Chadbourne et al. v. Coe, 51 F. 479

Caldwell, Circuit Judge, (after stating the facts as above.) The supreme court of the United States divide parties to suits in- equity into three classes—First, formal parties; second, necessary parties; third, indispensable parties. “ Formal parties ” are those who have no interest in the controversy between the immediate litigants, but have an interest in the subject-matter which may be conveniently settled in the suit, and thereby .prevent further litigation.

They may be parties or not, at the option of the complainant. “Necessary parties ” are those who have an interest in the controversy, but whose interests are separable from those of the parties before the court, and will not be directly affected by a decree which does complete and full justice between them.

Such persons must be made parties if-practicable, in obedience to the general rule which requires all persons to: be. made parties who are interested in the controversy, in order that there may be an end of litigation; but the rule in the federal courts is that if they are beyond the jurisdiction of the court, or if making them parties would oust the jurisdiction of the court, the case may proceed to ,a final decree between the parties before the court, leaving the rights of the absent parties untouched, and to be determined in any competent forum.

The reason for this liberal rule in dispensing with necessary parties in the federal courts will be presently stated. ■ “Indispensable parties” are those who not only have an interest in the subject-matter of the controversy, but an interest of such a nature that a final decree cannot be made without either affecting their Interest, or leaving the controversy in such a condition that its filial determination may be wholly inconsistent with equity and good eon-science. Shields v. Barrow, 17 How. 139; Ribon v. Railroad Cos., 16 Wall. 450; Coiron v. Millaudon, 19 How. 113; Williams v.

Bankhead, 19 Wall. 563; Kendig v. Dean, 97 U. S. 423; Alexander v. Horner, 1 McCrary, 634. The general rule as to parties in chancery is that persons falling within the definition of “necessary parties” must be brought in, for the purpose of putting an end to the whole controversy, or the bill will bo dismissed, and this is still the rule in most of-the state courts. But in the federal courts this rule has been relaxed.

The relaxation resulted from two causes; First, the limitation imposed upon the jurisdiction of these courts by the citizenship of the parties; and, secondly, their inability to bring in parties, out of their jurisdiction, by publication. The extent of the relaxation of the general rule in the federal court is expressed in the forty-seventh equity rule. That rule is simply declaratory of the previous decisions of the supreme court on the subject of the rule.

The supreme court has said repeatedly that, notwithstanding this rule, a circuit court can make no decree affecting the rights of an absent person, and that all persons whoso interests would be directly affected by the decree are indispensable parties. Shields v. Barrow, supra; Ribon v. Railroad Cos., supra; Coiron v. Millaudon, supra; Alexander v. Horner, supra; Cole S. M. Co. v. Virginia & G. H. W. Co., 1 Sawy. 685. Can a decree be made in this case without affecting the rights of Whitcomb?

Before the complainants can have the specific relief sought by the bill, the court must find and decree: First, that Whitcomb is indebted to the complainants in the sum of $5,000, more or less, as alleged in the bill; second, that Whitcomb is insolvent; third, that the deeds from Whitcomb to Coe are fraudulent and void as to Whitcomb’s creditors; fourth, that the agreement between Whitcomb and Coe relating to the sale of the property, and accounting for the same, and for the rents and profits thereof, is fraudulent and void; fifth, the court must decree a sale of the lands, and the application of the proceeds of the sale to the payment of'Whitcomb’s alleged indebtedness to the complainants; sixth, the court must decree that Coe account for the property, and its rents and profits, and that he pay the amount found due to the complainants on Whitcomb’s alleged indebtedness to them.

If the complainants are not creditors of Whitcomb, as they allege, or if Whitcomb is not insolvent, or if the deeds Whitcomb made to Coe are not fraudulent, or if the contracts set out between Whitcomb and Coe are valid, the bill cannot bo maintained. In the judicial determination of every one of these issues Whitcomb is an indispensable party. As to some of them he is necessarily the only party in interest, the only party who would be affected by the decree, and the only party capable of making an intelligent defense.

The contracts or trust agreements between Whitcomb and Coe, made part of the bill, are not fraudulent on the face. Upon their face they are valid agreements, under which Whitcomb can compel Coe to account for the property, and its rents, issues, and profits.

If the court, in a suit to which Whitcomb was not a party, should cons pel Coe to account for, and turn over, the property and money to the complainants, such a decree would be no bar to a suit by Whitcomb against Coe, to compel the latter to account to him, according to the terms of the agreement between them, and for this reason Coe has a right to insist that Whitcomb shall be made a party for his protection. Alexander v. Horner, 1 McCrary, 634.

Formerly the general rule was that a judgment must be obtained and execution returned nulla bona, or its equivalent, before a bill could be filed to vacate a fraudulent conveyance, and it was held that the debtor was a necessary party to such a bill. In modern times this rule has, by legislation in some of the states and by judicial decisions in others, undergone important modifications not necessary to be noticed in the decision of this case. The cases on the subject are collected in 3 Pom. Eq. Jur. § 1415, note 4; Story, Eq. PI. (10th Ed.)§ 233, note b; Pom. Rem. § 347.

But the modem cases which go to the greatest length in modifying the old rule fall far short of supporting the complainant’s contention in this case. In this case there is hot only no judgment, but it is contended the alleged debtor has no right to be heard on the question as to whether he owes the complainants anything for which a judgment should be rendered.

We do not rest our decision upon the ground that a creditor cannot file a bill to set aside a fraudulent conveyance of his debtor, and subject the property to the payment of his debt, until he has obtained a judgment at law for his debt, and had a return of nulla bona, (as to which, see Case v. Beauregard, 101 U.

S. 688;) but upon the ground that a creditor cannot maintain a bill to establish a debt against his alleged debtor, to annul the debtor’s conveyances and contracts, and appropriate his property and money to the payunent of the creditor’s alleged debt, without making the debtor a party to a bill seeking such relief. It is fundamental to the jurisprudence of this country that no court, and, least of all, a federal court, can adjudicate upon the rights of one not before it and not subject to its jurisdiction. The decree of the circuit court is affirmed.