KNAPP V. RAILROAD COMPANY, 87 U. S. 117 (1873)

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U.S. Supreme Court

Knapp v. Railroad Company, 87 U.S. 20 Wall. 117 117 (1873)

Knapp v. Railroad Company

87 U.S. (20 Wall.) 117


1. In determining a question whether a circuit court had erred in denying a motion to remand a case removed to it from the state court and giving judgment as if the case had been rightly removed to it, this Court cannot pay any attention to a certificate of the clerk of such circuit court certifying that on the hearing of the motion in the circuit court certain things "appeared," "were proved," or "were admitted," or "agreed to" by the parties respectively, such facts not appearing by bill of exception nor by any case stated. Neither party can gain any advantage by such it statement.

2. The Act of Congress of March 2, 1867, allowing either of the parties to a suit -- they being of a certain class described -- to remove it from a state court into the circuit court of the United States does not change the previously existing and settled rules which determine who are to be regarded as the plaintiff and defendant.

3. Hence, where two persons in one state, trustees, for bondholders, of a mortgage of a railroad owned by a company in another, foreclosed the mortgage, bought in the road in trust for the bondholders and then leased it to a citizen of the state to which they themselves belonged, and then a majority of the bondholders in the state where the original company was, in pursuance of a statute there, formed themselves into a new corporation to which the statute gave ownership and control of the road, and suit was brought in a state court against the lessee of the road by the trustees who had made the lease, held that the defendant could not remove the suit from the state court to the federal court on the ground that it was wholly between the new corporation and the lessee, and that the trustees were now merely nominal parties, they, the trustees, not having been discharged from or in any way incapacitated from executing their trust, and there having been in fact unpaid bondholders who had not joined in the creation of the new corporation and who had yet a right to call on the trustees to provide for the payment of their bonds.

Error to the Circuit Court for the District of Vermont, the only question in the case being whether the suit originally brought in a state court (the County Court for the

Page 87 U. S. 118

County of Bennington), had been rightly removed to the circuit court in pursuance of the Act of Congress of March 2, 1867, [Footnote 1] one enactment of which is as follows:

"That where a suit is now pending or may hereafter be brought in any state court in which there is a controversy between a citizen of the state in which the suit is brought and a citizen of another state and the matter in dispute exceeds the sum of $500, exclusive of costs, such citizen of another state, whether he be plaintiff or defendant, if he will make and file, in such state court, an affidavit stating that he has reason to and does believe that, from prejudice or local influence, he will not be able to obtain justice in such state court, may, at any time before the final hearing or trial of the suit, file a petition in such state court for the removal of the suit into the next circuit court of the United States to be held in the district where the suit is pending,"


The case was thus:

The Western Vermont Railroad Company, a corporation of Vermont, having issued a large amount of bonds, made a mortgage of the road to Knapp and Briggs, both citizens of New York, in order to secure the payment. By a foreclosure, in regular equity form, of that mortgage under the laws of Vermont, the title of Knapp and Briggs to the railroad became absolute in fee, in trust for the bondholders under the mortgage. They thereupon leased the railroad for a term of years to the Troy & Boston Railroad, a corporation of New York, and, therefore, according to the decisions of this Court, a citizen of the same state with Knapp and Briggs. The lease contained various covenants.

In the meantime and before the expiration of the lease, a new corporation, called the Bennington & Rutland Railroad Company, had been organized by a majority of the bondholders in pursuance, as was said, of certain provisions of a railway act of Vermont. That act, as the new corporation conceived, authorized the majority of the bondholders of any railroad company purchasing the road under a foreclosure

Page 87 U. S. 119

to form a new corporation which would own, maintain, and work the purchased railroad. [Footnote 2] It vested the company thus formed with all the powers, privileges, and franchises of the original corporation and empowered it

"to proceed in any manner it may deem expedient, either by purchase or otherwise, to obtain the title and ownership or the use and benefit of the whole estate and to satisfy the undivided interest or claims of any other party or parties interested in said railroad, and until the interests of such other parties shall become vested in such new corporation, such corporation shall be the trustees thereof, and shall be accountable therefor as tenants in common."

By an act passed November 18, 1864, the corporation formed under the foregoing provisions was declared entitled to receive rents accruing under leases executed by the trustees who foreclosed.

In this state of things, Knapp and Briggs sued the Troy & Boston Railroad Company on the covenants already mentioned of their lease to them. The defendants -- alleging that the new corporation was, by the provision of the statute under which it was formed, substituted as trustee of the other bondholders in place of Knapp and Briggs, and had thus become the real party in this suit, and filing such affidavit of local prejudice as the Act of March 2, 1867, requires -- asked the state court in a petition addressed to it to remove the cause into the circuit court. They contended that the subject matter of the controversy was wholly between the Bennington & Rutland Railroad Company, a Vermont corporation, and themselves, and that Knapp and Briggs were now but nominal parties to it, having no interest in it.

The petition, with the affidavit annexed to it together with the original writ, declaration, and pleas, were transmitted to the circuit court. The plaintiffs, upon these papers, the certified copy of the lease, and the affidavits of certain persons that there were outstanding bonds of the

Page 87 U. S. 120

Western Vermont Railroad, which had not been converted into or exchanged for the stock of the Bennington & Rutland Railroad Company nor in any other way paid or discharged, moved the circuit court to remand the cause to the state court for want of jurisdiction. This motion the circuit court denied, and proceeded to hear ad adjudge the case, and after suit gave judgment for the company. The plaintiff, Knapp, thereupon (Briggs having died) took this writ of error.

The transcript of the record, as it came to this Court, presented in regular form the papers on which the order for removal was founded and those filed in support of the motion to remand. It contained in addition a statement by the clerk of the court below (not authenticated in any way by the judge nor appearing in a bill of exceptions), occupying three pages of the transcript, of a number of things which according to the statement "appeared" or "were proved" on the hearing of the motion and of different things that were "admitted" or "agreed to" by the parties respectively. One part of the certificate was thus:

"It further appeared that said Knapp and Briggs had no interest, directly or indirectly, in the commencement or prosecution of this suit, that they had no control whatever over it, paid no part of the expenses of its prosecution, had employed no counsel, and that said suit was prosecuted solely by, and for the benefit of, said Bennington & Rutland Railroad Company, and at its expense, and that the said Bennington & Rutland Railroad Company had indemnified the said Knapp and Briggs against any liability growing out of said suit. And that Knapp and Briggs did not know that said suit was to be brought until after the writ had been served."

"It was admitted by both the plaintiffs and defendants that the said Bennington & Rutland Railroad Company was organized under the same laws of the state of Vermont, that said organization was valid and legal, and that thereby said Bennington & Rutland Railroad Company became the trustees of such bondholders as had not converted their bonds into the stock of said Bennington & Rutland Railroad Company, and of the interests and claims of all other parties in said railroad. "

Page 87 U. S. 121

"And it was admitted by the plaintiffs that this suit was brought in their names because, as the plaintiffs claimed under the laws of the State of Vermont and the rules of pleading then in force in that state, it was necessary so to commence the same in order to recover on said covenant, as no action upon a covenant can be maintained in that state in the name of any other person than the covenantor unless where the covenant is in terms assignable and runs with land, and has been duly assigned by the warrantee deed of the covenantor conveying the premises to which the covenant applies."

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