Cleveland v. Chamberlain
| Decision Date | 01 December 1861 |
| Citation | 1 Black 419,17 L.Ed. 93,66 U.S. 419 |
| Parties | CLEVELAND v. CHAMBERLAIN |
| Court | U.S. Supreme Court |
This was an appeal by the defendant from the District Court of the United States for the district of Wisconsin.
Newcombe Cleveland, of Illinois, brought his bill in equity in the District Court against the La Cross and Milwaukie Railroad Company, Byron Kilbourn, Moses Kneeland, James Luddington, D. C. Freeman, Charles D. Nash, of Wisconsin, and Selah Chamberlain, of Ohio, complaining that he had recovered a judgment against the railroad company for $112,271 76, besides costs, which remains unsatisfied, and on which the complainant issued his execution and levied upon the road of the company, and all its property, real and personal, and upon its franchises, rights and privileges, as by the laws of Wisconsin he had a right to do; that the railroad company fraudulently, and with intent to cheat its creditors, made to Selah Chamberlain a pretended lease of its railroad, except the Watertown division, for an indefinite time, and a sale of all its personal property except what was used on the Watertown division, together with all its rights, privileges and franchises connected with or incident thereto; that Chamberlain entered into possession of the road and took into his costody the property of the company conveyed to him by this fraudulent contract; that with a like fraudulent intent, the company made a similar lease and contract of sale for the Watertown division of their road, (but this lease was for a certain limited time,) and the personal property used thereon, with D. C. Freeman, who, under the contract, went into possession thereof; that while the complainant's action, in which he recovered the judgment already mentioned, was on trial, the railroad company fraudulently confessed judgment to Chamberlain for $629,105 22, though the company did not, at that time, owe him a sum exceeding fifty thousand dollars, and all of the judgment beyond that sum was without any consideration whatever. The bill charges Kilbourn, Kneeland, and Luddington, who were directors of the company, with fraudulently acquiring title to certain lands of the company worth $100,000 by means of a pretended sale made by themselves to another person, who was their agent, for $20,000 in stock of the company. The bill prays that the contracts with Freeman and Chamberlain, and the conveyances to the other defendants of the lands, as well as the judgment confessed by the company to Chamberlain, may be declared fraudulent and void.
The material charges of the bill were denied in the several answers of the defendants. Much evidence was taken on both sides, and the case was most fully heard and examined by the judge of the District Court, who decreed that the contract and judgment of Chamberlain were fraudulent, and, as such, should be set aside. The contract with Freeman having expired by its own limitation, no decree with respect to him was made, except that he pay a certain part of the costs. Against the other defendants the court made no final decree, but as to the conveyance of the lands to Kneeland and Luddington referred it to a master to ascertain the annual income of the lands they purchased, the value of the improvements made since their purchase, and the interest upon the purchase money paid. The suit against them was afterwards discontinued. The La Crosse and Milwaukie Railroad Company pending the suit had been dissolved, and their charter and property were transferred to another corporation, organized under the name of the Milwaukie and Minnesota Railroad Company. The only party, therefore, against whom a final decree was made, was Chamberlain, whose judgment and contract were set aside as fraudulent. Chamberlain took an appeal to this court.
Mr. Black, of Pennsylvania, on behalf of the Milwaukie and Minnesota Railroad Company, its stockholders and creditors, filed sundry affidavits, and moved that the appeal of Chamberlain be dismissed on the ground that Chamberlain himself was the only party on record who had any interest in the cause either way—that he was conducting the appeal in this court on both sides—and that other parties not named on the record would suffer by the decree which he might thus procure to be made. The motion was set for argument, and notice given to the counsel of Chamberlain.
Mr. Black, in support of his motion. The record with the documents and affidavits on file prove incontestably that Chamberlain bought Cleveland, the plaintiff below, entirely out. Cleveland's interest in the decree from which this appeal is taken, was the amount of his judgment against the La Crosse and Milwaukie Railroad Company for $112,000. Chamberlain has paid him the whole amount of that judgment, and taken an assignment of it. The affidavits prove this. Cleveland has admitted it, and Chamberlain himself has sworn to it in his answer to a bill filed against him by another party, which is here produced. Besides, it is made perfectly clear by the acknowledged fact, that Chamberlain, claiming to be the owner of the Cleveland judgment, has received and receipted for a part of it out of certain funds of the railroad company, which were applicable to it. In addition to that, we have here affidavits (the truth of which will not be denied) showing that Chamberlain has employed, or at least has agreed to pay, the counsel on both sides of this cause. Those who defend the decree of the court below, as well as those who prosecute the appeal, are in his service.
There being no real dispute between the appellant and the appellee, why should the cause be suffered o stand for a moment on your record? What chance is there of a fair hearing? Chamberlain, as he pays for the arguments on both sides, has the power, if not the right, to control them. Of course he will take care that the cause of the appellee is given away, and the decree of the District Court be reversed. And he wants it reversed, not because there is any conflict between him and the appellee, (for he has made the appellee's interest his own,) but because he desires to affect injuriously and wrongfully the rights of third parties.
The parties on whose behalf this motion is made were bondholders and mortgagees of the La Crosse & Milwaukie Railroad Company, who had advanced two millions of dollars, the money with which the railroad was built. They foreclosed the mortgage and sold out the company, its property, charter, and all. Then they converted their debt into stock, and formed a new company under the name of the Milwaukie & Minnesota Railroad Company. Their stock and franchises in this new company are all they have, or can ever get, for their bonds. They took the road and franchises subject to all legal incumbrances on them. Inasmuch as the transfer to them was after the date of Chamberlain's judgment against their predecessors, and after...
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...‘V ,’ " id. at 400 n.5, those cases, unlike this one, raise obvious concerns about friendly suits, see, e.g., Cleveland v. Chamberlain , 66 U.S. (1 Black) 419, 425–26, 17 L.Ed. 93 (dismissing case where one party bought out the litigating interests of the other side and brought suit "for th......
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...controversy was a real one." (Italics supplied.) A case which, if anything, is even stronger upon its facts is Cleveland v. Chamberlain (1862) 1 Black, 419, 17 L. Ed. 93. There the proceeding was in fact adversary throughout the trial in the lower court and until after judgment was rendered......
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