United States, or other proper tribunal to be established for that purpose by the congress, with such exceptions and under such regulations as the congress shall make."

This brief historical reference has been made for the purpose of showing that, even in that early time when State jealousies were keen, and experience had not demonstrated how groundless were any fears of unjust discrimination by the courts of one State against the citizens of another, there were very decided convictions among statesmen against giving the federal courts jurisdiciton over controversies between citizens of different States, a jurisdiction based solely on the grounds of residence.

Judge Story, in his commentaries on the Constitution, while admitting that the necessity for this provision may not stand upon grounds quite as strong as some of the others, insists that there are high notions of State policy and public justice by which it can be clearly vindicated. The learned commentator gives by way of example, some cases in which he thinks the jurisdiction of the federal courts over controversies between citizens of different States, might be indispensable or in the highest degree expedient. The constitution declares that the citizens of each State shall be entitled to all the privileges and immunities of the citizens of the several States. "Suppose," says Judge Story, "an attempt is made to evade or withhold these privileges, would it not be right to allow the party aggrieved an opportunity of claiming them, in a contest with a citizen of the State, before a tribunal at once national and impartial? Suppose a State should pass a tender law or law impairing the obligations of private contracts, or should grant unconstitutional preferences to its own citizens, is it not elear that the jurisdiction to enforce the obligations of the constitution in such cases ought to be confided to the national tribunai?”

To this I answer yes. But the jurisdiction of the national tribunal need not, in such cases as are suggested by the learned committee be made to depend on the residence of the parties. It is secured by that other and more comprehensive provision of the constitution, which extends the jurisdiction to all cases "arising under the constitution and laws of the United States." And in any case where there should be an actual denial of justice on account of the injured party's residence in another State an appeal or writ of error would lie to the Supreme Court of the United States. The denial of a constitutional right, raises a federal question. Ward v. Maryland, 12 Wall. R. 418; Guy v. Baltimore, 100 U. S. R. 434; Webber v. Virginia, 103 U.S. R. 344; Walling v. Michigan, 116 U. S. R. 446. The cases cited are those in which States have sought to discriminate against citizens of other States, but the Supreme Court of the United States has decided all such legislation to be void under the constitution. The question has generally, if not always, been brought into the supreme court by writ of

error to the State coart. These cases show the adequacy of the remedy by writ of error, and dispose of the argument that it is essential to the safety of the citizen that he should have the right to bring his action in or remove his suit to the federal court, if it is to be tried in a State of which he is not a citizen.

Congress has always exercised the right to limit the scope of the constitutional provision giving jurisdiction in cases between citizens of different States, by fixing the amount which must be involved, and by prescribing the time and manner for applying for the removal of causes from the State courts. From 1779 to 1887 the amount necessary to give jurisdiction was five hundred dollars. In the latter year it was raised to two thousand dollars. The right of congress to deny the federal courts jurisdiction over controversies between citizens of different States, when the amount involved is less than five hundred dollars or two thousand dollars, cannot be conceded if the letter of the constitution is to be insisted upon. The constitution makes no such limitation; nor does it in terms allow any limitation, but the power of congress to make a limitation has been recognized since the passage of the judiciary act in 1789, and can no longer be questioned. If this power exists, the exercise of it must be left to the discretion of congress, and the limitation can as well be fixed at twenty thousand dollars as at two thousand dollars. This leaves little to be said for the letter of the constitution as a guarantee of this right to the citizen.

Without going into the details of legislation on this subject, which can only weary without instructing the general reader, I will say that until the act of 1887 the amendments to the judiciary act of 1789, made from time to time by congress, and notably those made during and since the rebellion, tended uniformly in the direction of an enlargement of the jurisdiction of the federal courts. As a result of such legislation the small tide of litigation that formerly flowed in federal channels has swollen to a mighty stream, until now, much, if not most of the great litigation of the country is conducted in those courts. Dillon's Removal of Causes. The act of 1887 was the first step in the history of legislation on this subject, tending to curtail the federal jurisdiction. The writer has been assured by the clerks of the circuit courts of the several districts to whom he has applied that the act of 1887 changing the amount necessary to confer jurisdiction from five hundred to two thousand dollars, has reduced the number of cases to one-half.

I have attempted thus far to show that the only foundation for federal jurisdiction in controversies between citizens of different States, is in the letter of the constitution, and that congress has power, while adhering to the letter of the constitution, to limit such jurisdiction to cases of exceptional magnitude, or exceptional character, thereby reducing to a minimum the cases between

private parties over which the federal courts would have jurisdiction. I think it can safely be said that no substantial reason exists why the citizens of one State cannot, except in the extraordinary cases before referred to, secure impartial justice in the courts of any other State, and that no sensible man has any doubt on that point.

The objections to the federal courts having jurisdiction over purely private business in controversies between citizens of different States, solely on the ground of residence, are many and some of them serious. The limits of this article will only admit of a brief reference to a few of them.

1. The accumulation of business in the supreme court is largely due to such cases. Out of 300 cases argued and determined in that court during the year 1886, 155 were cases of a purely private character, which could as well have been tried in the State courts. In 1887 the number was 132 out out of 229. As we have seen the court is several

years behind, and unless some relief is afforded, it must soon happen that whoever has any litigation in the United States courts of sufficient magnitude to admit of an appeal to the supreme court will be sure of having something to leave to his heirs. To a plaintiff, whose all perhaps is bound up in such litigation, the delay is oppressive, and often times amounts to a total denial of justice

2. The volume of business makes it necessary to limit the causes in which an appeal or writ of error will lie to the supreme court to those involving considerable sums, at present five thousand dollars. The final determination of all causes involving a less amount is left to the circuit or district judge, without any opportunity for appeal. This is opposed to the practice and traditions of Anglo-Saxon justice. From the time of the Aula Regis to the present, the rule in civil cases, has been in England and in America, to give to every litigant who feels himself aggrieved by the judgment of an inferior court, the right of appeal to a superior. The reasons which underlie this almost universal rule are various, but aside from those which are so obvious as to require no mention, I will refer to but one. Chief Justice Jay, in his letter to President Washington, in relation to the powers and duties of the supreme court, then just inaugurated, used this language: "A celebrated writer has said that 'next to doing right, the great object in the administration of justice should be to give public satisfaction.'" The right of appeal secures, or helps to secure that end.

3. In exercising this jurisdiction in purely private litigation, the federal courts are, of course, administering the laws of the particular States in which the courts are held. The federal courts sitting in Illinois, must enforce the laws of that State in all purely private litigation; in Kansas, the laws of that State; in New York the .aws of that State. There are no other laws to be enforced. Congress has no authority, and has never assumed any, to pass laws that could

have any application to such litigation. At the outset the rule was laid down, that, in construing the laws in a particular State, the United States court would be guided by the rulings and decisions of the supreme court of that State. That was but natural and right, because the decisions of the court of last resort in a State are as much a part of the law as the common law or the statutes. But in time a substantial difficulty arose. The courts of the different States have not always followed the same line of reasoning from the same premises, and so have not always reached the same conclusions. On important questions, notably, some affecting the rights and liabilities of municipal corporations, and others which will readily occur to the profession, doctrines have grown up in different States, based upon judicial decisions, which are quite opposed to each other. When such questions reached' the Supreme Court of the United States it was forced to abandon the idea of following the decisions of the State courts in all cases, or else to decide the law of a case coming from one State to be so and so, and to be something different when a similar case came up from another State. A decent regard for consistency has driven the Supreme Court of the United States into conflict with the courts of some of the States. The inferior federal courts follow the supreme court, and so we have the anomaly of a man not being able to maintain an action in the State courts, which he will have no difficulty in maintaining if he will put himself in position to bring his action in the United States courts sitting in the same State, and supposed to be enforcing the laws of that State. This is a rock of offense. It approaches a judicial scandal.

4. The last objection which I shall consider is based upon the great extent of territory usually embraced within a judicial district, the consequent increase in the expense of litigation to the parties, and the dissatisfaction with which any man is drawn away from his home to contend for his rights among strangers.

In some of the newer and larger States the extent of country embraced within a single federal districtis equal to the whole of New England, while the places of holding court are hundreds of miles apart. When a citizen is sued in the United States court in one of these States, he is confronted with the alternative of allowing judgment to pass against him by default, or attempting a defense. But as either course will involve him in expenditures the extent of which may be ruinous, one alternative is as appalling as the other. So, likewise, if a citizen of one of the States is forced to bring a suit against a citizen of another State, for example an insurance company organized under the laws of another State, the almost certain removal of the cause by the company to the federal court, by which the plaintiff is forced to prosecute his claim in a distant part of the State, not infrequently results in serious hardship to him, and in some cases to a total denial of justice.

And here let me say, by way of parenthesis, is the secret of the removal. It is not because the insurance company, or other party, has any doubt of obtaining justice in the State court, that the cause is removed, but it is a rule in litigation, as in war, to harass the enemy, and if it can be discovered what the enemy wants done, not to do it. I think the observation of the profession will justify the statement, that if a man has a suit which he does not expect to try, but which he hopes to settle advantageously to himself, he is quite sure to want to commence in the United States court particularly if his opponent will be thereby inconvenienced. It is not that any one doubts the fairness of the States courts, or expects any undue advantage from the federal courts that these things are done, but because the popular dread that attends litigation in distant and unfamiliar tribunals, induces the settlement of even oppressive claims. While we will not stop here to quarrel with human nature for taking all the advantages known to legal strategy, it is the duty of the law-making power to secure the people from all needless burdens of litigation.

It is of the highest moment to the general government that it should not be suspected of fastening the unneccessary burdens upon the people. The strength of the federal union lies not so much in the power of the general government as in the cheerful obedience of the people. The maxim that that government is best which governs least, is especially true of a federal union. The object of a Union is not government. Government antedates union; existing governments unite "to secure domestic tranquility, provide for the common defense, and to promote the general welfare."

In a government like ours it is important that the unit of government should be near to the people, so as to quickly respond to the public will, and to be within easy reach of popular disapproval. The exactions and petty tyrannies of our local authorities, while they may harrass, do not alarm us, because of the assurance we feel, that we can, whenever we care to take the trouble, speedily get relief. But if the same burdens were laid upon us by some distant authority with which we felt ourselves unable to cope, we should feel borne down with them, and oppressed. It is this idea which underlies the commonly accepted American doctrine that so far as is possible, governmental agencies should be localized, and brought home to the people, where they can be easily seen and understood.

Among the instrumentalities of government which the citizen considers as belonging to the domain of local affairs is that of the courts. If compelled to resort to them for protection of his rights of person or property, he regards it for many reasons of the highest importance that such tribunals should be easy of access, and that they should be amenable to such influences as are not alien to him and his neighbors in their home and business life. It is one of the fundamental prin

ciples of the common law right of trial by jury that it should be drawn from the vicinage. By that is meant the neighborhood of the parties. It may as well be denied in form as to have it exercised in such a manner as to deprive the citizen of its essential principle.

To conclude, I think the jurisdiction of the federal courts over purely private controversies between citizens of different States, resting solely on the grounds of residence, ought to be done away by constitutional amendment. If not, then such jurisdiction should be so limited by law as to include only cases where the amount in controversy is large. I should find no fault with a local prejudice act, if provision was made in it for a fair hearing of both sides as on a motion for change of venue, before a cause should be brought in or removed to the federal court on the ground of local influence. In all cases of federal jurisdiction, an appeal or writ of error should lie to the supreme court. EDWARD CAHILL. Lansing, Mich.

Supreme Court of Rhode Island, Aug. 10, 1889. Upon the insolvency of a corporation its directors become trustees for the corporation creditors, hence they are prohibited from taking a mortgage on the corporate property to secure themselves for advances and for their indorsement of the notes of the corporation, in order to obtain priority over a creditor who had begun suit against the corporation for damages or personal injuries resulting from the negligence of such corporation, although such suit was still pending and undetermined at the time the mortgage was executed.

STINESS, J.: The complainants, judgment creditors of the Conanicut Land Company, seek to set aside a mortgage given to the defendants Lippitt, Davis, and Bradford to secure them for advances, and for their indorsements of the notes of the company. The mortgage was given immediately after the complainants had brought suits for damages against the company for negligence, and when the company was insolvent; the agreed statement of facts showing that it had not sufficient assets with which to discharge all its outstanding indebtedness were payment of the same to be demanded when due. Since then the complainants have levied executions on the property of the company. The complainants claim that, as the mortgagees are three of the four directors who voted to give the mortgage, thereby securing themselves, their action is so inconsistent with their fiduciary relation that it should be set aside. No fraudulent act in regard to the giving of the mortgage is alleged other than the fact itself, and, the case being submitted on bill, answer, and agreed facts as to the validity of the mortgage, we have the simple question whether

directors of an insolvent corporation are debarred in equity, by virtue of their positions, from preferring debts due to themselves. In so far as the mortgage is to be regarded as a mere preference, it is not contended that it is invalid. Except as limited by statute, the right of a debtor to prefer a part of his creditors has always been upheld in this State. Dockray v. Dockray, 2 R. I. 547; Elliott v. Benedict, 13 R. I. 463. The vital question is whether a director of an insolvent corporation is to be regarded as a trustee for its creditors. If he is so, the duty of a trustee to a cestui que trust is plain. For a trustee to collect his own debt, to the detriment of that of his cestui, is a clear breach of fidelity. When one accepts the trust of caring for another's interest, he accepts the attendant duty. It must be admitted that directors of a corporation are not technical trustees. They do not have, in themselves, the title to property which they hold for the benefit of others; and certainly as to creditors, they are under no express trust. The corporation is a legal being, distinct from its stockholders and officers. It may deal with them as individuals, and may owe them debts. It holds its own property, and has the capacity and responsibility of acting for itself. Nevertheless, the conduct of its affairs must, of necessity, be intrusted to officers in whom confidence is reposed, to whom large powers are given, and by whom its property is managed for the common benefit. As corporations have multiplied and have become so greatly concerned in business affairs in recent years, the obligations arising from such a relation have become correspondingly prominent. While the decisions in regard to this relation are not harmonious, it has been generally agreed that directors are trustees for stockholders. This being established, we think it follows naturally that, where the corporation becomes insolvent, and the stockholders have no longer a substantial interest in the property of the corporation, directors should be regarded as trustees of the creditors to whom the property of the corporation must go. If directors, with their office, assume the duty of caring for the interests of stockholders, why do they not also assume the duty, incidentally, of caring for the interest of those who, instead of the stockholders, may come to have claims upon the corporate property?

In speaking of directors as trustees for stockholders, Mr. Justice Miller, in Sawyer v. Hoag, 17 Wall. 610, calls this "a doctrine of modern date;" but as long ago as the time of Lord Hardwicke we find the duties and obligations of a director of a corporation thus clearly set forth: "I take the employment of a director to be of a mixed nature. It partakes of the nature of a public office, as it arises from the charter of the crown. But it cannot be said to be an employment affecting the public government. Therefore committee-men are most properly agents to those who employ them in this trust, and who empower them to direct and superintend the affairs

trust of this sort, a person is obliged to execute it with fidelity and reasonable diligence, and it is no excuse to say that they had no benefit from it, but that it was merely honorary; and therefore they are within the case of common trustees." Corporation v. Sutton, 2 Atk 400. To the effect that officers of a corporation are trustees for stockholders, see Hodges v. Screw Co., 1 R. I. 312; Hoyle v. Railroad Co., 54 N. Y. 314; Koehler v. Iron Co., 2 Black, 715; Railway Co. v. Hudson, 16 Beav. 485, 19 Eng. Law & Eq. 361; Railway Co. v. Magnay, 25 Beav. 586; Hope v. Salt Co., 25 W. Va. 789. Indeed, no cases that we know of deny a fiduciary relation of directors to stockholders, however they may differ in the use of terms to describe it. This relation has led logically to the conclusion that, in case of insolvency, the assets of the corporation being no longer held for the benefit of stockholders, but for the benefit of creditors, the directors owe to the creditors the duty of a trustee. This duty is clearly stated by Clifford, J., in Bradley v, Converse, 4 Cliff. 375; Assets of an incorporate company are regarded in equity as held in trust for the payment of the debts of the corporation, and courts of equity will enforce the execution of such trusts in favor of creditors, even when the matter in controversy may not be cognizable in a court of law. Such assets are usually controlled and managed by directors or trustees, but courts of equity will not permit such managers, in dealing with the trust-estate, in the exercise of the powers of their trust to obtain any undue advantage for themselves, to the injury or prejudice of those for whom they are acting in a fiducrary relation. Exact equality of benefit may be enjoyed, but the trustees are forbidden to protect, indemnify, or pay themselves at the expense of those who are similarly in relation to the same fund." To the same effect are Bradley v. Farwell, i Holmes, 433; Jackson v. Ludeling, 21 Wall. 616; Corbett v. Woodward, 5 Sawy. 403; Stout v. Milling Co., 13 Fed. Rep. 802; Haywood v. Lumber Co., 64 Wis. 639, 26 N. W. Rep. 184; Richards v. Insurance Co., 43 N. H. 263; Railroad Co. v. Bee, 48 Cal, 398, Hopkins' Appeal, 90 Pa. St. 69; Improvement Co. v. Terrell, L. R. 20 Eq. 168. Of the cases cited by the defendants, only three fully sustained their claim that, as creditors of the company, directors may, in the absence of fraud, secure themselves for their own debt, viz,, Burr's Ex'r v. McDonald, 3 Grat. 216; Bank v. Whittle, 78 Va. 737; Garett v. Plow Co., 70 Iowa, 697, 29 N. W. Rep. 395. In the case of Railroad Co. v. Claghorn, 1 Speer, Eq. 545-562, frequently cited upon this point, the mortgage in question was not given to nor was the suit brought against, directors, neither did the court find that the company was insolvent when the mortgage was given. The case depended mainly on a statute. In Stratton v. Allen, 16 N. J. Eq. 229, 232, the court expressed no opinion upon the point taken that the defendant was a trustee by virtue of his office as

director; but did hold that he was not entitled to priority, but must share proportionately with other creditors. This case also depended upon a statute. In Buell v. Buckingham, 16 Iowa. 284, Judge Cole states there was no evidence that the company was insolvent. Judge Dillon concedes that directors are trustees for stockholders, and treats the case as a sale, voidable between trustee and cestui que trust, to which a subsequent attaching creditor, having no lien upon the property at the time, could not make objection. Garrett v. Plow Co. depended upon this and other cases in Iowa, which had followed its apparent doctrine. In Burr's Ex'r v. McDonald the question was not discussed upon principle or authority. In Bank v. Whittle the question was elaborately discussed. The cases upon which the court relied were Railroad Co. v. Claghorn, Stratton v. Allen, and Buell v. Buckingham, to which we have referred. Also, Ashurst's Appeal, 60 Pa. St. 290, which was a suit by stockholders, denied on account of laches and absence of fraud, the court saying: "Creditors could have avoided what was done, but the complainants are not claiming as ereditors, or through creditors." Smith v. Skeary, 47 Conn. 47, in which the company was supposed to be solvent at the time of the transaction complained of. Also, Gordon v. Preston, 1 Watts, 385; Whitwell v. Warner, 20 Vt. 425; and Sargent v. Webster, 13 Metc. 497,-in neither of which cases was this subject treated of at length, or as an important element of the case.

We think the weight of recent authority regards directors of an insolvent corporation as trustees for creditors, and that this authority stands upon the better reason. If, as Judge Dillon said, the right to collect a debt is "a race of diligence," open alike to both, it must be admitted that it is a race in which the outside creditor is unduly handicapped. The parties do not contend upon an equal footing; and although it is said that the director has only an advantage which results from his position, and which is known to all who deal with the corporation, yet no one would say that an ordinary trustee should be entitled to an unequal start with bis cestui by means of information received in the discharge of his trust. If, then, the director be a trustee, or on who holds a fiduciary relation to the creditors, in case of insolvency he cannot take advantage of his position for his own benefit, to their loss. The right of the creditor does not depend upon fraud or no fraud, but upon the fiduciary relation.

It is claimed by the defendants that it was agreed they should have security, before the company became insolvent, and that this mortgage was given pursuant to such agreement. We do not think this claim is supported. The answer sets out that in January, 1874, the stockholders authorized the treasurer to execute a mortgage to secure certain directors who indorsed the notes of the company; but nothing was done under t his vote. November 22, 1877, the stockholders

again voted a mortgage to secure three directors and indorsers in a sum not exceeding $30,000, which mortgage was given. December 4, 1880, in order to rise from a stranger a new loan of $15,000 upon mortgage which was to be a first lien upon the property of the company, the directors, two of whom were persons not now directors or parties to this suit, canceled and discharged their mortgage upon the agreement for new security as aforsaid. This loan was increased in January, 1884, to $23,000, and a new mortgage given. It is not shown, however, that the company made such an agreement. No vote of the company is recited or put in evidence. The directors had no authority under the by-laws to make such an agreement, and it does not appear what would have been the total amount of indebtedness. If the proceeds of the new mortgage paid all the debts of the company, there was nothing due the directors, and their mortgage was properly discharged, with no occasion for such an agreement. If they still held debts, such debts, may have gone above the limit placed in the resolution. But however this may have been, no mortgage was given or demanded during a period of about eight years. In January, 1884, the company adopted by-laws which gave the directors full power to mortgage, the corporate property; but for more than four years after this, no demand for a mortgage was made, nor did the directors vote to give one. In the absence of an express agreement, we think the directors had no right, after they became aware of the unprofitable and disastrous state of the affairs of the company, to appropriate its entire property to secure themselves. But they say the complainants were not creditors whose rights they could consider at the time of the mortgage. True, they had not reduced their claims to judgment but the claims existed, and the defendants had notice of them by the commencement of suits. As trustees for creditors, we think the directors were as much bound to care for those who had given them notice of their claims by suits, in case they should succeed in obtaining judgments, as for those whose claims had been already ascertained. Their action was taken with full knowledge that these claims might ripen into judgments entitled to payment from the property of the company. We fail to see that it was any less the duty of the directors to protect these liabilities of the company than those arising upon contracts which the holders were not prosecuting to judgment. If it be said there is a difference, because of a presumption that contracts are made upon the trust and confidence reposed in the directors, it may also be presumed that, with equal trust and confidence in them, the complainants became guests of the hotel, assumed that, they would not, through negligence, allow it to become dangerous to life and health. Our conclusion is that, in view of the fiduciary relation of the directors to the creditors of the company, they are not entitled to priority