Williams v. Nottawa

¶7Mr. Chief Justice Waite

¶8delivered the opinion of th.e court.

¶9This suit was brought by Williams, a citizen of Indiana, against the township of Nottawa, a municipal corporation of ‘ Michigan, to recover the amount alleged to be due on certain of its bonds, negotiable by the law merchant, and payable to Samuel Kline, or bearer. A trial was had by a^jury;-which resulted in á verdict, by the direction of the court, in favor of Williams for six of the bonds, and in favor of the township for the remainder. This writ of error has been brought by Williams to reverse the judgment against him ; and, as the court directed the verdict which was rendered, the whole of the evidence has been embodied in the bill of exceptions, and is properly before us for consideration.

¶10From the testimony of Williams himself, it distinctly appears he was personally the owner of only three of the bonds *210sufed on of $ 100 each. One Bracey Tobey was the owner of three others of the samé amount. The judgment in favor of • Williams was upon these six bonds, and for $994;57 only. All the other-bonds, being those on which the judgment was ren-’ dered in favor of the township, were owned by Samuel - Kline) and William Connor, both of whom were residents ’of' the township and citizens of Michigan when, the bonds were issued. - .There is no evidence of .any change-of citizenship by"Kline since the bonds were delivered, and Connor, who 'was a wit-" ness at the trial, testified that he continued to be a citizen of Michigan. The bonds were- transferred by Kline and Con-nor to Williams simply for the purpose of - collection with his: own. The same is. true'of those, belonging to Tobey; but there is nothing in the evidence to show of wífat. Staté He was a citizen, though he testified that he bought his bonds in Michigan:

¶11By sect. 11 of the Judiciary Act of Sept. 24, 1789, c. 20 (1 Stat. 78), it was expressly provided that the District and Circuit Courts of the United States should not “ have cognizance of any suit to recover the contents of any promissory note or other chose in aetion in favor of an 'assignee, unless;-a suit -might have been prosecuted in such court to recover the said contents if no assignment had been made, except in cases of foreign bills of exchange.” By sect. 1 of the act of March 3, 1.875, c.-137 (18 Stat.-,' pt. 3, p. 470), this provision was so far modified as to extend the exception, to “ promissory notes negotiable by the law merchant and bills.of exchange,” but in sect. 5 it was expressly-enacted “ that if in any suit commenced in a Circuit Court ... it shall appear to the satisfaction of said Circuit Court, at any time after such suit has been brought, . . . that such suit does not really- and substantially involve a dispute .or controversy properly within the jurisdiction of said Circuit'Court, or that- the parties to said suit Laye been improperly or collusively made or joined, either as plaintiffs or defendants, for the purpose of creating a case cognizable . . . under this act; the said Circuit Court shall proceed no further therein, but shall dismiss the suit, . . . and shall make such order as to costs as shall be just.”

¶12This case, so far as the bonds owned by Kline and Connor *211are concerned, comes clearly within this prohibition. As the actual owners of - the bonds-were citizens of Michigan, they could not sue in the courts of the "United States, and Williams distinctly testifies that he received and held their bonds solely for the purpose of collection with his own, and for their account'. It cannot for a moment be doubted that this was done “ for the purpose' of creating a case ” for Kline and Connor cognizable in the courts of the United States. That being so, it was the duty of tbe'-Circuit Court to dismiss the suit as to these bonds, and proceed no further; for as to them the controversy was clearly between citizens of the sáme State, Kline and Connor being the real plaintiffs. The transfer to Williams was colorable only, and never intended to change* the ownership. This both Williams and Kline and Connor knew, Under the act of' 1789, it was held in Smith v. Kernochan (7 How. 198) that this objection was one which could only be taken by plea in abatement; but in Barney v. Baltimore (6 Wall. 280) there was- no such plea, and the bill was dismissed in this court without' prejudice, because it appeared in evidence that certain conveyances, by means of which the citizenship of the parties was changed so as to give the courts of the United States jurisdiction, did not transfer the real interest of the grantors. But whatever may have been the practice in this particular under the act of 1789, there can be no doubt-what it should be under that of -1875. In extending a long way the jurisdiction of the courts of the United States, Congress was specially careful to guard against the consequences of collusive transfers tp make parties, and imposed the duty on the court, on its own motion, without waiting for the parties, to stop all further proceedings and dismiss the suit the moment anything of the kind appeared. This was for the protection of the court as well as parties against frauds upon its jurisdiction ; for as was very properly said by Mr. Justice Miller, speaking for the court, in Barney v. Baltimore (supra), such transfers for such purposes are ■ frauds upon the court, and nothing more.

¶13It is- clearly shown, also, that Williams and Tobey were collusively joined as plaintiffs, to-create a case cognizable in the Circuit Court; for when the suit, was'begun the amount '' *212due them respectively was less than $500.- Neither <ne of them could then have sued alone in the courts of the United States, because the value :0| the: matter in' dispute was not sufficient.

¶14Since the judgment below was rendered, the amount due Williams and Tobey respectively has, by reason of the’ accumulation of interests exceeded $500. - The citizenship of Tobey is not disclosed by the' record. Whether he can’ sue in the courts of the’United States we dov hot know. Williams can sue at this time if he still continues to be a' citizen of some State other than Michigan, but without a false averment in 'his pleadings he could not have done so when this suit was begun. If lie had in his pleadings falsely overstated the •amount of his' claim, he could not, when his judgment was obtained, have- recovered costs, and at the discretion of the court might have been adjudged to pay costs. Gordon v. Longest, 16 Pet. 97. ’ He was as much guilty of Collusion as the other parties, and is no more entitled to consideration here than they are.

¶15• Inasmuch, therefore, as it was the duty of the Circuit Court, on its own motion, as soon as the evidence was in and the collusive character of the case shown, to sfop all further proceedings and dismiss the suit, the judgment is reversed, and the cause remanded with' instructions to dismiss’ the suit at the costs of the plaintiff in error, because it did not really and substantially involve a dispute or controversy-within the jurisdiction of’that court, leaving the parties in interest-to such remedies as they may each be entitled to for the recovery of any amount that may be due them respectively on the bonds they severally own. In this connection we-deem it proper to say that this provision of the act of 1875 is a salutary one, and that it is the duty of the Circuit Courts to exercise their power under it in proper cases. If they improperly dismiss a cause, their action in that behalf is expressly made reviewable here. Whether, if a defendant allows-a case to go on until judgment has been rendered-against him, he can take advantage of the objection on appeal, or writ of error, we need not now decide. That would be a- different case from this. Heie the party guilty ‘of the collusion asks relief from a judgment against *213himself. In such a ease we deem it our duty to, stop the suit just where it should, have been stopped in the court below, and remit the parties to their original rights.

¶16Judgment reversed.