232 F. 641 | 5th Cir. | 1916
Lead Opinion
(after stating the facts as above).
At the time the District Court of the United States for the Western District of Texas appointed its receiver, and at the time the receiver qualified and took possession of the mortgage property, the district court of Bexar county had made no order appointing a receiver in the cause there pending. The Texas state court had neither actual nor constructive possession of the mortgaged property at that time. The seizure by the receiver in the foreclosure suit, subsequently filed in the federal court, was therefore no interference with the possession of the state court or its receiver, since it then had none. The prior jurisdiction of the state court had, however, been invoked in a way that might thereafter require the possession by the state court of the mortgaged property for the accomplishment of the relief prayed for in the suit there pending. The question for determination is whether the federal court must surrender its first acquired possession to the state court, because the jurisdiction of the latter was first invoked in a matter which required possession of the res for its proper disposition.
*644 “When a court of competent jurisdiction has, by appropriate proceedings, taken property into its possession through its officers, the property is thereby withdrawn from the jurisdiction of all other courts. The latter courts, though of concurrent jurisdiction, are without power to render any judgment which invades or disturbs the possession of the property while it is in the custody of the court which has seized it. For the purpose of avoiding injustice which otherwise might result, a court during the continuance of its possession, as incident thereto and as ancillary to the suit in which the possession was acquired, has jurisdiction to hear and determine all questions respecting the title, the possession, or the control of the property. In, the courts of the United States this incidental and ancillary jurisdiction exists, although in the subordinate suit there is no jurisdiction arising out of diversity of citizenship or the nature of the controversy. Those principles are of general application, and not peculiar to the relations of the courts of the United States to the courts of the states. They are, however, of especial importance with respect to the relations of those courts, which exercise independent jurisdiction in the same territory, often over the same property, persons, and controversies. They are not based upon any supposed superiority of one court over the others, but serve to prevent a conflict over the possession of property, which would be unseemly and subversive of justice, and have been applied by this court in many cases, some of which are cited, sometimes in favor of the jurisdiction of the courts.of the states, and sometimes in favor of the jurisdiction of the courts of the United States, but always, it is believed, impartially and with a spirit of respect for the just authority of the states of the Union.”
In the case of Palmer v. Texas, 212 U. S. 118-129, 29 Sup. Ct. 230, 233 [53 L. Ed. 435], the rule is stated more broadly, as follows:
“We think the law of this court is well established to be that jurisdiction over the property was acquired by the state courts when the receiver was appointed, the judicial process served, and the receiver duly qualified, although the * * * receiver had not taken actual possession of the property. This principle was recognized in Farmers’ Loan & Trust Co. v. Lake Street Electric Ry. Co., 177 U. S. 51, 61 [20 Sup. Ct. 564, 44 L. Ed. 667], in which this court said: ‘The possession of the resi vests the court which has first acquired jurisdiction, with the power to hear and determine all controversies relating thereto, and, for the time being, disables other courts of coordinate jurisdiction from exercising like power. This rule is essential to the orderly administration of justice, and to prevent unseemly conflicts between courts whose jurisdictions embrace the same subjects and persons. Nor is this rule restricted in its application to cases where property has been actually seized under judicial process before a second suit is instituted in another court, but it often applies as well w|iere suits are brought to enforce liens against specific property, to marshal assets, to administer trust or liquidate insolvent estates, and in suits of a similar nature where, in the progress of the litigation, the court may be compelled to assume the possession and control of the property to be affected. The rule has been declared to be of especial importance in its application to federal and state courts.’ ”
From these cases it appears that the rule may he invoked in two classes of cases: First, in cases where there has been a disturbance of the actual or constructive possession of the res in one court by the officers of another court of concurrent jurisdiction. Property in the actual possession of a receiver, appointed by one court, can in no event be disturbed by the action of a court of concurrent jurisdiction. It is equally true that property in tire constructive possession of a receiver of one court, who has been appointed and qualified, but has not reduced the property to his actual possession, cannot be taken from his custody or that of the court appointing him by the action of any other court of concurrent jurisdiction. The rule is without exception
“Nor is this rule restricted in its application to cases where property has been actually seized under judicial process before a second suit is instituted in another court, bul it often applies as well lohere suits are brought to enforce liens against speciflo properly, to marshal assets, to administer trusts or liquidate insolvent estates, and in suits of. a similar nature, where, in the progress of ihe litigation, the court may be eom/pelled to assume the possession and control of the property to be affected.”
It seems clear that where the basis of the rule is an. infringement of the jurisdiction of the court, and not an interference with its possession of property, the rule depends upon the existence of such a conflict and is not absolute. The quoted language of the Supreme Court indicates that the rule, where there is no disturbance of possession, is one of limited and not of universal application. It is a rule of comity, to be applied by the court asked to surrender its possession, only when it is shown that that court has interfered with the jurisdiction of the court asking the surrender. It was held to be merely a rule of comity by this court in the case of Adams v. Mercantile Trust Co., 66 Fed. 617, 15 C. C. A. 1; a case iti which there was a clear conflict of jurisdiction. Where the issues in the two suits are the same, and their subject-matter substantially identical, comity and the orderly administration of justice, and the desire to avoid a conflict of jurisdiction, require of the court that last acquires jurisdiction, though it be the» first to acquire possession of the property involved in the litigation, that it surrender such possession, on application, to the court of concurrent jurisdiction which first acquired jurisdiction of the controversy. This was the holding in Palmer v. Texas, 212 U. S. 118, 29 Sup. Ct. 230, 53 L. Ed. 435; Farmers’ Loan Co. v. Lake Street Ry. Co., 177 U. S. 51, 20 Sup. Ct. 564, 44 L. Ed. 667; Adams v. Mercantile Trust Co., 66 Fed. 617, 15 C. C. A. 1. In such cases, the court making the surrender abdicates its jurisdiction over the cause, as well as surrenders possession of the res.
However, where the issues in the subsequent suit are different from those involved in the first suit, and the subject-matter is not identical, there can be no infringement of the jurisdiction of the court in which the first suit is pending, by reason of the institution of the second suit in a court of concurrent jurisdiction. The only identity between the two suits in that event is that they relate hr the same property, and, this being true, there is no apparent reason why the court which first acquires possession of the property should surrender its possession and thereby defeat its own jurisdiction, a jurisdiction which does not infringe upon the prior jurisdiction of the court in which the first suit was brought
The principle is thus stated in Gluck & Becker on Receivers, pp. 67, 68 (2d Ed. pp. 89-91):
“The decisive test, as expressed by the weight of authority, is that, when the controversy in both actions is the same, the court first acquiring jurisdiction of the controversy will retain it, and it is not necessary that it should take actual possession through its receiver of the property to obtain exclusive jurisdiction. If, however, the controversy is not the same, there is no conflict of jurisdiction as to the question or cause, and the court which first acquires jurisdiction over the property by actual seizure through its receiver will enforce that jurisdiction, and assume the actual possession, to which it gives the right, and until the property is seized, no matter when the suit was commenced, the court does not have jurisdiction over the property, and another court of concurrent jurisdiction may appoint a receiver, and through him take possession of the property.”
In the cáse of De La Vergne Refrigerating Mach. Co. v. Palmetto Brewing Co. (C. C.) 72 Fed. 579, 584, 585, applying this principle, Circuit Judge Simonton said:
“The counsel who argued this case with equal ability and earnestness have treated it as threatening a conflict of jurisdiction. But, as has been said, it is a question of comity., The jurisdiction of the court over the controversy made here is unquestionable. The jurisdiction of the state court over the controversy made there cannot be disputed. The receiver of this court is in actual, peaceable possession. The receiver of the state court was appointed, subsequent to his appointment, in proceedings antedating those in this court. * * * In view, therefore, of the fact that the controversy in the suit in this court is entirely distinct from that in the state court, and that the scope and purpose of the proceedings in the state court are not those of the proceedings in this court, connected with the fact that the receiver heretofore appointed in the main cause is in actual, peaceable possession of the property, and that the complainant holds a legal lien on the property, entitling it to its possession through a receiver, the mortgagor being insolvent, and that this court has been asked by it not to exercise an act of discretion, but to give effect to a right secured to it by the Constitution and laws of the United States,' the prayer of the petition cannot be granted, and it is so ordered.”
In the case of Moran v. Sturges, 154 U. S. 256-283, 14 Sup. Ct. 1019, 1028 (38 L. Ed. 981), the Supreme Court said:
“Tlie contention is not only that the’ title to these vessels vested in the receiver as of July 31st, and that, in such a case as this, constructive is the equivalent of actual possession, but that, although the receiver did not qualify until after the seizure by the marshal, he thereupon became constructively possessed of the vessels as of July 31st, and the jurisdiction of the District Court was thereby ousted. But, if jurisdiction had attached, it would not be defeated, even by the withdrawal of the property for the purposes of the state court, and,' moreover, the doctrine of relation has no application. As between two courts of concurrent and co-ordinate jurisdiction, having like jurisdiction over the subject-matter in controversy, the court which first obtains jurisdiction is entitled to retain it without interference, and cannot be deprived of its right to do so because it may not have first obtained physical possession of the property in dispute. But where the jurisdiction is not concurrent,, and tlie subject-matter in litigation in the one is not within the cognizance of the other, while actual or even constructive possession may, for the time being, and in order to avoid unseemly collision, prevent the one from disturbing such possession, yet whore there is neither actual nor constructive possession there is no obstacle to proceeding, and action thus taken cannot be invalidated by relation. That doctrine is resorted to only for the advancement of justice, and, under these state statutes, is adopted to defeat fraudulent, unwarranted, and unjust dispositions of the debtor’s property, and to accomplish just and equitable ends. Herring v. N. Y., Lake Erie, etc.. Railroad, 105 N. Y. 340, 377 [12 N. E. 763], At the time these libels were filed and tlie marshal seized the property, it had not been developed whether or when the receiver would or might give tlie security required and enter upon the discharge of his duties, and he had neither actual nor constructive possession. The jurisdiction of the state court over the subject-matter of tlie winding up of tlie corporation and the distribution of its assets did not embrace the disposition of the claims of the libelants upon these vessels, nor were they as holders of maritime liens represented by the attorney general when he assented to the order of July 31st, as mere creditors of the Schuyler Company were. The adjudication by that order may have so operated on the title in respect of the parties to that suit as to place the property constructively in the custody of the law as of that date, but; not as to all persons and for all purposes. Under the circumstances we are unable to accept the conclusion that simply by the institution of the winding up proceeding, property, subject to liens over which that court could not exercise jurisdiction in invitum, was placed in such a situation in respect; of liability to being ultimately brought within the custody of the court that the District Court could not obtain jurisdiction for the purpose of ascertaining and enforcing those liens in rosxject of which its jurisdiction was exclusive. It axtpears to us that the District Court violated no rule of comity nor any other rule in entertaining the libels.”
It is true the case of Moran v. Sturges is to be distinguished from this case, in that in it the state court did not have the capacity to take jurisdiction of the enforcement of maritime liens which were the subject-matter involved in the suit in the federal court, whose jurisdiction thereof was paramount and exclusive, while in this case the Texas state court had the capacity to take jurisdiction of the action to foreclose a mortgage. The Supreme Court, however, did not limit the rule of nonsurrender to cases in which the court, asking the surrender, was
“As between courts of concurrent and co-ordinate jurisdiction, having like jurisdiction over the subject-matter in controversy, the court which first obtains jurisdiction is entitled to retain it without interference.”
The court again recognized that the rule of nonsurrender applied in cases in which the court asking the surrender had not actually taken jurisdiction first, though clothed with the power to do so, as well as those in which it had no potential jurisdiction, by declaring the rule applicable, both in cases “where the jurisdiction is not concurrent” and .in cases where “the subject-matter in litigation in the one is not within the cognisance of the other.” Cognizance and the want of it may be actual as well as potential. Again the Supreme Court said :
“The jurisdiction of the state court over the subject-matter of the winding up of the corporation and the distribution of its assets did not embrace the disposition of the claims of the libelants upon these vessels, nor were they as holders of maritime, liens represented by the Attorney General, when he assented to the order of July 31st, as mere creditors of the Schuyler Company were.”
This language is more appropriate when applied, to an absence of jurisdiction in fact than to an absence of jurisdiction in law. The Supreme Court held that a court having possession of the res is entitled to retain it (1) as against any court which has no jurisdiction of the controversy pending about it, though such court first assumed to exercise jurisdiction; and (2) as against any court clothed with jurisdiction of the controversy, provided jurisdiction was first obtained by the court in possession of the res and asked to surrender it.
In this case the federal court was first in possession of the res, and is asked to surrender its possession to the state court, a court whose general competency is conceded. The propriety of the surrender must therefore depend upon which court in fact first obtained jurisdiction of the subject-matter in controversy. Conflict of jurisdiction as to the subject-matter of the litigation does not mean merely that the tjwo suits relate to the same physical property. Moran v. Sturges holds directly to the contrary. It means that the issues involved, relief prayed for, and parties to the two suits are so substantially alike that the lis pendens of the last brought is included in the first. Unless it can be said that the issues involved, the relief sought, and the parties to the suit in the federal court were included^ substantially in the lis pendens of the prior suit in the state court, the jurisdiction of the former did not conflict with that of the latter. The subject-matter of the suit in the federal court exclusively related to the foreclosure of the appellant’s mortgage. In the suit as originally brought in the state court the foreclosure of appellant’s mortgage was not sought. The appellant, as trustee, and the bondholders, as such, were not made parties to it. There had then been no default that would authorize a
We think the principle decided in the case of Moran v. Sturges properly applies to the facts of this case, though it be conceded that the district court of Bexar county, Tex., was clothed with general jurisdiction of actions to foreclose mortgages. We also cite in support of the right of the court first acquiring possession of the res to maintain it, as against a court in which was pending a suit, first brought, but relating to different issues, and the objects of which would require it to take possession of the property during the progress of the suit, the cases of Mercantile Trust Company v. M., K. & T. R. R. Co. (C. C.) 48 Fed. 351; Compton v. Jesup, 68 Fed. 263, 15 C. C. A. 397; State Trust Company v. National Land Imp. & Mfg. Co. (C. C.) 72 Fed. 575. The case of McKinney v. Kansas Natural Gas. Co. (D. C.) 209 Fed. 772, is opposed to this view.
It is with this second class of cases that we are concerned in this case, since there was no actual or constructive possession of the res in the state court, when the receiver of the federal court assumed possession of the mortgaged property. No receiver had at that time bpen appointed by the state court. Moran v. Sturges, 154 U. S. 255-284, 14 Sup. Ct. 1019, 38 L. Ed. 981. The suit in the district court was instituted by a creditor and stockholder for the purpose of winding up the corporation and distributing its assets among its creditors as an insolvent corporation under the Texas statutes. No lien was sought to be enforced in it; the creditor, who was a bondholder, did not rely on his security, or seek to have enforced the lien of the mortgage. The trustee under the mortgage was not made a party to the proceeding in the state court. After the suit was brought, other holders of bonds and of stock intervened, as well as certain riparian claimants; but the. nature and the purposes of the suit were in no wise changed. The foreclosure of the mortgage lien was never within the lis pendens of
The suit in the District Court of the United States for the Western District of Texas sought exclusively the foreclosure of a mortgage which was a first lien on the property of the corporation. The plaintiff was the trustee under the mortgage, the defendants were the mortgagor and certain subsidiary corporations. The record shows quite conclusively that there was no probable equity over and above the mortgage indebtedness, and that the bondholders were primarily, if not exclusively, interested in the administration of the property. They had a prior claim over the unsecured creditors represented in the state insolvency proceedings, a claim which was not within the issues or subject-matter of that proceeding. Though some of the creditors in the state suit happened to be bondholders, they were not there insisting on their security or seeking to enforce it, and so were in the attitude of unsecured creditors.
Under tire circumstances, we conclude that the issues, the subject-matter, and the relief prayed for in the two suits are so different that it cannot be said there is a conflict of jurisdiction between them. If both suits had sought the winding up of the corporation because of its insolvency, or both had sought to enforce a mortgage lien on the property of the corporation, such a conflict of jurisdiction would have existed, and possession would have been rightly surrendered to the court in which the first suit was instituted.
Neither tire rule that, in case' of conflict of jurisdiction, possession. should be surrendered to the court first acquiring jurisdiction of the' controversy, where it is or may be required for the purposes of the litigation during its progress, nor the rule against the disturbance of the court’s possession has, therefore, airy application in this case.
In addition, in this case, the persons having the prior right and probably the exclusive interest in the property, which is the subject-matter ■of the litigation, are the bondholders, who are represented by the plaintiff in the suit in the federal court. Ordinarily the parties chiefly interested in the administration of the property should be permitted to select the forum. It is asked, however, that the court, in which the prior lien is sought to be enforced, which has full jurisdiction to enforce it, and whose receiver is in peaceable possession of the mortgaged property, acquired by him when the state court had neither actual nor constructive possession of it, surrender the possession to a receiver, appointed by the state court, in a suit instituted by creditors, whose claims are entitled to payment only after those of the bondholders are fully satisfied, when to do so would defeat the jurisdiction of the federal court to foreclose the mortgage, which the plaintiff has rightfully invoked, and remit the plaintiff, along with the res, to the state court, to apply for leave to intervene in the insolvency proceedings to assert the lien of its mortgage in a proceeding, which had not taken cognizance thereof.
■ It appears to us that no rule of comity required the District Court to surrender its possession under the circumstances indicated, if it be conceded that a case, in which there is no conflict of jurisdiction between the state and federal courts, and no interference by the federal
The decree appealed from is reversed, and the cause is remanded, with instructions to set aside the order of November 10, 1914, reinstating the order of August 1, 1914, and thereafter proceed in the case as equity and good conscience may require.
Dissenting Opinion
(dissenting). I do not concur in the conclusion last stated in the foregoing opinion. It seems to me that the withholding from the state court of the possession of the property in question has the affect of interfering with that court’s first acquired jurisdiction, as its possession of that property was necessary to enable it to exercise that jurisdiction. The conclusion that this is permissible is not reconcilable with the proposition that “as between two courts of concurrent and co-ordinate jurisdiction, having like jurisdiction over the subject-matter in controversy, the court which first obtains jurisdiction is entitled to retain it without interference, and cannot be deprived of its right to do so because it may not have first obtained physical possession of the property in dispute.” Moran v. Sturges, 154 U. S. 256, 283-284, 14 Sup. Ct. 1019, 1028 [38 L. Ed. 981]. The effect of the decision iñ the -case cited was that the proposition just stated by quoting from the opinion rendered in that case was not applicable therein, because that was the case of the exercise of a jurisdiction which was exclusive, not being possessed by the court whose jurisdiction was first invoked, that court not being vested with the admiralty jurisdiction, which was exercised by the court which first took possession of the property in question. In the instant case it is not denied that the state court had jurisdiction, which was exercisable in the suit first brought in it, to marshal the assets which that court was asked to take possession of by its receiver, to ascertain all claims to or against those assets, including liens or charges thereon, and to make distribution to all parties in interest according to their priorities. Such a jurisdiction includes the power to require a mortgagee of the whole or a part of those assets to intervene in that suit and assert his claim therein. The suit subsequently brought in the federal court invoked the exercise by that court, not of -a paramount or exclusive jurisdiction, but of a jurisdiction which it had concurrently with the state court. I have not been convinced that the latter court properly can be deprived of its right to retain its first-acquired jurisdiction because another court, the concurrent and co-ordinate jurisdiction of which subsequently was invoked, first obtained physical possession of the property in dispute. 1 do not understand that the rule above stated is subject to an exception which renders it inapplicable when the suitor in the subsequently brought suit, in which possession is acquired, asserts a claim to or against the property in question which the court to which he resorts regards as being entitled to priority over the claim previously asserted by another in another court; the subsequently asserted claim being one which is cognizable by the court whose jurisdiction first attached, and in the suit which was the first one that invoked a jurisdiction the exercise of which required possession of the property in question.