MR. JUSTICE MILLER delivered the opinion of the court.
This is an appeal from the Circuit Court of the United States for the Southern District of Illinois.
James W. Steel, the complainant in the Circuit Court, is a citizen of Alabama, and he brings his bill against the city of Quincy, a municipal corporation of the State of Illinois, and the Quincy Gas Light and Coke Company, also a corporation, of that state. He sets out a contract between the city of Quincy and the gas company, dated February 14, 1877, the only parts of which in this connection of any importance being that the gas company was to furnish a certain number of lighted lamps for the streets of said city, for which the city agreed to pay a fixed price per annum. This contract was to continue for five years. The city failed to pay the full amount due for gas in any one year, but paid a part of the bill on each year as long as the gas company continued to furnish the gas. On May 11, 1881, the city passed an ordinance declaring that it no longer recognized as binding the agreement between it and the gas company, under which the gas had been furnished, and notifying the company of that fact. The company, however, continued to furnish gas until November, 1883.
Instead of a suit by the gas company against the city of Quincy, in an action at law to enforce the rights of the company by a judgment, and by an appropriate writ of mandamus if the city did not pay the judgment the present suit is brought by Mr. Steel in his own name, on the ground that he is a stockholder in the gas company; and, as the allegations on this branch of the subject, on which he relies as his authority to maintain this suit, are important, they are given here verbatim from the bill.
He says "that your orator is advised and believes, and so states the fact to be, that the said company has a just and valid claim against said city of Quincy, and one recoverable in the courts by some suit or suits in the name of said company; that your orator has at different times endeavored to
The decree of the court below was rendered on a demurrer to the bill filed by the city of Quincy, which, being overruled, the city refused to plead further, and decree was thereupon rendered against it. This decree, made on the 1st day of March, 1886, among other things, "orders, adjudges, and decrees that said The Quincy Gas Light and Coke Company have and recover of said defendant city of Quincy the sum of $36,116.21." It then makes provision for the enforcement of this decree by certain orders concerning future annual appropriations to be made by the city for payment out of its annual tax levy.
The other principle which it is necessary to override is, that in the Federal courts the distinction between actions at law and suits in equity has always been kept up. In the present case it is but a plain suit to recover damages on a written contract by the one corporation against the other on account of a violation of that contract, except as Mr. Steel endeavors to bring himself into the case as having rights which he cannot enforce in a court of law. It is purely and simply a suit to recover money on a written contract in an action in the nature of assumpsit.
If, therefore, Mr. Steel, by virtue of being a citizen of Alabama, has any right to prosecute this suit in a court of the United States, and in a court of equity instead of a court of law, it is very obvious that he should make this right plain.
Prior to 1875 cases had come into the courts of the United States, especially into the Circuit Courts, where citizenship had been simulated, and parties improperly made or joined either as plaintiffs or defendants, for the purpose of creating a case cognizable in the Circuit Courts originally, or removable thereto from the state courts; and as it very frequently occurred that both plaintiffs and defendants were willing to seek that court
In the cases of Hawes v. Oakland, 104 U.S. 450, and Huntington v. Palmer, 104 U.S. 482, the question of the growth of the form of invoking Federal jurisdiction, where it does not otherwise exist, by the attempt of a corporation which cannot sue in the Federal court to bring its grievance into that court by a suit in the name of one of its stockholders who has the requisite citizenship, was very much considered. In order to give effect to the principles there laid down this court at that term adopted Rule 94 of the Rules of Practice for Courts of Equity of the United States, which is as follows:
"Every bill brought by one or more stockholders in a corporation, against the corporation and other parties, founded on rights which may properly be asserted by the corporation, must be verified by oath, and must contain an allegation that the plaintiff was a shareholder at the time of the transaction of which he complains, or that his share had devolved on him since, by operation of law; and that the suit is not a collusive one to confer on a court of the United States jurisdiction of a case of which it would not otherwise have cognizance. It must also set forth with particularity the efforts of the plaintiff to secure such action as he desires on the part of the managing directors or trustees, and, if necessary, of the shareholders, and
The bill in the present case, although verified by oath, is far from complying with the letter or the spirit of this rule. It does not contain an allegation that the plaintiff was a shareholder at the time of the transaction of which he complains, although the allegation on that subject includes a part of the time in which the city of Quincy failed to pay for its gas; but inasmuch as the sworn allegation in the bill was made on the 18th day of August, 1885, and he there swears that he had been the owner of the stock on which he brings this suit over four years, it is easy to suppose that he acquired this stock after the 11th day of May, 1881, on which day the city by its official action notified the gas company that it repudiated the contract and would no longer be bound by it. And it is not an unreasonable supposition that the gas company, forseeing litigation which it might be desirable for that company to have carried on in a Federal court, immediately after receiving notice of that resolution had this stock placed in the hands of Mr. Steel for the purpose of securing that object, and though the suit was delayed for two or three years, it was probably because the city continued to pay some part of the demand for the gas furnished by the company. The bill does not contain the allegation expressly prescribed by this rule, that "the suit is not a collusive one to confer on a court of the United States jurisdiction of a case of which it would not otherwise have cognizance." The allegation of the bill, "that this suit is brought in good faith, and for the collection of, and to compel the collection of, what your orator believes to be a meritorious claim," is by no means the equivalent of this provision of the rule, for it may very well be understood that the party who is seeking to enforce a debt which he believes to be due is acting in good faith for the purpose of compelling its collection, while he may be well aware that he is imposing upon the court to which he actually resorts a jurisdiction which does not belong to it.
The rule also requires that he must set forth with particularity his efforts to secure action on the part of the managing
In the case of Hawes v. Oakland, 104 U.S. 450, 461, in speaking of this perfunctory effort to induce the trustees of the corporation to act, it is said: "He (the plaintiff) must make
In the case of Huntington v. Palmer, 104 U.S. 482, 483, the court says: "Although the company is the party injured by the taxation complained of, which must be paid out of its treasury if paid at all, the suit is not brought in its name, but in that of one of its stockholders. Of course, as we have attempted to show in the case just mentioned, Hawes v. Oakland, this cannot be done without there has been an honest and earnest effort by the complainant to induce the corporation to take the necessary steps to obtain relief." See Detroit v. Dean, 106 U.S. 537.
We think upon the face of the bill in this case there is an entire absence of any compliance with the rule of practice laid down for equity courts in such cases, and of any evidence of an earnest and honest effort on the part of the complainant to induce the directors of the gas company to assert the rights of that corporation. On the contrary, the clear impression left upon reading the bill is, that it is an attempt to have a plain common law action tried in a court of equity, and the rights of parties decided in a court of the United States who have no right to litigate in such a court, and that there is no sufficient reason in the bare fact that Mr. Steel is a stockholder in the corporation which justifies such a proceeding.
If other evidence were wanting of the soundness of our inferences
We are of opinion that the demurrer to the plaintiff's bill ought to have been sustained and the bill dismissed. The decree is, therefore, reversed, and the case remanded to the Circuit Court with instructions to that effect.