Cowell v. City Water Supply Co.

• Decision Date: 16 February 1903
• Docket Number: 1,785.
• Citation: 121 F. 53
• Parties: COWELL et al. v. CITY WATER SUPPLY CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

121 F. 53

COWELL et al. v. CITY WATER SUPPLY CO. et al.

No. 1,785.

United States Court of Appeals, Eighth Circuit.

February 16, 1903

Syllabus by the Court.

The sum or value of the matter in dispute, which conditions the jurisdiction of a federal circuit court, is the amount or value of that which the complainant claims to recover, or the amount or value of that which the defendants will lose if the complainant obtains the recovery he seeks.

In a suit by an alleged owner of 1/325 of certain real property constituting waterworks and their appurtenances, to cancel and avoid mortgages thereon for $475,000, and to declare his interest in the property free from the liens of those mortgages, the sum or value of the matter in dispute is not the amount of the mortgages or the value of the entire property, but the value of the 1/325 of the property which the complainant claims to own, and seeks to relieve from the liens of the incumbrances.

W. E Blake, for appellants.

William A. Underwood (William McNett, on the brief), for appellees.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

This is an appeal from a decree which sustained a demurrer to and dismissed a bill in equity against the City Water Supply, a corporation, and other parties, which was exhibited by William F. Cowell in the district court of Wapello county, in the state of Iowa, in September, 1898. The suit was removed to the Circuit Court of the United States for the Southern District of Iowa on the petition of the defendants and on April 3, 1899, the complainant, Cowell, made a motion to remand the case to the state court on the ground that the matter in dispute, exclusive of interest and costs, did not exceed the sum of $2,000. This motion was denied and the ruling of the court denying it is the first error assigned. This alleged error will be first considered, because, if this ruling was erroneous, the court below was without jurisdiction to determine the merits of the case, and it will be unnecessary to state or discuss them.

When the motion to remand was made, the sum or value of the matter in dispute was determinable from the averments of the bill and an affidavit of William A. Underwood that the value of the property of the defendant the City Water Supply Company was $300,000. The bill contained allegations of the following facts: The complainant, Cowell, was the owner of one of 400 bonds, of $1,000 each, made by the Iowa Water Company, secured by a mortgage of its waterworks at Ottumwa, Iowa, and dated April 15, 1887. Default had been made in 1894 in the payment of the interest upon these bonds, and the defendants Frederick E Potter, Winthrop Smith, Charles G. Sanford, and Frederick H. Mills became a committee of the bondholders, as such issued a plan for protecting the interests of the bondholders, and solicited the deposit of bonds with themselves under that plan. The complainant deposited his bond under the plan, and 327 other bonds of like amount and character were deposited with the committee in the same way. Thereupon this committee foreclosed the mortgage securing these bonds, bid in the property at the foreclosure sale, incorporated the defendant the City Water Supply Company, unlawfully issued $80,000 of the preferred stock and $20,000 of common stock of this new company, conveyed the waterworks and their appurtenances to this corporation, and caused it to make two mortgages upon this property-- one for $150,000 and one for $325,000-- both of which, together with the bonds which they secure, are void, and constitute a fraud upon the rights of the complainant, for numerous reasons set forth at large in the bill. The committee have also organized an illegal voting trust, by means of which they hold the possession and power to vote the stock of the water supply company, and the possession and operation of the plant and property of that company. The complainant brings this suit on behalf of himself and on behalf of all others of the same class who may join in the proceeding, and his prayer is that the organization of the City Water Supply Company, the stock it has issued, and the mortgages it has made, may be declared void; that his undivided interest, which he avers to be 1/325 of the property held by the City Water Supply Company, may be declared to be free from all liens and incumbrances except a lien for $51,000, evidenced by an old underlying mortgage made by the Ottumwa Waterworks Company before the mortgage which was foreclosed was executed, or that, in the event that the court should sustain the incorporation of the supply company, and the stock and mortgages it has made, the complainant may recover of the individuals constituting the committee a sum of money equal to 1/325 of $524,000 and 1/325 of $1,509.79, and 1/325 of the income and earnings of the property since it came into the hands of the committee on September 12, 1897.

It will be seen from this brief statement of the averments of the bill that the property of the City Water Supply Company was not worth, and is not claimed to be worth, more than $525,000, and that the complainant's alleged share of it was not of a value exceeding 1/325 of $525,000, or $1,615.38, while the amount of the judgment for money which he sought to recover in case the stock and the mortgages of the supply company were sustained did not exceed $1,650, and the debt he was endeavoring to collect was only $1,000 and interest.

The Circuit Courts of the United States have no jurisdiction unless 'the matter in dispute exceeds, exclusive of interest and costs, the sum or value of two thousand dollars.' 25 Stat. 433; 1 U.S. Comp.St. 1901, tit. 13, Sec. 629, p. 508.

Where a suit is brought by one of a class on behalf of himself and all others similarly situated who may join in the proceeding, the sum or value of the matter in dispute is the amount or aggregate value of the interests of those who have joined in the suit. It is not the amount or value of the interest of the entire class. Foster's Federal Practice, Sec. 16, p. 33. As no one had joined in this suit with the complainant when the motion to remand was made, the sum or value of the matter in dispute at that time was the amount or value of that which he would gain or of that which the defendants would lose if he recovered that for which he prayed in his bill.

It was admitted by the court below, and it is conceded by counsel for the appellee, that the amount or value of the property or of the money which the complainant sought to recover in this suit was less than $2,000. But their contention is that because the complainant prays in his bill that the mortgages made by the City Water Supply Company, aggregating $475,000 be canceled and annulled, and that his 1/325 of the property covered by them may be declared to be free from their liens, the amount involved is the amount of the mortgages, $475,000, and the federal court has jurisdiction. In support of this contention, cases are cited in which owners of property were contesting opposing claims to it, where it is held that the value of the property the complainant claims to own is the test of jurisdiction, as in Berthold v. Hoskins (C.C.) 38 F. 772; Lehigh Zinc & Iron Co. v. New Jersey Zinc & Iron Co. (C.C.) 43 F. 545; Parker v. Morrill, 106 U.S. 1, 1 Sup.Ct. 14, 27 L.Ed. 72; and Smith v. Adams, 130 U.S. 167, 175, 9 Sup.Ct. 566, 32 L.Ed. 895. If the complainant were the owner of the waterworks, these cases would be controlling, and the value of that property would be the test of the jurisdiction of the court below, and that value...