Newton v. Gage

• Decision Date: 05 August 1907
• Docket Number: 1,211.
• Citation: 155 F. 598
• Court: U.S. District Court — Southern District of California
• Parties: NEWTON v. GAGE et al. NORTHERN COUNTIES INV. TRUST, Limited, v. GAGE et al.

155 F. 598

NEWTON v. GAGE et al.

NORTHERN COUNTIES INV. TRUST, Limited, v. GAGE et al.

No. 1,211.

United States Circuit Court, S.D. California, Southern Division.

August 5, 1907

John G North and Hunsaker & Britt, for complainant.

J. S Chapman and Purington & Adair, for defendants.

M. B Kellogg, for interveners.

WELLBORN District Judge.

This is a bill by Thomas Henry Goodwin Newton, a subject of Great Britain, against Matthew Gage and Jane Gage, citizens of California, to foreclose a mortgage on real estate. By leave of the court, the Northern Counties Investment Trust, Limited, also a British subject, intervened and filed its cross-bill against the said defendants for the foreclosure of a junior mortgage, also making Walter Powell, likewise a subject of Great Britain, a defendant to the cross-bill. The original defendants, Matthew Gage and Jane Gage, have demurred to, and also interposed a motion to strike out, the cross-bill, and the present hearing is on said demurrer and motion. The other facts will appear further on in the opinion.

The grounds of objection to the cross-bill, raised by demurrer and also by a motion to strike out, seem to be three in number and as follows: First. That, aligning the Northern Counties Investment Trust, Limited, and Walter Powell as codefendants with Matthew Gage and wife, which alignment all parties agree is the proper one, federal jurisdiction is thereby ousted, because the resulting situation presents Newton, an alien, on side, and the Northern Counties Investment Trust, Limited and Powell, both aliens, on the other side of the case. Second. That the foreclosure of cross-complainant's junior mortgage is in no way a matter of defense to the foreclosure of complainant's first mortgage, but a distinct and independent cause of action, and, therefore, not the subject of a cross-bill. Third. That a cross-bill could not be filed by the Northern Counties Investment Trust, Limited, nor against Walter Powell, even if the original complainant and each of the two parties just named were citizens of different states, for the reason that both of said parties are strangers to the original bill. These objections will be noticed in the order of their statement.

First. That the bringing in of a new party, by cross-bill or otherwise, when the presence of such party as an original defendant would have defeated federal jurisdiction, violates both the constitutional and statutory requirement as to diverse citizenship, is expressly held in Shields v. Barrow, 58 U.S. 130, 15 L.Ed. 158, wherein the court says:

'It is apparent that, if it were in the power of a Circuit Court of the United States to make and enforce orders like this, both the article of the Constitution respecting the judicial power, and the act of Congress conferring jurisdiction on the Circuit Courts, would be practically disregarded in a most important particular. For in all suits in equity it would only be necessary that a citizen of one state should be found on one side, and a citizen of another state on the other, to enable the court to force into the cause all other persons, either citizens or aliens. No such power exists; and it is only necessary to consider the nature of a cross-bill to see that it cannot be made an instrument for any such end. * * * When the defendants, Mrs. Shields and Bisland, had complied with the order of the court, and filed their cross-bill, as it was called, against the other indorsers and Thomas R. Shields, and they had come in, as they did, what was their relation to the cause? They surely were not plaintiffs in it. If they were defendants the court had not jurisdiction, for they, as well as the complainant, were citizens of Louisiana. In truth, they were not parties to the original bill. They were merely defendants to the cross-bill. They had no right to answer the original bill, or make defense against it, and of course no decree could be made against them upon that bill. We do not find it necessary to pursue further an examination, in detail, of the complicated maze of pleas, demurrers, answers, amendments, and interlocutory orders, which followed the filing of this so-called cross-bill. It is enough to say that the defendants to it were never lawfully before the court; that the court never obtained jurisdiction over those of the parties who were citizens of the state of Louisiana, and amongst them was Thomas R. Shields, who, though made a party to the original bill by amendment, as a citizen of Mississippi, pleaded that he was a citizen of Louisiana, and was thereupon stricken out of the original bill, and was only a defendant to the cross-bill.'

From appellant's brief in that case, on the point decided by the court in the foregoing extract from its opinion, I quote as follows:

'On what ground is the jurisdiction of the Circuit Court of the United States to determine a controversy between citizens of Louisiana to be maintained? The only authority cited by complainant's counsel is Story Eq. Pl. Sec. 392, and authorities there cited. This authority is not at all in point. It only refers to a question of pleading in equity, relating to cross-bills, but does not touch the question of jurisdiction. * * * The device used in this case is perfectly transparent, and, if successful, converts the federal courts into courts of unlimited jurisdiction, regardless of the citizenship of the parties. It requires no argument to show that the original bill could not possibly be sustained for want of proper parties. A bill to set aside an agreement for canceling the sale of property could not be entertained without the presence of the two parties to the sale and agreement to cancel. But the court was without jurisdiction between these two parties, who were both citizens of Louisiana, and the bill should have been dismissed on its face. Instead of this, the defendants, citizens of Mississippi, having a common interest with these citizens of Louisiana, were forced, in spite of their protest, and under duress of the process of the court, to file a bill against their codefendants, not for their own benefit, but in order to help the complainant to get a judgment against themselves and against the codefendants.'

The authority of Shields v. Barrow, although the opinion of the court has been subjected to criticism in another particular, has never been challenged, as for as I know, on the point now under consideration. The following extracts from defendants' brief are in line with the doctrine declared in Shields v. Barrow, and show its direct application to the case at bar, namely:

'This cross-bill relates solely to another mortgage upon a part of the same property and seeks to foreclose that mortgage. If it had brought such a suit in this court for the same purpose originally, it is obvious that the court would have no jurisdiction. Any defense which the original defendants should make to this cross-bill must necessarily be foreign to the original bill; for in any controversy existing between the Northern Counties Investment Trust, Limited, and the original defendants, is a controversy which does not concern the plaintiffs, and is not necessary to a complete decree on the original bill. If the Northern Counties Investment Trust, Limited, had been brought into this suit originally, in what capacity must it have appeared? It could not have been a coplaintiff with Newton, and must necessarily have been made a party defendant. If it had been a party defendant, the jurisdiction of the court would be ousted, and the jurisdiction of a court cannot be called into action by such a simple contrivance as a plaintiff's leaving out of his bill one who insists that it ought to have been a party defendant, then permitting that party to come in as an intervener, and then to file a cross-complaint whereby others who ought to have been parties to the original bill are brought into court, and the jurisdiction saved by this roundabout device. The maxim by which courts of equity are controlled no one denies. Their anxiety to make an end of litigation in one suit where that is possible, its reluctance to litigation by piecemeal, are all well understood principles and highly commendable. But those same principles are recognized by the state courts as fully as they are by the federal courts in equity. And this court is not inclined to draw to itself jurisdiction in cases where it does not rightfully attach by reason of, or through the application of, these principles, when there was nothing to hinder the invocation of those same principles in the state courts and where the objection to the jurisdiction on the ground of the citizenship of the parties would not have existed.'

I have examined carefully and in detail the authorities cited in complainant's brief to his contention that interventions, bringing in new parties, do not oust federal jurisdiction, no matter what be the citizenship of the parties thus introduced, and find that each one of them is an exceptional case, easily harmonized with Shields v. Barrow, supra.

In Sioux City Terminal R. & W. Co. v. Trust Co. of N.A., 82 F. 124-126, 27 C.C.A. 73, the mortgaged property was in the custody of the court, as shown by the following extract from the opinion, at page 128 of 82 F. (27 C.C.A. 73):

'When the banks had been dismissed, the Circuit Court had jurisdiction of the subject-matter and of the parties to the suit. It also had the possession of the mortgaged property, which was then in the hands of the receiver.'

This statement of the court as to the possession of the mortgaged property, which is not set forth in complainant's quotation of part of the same paragraph, distinguishes said case widely from Shields v. Barrow, and brings it within the exception above...