Bank v. Carrollton Railroad

APPEAL from the Circuit Court for the District of Louisiana.

The Fourth National Bank of New York filed a bill in December, 1867, in the court below against the New Orleans and Carrollton Railroad Company, Beauregard, Hernandez, Binder, and Bonneval. The court dismissed the bill and this case was an appeal by the bank. The case was thus:

The railroad company just mentioned was a corporation in Louisiana, which had made a railroad from New Orleans to Carrollton. On the 12th April, 1866, this corporation made a lease to the defendant, Beauregard, of the road, for twenty-five years, from the 16th of that month, at a rent of $20,000 a year, under covenants to make large improvements and changes in its condition and operation. The lease contained this provision:

'The said lessee (Beauregard) shall not have the right of transferring this lease or of underletting the premises leased without the consent of the directors of the said railroad company.'

A certain May and one Graham signed the lease as sureties for Beauregard, the lessee. Immediately after the execution of this lease, that is to say, on the 18th April, Beauregard, May, and Graham entered into an agreement for the equipment of the road for their common advantage. Beauregard was to have charge and direction of the road, appointing his own assistants; to have for himself an annual salary of $5000. All was to be in his name, but for the common benefit. The arrangement was to continue for twenty-five years. The whole amount of the money necessary to carry out the enterprise was to be furnished by May and Graham $20,000 by each immediately after the lease was obtained, and $20,000 by each every month after, for four months, and them $10,000 each, per month, for five months. The money advanced, with 8 per cent. interest, was to be repaid from the annual net profits and the remainder of the profits was to be divided between the partners; all losses being borne equally. Books were to be kept showing the moneys received and expended, and the purchases made on account of the copartnership, and monthly statements of the amounts received and expended were to be furnished by Beauregard to May and Graham. On the 8th May, 1867, Graham, in consideration of one dollar, assigned all his estate, right, and title to the lease which he derived from the partnership articles, and all his right and interest in any property and effects of the partnership, and all debts due to him by the said partnership or any partner, to the complainant, and it was in virtue of this assignment that the bill was filed. It will be observed that neither May nor Graham, the partners, were parties to the bill. The purpose of the bill, which did not charge any fraudulent confederacy, was to enforce the transfer made by Graham. The bill charged that the defendants had taken possession of the lease and partnership, and would not recognize the partnership or the interest of the plaintiff; that they claim under the copartner, May, and claim independently of the plaintiff. In point of fact, they claimed two-thirds of the partnership, in virtue of an assignment from May, made on the 14th and 16th of May, 1867, and denied that when Graham assigned to the bank he had any interest to assign; asserting that he was but a trustee for May. The prayer of the bill was that the defendants might be ordered to recognize the interest of the complainant, the bank, in the copartnership and in the business carried on under the lease, and to pay them the capital advanced by Graham and his share of profits.

Issue being joined and evidence being taken, the question as to the true interest of Graham in the partnership, whether indeed he had any as against May, and how far he had a right to make the assignment which he did, to the bank, were matters to which testimony was largely directed.

The court below dismissed the bill, with leave to the complainant to bring a suit against Beauregard, Graham, and May, for a settlement of whatever partnership existed between them prior to the transfer of May, on the 14th and 16th of May, 1867.

Graham at the time when the lease was made was a resident of New Orleans, but in 1866 removed to New York, and was a citizen of that place when the bill was filed in 1867.

Mr. P. Phillips, for the bank, appellant, recapitulating the evidence, contended that on it the bona fides of the assignment by Graham to the complainant on the 8th May, 1867, could not be successfully impeached; that Graham having thus assigned his interest to the complainant, and May his interest to Hernandex, Binder, and Bonneval, the bill was well filed against the latter and Beauregard, one of the original partners, to have an account of the profits of the concern under the prayer for general relief; that as the assignment by Graham to the complainant was absolute, Graham was not a necessary party; this, especially, as to have made him a defendant (being a citizen of the same State with the complainant) would have ousted the jurisdiction; that the decree dismissing the bill with leave to institute a suit against Beauregard, May, and Graham for a settlement of whatever partnership existed between them prior to the transfer by May, on the 14th and 16th May, 1867, was palpably erroneous, as it was through May that Bonneval, Binder, and Hernandez had come into the possession and control of the partnership effects; that the real defendants were thus protected from a suit and parties who had divested themselves of all possession and interest were to be substituted as defendants; this in an equity proceeding which deals always with those who have the real interest.

But admitting that May and Graham were necessary parties, Mr. Phillips contended that their absence did not deprive the court of jurisdiction over the cause; that the objection could only be urged against granting the relief sought without bringing them in, and that this did not warrant an absolute dismissal of the bill as to those properly before the court; that in such a case an amendment of the bill would be ordered. And that, if necessary to maintain the jurisdiction, Graham might have been made a co-plaintiff.

Messrs. J. A. and D. Campbell, contra.

Mr. Justice STRONG delivered the opinion of the court.