Hale v. Allinson

• Decision Date: 11 June 1900
• Docket Number: 26.
• Citation: 102 F. 790
• Parties: HALE v. ALLINSON et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

102 F. 790

HALE v. ALLINSON et al.

No. 26.

United States Circuit Court, E.D. Pennsylvania.

June 11, 1900

Charles C. Lister and M. H. Boutelle, for complainant.

John G Johnson and Walter C. Rodman, for respondents.

McPHERSON District Judge.

The complainant is the receiver of the Northwestern Guaranty Loan Company, a Minnesota corporation, and has been specially appointed by a court of that state to enforce the additional liability that is imposed upon stockholder of certain classes of corporations by the Minnesota constitution. The defendants are Pennsylvania stockholders, 47 in number, who were not served with process and did not appear in the proceeding by which the Minnesota court ascertained what debts were due by the corporation and how large the assessment upon each stockholder should be. The assessment was fixed at 100 per cent., and recovery is therefore sought of the whole amount that each defendant can be called upon to pay. The demurrer attacks the bill upon several grounds, of which only one, in my opinion, is necessary to be considered, namely, that the complainant has an adequate remedy at law.

As it stands, the bill is brought by two complainants; one being the creditor that began the foregoing proceeding in Minnesota, and the other being the receiver that was thereupon specially appointed,-- both professing to sue in this jurisdiction for the equal benefit of all the creditors of the company. The joinder of these two complainants is one of the grounds of demurrer; but as leave has been asked, and is now granted, to dismiss the creditor from the suit, I shall treat the bill as if it had been brought in the first instance by the receiver alone. But, even thus considered, I think it cannot be sustained, because the complainant's remedy is properly at law. I have heretofore had occasion to decide a similar question, in Tompkins v. Craig, 93 F. 885; and, without repeating the reasons there given (to which I now take leave to refer), I adhere to that decision. It is, no doubt, true that the authorities are not uniform upon the point under consideration, but I think this much, at least, may be safely affirmed: Equity does not under all circumstances acquire jurisdiction of a controversy against numerous defendants upon the single ground that a multitude of suits at law might thereby be avoided. For example, if the receiver of an insolvent bank should come into possession of 50 promissory notes, apparently due to the bank from as many separate debtors, he certainly could not join these defendants in one equitable proceeding, based upon all the notes, merely because 50 suits at law might thereby be avoided. Neither would a court of equity acquire jurisdiction in such a case upon the additional ground that the money, when collected, would become part of a fund that would be distributed under the court's control. The principles that might govern the distribution would not change the character of the various liabilities sought to be enforced by the bill, and the receiver would be obliged to sue at law upon the separate legal obligation created by each contract, although the money realized by the suits might be afterwards distributed by a court of equity in accordance with equitable principles. Neither would the court acquire jurisdiction in such a case if the further ground be added that the receiver's right of action against each defendant was similar to his right against each other; being a right in each case to sue upon a contract made with the same insolvent, and evidenced by a written instrument essentially of the same description. Moreover, if such a bill could be filed in equity merely because a multitude of suits at law would thereby be avoided, by what rule of computation should the objectionable multitude be determined? Would 2 suits be sufficiently numerous? Or 5? or 25? And, if one bill might be filed because there were 50 defendants, why might not two bills be filed, each selecting 25 defendants? I see no equitable principle, therefore, in the mere consideration that the receiver might have a legal right to sue many debtors separately upon obligations similar in kind, or in the additional fact that the money recovered upon such obligations might afterwards be distributed under the supervision of a court of equity.

Something more is necessary before the equitable jurisdiction will attach, and I think the needful something is this: Before a controversy between a receiver and numerous separate debtors of the corporation can be joined in one proceeding, there must be some common relation or common interest or common question to serve as a basis for the joinder. In the absence of such a relation or interest or question, as is said by Mr Pomeroy in the first volume of his treatise on Equity Jurisprudence (section 251), 'the decree of a court of equity, and the relief given by it in one judicial proceeding, could not by any possibility prevail to prevent the multiplicity of suits which is the very object of its interference. ' That is to say, the issues will still be actually numerous, and will still be essentially separate, although there is a formal pretense that one suit only is being carried on. In section 269 the rule is stated affirmatively in the following language:

'The weight of authority is simply overwhelming that the jurisdiction may and should be exercised either on behalf of a numerous body of separate claimants against a single party, or on behalf of a single party against such a numerous body, although there is no common title nor community of right or of interest in the subject-matter among those individuals, but where there is, and because there is, merely a community of interest among them in the questions of law and fact involved in the general controversy, or in the kind and form of relief demanded and obtained by or

...