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sought in Fleitmann v. Welsbach Co., 240 U. S. 27, was denied; but this denial affords no reason for assuming that the long settled rule under which stockholders may seek such relief only in a court of equity will be departed from because the cause of action involved arises under the Sherman Law.
This action was commenced May 3, 1912. The judgment dismissing the complaint was rendered in the District Court September 24, 1914, and affirmed by the Circuit Court of Appeals April 13, 1915. The case was entered in this court July 27, 1915. On April 7, 1917, about a fortnight before the case was reached for argument, George D. Hendrickson and Luther Martin, Jr., filed in this court a motion that they be substituted as plaintiffs in error. The motion recites that they had, on March 1, 1917, been appointed receivers of the United Copper Company by the Court of Chancery of New Jersey, and had on April 2, 1917, been authorized by it to apply for such substitution. Annexed to the motion is a copy of the petition for appointment of the receivers which alleges that the United Copper Company had on February 28, 1912, been dissolved by proclamation of the Governor of New Jersey for failure to pay franchise taxes; and that it had assets of large value; but that its directors named (who under the statute thereupon became trustees for the corporation) had taken no steps whatever to collect its assets or settle its affairs and were not fit and proper persons to be entrusted with them. Only by opposing affidavits filed by defendants was it disclosed that, on February 10, 1913, more than four years previously, the District Court of the United States for the Southern District of New York had appointed others receivers of the
legal claim of the corporation damages for breach of contract; and the court sustained a demurrer to the bill, not because the suit should have been at law, but because the bill failed to show that complainant had made sufficient effort to induce the directors to enter suit.
United Copper Company, and had vested in those receivers the possession of “all the properties owned by the de fendant (the United Copper Company), or in which the said defendant has any ownership or interest, whether such property be real, personal or mixed, of whatsoever kind and description, and wheresoever situated, including
things in action, credits, stocks, bonds, securities, shares of stock in the corporations described in said bill of complaint, and all shares of stock, certificates of equitable interest and other certificates representing any interest in any property and all other securities of whatsoever character owned by the defendant company, on or in which it has any interest, or which it controls directly or indirectly," and that on February 14, 1913, the same persons had been appointed ancillary receivers by the United States District Court for the District of New Jersey. We have no occasion to consider the power of this court to grant the motion for substitution. See Railway Co. v. Twombly, 100 U. S. 78, 81. It is without merit and is denied.
HAMER ET AL. v. NEW YORK RAILWAYS COM
PANY ET AL.
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK.
No. 968. Argued April 10, 1917.---Decided May 21, 1917.
With the delivery of a mortgage to secure bonds of one corporation
there was delivered to the trustee stamped on each bond a guaranty by another corporation whereby the latter guaranteed "to the Trustee of the within-mentioned mortgage, for the benefit of the holders thereof, punctual payment of the principal of the within bond and the interest thereon
according to the tenor of
the several coupons belonging thereto." Upon foreclosing the mortgage, the trustee obtained judgment against the guarantor company
for a deficiency. Held: (1) That whether the guaranty were treated as having created
an aggregation of as many obligations as there were bonds, each constituting separate contract between the guarantor and the respective bondholder, or a single obligation for the benefit of the bondholders collectively, in either case there was a merger of the original cause or causes of action in the single judgment recovered by the
trustee. (2) The judgment being held as an unit by the trustee, for the benefit
of all the bondholders, a suit to enforce it by a majority of them, though alleged to be on behalf also of all others similarly situated could not be maintained without joining the trustee as a necessary
party. (3) In such suit, for the purpose of testing the District Court's juris
diction on the basis of diverse citizenship, the trustee, though made a defendant, must be realigned as a plaintiff, no hostility on its part appearing beyond a refusal to institute the action, assignable to no other motive than to aid the federal jurisdiction, and its real attitude
being friendly as evinced by its answer. One corporation, after guaranteeing bonds of another, passed into a
receivership in the District Court which ended in foreclosure of its own bonds and sale of its property, without reservation in the decree of liens or similar rights or power of the court concerning them. Meanwhile by independent proceedings in a state court the bonds of the second company were foreclosed and a deficiency judgment was rendered against the first company on the guaranty, which judgment being presented as a claim in the District Court proceedings was rejected because the first company's liability to pay it was contingent at the date set for proving claims in that court. Held, that a suit brought later in the District Court upon the ground that by its decree the equities of persons interested in the deficiency judgment were wrongly ignored and seeking to have that judgment impressed as a lien upon the property so sold, was not within the District Court's jurisdiction as a suit ancillary to the foreclosure proceedings
in which its decree was rendered. Affirmed.
The case is stated in the opinion.
MR. JUSTICE BRANDEIS delivered the opinion of the court.
This appeal presents the single question whether the District Court erred in dismissing the bill for want of jurisdiction, on the ground that the controversy involved was not one between citizens of different States. The question was duly certified in conformity to 8 238 of the Judicial Code. The facts are these:
The Twenty-eighth and Twenty-ninth Street Crosstown Railroad Company, of New York City, issued, on October 1, 1896, bonds to the amount of $1,500,000, and secured them by a mortgage of its property to the Central Trust Company. The Metropolitan Street Railway Company having previously leased the Crosstown Railroad, delivered with the mortgage stamped on each of the bonds a guaranty to the Trust Company in the following terms:
"FOR VALUE RECEIVED, the Metropolitan Street Railway Company hereby guarantees to the Trustee of the within-mentioned mortgage, for the benefit of the holders thereof, punctual payment of the principal of the within bond and the interest thereon at the time and in the manner therein specified and according to the tenor of the several coupons belonging thereto."
In September, 1907, the Metropolitan Company passed into the hands of receivers appointed by the Circuit (now District) Court of the United States for the Southern District of New York. Soon thereafter default was made in the payment of interest on the Crosstown bonds. The customary bondholders' committee was formed; and 1373 of the 1500 bonds outstanding were deposited with it. At its request the Trust Company declared the bonds due and brought suit in the Supreme Court of New York to foreclose the mortgage. The court by special order granted an application of the Trust Company for permission to liquidate, in the foreclosure suit, its claim against
the Metropolitan Company on the guarantee. For that purpose the Metropolitan Company was joined as defendant; and a deficiency judgment for $1,745,344.21 was entered against it on February 20, 1912, in favor of the Trust Company.
The property of the Metropolitan Company had meanwhile been administered by receivers appointed by the District Court of the United States for the Southern District of New York; and the several committees representing its bondholders, stockholders and creditors had adopted a plan and agreement for the reorganization of that company. Pursuant thereto its franchise and assets had been, on January 1, 1912, transferred to a new corporation, the New York Railways Company; and the securities and cash issued in exchange therefor were distributed among security holders, creditors, and otherwise, as in the plan provided. No provision was made in the plan for adjusting the liability of the Metropolitan Company arising out of its guaranty of the Crosstown bonds. The District Court refused to allow the claim on the deficiency judgment to be proved in the Metropolitan receivership; because the date as of which claims against the property were ordered to be proved was January 15, 1908; and the claim on the guaranty was at that date contingent merely. Consequently neither the Committee nor the Trust Company representing the Crosstown bondholders assented to the plan for reorganizing the Metropolitan Company.
In October, 1913, the members of the Crosstown bondholders' Committee, suing on behalf of themselves and "all other similarly situated bondholders," brought suit in the District Court of the United States for the Southern District of New York against the New York Company, the Metropolitan Company and the Central Trust Company, to enforce out of the property of the New York Company satisfaction of the liability of the Metropolitan Com