Case Name: SALEM TRUST CO. v. MANUFACTURERS' FINANCE CO. et al.
Court: United States Court of Appeals for the First Circuit
Jurisdiction: United States
Decision Date: 1922-04-11
Citations: 280 F. 803
Docket Number: No. 1515
Parties: SALEM TRUST CO. v. MANUFACTURERS’ FINANCE CO. et al.
Judges: Before BINGHAM and JOHNSON, Circuit Judges', and BROWN, District Judge.-
Reporter: Federal Reporter
Volume: 280
Pages: 803–815

Head Matter:
SALEM TRUST CO. v. MANUFACTURERS’ FINANCE CO. et al.
(Circuit Court of Appeals, First Circuit.
April 11, 1922.)
No. 1515.
1. Removal of causes <&wkey;30 — Citizenship of nominal party held not to defeat right of removal.
Joinder of a defendant, which is a citizen of the same state as complainant, hut is merely the depository of the fund in controversy between the other parties, without any interest therein, held not to defeat the right of removal by the principal defendant, which is a nonresident.
2. Courts <&wkey;>372(l) — Federal courts not bound by state decisions as to priority between assignees.
The question whether, as between two successive assignees of the same chose in action, the fact that the second first gave notice to the debtor gives him priority is one of general jurisprudence, on which the federal courts are not hound by the decisions of the courts of the state where the parties reside and the assignments were made.
3. Assignments c&wkey;83~-First notice to debtor gives priority as between successive assignees of chose in action.
Under the rule of the federal courts, as between two successive assignees of the same chose in action, the second prevails if he was the first to give notice to the debtor.
Brown, District Judge, dissenting.
Appeal from the District Court of the United States for the District of Massachusetts; George W. Anderson, Judge.
Suit in equity by the Salem Trust Company against the Manufacturers’ Finance Company and another. Decree for defendants, and complainant appeals.
Affirmed.
Alexander Whiteside, of Boston, Mass. (Raymond P. Baldwin and Warren, Garfield, Whiteside & Ramson, all of Boston, Mass., on the brief), for appellant.
Robert G. Dodge, of Boston, Mass., for appellee Manufacturers’ Finance Co.
Before BINGHAM and JOHNSON, Circuit Judges', and BROWN, District Judge.-

Opinion:
BINGHAM, Circuit Judge.
This is a bill in equity brought by the Salem Trust Company, a Massachusetts corporation, against the Manufacturers' Finance Company, a Delaware corporation, and the International Trust Company, a Massachusetts corporation, to establish the alleged right of the Salem Company as against the Finance Company to a sum deposited by the Finance Company with the International Trust Company.
The suit was originally brought in the superior court of Massachusetts, but was removed by the Finance Company to the District Court on the ground of diverse citizenship. After removal the plaintiff, the Salem Company, filed a motion to remand the cause, which was denied.
The case was then heard on agreed facts from which it appears that, On May 16, 1919, the Nelson Blower & Furnace Company, assigned to the Salem Company the indebtedness, to the amount of $45,000, of the Murray & Tregurtha Corporation to it under a contract for tbe construction of certain marine engines; that, on July 15, and again on September 20,¡ 1919, the Blower & Furnace Company assigned the same indebtedness to the defendant, the Finance Company, on the former date to the amount of $40,000 and on the latter $10,000; that all of the assignments were for a valid consideration; that on or about September 20, 1919, the defendant the Finance Company, having no knowledge of the assignment to the plaintiff, notified the Murray & Tre-gurtha Corporation of the assignment to it; that at that time the Murray & Tregurtha Corporation had no knowledge of the assignment to the plaintiff, and did not learn of it until later; that on September 26, 1919, the Blower & Furnace Company was placed in the hands of a receiver, who completed the contract with Murray & Tregurtha only on the understanding that his expenses should be paid in priority to the assignments; that on October 6, 1919, the plaintiff and defendant, having learned of the assignments, entered into an agreement reciting the facts as to the assignments; that the parties were in dispute as to their respective rights, and providing that the defendant should collect the account and deposit the proceeds in the International Trust Company in a special account in the defendant's name as trustee, and that if the parties could not agree upon the ownership of the proceeds, the question should be determined in some court of competent jurisdiction upon a proceeding brought by either party; that in pursuance of this agreement the defendant collected $8,634.10, which it deposited as agreed in the International Trust Company; that after deducting the cash expenses incurred in making such collection the amount on deposit was $7,963.36, the sum in dispute.
In the court below it was Held that, inasmuch as the defendant was the first to give notice of its assignment to Murray & Tregurtha, it was entitled to the fund, even though its assignment was later in time to that of the plaintiff, and a decree was entered dismissing the bill.
It is from this decree that the present appeal is taken, and the assignments of error present two questions: (1) Did the District Court err in refusing to remand the cause ? and (2) in ruling that, as between two successive bona fide assignees of the same chose in action, the second prevails, if he was the first to give notice to the debtor.
The International Trust Company was not a necessary party defendant. It had no interest in the subject-matter litigated, but held the sum in dispute as the agent or depositary of the defendant, the Finance Company. By the sixth article of the contract the parties did not agree upon any particular court to determine the controversy between them, but left that question for determination by any court of competent jurisdiction, and, as the International Trust Company was at most a nominal party only, the motion to remand was rightly denied. Walden v. Skinner, 101 U. S. 577, 25 L. Ed. 963; Barney v. Latham, 103 U. S. 205, 26 L. Ed. 514; Bacon v. Rives, 106 U. S. 99, 1 Sup. Ct. 3, 27 L. Ed. 69; Ex parte Nebraska, 209 U. S. 436, 28 Sup. Ct. 581, 52 L. Ed. 876.
We are also of the opinion that the ruling of the court below, that the assignee who first gave notice had the prior right, though the assignment to him was later in date, was correct, and that the question decided is one of general jurisprudence as to which the decisions of the highest courts of a state are not controlling. Methven v. Staten Island Light & Power Co., 66 Fed. 113, 13 C. C. A. 362; and In re Letermau, Becher & Co., 260 Fed. 543, 171 C. C. A. 327, in which cer-tiorari was denied October 20, 1919, by the Supreme Court, 250 U. S. 668, 40 Sup. Ct. 14, 63 L. Ed. 1198, under the name of Coleman & Co. v. Tawas Co. The ruling was in conformity with the well-established rule in the federal courts that the party who first gives notice of his assignment is to be regarded as having the greater equity. Judson v. Corcoran, 17 How. 612, 15 L. Ed. 231; Spain v. Hamilton's Administrator, 1 Wall. 604, 17 L. Ed. 619; Laclede Bank v. Schuler, 120 U. S. 511, 516, 7 Sup. Ct. 644, 30 L. Ed. 704; Methven v. Staten Island Light, Heat & Power Co., 66 Fed. 113, 13 C. C. A. 362; In re Leterman, Becher & Co., 260 Fed. 543, 171 C. C. A. 327; Farmers' & Merchants' Bank v. Farwell, 58 Fed. 633, 637-639, 7 C. C. A. 391; 5 C. J. pp. 953, 954, 955, § 135.
The law of Massachusetts relating to the assignment of choses in action is the same as that of New York and the facts in the cases cited from the Second circuit (66 Fed. 113, 13 C. C. A. 362, and 260 Fed. 543, 171 C. C. A. 327) differ in no material respect from those now before us, namely, the applicability of the state or the federal rule and the limitations of the latter. The questions presented are therefore the same as those that were before the court in the Second circuit, the decision of which the Supreme Court declined to review on certiorari. As these questions were definitely presented in the certiorari proceeding and were of general importance in that their decision by the Court of Appeals in the Second Circuit involved a conclusion at variance with the law of New York as well as with that of many other states, the action of the Supreme Court in declining to review the decision is hardly conceivable unless it was satisfied the decision was right.
The decree; of the District Court is affirmed, with costs to the Manufacturers' Finance Company, appellee, in this court.