of September, 1902, the defendant appeared by counsel and filed a motion with the clerk of the court to recall the execution issued in the case, to vacate and set aside the default and judgment, and quash the service of summons. The motion was supported by the affidavit of W. E. Smythe, the president of the corporation defendant. In this affidavit it is averred:

"That said defendant, the Associated Colonies, is, and for more than five years last past has been, a corporation organized and existing under the laws of the state of New York, and that the business for the carrying on of which it was incorporated and the objects of the incorporation of said company were to colonize, irrigate, and sell lands for homes and farming purposes, and to buy, sell, and deal in mortgages, bonds, and securities. That ever since its incorporation the said defendant has had its office and principal place of business in the city of New York, in the state of New York. That affiant is now, and was at all the times hereinafter mentioned, and ever since its incorporation, the president of the said defendant corporation. That prior to the 1st day of January, 1900, said defendant company had owned certain real and personal property in the county of Lassen, state of California, and for a period of about one year prior thereto had, through its tenants and agents, cultivated a small portion of its said lands in the said county of Lassen, state of California, but never at any time, or ever at all, carried on, transacted, or did any business in the state of California, other than the cultivation of said portion of its said lands as aforesaid. That on or about the 2d day of January, 1900, the said defendant corporation transferred, sold, and conveyed all of its said property, real and personal, in the state of California, and abandoned all intention of carrying on business in the state of California, and since said date has neither owned nor been in possession or use of any property, real or personal, of any kind, in the state of California. That since said 2d day of January, 1900, the said defendant has not done or carried on any business in the state of California, and has not been doing business in the state of California, and was not at the commencement of this action, or at the date of the attempted service of summons herein, or at the date of the said default or of said judgment, engaged in any business, trade, or calling in the state of California, and was not on either of said dates doing its or any business in the state of California, and did not on either of said dates, or ever or at all, since the 2d day of January, 1900, maintain any office or agent in the state of California. That the summons in this action was never personally served upon said defendant corporation, or upon any of its officers or agents, and that affiant, individually or as president of the said defendant corporation, never knew that this case had been begun by plaintiff against said defendant until on or about the 8th day of May, 1902, when he was advised that the said plaintiff had recovered a judgment against said defendant corporation; but even then affiant did not know upon what plaintiff based his claim or brought his suit, or when the suit had been begun, or where. That affiant was not fully informed of the facts or particulars of plaintiff's claim, or of the nature of his cause of action, or of the amount of the judgment, or its date, or where or when the suit was brought, until on or about the 1st day of August, 1902, when he was advised of those facts by W. F. Williamson, Esq., his attorney, who had made inquiry in that regard at his instance and request."

It is further averred that the defendant is advised by its attorney that it has a good, valid, meritorious, and legal defense on the merits. On the same day that defendant filed its motion to recall execution, vacate and set aside the judgment, and quash the service of summons, it presented its petition to the court for removal of the case to this court, alleging diverse citizenship, and that the amount involved exceeded the sum of $2,000, exclusive of costs and interest; and, upon giving the proper bond, the case was brought to this court.

The matter now before the court is the motion to recall the execu

tion, vacate and set aside the judgment, and quash the service of summons. The determination of this motion depends upon the question whether the service of process made upon the secretary of state gave the superior court of Lassen county jurisdiction over the defendant. Section I of the amended act of the legislature of March 17, 1899, providing for the service of process upon the secretary of state, is made applicable to any corporation created by the laws of any other state or foreign country, and "doing business in the state." The defendant was a corporation created by the laws of the state of New York, and it had not designated any person residing in this state upon whom the process might be served. If, then, the defendant was "doing business in this state," the service of process on the secretary of state was sufficient, under the statute, to obtain constructive service upon the defendant. Was the defendant "doing business in this state"? It is objected that this court cannot examine into this question, on the ground that it had already been judicially determined by the state court that it had such jurisdiction. It would be a sufficient answer to this objection to say that when this case was removed to this court the superior court of Lassen county had authority, under section 473 of the State Civil Code of Procedure, to relieve the defendant from the judgment entered in the case. That section provides, among other things, that:

"The court may

also upon such terms as may be just, relieve a party or his legal representative from a judgment, order, or other proceeding taken against him through his mistake, inadvertence, surprise or excusable neglect: provided, that application therefor be made within a reasonable time, but in no case exceeding six months after such judgment, order, or proceeding was taken. When from any cause the summons in an action has not been personally served on he defendant, the court may allow, on such terms as may be just, such defendant or his legal representative at any time within one year after the rendition of any judgment in such action, to answer to the merits of the original action."

The judgment by default was entered on April 3, 1902. Defendant's motion to vacate and set aside the default judgment and to quash the service of summons was made on September 20, 1902, or within six months after the judgment and order was entered. The state court had authority, while the case was still pending in that court, to determine upon such a showing whether the defendant was entitled to be relieved from the judgment or not, and upon the removal of the case that authority was vested in this court.

The suggestion of the plaintiff that the case be remanded to the state court to have this motion determined cannot be entertained. This court cannot abdicate its authority or duty in any case in favor of another jurisdiction. Hyde v. Stone, 20 How. 170, 175, 15 L. Ed. 874. Moreover, the appearance of the defendant in the state court, under the circumstances, was not a waiver of objection to the jurisdiction. The appearance must be treated as a special appearance to secure the removal of the case to this court. Railway Co. v. Brow, 164 U. S. 271, 279, 17 Sup. Ct. 126, 41 L. Ed. 431. But the authority of this court to determine whether the state court had jurisdiction of the defendant to make the order and enter the judgment contained in the record has a wider scope than the power conferred upon the

state court to set aside defaults, as provided in section 473 of the State Code of Civil Procedure. In Goldey v. Morning News, 156 U. S. 518, 523, 15 Sup. Ct. 559, 30 L. Ed. 517, the supreme court of the United States declared that this authority was not limited by the laws of the state, but was dependent upon its constitutional jurisdiction under the laws of the United States. The court said:

"The jurisdiction of the circuit court of the United States depends upon the acts passed by congress pursuant to the power conferred upon it by the constitution of the United States, and cannot be enlarged or abridged by any statute of a state. The legislature or the judiciary of a state can neither defeat the right given by a constitutional act of congress to remove a case from a court of the state into the circuit court of the United States, nor limit the effect of such removal."

In that case the defendant was a corporation organized and existing under the laws of the state of Connecticut, and was engaged in doing business in that state, having no place of business, officer, agent, or property in the state of New York, where service of summons in the case was made upon the president of the corporation, a citizen and resident of the state of Connecticut. The service of summons was made upon the president while he was temporarily in the state of New York. Such a service had been held valid by the court of appeals of the state of New York, but invalid by the circuit courts of the United States held within that state. In the supreme court the latter opinion was upheld. The court, speaking upon this subject, said:

"It is an elementary principle of jurisprudence that a court of justice cannot acquire jurisdiction over the person of one who has no residence within its territorial jurisdiction, except by actual service of notice within the jurisdiction upon him, or upon some one authorized to accept service in his behalf, or by his waiver, by general appearance or otherwise, of the want of due service. Whatever effect a constructive service may be allowed in the courts of the same government, it cannot be recognized as valid by the courts of any other government. D'Arcy v. Ketchum, 11 How. 165, 13 L. Ed. 648; Knowles v. Gaslight Co., 19 Wall. 58, 22 L. Ed. 70; Hall v. Lanning, 91 U. S. 160, 23 L. Ed. 271; Pennoyer v. Neff, 95 U. S. 714, 24 L. Ed. 565; York v. Texas, 137 U. S. 15, 11 Sup. Ct. 9, 34 L. Ed. 604; Wilson v. Seligman, 144 U. S. 41, 12 Sup. Ct. 541, 36 L. Ed. 338. For example, under the provisions of the constitution of the United States and of the acts of congress, by which judgments of the courts of one state are to be given full faith and credit in the courts of another state or of the United States, such a judgment is not entitled to any force or effect unless the defendant was duly served with notice of the action in which the judgment was rendered, or waived the want of such notice. Const. art. 4, § 1; Acts May 26, 1790, c. 11 (1 Stat. 122 [U. S. Comp. St. p. 677]), and March 27, 1804, c. 56 (2 Stat. 299; Rev. St. § 905 [U. S. Comp. St. p. 677]); Knowles v. Gaslight Co. and Pennoyer v. Neff, above cited."

These views of the supreme court with respect to the invalidity of a constructive service of process must, of course, be considered in connection with the admitted fact that the defendant was not doing business in the state of New York. The decision is cited mainly for the purpose of showing that the circuit court must determine for itself the validity of a service of process in a given case, whatever may be the law of a state, or its interpretation by the courts of a state, under which a valid service of process may be claimed.

This brings us to the consideration of the final question in this

case. The state has the right to exclude foreign corporations from doing business in the state, and, where they are not excluded, their right to engage in business within the state depends upon the laws of the state granting the permission. It follows that where the state provides by law that such a corporation doing business in the state must designate some person residing in the state upon whom the process must be served, and, in default of such designation, service of process may be made upon the secretary of state, such service is valid only when the corporation is actually doing business in the state. It is not valid when the corporation has withdrawn from the state, and has ceased to do business within the state. St. Clair v. Cox, 106 U. S. 350, 1 Sup. Ct. 354, 27 L. Ed. 222; Swann v. Association (C. C.) 100 Fed. 922; Friedman v. Insurance Co. (C. C.) IOI Fed. 535.

The affidavits introduced in this case in support of the motion under consideration show conclusively that the defendant had not been doing business in this state for more than two years when service of process was made upon the secretary of state. The fact that there was some claim against the defendant, remaining from its former business in the state, is not sufficient. It must be engaged in transacting some substantial part of its ordinary business. U. S. v. American Bell Telephone Co. (C. C.) 29 Fed. 37, 41.

The motion of the defendant to quash the service of summons, recall the execution, and vacate and set aside the default and judgment, is granted, and the action dismissed. Railway Co. v. Brow, 164 U. S. 271, 280, 17 Sup. Ct. 126, 41 L. Ed. 431.

CASSIDY FORK BOOM & LUMBER CO. v. ROARING CREEK & C. R. CO. (Circuit Court, N. D. West Virginia. August 28, 1902.)

1. EQUITY-SUFFICIENCY OF ANSWER.

Various exceptions to the answers of defendants in a suit in equity considered and overruled.

2. CORPORATIONS-INSOLVENCY PROCEEDINGS-PURCHASE OF CLAIMS.

A creditor of an insolvent railroad company is not entitled to a discovery in respect to the prices paid for claims against the company by its president, who purchased for a third person having full right to buy the same, unless a conspiracy to defraud stockholders and creditors is first shown, and especially where such claims have been previously considered and allowed by a master.

In Equity. On exceptions to answers.

B. M. Ambler, for plaintiff.

E. D. Talbott, for defendant.

JACKSON, District Judge. This case is now heard upon the exceptions to the answer of Henry C. Terry, E. J. Burwind, and Charles Heebner. As Mr. Terry is the president of the company, and has been for some years, the court will first dispose of the exceptions to his answer, for the reason that the ruling upon the exceptions will sub

stantially dispose of the exceptions to the answers of the other defend

ants.

The first exception filed by the plaintiff's counsel to the answer of Mr. Terry is to the answer of paragraph 4 of the bill. It is not necessary for the court to refer to paragraph 4 except to say that the answer of Mr. Terry specifically denies each and every averinent of paragraph 4 of said bill, except so far as they are expressly admitted in his answer. Replying to that portion of the bill referring to traffic agreement, he expressly says that there was no traffic agreement. Replying to that part of the bill which states that the $28,000 was made up by a fair average from 1896 of about $10,000 per year, and giving an average of disbursements of about $10,500 per year, as shown by the report, etc., the answer expressly says that the claim is not made up by giving the total receipts as an average and giving the average of disbursements, but is made up from the actual receipts and actua! disbursements in connection with the operation of the said railroad, all of which are fairly and honestly stated and accounted for, which appears from an inspection of the master's report, the proofs of which were laid before him and allowed by him, and that the report further shows that there is a large amount due from the receiver, Thomas Fisher, to the defendant Terry. For the reasons assigned, the court overrules exception No. I to paragraph 4.

In reference to exception 2 to paragraph 4, in regard to the $150,000 bonds and interest, the court overrules that exception, for it clearly appears from the answer of the defendant Terry how those bonds were acquired, and by whose money they were purchased. It is a question of fact to be determined upon the hearing whether or not the statements in his answer are true. The defendant Terry expressly denies that the bonds were held as collateral for any obligation of the railroad company.

Exception No. 3 to paragraph 4 as to the mechanics' liens, amounting to $3,542.10, is overruled, for the reason that the answer states that they were just items of liens against the railroad company, and were purchased by him as trustee for E. J. Burwind, upon a fair and proper consideration. The question whether or not he paid the face value of those liens is, in the view of the court, not a matter for fair and proper consideration, for the reason that it clearly appears in other proceedings in this case that the railroad company was bankrupt, and was in the hands of a receiver, and its obligations, securities, and judgment liens against it were far below the face value of them. It is not to be presumed, in dealing with a bankrupt, that the purchaser would be expected to pay anything like the face value of its obligations, especially when it appears that the purchaser, Burwind, was in no wise connected or associated with the company. Though a conspiracy and combination is alleged between Burwind and the others, yet the answer denies in strong terms the existence of any such conspiracy or combination.

As to exception No. 4 to the answer, which states that, as to material used for the construction of the railroad, amounting to $12,054.34, the said Terry did not pay as much as $8,000 on account thereof, and the answer does not refer to such allegation, or make any