued to the Memphis,
Carthage and Northwestern Railroad Company, the numbers being
twenty-eight to forty-eight, inclusive (also bond No. 27, 3/5 of
which [$300 Worth] is to be held for same parties under same terms,
in all $10,800 bonds), each bond for $500, due 20 years after date,
dated Sept. 2nd, 1872, annual interest at ten percent, represented
by the nineteen coupons attached to each bond, all of such ten
thousand eight hundred dollars of bonds subject to the joint order
of said C. Montague, trustee, or his successors or successor in
office, and the said Edward Burgess, upon the return of this
receipt duly endorsed."
"[Signed] James B. Love,
Cashier"
The defendant further answered that it had no knowledge that
Burgess had completed the work on the railroad, nor of his having
become the owner of the bonds, nor of his assignment to the
plaintiff, and further that before the commencement of the suit,
Montague, trustee, acting in the premises on behalf of the Oswego
township, had notified defendant that Burgess was not entitled to
the bonds.
The defendant also stated that it was ready and willing to
surrender the bonds to the party or parties legally entitled
thereto whenever it was settled in such manner as to protect
defendant from further responsibility, and prayed that all
claimants and the parties in interest might be brought into court
and interplead for the bonds, and that it might be allowed a
reasonable compensation for the custody thereof since the year
1873, and also a reasonable allowance for attorney's fees.
Montague and the Oswego township filed separate answers in which
they denied that the bonds in question had ever been delivered to
the Memphis, Carthage and Northwestern Railroad
Page 151 U. S. 61
Company under any legal authority; alleged that the bonds were
void because they were never lawfully issued under any authorized
election and vote of the people of the township to the railroad
company; that they were never in fact delivered to that railroad
company, but that they were delivered to the Union Savings
Association to secure the payment by Burgess of all debts,
liabilities, and obligations which might be contracted by him in
the prosecution of the work upon the railroad through the township
and county; that he had never performed this work, according to his
contract with the railroad company, and, if the bonds had ever been
regularly issued, he had never acquired a title thereto. The Oswego
Township therefore claimed that the bonds should be surrendered to
it for cancellation.
The Memphis, Carthage and Northwestern Railroad Company failed
to answer the petition, and made default thereto.
On December 4, 1886, Montague and the Oswego Township filed
their petition to have the cause removed to the circuit court of
the United States on the ground that at the commencement of the
suit, and at the time of the motion, they were citizens of the
State of Kansas, while the plaintiff was a citizen of the State of
Missouri; that the Union Savings Association, though a citizen of
the State of Missouri, was only trustee of the bonds, and had no
interest in the result of the controversy, and that the Memphis,
Carthage and Northwestern Railroad Company, named as a party
defendant, had never been served with process of entered its
appearance in the suit.
On this petition and proper bond tendered therewith, the suit
was removed into the United States Circuit Court for the Eastern
District of Missouri. After such removal was effected, the
plaintiff moved the court to remand the cause to the Circuit Court
of the City of St. Louis on the grounds first that the application
was not made under the second paragraph of section 639 of the
Revised Statutes; second, that the cause was not one in which there
could be any final determination of the controversy as to the
parties applying for the removal without the presence of the other
defendants; third, that the
Page 151 U. S. 62
suit was not one between citizens of different states, but was
one in which the plaintiff and the defendant the Union Savings
Association and the Memphis, Carthage and Northwestern Railroad
Company were citizens of Missouri, while Montague and Oswego
Township were citizens of the State of Kansas; fourth, that the
suit was not one in which there was a separable controversy between
citizens of different states, and that the sheriff's return as set
out in the record showed that the defendant the Memphis, Carthage
and Northwestern Railroad Company had been duly served and brought
before the court prior to the filing of the petition for the
removal of the cause.
The motion to remand was, however, overruled, and thereafter
various amended pleadings were filed in the circuit court,
including a cross-bill on the part of the Oswego Township to have
the bonds in controversy declared void and returned to it for
cancellation.
Upon the hearing of the cause, the court entered a final decree
holding that the bonds in question were issued without authority of
law, and that the same should be delivered by the Union Savings
Association to the Oswego Township for cancellation, and, it
further appearing that bond No. 27, referred to in the pleadings,
had been appropriated by the Union Savings Association. and was no
longer in its possession, a decree was entered against it for the
value of the missing bond, subject to a deduction for the amount of
compensation allowed it as custodian of the bonds. From the final
decree the present appeal is prosecuted.
The question first presented for our consideration by the
appellant is that the cause was improperly removed from the state
court to the United States circuit court, and that his motion to
remand the same to the state court should have been sustained, for
the reason that the defendants the Union Savings Association and
the Memphis Carthage and Northwestern Railroad Company were
citizens of the same state as the plaintiff and that the suit could
not be finally disposed of without the presence of these
defendants, both of whom were proper, if not necessary,
parties.
Against this position it is urged on behalf of the appellees
Page 151 U. S. 63
that the real controversy in the case was wholly between the
plaintiff and the Oswego Township and C. Montague, and could be
fully determined between them without reference to the other
defendants; that the railroad company and the Union Savings
Association were, at the most, only nominal or formal parties.
The removal in this case was had under the second section of the
act of 1875, but under which clause of that section does not
distinctly appear. The first clause of the section relates to
removals of controversies that are not separable, and in which all
the parties on one side of the suit are citizens of different
states from those on the other side, which is a necessary condition
to enable the circuit court to take jurisdiction of the entire
suit. Under this clause, all of the plaintiffs, if there are more
than one, or all the defendants, there being more than one, must,
in order to remove the suit, unite in the petition therefor, and it
is settled by the authorities that to enable a suit to be removed
under this first clause of the section, when the ground for removal
is diversity of citizenship, the party to the suit on the one side,
whether consisting of one or more persons, must have a state
citizenship different from that of the party on the other side,
whether consisting of one or more persons, and that, for the
purpose of removing the suit, these parties may be placed "on
different sides of the matter in dispute according to the facts,"
so that all those on one side will be "citizens of different states
from those on the other," and that, this being done, those on
either side may remove the suit provided that all unite in the
petition therefor.
The situation of the parties, in this case in connection with
the relief sought by the petition, does not admit of placing the
parties on different sides of the matter in dispute, so that those
on one side will be citizens of different states from those on the
other for the purpose of removing the suit, unless it can be held
that both the Memphis, Carthage and Northwestern Railroad Company,
which was made a party defendant, and duly served, and the Union
Savings Association were merely nominal, formal, and unnecessary
parties, as
Page 151 U. S. 64
these corporations were citizens of the same state as the
plaintiff.
It is settled that the jurisdiction of the federal courts will
not be defeated by the mere joinder or nonjoinder of formal
parties.
Wormley v.
Wormley, 8 Wheat. 421,
21 U. S.
451.
In
Wood v. Davis,
18 How. 467, where formal or nominal parties were united with the
real parties to the litigation, it was held that such joinder would
not oust the jurisdiction of the federal court if the citizenship
of the real parties was such as to confer it, but in speaking for
the court, Mr. Justice Nelson said, in that case:
"This is not a case of a stakeholder, or the holder of a deed as
an escrow, where a trust has been created by the parties, which is
sought to be enforced by one of them. In all such cases, the
trustee may be a proper party, as he has a duty to perform, and
which the court may enforce, if improperly neglected or
refused."
In
Bacon v. Rives, 106 U. S. 99, where
the complainants were citizens of the state in which the suit was
originally brought, and the defendant, the real party to the
controversy, against whom relief was sought, was a citizen of
another state, his right to remove the suit to the circuit court of
the United States was held not to be defeated upon the ground that
the citizenship of another defendant, who was a stranger to that
controversy and who occupied substantially the position of a mere
garnishee, was the same as that of the complainant. In that case,
however, the relief sought was against a nonresident defendant, as
the real party to the controversy. In the present case, no relief
is sought against the removing parties.
These authorities do not control in this case, for the reason
that the relief sought by the plaintiff in his bill or petition was
the recovery of the possession of the bonds held by the Union
Savings Association. He sought no active or affirmative relief
against any other defendant to the suit. He did not even make the
Oswego Township a party defendant. By his petition, he raised no
question whatever as to the validity of the bonds or the regularity
of their issue. He alleged that they were regularly issued by the
Township of Oswego to the
Page 151 U. S. 65
Memphis, Carthage and Northwestern Railroad Company, and that by
an arrangement between the railroad company and C. Montague,
trustee, and Edward Burgess, they were placed in the possession of
the Union Savings Association until Burgess should complete his
contract with the railroad company, when the bonds were to be
delivered to Burgess or his assignee. The plaintiff, as his
assignee, claimed that Burgess had complied with and completed his
contract, thereby becoming the owner of the bonds and entitled to
their possession, and that thereafter he assigned his right, title,
and interest in the same to the plaintiff, who by his petition only
sought to recover possession of the bonds. The Union Savings
Association, being the bailee or trustee of the bonds, was a
necessary and indispensable party to the relief sought by the
petition, and, that defendant being a citizen of the same state
with the plaintiff, there was no right of removal on the part of
Montague or of the intervening defendant, the Oswego Township, on
the ground that the Union Savings Association was a formal,
unnecessary, or nominal party.
Furthermore, under the allegations of the petition that the
bonds had been issued to the Memphis, Carthage and Northwestern
Railroad Company by the Oswego Township by authority of law, and
that it had contracted with Burgess to pay him the bonds in
question for work and labor performed and to be performed by him in
the construction of its line of railroad, the railroad company was
a proper if not a necessary party, as it had an interest in the
question whether Burgess had performed his contract and earned the
bonds.
Considering the nature of the suit and the relief sought
thereby, these defendants cannot be treated and regarded as purely
formal and unnecessary parties. The character of the relief sought
made the Union Savings Association, which occupied the position of
a bailee or trustee, a necessary and indispensable party.
But can the removal be sustained under the second clause of the
second section of the act of 1875 on the ground that the suit
presented a separable controversy between the plaintiff
Page 151 U. S. 66
and the parties applying for and securing the removal? We think
not. The question whether there is a separable controversy
warranting a removal to the circuit court of the United States must
be determined by the state of the pleadings and the record of the
case at the time of the application for removal, and not by the
allegations of the petition therefor, or the subsequent proceedings
which may be had in the circuit court.
Barney v. Latham,
103 U. S. 205.
The original petition in the present case, filed in the state
court, and the relief sought thereunder did not present a
controversy which was wholly between citizens of different states,
or one that could be finally determined as between the plaintiff
and the removing parties, without the presence of the Union Savings
Association, and could not therefore be removed separately or
jointly by either Montague or the Township of Oswego.
The fact that the Memphis, Carthage and Northwestern Railroad
Company did not answer, but made default, is unimportant, and
placed the parties in no different position with reference to a
removal of the cause than they would have occupied if that company
had answered, and either admitted or denied the rights of the
plaintiffs.
Putnam v. Ingraham, 114 U.
S. 59.
The petition filed in the state court did not present several
causes of action, some of which were against the resident
defendants and others against the nonresident defendants, but
embraced a single cause of action and a single ground of relief. It
did not, therefore, come within the authorities which allow a
removal on the ground of a separable controversy such as entitled
the nonresident defendants to remove the cause.
Without reviewing the authorities on the subject of removal of
causes on the ground of separable controversies, within the meaning
of the second clause of the second section of the act of 1875, we
deem it sufficient to cite the following cases as fully sustaining
the conclusion to which the Court has arrived, that the pleadings
in the case under consideration present no ground on which to base
the right of removal:
Brooks
Page 151 U. S. 67
v. Clark, 119 U. S. 502,
119 U. S. 511;
Brown v. Trousdale, 138 U. S. 389,
138 U. S. 396;
Torrence v. Shedd, 144 U. S. 527,
144 U. S.
530.
In this last-cited case, MR. JUSTICE GRAY, speaking for the
Court, sums up the authorities on the subject as follows:
"But in order to justify such removal on the ground of a
separate controversy between citizens of different states, there
must, by the very terms of the statute, be a controversy 'which can
be fully determined as between them,' and by the settled
construction of this section, the whole subject matter of the suit
must be capable of being finally determined as between them, and
complete relief afforded as to the separate cause of action,
without the presence of others originally made parties to the
suit."
Considering the character of the relief sought by the original
bill, and the situation of the parties, it cannot be properly said
that the whole subject matter of the suit was capable of being
finally determined between the plaintiff, on the one side, and
Montague and the Oswego Township, on the other, without the
presence of the Union Savings Association, so as to warrant the
removal as a separable controversy.
The cases of
Thayer v. Life Association, 112 U.
S. 717;
St. Louis & San Francisco Railway v.
Wilson, 114 U. S. 60, and
Crump v. Thurber, 115 U. S. 56, are
not distinguishable in principle from the present case. In the
former case, the situation of the parties was substantially the
same as in the case under consideration, and it was held that the
resident corporation, as the holder of the stock which the
complainant sought to have transferred to himself, was such an
indispensable party as would prevent the removal of the cause from
the state to the circuit court.
We are therefore of opinion that the cause was wrongfully
removed, and that the motion to remand should have been sustained.
The decree below is
Reversed, with costs, and the cause remanded to the Circuit
Court of the United States for the Eastern District of Missouri
with directions to remand the suit to the state court from which it
was originally removed.