Gay, Hardie & Co. v. Brierfield Coal & Iron Co.

| Ala. | Nov 15, 1894

PER CURIAM.

— When this cause was before this court at a former term, (Gay, Hardie & Co. v. Brierfield Coal & I. Co., 94 Ala. 303" court="Ala." date_filed="1891-11-15" href="https://app.midpage.ai/document/gay-hardie--co-v-brierfield-coal--iron-co-6514545?utm_source=webapp" opinion_id="6514545">94 Ala. 303), there was a very elaborate discussion of all the questions now involved in the demurrer of the appellant, the Brierfield Coal & Iron Company, and the pleas of the appellant Chambers. The result and effect of the decision then made seem fully and clearly summarized in the first head-note of the reporter: “The pendency of a suit in a Federal Circuit Court, against an insolvent corporation and its mortgage bondholders, under a bill filed by the trustee in the mortgage and deed of further assurance, in which suit the succeeding trustee, by appointment of the court, has been allowed to issue receiver’s certificates, declared to be a first lien on the property, and a decree of foreclosure and sale has been rendered, without any effort to collect the outstanding indebtedness of the stockholders, who are also the principal bondholders, — does not oust the jurisdiction of a State chancery court to entertain a bill by simple contract creditors of the corporation, who were not parties to that suit, and could not properly assert their rights therein, against the corporation and the trustee, assailing the mortgage bonds as having been issued without consideration, in fraud and violation of constitutional provisions, and the judicial proceedings as fraudulent and collusive; but nothing is decided as to the character and extent of the relief which may be granted under such a bill, except that the court can not interfere with the possession of the property by the trustee or receiver.” The essential principle on which the decision depends and was rested, is, that by the decree of the foreclosure and sale, no right or claim of the creditors of the corporation who were not parties was adjudicated, or could be adjudicated, for the reason that their rights or claims were not beforp the court, and they were without the opportunity to maintain them. Without expressing assent to, or dissent from, these conclusions, if they were res integra, they are now conclusive on the court. It may be, as is argued, that they are in direct conflict with the later case of Hollins v. Brierfield Coal & Iron Company, 150 U.S. 371" court="SCOTUS" date_filed="1893-11-20" href="https://app.midpage.ai/document/hollins-v-brierfield-coal--iron-co-93711?utm_source=webapp" opinion_id="93711">150 U. S. 371, a case not distinguishable from the present case in any respect, except in that case the bill was filed in the Federal court in which the decree of foreclosure and sale, was rendered. The Supreme Court decided that the simple contract creditor had a right, and it was a duty to intervene, in the suit for the foreclosure of the mortgage, and assert whatever of right or equity they had in respect to the property. The court said: “Doubtless in such foreclosure suit the simple contract creditor can intervene, and if he has any equities in respect to the property, whether prior or subsequent to those of the plaintiff, can secure their determination and protection ; and here, by the express language of the bill filed by the trustee, all claimants and creditors were invited to- present their claims and have them adjudicated. ” And it would seem from the opinion, that the decree of foreclosure is binding on the plaintiffs, Gay, Hardie & Co. But the court is unwilling to depart from the previous decision, and of consequence, there was no error in over-ruling the demurrer and pleas.

2. The statute, (Code, § 3421), requires an original bill to be “filed in the district in which the defendants, or a material defendant resides,” &c. A material defendant, ant, within the meaning of the term as employed in the statute, is not a mere nominal or proper party, but is a defendant who is a necessary party, really interested and against whom a decree is sought. — Lewis v. Elrod, 38 Ala. 17; Waddell v. Lanier, 54 Ala. 440" court="Ala." date_filed="1875-12-15" href="https://app.midpage.ai/document/waddell-v-lanier--hopkins-6509301?utm_source=webapp" opinion_id="6509301">54 Ala. 440 ; Ala. Gold Life Ins. Co. v. Cobb, 57 Ala. 547" court="Ala." date_filed="1877-12-15" href="https://app.midpage.ai/document/alabama-gold-life-insurance-v-cobb-6509714?utm_source=webapp" opinion_id="6509714">57 Ala. 547 ; Harwell v. Lehman, 72 Ala. 344" court="Ala." date_filed="1882-12-15" href="https://app.midpage.ai/document/harwell-v-lehman-durr--co-6511511?utm_source=webapp" opinion_id="6511511">72 Ala. 344. It seems to us, Chambers, the trustee in the mortgage, in whom the legal title to the property in controversy resided, and who had obtained the decree of foreclosure assailed for fraud, was an indispensable party defendant, and the original bill was properly filed in the district of his residence.

The parties as originally constituted had full competency by consent to transfer the cause to the chancery court of another district of co-equal jurisdiction of the subject matter. Consent will confer jurisdiction of the persons, and jurisdiction of the persons only was conferred by the transfer, not jurisdiction of the subject-matter, with which the court was clothed by law. When the suit reached the -chancery court of Jefferson, as to jurisdiction of the person of the plaintiffs and defendants, that court succeeded to the jurisdiction which the court of chancery of Colbert had acquired. Thereafter, the suit progressed as if it had been originally commenced in the chancery court of Jefferson — by the transfer the parties lost nothing of essential right which had attached while the suit was pending in the chancery court of Colbert. In the transfer of causes from one court of the State to another of co-equal jurisdiction of the subject-matter, all that is lost by one court, or acquired by the other, is mere local jurisdiction. If it becomes necessary after such transfer, by amendment, to introduce new parties, they will be introduced into a suit pending in a court of plenary local jurisdiction, and of the persons of the 'parties, as the suit is constituted. That jurisdiction is as fixed as if the transfer had not been made, or the suit originally commenced property in the court to which it is made ; there is no room for further inquiry into, or contestation of the local jurisdiction of the court, or the jurisdiction of the person of the parties who are before it. It is the original bill only, which the statute requires to be filed in the district of the residence of a material defendant, and it is only a defendant brought before the court by original bill, who can in any form complain that he is not sued in the district of his residence. The objection is strictly and purely personal, and must be interposed before entering upon a defense on the merits. If it is waived, as it may be, the suit is as properly constituted, as if the objection did not exist. Steering clear of all’cases of collusive suits, frauds upon the court and its jurisdiction, against which it is the duty of the court at all times to protect itself and its suitors, parties who are subsequently introduced into the suit by amendment or otherwise, are introduced into a suit of which the court has plenary jurisdiction.

The amendment of the bill, introducing Peter as a defendant, was not, in any proper sense, the commencement of a new suit. So far as the question we are considering is involved, it was a continuation of the suit as originally commenced; the mere correction or curing a defect therein existing. It was an incident of the jurisdiction the court had acquired to call him in by amendment, without regard to the district of his residence. Otherwise, the jurisdiction of the court could not be made effectual. There was error in sustaining the plea to the jurisdiction as interposed — it should have been overruled. On the cross-appeal of the appellants, Gay, Hardie & Co., the decree will be reversed, and a decree will be here entered overruling the plea of the defendant Peter and the cause will be remanded.

Reversed, rendered and remanded.