209 U. S.

Argument for Appellant.

The right to bring a suit is distinguishable from the right to prosecute the particular bill; and, where the other jurisdictional essentials exist, the Circuit Court has jurisdiction of an action against a corporation by one of its stockholders although the bill does not comply with Equity Rule 94 and for that reason must be dismissed.

The jurisdiction of the Circuit Court is prescribed by laws enacted by Congress in pursuance of the Constitution and while this court may, by rules not inconsistent with law, regulate the manner in which that jurisdiction shall be exercised, that jurisdiction cannot by such rules be enlarged or diminished.

THE facts are stated in the opinion.

Mr. Abram J. Rose, Mr. George H. Yeaman, Mr. Alfred C. Petlé and Mr. Stephen M. Yeaman for appellant:

The Circuit Court should have aligned the Great Northern Railway with the plaintiff which would defeat jurisdiction. The question of jurisdiction is directly raised in and appears by the record.

The action is the common one in equity by a stockholder of a corporation suing on behalf of himself and of other stockholders to recover for a wrong alleged to have been done to the corporation by its officers dealing on its behalf to their own personal profit and advantage and to the waste and injury of the corporation, its funds and estate.

The original complaint in the state court stated a good cause of action as was conceded by the circuit judge in the opinion sustaining the demurrers which cited Young v: Drake, 8 Hun, 61, 64; Frothingham v. Broadway &c. Ry. Co., 9 Civ. Pro. 304, 314; O'Connor v. Va. P. P. Co., 46 Misc. 530, 535; Frickett v. Murphy, 46 App. Div. 180, 186; Sayles v. Central Bank of Rome, 18 Misc. 155, 158; Hanna v. Lyon, 179 N. Y. 107. See also Stewart v. Erie &c., 17 Minnesota, 372, 400, 401; Cook on Corporations (5th ed.) 1882; Elkins v. Camden & At. R. R. Co., 36 N. J. Eq. 514; Parsons v. Joseph, 92 Alabama, 403, 405; Montgomery Light Co. v. Lahey, 121 Alabama, 131, 136.

Such being the nature of the action, the only possible ground of Federal jurisdiction would be the diverse citizenship of the parties, and unless the required diversity of citizenship is

Argument for Appellant.

209 U. S.

shown to exist, the Circuit Court was wholly without jurisdiction

The facts necessary to confer jurisdiction on a United States court to entertain an action of the nature of the one at bar when the diverse citizenship of the parties is the sole ground of jurisdiction have been expressly laid down and defined in Equity Rule 94:

The reasons which gave rise to the promulgation of this rule and the abuses which it was intended to prevent are well known.

The direct object and purpose of that rule was to prevent the courts of the United States from being overburdened with actions brought by stockholders of corporations, which, except for the diverse citizenship of the stockholder appearing as complainant, would have to be brought in a state court, of competent jurisdiction. Hawes v. Oakland, 104 U. S. 450; Detroit v. Dean, 106 U. S. 537; City of Quincy v. Steele, 120 U. S. 241.

If the necessary jurisdictional facts required by Rule 94 do not appear, the corporation will be aligned as the party plaintiff, and the question of jurisdiction determined as if the suit had been originally brought by it and not by a stockholder in its behalf. Elkins v. City of Chicago, 119 Fed. Rep. 957; Kemmerer v. Haggerty, 139 Fed. Rep. 693; Dickinson v. Consolidated Traction Co., 114 Fed. Rep. 232; Waller v. Coler, 125 Fed. Rep. 821; Groel v. United Electric Co., 132 Fed. Rep. 252.

The allegations of the bill clearly do not meet the requirements of Rule 94; either as to the plaintiff being a stockholder at the time the cause of action arose, that he thereafter became a stockholder by devolution of law, or as to the suit not being a collusive one to confer on a court of the United States jurisdiction of a cause of which it would not otherwise have cognizance. In these respects, therefore, there is no compliance with the rule and the case cannot be taken out of the application of the wholesome rule that for the purpose of determining jurisdiction on the ground of diverse citizenship, the real

209 U.S.

Argument for Appellees.

party in interest will be aligned on the part of the complainant. Brown v. Strode, 15 Cranch, 303; McNutt v. Bland, 2 How. 9; Maryland, use of Markley v. Baldwin, 112 U. S. 490; Stewart v. Baltimore & Ohio R. R. Co., 168 U. S. 445.

Rule 94 does not apply to actions removed from a state court to a Federal court. Earle v. Seattle &c. R. R. Co., 56 Fed. Rep. 909; Evans v. Un. Pac. Ry. Co., 58 Fed. Rep. 497. See also City of Chicago v. Camerson, 22 Ill. App. 91, 102.

The Circuit Court had no original jurisdiction of the case and could not acquire jurisdiction by removal.

Since the acts of 1887 and 1888, it is very clear that the intent is to confine the right of removal to cases originally cognizable in the Circuit Courts of the United States. See Mexican National Ry. Co. v. Davidson, 157 U. S. 201, and this differentiates this case from those cited in the opinion below, in which were involved §§ 11 and 12 of the act of 1789.

The Circuit Court being wholly without jurisdiction should have remanded the case to the state court. Detroit v. Dean, 106 U. S. 537.

Mr. Julius F. Workum for appellees:

Inasmuch as this appeal is taken direct from the Circuit Court to this court, and the question of the former court's jurisdiction is certified up, this court can consider only whether the Circuit Court as a Federal court had jurisdiction, and not whether as a court of equity it should have sustained or overruled the demurrers. Chicago v. Mills, 204 U. S. 321, 326; Louisville Trust Co. v. Knott, 191 U. S. 225, 233, 234; Hennessy v. Richardson Drug Co., 189 U. S. 25, 33; Mexican Central R. R. Co. v. Eckman, 187 U. S. 429, 432; Blythe v. Hinckley, 173 U. S. 501; United States v. Rider, 163 U. S. 132, 139; Smith v. McKay, 161 U. S. 355; United States v. Jahn, 155 U. S. 109, 113; Schunk v. Moline, 147 U. S. 500, 507; McLish v. Roff, 141 U. S. 661; Rosenbaum v. Bauer, 120 U. S. 459.

The only question that is open for discussion, therefore, is whether the case involves a controversy between citizens of

different States. As the parties are arranged the citizenship of plaintiff is different from that of the defendants. The mere fact that the defendant corporation might be benefited by such a suit does not force its alignment with complainant, unless there is really no controversy between the complainant and the railroad company. See Detroit v. Dean, 106 U. S. 537, and cases cited; and Dodge v. Woolsey, 18 How. 331; Davenport v. Dows, 18 Wall. 626; Memphis v. Dean, 8 Wall. 64; Greenwood v. Freight Company, 105 U. S. 13; Quincy v. Steel, 120 U. S. 241.

Doctor v. Harrington, 196 U. S. 579, is conclusive of the case at bar, for in that case, as in this, the complainant based his right to maintain the action on the ground that the defendant corporation is controlled by its co-defendant, who, it is alleged, used the corporation for his own advantage. New Jersey Central R. R. Co. v. Mills, 113 U. S. 249. See also East Tenn. &c. R. R. Co. v. Grayson, 119 U. S. 240; Chicago v. Mills, 204 U. S. 321; Hawes v. Oakland, 104 U. S. 450, 452. Complainant cannot, under Equity Rule 94, maintain the action; as a matter of fact he purchased his stock just before bringing suit, long after the alleged acts of which he complained, and he could not, and did not, allege that he was a stockholder at the time of their occurrence. This defect of title did not, as appellant argues, create any Federal jurisdictional question. Corbus v. Gold Mining Co., 187 U. S. 455; Illinois Central R. R. Co. v. Adams, 180 U. S. 28, 34, 35.

MR. JUSTICE MOODY delivered the opinion of the court.

The plaintiff in error, a citizen of New York, brought this suit in equity in the Supreme Court of New York against the defendant railroad, a citizen of Minnesota, and the other defendant, its president, also a citizen of Minnesota. The complaint set forth in substance the following facts upon which the right to relief was claimed: The plaintiff was a stockholder in the defendant railroad at the time of the beginning of the

suit in 1906. Whether or not he was a stockholder at the time when the alleged wrongful acts were committed by the defendants does not appear by any allegation in the complaint. The defendant James J. Hill was a director and the president of the other defendant, the Great Northern Railway Company, and that railroad and its board of directors were under his absolute control. While holding these offices and exercising this control, in 1900 and 1901, Hill purchased, or caused to be purchased for his use, stock of the Chicago, Burlington and Quincy Railroad Company of the par value of $25,000,000, at an average price of one hundred and fifty dollars a share. This purchase was made with the design of selling the stock at a higher price to the company of which he was a director and president. Subsequently, in 1901, while still holding his offices in the Great Northern Railway and exercising the same control over that corporation, he sold to it a large amount of the stock of the Chicago, Burlington and Quincy Railroad Company owned by him, and made an unlawful profit of $10,000,000 on the transaction. Before bringing this suit the plaintiff demanded of the Great Northern Railway Company that it bring suit against Hill to compel him to account for and pay over to it the wrongful profit which he had obtained. The railroad refused to comply with this demand, and thereupon the plaintiff brought this suit as a stockholder in his own behalf, and in the behalf and for the benefit of other stockholders similarly situated. The prayer was that Hill should account for his profit and pay it to the Great Northern Railway Company with interest, and for general relief. On the defendants' petition the case was removed to the United States Circuit Court for the Southern District of New York, on the ground of diversity of citizenship of the plaintiff and the defendants. In that court the plaintiff was ordered to "replead the complaint herein according to the forms and practice prevailing in equity." This was done on November 9, 1906. The new complaint set forth the facts in greater detail and with some variations, but its substance and effect was