McDonald v. Seligman

• Decision Date: 22 June 1897
• Docket Number: 12,365.
• Citation: 81 F. 753
• Parties: McDONALD v. SELIGMAN et al.
• Court: U.S. District Court — Northern District of California

81 F. 753

McDONALD v. SELIGMAN et al.

No. 12,365.

United States Circuit Court, N.D. California.

June 22, 1897

C. N Clement and T. C. Judkins, for complainant.

Jesse W. Lilienthal and J. W. Goodwin, for respondents.

MORROW Circuit Judge.

This is a bill in equity by Mark L. McDonald, a citizen of the state of California, against James Seligman and Isaac N. Seligman residing and carrying on business as co-partners in the city and state of New York under the firm name and style of J.&W Seligman & Co., and the city of Santa Rosa, a municipal corporation of the county of Sonoma, state of California within the Northern district of California, to enjoin the respondents, James and Isaac N. Seligman, from further prosecuting an action at law pending in this court, and entitled 'Seligman et al v. City of Santa Rosa,' until the final determination of this suit; and, further, that the complainant be permitted to intervene in said action at law, so that he may set up facts alleged in his bill to constitute a defense to said action, in order that the same may be tried and adjudicated upon its merits, and that such further and other relief may be granted to the complainant as he may, in equity and good conscience, be entitled to. The case now comes up on an order entitled to. The case now comes upon an order to show cause why the injunction prayed for, restraining the action at law referred to, should not be granted. The respondents, James and Isaac N. Seligman, have appeared specially, through their solicitor, Mr. Jesse We. Lilienthal, to resist said motion. The action at law, which it is now sought to restrain and enjoin, was brought in this court by James and Isaac N. Seligman, the two respondents in the present suit, against the city of Santa Rosa, the other respondent in this suit, to recover the sum of $10,395, alleged to be due the plaintiffs on account of 5 bonds, with 190 coupons, issued by the city of Santa Rosa. That case was submitted to the court on the complaint and the answer, and, after due consideration, judgment was entered in favor of the plaintiffs, James and Isaac N. Seligman, the respondents in the present suit, for the sum of $10,131. See opinion filed April 10, 1897. 81 Fed.

524. Subsequent to the submission, and previous to the rendition of the decision, of that case, Mark L. McDonald, the complainant in this suit, applied to the court for leave to intervene in that action, on the ground that he was a resident and taxpayer of the city of Santa Rosa, and desired to resist the payment of the bonds and coupons in controversy in that case; it being claimed that said bonds were illegal, and that a proper defense was not being made by the defendant the city of Santa Rosa. This motion was opposed by the plaintiffs on the grounds, among others, that the motion came too late; that, even if it were in time, the court would have no jurisdiction over the intervention, for the reason that the intervener was a citizen of this state, and that, as between him and the city of Santa Rosa, there would be a lack of diversity of citizenship; that the status of McDonald, as a taxpayer, did not entitle him to intervene and object to the payment of the bonds. The motion for leave to intervene was denied, and lith respect to the last two grounds urged in opposition to the motion to intervene this court said:

'This is an action over which the circuit court has jurisdiction by reason of the diverse citizenship of the parties. The complainants are citizens of New York and the respondent is a municipal corporation of this state. The proposed intervention is by a citizen also of this state, and his controversy is with the respondent. His complaint is that the respondent is not properly defending the action. In the case of United Electric Securities Co. v. Louisiana Electric Light Co., 68 F. 673, it was determined that the circuit court has no jurisdiction over such a controversy unless the controversy between plaintiff and defendant is one which draws to the court the possession and control of defendant's property, in which the intervener claims some interest. It is contended, however, that this case does draw to the court the possession of property in which McDonald, as a taxpayer, has an interest, namely, the fund out of which the bonds and coupons are to be paid. But I do not understand that the doctrine of the case cited has any such scope. It certainly does not mean that any person may come into a case as an intervener who has an interest in a fund provided by a corporation for the payment of a debt, the possession of which fund is retained by the corporation, but it must mean that the property of the corporation in which the intervener claims an interest must be property that the court has obtained possession and control of for some purpose connected with the case. That is clearly not the case. The next objection is that the status of McDonald as a taxpayer does not entitle him to intervene in this case. It appears by the complaint that the money to pay these bonds and coupons has been raised by taxation, and is in the treasury for that purpose, but the payment has been enjoined by proceedings in the state courts. This is admitted by the answer. A taxpayer may intervene to stop an illegal levy while his property is subject to taxation, because such a levy would cast a cloud upon the title to his property. But I do not understand that this principle can be extended to an intervener where the money has been collected and is in the treasury for the purpose of paying a specific debt. In Kilbourne v. St. John, 59 N.Y. 21, the court said: 'To permit every taxpayer in the state who believes that a tax for an unconstitutional purpose had been imposed by the legislature to commence an action in equity against the state treasurer to restrain him from applying the proceeds in his hands to the purpose directed, and compel him to distribute the fund among the taxpayers of the state, and, upon the same principle, every taxpayer of a city, county, town, or other municipal corporation to maintain a like action for like purposes against the official custodian of its funds, upon the ground that the tax, or some portion, was not authorized by law would, I think, lead to most alarming results. It would be the direct opposite of one of the acknowledged sources of equity jurisdiction, which is that it exists when necessary to prevent a great number of suits. This would, I think, inevitably cause an immense number.' There is nothing in the statement of this motion that in my judgment shows any right of intervention.' The motion for leave to intervene having been denied, McDonald thereupon brought this bill to enjoin the action at law, and to obtain leave to intervene and defend in that action. In other words, it is sought by the bill in equity to accomplish what this court determined could not be done by intervention. It may be observed, further, that no appeal was taken from the order of this court, in the action at law, denying the motion to intervene, and it therefore stands unreversed.

It is objected by counsel appearing specially for the respondents, James and Isaac N. Seligman, in opposition to the motion for the injunction, that the court has no jurisdiction of this suit, as the complainant and the city of Santa Rosa, one of the respondents, are both citizens of the state of California. The bill, on its face, conclusively shows this to be the fact, and it is the well-settled rule that, in order to give the circuit court jurisdiction on the ground of diverse citizenship, this diversity of citizenship must exist between the complainant and all of the respondents. If one or more of the complainants and one or more of the respondents are citizens of the same state, it is fatal to the jurisdiction of the circuit court on the ground of diversity of citizenship. Coal Co. v. Blatchford, 11 Wall. 172; Case of the Sewing Machine Companies, 18 Wall. 553, 574; Vannevar v. Bryant, 21 Wall. 41; Removal Cases, 100 U.S. 457, 469; Thayer v. Association, 112 U.S. 717, 5 Sup.Ct. 355. But it is contended by counsel for complainant that this defect is immaterial, so far as the present suit is concerned, as it is an auxiliary, and not an original, suit; it being claimed that it is but ancillary to, and a continuation of, the action at law referred to. It therefore becomes necessary to determine whether the bill is original or ancillary. The bill seeks to stay the enforcement of the judgment rendered in favor of the respondents, James and Isaac N. Seligman, who were the complainants in the case of Seligman et al v. The City of Santa Rosa, until the complainant in the present suit can intervene in, and present his defense to, said action. The bill further shows that the defense to be made to said action is that the issue of the bonds in question was illegal and void, and that this defense was not presented in the action at law by reason of the collusion and fraud of the defendant in that action, the city of Santa Rosa, and the plaintiffs therein, James and Isaac N. Seligman. The suit is, in effect, one to impeach a judgment for fraud. It seems to be just such a suit as is described in Jones v. Andrews, 10 Wall. 327, 333, where the supreme court, speaking through Mr. Justice Bradley, said:

'The suit is, in its nature, not an original, but a defensive or supplementary suit, like a cross bill, or a bill filed to enjoin a judgment of the same court. The bill is filed for an injunction against the garnishee proceedings under the suit of law for the delivery up of the complainant's notes, and for the establishment of this set-off against Andrews. This is, in substance, its character; and if the facts charged furnish a sufficient ground of equity for the relief asked,-- as to

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