McCabe v. Guaranty Trust Co. of New York

243 F. 845 | 2d Cir. | 1917

ROGERS, Circuit Judge

(after stating the facts as above). 'This suit is ancillary in its nature, and is brought by two citizens of the state of South Carolina against a New York corporation residing in the Southern District of New York, and an injunction is asked to restrain the defendant from proceeding in an action which was commenced by it in the Supreme Court of New York county, and which is alleged to have been removed by the plaintiffs herein, being the defendants in the action removed. The District Judge has refused to remand the original action, and holds it to have been properly removed; and he has refused the injunction for reasons which will be referred to hereinafter.

The defendant in this suit in its answer denies that this court has the power or jurisdiction to entertain and take jurisdiction of the original action, and denies that that action is legally removed or can be removed. It also avers “that this court is without power and jurisdiction to entertain and take jurisdiction of this action as ancillary to the aforesaid .action, because this court could not take jurisdiction of and proceed with or take any steps in the original action in the state court if removed to this court, and would be required to remand such action or to dismiss the same from its further consideration.”

[1] The question whether the action was properly removed from the state court was raised in the District Court on a motion to remand, and that court decided that the case was legally removed, and overruled the motion to remand. Whether the refusal to remand was error is not before this court in the present suit. The way to correct that error, if error was committed, is not by means of an averment in an answer filed in an ancillary suit. The Guaranty Trust Company denies that the original action was properly removed. In other words, it denies the jurisdiction of the District Court over a suit which is removed solely on the ground of diverse citizenship, where the assignees do not all live in the same district. The question whether jurisdiction exists under such circumstances is a most important one, upon which, unfortunately, the judges in the Southern district hold contradictory views. In the original suit now under discussion the District Judge thought he had jurisdiction, and, as we have seen, refused to remand. In Doherty v. Smith (D. C.) 233 Fed. 132 (1915). Judge Reamed Hand felt constrained to hold the reverse, not feeling himself sufficiently assured whether Ex parte Wisner, 203 U. S. 449, 27 Sup. Ct. 150, 51 L. Ed. 264, was intended to be overruled by the cases of In Matter of Tobin, 214 U. S. 506, 29 Sup. Ct. 702, 53 L. Ed. 1061 (1906), and of In the Matter of Athanasi Nicola, 218 U. S. 668, 31 Sup. Ct. 228, 54 L. Ed. 1203. While appreciating all this fully, we are prevented from expressing our views upon the subject at this time; for the law is that the jurisdiction of the court as regards the principal suit cannot be questioned in an ancillary proceeding or suit. Johnson v. Christian, 125 U. S. 642, 8 Sup. Ct. 989, 1135, 31 L. Ed. 820 (1888); New Orleans v. Fisher, 180 U. S. 185, 21 Sup. Ct. 347, 45 L. Ed. 485 (1901).

[2] Again, the jurisdiction of the court over this ancillary suit is denied on the ground that the right which the Guaranty Trust Company1 asserts is the right of an assignee, and that, as two of the assignors live in the Southern district of New York and one in tire Eastern district, the suit cannot be maintained, as the assignors are not residents of the same district and consent is not given to be sued in a district in which all the assignors do not reside. Root v. Woolworth, 150 U. S. 401, 413, 14 Sup. Ct. 136, 37 L. Ed. 1123 (1893); Pacific Railroad v. Missouri Pacific Railway, 111 U. S. 505, 522, 4 Sup. Ct. 583, 28 L. Ed. 498 (1884); Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. 27, 28 L. Ed. 145. This court is, however, not only com.pelled to decline to consider at this time the question of jurisdiction as respects the original suit, but is also precluded from questioning the right of the complainants to file the ancillary suit against defendants who do not all reside in the same district. We can only consider tire question of jurisdiction of the ancillary suit so far as to ascertain whether the ancillary character of the suit is made to appear by the allegations of the bill. The rule is that neither the citizenship of the parties nor any other factor that would ordinarily determine jurisdiction has any bearing on the right of the court to entertain jurisdiction of an ancillary suit. There seems to be one exception to the rule as above stated, but the circumstances of this case do not bring it within the exception. See Street on Federal Equity Practice, §§ 1229 and 1230.

[3] This brings us to inquire whether the injunction which the plaintiffs in the ancillary suit are seeking was properly refused. The United States courts are forbidden by act of Congress to enjoin proceedings in state courts, except as authorized by laws relating to proceedings in' bankruptcy; but the prohibition referred to has no application to cases where it is necessary by injunction for a United States court to protect its own jurisdiction. So that, if a cause is properly removed from a state to a federal court, the latter may, when it is necessary to do so, issue an injunction to restrain further proceedings in the state court, if such court should persist in proceeding. This it does by restraining the party against whom a cause has been legally removed from any further steps in the state court. Madisonville Traction Company v. St. Bernard Mining Company, 196 U. S. 239, 245, 25 Sup. Ct. 251, 49 L. Ed. 462 (1905); Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U. S. 146, 154, 34 Sup. Ct. 278, 58 L. Ed. 544 (1914). In the instant case the bill states:

“On information and belief, that the defendant herein the plaintiff in said action, notwithstanding the removal thereof to the District Court of the United States for the Southern District of New York, purposes and intends to proceed in said action in the Supreme Court of New York, and in said court to take further steps in said action and to enter judgment there,” etc.

[4] The answer was filed while the Supreme Court had under consideration the motion to remove the cause, and it denied the right of removal and admitted that, if the Supreme Court decided that the cause was not removable, it intended to proceed in the state court, according to die law of that state and procedure of its courts, but denied each and every other allegation as to its intentions. Before the decree in the District Court, Mr. Justice Mullan, of the Supreme Court of New York, granted the motion to remove tlie cause. The state of facts existing at the time the decree is entered, and not the facts existing at the time the bill is filed, determine the rights of the parties. It Is true that the right to judgment in an action at law depends upon the facts as they exist when the action is commenced; but in equity a different rule governs, and is, as already stated, that the decree in equity is to be shaped as the rights of the parties exist at the time of the decree. This principle was recognized by the Supreme Court of the United States in Randel v. Brown, 2 How. 406, 423, 11 L. Ed. 318 (1844). The courts of New York have recognized it in like manner. Gay v. Gay, 10 Paige Ch. (N. Y.) 369 (1843); Peck v. Goodberlett, 109 N. Y. 180, 189, 16 N. E. 350 (1888); Sherman v. Foster, 158 N. Y. 587, 593, 53 N. E. 504 (1899).

It appearing at the time of the decree that the intention to proceed in the New York court was conditioned solely upon the fact that the New York court should decide to refuse to grant the motion to remove, and as that court did not so decide, but granted the motion to remove the cause, we think the District Court was right in refusing the injunction and in dismissing the bill without prejudice. If any attempt to proceed in the state court contrary to the statements contained in the answer should hereafter be made, the plaintiffs herein are at liberty to renew their application.

Decree affirmed.