238 F. 734 | 4th Cir. | 1916
The underlying question in this case is the question of jurisdiction. Briefly stated, the material facts are these:
During a period of years prior to January 19, 1915, when this suit was commenced, the appellee, Josiah V. Thompson, a citizen of Pennsylvania, had become the owner of extensive tracts of coal lands and other properties in that state and the state of West Virginia. His holdings in the former state amounted to over 78,000 acres, and in the latter state to some 26,000 acres. On the date named this bill was filed, the nature and purpose of which will be presently explained. In the meantime, and on various dates between December 3, 1914, and January 19,1915, certain creditors of Thompson, citizens of West Virginia, had brought suits against him in the circuit court of Harrison county and levied attachments upon all or a large- portion of his coal lands in that state, and these suits were pending and undetermined when the bill of complaint herein was filed.
The plaintiff in the bill is the appellee Hayden, and Thompson was the sole defendant. Hayden was the holder of two past-due notes of Thompson, each for $10,000, but his claims had not been .reduced to judgment, and he had no lien or other security; he was a simple contract creditor. After setting out the notes, and averring that the amounts thereof were admittedly due, without offsets or deductions of any sort, the bill alleges, among other things not needful to recite, that the total indebtedness of Thompson was approximately $22,000,-000, of which about $7,000,000 was unsecured; that the balance of $15,000,000 was secured by mortgage or pledge of substantially all'his assets, “which assets are of the fair value of $70,000,000, leaving nothing but equities out of which your orator and other unsecured creditors can be paid,” and that such creditors could not collect their claims by execution; that the equities belonging to Thompson were worth approximately $48,000,000, and that if his assets could be conserved and sacrifice prevented they could be sold at even very low prices for a sum largely in excess of the indebtedness to both secured and unsecured creditors; that Thompson was unable to pay the interest already past due upon a part of his obligations, or to provide for the interest soon to become due on other obligations; that suits had been brought against him by certain creditors, and judgments entered on which executions were threatened; that other creditors were threatening to sell the collaterals held by them as security for their claim-s; and that in consequence there was great danger that early and forced sales under mortgages and
On the day this bill was filed, at Wheeling, in the Northern district of West Virginia, Thompson was conveniently in that city and at once accepted service of the subpoena. On the same day he filed his answer, admitting the allegations of the bill, averring that his assets were “fairly and conservatively worth more than three times the amount of my indebtedness,” and consenting to the appointment of a receiver, and thereupon a receiver was immediately appointed according to the prayer of the bill. Thereafter, on April 15, 1915, the plaintiff filed in open court an “amended and supplemental bill,” which reiterated the allegations of the original bill, recited the previous order appointing a receiver and enjoining creditors, alleged that the receiver had qualified and taken possession of all the assets and property of Thompson in West Virginia, and set out a long list of creditors in that state, with the amounts due to them and the securities, if any, held by them respectively, and the proceedings, if any, severally taken by them to enforce their claims. All these creditors were named as defendants, but it appears that no subpoena to answer was ever issued. On the same day a temporary restraining order was entered, to the like effect in substance as the original injunction, which order by its terms was to remain in force “only ten days from this date, within which time plaintiff shall give notice to the parties of a motion for preliminary injunction as required by the seventy-third equity rule.”
The motion accordingly made was heard on the 24th of April, and with it the motions of certain defendants, all or most of whom‘had levied attachments, to dissolve the injunction, vacate the order appointing a receiver, and dismiss the original and amended bills for want of jurisdiction and other reasons. The order made that day, 'after reciting that the court, “being not now advised what order to enter in the premises, thereof takes time to consider,” gave the parties 15 days to file briefs, and continued the temporary restraining order in force “until this motion for a preliminary injunction can be determined.” The situation thus brought about remained practically unchanged, so far as the record discloses, until the 29th of October, when a memorandum opinion was filed and an order entered which, in effect, as we hold, denied the motions to dismiss and granted a pre-diminary injunction. It was provided, however, that the injunction be so far modified as to allow creditors to prosecute their claims to judgment, but not to enforce the judgments by execution sales or otherwise. From that order áppeal was taken to this court.
“Conceding that a restraining order granted without a hearing is not Ordinarily appealable, yet a restraining order which is granted, or sustained, or denied, after a hearing of the parties, and which in effect and in everything but name is a temporary injunction, falls within the evident meaning of the statute, and is reviewable by appeal, and the orders in question were of that character.”
So in this case. The first injunction was binding, under the Clayton Act (Act Oct. 15, 1914, c. 323, 38 Stat. 730), upon no one but Thompson, because he was the only defendant in the original bill. When the amended bill was filed, making other creditors defendants, an ex parte restraining order was granted for 10 days from its date. Within that time there was a' full hearing upon notice of plaintiff’s motion for a preliminary injunction and defendants’ motions to vacate and dismiss. Desiring further time to consider, the court continued the restraining order until the matter could 4>e more deliberately decided. There surely was no occasion after that to again continue the restraining order for the same purpose, and we are clearly of opinion that the subsequent order of October 29th should not be so construed. On the contrary, it was in intention, and certainly in practical effect, a decision of the pending applications, granting to the plaintiff a preliminary injunction and denying the motions made by defendants. Indeed, in the memorandum filed with the order, it is referred to as an “injunction”; and in the order allowing an appeal it is described as “an interlocutory order or decree continuing an injunction and refusing to dissolve an injunction.” In short, it was a final disposition of the motions made by the respective parties, which were heard and submitted, and on which decision was reserved, some six months before, and'as such it was plainly appeal-able. The motion to dismiss must be denied.
We are clearly of opinion that these facts are insufficient to warrant the action of the court below. In its most favorable aspect the plaintiff’s case comes under no recognized head of equity jurisdiction. Indeed, we take it to be. an established principle of jurisprudence that a court of equity is without power, in the absence of statutory authority, to appoint a receiver of the assets of an individual debtor, or to enjoin the prosecution of claims against him, at the suit of a mere contract creditor who has no lien or other security, and who asserts no right to subject any specific property to the payment of his debt. Equity may aid, in a proper case when legal remedies have been exhausted, but cannot be resorted to in the first instance. The authorities to this effect are numerous and of uniform import. Among the leading cases which illustrate and apply the doctrine are Thompson v. Railroad Companies, 73 U. S. (6 Wall.) 134, 18 L. Ed. 765, Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358, Scott v. Armstrong, 146 U. S. 499, 13 Sup. Ct. 148, 36 L. Ed. 1059, Cates v. Allen, 149 U. S. 452, 13 Sup. Ct. 977, 37 L. Ed. 804, and Hollins v. Brierfield C. & I. Co., 150 U. S. 371, 14 Sup. Ct. 127, 37 L. Ed. 1113. In the last-named case the Supreme Court said:
“The plaintiffs were simple contract creditors of the company, their claims had not been reduced to judgment, and they had no express lien by mortgage, trust deed, or otherwise. It is the settled law of this court that such creditors cannot come into a court of equity to obtain the seizure of the property of their debtor, and its application to the satisfaction of their claims; and this, notwithstanding a statute of the state may authorize such a proceeding in the courts of the state.”
The only case cited by appellees, and the only one we have been able to find which can be claimed to support their contention, is In re Metropolitan Railway Receivership, 208 U. S. 90, 28 Sup. Ct. 219, 52 L. Ed. 403. But this was the case of an insolvent corporation, which, for reasons that have often been pointed out and need not here be repeated, stands upon an entirely different footing from an individual debtor, and especially an individual debtor whose solvency is affirmed by the creditor asking the interposition of a court of equity. In short, we are convinced that the appointment of a receiver and the restraining of creditors in this case, upon the facts al
“The complainant had no right for two reasons to ash that the court should enjoin the prosecution of suits against his debtor in the state courts of West Virginia. If A. is indebted to * * * B. and C., it takes no citation of authority to show that B. cannot ask a court of equity to enjoin O. from suing A., merely because 0. by beginning his suit first may get a lien upon A.’s property before B. does. In the second place, if the complainant had any standing in a court of equity to ask that proceedings at law be enjoined, the statutes of the United States expressly prohibit a. federal court of equity from granting that relief when the proceedings sought to be enjoined are pending in a state court. * * * A court of equity of the United States has no jurisdiction, at the instance of a simple contract creditor whose claim has not been reduced to judgment, to appoint a receiver for property upon which he asserts no specific lien.”
“A court of equity may in any proper case pending therein, in which the property of a corporation, firm or person is involved, and there is danger of the loss or misappropriation of the same or a material part thereof, appoint a special receiver of such property or of the rents, issues and profits .thereof, or both.”
Even if it be granted that this statute was not brought to the attention of the court, and therefore not considered, there are two answers to the argument based upon its provisions. The first is that the equitable powers now in question cannot be conferred upon the federal courts by the Regislature of a state, as was distinctly held in Hollins v. Brierfield C. & I. Co. supra, wherein the Supreme Court said:
“The line of demarcation between legal and equitable remedies * * * qannot be obliterated by state legislation.”
The other answer is .that we are bound to accept the construction of a state statute by the highest court of the enacting state, and the Supreme Court of Appeals of West Virginia has held that the statute referred to does not authorize the appointment of a receiver, in such a case as is here presented, at the suit of a mere contract creditor. Rainey v. Freeport Coal Co., 58 W. Va. 424, 52 S. E. 528; Thompson v. Adams, 60 W. Va. 463, 55 S. E. 668. In the latter case it was said:
“Under our statute * * * a receiver will be appointed where there is danger of loss or misappropriation of the property, or a material part thereof,*740 of a debtor; but this is only done in a proper pending case. It certainly must be at tbe instance of some one wbo bas a right to chai'ge tbe property, and tbe statute does not mean to extend this remedy to every one wbo claims to be a common creditor. Equity must bave jurisdiction, independent of tbe appointment of a receiver.”
Finally it is argued that jurisdiction was acquired in this case by the consent of Thompson to the appointment of a receiver. But this contention was also made and rejected in Maxwell v. McDaniels; the court saying:
“An individual is not a corporation. Tbe administration of tbe affairs of an insolvent individual is not a recognized bead of equity jurisdiction, as is tbe administration of tbe assets of an insolvent corporation. Tbe subject-matter in tbe former case is not one over wbicb tbe qourt bas jurisdiction. Mere waiver by tbe defendant of objections otherwise fatal to tbe capacity of tbe plaintiff to invoke tbe jurisdiction in tbe case of á corporation removes tbe only obstacle to tbe granting of tbe relief desired., In tbe case of an individual defendant it leaves untouched tbe most serious difficulty of all, namely, that tbe subject-matter is not one within tbe province of tbe court.’!
Without citing further decisions or otherwise prolonging the discussion, we deem it sufficient to repeat our conviction that the appointment of a receiver and the granting of an injunction in this case were wholly without authority, and should be set aside. It follows that the order appealed from must be reversed, and the case remanded, with directions to dissolve the injunction, discharge the receiver, and vacate his appointment, and to dismiss the original and supplemental bills for want of jurisdiction.
Reversed,
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