Opinion of the Court.

Circuit Court of the United States. It is too plain for argument that the replevin suit, affecting only certain articles of personal property, and arising out of a controversy between the railway company and Tillotson, its vice president, could not draw into the jurisdiction and control of the state court the railroad and franchises of the railway company, so as to preclude creditors of the company from instituting proceedings in the Federal court. As respects the restraining order, if such were ever issued, it does not appear that Tillotson ever disobeyed it, and, if he did, he personally would be answerable to the state court. It may be further observed that it is not made to appear that the restraining order ever became operative as an injunction by the filing of a bond in $5000, which was imposed as a condition for its issuance. At all events, and conclusively as to the merits of this contention, the property and franchises which are the subject-matter of the present suit were not, either actually or constructively, in the possession of the state court when the Federal court appointed its receiver.

Our inspection of this record has not constrained us to hold that the Circuit Court lost its apparent jurisdiction of the case by reason of disclosures made subsequently in the progress of the case. The mere denial that the materials sold by the complainant to the railway company were of the value alleged in the bill did not, of itself, deprive the court of jurisdiction. Thereby was presented a question of fact into which the court had jurisdiction to inquire. Within the letter of the statute there was a controversy between citizens of different States, in which the matter in dispute was over the sum or value of two thousand dollars.

The fifth section of the act of March 3, 1875, 18 Stat. 470, provided that if in "any suit commenced in a Circuit Court,

it shall appear to the satisfaction of said Circuit Court, at any time after such suit has been brought, that such suit does not really and substantially involve a dispute or controversy properly within the jurisdiction of said Circuit Court, the said Circuit Court shall proceed no further therein, but shall dismiss the suit."

And it has been several times decided by this court that a

Opinion of the Court.

suit cannot properly be dismissed by a Circuit Court as not involving a controversy of an amount sufficient to come within its jurisdiction unless the facts, when made to appear on the record, create a legal certainty of that conclusion. Barry v. Edwards, 116 U. S. 550; Wetmore v. Rymer, 169 U. S. 115.

It is not clearly shown in this record that, at any time after the suit was brought, it was made to appear, to the satisfaction of the Circuit Court, that the suit did not really and substantially involve a dispute or controversy properly within the jurisdiction of said Circuit Court. On the contrary, it appears that the Circuit Court was not so satisfied, but overruled complainant's motion to dissolve the preliminary injunction and to discharge the receiver. Thereupon the cause was taken on appeal to the Circuit Court of Appeals, and that court directed that the preliminary injunction granted by the Circuit Court should be dissolved, but held that, on that appeal, the Circuit Court of Appeals had no jurisdiction to proceed further, and was without power to direct a dismissal of the bill or to vacate the order appointing a receiver.

It is true that observations were made by the judges of that court, based on affidavits made in the court below, that jurisdiction had been collusively obtained by reason of false statements of the amount of materials sold by the complainant to the defendant company, and they seem to have thought that by such affidavits the Circuit Court had been made to know that its equitable jurisdiction had been improperly invoked. Industrial, etc., Co. v. Electrical Supply Co., 58 Fed. Rep. 733, 744.

But such observations of the learned judges did not have the force of a decision, nor did they undertake to direct the Circuit Court to dismiss the bill for want of jurisdiction.

It further appears that, upon the filing of the mandate of the Court of Appeals in the Circuit Court, the counsel of complainant filed a motion to dismiss the bill, and claimed that the Court of Appeals had decided that the Circuit Court had no jurisdiction. This and subsequent motions to the same effect were overruled by the Circuit Court, and the Circuit Court of Appeals denied an application for a writ of mandamus. 90 Fed. Rep. 831.

Opinion of the Court.

Pending these proceedings and before the final decree of sale, the Atlantic Trust Company filed an intervening petition, alleging its ownership as trustee of one hundred and twenty-five mortgage bonds of the defendant company; that there was the sum of $40,250 due and unpaid on account of said indebtedness, and praying for an account and for a decree of foreclosure and that the lien of said trust company should be decreed to be a lien prior to those of the other creditors. As already stated, the Circuit Court overruled the defendant's demurrer to this intervening petition, and on December 12, 1899, the court entered an order that said intervening petition should be taken pro confesso, and appointing a master to ascertain and report the amount and ownership of the outstanding mortgage bonds. And subsequently, on December 15, 1899, the final decree or order of sale was entered, in which the court reserved for further consideration, as between the Atlantic Trust Company and the Bodefield Belting Company, any and all questions arising between them as to the priority of their respective liens. A sale of all the property of the defendant railway company, in pursuance of said decree, was made on February 24, 1900; and, no objections or exceptions to the sale having been filed by any of the parties, on March 26, 1900, the sale was confirmed absolutely, and the master directed to execute a deed for the property so sold by him to the purchasers.

It appears that, under the intervening petitions of other creditors than the complainant, there were involved, before and at the time of the decree of sale, liens and claims against the defendant's property largely in excess of the amount necessary to confer plenary jurisdiction on the Circuit Court. Jurisdiction having attached under the allegations of the original bill, and the court having proceeded, in a proper exercise of its discretionary power, to appoint a receiver and to authorize a large expenditure of money raised by certificates, in order to protect and preserve the property in its custody, and the court having also, in the exercise of its power as a court of equity, allowed the intervention of other creditors, as between some of whom and the defendant company there was jurisdiction in the court, both as respects diversity of citizenship and amount of claims,

Opinion of the Court.

we think its jurisdiction did not fail by reason of anything that appeared in ex parte affidavits filed on behalf of the defendant company, denying the truth of the allegations contained in the original bill in respect to the amount in dispute.

In Krippendorf v. Hyde, 110 U. S. 283, it was said: "The equitable powers of courts of law over their own process, to prevent abuses, oppression and injustice, are inherent and equally extensive and efficient, as is also their power to protect their own jurisdiction and officers in the possession of property that is in custody of the law. Buck v. Colbath, 3 Wall. 334; Hagan v. Lucas, 10 Pet. 400. And when, in the exercise of that power, it becomes necessary to forbid to strangers to the action the resort to the ordinary remedies of the law for the restoration of property in that situation, as happens when otherwise conflicts of jurisdiction must arise between courts of the United States and of the several States, the very circumstance appears which gives the party a right to an equitable remedy, because he is deprived of a plain and adequate remedy at law; and the question of citizenship, which might become material as an element of jurisdiction in a court of the United States when the proceeding is pending in it, is obviated by treating the intervention of the stranger to the action in his own interest as what Mr. Justice Story calls, in Clarke v. Matthewson, 12 Pet. 172, a dependent bill."

Circuit Judge Severens, in his opinion in the present case, aptly referred to the case of Gumbel v. Pitkin, 124 U. S. 132, as containing an elaborate exposition of the principles upon which a court of equity may proceed when the rights of intervening creditors are to be dealt with, and upon which principles the Circuit Court proceeded in this case.

We fail to perceive any equities in the position of the appellant company. All its creditors, as well the original complainant as the several intervening creditors, have acquiesced in the action of the Circuit Court and have availed themselves of the remedy afforded by the sale of the defendant's property. Having failed and declined to accept the opportunity afforded by an interlocutory order to regain possession of its property, by giving a bond to pay such charges as the court should deVOL CLXXXI-28

Statement of the Case.

termine to be just and proper, and not having offered, at last, to pay the claims and liens adjudged to be just and proper, the defendant company seems to us to have suffered no injustice. However this may be, the case is before us only on the question whether the Circuit Court had jurisdiction to entertain the said cause and render the decrees so appealed from, and this we answer in the affirmative, and direct the appeal to be dismissed with costs. Let it be so certified.

UNITED STATES RUBBER COMPANY v. AMERICAN OAK LEATHER COMPANY.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH

CIRCUIT.

No. 150. Argued January 25, 28, 1901.- Decided May 13, 1901.

The right of an insolvent debtor to prefer one creditor to another, exists in the State of Illinois to its fullest extent, and the giving of judgment notes is recognized as a legitimate method of preference.

In the absence of national bankrupt laws, if a remedy is sought in a court of equity against fraudulent preferences, it must be on allegation and proof of a design to defraud and to delay the complaining creditor. While the policy of the law permits preferences, and such preferences as are necessarily unknown to others than those concerned, it does not permit any device which prevents the debtor from giving a like advantage to his other creditors, if he so wishes, unless such device is put in the form of a mortgage, or other instrument, perpetually open to public inspection upon the public record.

The present case is one in which the fundamental rule that equality is equity, may properly be applied.

ON September 11, 1896, the American Oak Leather Company, a corporation of the State of Ohio, filed, in the Circuit Court of the United States for the Northern District of Illinois a bill of complaint against C. H. Fargo & Company, a corporation of the State of Illinois; the United States Rubber Company, a corporation of the State of New Jersey; L. Candee & Company,