Watson v. Bonfils

• Decision Date: 24 April 1902
• Docket Number: 1,653.
• Citation: 116 F. 157
• Parties: WATSON et al, v. BONFILS et al.
• Court: U.S. Court of Appeals — Eighth Circuit

116 F. 157

WATSON et al, v. BONFILS et al.

No. 1,653.

United States Court of Appeals, Eighth Circuit.

April 24, 1902

Caldwell Circuit Judge, dissenting.

Syllabus by the Court.

A national court has no jurisdiction of a suit which involves a controversy between a citizen of a state and a citizen of a territory, and the fact that citizens of different states are interested in the controversy and are made parties to the suit does not remove the fatal objection.

The citizenship of nominal parties to a suit is not material and may be disregarded, but the citizenship in a state or foreign country by every proper party who has a real interest in the controversy involved in the suit is essential to the jurisdiction of a federal court on the ground of diversity of citizenship.

A party who has a real controversy with the opposing parties to a suit, which presents a common point of litigation, that affects its entire subject-matter, and the decision of which will settle the rights of all the parties to the suit, is a proper and real party to the suit.

In a direct attack upon a judgment or decree of a federal court by writ of error or appeal, the record must affirmatively show the jurisdiction of the court which rendered it. But on a collateral attack, jurisdiction is presumed.

Where through the mistake or inadvertence of one of the parties the requisite averments of citizenship have not been made, an appellate court may reverse and remand the case, with leave to the court below to permit amendments to show its jurisdiction, but it has no power to permit such amendments in the appellate court.

A conveyance by a debtor of its leviable equitable interest in land with intent and in furtherance of a scheme to induce parties to become its creditors, and to delay and defraud them, is voidable at the election of existing and subsequent creditors.

The use of sheriff's deeds and other legal instruments to effect a fraudulent conveyance of property by a debtor is no bar to its avoidance.

A bank devised the scheme to run the title to all the real estate upon which it foreclosed mortgages into a realty corporation whose stock it held, and to take notes and mortgages upon the real estate for the amounts due by the former mortgagors. The result was that it procured notes of the realty corporation which was insolvent, for $330,000, many of which were partially secured by mortgages; and it carried these notes and the worthless stock of the realty company, $100,000 in amount, at par, among its assets. Held, that the plan disclosed an intent to obtain creditors by deceit and the defraud them, and sheriff's deeds and conveyances made in furtherance of the scheme were voidable for fraud at the election of the creditors.

An express trust prohibits the inference from the same transaction of an implied trust on different terms. Where parties agree that property shall be transferred to and held by a corporation under the express trust which the relation of a corporation to its creditors and stockholders creates, and it is transferred to the corporation accordingly, they are estopped from claiming that an implied trust of different terms arose from the transaction, and no such trust can be inferred between them.

A corporation is an entity distinct from its stockholders and creditors, and a sole creditor and stockholder of a corporation cannot ignore its existence, and convey, incumber, or deal with its property without the action of the corporation.

A general assignment for the benefit of creditors under the laws of Missouri and under the common law does not vest in the assignees the rights of creditors to avoid the fraudulent conveyances of the assignor. It conveys what the assignor has, but nothing that he has transferred by conveyances good against him, but fraudulent as to his creditors.

A general assignment made in one state (Missouri) vests no better title in, and grants no greater power or rights to the assignees in, another state (Kansas), than it gave them in the state where it was made.

Subsequent attachments of real estate fraudulently conveyed by an assignor by deeds good against him are superior in law and in equity to the title of assignees under a general assignment under the laws of Missouri and the common law.

George B. Watson, Silas Porter, and Junius W. Jenkins (A. E. Watson and Henry McGrew, on the brief), for appellants.

Frank Hagerman and L. W. Keplinger (O. L. Miller, C. F. Hutchings, William Warner, O. H. Dean, W. D. McLeod, Hale Holden, and Albert H. Horton, on the brief), for appellees.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

This is an appeal from a decree in favor of the complainants, certain creditors of an insolvent bank, which avoids liens of attaching creditors upon real estate in the state of Kansas, and impresses a trust in favor of all the creditors of the bank upon it under a general assignment which the bank made in the state of Missouri.

The only ground of the jurisdiction of the circuit court was diversity of citizenship. One of the defendants, an attaching creditor, was a citizen of the territory of Oklahoma. A national court has no jurisdiction of a suit or controversy between a citizen of a state and a citizen of a territory and the joinder or association of citizens of states with the respective parties to such a suit or controversy does not remove the fatal objection. City of New Orleans v. Winter, 1 Wheat. 91, 95, 4 L.Ed. 44; Barney v. Baltimore City, 6 Wall. 280, 287, 18 L.Ed. 825. Counsel for complainant are met at the opening of their argument in support of their decree by this conceded fact, and this indisputable principle of law, and they devote more than 20 pages of their printed briefs to attempt to escape the logical result to which they lead. They say that the federal courts have jurisdiction of controversies between citizens of different states, and hence of any controversy between citizens of different states; that in this suit there were a number of separate controversies between citizens of different states, in which Jeoffroy, the citizen of Oklahoma, had no interest, because his attachment was late, and subject to prior attachments, one of which, for example, had ripened into a sale and a sheriff's deed of certain parts of the real estate he attached before this suit was instituted, and so that Jeoffroy had no interest in the controversy between the complainants and the defendant who held this sheriff's deed. But this argument confounds interests in property with controversies. When this suit was commenced the defendants had different interests in the real estate which they had attached. One of them had a sheriff's deed of certain lots on which Jeoffroy and some of the other attaching creditors had no lien which could be successfully maintained against the title under that deed. But the controversy between the complainants and every one of the attaching creditors was, after all, one and the same. It was whether or not the general assignment in Missouri created a trust in the attached real estate in Kansas in favor of all the creditors of the assignor, which was superior in equity to the liens of the attachments. If it did, every attachment was voidable at the suit of the complainants; and, if it did not, every attachment was impregnable to their attack. Hence there was a single controversy, a single and common point of litigation in this suit, the decision of which would terminate the litigation and settle the rights of all the parties to it. And there can be no misjoinder of causes of action in equity in any bill which presents a common point of litigation which affects the entire subject-matter, and the decision of which will settle the rights of all the parties to the suit. Kelley v. Boettcher, 29 C.C.A. 14, 23, 85 F. 55, 64; Hayden v. Thompson, 36 U.S.App. 361, 373, 17 C.C.A. 592, 598, 71 F. 60, 67; Chaffin v. Hull (C.C.) 39 F. 887; Brinkerhoff v. Brown, 6 Johns.Ch. 139; Fellows v. Fellows, 4 Cow. 682, 700, 702, 15 Am.Dec. 412; Prentice v. Storage Co., 19 U.S.App. 100, 107, 7 U.S. 403, 412, 9 Sup.Ct. 127, 32 L.Ed. 468; Addison v. Walker, 4 Younge & C.Ch. 442; Parr v. Attorney General, 8 Clark & F. 409, 435; Worthy v. Johnson, 8 Ga. 236. If Jeoffroy had been a nominal party merely, his presence might have been disregarded, and the jurisdiction of the court below might have been maintained. Wormley v. Wormley, 8 Wheat. 421, 451, 5 L.Ed. 651. But he was a real party to the controversy, and its decision was as vital to the determination of his rights and those of the complainants as it was to the determination of the rights of any of the other attaching creditors and those of the complainants. It may be that the complainants could have reached the merits of a suit in the circuit court against a single attaching creditor, and it is undoubtedly true that they could have accomplished this end by omitting Jeoffroy from their list of defendants, and alleging that his joinder would oust the jurisdiction of the court. 5 Stat. 321; Shields v. Barrow, 7 How. 130, 15 L.Ed. 158. But they did not pursue this course. There was a real controversy between them and this citizen of the territory of Oklahoma. They brought a suit against him which involved this controversy. They joined other parties (with whom they had the same controversy) with him as defendants. He still remained, however, a real and a proper party to the suit; and the presence of a proper party to a suit involving a real controversy between him and the opposing parties, over which the federal court has no jurisdiction, is as fatal to the power of that court to hear and determine the issues which the suit involves as the presence of an indispensable party under similar...