state of West Virginia the lien of the two trust deeds set up in the petition of Allebach and Mohler, trustees, was bona fide and not preferential, and under the law of the state of West Virginia said trustees and their cestui que trust were entitled to their remedy by foreclosure by notice of sale, which notice was published before the petition in bankruptcy was filed, and matured before a trustee for said bankrupt was elected, and for the further reason that, under section 67d of the Bankruptcy Act, said lien of said trust deed and the remedy for the foreclosure of same are fixed rights, in no manner affected or avoided by the filing of a petition in bankruptcy by H. G. Nicholson, and the adjudication that he was bankrupt, for the reason that said order was entered ex parte, and without notice or opportunity to be heard to Allebach and Mohler, trustees."

From the specification of error it appears that the appellant's case is predicated on the fact that (a) the referee in bankruptcy could not grant an ex parte injunction without notice; (b) that under the deeds of trust, in which appellants were named as trustees, the beneficiaries whose debts were bona fide, and not preferential, were entitled under the laws of West Virginia to a remedy by foreclosure by mere notice of sale; (c) and that in advance of the bankruptcy proceedings, having given notice of the proposed sales under the deeds of trust, they were entitled to that remedy, which was a fixed right, and in no manner affected or to be avoided by the bankruptcy proceedings.

As viewed by the court, none of these positions taken by the appellants is meritorious. On the contrary, they are wholly at variance with the provisions of the Bankruptcy Act, and the methods of disposition of property thereunder, in the due administration of bankrupts' estates.

[1,2] The facts are briefly these: The bankrupt was the owner of two pieces of real estate, referred to as the Raviana property and the Bradford street property, each located in the city of Charleston, W. Va. That upon the first piece of property there was a deed of trust dated 2d day of November, 1923, given to secure $8,000, evidenced by 29 semiannual installments of $240 each, beginning September 1, 1924, the final payment to be March 1, 1939, with interest from date. It was provided, after default in payment of any installment of any one note, or any installment of interest, that the entire debt should become due. That at the time of the proposed sale there had been default in the payment of two notes of $240 each, due Sep

tember 1, 1925, and 1st of March, 1926. Upon the Bradford street property there was a deed of trust, dated 11th of October, 1923, to secure an indebtedness of $6,000, payable in 29 semiannual payments of $180 each, beginning with the 1st day of September, 1924, and ending with March 1, 1939, and providing that, upon default in the payment of any installment, the entire indebtedness became due, and that at the time of the proposed sale there was default in the payment of two notes, of $180 each, dated respectively September 1, 1925, and March 1, 1926. That several days prior to the time of the proposed sale under the deeds of trust aforesaid, the bankruptcy proceedings having been inaugurated, certain creditors of the bankrupt filed their petitions in the bankruptcy proceedings, asking that the sales be enjoined, averring, among other things, that they would result in a sacrifice of the property. Subsequently, the adjudication in bankruptcy having been made and a trustee in bankruptcy duly chosen, he filed his petition, joining in the request to enjoin the sales of the property.

The question of the precise amounts due is not entirely clear from the record, but it is true that appellants, on the one hand, insist that there is no equity over and above the amounts of the liens on the property; whereas, other creditors, and the bankrupt's trustee, insist that there is a large equity, certainly in one of the parcels of land. Appellants aver that, in anticipation of the sale, they made diligent endeavor to find purchasers for the properties by private inquiry, and had assurances from prospective bidders that bona fide bids would be made by solvent and responsible parties at the sale, in an amount sufficient to pay the liens of approximately $15,000 for the Riviana lot and $16,000 for the Bradford street lot, which represented the fair market values of the properties. On the other hand, petitioning creditors and the trustee in bankruptcy claimed that the properties were worth $48,000. These differences in views as to the values of the properties of the bankrupt are not uncommon, and arise most frequently at the very juncture, and between the same parties as here, viz. those who represent special creditors or lienors, on the one hand, and the general creditors, or the trustee in bankruptcy, who speaks for general creditors and the bankrupt, on the other, and show in many instances, as in this one, why the injunctive relief asked for and afforded is the safer and wiser course to adopt. Of course, absolute certainty as to values at this stage and as to the outcome, cannot be forecast, as it depends upon many considera

tions; but the method affords reasonable time and full opportunity to those in interest to be heard.

Just to whom shall be delegated the power to sell the property depends upon many considerations. Preferentially, as between the bankrupt's trustee and the trustees in the deeds of trust executed by the debtor in advance of the bankruptcy, where an equity is believed to exist, the choice would be with the bankrupt's trustee, as he is assumed to be impartial, and representative of the bankrupt, lienors, and creditors alike; whereas, the trustees in deeds of trust are alone interested in the protection of the beneficiaries named in their several liens. This entire subject, however, is one solely within the discretion of the bankruptcy court, and it may adopt one of several courses in disposing of the property, best suited to the circumstances of the particular situation, and which it is believed will yield for those interested the best results. [3] The theory of the appellants and petitioners for review is that they have been deprived by the action of the court of some contractual right in respect to their debts, and the security taken for payment of the same. This, however, is an entire misconception of the effect of the Bankruptcy Law, which in plain terms provides that the bankruptcy proceedings shall not affect the validity of the lien; but it nowhere says that this fact shall in any manner affect the remedy to enforce the lienor's rights. The remedy may be altered, without impairing the obligations of the contract, so long as an equally adequate remedy is afforded.

This has been the almost universally accepted interpretation of the Bankruptcy Act since its passage, and it will only be necessary to review one or two of the leading and especially instructive decisions on the subject. An early case was In re Jersey Island Packing Co. (C. C. A.) 138 F. 625, 2 L. R. A. (N. S.) 560, a decision of the Circuit Court of Appeals for the Ninth Circuit, in which the court, speaking through its presiding officer, Judge Gilbert, at page 627, said:

"The trustee in bankruptcy has the election to refuse to take possession of mortgaged property, if its value, over and above the incumbrance, is not sufficient to justify an attempt to administer it. It is true that the bankruptcy act provides that liens such as the lienholders had under the trust deeds in this case shall not be affected by bankruptcy, but that is far from saying that such lienholders may, after the commencement of proceedings in bankruptcy against the debtor, proceed to enforce their liens or contracts in the manner

prescribed in the instruments which create them; and this is true whether such lien is an ordinary mortgage or a deed of trust with provision for a strict foreclosure by a notice and sale. The provision of the Bankruptcy Act that such a lien shall not be affected by the bankruptcy proceedings has reference only to the validity of the lienholder's contract. It does not have reference to his remedy to enforce his right. The remedy may be altered without impairing the obligation of his contract, so long as an equally efficient and adequate remedy is substituted. Every one who takes a mortgage, or deed of trust intended as a mortgage, takes it subject to the contingency that proceedings in bankruptcy against his mortgagor may deprive him of the specific remedy which is provided for in his contract."

In re Hasie, 206 F. 789, a decision of Judge Meeks, of the Northern District of Texas, at Dallas, will be found a full and comprehensive review of the entire subject, with the authorities bearing thereon, and the still later case of In re North Star Ice & Coal Co., 252 F. 301, a decision by District Judge (now Mr. Justice Sanford of the Supreme Court) will also be found an able discussion of the subject.

Considering who should make sale of the bankrupt's property, this court, in a comparatively recent case said:

"The order of the court below directing a sale of the property clear of all liens, claims, and incumbrances was, under the circumstances, a wise exercise of judicial discretion, being such action as the bankrupt act contemplates and provides for in those instances where the nature and location of the property makes it desirable, in the interest of the creditors, that the same be sold as soon as practicable. The act does not require that such sales shall be made by the trustee in bankruptcy, and while ordinarily it will likely be best and more convenient that such official conduct such sales, still there are doubtless many cases in bankruptcy where it is entirely proper for the court to exercise its undoubted right to designate the officer it wishes to conduct the sale it is authorizing; such designation being other than the trustee. There is nothing in the record before us indicating that the court below, in appointing its commissioners of sale, exercised its discretion improvidently, thereby militating against the interests of either the bankrupt or the creditors. This contention is without merit." President Goff, speaking for the court at page 3, in Sturgiss v. Corbin, 141 F. 1.

This would seem to be conclusive of the

subject as far as the courts of this circuit are concerned. The decision on No. 2566 will be affirmed, and No. 2568 will be dismissed; appellants and petitioners to pay costs in each

case.

Case No. 2566, affirmed. Case No. 2568, dismissed.

WOODS et al. v. FIRST NAT. BANK OF ALBUQUERQUE, N. M.

(Circuit Court of Appeals, Ninth Circuit. November 15, 1926. On Petition for Rehearing, January 31, 1927.)

No. 4873.

1. Courts 323-Assignee of chose In action, Invoking federal court's jurisdiction on ground of diversity, must affirmatively show requisite diversity, and, on failure to do so, court must declare lack of Jurisdiction on its own motion (Judicial Code, §§ 24, 2740 [Comp. St. §§ 991, 1251c]).

Where federal court's jurisdiction is invoked, under Judicial Code, § 24 (Comp. St. § 991), by assignee of chose in action, on ground of diversity of citizenship, record must affirmatively show requisite diversity, and, on failure to do so, court, if necessary, must declare lack of jurisdiction on its own motion, rule not being changed by section 274c (Comp. St. § 1251c).

2. Courts-323.

If complaint by assignee of chose of action under Judicial Code, § 24 (Comp. St. § 991), does not allege necessary jurisdictional facts by reason of diversity of citizenship, burden is not shifted to defendant to show negatively that jurisdiction does not exist.

3. Courts 322 (2).

Under Judicial Code, § 24 (Comp. St. § 991), allegation that plaintiff's assignor of chose in action was a corporation of certain county of state held insufficient to show requisite diversity of citizenship.

4. Mortgages 427(1).

Owner of equity of redemption is necessary party to suit to foreclose mortgage.

5. Executors and administrators 439-Mort gages427(3).

Generally, heirs and devisees of mortgagor having equity of redemption at time of death are necessary parties to foreclosure, although

executors and administrators are not.

On Petition for Rehearing.

8. Courts 405 (16)-Certiorari for diminu tion of record is allowable only for surprise or excusable neglect.

Application for certiorari for diminution of record should only be granted in case of surprise or excusable neglect.

9. Courts 356-Certiorari for diminution of record will not be allowed to correct defect questioned in lower court (equity rule 75).

Where jurisdiction dependent on citizenship of parties was properly challenged in trial court, and not withstanding challenge appellee permitted case to be heard on appeal, without attempt to supply defects in record, application for certiorari for diminution of record will not be granted, particularly where statement of evidence was not prepared by trial judge, as required by equity rule 75.

Appeal from the District Court of the United States for the District of Arizona; F. C. Jacobs, Judge.

Suit by the First National Bank of Albuquerque, N. M., against Chauncey Woods, individually and as executor of the estate of Joseph F. Woods, deceased, and Rowena Woods, guardian of Joseph Huston Woods, an infant, and another. Decree for plaintiff, and defendants named appeal. Reversed, with directions.

C. H. Jordan, of Holbrook, Ariz., and Armstrong, Lewis & Kramer, of Phoenix, Ariz., for appellants.

A. H. Favour and A. G. Baker, both of Prescott, Ariz., for appellee.

Before GILBERT and RUDKIN, Circuit Judges, and NETERER, District Judge.

RUDKIN, Circuit Judge. This was a suit to foreclose a mortgage on certain real property in the state of Arizona. The parties to the mortgage were Joseph F. Woods, mortgagor, and Holbrook State Bank, mortgagee. The complaint contains no averment as to the citizenship of either party, aside from a recital in the mortgage that the mortgagor was "of Holbrook, of the county of Navajo, state of Arizona," and the mortgagee, "a corporation, of Holbrook, Navajo county, Ariz." The mortgagor died November 7, 1923, leaving a last will and testament, which was admitted to probate on January 21, 1924, and Chauncey Woods was appointed executor thereof. The beneficiaries under the will are Chauncey Woods and Joseph Huston Woods, an infant for whom Rowena Woods is guardian.

The parties to the present suit are the First National Bank of Albuquerque, plaintiff, and Chauncey Woods, individually and

as executor of the estate of Joseph F. Woods, deceased, Rowena Woods, guardian of Joseph Huston Woods, an infant, and Jesse S. Hulet, receiver of the Holbrook Bank in liquidation, defendants. The complaint avers that the plaintiff is a corporation organized and existing under the laws of the United States and is a citizen of the state of New Mexico; that the defendant Chauncey Woods, individually and as executor of the estate of Joseph F. Woods, deceased, is a citizen of the state of California; that Rowena Woods, guardian of Joseph Huston Woods, is a citizen of the state of Arizona; that Hulet, receiver of the Holbrook Bank in liquidation, is a citizen of the state of Arizona; and the citizenship of Joseph Huston Woods, one of the devisees, is not stated. A part of the relief sought was that the defendants, all and several, and all persons claiming through or under them, either as purchasers, mortgagees, or otherwise, be barred and forever foreclosed of all right, claim, interest, or equity of redemption in said real property or any part thereof, and such was the relief granted by the final decree.

A motion to dismiss was interposed for want of jurisdiction; the motion was denied, and a final decree was entered in accordance with the prayer of the complaint. From that decree the defendants, other than Hulet, have appealed, and the jurisdiction of the court below to entertain the suit is the sole question presented for decision.

Section 24 of the Judicial Code (Comp. St. § 991) provides: "No District Court shall have cognizance of any suit (except upon foreign bills of exchange) to recover upon any promissory note or other chose in action in favor of any assignee, or of any subsequent holder if such instrument be payable to bearer and be not made by any corporation, unless such suit might have been prosecuted in such court to recover upon said note or other chose in action if no assignment had been made."

[1, 2] The present suit was instituted by an assignee of a mortgage, and the jurisdiction of the court below is limited by the above provision. Counsel for the appellee earnest ly contend that no exception was reserved to the order denying the motion to dismiss, and that, inasmuch as the entire record has not been brought here, this court cannot presume error in the denial of the motion. But this contention entirely ignores the nature of the jurisdiction of the courts of the United States. In Anderson v. Watt, 138 U. S. 694, 11 S. Ct. 449, 34 L. Ed. 1078, the court declared that it has been the constant effort of

Congress and of the Supreme Court to prevent a discrimination in respect to suits between citizens of the same state and suits between citizens of different states, established by the Constitution and laws of the United States from being evaded by bringing into the federal courts controversies between citizens of the same state; that the jurisdiction of the federal courts is limited, in the sense that they have none, except that conferred by the Constitution and laws of the United States; that there is a presumption that a cause is without their jurisdiction unless the contrary affirmatively appears; that it is essential, in cases where jurisdiction depends upon the citizenship of the parties, that such citizenship, or the facts which in legal intendment constitute it, should be distinctively and positively averred in the pleadings, or should appear affirmatively or with equal distinctness in other parts of the record; that it is not sufficient that jurisdiction may be inferred argumentatively from the averments, nor to aver that the parties are residents of different states, or that a party was a citizen or resident holding his fixed and permanent domicile in a certain place, and that the inquiry is determined by the condition of the parties at the commencement of the suit.

In Metcalf v. Watertown, 128 U. S. 586, 9 S. Ct. 173, 32 L. Ed. 543, it was held that a failure of the record to show of what state the assignors of the plaintiff were citizens is fatal to the jurisdiction. In Brock v. Northwestern Fuel Co., 130 U. S. 341, 9 S. Ct. 552, 32 L. Ed. 905, an action was brought by a Minnesota corporation, a citizen of that state, against a citizen of Iowa on a contract assigned to the plaintiff by the What Cheer Land & Coal Company, a corporation "alleged to be doing business in the state of Iowa," and it was held that the allegation that the assignor was doing business in the state of Iowa did not necessarily import that it was created by the laws of that state.

By these decisions and many others that might be cited it is well settled that where the jurisdiction of a District Court of the United States is invoked by the assignee of a chose in action, on the ground of diversity of citizenship, the record must show affirmatively that the requisite diversity of citizenship existed between the assignor and the adverse parties at the commencement of the suit, and if it fails to do so jurisdiction is lacking and it is the duty of the courts to so declare of their own motion if need be. Nor is this rule changed by section 274c of the Judicial Code (Comp. St. § 1251c). That section provides for amendments at any stage of the proceed

ings for the purpose of showing the requisite diversity of citizenship where such diversity exists in fact though not properly pleaded. But, notwithstanding the amendment, the presumption is still against jurisdiction, and it is still incumbent upon the party invoking it to make the jurisdictional facts appear. And if the complaint does not allege the necessary jurisdictional facts the burden is not shifted to the defendant or defendants to show negatively that jurisdiction does not exist.

[3] Applying these rules to the case at bar, there is no allegation in the complaint that the assignor of the appellee was a corporation, or a corporation of any particular state, and the mere recital in the mortgage that it was a corporation of a certain county of a state falls far short of satisfying the rule, laid down by the Supreme Court in Anderson v. Watt, supra, that "such citizenship, or the facts which in legal intendment constitute it, should be distinctively and positively averred in the pleadings, or should appear affirmatively with equal distinctness in other parts of the record. It is not sufficient that jurisdiction may be inferred argumentatively from the averments." The recital in the mortgage that the assignor was a corporation of a certain county and state means nothing more, at best, than an averment or recital that it was doing business there, and this was declared insufficient in Brock v. Northwestern Fuel Co., supra.

[4, 5] Again, if we look to the citizenship of the defendants alone, the question is not free from difficulty. The cases are uniform in holding that the owner of the equity of redemption is a necessary party to a suit to foreclose a mortgage. Wiltsie on Mortgage Foreclosure, § 147. It is likewise the general rule that the heirs and devisees of a mortgagor who was the owner of the equity of redemption at the time of his death are necessary parties, and that executors and administrators are not. Id. §§ 161, 163, and 165. In some states it is provided by statute that such suits may be brought against the personal representative alone, but what the law of the state of Arizona is we are not advised.

Counsel for the appellants assume, without argument or citation of authority, that all parties named in the record were necessary parties defendant, while counsel for the appellee assume, in like manner, that the personal representative is the only necessary party In Bennet v. United States Land, Title & Legacy Co., 16 Ariz. 138, 141 P. 717, the Supreme Court of Arizona said: "In the strictest sense the only necessary parties to a

foreclosure suit are the mortgagee, the mort. gagor, and those who have acquired interests in the premises subsequent to the mortgage." [6,7] In view of the state of the record, we will not discuss this question further. If devisees are necessary parties to a foreclosure suit under the laws of Arizona, a failure of the complaint to show the citizenship of one of the devisees would be fatal to the jurisdiction. It is no answer to say that such devisee was not made a party, because a plaintiff cannot avoid the jurisdictional objection by omitting a necessary and indispensable party, whose presence would defeat jurisdiction.

The decree of the court below is reversed, with instructions to sustain the motion to dismiss and to dismiss the suit, unless by amendment a case is made within its jurisdiction.

Opinion on Petition for Rehearing.

[8, 9] The appellee has filed a petition for a rehearing in this case, accompanied by a motion for certiorari to bring up the testimony taken at the trial to show the citizenship of the assignor of the appellee. For the purposes of the petition and motion we will assume that the executor was the only necessary party defendant in the court below, and that that court had jurisdiction of the controversy and of the parties, provided the assignor of the plaintiff was a citizen of the state of Arizona, and provided, further, the remaining defendants, who are citizens of the state of Arizona, are dismissed from the case.

In

There are two objections to the motion for certiorari for diminution of the record. the first place, the practice of allowing such motions after final judgment in this court is not to be commended, and the application should only be granted in case of surprise or excusable neglect. Here the jurisdiction of the court below was challenged at the threshold by a timely motion to dismiss, but notwithstanding the challenge the appellee proceeded to final decree, not only against the executor, but against citizens of Arizona as well, over whom the court confessedly had no jurisdiction.

The attention of the appellee was again challenged to the jurisdictional defects in the record by the assignments of error; the only assignment being based upon the ground that the complaint did not aver the citizenship of the assignor. Again, notwithstanding this challenge, the appellee permitted the case to be heard in this court without any attempt to supply the defects in the record, relying upon the unwarranted assumption that the bur