Jones v. Gould

• Decision Date: 14 December 1906
• Docket Number: 1,551.
• Parties: JONES v. GOULD et al.
• Court: U.S. Court of Appeals — Sixth Circuit

149 F. 153

JONES v. GOULD et al.

No. 1,551.

United States Court of Appeals, Sixth Circuit.

December 14, 1906

C. B Matthews, for appellant.

J. H Doyle and W. M. Duncan, for appellees.

Before LURTON and SEVERENS, Circuit Judges, and COCHRAN, District judge.

SEVERENS Circuit Judge.

In December, 1901, three of the defendants, Gould, a citizen of New York, and Ramsey and Guy, citizens of Missouri, in the character of managers, entered into an agreement with other subscribers to form a 'syndicate,' as they called it for the purpose of acquiring and purchasing certain railroad properties in West Virginia and Ohio, and purchasing coal lands in the former state, and of improving, extending merging, operating, controlling, and disposing of the properties, the railroads and lands, as the managers might determine, for the benefit of the syndicate. Each of the subscribers agreed to contribute from time to time when required, to the purposes of the syndicate ratably with the others to the extent of their subscriptions. Ample powers were given to the managers for the full control and management of all its affairs, and their appointment was made irrevocable. The profits and losses were to be shared by the subscribers ratably, and the net proceeds of the enterprise were finally to be distributed to them in the like proportion. Subscriptions to this agreement were obtained amounting to $7,000,000 or $8,000,000, of which the managers subscribed about one-half. The complainant in this suit subscribed for $100,000. The project was carried forward by the managers. Railroads were bought or built in each state, and 85,000 acres of coal lands in West Virginia were also bought. For the building and operation of some of the railroads, the managers organized corporations in the states where they were severally located. In other cases, they purchased the capital stock of existing corporations thereby obtaining control. Of the corporations organized by the managers, two were in Ohio, the Janesville, Marietta & Parkersburg Railroad Company and the Marietta, Columbus & Cleveland Railroad Company. Many details of the operations of the managers in the conduct of the business of the syndicate are stated in the bill which it is not now important to enumerate.

On September 26, 1905, the complainant, John S. Jones, of Chicago, and a citizen of Illinois, filed this bill in the Circuit Court for the Southern District of Ohio, against the defendants, Gould as a citizen of New York, Ramsey and Guy as citizens of Missouri, The Union Trust Company, also a citizen of Missouri, and other persons and corporations, citizens of other states than Illinois, the corporations being the railroad companies in West Virginia and Ohio above mentioned, and the other private parties being persons who had participated in the transactions complained of. The bill, after setting out the agreement of December, 1901, states that the managers, under color of the authority given them, have been guilty of many enumerated breaches of their trust by wrongful acts and negligences in the management of the syndicate's affairs, which have resulted in serious loss and damage to the other subscribers, himself among them. As we are not to decide the merits, it is necessary to do no more than to make this general statement of the charges made by the bill. The prayer is for an injunction to restrain the managers from doing certain specified things in their management of the affairs of the syndicate, which are charged to be prejudicial, for a receiver and for the sale of the assets, the payment of its debts, and the distribution of the net proceeds to the subscribers.

Upon the filing of the bill, the complainant moved thereon for the appointment of a receiver; and the motion was set for hearing on October 9, 1905. And the court made the further order that pending the hearing of the motion, the defendants Gould, Ramsey, and Guy, be restrained from disposing of certain property described in said order. The court also required that notice of the order should be served personally upon the defendants last named, and Blair, another of the individual defendants described in the bill as a citizen of West Virginia. Notice of the hearing and a certified copy of the bill of complaint were served on Blair; at what place is not shown by the affidavit of service, but as the affidavit was made and sworn to in West Virginia, and he is described as a citizen of that state, we infer that the notice was served there. We also infer from what follows that a like notice was also served on Gould, Ramsey, and Guy in the states of which they were, respectively, citizens. Ramsey, Guy, and Blair in one motion, and Gould in another, appearing specially for the purpose of the motions, and, protesting against the jurisdiction of the court, moved to quash the service of the notice of the order above mentioned. These motions were based upon the grounds as therein stated, in the motion of Gould:

'First. That he is an inhabitant and a citizen of the state of New Jersey. Second. It appears upon the face of the bill of complaint that the relief sought is of such nature that he can not lawfully be called upon to defend against the same in this district. Third. This court is without jurisdiction to proceed against him.'

And in the motion of the others:

'First. That said Joseph Ramsey, Jr., and W. E. Guy, and each of them, are inhabitants and citizens of the state of Missouri, and that E. D. Fultin and J. T. Blair, and each of them, are citizens and inhabitants of the state of Pennsylvania.'

The second and third grounds were, in substance, the same as the second and third of Gould's. On the day appointed for hearing, the court Richards, Circuit Judge, presiding, granted the motions to quash the service of notice and ordered as follows:

'And the court being of the opinion that it is without jurisdiction of the said suit, and of its own motion, hereby orders, adjudges and decrees that the bill of complaint herein be and the same is hereby dismissed for want of jurisdiction, and the restraining order heretofore granted is hereby dissolved.' Judge Richards' opinion is reported in 141 F. 698. On this appeal the complainant assigns error as follows:

'First. The court erred in granting the motion in this case made by Joseph Ramsey, Jr., William E. Guy, E. D. Fulton, and James T. Blair, defendants above named, to quash the service of an order of this court entered herein on September 26, 1905.

'Second. The court erred in granting a motion, filed on the . . . day of October, 1905, by George J. Gould, one of the defendants above named, to quash the service of an order on said defendant made by this court herein on the 26th day of September, 1905.

'Third. The court erred in holding that this suit, was not a suit in which service upon nonresident defendants could be made by publication or otherwise, in accordance with the orders of the court in that behalf, under section 738 of the Revised Statutes of the United States.

'Fourth. The court erred in holding that this suit was one over which the said Circuit Court of the United States had no jurisdiction, and dismissing the complainant's bill and amendment to the bill on its own motion, and dissolving the injunction.

'Fifth. This court erred in not retaining jurisdiction of said cause, and directing service by publication on the nonresident defendants, under section 738 of the Revised Statutes of the United States.

'Sixth. This court erred in not holding that the parties making the several motions specified in the first and second assignments of error, had entered their appearance in this cause, and submitted themselves to the jurisdiction of this court.'

The principal questions which we are asked to review are:

(1) Did the defendants in stating the second ground of their motion submit as respects their persons, to the jurisdiction of the court?

(2) Was the nature of the...