154 F. 273 | 7th Cir. | 1907
Lead Opinion
after stating the facts, delivered the opinion of the court.
The ultimate facts involved in this review are simple, however serious their import in the administration of equitjr powers and duties, and their effect in the commitment of the plaintiff in error for contempt. The propositions of law upon the general powers of the trial court to restrain the prosecution of cognate suits in other courts, and in reference to the rights and privileges of counsel in actions'so brought — which are presented in one of the aspects of this adjudication and discussed in the arguments — are not free from difficultjr under the authorities. It is not needful, however, to decide either of these important general questions, unless the validity of the commitment rests upon their solution.
The in junctional order of which violation is adjudged was not contained in the express terms of the foreclosure decree, which was entered in 1903 (and affirmed upon appeal to this court), but was made a part of the order or decree entered May 5, 1905, confirming the sale made April 18, 1905, as reported to the court under the decree of 1903. Primarily, therefore, jurisdiction must appear for making, in that proceeding and at that stage, an order which became operative as a personal injunction against the individual bondholders and their special counsel, applicable to the alleged violation by the plaintiff in error, to uphold the commitment. Neither the bondholders nor the plaintiff in error were named as parties to the decree or subsequent order, nor cited in or recognized as parties of record. True, the trustee named in the trust deed securing the bonds in controversy was a party; and the general rule under such instrument and relation is firmly established chat the trustee represents the bondholders in such foreclosure proceedings involving interests under the trust deed, and that his'presence is sufficient to bind the rights and interests of bondholders, who are thus constructively served and present. In the foreclosure proceedings thereupon it may well be assumed that the court possessed ample power to make all needful orders or provisions, interlocutory or final, not only to foreclose interests which are represented, but to protect the res and interests involved in the litigation for complete administration.
The final decree theretofore entered (1903) was complete and binding upon all parties for the intended foreclosure, and for definition of the title which would be conveyed to the purchaser of the res upon sale, together with provisions for and terms of conveyance and possession. Except for the last-mentioned purposes of sale and conveyance, and the questions and objects reserved in the concluding paragraphs (25, 26, 27), the controversy was closed, and no further relief was open in the suit. To carry forward these specific purposes and determine the reserved questions, orders and directions were authorized at the foot of the decree, but jurisdiction was not retained beyond those which were so specified, all executory in their nature.
The sole reliance for support of the in junctional order in the terms
The right of the purchaser or his successor in interest to invoke the jurisdiction of the trial court, by supplemental bill in the action, against a disturber of title and possession so acquired, in derogation of the decree of foreclosure, is expressly upheld in Julian v. Central Trust Co., 193 U. S. 93, 109, 24 Sup. Ct. 399, 48 L. Ed. 629, so that the exercise of- jurisdiction to prevent actual interference is unquestionable, when the parties are before the court under issues duly made. No authority is brought to our attention, which sanctions either (1) supplementary injunctional orders of the present nature, without personal service and issue raised upon the infringement; or (2) enjoining the mere commencement of suits in a state court, with no disturbance of possession, unless within the exception named in section 720, Rev. St. [U. S. Comp. St. 1901, p. 581]. And we are of opinion that the order in question, in so far, at least, as it was treated as operative against the filing of bills on behalf of individual bondholders, was not within the limited jurisdiction reserved in the trial court.
The doctrine is well established that the right o-f a court of equity to decide all questions arising in the case, when jurisdiction is once acquired, is subject to important limitations; that it extends only to controversies which arise and are submitted by proper proceedings between adverse parties. -As stated in Windsor v. McVeigh, 93 U. S. 274, 282, 23 L. Ed. 914:
“All courts, even tlie highest, are more or less limited in their jurisdiction.. * * * Though the court -may possess jurisdiction of a cause, of the subject-matter, and of the parties, it is still limited in its modes of procedure, and in the extent and character of its judgments. It must act judicially in*279 all things, and cannot then transcend t.he power concurred by the law. ⅜ * ⅞ So a departure from established modes of procedure will often render the judgment void. ⅜ * * The decree oí a court of equity upon oral allegations, without written pleadings, would be an idle act, oí no force beyond that of an advisory proceeding of the chancellor. And the reason is that the courts are not authorized to exert their power in that.way.”
When a court transcends the limits of its authority in a given case, its orders are void, not merely erroneous. Id.
In the proceedings of May 5, 1905, the sole questions before the court, as before stated, were the action to be taken in reference to the sale as reported, and disposition of the proceeds. No individual holders of bonds were cited or called in to answer any application for the injunctional order; nor does it appear that application was made for it. It is true that certain of the bondholders objected to confirmation of the sale, and written specifications were filed on their behalf, by the plaintiff in error, as “appearing separately for bondholders to obj ect to confirmation”; but upon the hearing it was ordered that “the said objections and exceptions” he and they were “overruled and held for naught.” These objectors were there for no other purpose, and were out of the proceeding when their objections were overruled: and uo conduct appears upon the part of either to authorize the exercise of jurisdiction in personam over the plaintiff in error or his clients to restrain them from setting up or suing upon their supposed independent claims, however groundless such claims may appear when brought to hearing.
The contention in support of the order and its application to the suit commenced by the plaintiff in error is twofold and substantially this : That the order was valid against the trustee, who represented the bonds in controversy, and was a party to the proceedings, and was thus authorized and made binding as a personal injunction against each of the bondholders so represented. We are not satisfied that the premise is sound of right to enjoin the trustee; but, however that may he, we are satisfied that the injunction was inoperative as against the proceeding in question on the part of the bondholders.
The property and subject-matter of the decree were neither molested, nor threatened with disturbance in the hands of the court or pending administration, so that no need appears for an injunction to preserve the status. If suit were commenced upon the bonds, either in that court or elsewhere, no deprivation of rights which were lawfully conferred by the prior decree of the federal court could have judicial sanction, as the application for atid grant of a restraining order necessarily assumes to justify the restraint. The mere institution oí suit in such case does not disturb the prior jurisdiction or adjudication in any degree. As said by Judge Grosscup, speaking for this court, in Copeland v. Bruning, 127 Fed. 550, 552, 63 C. C. A. 435, in reference to like contention that a suit in the state court “challenged the decree of the federal court”:
“Let this be' admitted, even then the injunction is not justified, for to the extent that the subject-matter of the suit in the state court was already settled by former adjudication, the defense should have been by plea in the court where the suit was brought, and not by injunction in another jurisdic*280 tion. No possession of the res was involved, and no conflict of courts could have followed, that would have affected the decree in the United States court.”
Again, in Royal Trust Co. v. Washburn, B. & I. R. R. Co., 139 Fed. 865, 867, 71 C. C. A. 579:
“The point at which interference with the possession of the federal court begins is not the invoking in the state court of its power in that respect, but the attempt to exercise such' power, to the extent that the exercise of such power would interfere, actually and physically, with the possession of the property by the United States court.”
In the case last cited an adjudication of the federal court-committing attorneys for contempt of that court was reversed, although they had applied for and obtained an injunction in a state court against the execution by officers of the federal court of the final decree of such court, and had delivered the restraining order to the sheriff for enforcement. While commitment of the sheriff was upheld, for actual invasion and interference, the attorneys were held not guilty, as their procedure was not an invasion of the federal jurisdiction. Section 720, Rev. St. [U. S. Comp. St. 1901, p. 581],.expressly proh hits an injunction “to stay proceedings in any court of a state,” except as authorized in bankruptcy; and, while this provision is not applicable when the jurisdiction of the federal court is disturbed thereunder by actual invasions (Julian v. Central Trust Co., supra), it may rightly be applicable to deny injunctional relief against orderly proceedings in any court, even by parties, without such invasion (Guaranty Trust Co. v. North Chicago St. R. Co., 130 Fed. 801, 805, 65 C. C. A. 65). The court may exercise ancillary jurisdiction, as in the Julian Case, when properly invoked on behalf of the purchaser under the decree, to prevent invasion of rights which were adjudicated and vested in such purchaser; but we do not understand that sanction appears in any of the authorities, either for warranty of title or possession upon judicial sale, or for an injunctional order to prevent future litigation against the purchaser, beyond the saving effect of the decree. Under the doctrine of caveat emptor, which is strictly applicable to all judicial sales (The Monte Allegre, 9 Wheat. [U. S.] 616, 645, 6 L. Ed. 174; Sorer on Judicial Sales, §§ 174, 475, 476, 528), authority for such provision in the order may well be doubted, even as against the trustee.
Raying aside, however, the question whether such injunction can be granted as against parties who are personally served, the plaintiff in error and bondholders represented by him were not parties in any sense which would authorize jurisdiction over their persons to make such order binding upon them. Assuming that the foreclosure suit and decree bound the holders of all bonds, through the substituted service upon the trustee, it -was thus effectual only as a proceeding in rem and to the extent of their interest in the res, and authorized no procedure or relief in personam 'against the individual bondholders, constructively bound by such decree. Pennoyer v. Neff, 95 U. S. 714, 727, 24 L. Ed. 565; 9 Notes U. S. Rep. 339. So, if the injunctional order were germane, authorized, and operative as
While the trust deed was before the trial court, as part of the subject-matter in the foreclosure suit, and (presumptively) construed otherwise in entering the final decree, the bondholders were not personally served and their contention was not heard in such interpretation and entry. Whatever be their actual right, or the effect to be given that adjudication, they cannot be restrained in that proceeding — to say the least, without personal service upon them — through any injunction against the trustee, from the common right of suit upon their alleged independent claim, which arises under their grantor, not under the trustee. If res judicata, or otherwise without merit, such determination, in the first instance at least, is for the forum in which such suit is brought, and the court of prior jurisdiction of the subject-matter cannot, as we believe, enjoin such procedure in another court of coordinate jurisdiction, nor can it rightly be assumed by any court, in thus directing conveyance to a purchaser under its decree, that coordinate judicial tribunals would disregard such decree or fail to give it due effect when so involved in subsequent litigation.
We are of opinion, therefore, that the injunctiouai order in question was without force against the individual bondholders or their attorney, and that the plaintiff in error was not guilty of contempt in his proceedings in the state court.
Dissenting Opinion
(dissenting). Though the facts are fully and accurately stated in the opinion of the court, I shall summarize such of them, in their logical order, as are necessary to bring out the view upon which this dissent is founded.
The original bill was not the ordinary and usual bill for foreclosure, nor was the decree the ordinary and usual decree foreclosing a mortgage. The bill brought to the attention of the court the fact that certain property claimed by the New England Water Company as its own, free from the Farmers Loan and Trust Company mortgage, and mortgaged by the New England Company as unencumbered property to the International Trust Company, was not in fact property free from the Farmers Loan and Trust Company mortgage, but was property subject to the Farmers Loan and Trust Company mortgage
Under the decree thus entered — a decree judicially determining the legal status of the property in dispute — all the property, including the property in dispute, was offered for sale, under a provision that a committee of bondholders represented by the Farmers Loan and Trust Company might bid; and, should they become the purchasers, might pay for the same, by turning in cash sufficient to discharge a previous mortgage in which they were not interested, and by paying in cash to the bondholders not represented bv the committee, their proportion of the purchase price, together with costs of suit — the bonds of those represented by the committee to be turned in for the balance; under which provisions — all of them provisions in the decree — the committee made the'highest and best bid for the property.
• When this sale came to the court for confirmation, tire appellant appeared and filed objections as counsel for bondholders claiming under the International Trust Company’s mortgage (he had also been counsel throughout the preceding litigation) on various grounds, including one that the selling price was too small, but chiefly on the ground that the individual bondholders whom, he now appeared for, not having been parties, in name at least, to the previous proceedings, were not bound by the decree, and still retained, notwithstanding the decree, a lien or claim upon the property in dispute.
The filing of these objections put the posture of affairs thus: The court .had a bid, based upon a decree that the purchaser was to obtain the property in dispute free and clear from the claim of the International Trust Company, and those claiming under it (meaning of course these individual bondholders); a bid that required that large sums in cash should be paid to a previous mortgage? and to bondholders not represented. But the individual bondholders claiming under the International Trust Company were now in court insisting, that as against them, notwithstanding the clear terms of the decree, the purchaser should obtain no such free and unencumbered title. So the practical question before the court was: Are these individual bondholders foreclosed by that decree, as to this disputed property, or are they not; for if foreclosed, the court could give title free and clear of encumbrance .according to the provisions of the decree; while
Unquestionably, to my mind, the court in overruling these objections, determined — was bound to determine — that the individual bondholders were bound by the original decree, and that the purchaser would take the property free from their claims. There is no other reason or logic in the ruling. And unquestionably too, the injunc-lional order included in the decree of confirmation was intended by the court as a method of protecting the purchaser against the disregard, by the individual objecting bondholders and their counsel, of this ruling — a step taken by the court to secure to the purchaser the kind of title that the court in the original decree had offered to the purchaser. Now. was the court.without power to put that ruling into practical effect ?
The opinion from which I dissent does not hold that the court had no power, in its original decree, to order the property sold, free and clear from the claim of the International Trust Company and those claiming under it; nor that the individual stockholders, whose counsel appellant was, are not parties claiming under the International Trust Company, and for that reason not bound by that portion of the decree. On the contrary it proceeds on the assumption that in the original decree the court had such power; and that these individual bondholders are thus bound.
Nor does the opinion from which I dissent hold, that supplemental to the, foregoing power the court would not have had the power, in the original decree, to enter an in junctional order restraining the International Trust Company, and those claiming under them, and their attorneys, from setting up any pretended title against the title of the purchasers acquired under the court’s deed. On the contrary, respecting that question, the opinion says :
“The propositions o£ law upon the general powers oí the trial court to restrain the prosecution of cognate suits in other courts, and in reference to the rights and privileges of counsel in actions so brought — -which are presented in one of the aspects of this ad,indication and discussed in the arguments — are not free from difficulty under the authorities. It is not needful, however, to decide either of these important general questions, unless the validity of the commitment rests upon their solution.”
And further on the opinion proceeds:
“In die foreclosure proceeding, therefore, it may well be assumed that the court possessed ample power to make all needful orders or provisions interlocutory or final, not only to foreclose interests which are represented, but to protect the res and interests involved in the litigation for complete administration.”
The opinion from which I dissent does not show, specifically at least, that the iujunctioiial order subsequently entered was not known to the individual bondholders or appellant, before the acts constituting the contempt were committed: though it does state that neither the bondholders nor the plaintiff in error were named as parties to the iujunctioiial order, nor cited in, nor recognized as parties of record.
The opinion from which I dissent, puts forth no pretension that if the injunctional order were within the power of the court to enter, appellant can defend against the contempt proceedings on the ground, either that the -proposition of law on which it was founded was erroneous; or that the proceedings were defective or irregular; or that on review on appeal, or in error, the court for any reason other than that of want of power should have vacated the order. And I take it, it is too well settled for further discussion, that a party charged with contempt may not procure a review of the injunctional order entered on any ground other than want of power of the court to enter it — may not obtain a general review of an order by simply defying it.
Assuming,- then, that the court, in its original decree of foreclositre, had power to enter the injunctional order (as assumed though not decided, in the opinion from which I am dissenting; but decided I think in Julian v. Central Trust Company, 193 U. S. 93, 24 Sup. Ct. 399, 48 L. Ed. 629), the opinion proceeds to find that the court was without power to enter the order, in the subsequent confirmatory decree, for the following reasons as I understand them: (a) That such an order was not'within the reservation contained in the original decree; (b) That such an order was not within the issues presented to the court on the confirmatory decree; and (c) That the individual bondholders,, and the plaintiff in error, were not in court at the time the injunctional order was entered, upon any issue that could eventuate in such an injunction.
I take up these reasons in the order stated. Eirst then as to the reservation in the original decree. The original decree reserves full power of “enforcing the conditions of this decree, and of any further order made herein.” Why is not that broad enough to include the condition that the purchaser, at the foreclosure sale, should take title, free and clear of the claims of the International Trust Company and those claiming under them? Indeed, the proviso just named, was one of the main conditions of the decree. .Upon it rested the practical question of what amount the property would sell for, or whether the property could be sold at all. To clear up that condition, the main litigation was fought out — there was no other substantial issue in the case; so that to say now that the court, in entering its original decree, did not intend to reserve power, to the extent if necessary of all the power it possessed, to enforce that condition of the decree, by any order that it might subsequently enter, is to say that the court kept its eyes and its decree open to the. smaller contingencies that might transpire, but closed both its decree and its eyes to the single great contingency that might intervene to defeat the court’s purpose, and the court’s power to subsequently carry out that purpose.
Assuming then that the injunctional order was within the reservations contained in the original decree, is there anything in the proposition that it was not within the issues subsequently presented to the
The injunctional order entered is an unusual one. But the case in some respects is unusual. The practical consideration behind the court’s determination of the status of the disputed property — whether it should be sold free and clear of the claim of the International Trust Company and those claiming under it, or not — was not merely that the parties might know what, in law, was the status of the disputed property. The practical consideration, behind that portion of the decree, was that the court might obtain the highest price that the property would command, by selling it, in fact, free and clear of such encumbrances. And to secure such a sale, to make good its assurance that the property would gO‘ to the purchaser free and clear of the claims adjudicated, the court had power, in my judgment, at any stage in its proceedings, by giving proper notice to the parties bound by the decree, to lay its mandate of prohibition against their doing anything that would defeat the decree. Indeed, to say now to the purchaser, that it was not a water plant, free and clear of all the claims litigated and determined that he was buying, but a water plant encumbered by a renewed lawsuit, that might be carried on in any of the courts of the country, seems to me to be flying in the face of the very con
The judgment of the Circuit Court is reversed, with direction to dismiss the petition and discharge the plaintiff in error.