130 F. 801 | 7th Cir. | 1904
(after stating the facts as above). The rule is axiomatic that the courts of the United States should not interfere with proceedings in the courts of the state, except so far as may be necessary to assert and protect a rightful jurisdiction. The rule is emphasized by the provisions of a statute as old as the judicial system of the United States: “The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a state, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.” Rev. St. § 720 [U. S. Comp. St. 1901, p. 581]. The rule is reciprocally recognized and generally observed by both state and federal courts, because it is essential to the maintenance of harmony and indispensable to the orderly administration of justice. The rule has been declared and its limitations established by the ultimate tribunal, and is so well recognized by the profession that but for the importance of the case under consideration, and the earnest controversy of counsel with respect to the rule, we should deem a reference to the authorities unnecessary. We need not now review the numerous decisions which have led up to the final settlement of the rule, but a brief reference to some of them may not be out of place.
In Freeman v. Howe, 24 How. 450, 16 L. Ed. 749, it was ruled that property held by a marshal under a writ from a federal court could not lawfully be taken from his possession by a proceeding issuing from a state court; and this upon the ground that “the possession of the marshal was the possession of the court, and that no other court with merely .concurrent authority could be allowed to disturb that possession. In Buck v. Colbath, 3 Wall. 334, 18 L. Ed. 257, where under similar circumstances the marshal was sued in trespass for taking the goods,
In Moran v. Sturges, 154 U. S. 256, 14 Sup. Ct. 1019, 38 L. Ed. 981, the court reviews the various decisions, affirming the principle declared in Buck v. Colbath, and seems to approve the principle that “courts, for the purpose of protecting their jurisdiction over persons and subject-matter, may enjoin parties who are amenable to their process and subject to their jurisdiction from interference with them in respect of property in their possession, or identical controversies therein pending, by subsequent proceedings as to the same parties and subject-matter in other courts of concurrent jurisdiction,'” and also approves of a remark by Mr. Justice Miller in Buck v. Colbath, that:
“It is not true that a court, having obtained jurisdiction of a subject-matter of a suit, and of parties before it, thereby excludes all other courts from the right to adjudicate upon other matters having a very close connection with those before the first court, and in some instances requiring the decision of the same questions exactly. In examining into the exclusive character of the jurisdiction of such cases, we must have regard to the nature of the remedies, the character of the relief sought, and the identity of the parties in the different suits.”
In Moran v. Sturges the court sustains the exclusive jurisdiction of the United States District Court in admiralty over the subject-matter, and that the proceeding in the state court was an unlawful interference with the proceedings in the admiralty.
In re Chetwood, 165 U. S. 443, 17 Sup. Ct. 385, 41 L. Ed. 782, the general principle stated is reaffirmed and declared to be firmly established.
In Central National Bank v. Stevens, 169 U. S. 432, 18 Sup. Ct. 403, 42 L. Ed. 807, the court reviews the various cases bearing upon the subject and reaffirms the rule.
In Farmers’ Loan & Trust Company v. Lake Street Elevated Railroad Company, 177 U. S. 51, 20 Sup. Ct. 564, 44 L. Ed. 667, the principle is thus declared:
“The possession of the res 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 co-ordinate jurisdiction from exercising a like power. This rule is not restricted in its application to eases where property has been actually seized under judicial process before a second suit is instituted in another court, but it often applies as well where suits are brought to enforce liens against specific property, to marshal assets, administer trusts, or liquidate insolvent estates, and in suits of a similar nature.”
In Baltimore & Ohio Railroad Company v. Wabash Railroad Company we stated the rule to be as follows:
“It is settled that, when a state court and a court of the United States may each take jurisdiction of a matter, the tribunal whose jurisdiction first attaches holds it, to the exclusion of the other, until its duty is fully performed, and the jurisdiction involved is exhausted. Harkrader v. Wadley, 172 U. S. 148, 19 Sup. Ct. 119, 43 L. Ed. 399; Farmers’ Loan & Trust Co. v. Lake Street El. R. Co., 177 U. S. 51, 20 Sup. Ct. 564, 44 L. Ed. 667. We have followed this rule, declaring ‘that the court which first obtains possession of the res or of the controversy, by priority in the service of its process, acquires exclusive jurisdiction for all the purposes of a complete adjudication.’ 505,000 Feet of Lumber, 24 U. S. App. 509, 517, 12 C. C. A. 628, 65 Fed. 236. The rule is not only one of comity, to prevent unseemly conflicts between courts whose jurisdiction embraces the same subject and persons, but, between state courts and those of the United States, it is something more. ‘It is a principle of right and law, and therefore of necessity. It leaves nothing to discretion or mere convenience.’ Covell v. Heyman, 111 U. S. 176, 4 Sup. Ct. 355, 28 L. Ed. 390. The rule is not limited to cases where property has actually been seized under judicial process before a second suit is instituted in another court, but it applies as well where suits are brought to enforce liens against specific property, to marshal assets, administer trusts, or liquidate insolvent estates, and in all suits of a like nature. Farmers’ Loan & Trust Co. v. Lake Street El. R. Co., supra; Merritt v. Steel Barge Co., 24 C. C. A. 530, 79 Fed. 228, 49 U. S. App. 85. The rule is limited to actions which deal either actually or potentially with specific property or objects. Where a suit is strictly in personam, in which nothing more than a personal judgment is sought, there is no objection to a subsequent action in another jurisdiction, either before or after judgment, although the same issues are to be tried and determined; and this because it neither ousts the jurisdiction of the court in which the first suit was brought, nor does it delay or obstruct the exercise of that jurisdiction, nor lead to a conflict of authority where each court acts in accordance with law. Stanton v. Embry, 93 U. S. 548, 23 L. Ed. 983; 8 Rose, Notes, 1010. The doctrine is lucidly stated by Judge Thayer in Merritt v. Steele Barge Co., supra. Subject to the conditions stated, where jurisdiction, concurrent with the state court, exists in the federal court, parties have the right — the necessary diversity of citizenship existing — to invoke that concurrent jurisdiction, and it may not be denied them.”
The difficulty lies not in an understanding of the principle of the rule, but in applying it correctly to the various cases as they arise. Bearing in mind, as stated in Buck v. Colbath, supra, that jurisdiction rightfully assumed does not “exclude all other courts from all right to adjudicate upon other matters having a very close connection with those before the first court, and in some instances requiring a decision of the same questions exactly,” and that, in determining the question of exclusive jurisdiction, “we must have regard to the nature of the remedies, the character of the relief sought, and the identity of the parties in the different suits,” it remains to ascertain the nature of-the bill filed in the creditors’ suit, the relief sought and allowable under the bill, the issues therein proper to be resolved and determined by the
The bill is a creditors’ bill founded upon the judgment for $565,-081.22, recovered April 22, 1903. It sets forth the ownership by the North Chicago Company of certain franchises and railroads, subject to the mortgage of $3,171,000, and another mortgage of $1,614,000, the lease of the' property to the Union Traction Company of June 1, 1899, and the deposit of the shares of stock stated in the lease; that the company has no other property which could be subjected to the payment of its debts; that it has a floating indebtedness of about $2,316,000, presently maturing, and which the Union Traction Company had by its lease agreed to pay or renew; that, if the Union Traction Company fully kept and performed the terms of the lease, there would be adequate provision for the payment of the floating indebtedness and of the interest upon the bonded debt; that the corporate life of the defendant corporation is for a term of 99 years from February 14, 1859; that the city of Chicago claims that a large number of the franchises of the defendant would expire in the year 1903, and in subsequent years (some of them on the 30th of July, 1903), and had threatened that, unless the Union Traction Company should consent to terms satisfactory to the authorities of the city, the right and privilege of transporting passengers would be sold by the city to some one other than the railroad company, with the effect, substantially, of transferring to other persons the franchises owned by the defendant corporation, and leased to and exercised by the Union Traction Company — and charged that the city, oppressively, illegally, and unreasonably, would entertain no application for the renewal of the franchise unless the defendant company would renounce, abandon, and repudiate the obligation and authority claimed to have been conferred and imposed by the Legislature of the state, and the right claimed to have been granted for the operation of certain of their railways during the period of 99 years from February 14, 1859; that that action of the city had destroyed the credit of the defendant corporation, so that it is impossible to obtain a renewal of its floating indebtedness, the credit of the Union Traction Company had been destroyed, and the company was insolvent; that, in case of default by the Union Traction Company in the performance of the condition of the lease, the only property which the defendant possesses, which could be used for the satisfaction of its debts, would be the several street railways owned by it along the routes mentioned, with their equipment and appurtenances, and 2,501 shares of the capital stock of the North Chicago City Railway Company, and that the dividend payable upon that stock under the lease would be insufficient to pay the interest upon the mortgages; that the railroads owned by the defendant corporation are incapable of being properly operated apart from the general system of railways owned by the North Chicago City Railway Company; and that the earnings of the railroads owned by the defendant corporation, if separately operated, would not suffice to pay the deficiency of interest upon the mortgage debts of the defendant, ft then sets forth the tripartite agreement previously herein stated, and the
The bill was confessed by the North Chicago Company, the sole defendant therein, and no issue was raised or presented for judicial determination.
The bill, it will be observed, is a creditors’ bill, seeking the payment of the complainant’s judgment in the first instance, and, in subordination thereto, the payment of the claims of other creditors, and, being confessed, the matter becomes one of mere administration. It was, of course, proper for the court to take into its possession, upon the bill filed against the Union Traction Company, the custody of the railroad. The North Chicago Company was not in possession and was not operating any road. Its entire property was leased to the Union Traction Company. Its entire income consisted in the rentals received from the Union Traction Company. It had no disbursements to make from that income in respect of its debts, except upon default by the Union Traction Company, for the interest upon its mortgage and floating indebtedness was to be paid by the lessee, and the principal of the indebtedness to be paid or renewed by it as it should mature. The rental was manifestly a fixed percentage of the capital stock of the North Chicago Company intended for distribution among its stockholders. So that practically all that the court? below, through its receivers, could obtain from the North Chicago Company, were the rentals payable by the Union Traction Company, and these rentals could undoubtedly have been applied to the payment of the complainant’s debt; but in fact, with the consent of the complainant, and under the order of the court, the receivers paid to the stock
The bill, then, being a mere creditors’ bill, with possibly the right of the court in a proper proceeding to determine and assert the rights of the defendant corporation as against the city of Chicago, the duty of the court would seem to be clear, and that was to marshal assets, to collect the rentals to become due under the lease, to protect the rights of the North Chicago Company under the lease, to obtain satisfaction of the complainant’s debt and of all other debts due by the company, to enforce payment of those debts from the lessee company, which had obligated itself to pay them, and if a sale were not necessary to accomplish this, and the Union Traction Company was not able to meet its obligations under the lease, to take from it possession of the leased property and return it to the lessor, for the receivership did not operate to dissolve the corporation or to suspend its corporate faculty.
We now come to the nature of the bill filed in the state court, the prosecution of which was enjoined. It was presented by certain stockholders of the North Chicago Company,. on behalf of themselves and all other stockholders, against the Union Traction Company, the Illinois Trust & Savings Bank, and certain individual defendants, the receiver not being a party to the bill. It charges that the judgments obtained by the Guaranty Trust Company were recovered in collusion with the Union Traction Company, and for debts which the latter company was bound, under its lease, to pay and discharge; that the directors of the North Chicago Company were officers, attorneys, or persons in the service of the Union Traction Company; that, at a special meeting of the board of directors, held secretly and without notice, and which was controlled by the officers and attorneys of the Union Traction Company, each of the directors separately resigned, and a new board of directors was elected; that the stockholders had no voice in the selection of the directors, and were deprived of the right to vote; that the majority of the officers and directors then elected were not interested in the North Chicago Company, but all of them were interested, as stockholders or otherwise, in the Union Traction Company, and are subservient to and under the control of that company; that, at the request and by the direction of the officers of the Union Traction Company, this board of directors adopted a new lease with the Union Traction Company, subject to the approval of the holders of a majority of the stock of the North Chicago Company at a stockholders’ meeting to be called for that purpose; and the agreement there adopted was deposited in escrow, to be turned over when approved by a majority of the stockholders, and when a like agreement by the West Chicago Company should be made and delivered to the Traction Company. By the provisions of the amendatory lease, the term was extended from 99 years, as specified in the original lease, to 984 years, and the rental was reduced from 12 per cent, to 6 per cent, upon the stock of the North Chicago Company, and that the rights reserved to the North Chicago Company with respect to the 20,000 shares of stock deposited under the tripartite agreement were waived; that the Union Traction Company claimed the right and threatened
Does the prosecution of this suit in any way encroach upon the rightful jurisdiction of the court below ? It in no way seeks to take from the receivers the possession of any physical property of the North Chicago Company. It in no way affects the receivers in the management of the property under their receiverships. It in no way affects any issue presented under the creditors’ bill, or arising under any intervening petition. Under a well-recognized principle, the court below might, at the commencement of the proceedings under the creditors’ bill, have directed the receivers of the Union Traction Company to disavow the lease, and to account only for a fair rental value during possession of the property, by the receivers. It did not do that, but ratified the lease by directing payment of rental thereunder, and all parties treated the lease as existing. The complainants in the bill in the state court sought to prevent an extension of the term of the lease for a long period at a greatly reduced rental. That was matter which concerned the parties to it, and with which the receivers had rightfully nothing to do. There was no controversy respecting it under the creditors’ bill. There could be none, for, according to the allegations of the bill in the state court, the North Chicago Company, the sole defendant to the creditors’ hill, controlled by the Union Traction Company, consented to the proposed amendment, and petitioned the court, in which the receivers united, to enjoin the stockholders of the company from asserting their supposed rights with respect to the alleged wrongful action of the board of directors of the North Chicago Company. All this has nothing to do with the marshaling of the assets of the North Chicago Company, and the subjection of them to the payment of its creditors. Surely, when the Union Traction Company has assumed the payment of all of the debts of the North Chicago Company, and has failed in its obligation, and has obtained control of the directors of the North Chicago Company, so that they act solely in the interest of the Union Traction Company, it ought not to be permitted that, ex parte, without opportunity of hearing, or at all, the stockholders of the North Chicago Com
Anxious to preserve the federal jurisdiction from improper interference by a state tribunal, we are equally desirous that there should be no improper interference with the rightful jurisdiction of a state court by a federal tribunal. We are unable to perceive that the prosecution in the state court of the suit enjoined by the decree appealed from does in any way interfere with the possession of the res by the receivers, or encroaches upon any rightful jurisdiction under this creditors’ bill.
The decree or order of October 9, 1903, is reversed, and the cause is remanded, with the direction to the court below to set the same aside, and to vacate the order of August 15, 1903, and to dismiss the petition of the North Chicago Company filed August 15, 1903.
