Oct. 9, 1869." A. F. Smith & Co. sold and shipped off the wheat after it had been put in their elevator, and failed before the time-drafts fell due, which were duly protested for non-payment, and have never been paid. The Milwaukee Bank sued the City Bank to recever their loss on the drafts, on the ground that the City Bank had delivered the wheat to Smith & Co. before the drafts were paid. contrary to the instructions which accompanied the drafts and the bills of lading. The case was tried before a jury, and all the evidence is embodied in the bill of exceptions, and on the ease, as there made, the court instructed the jury to find a verdict for defendant, which was done. It is this instruction which is assigned for error. The City Bank, in receiving the drafts and bills of lading in letters which instructed it to deliver the wheat to A. F. Smith & Co., on payment of the drafts, and acknowledging the receipt of these drafts, became the agent of the Milwaukee Bank in the business which it had undertaken. Whatever obligation might, under other circumstances, be imposed on the bank by its consent to receive the drafts and bills of lading, it, in the present case, received them with instructions which the bills of lading empowered it to execute, namely, to control the possession of the wheat until the drafts on Smith & Co. were paid. In acknowledging the receipt of these papers the cashier says: "We prefer, after this, not to receive B L (meaning bill of lading) when we have to look after the property." This is an implied admission that they were to look after the property, and would do so in the case to which the letters related. The bank also undertook to discharge this duty when the masters of the vessels, presenting themselves and cargo to the cashier of the bank for delivery, were directed by him in writing to the Corn Exchange Elevator. It, therefore, undertook to discharge a duty as agent of the Milwaukee Bank in regard to the custody of the wheat, under instructions that it should deliver it to Smith & Co. on payment of the drafts. There is evidence tending to show that the Oswego Bank, in its account with the Milwaukee Bank, made an additional charge or percentage for their trouble beyond the customary charge for collecting and remitting proceeds of the drafts. So that it undertook a duty for which it received and intended to exact compensation. What, then, is the measure of its obligation as such agent to the plaintiff bank? We suppose that there can be no question that it should use due care and diligence in performing the task which it had set itself to do. One of the clear duties of an agent under such circumstances, is to obey instructions, if they can be obeyed by a reasonable exercise of diligence and care. We think the instructions in this case clearly implied that the bank, which by bill of lading was invested with the full right to the possession of the wheat, should not deliver it to A. F. Smith & Co., except upon payment of the drafts-that is, of all the drafts drawn against each cargo of wheat. The reasons for this are

very plain. The wheat had been bought by Mower, Church & Bell in Milwaukee for A. F. Smith & Co., but they had to raise the money to pay for it by drafts on the latter. These drafts could only be negotiated by placing the control of the wheat in the hands of the purchasers of the drafts as security for their payment. The sightdrafts were paid by Smith & Co. when the wheat arrived in Oswego. They had thus paid that much money on the purchase. There remained unpaid, however, the time-drafts, and the instruction of the Milwaukee Bank to its agent, the City Bank, was not to part with the possession and control of this wheat to Smith & Co. until those drafts were paid. It was the only security the bank had for their payment, and it was ample.

As we have already said, A. F. Smith & Co., were the owners and managers of the Corn Exchange Elevator. It is proved that the officers of the bank knew this. The cashier of the City Bank, therefore, knew that when he made the order on the bills of lading for the delivery of the wheat to the Corn Exchange Elevator, he was ordering its delivery to A. F. Smith & Co. It was by reason of this delivery and the failure of Smith & Co., that the amount of the drafts was lost to plaintiff. Did the defendant bank, therefore, under the circumstances of the case, exercise due care and diligence in storing this wheat in the Corn Exchange Elevator? The judge took this question from the jury and decided it in favor of defendant. We are of opinion that in this the court erred. We do not decide here that the defendant bank was negligent. We think there was evidence on which that question should have been left to the jury. We think it should still be left to a jury. It was said, in answer to this view of the subject, that the bank had no warehouse or other place of its own in which to store the wheat, and that this was known to the Milwaukee Bank, which must, therefore, have known that the City Bank would be compelled to store it with some one until the drafts, which had some time to run, should be paid. That Smith & Co. were supposed to be safe and solvent men engaged in that business, of good reputation, and that all wheat received under such circumstances in Oswego, was deposited in elevators. These are circumstances for the jury to consider. On the other hand, it is to be said that there were other elevators in Oswego, not owned by Smith & Co., ready to receive the wheat. To some of these it could have been delivered without danger of complicating the possession as bailee, with possession under claim of ownership. Aud this is important, for there are laws making the embezzlement of property, when held as bailee by warehousemen and elevators, a criminal offense. It would be more difficult to convict Smith & Co. of embezzlement for selling this wheat when it had been bought for them, part of the money paid for it by them, and when they had accepted negotiable drafts for the remainder of the purchase

money, and when, in fact, it was their property, subject only to the payment of their outstanding drafts. Was it acting with ordinary prudence to hazard the security which possession of the wheat gave, by delivering it to the very party to whom his principal had directed him not to deliver it? It further appears that the defendant bank took no receipt from Smith & Co., showing that they held it as bailees, but left that to stand on the indorsement they made on the bills of lading in the hands of the masters of the vessels, and a simple acknowledgment of the receipt of the wheat by A. F. Smith & Co., on the same bills of lading. One of the firm of Smith & Co., swears that no warehouse receipt was given. There was a plain course to be pursued, which involved no difficulty or trouble, namely, storing the wheat in some other elevator or warehouse until A. F. Smith & Co., on payment of the acceptances, should call for it. This course would not have involved a departure from their instruction not to deliver to Smith & Co. until the drafts were paid, and would have saved all parties from loss. Some question is nade in the argument as to the effect of proceedings taken by the plaintiff to recover the wheat or its value of the parties who bought or received it from A. F. Smith & Co. It is only necessary to say, if the jury shall be of the opinion that the defendant was negligent in delivering the wheat to A. F, Smith & Co., it is responsible to plaintiff for the amount of the unpaid drafts, less any sum not actually recovered from others.

Without further comment, we are of opinion that there was evidence of negligence or want of due care on the part of defendant, which, taken in connection with the positive instruction of the plaintiff, should have been submitted to the jury. The judgment of the circuit court is, therefore, reversed, with instructions to grant a new trial.

REMOVAL OF CAUSES-AMOUNT IN CONTROVERSY-COUNTERCLAIM.

FALLS WIRE MANF. CO. V. BRODERICK.

Circuit Court of the United States, for the Eastern

District of Missouri, March, 1881.

Under the Act of Congress of March 3, 1875, granting the right of removal from the State courts in certain causes, where tho amount involved is more than $500, the question of what is the amount involved is to be determined from the plaintiff's demand, and not from a counterclaim filed by defendant prior to application for removal.

On motion to remand.

Louis R. Tatum, for the plaintift; Noble & Orrick, for the defendant.

TREAT, J., delivered the opinion of the court: The plaintiff, an Ohio corporation, brought suit

in the State circuit court for less than three hundred dollars, the defendants being citizens of Missouri. The defendants appeared (Feb. 8) and filed an answer and counterclaim. The counterclaim is based on an alleged contract in writing, for the non-performance of which the defendants have sustained damages (unliquidated) in the sum of $1,000. No written contract was filed, or profert thereof made. On the following day, the defendants filed a petition for the removal of the cause to this court. Under the Act of March 3, 1875, the defendants, thongh citizens of Missouri, had a right to the removal, the plaintiff being a citizen of another State; provided the amount in dispute exceeds $500. The plaintiff claims less than $500, but the defendants, by way of counterclaim, demand $1,000. The Missouri statute requires that the written contract on which such counterclaim is based should be filed, and under the more recent decisions of the Supreme Court of Missouri, if not filed, a motion to dismiss, etc., would lie. But the defendants having filed their answer and counterclaim on February 8, but not the written contract, appeared next day, February 9, with petition, etc., for removal to this court, an order for which was duly granted. The act of 1875 provides for the removal of a civil suit "where the matter in dispute exceeds, exclusive of costs, the sum or value of $500" in which there shall be a controversy between citizens of different States." Hence the parties are within its terms as to citizenship. Are they as to the amount in dispute? Judge Blatchford has recently held (Clarkson v. Manson), in a case similar to this, that, although the plaintiff's demand was for less than $500, yet as the defendant's counterclaim for judgment over, was for more than $500, the cause was removable. If that be a true interpretation of the act, the door for renovals is wide open, whenever a defendant, for purposes of delay, or otherwise, chooses to interpose a counterclaim for more than the prescribed sum; thus drawing into United States courts the trial, through the device of a counterclaim, of any cause in which the amount claimed by plaintiff, although less than $500, is to be determined. It may be, on the other hand, that the original demand in the State court is for a small sum, while the real dispute involves thousands of dollars. How shall a United States court avoid fraud on its jurisdiction on one hand, and preserve the just right of removal on the other? Must it await the final outcome, and then render judgment as the facts may require, pursuant to the terms of section 5 of the act of 1875, by remanding or dismissing?

An important inquiry in this case arises under sec. 6 of said act, viz.: "That the Circuit Court of the United States shall, in all suits removed under the provisions of this act, proceed therein, as if the suit had been originally cominenced in said circuit court, and the same proceedings had been taken in such suit in said circuit court as shall have been had therein in said State

court prior to its removal." The purpose of this section is, obviously, that all proceedings after removal shall be as if the suit was originally brought in the United States Circuit Court, and all had in the State court before removal shall stand on the same footing. Hence, when the answer and counterclaim were filed, February 8, in the State Court without the alleged contract in writing, the plaintiff could have interposed a. motion for dismissal; but, as the case was removed to this court before opportunity given for such motion, his right to do so still remains. Suppose such a motion interposed here and sustained, what would be the status of the case? Under sec. 5, no dismissal of the case should be had, for the plaintiff would not be at fault. If the counterclaim is dismissed, and the case remanded after such dismissal, what effect would such dismissal have,jurisdictionally, it being rendered by a court that had thus decided its own want of jurisdiction in the premises. The act of Congress (sec. 5) provides that when it shall appear to the United States Circuit Court that the dispute is not properly within its jurisdiction, it "shall proceed no further therein, but shall dismiss the suit, or remand it," etc.

Hence, it seems that the first inquiry, on proper motion, is to ascertain whether on the papers, as transmitted to this court, it will remand, sustain a motion to dismiss the counterclaim, or will permit the defendants here to do what should have been done in the State court. Under the later rulings of the Missouri Supreme Court, the counterclaim is subject to dismissal on motion. If such a motion is made and granted, the case will have to be remanded. The anomalous position the case will then occupy in the State court can not be avoided.

The judgment of this court for dismissal of counterclaim, if its jurisdiction is to be thus determined, may or may not prevent the State Court from allowing the same to be re-instated and the filing of the written contract. All this court will have decided is that the motion to dismiss the counterclaim is sustained, whereby it will have decided that it has no jurisdiction of the case, and that the same should be remanded at defendant's costs. If the motion to remand, in the present state of the record, is overruled, then, under section 5 of the Act of 1875, it may appear, through proper motions, that this court has not properly jurisdiction of the case, and the order to remand may hereafter be granted. The Supreme Court of Missouri has held that under the State Practice Act, profert is not necessary; and that advantage of the non-filing of a written contract must be taken by motion. If a case is removed to this court, without opportunity for making such a motion in the State court, and such motion is made here, will this court permit such contract to be filed here, and thus give the case here a position, jurisdictionally, different from what it had when removed? Can the removing party thus obtain jurisdiction, or escape the consequences of

his position in the State court? Must he not abide by the record as it stood? Or may he assume that as no motion to dismiss was made before removal, the case here has the same status as if the contract had been filed before removal? These difficulties are suggested with a view of determining the true meaning of the statute as to the amount in dispute. Under the Act of 1789, the defendant, on entering his appearance, had to then file his petition for removal, and there is a long line of decisions that the amount was to be determined by plaintiff's demand. Indeed, no other criterion could be had in the then state of the record. Since then, various acts of Congress have granted permission to remove at other stages of the proceedings; but none has changed the rule as to the amount in dispute, or the rule by which it is to be ascertained; unless the adoption of the State practice has so done under the acts of 1872. The rules of law, as established before State practice as to counterclaims existed, are familiar. Is it to be supposed that the uniform rulings of the United States Court were intended to be overturned as to removals, by the act of 1872, independent of all the statutes and decisions concerning the removal of causes?

While the practice acts of the State may prevail as to pleadings, etc., under the United States act of 1872, they can not enlarge or change the United States acts concerning removal of causes from State courts. The amount in dispute still continues to be what plaintiff claims, and not what by counterclaim the defendant may demand.

Motion to remand sustained.

NOTE.-1. This case is interesting in being the second. decision in the federal courts, upon the value of a counterclaim in determining the amount in controversy. The point as to the validity of the counterclaim - though sufficient in this case, and well settled by statutes, clinched by the favorable constructions of the Supreme Court of this State-is not a question as to the merits and will not be further noticed here.

2. The body of the doctrine enunciated in the principal case, that the amount in dispute is determined by the claim of the plaintiff, is well settled at common law in a long line of U. S. Supreme Court decisions, beginning as far back as 1842 with the case of Gordon v. Longest,16 Peters, 97. This case was brought up by writ of error to the Kentucky Court of Appeals, which affirmed the decision of the circuit court of that State refusing the petition for removal to the Federal Court on the ground it did not appear to the court's satisfaction, that the amount in controversy exceeded $500, exclusive of costs, as required by statute. The damages claimed in the writ and declaration were $1,000. The case was reversed and remanded, McLean, J., holding that "the damages claimed in the writ and declaration were unquestionably the sum in controversy." Then follow several decisions, notable among which is Kanouse v. Martin, 15 How., 198-27, in which Curtis, J.,

summing the authorities, lays down the rule as settled, that " until some further judicial proceedings have taken place, showing upon the record that the sum demanded is not the matter in dispute, that sum is the matter in dispute, in an action for damages." And finally, in the progress of the cause of Lee v. Watson, 1 Wall. 337, an amendment was made to the amount of damages claimed for the purpose of bringing the case within the appellate jurisdiction of the Supreme Court, and that court held an amendment insufficient to confer jurisdiction. Mr. Justice Field delivered the opinion of the court, that " by matter in dispute is meant the subject of litigation-the matter for which suit is brought -and for which issue is joined, and in relation to which jurors are called, and witnesses examined. In an action upon a money demand where the general issue is pleaded, the matter in dispute is the debt claimed and its amount, as stated in the body of the declaration, and not merely the damages alleged.". This decision, rendered in 1869, closes a list which, from a common law standpoint, furnishes sound precedents for almost every conceivable phase of the question.

3. When many of the States formulated the various statutory departures from the common law practice into a system of code pleading and practice, among other innovations upon the old procedure, the doctrine of counterclaims grew apace, allowing defendants to set up new matters, existing in their favor and against plaintiffs, and if their value exceeded plaintiffs' demand, to recover the excess by judgment over. Then the common-law rule, that plaintiff's demand determines the amount in controversy, was necessarily amended to read, "the largest sum claimed, etc.;" and upon this measure of jurisdiction, suits were taken to the State appellate courts.

4. In order to assimilate the practice of the Federal Courts to this new system, Congress passed an act in 1872, known as the Practice Act, which provides that "the practice, pleading, and forms and modes of proceeding in civil causes, other than equity and admiralty causes, in the circuit and district courts, shall conform, as near as may be, to the practice, pleadings and forms and modes of proceeding existing at the time in like causes in the courts of record of the State within which such circuit or district courts are held, any rule of court to the contrary notwithstanding." By this act harmony was restored; new life was infused into the Federal Courts, and they were enabled to accomplish the main object of their existence,-to administer the laws of the State, free from local influences, with equal justice to the citizen and the alien; thus fulfilling all those duties which constitute them embassadors to a State from the people of the Union. When the act of March 3, 1875, was passed, allowing "either party" to remove, at any time before trial or final hearing," etc., the door for removals

was indeed thrown "wide open," as the learned judge remarks in the principal case; and it is to be hoped it will never be closed.

5. Issue will not be taken here upon the soundness of reasoning which led to the establishment of the doctrine of counterclaims, inasmuch as it is effectually and finally settled. It may be sufficient to say, it is one of the results of modern progress in the science of law. It is certainly sufficient for the purposes of this article, that it is a law of the State, which the Federal Courts are bound to enforce, and it can only be enforced under the State "practice, pleadings, and forms and modes of proceeding” to which the Federal Courts are required by the Practice Act to conform.

6. The common-law rule that "the plaintiff's demand shall determine the amount in controversy" is not, in fact, incompatible with the consideration of counterclaims in determining the amount; for if the counterclaim exceeds the plaintiff's claim, the relations of the parties are ipso facto reversed, and the defendant becomes the real plaintiff. The State courts hold, however, that the criterion by which the amount in controversy shall be determined, is "the largest sum for which judgment may be given;" and this, being no infringement upon any United States statute for the rule that the plaintiff's demand govern is purely a common-law one-is binding on the Federal courts. This view has been taken in the only other case upon the subject since the act of 1872, Clarkson v. Manson, 4 Fed. Rep. 257. In this case the plaintiffs sued for $195 in State court-New York. The defendant in his answer denied the allegations of the petition, and set up a counterclaim of $750 damages. The reply denied the answer. A removal to the Federal court was granted to defendant as a citizen of New Jersey, on the ground that the amount in controversy exceeded $500, exclusive of costs. Blatchford, United States Circuit judge, denied the motion to remand in the following language: the defendant here contends that the matter in dispute on the issue raised by the counterclaim in the answer and the reply thereto, exceeds $500, exclusive of costs; that there is a controversy in regard to such matter, made a controversy exclusively by the plaintiff by his reply to the counterclaim; and that on this ground the defendant can remove the whole claim into this court. In view of the facts that the suit is, in form, one brought by the plaintiffs against the defendants, and includes the plaintiffs' claim by the voluntary act of the plaintiffs, and is made to include the defendant's claim by the operation of the statute of New York; and that thus there is but one suit, though there are two controversies in it; and that the whole suit is to be removed; and that either party may remove it; and that the counterclaim necessarily 'must tend in some way to diminish or defeat the plaintiff's recovery,' it follows that the whole suit is removed, including

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Vendors agreed to sell a paper mill and business as a going concern to a trustee on behalf of a company about to be formed for £32,500, and to accept £15,000, part of the purchase-money, in fully paid-up shares of the company. The prospectus of the company was then issued, stating that the remuneration of the directors would be fixed by the shareholders, and that it was proposed that they should be paid only by a commission on the profits made, no promotionmoney being paid by the company, and all formation expenses whatever being paid by the vendors. The vendors, who were themselves the original directors, presented part of their fully paid-up shares, of the nominal value of £4,000, to certain persons of influence in the paper trade to induce them to become directors of the company. After the shares had become depreciated in value, an original allottee of shares brought an action against the directors, claiming damages for deceit and misrepresentation in the statements contained in the prospectus. Held, that the statement as to the remuneration of the directors contained in the prospectus did not amount to a misrepresentation sufficient to support an action for deceit.

Appeal from a decision of Fry, J.

The argument in the Court of Appeal was confined to the question of the misrepresentation contained in the following clause of the company's prospectus:-"The remuneration of the directors will be fixed by the shareholders, and it is proposed that they shall be paid only by a commission on the profits made, no promotion-money whatever being paid by the company, and all formation expenses being paid by the vendors." Kay, Q. C., Addison, Q. C., and Romer, for the appellants.

North, Q. C, and H. A. Giffard, for the respondent.

JAMES, L. J.-I am of opinion that the judgment of Mr. Justice Fry in this case can not be sustained. With all deference to the learned judge, I think there has been a confusion between two different kinds of wrong, and two different kinds of remedy, between a mala praxis as between a vendor and a purchaser, and such a mala praxis as is sufficient to form the ground of an action of deceit. There are a great number of purely equitable considerations which come before the court when it is dealing with actions to set aside contracts, when there has been some misrepresentation or concealment or suppression of facts, or

some misdealing between a vendor and a person who stands in a fiduciary relation to the purchaser. But those cases are quite distinct from the one now before us. In the present case it was merely an accident that the defendants were, or had been, the directors and solicitors engaged in the transaction. The action is really the same as if it had been brought against a financial agent employed at a commission to float the company, and who had issued the prospectus with all the knowledge that these directors had. If such a person in such a case would have been liable to the plaintiff in an action, the directors would be liable on precisely the same grounds and to the same extent. The plaintiff must make out that he was deceived by the false representation which he alleges was made by the person who prepared and issued the prospectus. It was conceded that there had been an improper dealing between the vendors and the persons whom they procured to become directors of the company. But the question we have to decide is, whether there was an actual misstatement in words in the prospectus, or such a suppression as made that which was stated false. The statement of a thing partially may be a false statement. If something is left out which would qualify that which is stated, that is as much a misstatement as anything that can be conceived. But mere silence cannot be the ground of an action of deceit.

In the present case there has been nothing which, in my view, amounts to any misstatement whatever. The price to be given for the property was truly stated, and every word of the rest of the statement which has been mainly relied on by the plaintiff was, in my opinion, strictly true. The remuneration of the directors was to be fixed by the shareholders, and it was proposod to pay them by a commission on the profits. To say that nopromotion-money was to be paid by the company meant that the shareholders would have the property free from any expense beyond the price which was to be paid for it. The vendors were to pay allformation expenses." That necessarily included "promotion expenses," which are the principal part of the expense of forming a company. Promoting a company is really the obtaining of shareholders for it, and that isthe principal thing to be done in forming a company. It is said that there was in the present case a scheme for selling the property for £28,000 as the real price, and that then the price was altered to £32,000 for the purpose of getting the difference of £4,000 for division among the promoters. But there was not the slightest evidence of anything of the kind. Every vendor, when he sells, fixes a price which will cover his expenses of selling; and it is well known that auctioneers' and solicitors' charges always absorb a considerable part of the gross purchase-money. In order to prove that the promotion-money was paid by the company, it must be shown that the price agreed on for the property was swollen and exaggerated for the purpose of making the company pay the promo