ow

CHESTER WATER CO. ,. HOLLY MANUF'G CO.

19

thorized the court. to exercise jurisdiction. In the case at bar this court has no jUrisdiction, except upon the. ground of diverse citizenship. Whether such diverse citizenship exists hinges on the question, is the state of Indiana a citizen of the state of Indiana, within the meaning of the removal act, for the purpose of giving this court jurisdiction? This question must be answered in the negative. A suit instituted by a state in one of its own courts against a citizen of another state is not removable into a circuit court of the United States on the ground of a diversity of the parties. Stone v. South Carolina, 117 U. S. of the 430, 6 Sup. Ct. Rep. 799; Ferguson v. Ross, 38 Fed.. Rep. 161; State of Alabama v. Wolffe, 18 Fed. Rep. 836. There is no federal question presented by the record in this case, and in that respect it differs from the case of Railroad Co. v. Mississippi, 102 U. S. 135. The want of jurisdiction is affirmatively shown on the face of the record. In such case neither silence nor positive consent will confer jurisdiction, because the parties osnnot confer on the court a jurisdiction denied to it by the statute. If this court should try the case, it would be the the appellate court to which it might be taken to reverse and remand,· with instructions to this court to return it to the state court. Graves v. Corbin, 132 U. S. 571,10 Sup. Ct. Rep. 196. This court will not permit a cause of action of which it has no jurisdiction to be tried before it, even if the parties should stipulate in writing to abide its judgment. Let the cause be remanded,at the costs of the defendant.

NEW CHESTER WATER CO. et a1. v. HOLLY MANUF'G CO. tit

at

(Ci,rcuit Court of Appeals, Third Circuit. November 14, 1892.) No.7.
1. FEDERAL COtrnTs-JURI8DICTION-CITIZENSHIP-PARTIES.

A firm owning substantially all the stock of a water company purchased engines for the same, and subsequently suffered judgment by confession for II balance due thereon. In the mean time they sold and transferred all the atock toothers, and conveyed the land on which the engines were located to tbe water company. A suit was SUbsequently brought by the seller of the engines to assert a vendor's lien thereon, and by an amendment the members of "tbe firm were made parties plaintiff. Held that, as no relief was sought against them. and as they had parted with all their interest, they were merely formal parties, and it was not necessary to make them parties defendant, and the fact that they were citizens of the same state with com· plainants did not oust the jurisdiction. 48 Fed. Rep. 879, affirmed.

2. EQUITy-PARTIEs-JURIsDICTION OF FEDERAL COURTS. In a suit to assert a vendor's lien against specific maehinery of a corporation it is not necessary to make the trustee of its mortgage bondholders II party defendant. when substantially all the bondholders tbemselves are before th.e court. The trustee beinjt without the territorial jurisdiction of the court" .its presence can be dispensed with under equity rule 47. even though it might otherwise be deemed a proper or necessary party. 48 Fed Rep. 879, affirmed.
.. VElIlDOR'S LIEN-NOTICE-CORPORATIONS,

A firm which owned all the stock of a water company, and whose employes were its officers, purchased pumping engines, contracting that the same should be &ubject to a lien for the price, and placed them in thE> com· pll.ny'" works.. After erection, the en/l:ines: remained in the exclusive charge and management of the Beller's agent.. lleanwhile the firm disposed of an

' kEPORTEU,

vol. 53.

.:1'1

'itUtock'.and conveyed:t()'the water company the landdn which the engines , /ltOQd." ;Held. that the <10,nwany had notice of the lieu. and took , Fell. Rep. ,alfirlDed. . ,
4.

Tl:leteis nO'public polfeywhich renders invalid a contractual vendor's lien upoIithe ,pumping engines ofa water company. Qna sale of pumping engines for waterworks the purchaser expressly agreed that the seller should have a lien thereon. with full right of possession, until the price was paid. Held, that this showed an intent that they shoUld I not become apart of the realty, and, under the Pennsylvania decisi()ns"tllisintent was controlling. and the lien was notwllhed in favor of the mortgage bondholders or other creditors by attaching the engines to the foundation in the usual manner. '
OF PARTIES.

POLICY.

5.

"

'

i

Appeal from the Circuit Court of the United States for the Eastern District of Pennsylvania. In" Equity. Bill to establish and enforce a lien on certain pumping price thereof. Decree 'for complainants. 48 Fed. Rep,; 879. "Defendants appeal. Affirmed. St8lte:inent by WALES, District Judge:
in equity, btought in the, U'nited States circuit court for the easterridistrlct of Pennsylvania by the Holly Manufacturing Company,acorpo· ration orga'rlizednbder the, laW's of the state of New Yor!t, aud a citi,zen of .that state.agaipllt Water Compp,ny and tbe !South Chester Company. corporatIons organized under the lawsof the state of PennsylvaDla. andcitize'ris'of said state; Wtlliam G. Hopper and Harry,S. Hopper, citizens of the state of Pennsylvania. trading under the name of WilliaIJ;l G. Hopper & Co.; William Bucknell. a citizen.of the state of ,Pel,lUsylvania; Ricl;lard Wood, George Wood, Waltet"Wood. and Stuart Wood. citizens of the State of Pennsylvania, trading under the firm name of R. D. Wood & Co.; and the Bienville Water Sup· ply Company. a corporation existing under the laws of the state of Alabama. and a citizen thereof. The. 1;IJ!I. o,riginally filed. alleges thaton March 21, W87, , the New Chester Water Company made'a contraCt with Samuel R. Bullock and William S. Mercer. citizens o(the statll of New Yor,k, doing busiuess under the name of Samuel R. Bullock &; Co., by which Bullock & Co. agreed to construct and equip. at their own proper cost and expense. a system of waterworks at or near Chester. Pa.. in the manner and according to tbljl plans anll specifications prepared by the chief engineer pft,beWllter compaqy; the said works to be completed and ready for occupati<lnQD or bllfore the 1st day of January. 1888. Bullock & Co. also agreed to furnispat tpeir own expense all lands necessary for the location of engine and boiler site. On the, completion of the works the water com· pany was to an inspection and test of the same. to satisfy it that the said works :IV.ere ponstructed and equipped in accordance with the tllrms of the con· tract., Qo. covenanted to transfer and deliver the said waterworks and otherproRCrty to the NewChester Water Company free from and unincum· bered by al!:y.l!ells for the R,1l,l!efit of laborers, Ulechanics, qr materialmen, In considerlltiol! -of ,t/leexecutJon and pe,rformance of the cOJ;ltract by Bullock & Co., the water, cQIDPllny was to Pity that firm $;300.000 In first mortgage 6 per cent. bonds of the water company, sepured by a mortgage on all the, property and franch, iseS',c:>,ftb,e wate',r co,m,pa,ny, as aut,h,oriz,ed bY,reSolution,SOfitS stOCk,holders and boardof,liirectors. and l't,OOO shares of Its common capillil stock at a par value of $5Q,allch.'l'he bonds and stock were all delivered'to Bullock Co. to enable themW proceed witlJ. and to prqcure the construction and completion of t,b,e ,wa,',wr S,I,IIl,PI,YSY, "stem,,a"ndt"o,' ,be ,us,ed for, that purpos,e,' and to the pa,yment of " thl/ said BullOCk &00. therefor When completed; That, for the purpose of carrying out their contract with the water company, Bullock & Co.· on August a, 1887, made a contract with the Holly Manufacturing Company to set up in work· ing pumping station in Chester.'Pa.. two pumpin/o\' engines. for which ,Bullock to pay to the Holly l\1anufacturing Company the sum of $50,000 in sjx spec1fie(i installments until the whole amount of the purchase money Qf tIle said and connections sho.uld be fully paid to the Holly ManufacturingComvany, That the Holly Manufacturing Company constructed and erected

NEW CHESTER WATER CO. II. HOLLY MAKU]"G CO.

21

the engines in accordance with the contract, and received from Bullock & Co." $8.333.33 on account; and there remains due and owing to the complainant the sum of $41,667, with interest from August 11, 1888. That Bullock & Co., after making the contract of August 3.1887, with the Holly Manufacturing Company. for the purpose of raising money to carryon the construction of the water works, pledged the bonds and shares of the water company to William G. Hopper & Co. to secure the price of materials and money to be supplied for the completion of the said waterworks. The bill averred, in substance. the facts above stated, and prayed a decree establishing a lien in favor of the Holly Manufacturing Company, free and superior to any and all liens and claims of any other parties upon the said pumping engines; and. further, that the defendants in this cause may be decreed to pay to the Holly Manufacturing Company the amount ascertained to be due for said pumps at a short day; and that, in default thereof, the defendants be absolutely foreclosed of all right in equity of redemption in the same. To the bill as originally filed tbe defendants demurred upon the ground of the nonjoinder as parties in the cause of Samuel R. Bullock and William S. Mercer, trading as Samuel R. Bullock & Co., whereupon the said Samuel R. Bullock & Co. were brought upon the recorq by an amendment which set forth they joined as parties plaintiff, .. not as seeking any special or distinct relief in the premises in this proceeding, but in affirmance of the rights of their coplaintiff. tbe Holly Manufacturing Company, and in order to invest the court with full jurisdiction in the premises, so that a complete decree. protectin/{ the rights of all parties, can be made." Thereupon the defendants answered, inter alia, suggesting that the principal controversy in the cause was between the complainant the Holly Manufacturing Company and Bullock & Co., all of wbom were citizens of the state of New York, and that, therefore, the court was without jurisdiction in the premises. ' At the hearing upon the bill. answer, and proofs, the following facts appeared: In the year 1885 charters of incorporation were obtained for water com· panies, namely, the New Chester Water Company, the South Chester Water Com· panv, the Penn Water Company, and the Upland Water Company, formed for the purpose of furnishing water for public and domestic use to the city of Chest ter and adjacent boroughs in Delaware county, Pat On December 9,1886, before any work was done by them. a written agreement was entered into between the four named companies in their corporate capacity, all the stockholders thereof individually, and Samuel R. Bullock & Co., a firm of waterworks contractors. The leading purpose of the parties to this agreement is expressed in the follow· ing clause of the preamble: ' "And whereas. the stockholders are desirous of selling their said shares of cap' ital stock, and of transferring and surrendering the absolute control of the water companies, and the vendees (Bullock & Company) are desirous of purchasing and acquiring the same, accordingly the stockholders thereby agreed to transfer all the stock of said companies to Samuel R. Bullock & Company, and to deliver to them all the charters, certificates of organization, books, papers, deeds. maps, plans. estimates, stock certificate books, transfer books, minute books, receipts. accounts, contracts, the corporate seals, and all other property of any and every description, kind, or nature belonging to the water companies, or any of them; and, in consideration thereof, Bullock & Company agreed to enter into a con· tract with the water companies, on terms to be for the construction and equipment of a system of waterworks for furnishing water to the places which the companies were authorized to supply. " The stockholders having complied with their part of this agreement, the following transactions took place and conlracts were entered into, all on March 21, 1887: Resolutions were adopted by the stockholders of the Penn Water Company and Upland Water Company to sell and convey the franchises and property of those companies to the South Chester Water Company, and such written transfers were executed. Resolutions were adopted by the stockholders of the South Chester Water Company to increase its capital stock from $1,000 to $600,000, and to issue its bonds for $300,000, to be secnred by a mortgage upon its franchises and property. Resolutions were adopted by the stockholders of the New Chester Com· pany to increase its capital stock from $500,000 to $1,000,000, to issue its bonds for $;"00,000, to be secured by a mortgage upon its franchises and property. and that the company guaranty the said bonds of the South Chester Water Company. 'I'he New Chester Water Company and the South Chester Water Company en· lllred into an lligreement which, inter alia, provided that the former company, by

22

vol. 53.

O

w,ould supply water ,tbrougbtbe pipes ot . ;.. 9.mp""y,t,o itst*lrr.itory ".;,. finally. a contI'.,act. in,writing. w.as.den R. UUllopk& Co. alld the New CbeetlilrWaterGomfOr/ner agNledtp Provide the necessary.Iand, for, an engine a reSlilrvoir sHe. to furnish all materill<l andJabor for and to ,w/literworks, ,M Chester. to be accepted by the water company aftor completion andIJMisfactorlY inspection and test. for the consideration to the contractors of $500,000 in the mortgage bonds of the water. company and 17.000 shares of its capitals$ockof thepar:value of $50 each, March 21. 1887.'the stockholders of the New Ohester Water Company and the number of their respective shares were as follows:: Samuel R. Bullock & Co., 9.995 shares; J. L. Forwood. 1 share; W. H. Miller.:1share; E. F. Fuller. 1 share; 'Ellis Morrison. lshare; Charles M. 1 share.lJ;ach of the last-named./ive persons then held,onlUlbare of stock in llsch of the other named water companies, Bullock & Co. holding the rest of the ,stock thereof, The proofs fully warrant the conclu· t.hR. .... 6.se holdings ofsto.ck by Forwood. Miller, Fuller, Morrison. and Berrian were nominal.and.fornlll1.merely to: give a leg'al status to the orglmization. These 1!.v,oEl:persons constituted: thll boaI'd of directors of the New Chester Water oomp.. illY" Fo.,.we.odbeinl'l'e pr\lsident, Q../ldM.iller secretary. Fuller was chief engineqr cQmpany, and an employe, of Bullo'ck &'Co. Berrian was the attorney o( ttle. and ,PliiVate counsel of Mr. Bullock. All these five directors under the control and.qirection of Samuel R. Bullock & 00. Emil treasurer. oft)le company, was theconlidential clerk of that firm. testijilld; An arrangement was perfected. Whereby the personllllli Chester ,Water Company was subordillRted to the management. of my firm, bl'sed upon. the idea that we would carry out the oPjeqt<lt·fpr Which tlja.t,companywas, At the dates of several transactions to which reference is about to be made. and from March 21. 1887. continuouIIIY'.4;!own until NQl1ell1ber, R. Bullock & Co. bad "tbe abthe:N'ew:ChElster Water Company, and the organization of th.at .w.holly u.tldQr the el1t and practically in the hands of that acquillsced in that firm did, and practically were but its ,lltgllJltS. .. . .:' On April];. 1687. the New Chester Water Company executed a mortgage of its franChise .. J;ld, p.J1operty. the. 1).'. ow.ned or there,aftflr to be acquired. to the Farmers' ..sa Loan ·{/(;TrI,lJlt:QlIlmpany. a cQrporation of .the state of New York, to secure pay· mentof $QQO,OO!} of,,i.tsbonds, payable to Samo'el R. HUllock & Co. or bearer, and theSouthCIll\sterWater executtld 110.: like mortgage to the same trustee, to secure like bonds to the amount of $300.000. On May 31. 18s7. an agreement in wrHing was.:E$terep. intQ,Wtween the SouthWard' Waterworks, a corporation, thlil city of Cl16l1tel.', and lhe, ,New Chester Water Company, whereby, for a con· si<lllrationmentioned. andlil:loving from the last-named company·.the. first·named cOrPoration fl,g,ree.dtosell,transfer, and convey all its property. real and personal. to the NewCbeste,r Water Company. On June 13, 1887. a. contract in writing was made])etwelilD 'Wi!li&n>..G··.Hopper &, Co. and Samuel R. Bullock & Co., whereby, tor aSPllcified conllideration, the formed agreed to furnish to the latter advances of money'upon th,c'bQnds of the New Chester Water Company. as earned by and delivered to Bullock & ao., and the notes of that firm. with a deposit as further collateral seo11rit.,y .ofall. tlle,stockof the New Chester Water Company and . the propertyo( tbll South ,Wllitd Waterworks. On July 7,1887, Hopper & Co. made a special .advanceof al:>.out $300,000 to Bullock & Co., to enable them to consummate the purchase of the South Ward. Waterworks, and as security therefor Hopper & Co. the above-mentioned $300.000 of bonds of the SOUth Ohester Waler Gornpany.. In pursuance of a written authority signed" J. L"ll'Ptwoed; President, and" W. H. Miller. Secretary." the real of the South Ward Waterworks, by the deed of that corporatJon, dated and: executed July '1;:1567". was coill<veyed to Samuel R Bullock in fee. On .July 12. Bullock. by d$ad of that date, conveyed the said real estate to B;.:S. 18t:l7, executed and gave to Bullock an instrument in that the conveyance to him was made as security for ad· made by, Hopper & Co'; to Bullock & Co. All the advances vances & Co, ever made under their contract of June 13, 1887. were made which prior toSeptembel\ 1887. On August 3,1887, 8amuel H. Bullock & Co. and theHolly ManufactUring.Company/a corporation of the state of New York, entered into a writtencQntract, Whereby the latter agreed to manufacture two pumping engines of specified, capacity; and setup the same at the city of Ohester. for tho:
!I>.

NEW CIIES'l.'ER WATER 00. V. HOLLY· MANUF'G (;0.

23

sum of $50,000; payable$8,331t33 on each engine when delivered in Chester, and the like sum on each engine when it has been properly run 80 days, and the like sum on each engine 80 days thereafter. The contract contains the following clause: "When said engines and connections are completed and ready for service, and on notice thereof to the party of the first part (Bullock & Co.) to that effect. the same shall be subjected to a fair trial of their capacity and efficiency for not exceeding twenty-four hours, and on the successful testing thereof the liability of the party of the second part (Holly Company) hereunder shall cease and determine. bnt it is expressly understood and agreed that the party of the second part shall have a lien on all of said engines and connections, and the party of the second part. may remain in and have full possession thereof until the whole amount of the purchase price of said engines and connections shall have been fully paid to the party of the second part or its assignee." One payment only. namely, the sum of $8,333.33. was made to the Holly Company under its contract. and at the date of the bringing of this suit the balance, or sum of $41,667. was due that company on said engines. On October 26.1887, a tripartite agreement was entered into between Samuel R. Bullock & Co., R. D. Wood & Co., and William G. Hopper & Co., whereby, aCter reciting contracts between Bullock & Co. and Hopper & Co. for advances by the latter tothe former upon a pledge of bonds and stocks of water companies, and assignme!ut8 by Bullock & Co. to Wood & Co. of the bonds and stock so pledged as collateral security for materials that they had furnished. and contracts be-I tween Bullock & Co. and Wood & Co.· by which the latter had undertaken to complete waterworks at Chester. Greencastle. and Mobile. and the representation by Bullock & Co. that $200.000 would enable them to complete those works. William G. Hopper & Co. agreed to advance to Bullock & Co. $200.000, the same to be applied by Wood & Co. to the completion of the waterworks at the three named places in certain specified proportions. Wood & Co. to present to Hopper; & Co. the detailed applications by Bullock & Co. for money as needed. and Hop·1 per & Co. thereupon to furnish such amounts (within the limit stated) to Wood & Co., who should give their checks for the same to Bullock & Co.. who should disburse the moneys for the purposes aforesaid; and. in consideration of this ad·! vance by Hopper & Co., Wood & Co. a.¥reed to procure' the completion of the waterworks at the three named places. clear of all liens ahead of the securities held by William G. Hopper & Co." Under this agreement Hopper & Co. ad-' vanced the $200.000, which was all applied to the waterworks at the three named places. but not in the proportions mentioned in the contract. The specified amount applicable to the works at Chester was $129.800. whereas the sum actually applied was $61.000 only. But the representation by Bullock & Co. that $200,000 would suffice to complete the works at the three places proved to be incorrect, for. besides the money so advanced by Hopper & Co.· Wood & Co.· in the completion of these works, used $105,000 of their own money. and even then the balance of $41.667 due the Holly Company on the pumping engines at Chester was left unpaid. and also $25,000 due that company on engines at Mobile. All the advances by Hopper & Co. under the tripartite agreement were made before the latter part of January, 1888, except a trifling sum, which was paid shortly afterwards. In October, 1887, the Holly Company shipped one of the pumping engines to Chester. and in February. 1888. the other. Each was consigned to that company itself. and its agents at Chester received the engines. and proceeded, at its expense, to put them in place. They were set on the top of masonry foundations. and were attached thereto by a number of two-inch iron bolts. They could not be operated or tested otherwise. The engines stand in a brick building erected on land which the South Ward Waterworks Company agreed to sell and convey to the New Chester Water Company. but actually conveyed to Samuel R. Bullock. who conveyed the same to H. S. Hopper for the purpose Bet forth in the paper executed by the latter, as already mentioned. Each engine weighs from !thout 70 to 80 tons. but they can easily be disconnected from the foundations on which they rest without disturbing the foundations. and can readily be taken apart and through the door of the engine house without injury to the buildinl('. When the first engine was shipped to Chester. John Lockman. by order of the Holly Company. and as its agent. went there to superintend the erection of the engines. and to take charge and control thereof. Tbis he did. remaining constantly in charge. The work of setting them up and ready· for service was not completed until Bome time in July, 1888, but for the delay the Holly Company was not responsible.