Vidal v. South American Securities Co., 276 F. 855

Vidal v. South American Securities Co.

276 F. 855 | 2d Cir. | 1921

Lead Opinion

ROGERS, Circuit Judge

(after stating the facts as above). The complainant brought this suit for an accounting of the profits realized by Bright from the sale which Bright made of a railroad concession granted by the government of Uruguay to one Juan Jose Castro, the profits being realizable from or out of certain securities delivered by the Railway Company and the Construction Company to the Securities Company under contracts existing between them. The complainant alleges that under his agreement with Bright he is entitled to receive 30 per cent, of the profits. District Judge Augustus Hand was satisfied that the complainant was entitled to 30 per cent, of any net profits which belonged to Bright as a result of his negotiating the concession. Under the decree which has been entered, the complainant receives nothing, as the court has found that the concession which Bright caused to be transferred to the Railway Company had no value and has directed that the securities which were issued therefor should be returned to .the Railway Company and to the Construction Company by which they were issued. And the contracts between those corporations and the Securities Company, and under which the securities were issued, were directed to be rescinded and canceled in accordance with the prayer of the cross-bills.

The Securities Company has taken an appeal from the orders and decrees which have been entered, and we are presented with a prolix record of 5 printed volumes containing over 3,000 pages, with 316 different assignments of error. The thirty-eighth assignment of error, is as follows:

“That the court erred in finding in the interlocutory decree that this court has jurisdiction of this ease, of the subject-matter thereof, and of the parties hereto.” ■

We shall therefore proceed at once to inquire whether the court had jurisdiction. The Securities Company and the two Brights each appeared specially under protest for no other purpose than to plead to the jurisdiction. The plea of each declared that—

“The court has no jurisdiction because'the action is not one to enforce any legal or equitable lien upon or claim to, or to remove any incumbrance or lien or cloud upon title to real or personal property within the Southern District of New York, and defendant Charles Bright is not a resident of the state of New York, and was not served .within the Southern District of New York.”

*865The answers interposed by the other defendants all asserted that the court was without jurisdiction. The question was heard before Judge Coxe, who overruled the objection and stated that, while he had some doubt as to the jurisdiction of the court, he was not sufficiently convinced to determine the question adversely to the complainant upon the papers then before the court. Later another motion was made to dismiss the complaint for want of jurisdiction. This time it was alleged that it was apparent from the bill that the jurisdiction of the court must be founded only on the fact that the action was between citizens of different states, and that the required diversity of citizenship did not exist. This motion was denied by Judge Holt.

[1] The jurisdiction of the court does not depend upon diversity of citizenship, the complainant not being a citizen of the United States. The complainant being an alien he is by virtue of that fact entitled to sue in a federal court one who is a citizen of this country. Section 24 of the Judicial Code (Comp. St. § 991) expressly provides that the District Courts shall have original jurisdiction of all suits of a civil nature at common law or in equity between citizens of a state and foreign states, citizens or subjects. So that the alienage of a plaintiff of itself gives jurisdiction to a court of the United States as against a citizen. Katalla Co. v. Rones, 186 Fed. 30, 108 C. C. A. 132; Suravitz v. Pristasz, 201 Fed. 335, 119 C. C. A. 537; Eldorado Coal & Mining Co. v. Mariotti, 215 Fed. 51, 131 C. C. A. 359. And if an alien begins his suit in a state court against a citizen, the latter, it has been held, may remove it into a federal court. Barlow v. Chicago Ry. Co. (C. C.) 164 Fed. 765; Stalker v. Pullman Co. (C. C.) 81 Fed. 989; Katalla Co. v. Rones, supra.

[2] In Lehigh Valley Coal Co. v. Washko, 231 Fed. 42, 145 C. C. A. 230, this court held that an alien can maintain a suit in the federal courts against a citizen only in the district of his residence unless defendant waives his privilege to be sued only in such district. And such we understand to be the well-established law. Galveston, etc., R. Co. v. Gonzales, 151 U. S. 496, 14 Sup. Ct. 401, 38 L. Ed. 248; Colosino v. Pittsburgh & L. E. R. Co. (D. C.) 210 Fed. 550. So a corporation cannot without its consent be sued by an alien in any district out of the state where it is incorporated, and if there is more than one district in such state then the suit should be brought in that district in which, it has its headquarters and general offices. Galveston, etc., R. Co. v. Gonzales, supra; Lehigh Valley Coal Co. v. Washko, supra; Vitkus v. Clyde Steamship Co. (D. C.) 232 Fed. 288, 292; Best v. Great Northern Ry. Co. (D. C.) 243 Fed. 789. The defendant Bright was not at the time this suit was instituted a resident of the Southern District of New York in which the suit was commenced, and he was not served in the district. He appeared in the suit to object to the jurisdiction, and after his plea to the jurisdiction was overruled he put in an answer. But unlike some of the other defendants he filed no cross-bill and asked for no affirmative relief. In his answer he again insisted on the want of jurisdiction and stated that he made answer “without waiving any objections which he may have to the jurisdiction of the court.” Then in the first, second, and third paragraphs of the answer he specifically *866declared that the court was without jurisdiction. The third paragraph reads as follows:

“Third. That the court has no jurisdiction because the action is not one to enforce any legal or equitable lien upon or claim to, or to remove any incum-brance or lien or cloud upon title to real or personal property within the Southern District of New York, and this defendant is not a resident of the state of New York, and was not served within the Southern District of New York.”

[3] In the federal courts if a defendant appears specially for the single purpose of objecting to the jurisdiction and his objection is overruled and he excepts to the overruling thereof, and then pleads to the merits, he is not considered as waiving or abandoning his objection to tire illegality of the proceeding, but may raise the question on writ of error in the appellate court. Southern Pacific Co. v. Denton, 146 U. S. 202, 206, 13 Sup. Ct. 44, 36 L. Ed. 942; Mexican Central Ry. v, Pinkney, 149 U. S. 194, 209, 13 Sup. Ct. 859, 37 L. Ed. 699; Goldey v. Morning News, 156 U. S. 518, 15 Sup. Ct. 559, 39 L. Ed. 517; Davis v. C., C., C. & St. Louis Ry. Co., 217 U. S. 157, 174, 30 Sup. Ct. 463, 54 L. Ed. 708; Western Indemnity Co. v. Rupp, 235 U. S. 261, 272, 35 Sup. Ct 37, 5L. Ed. 220. We do not think the defendant Bright by his answer waived his right to object to being sued by an alien in a district in which he did not at the time reside. In his sworn answer he alleged as follows:

“Tbis defendant admits that be was at all tbe times mentioned in tbe bill as amended, and still is, a citizen of tbe United States, but be denies tbat be is a citizen of tbe state of New York, and alleges that be has been and still is domiciled in tbe city of Buenos Aires, republic of Argentine, South America, and by order of tbe Commercial Judge is a duly registered merchant in tbe register of Commerce of said city in good standing, where he is still carrying on business as a merchant, as tbe complainant well knew. That be is now in tbe city of New York and within the Southern District of New York.”

[4] But this makes it necessary for us to inquire further, for the federal courts are authorized to assume jurisdiction in certain cases notwithstanding the fact that a defendant is not an inhabitant of the district and has not been served in the district and has not voluntarily appeared. Section 57 of the Judicial Code (Comp. St. § 1039), which is found in the margin,1 authorizes a suit to be commenced in any Dis-*867triet Court of the United States to enforce any legal or equitable lien upon or claim to real or personal property within the district against one who is not an inhabitant of or found within the district or does not voluntarily appear. So that the question arises whether the claim which the complainant asserts relates to property which is within the Southern District of New York.

This section of the Judicial Code is a re-enactment of section 8 of the Act of March 3, 1875. The courts in construing the statute have said in a number of cases that an act which undertakes to give to courts jurisdiction over nonresidents, who do not come within the district for purposes of residence or business should be strictly construed and not enlarged by liberal construction. Woolridge v. McKenna (C. C.) 8 Fed. 650; Batt v. Proctor (C. C.) 45 Fed. 515; Non-Magnetic Watch Co. v. Association Horlogere Swisse of Geneve (C. C.) 44 Fed. 6. In Consolidated Interstate Callahan Mining Co. v. Callahan Mining Co. (D. C.) 228 Fed. 528, 530, the court was of the opinion that the statute should receive a liberal construction. In Non-Magnetic Watch Co. v. Association Horlogere Swisse of Geneve, supra, speaking of this provision of the statute, Judge Lacombe said :

‘‘Statutes which undertake to give to courts jurisdiction over nonresidents, who do not come within the district for purposes either of residence or business, should not be enlarged by too liberal construction.”

And he declared that he could not satisfy himself that the section was intended to cover such incorporeal arid intangible property as a ¡latent right, possession of which must of necessity be ideal, not actual, and which could not be seized or sold under an execution. In De Ganay v. Lederer, 250 U. S. 376, 39 Sup. Ct. 524, 63 L. Ed. 1042, the court declared that stocks and bonds are often regarded as “property” and not simply evidence o'f the ownership of the interests which are property. The court said that — -

“Unless the contrary appears, statutory words are presumed to be used in their ordinary and usual sense, and with the meaning commonly attributable to them. To the general understanding and with the common meaning usually attached to such descriptive terms, bonds, mortgages, and certificates of stock are regarded as property.”

*868And we have no doubt that stocks and bonds are property within the meaning of section 57 of the Judicial Code.

In the case now before the court there are in the district in which the suit is brought certificates of shares of stock and debenture bonds issued by the Railway Company and by the Construction Company, both of which were organized, as already stated, under the laws of Maine.

[5] Shares of stock are not chattels but are in the nature of dioses in action. They are intangible incorporeal personal property. They may have a situs for some purposes at the domicile of the owner, and for some purposes they may have one at the domicile of the corporation. It makes no difference in determining such situs where the certificate of stock may physically be, since it is merely evidence of title to the stock. 14 C. J. 390. Cook on Corporations (7th Ed.) vol. 1, p. 61, states that—

“Legal proceedings against tlie stock may be initiated at the domicile of the corporation. A claimant of stock in a corporation may institute suit at the place where the company is incorporated for the purpose of obtaining possession of the stock, even though the holders of the stock are nonresidents and are brought into the case only by publication and substituted service. The court acquires jurisdiction over the defendants.”

The same writer, in volume 2, § 363, declares that it is well established that shares of stock may have a situs at two separate places at the sáme time, That for purposes of taxation, and for a few other purposes, shares of stock follow the domicile of the shareholder. But that for purposes of suits concerning the title to the stock, for attachment and execution, and for various other similar purposes, the situs is at the place where the corporation exists.

An important distinction exists between shares of stock and certificates for the shares, the certificates being mere evidence of title. Winslow v. Fletcher, 53 Conn. 390, 4 Atl. 250, 55 Am. Rep. 122. And it has been held that shares can have no situs in a state merely because a corporation does business in a state other than the one in which it is incorporated. Ashley v. Quintard (C. C.) 90 Fed. 84; Plimpton v. Bigelow, 93 N. Y. 592; New Jersey Sheep, etc., Co. v. Traders’ Deposit Bank, 104 Ky. 90, 46 S. W. 677.

And while ordinarily shares of stock have their situs either at the domicile of the corporation or at the domicile of the shareholder, it is possible that under some circumstances they may have their situs elsewhere. In Lockwood v. United States Steel Corporation, 209 N. Y. 375, 103 N. E. 697, L. R. A. 1915C, 471, the domicile of the corporation was in New Jersey and the domicile of the deceased shareholder was in Bermuda. But the New Jersey corporation maintained an office in New York for the purpose of receiving certificates of its stock for transfer upon its books and for the delivery of new certificates when such transfers had been made. It was held in a unanimous opinion, reversing the Appellate Division, that the foreign corporation had a domicile in New York for transfer purposes.

In Re Clark, L. R. (1 Ch. 1904) 296, the will of a testator domiciled in England bequeathed all his personal estate in the United Kingdom to his home trustee and all his personal estate in South Africa to his *869foreign trastee. He was possessed of shares in South African mining companies, which had an office in London where a duplicate register of shares was kept and shares could be transferred. The court had to determine the locality of the personal estate. The actual effective transfer could be done equally effectually in South Africa or in England. And the court held that where the certificates of the shares were in England they passed under the gift of property in South Africa. No reference was made to the doctrine that personal property is deemed to follow the domicile of the owner.

In the instant case while the corporations issuing this stock were organized under the laws of the state of Maine, each maintains its principal office in the city of New York in the Southern District in which this suit was brought. The certificates of the stock being within the district and capable of transfer within the district on the books of the corporations at their principal offices therein, the securities constitute properly within the district within the meaning of section 57 of the Judicial Code.

In Jellenik v. Huron Copper Mining Co., 177 U. S. 1, 20 Sup. Ct. 559, 44 L. Ed. 647, a suit was brought in a Circuit Court of the United States for the Western District of Michigan against a mining corporation organized under the laws of that state and against certain individual defendants holding shares of stock in that corporation and being citizens of the state of Massachusetts. The suit was brought by plaintiffs living in another state. They sought a decree removing a cloud upon their title to the stock. They alleged in their bill that the shares of stock in the defendant company constituted personal property “and its location is where the company is incorporated and nowhere else.” The Supreme Court reversing the court below held that the locus in quo of the stock was in Michigan and in the district in which the suit was brought within the meaning of the act of Congress now under consideration. We think that case is distinguishable from this in view of the fact that in this case the corporations maintained their principal office, not in the state in which they were incorporated, but in the district in New York in which the suit was brought and where its books are kept and transfers made.

In Blake v. Foreman Bros. Banking Company (D. C.) 218 Fed. 264, District Judge Carpenter held that certificates of stock in a foreign corporation properly indorsed and delivered as security to a trustee with power of sale in case of default are “property” having a situs at the place of business of the trustee under section 57.

[6] Assuming then that there is property within the district within the meaning of section 57, the question remains whether the complainant has such an interest in it as can be asserted by him in the suit which he has brought. Is the suit one to enforce a legal or equitable lien upon or claim to, or to remove any incumbrance or lien or cloud upon title to real or personal properly within the district? If the suit is not one to enforce a lien upon or claim to property within the district, or to remove a cloud upon the title to such property, the court was without jurisdiction to proceed.

*870In Shainwald v. Lewis (D. C.) 5 Fed. 510, the court construed the language of the section now under consideration, and it was declared that — '

The section “was only intended to reach those suits in equity in which it was sought to enforce some pre-existing lien or claim, legal or equitable, upon or to some specific property, real or personal, and not cases in which it is sought to reach and appropriate the general property of a defendant to the payment of his debts. By the words ‘legal or equitable lien or claim against real or personal property,’ Congress intended to reach every case in which there should be any sort of charge upon a specific piece of property, capable of being enforced by a court of equity. This is manifest to my mind from the section as it stands; but when we look to the Act of March 3,1875, which was evidently intended as a substitute for section 738, all doubt vanishes. Such expressions as were obscure in the latter section are by the former made clear.”

And the doctrine announced in the above case is followed in the subsequent decisions. See Dormitzer v. Illinois & St. Louis Bridge Co. (C. C.) 6 Fed. 217; Jones v. Gould, 149 Fed. 153, 80 C. C. A. 1; Wabash Railroad Co. v. West Side Belt Railroad Co. (D. C.) 235 Fed. 645.

[7] The term “lien” is the right which a creditor has to obtain satisfaction of a debt or duty out of a specified res which is ownéd by another. It is a charge or incumbrance upon specific property which is security for the payment of money or the performance of some duty. See Hotchkiss v. National City Bank of New York (D. C.) 200 Fed. 287, 291; In re National Cash Register Co., 174 Fed. 579, 581, 98 C. C. A. 425; In re Maher (D. C.) 169 Fed. 997, 999; Hardin v. Kelley, 144 Fed. 353, 354, 75 C. C. A. 355; In re Bennett, 153 Fed. 673, 690, 82 C. C. A. 531. Unless there is a specified res there can be no lien. It certainly will not be said that any legal lien exists in the complainant. And we are satisfied that no equitable lien is possessed by him. Judge Story, in his Equity Jurisprudence (volume 2, § 1215), refers to “that class of implied trusts, arising from what are properly called equitable liens.” And he says that a lien is not, strictly speaking, either a jus in re, or a jus ad rem; that “it is not a property in the thing itself, nor does it constitute a right of action for the thing. It more properly constitutes a charge upon the thing.” And in section 1217 he says that equitable liens arise from constructive trusts. The instances are. numerous in which courts of equity acting upon the theory of an implied trust convert a party who has received property which he cannot conscientiously withhold from another into a constructive trustee, making the property itself subservient to the proper purposes of recompense by way of equitable trust or lien. I Fonbl. Eq. B. 1, c. 2, § 2, note K. A lien based upon the fundamental maxims of equity may be implied and declared by a court of chancery out of general considerations of right and justice as applied to the relations of the parties and the circumstances of their dealings. If dne enters into a valid executory agreement whereby he indicates his intention to make some particular property a security for a debt, or promises to convey, or assign or transfer the property as security, the courts of equity hold that the mere agreement creates an equitable lien which is enforceable against the property not only in the hands of the promisor but in those *871of his voluntary assignees and purchasers or incumbrances with notice. The doctrine rests upon the maxim that equity regards as done that which ought to be done. Walker v. Brown, 165 U. S. 654, 17 Sup. Ct. 453, 41 L. Ed. 865; Ketcham v. St. Louis, 101 U. S. 306, 25 L. Ed. 999; Farmers’ Loan & Trust Co. v. Penn. Plate Glass Co., 103 Fed. 132, 151, 152, 43 C. C. A. 114; 56 L. R. A. 710; Pinch v. Anthony, 8 Allen. (Mass.), 536; Pomeroy’s Eq. Jur., vol. 3, § 1235. And in Legard v. Hodges, 1 Vesey, Jr., 478, Lord Thurlow said:

“I take this to be a universal maxim, that wherever persons agree concerning any particular subject, that, in a court oí equity, as against the party himself, and any claiming under him voluntarily, or with notice, raised a trust These persons have so claimed; and therefore, this is a pure trust estate.”

13] In the case under consideration it was agreed between the defendant Bright and the complainant that the latter should render certain services to Bright in carrying through the enterprise and that the complainant should have 30 per cent, of the profits arising from the enterprise. The written agreement which appears in the answers gives the complainant “thirty per cent. (30%) of the net profits that you (Bright) may make in negotiating the said concession, after paying out or deducting all expenses, obligations or commissions, or other sums whatsoever that you may incur in connection with the said business, and a further sum of £5,000 to be deducted for your personal expenses.” But there was never any agreement to give the complainant a lien on moneys paid or on stocks or bonds delivered to Bright and out of which the profits were to be realized. Bright cannot be regarded as a constructive trustee holding such moneys and stocks and bonds in trust for the complainant. He was at liberty to use the moneys and stocks and bonds as he saw fit and could pass an unincumbered title to one with notice. He was simply a debtor to the complainant for 30 per cent, of the net profits after all proper deductions had been made. “Profit” is the gain made in a business transaction and represents the excess of acquisition over expenditure. Providence Rubber Co. v. Goodyear, 9 Wall. 788, 804, 19 L. Ed. 566; People v. Niagara County Supervisors, 4 Hill (N. Y.) 20, 23; Mundy v. Van Hoose, 104 Ga. 292, 30 S. E. 783; Prince v. Lamb, 128 Cal. 120, 60 Pac. 689; Maryland Ice Co. v. Arctic Ice Mach. Mfg. Co., 79 Md. 103, 29 Atl. 69; Mitchell v. Chicago, Rock Island and P. R. Co., 138 Iowa, 283, 114 N. W. 622. Profits and net profits usually mean the same thing. Thomas v. Columbia Phonograph Co., 144 Wis. 470, 129 N. W. 522. There is no reason to doubt that the profits out ox which, the complainant in this case was to be paid his 30 per cent, meant net profits. We cannot see, therefore, that Vidal had any lien upon any specific sum of money or upon any specific security delivered to Bright or to the Security Company on his behalf.

'[9] It remains to inquire, if Vidal had no lien, whether he had such a “claim” to property within the district as was sufficient to justify the court in assuming jurisdiction under the section under consideration. The term “claim,” as used in the section, is the right to lay claim to1 a *872specific property which is in another’s possession. Webster’s New International Dictionary defines the word as follows:

“2. A right to claim something; a title to any debt, privilege, or other thing in the possession of another; also a title to anything which another should give, or concede to, or confer on, the claimant.

The Century Dictionary defines it as follows:

“3. A right to claim or demand; a just title to something in one’s own possession or in the possession or at the disposal of another.”

The legal definition given by Jacobs is:

“A challenge of interest in anything that is in the possession of another, or at least out of a man’s own possession.”

As quoted by Jacobs from Plowden, giving the definition of Chief Justice Dyer, it is “a challenge of the ownership or property that one hath not in possession but which is detained from him by wrong.” In Silliman v. Eddy, 8 How. Prac. (N. Y.), 122, 123, the word “claim” is defined to mean “a demand of anything that is in the possession of another.” The term “claim” must be construed in the light of the context, and so construed it cannot be understood as giving to a mere general creditor a right to sue a nonresident in any district in which he can find any property belonging to his debtor when he himself has no lien and no claim of ownership in the property to assert. It has been held that where the plaintiff has no special claim against the property, or any right in or to it different from any other general creditor of the defendant, or any one having a right to sue the defendant in tort, he cannot use the existence of the property within the district as a basis for bringing his suit within it against a defendant who is not an inhabitant of the district or found in the district or does not voluntarily appear therein. George v. Tennessee Coal, Iron & R. Co. (C. C.) 184 Fed. 951.

In Ladew v. Tennessee Copper Co. (C. C.) 179 Fed. 245, 251, Judge Sanford, construing section 57 and the words “claim to * * * property,” said that—

They “axe evidently used in contrast to liens or incumbrances upon property and are the only words in the section under which a claim to the direct ownership of property may be included, these words relate only to claims made to the property in the nature of an assertion of ownership or proprietary interest, or other direct right or claim to the property itself, such, for example, as the claim of ownership of an undivided interest in the property upon which a suit for partition may be based, * * * and do not include the assertion of a right which is not based upon an interest in the property itself, but seeks merely to enforce a restriction which the law imposes upon the owner of the property in reference to its proper use.”

And it cannot be said that Vidal asserts any claim in the nature of ownership or proprietary interest in the property which is within the district.

In Lengel v. American Smelting & Refining Co. (C. C.) 110 Fed. 19, a stockholder who resided in Pennsylvania sued in a Circuit Court of the United States in New Jersey to restrain the enforcement of a contract, by which the New Jersey corporation sold certain of its stock to *873its codefendants who were citizens of New York. In dismissing the bill Circuit Judge Gray said that an “ingenious” argument was made in favor of jurisdiction under section 738 of the Revised Statutes (section 57 of the Judicial Code) on the ground that the subject-matter of the suit was the capital stock of the New Jersey corporation, and as such must be regarded as property within the district.” He continued:

"It is very clear that the present suit is not brought to ‘enforce any legal or equitable lien or claim against real or personal property,’ within the meaning of this statute. * * * The enforcement of an antecedent existing lien held by the complainant is not the subject-matter of this suit.”

[10] Neither can it be said that the suit is one to remove an incum-brance, or lien, or cloud upon the title to real or personal property. One can only bring a suit to remove “an incumbrance, or lien, or cloud upon the title” to property to which he is himself entitled. And a mere general creditor who has not reduced his claim to judgment has no such interest in the property of his debtor as brings him within this provision.

In Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358, the suit was in equity to subject to the payment of a debt alleged to be due and owing to the complainants by the defendant, certain property of the defendant within the district. The equitable suit was brought to enforce the application of the property to the purposes intended by the contract of the parties. The court in holding that the suit could not be maintained said:

“In all cases where a court of equity interferes to aid the enforcement of a remedy at law, there must be an acknowledged debt, or one established by a judgment rendered, accompanied by a right to the appropriation of the property ol' the debtor for its payment, or, to speak with greater accuracy, there must be, in addition to such acknowledged or established debt, an interest in the property or a lion thereon created by contract or by some distinct legal proceeding.”

And in the case now before us the suit is also in equity to secure the payment of a debt, although in this suit and in aid thereof an accounting and discovery is asked. And in this suit, as in that, the suit is to enforce the application of property within the district to the purposes intended by the contract of the parties. But in this case, as in that, the complainant has “no interest in the property and no lien thereon.”

The conclusion we have reached is that the suit is one to enforce the payment of a debt and for an accounting, and that the facts alleged do not show a lien or a claim of ownership in specific property, and therefore is not within section 57 of the Judicial Code. And that as the suit was not within the section the court was without jurisdiction over Bright with whom Vidal made the contract which is the basis of the suit and who is a necessary party, and who is not an inhabitant of the district and has not been served, and has not voluntarily appeared.

This conclusion makes it unnecessary to consider a motion to dismiss the appeal for a reason now to be mentioned. Upon the argument of the appeal in this court a motion was made for an order dismissing the appeal on the ground that the bonds and shares of stock involved in the litigation had become valueless, and that the appeal therefore *874brought up only a moot question. We reserved our consideration of that motion and allowed the argument of the- appeal to proceed with the understanding that we would dispose of the question thus raised after we had examined into the whole case.

[11,12] We have no doubt that it is the duty of a court to dismiss an appeal and not proceed to formal judgment if pending the appeal an event occurs without any fault of the defendant which renders it impossible for the court, if it should decide the case in favor of the plaintiff, to grant him any effectual relief whatever. Mills v. Green, 159 U. S. 651, 16 Sup. Ct. 132, 40 L. Ed. 293; Board of Flour Inspectors v. Glover, 160 U. S. 170, 16 Sup. Ct. 321, 40 L. Ed. 382; Kimball v. Kimball, 174 U. S. 158, 162, 19 Sup. Ct. 639, 43 L. Ed. 932. And the cases show that facts which have occurred since the decree and which make the question at issue moot and which are outside of the record may be proved by extrinsic evidence. See Lord v. Veazie, 8 How. 251, 12 L. Ed. 1067; Dakota County v. Glidden, 113 U. S. 222, 225, 226, 5 Sup. Ct. 428, 28 L. Ed. 98; California v. San Pablo & Tulare Railroad, 149 U. S. 308, 13 Sup. Ct. 876, 37 L. Ed. 747; Ridge v. Manker, 132 Fed. 599, 601, 67 C. C. A. 596. If we had concluded that the court had jurisdiction of the case it might have been our duty to have dismissed the appeal if convinced that the property within the district had become valueless and that the question presented was moot. But it is 'unnecessary now to enter upon a consideration of that phase of the matter.

The decrees appealed from are reversed, and the case is remanded, with directions to dismiss the bill of complaint and the cross-bills of the Pan-American Transcontinental Railway Company and the National Railway Construction Company for want of jurisdiction. Costs of the appeal to be taxed against John J. McKelvey and the Railway and Construction Companies.

HOUGH, Circuit Judge, dissents.

Rehearing

On Petition for Rehearing.

PER CURIAM.

We dismissed the original bill in this case because the plaintiff had no lien upon or claim to the securities mentioned under section 57 of the Judicial Code, and also because the defendant Bright was not an inhabitant of the Southern district of New York or served therein. Following the general rule that a cross.-bill falls with the original bill, we also dismissed the counterclaims which under equity rules 30 (201 Fed. v, 118 C. C. A. v) and 31 (198 Fed. xxvii, 115 C. C. A. xxvii), are substituted for cross-bills of the defendant Pan-American Transcontinental' Company and of defendant National Railway Construction Company against defendant Charles Bright and defendant South American Securities Company. The Securities Company only has appealed.

[13,14] As the counterclaims set up causes of action within the jurisdiction of the court as a court of equity, and within its jurisdiction as a federal court because of the citizenship of the parties, except in the case of the defendant Bright, they should not have been dis*875missed, but should Have been treated as original hills upon the dismissal of the original bill. Bates on Federal Equity Procedure, § 386; Markell v. Kasson (C. C.) 31 Fed. 104; Jesup v. Illinois Central R. R. Co. (C. C.) 43 Fed. Rep. 483; San Diego Flume Co. v. Souther, 90 Fed. 164, 32 C. C., A. 548. The defendant Bright, however, although a citizen of the United States, not being a citizen of any state, because he has been domiciled and engaged in business at Buenos Aires, Argentina, for many years, the counterclaims were properly dismissed as to him; the jurisdiction of the court being limited to controversies between citizens of different states.

[15] We agree with the court below that the contracts between the Securities Company and the Railway Company and the Construction Company should be canceled and rescinded, and all securities delivered thereunder to the Securities Company, in its possession or in possession of the receiver, be returned to those companies, respectively, and that the counterclaim of the Securities Company against John J. McKelvey and Alpheus H. Favour, individually and as co-partners, for $500,000 damages, should be dismissed, and that the amended bill of complaint be dismissed as to the defendants Frederick R. Bright, William F. Piper, Charles R. Dcmarest, Edward I. Thompson, Ralph H. McKelvey, and Warren G. Thompson. But the decree must be reversed because the original hill should have been dismissed, with costs to defendant Charles Bright against Vidal, and the counterclaims of the Railway Company and Construction Company against defendant Charles Bright should also have been dismissed, with cosía of both courts, payable one-hall by the Railway Company and one-half by the Construction Company, and the affirmative relief before mentioned on the counterclaims should have been given to the Railway Company and the Construction Company, with costs of both courts against the Securities Company, and, finally, the rights of persons not parties or persons not within the jurisdiction of the court should not have been determined.

Decree reversed, and the court below is directed to enter a decree in accordance with this opinion, making such provisions for payment of the fees of the special masler, receiver, and stenographers as to it shall seem proper.