Cella, Adler & Tilles v. Brown

• Decision Date: 01 March 1905
• Citation: 136 F. 439
• Court: U.S. District Court — Eastern District of Missouri
• Parties: CELLA, ADLER & TILLES v. BROWN et al.

136 F. 439

CELLA, ADLER & TILLES v. BROWN et al.

United States Circuit Court, E.D. Missouri, Eastern Division.

March 1, 1905

Henry W. Bond, for complainants.

George W. Easley and Boyle, Priest & Lehmann, for defendants.

SANBORN Circuit Judge.

On October 31, 1904, the complainants, who are citizens of Missouri, filed in the circuit court of the city of St. Louis a bill in equity against the defendants, James Brown and others, copartners as Brown Bros. & Co., and all citizens of the state of New York, and the National Bank of Commerce, the St. Louis Transit Company, and the United Railways Company corporations of the state of Missouri. The summons required the defendants to appear and answer on the first Monday of December, 1904. On the 2d day of November, 1904, James Brown and the defendant corporations appeared and presented motions relative to the issue of an injunction sought by the complainants. On November 17, 1904, the defendant James Brown filed a petition for the removal of this suit to the Circuit Court of the United States for the Eastern District of Missouri on the ground that it involved a separable controversy between the members of the firm of Brown Bros. &amp Co. and the complainants. A petition for removal which is filed before the time fixed by the statutes or rules of court for the interposition of the answer to the bill is in time and the appearance of the petitioner, and his hearing upon preliminary motions regarding injunctions, attachments, and other provisional remedies, do not waive his right to removal. Sidway v. Missouri Land & Live Stock Co. (C.C.) 116 F. 381, 394, and cases there cited; Garrard v. Silver Peak Mines (C.C.) 76 F. 1.

The only question remaining is, was there a separable controversy which rendered the suit removable? So far as the facts set forth in the bill are material to this question, they are these: The complainants were the owners of 11,000 shares of the stock of the St. Louis Transit Company. The transit company was the owner of a large amount of stock and bonds, which were pledged to secure the payment of a debt of about $7,000,000 which it owed. The transit company and the United Railways Company, through the votes and influence of Brown Bros. & Co., adopted a certain plan of reorganization. One of the terms of this plan was that each stockholder in the transit company should be permitted to contribute in proportion to the amount of his stock, to the payment of this debt of $7,000,000, and should receive such a portion of the pledged stocks and bonds of the transit company as the amount contributed should bear to the whole debt of $7,000,000. Brown Bros. & Co. made a contract with the transit company and the railways company that they would carry into effect this plan, and thus vest in these various stockholders their respective shares of the pledged stock and bonds. The complainants' share of the $7,000,000 required to pay the debt was $446,160, and consequently their share of the pledged stocks and bonds was approximately one-sixteenth of the whole. Brown Bros. & Co. allotted to the complainants their proper share, and appointed the National Bank of Commerce their agent to receive the contributions of all the stockholders. They notified the complainants to pay to the Bank of Commerce 84 per cent. of their contribution, and the complainants tendered the payment of this amount to the bank. Before this tender was made, Brown Bros. & Co. had prepared a contract between themselves and the stockholders who should contribute to the payment of this debt, which provided that Brown Bros. & Co. should receive rights and advantages relative to the pledged securities to which they were not entitled under their contract with the railroad corporations, and that the contributors should deprive themselves of rights and privileges which lawfully belonged to them, and had instructed their agent, the bank, to accept no contribution until the contributor signed this contract. The bank accordingly presented the contract to the complainants, and demanded their signature, as a condition of its receipt of their contribution.

The complainants refused to sign. The bank refused to accept their contribution. The bank now makes claim that, after it refused the tender of the payment by the complainants, it paid the amount which had been allotted to them to pay, and that, unless the complainants will sign and become parties to the contract demanded by Brown Bros. & Co., the bank will claim for itself all the benefits of its payment. But the bank had no authority to act for the complainants in the matter, and could acquire, according to the averments of the bill, no rights to the securities belonging to the complainants by any such action. Brown Bros. & Co. threaten to allot the share of the complainants in the payment of the debt and in the pledged securities to some other person who will sign their contract. Brown Bros. & Co. induced the transit company, the United Railways Company, and their stockholders to adopt the scheme of reorganization by misrepresentation, deception, and fraud.

The bill prays that all proceedings in the attempted reorganization of the corporations be avoided for fraud, that Brown Bros. & Co. and the Bank of Commerce be required to deliver up to the complainants their shares of the pledged securities upon their payment of their share of the debt, that Brown Bros. & Co. be enjoined from allotting their share to any other party, that the proposed contract which Brown Bros. & Co. presented for their signature be declared fraudulent and of no effect, and that the transit company and the United Railways Company be enjoined from interfering with the complainants' right to their share of the securities.

After the petition for removal had been filed, amendments were made to the bill. But the motion to remand is conditioned by the bill as it read at the time the petition was filed, and for this reason the amendments will be disregarded. The sufficiency of the statements of facts to constitute the causes of action pleaded in the bill is not open to consideration on a motion to remand, and nothing here said intimates any opinion upon that question.

The bill clearly sets forth two controversies or causes of action-- one for the avoidance of the scheme and contract of the railroad companies and Brown Bros. & Co. to reorganize those corporations, and another to enforce the specific performance of the contract of Brown Bros. & Co. to convey to and vest in the complainants their share of the pledged securities of the transit company. There is no claim that the controversy and cause of action relative to the enforcement of the specific performance of the contract of Brown Bros. & Co. does not present a separable controversy and a distinct cause of action. The only question is whether it presents a controversy wholly between citizens of different states, which may be finally determined as between them.

All parties who a-e not indispensable to the determination of a suit in the federal court may be dismissed or disregarded if their presence would oust or interfere with the jurisdiction of that court. Hence, in the determination of questions involving the jurisdiction of the federal court, and the rights of petitioners to remove suits to that court, indispensable parties alone require consideration, Geer v. Mathieson Alkali Works, 190 U.S. 428, 432, 23 Sup.Ct. 807, 47 L.Ed. 1122; Bacon v. Rives, 106 U.S. 99, 104, 1 Sup.Ct. 3, 27 L.Ed. 69; Wormley v. Wormley, 8 Wheat. 421, 451, 5 L.Ed. 651; Wood v. Davis, 18 How. 467, 475, 15 L.Ed. 460; Sioux City Terminal R. & W. Co. v. Trust Co. of North America, 82 F. 124, 126, 27 C.C.A. 73, 75. There is no allegation in the bill that the railroad corporations have done or threaten to do any act in violation of, or to prevent the performance of, the contract of Brown Bros. & Co.; and there is no prayer in the bill for any decree that they, or either of them, shall make any conveyance or take any step toward the execution of that agreement. There is a prayer for an injunction to forbid them from doing any act or taking any step to interfere with the rights of the complainants, but it stands without averment or recital of any fact to sustain it. The railroad corporations, therefore, are not made by the allegations of this bill indispensable parties to the controversy and cause of action for the enforcement of the contract of Brown Bros. & Co. Nor is any such claim seriously made by counsel for the complainants.

But counsel argues with great ability and force that the Bank of Commerce is an indispensable party to this cause of action and in support of his contention he cites Wilson v. Oswego Township, 151 U.S. 56, 14 Sup.Ct. 259, 38 L.Ed. 70; Barth v. Coler, 60 F. 466, 9 C.C.A. 81; Powers v. Chesapeake & Ohio Ry. Co., 169 U.S. 92, 97, 18...