Northern Indiana Railroad Company v. Michigan Central Railroad Company

THIS was an appeal from the Circuit Court of the United States, for the District of Michigan, sitting as a court of equity.

The appellants were complainants below. They were corporations created by, and doing business in, the State of Indiana, claiming a prior right to make and use a railroad running from east to west across the northern part of Indiana. The defendants were a company incorporated by Michigan, and had made a road from Detroit to Michigan City. Being desirous to continue the road round the southern end of Lake Michigan, they entered into an agreement, for this purpose, with a company, incorporated by Indiana, called the New Albany and Salem Railroad Company. The appellants filed a bill in Michigan, the domicil of the Michigan Central Railroad Company, praying for an injunction to prevent them from entering upon or using the said lands of said complainants, and from grading and excavating upon the same, and from hindering the complainants from completing their road and using the same exclusively, and from constructing and using the railroad which the defendants have laid out, or any railroad upon or near the line where the same is located, and from doing any thing in violation of the exclusive rights of the complainants.

To this bill the defendants demurred, and the Circuit Court dismissed the bill, with costs.

The complainants appealed to this court.

It was argued by Mr. Bronson, for the appellants, and by Mr. Pruyn and Mr. Jay, for the appellees.

The agruments branched out into several heads, but it is only necessary to notice those bearing upon the question of jurisdiction, arising from locality and the want of proper parties.

Mr. Bronson, for appellants.

Sixth Point. The New Albany and Salem Company is not a necessary party.

First. The defendants have done, and threaten to do, the wrong of which we complain. It is a tort or trespass upon our rights, for which the wrongdoers are answerable, whoever may stand behind them. No one standing behind a trespasser, whatever may be the relation between them, has a right to say that he must be made a party, when the person injured seeks redress against the transgressor. We demand nothing as against the New Albany and Salem Company. Kerr v. Watts, 6 Wheat. 550.

If the New Albany and Salem Company was made a party, the rights existing between that company and the defendants, whatever those rights may be, could not be adjusted in this suit.

Second. The relation between the New Albany and Salem Company and the defendants is that of grantor and grantee; and it is never necessary to make the grantor a party to a suit against the grantee, except in real actions, where the grantee vouches the grantor to warranty.

The New Albany and Salem Company has sold its franchise, so far as relates to the road in question, to the defendants, and the pretended right to repurchase is only colorable.

(1.) There is no mortgage, because there is no debt or obligation to pay. Conway v. Alexander, 7 Cranch, 218, 237; Almy v. Wilber, 2 Wood. & Minot, 371; Glover v. Payn, 19 Wend. 518.

(2.) There is nothing like the relation of principal and agent. The defendants are doing work for themselves only.

Third. If the relation between the two companies is that of mortgagor and mortgagee, or principal and agent, it is still enough that we bring into court the party who has done and is doing the wrong, when we ask no redress against the other.

The New Albany and Salem Company could not, by any form of contract with the defendants, entitle themselves to be made parties to assist against the defendants as tort-feasors.

Fourth. The New Albany and Salem Company is not a necessary party, because it cannot be joined without ousting the jurisdiction of the court.

(1.) The jurisdiction of the Circuit Court, as the suit now stands, cannot be questioned. The matter in dispute exceeds five hundred dollars, (page 10.) The complainants are corporations created by, and doing business in Indiana. The defendants are a corporation created by, and doing business in, Michigan. The suit is, therefore, between citizens of different States. Louisville R. R. Co. v. Letson, 2 Howard, 497. And the suit is brought in Michigan, where the defendants reside.

(2.) The New Albany and Salem Company is a corporation created by, and doing business in Indiana, page 6.

That company cannot be made a defendant in this suit, for the reasons,

1. It is a citizen of the same State with the complainants; and

2. It cannot be arrested or served with process in the District of Indiana, where it resides, for trial in the District of Michigan, where the suit is brought, and the trial is to be had. Judiciary Act, of 1789, § 11.

The courts of the United States have always been disposed to get rid of an objection for the non-joinder of a party who was beyond the jurisdiction of the court, or whose joinder would oust the court of jurisdiction.

And the case is now fully provided for by Congress, and the rules of the court. Act of February 28, 1839.

Sect. 1. 'That where, in any suit at law or in equity, commenced in any court of the United States, there shall be several defendants, any one or more of whom shall not be inhabitants of, or found within, the district where the suit is brought, or shall not voluntarily appear thereto, it shall be lawful for the court to entertain jurisdiction, and proceed to the trial and adjudication of such suit, between the parties who may be properly before it; but the judgment or decree rendered therein shall not conclude or preclude other parties not regularly served with process, or not voluntarily appearing to answer; and the non-joinder of parties who are not inhabitants, or found within the district, shall constitute no matter of abatement or other objection to said suit.'

Rules of Practice for the Court of Equity of the United States, adopted January Term, 1842.

Rule 22. 'If any person, other than those named as defendants in the bill, shall appear to be necessary or proper parties thereto, the bill shall aver the reason why they are not made parties, by showing them to be without the jurisdiction of the court, or that they cannot be joined without ousting the jurisdiction of the court as to the other parties.' 1 Howard, 48.

The proper averment has been made in the bill, by showing that the New Albany and Salem Company is without the jurisdiction of the court, and cannot be joined without ousting the jurisdiction of the court. Ketchum v. Farmers Loan and Trust Company, 4 McLean, 1; Culbertson v. Wabash Navigation Company, Id. 544.

Rule 47. Union Bank of Louisiana v. Stafford, 12 Howard, 327, 341-3; New Orleans Canal and Banking Company v. Stafford, Id. 343, 346; McCoy v. Rhodes, 11 Id. 131, 141.

The counsel for the appellees made the following points:

As to want of jurisdiction from locality-The Circuit Court in Michigan had no jurisdiction in the case. Whether the defendants act under the authority of law or not, the alleged cause of complaint is local, and the bill can only be maintained in Indiana. 6 Cranch, 158; Chitty, Pl. 268; 1 Atk. 544; 3 Vesey, 183; 10 Vesey, 164; 3 Atk. 589; 1 Sumn. 504; 1 H. & J. 223; 1 Vesey, sen. 446; 1 Bibb, 409.

As to the want of proper parties-The defendants contend that the case cannot go on, even to a hearing, without the presence of the New Albany and Salem Railroad Company. The injustice of hearing and deciding the case without giving that company an opportunity to be heard, is manifest, and most clearly so. It claims the right and authority to construct a railroad from New Albany to the Illinois line, making Michigan City, at the head of Lake Michigan, the termination of the Michigan Central Road, a point, and to mortgage the whole or any part of the road constructed, or proposed to be constructed, to obtain money wherewith to build. It has entered into an arrangement with the Michigan Central Company to advance money enough to construct, and to construct, as the agent of that company, that part of the road west of Michigan City, and to take in addition thereto $500,000 of stock, which said money is to be expended, one fifth south and four fifths north of Lafayette and south of Michigan City, and for the punctual payment of the subscriptions of stock it holds as absolute security all the road from Michigan City to the Illinois line complete and running; with the right to declare forfeited and null all the rights of the Michigan Central Company, in case of its default in paying its subscriptions of stock. It has mortgaged its entire line of road from New Albany to Michigan City, and upon the credit thereof, has obtained loans to large amounts, which are rapidly completing the road through its entire distance. It is still in the money market to dispose of about a million and a half of unsold mortgage bonds to complete entirely the work, the most important, by far, in the State of Indiana. The farmer, merchant, and mechanic, from one end of the State to the other, are its stockholders.

Now, upon all these vast interests, the decree of this court, if it can make one against these defendants, must act directly. It is the charter of the New Albany and Salem Company which is in controversy. The powers claimed by it will be struct out of existence. Its arrangements with the Michigan Company will be declared null and void. Its road west of Michigan City will be struck out of legal existence. Its security for $500,000 of stock destroyed. Its road south of Michigan City towards Lafayette complete more than half, and nearly complete the whole distance, blotted out. Its credit in the money market, its stock and its bonds sold, will be ruined, and all this in a suit where that company cannot be heard. Is this possible in a court of equity? And yet this suit cannot go on, and the complainants succeed, without all these disastrous results. They are the direct results of the decree sought, and of the allegations in the bill; and the rights of the New Albany and Salem Company are all the rights in controversy, the Michigan Central Company claim none of themselves, and exercise none except as the New Albany and Salem Company are empowered to grant them.

That the welfare, nay, the fate, of the New Albany Company, of its stocks, bonds, its entire interests, depends upon this question, there can be no doubt. Can this case go on without making that company a party? Shall a decision be had which may destroy it, when, if here, it might make a showing and a defence which the present defendants know nothing of? There needs nothing to show the injustice of thus acting.

'But the rule of law here runs with equity and justice. All persons interested, either legally or beneficially, in the subject-matter of the suit, are to be made parties to it, either as plaintiffs or defendants, so that a complete decree shall be made, which shall bind them all. By this means the court will make a complete decree to prevent future litigation, and to make it perfectly certain that no injustice is done either to the parties before it or to others who are interested in the subject-matter by decree, which might otherwise be grounded upon a partial view only of the real merits. When all parties are before the court the whole case may be seen, but it may not where all the conflicting interests are not brought out by the pleadings by the parties thereto.' Story's Pleadings, p. 74, sections 72 and 75.

'If the proper parties are not made to a bill, even though there be a decree, yet it will bind none but the parties to a suit, so that all the evils of fruitless or inadequate litigation may be visited upon the successful party to the original suit, by leaving his title still open to future question and controversy.' Story, § 75.

Here the New Albany Company would not be bound. It would, in its own courts, seek to enforce its rights under the contracts with the defendants. The State courts would not be bound even by a decree of this court construing the statutes of the State, and this court might be compelled to reverse its own decisions on such a question. What would be the position of the two companies in such a case?

This question is fully discussed also in the following cases: Platt and Oliver, 2 McLean, 305; 4 Peters, 202.

We are aware that there are exceptions to this rule, but they are all cases where complete justice can be done between the parties before the court, without prejudice to the rights and interests of parties not before it. Story's Pleadings, sections 77, 81, 83, 89, 94, 96, 154, 191, 192, 193.

Agents are not proper parties to a bill, because they have no interest in the subject-matter. There is one instance, however, and that is where a discovery may be sought from a corporation in which officers may be joined, though Judge Story evidently did not think this exception founded upon principle. Story's Pleadings, 204, § 235.

We are not unaware of the remarks which fell from Mr. Justice Baldwin, in the case Bonaparte v. The Camden and Amboy Railroad Company. He there seems to think that because an agent can be sued for a trespass, he can be impleaded in the Court of Chancery, and the principles upon which the two courts act in allowing suits against agents are the same, and he reasons from cases at law to cases in equity. There may be no doubt that an agent may be, in a multitude of cases, sued at law, when the rights of his principal could not be determined and settled in a suit in equity against him alone. The case of Osborne against the United States bears no analogy to this. There was in that case no possibility that the decree of the court could operate injuriously to any other parties; and in the case of Bonaparte, the railroad company was made a party, and could be heard.

That case also differs from this in many respects. There were no such relations there subsisting between the railroad company and its agents, as subsist between the defendants and the New Albany and Salem Company. The decree for an injunction would not cut through such vast interests, and work such wide, sweeping destruction to manifold interests as would an adverse decree in this case. That case differs from this also in this: that was a bill to enjoin against committing a trespass which would be the cause of an irreparable injury, and immediate and decisive action was necessary to avert the ruin. Here is no such thing. Here the bill is merely to test the legal right, which in truth should be tried in an action of ejectment. It is not to prevent a trespass, but to procure a decision whether the New Albany and Salem Railroad Company have the legal right to maintain a railroad where it has constructed and laid it down, and is now operating it. It sufficiently appears from the bill that the road had been constructed before the bill was filed. It had, in fact, been constructed for some months, and passenger trains had been run over it for a long period of time. The controversy is, then, not to prevent an irreparable trespass, but to dispute the right of the New Albany and Salem Company to maintain its road where it has long been built and in operation, and was so before the road of the complainants was built; to dispute its right to mortgage it to the defendants, and to procure a decree that its asserted rights are null and void, and securities held by it and mortgages made by it are all null and void; and to enjoin against the maintaining and using its road; and all this without giving it a chance to be heard. It would seem as if there could be no need of argument in such a case in a court of equity.

It is no answer to these questions to say that the jurisdiction of this court will be ousted if the New Albany and Salem Company is made a party. The court cannot go on and do justice unless that company is a party, and that is always a reason why the suit should be dismissed. 3 Sumner, 426; 3 Russell & Mylne, 83; 2 Mason, 181; 3 Swanston, 140-5.

The act of Congress of 1839 cannot aid the complainants in this case. That act did not intend to overthrow the fundamental principles upon which a court of chancery acts, and determine the rights of one party in a suit against another. That act simply provides that the court shall go on with the suit against the party who shall appear; but the decree shall not affect the rights of the party who does not appear; that is, that the court shall exercise its jurisdiction where it may do so without prejudice to the rights of parties in interest who do not appear, or have not been made parties. Act of Feb. 28, 1839, sec. 1.

This does not at all change the principles which are fundamental with courts of equity upon questions of jurisdiction. See 14 Peters, 66.

In order to change the universal rule of the court, and alter its practice in fundamental points, the act of Congress should be express, and its intention to do so expressed with irresistible clearness and force. 1 Peters's Cond. Rep. 425.

Mr. Justice M'LEAN delivered the opinion of the court.