Lead Opinion
delivered the opinion of the Court.
These cases were argued in succession and are dealt with in a single opinion because the controlling question in both is the same: Does a federal court have power to stay a proceeding in a state court simply because the claim in controversy has previously been adjudicated in the federal court?
No. 16. In 1935, Toucey brought suit against the New York Life Insurance Company in a Missouri state court. He alleged that in 1924 the company issued him a life insurance policy providing for monthly disability benefits and for the waiver of premiums during disability; that he became disabled in April, 1933, and that the defendant fraudulently concealed the disability provisions from him; that the defendant unlawfully cancelled the policy for nonpayment of premiums; that in September, 1935, he discovered the existence of the disability provisions; that he then applied to the company for reinstatement of the policy and for the payment of disability benefits, and that the company refused.
In 1937, an action at law was brought against the insurance company in the Missouri state court by one Shay, a resident of the District of Columbia. He alleged that he was Toucey’s assignee and that Toucey’s disability entitled him to judgment. It does not appear that the insurance company filed an answer or any other pleading. Instead, a “supplemental bill” was filed in the Western District of Missouri, setting forth the history of the litigation between the parties, alleging that the assignment to Shay was made in order to avoid federal jurisdiction, and praying that Toucey be enjoined from bringing any suit for the purpose of readjudicating the issues settled by the federal decree and from further prosecuting the Shay suit.
A preliminary injunction was granted, and affirmed by the Circuit Court of Appeals for the Eighth Circuit.
No. 19. The Iowa-Wisconsin Bridge Company, a Delaware corporation, in 1932 executed a deed of trust conveying all of its proрerty, principally a bridge across the Mississippi River between Iowa and Wisconsin, to secure a $200,000 bond issue. In 1933, the trustees, an Iowa corporation and a Wisconsin citizen, filed a bill of foreclosure in the federal District Court for the Northern District of Iowa. One of the Bridge Company’s stockholders intervened as a party defendant, alleging that the bonds and mortgage were fraudulent and without consideration. Upon his motion, the Phoenix Finance Corporation, a Delaware corporation which held almost 90% of the bonds, was joined as a plaintiff. The Bridge Company’s answer challenged the validity of the indenture and alleged that the bonds were issued without consideration. Phoenix denied all allegations of fraud.
The case was tried before a master, whose modified conclusions were adopted by the court. Finding that the mortgage and bonds were fraudulently issued and that almost all the bonds were without consideration, the court denied foreclosure. The Circuit Court of Appeals for the Eighth Circuit affirmed,
Phoenix thereafter instituted five separate suits against the Bridge Company in the Delaware state courts, seeking recovery on various notes and contracts claimed to have constituted the consideration for the bonds. The Bridge Company thereupon filed a “supplemental bill” in the Northern District of Iowa, asserting that the issues involved in the state court suits had been made res
The courts below have thus decided that the previous federal judgments are res judicata in the state proceedings, and that therefore, notwithstanding the prohibitory provisions of § 265, the federal courts may use their in-junctive powers to save the defendants in the state proceedings the inconvenience of pleading and proving res judicata.
First. Section 265 — “a limitation of the power of the federal courts dating almost from the beginning of our history and expressing an important Congressional policy — to prevent needless friction between state and federal courts,” Oklahoma Packing Co. v. Gas Co.,
The history of this provision in the Judiciary Act of 1793 is not fully known. We know that on December 31, 1790, Attorney General Edmund Randolph reported to thе House of Representatives on desirable changes in the Judiciary Act of 1789. Am. State Papers, Mise., vol. 1, No. 17, pp. 21-36. The most serious question raised by Randolph concerned the arduousness of the circuit duties imposed on the Supreme Court justices. But the Report also suggested a number of amendments dealing with procedural matters. A section of the proposed bill submitted by him provided that “no injunction in equity shall be granted by a district court to a judgment at law of a State court.” Id., p. 26. Randolph explained that this clause “will debar the district court from interfering with the judgments at law in the State courts; for if the plaintiff and defendant rely upon the State courts, as far as the judgment, they ought to continue there as they have begun. It is enough to split the same suit into one at law, and another in equity, without adding a further separation, by throwing the common law side of the question into the State courts, and the equity side into the federal courts.” Id., p. 34. The Report was considered by the House sitting as a Committee of the Whole, and then was referred to successive special committees for further consideration. No action was taken until after Chief Justice Jay and his associates wrote the President that their cir
Charles Warren in his article Federal and State Court Interference, 43 Harv. L. Rev. 345, 347, suggests that this provision was the direct consequence of Randolph’s report. This seems doubtful, in view of the very narrow purpose of Randolph’s proposal, namely, that federal courts of equity should not interfere with the enforcement of judgments at law rendered in the state courts. See Taylor and Willis, The Power of Federal Courts to Enjoin Proceedings in State Courts, 42 Yale L. J. 1169, 1171, n. 14.
There is no record of any debates over the statute. See 3 Annals of Congress (1791-93). It has been suggested that the provision reflected the then strong feeling against the unwarranted intrusion of federal courts upon state soverеignty. Chisholm v. Georgia,
Regardless of the various influences which shaped the enactment of § 5 of the Act of March 2, 1793, the purpose and direction underlying the provision are manifest from its terms: proceedings in the state courts should be free from interference by federal injunction. The provision expresses on its face the duty of “hands off” by the federal courts in the use of the injunction to stay litigation in a state court.
Second. The language of the Act of 1793 was unqualified: . . nor shall a writ of injunction be granted to stay proceedings in any court of a state ...” 1 Stat. 335. In the course of one hundred and fifty years, Congress has made few withdrawals from this sweeping prohibition:
(1) Bankruptcy proceedings. This is the only legislative exception which has been incorporated directly into § 265: “. . . except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.” 36 Stat. 1162. This provision, based upon § 21 of the Bankruptcy Act of 1867, 14 Stat. 526, was inserted in the Act of 1793 by the Revisers. R. S. § 720;
(2) Removal of actions. The Removal Acts, ever since the Act of September 24, 1789, 1 Stat. 73, 79, have provided that whenever any party entitled to remove a suit shall file with the state court a proper petition for removal and a bond with good and sufficient surety, it shall then be the duty of the statе court to accept such petition and bond “and proceed no further in the cause.” Section 265 has always been deemed inapplicable to removal proceedings. Dietzsch v. Huidekoper,
(3) Limitation of shipowners’ liability. The Act of 1851 limiting the liability of shipowners provides that after a shipowner transfers his interest in the vessel to a trustee for the benefit of the claimants, “all claims and proceedings against the owner or owners shall cease.” 9 Stat. 635, 636. Being a “subsequent statute” to the Act of 1793, this provision operates as an implied legislative amendment to it. Providence & N. Y. S. S. Co. v. Hill Mfg. Co.,
(4) Interpleader. The Interpleader Act of 1926, 44 Stat. 416, amended the 1917 Interpleader Act, 39 Stat. 929, to provide as follows: “Notwithstanding any provision of the Judicial Code to the contrary, said [district] court shall have power to issue its process for all such clаimants and to issue an order of injunction against each of them, enjoining them from instituting or prose-
(5) Frazier-Lemke Act. The filing o£ a petition for relief under this Act subjects the farmer and his property, wherever located, to the “exclusive jurisdiction” of the federal court. And except with the consent of the court, specified proceedings against the farmer or his property “shall not be instituted, or if instituted at any time prior to the filing of a petition under this section, shall not be maintained, in any court . . .” 47 Stat. 1473. See Kalb v. Feuerstein,
Third. This brings us to applications of § 265 apart from these statutory qualifications. The early decisions of this Court applied the Act of 1793 as a matter of course.
The Act of 1793 expresses the desire of Congress to avoid friction between the federal government and the states resulting from the intrusion of federal authority into the orderly functioning of a state’s judicial process. The reciprocal doctrine of the res cases is but an application of the reason underlying the Act. Contest between the representatives of two distinct judicial systems over the same physical property would give rise to actual physical friction. The rule has become well settled, therefore, that § 265 does not preclude the use of the injunction by a federal court to restrain state proceedings seeking to interfere with property in the custody of the court.
Another group of cases is said to constitute an exception to § 265, namely, where federal courts have enjoined litigants from enforcing judgments fraudulently obtained in the state courts. Marshall v. Holmes,
Fourth. We come, then, to the so-called “relitigation” cases, the first of which is Dial v. Reynolds,
Fifth. We find, therefore, that apart from Congressional authorization, only one “exception” has been imbedded in § 265 by judicial construction, to wit, the res cases. The fact that one exception has found its way into § 265 is no justification for making another. Furthermore, the res exception, having its roots in the same policy from which sprang § 265, has had an uninterrupted and firmly established acceptance in the decisions. The rule of the res cases was unequivocally on the books when Congress reenacted the original § 5 of the Act of 1793, first by the Revised Statutes of 1874 and later by the Judicial Code in 1911.
In striking contrast are the “relitigation cases.” Loose language and a sporadic, ill-considered decision cannot be held to have imbedded in our law a doctrine which so patently violates the expressed prohibition of Congress.
It is indulging in the merest fiction to suggest that the doctrine which for the first time we are asked to pronounce with our eyes open and in the light of full consideration, was so obviously and firmly part of the texture of our law that Congress in effect enacted it through its silence. There is no occasion here to regard the silence of Congress as more commanding than its own plainly
Section 265 is not an isolated instance of withholding from the federal courts equity powers possessed by Anglo-American courts. As part of the delicate adjustments required by our federalism, Congress has rigorously controlled the “inferior courts” in their relation to the courts of the states. The unitary system of the courts of England is saved these problems.
The guiding consideration in the enforcement of the Congressional policy was expressed by Mr. Justice Campbell, for the Court, in Taylor v. Carryl,
“The legislation of Congress, in organizing the judicial powers of the United States, exhibits much circumspection in avoiding occasions for placing the tribunals of the States and of the Union in any collision.”
We must be scrupulous in our regard for the limits within which Congress has confined the authority of the courts of its own creation.
Reversed.
Notes
Pleading a federal decree as res judicata in a state suit raises a federal question reviewable in this Court under § 237 (b) of the Judicial Code, 43 Stat. 937, 28 U. S. C. § 344 (b). Dupasseur v. Rochereau,
Formulated as a contraction of the federal courts’ equity jurisdiction, the Act of 1793 “limits their general equity powers in respect to the granting of a particular form of equitable relief; that is, it prevents them from granting relief by way of injunction in the cases included within its inhibitions.” Smith v. Apple,
The last clause of § 5 of the Act of 1793, outlawing the familiar ex parte injunction, affords another illustration of hostility to chancery practice: “nor shall such writ [of injunction] be granted in any case without reasonable previous notice to the adverse party, or his attorney, of the time and place of moving for the same.” 1 Stat. 335.
Section 262 of the Judicial Code, 36 Stat. 1162, 28 U. S. C. § 377, is derived from § 14 of the Judiciary Act of 1789, 1 Stat. 81, which provided that the “courts of the United States shall have power to issue writs of scire facias, habeas corpus, and all other writs not specially provided for by the statute, which may be necessary for the exercise of their respective jurisdictions, and agreeable to the principles and usages of law.” The general powers thus given to the federal courts were obviously limited by the subsequent enactment of the specific prohibitory provisions of the Act of 1793.
The first case arising under the provision was Diggs & Keith v. Wolcott,
The extent to which a federal court’s exclusive control over the res may require use of the injunction to effectuate its decrees in rem is illustrated by Riverdale Mills v. Manufacturing Co.,
For similar reasons we need not here consider cases like Ex parte Young,
The Court also held that in a foreclosure proceeding the complainant cannot join a third person who claims adversely to the mortgagor and mortgagee, and that consequently there was a misjoinder of parties.
Root v. Woolworth,
There is no warrant for the assumption that, in the proposals for the Judicial Code of 1911, Congress had before it the “relitigation” exception as settled doctrine, and that by § 265 gave it legislative confirmation. The Report of the Special Joint Committee on Revision and Codification of the Laws of the United States annotated the Act of 1793 with citations to twenty-six decisions of this Court. Sen. Rept. No. 388, 61st Cong., 2d Sess., p. 470. Yet no reference was made to four of the five decisions of this Court prior to the
Dissenting Opinion
dissenting:
The controlling issue in both the Toucey and the Phoenix Finance cases is the power of a federal court to pro
As originally enacted, § 265 was a single line in a two page act concerning practice in the federal courts, Act of March 2, 1793, c. 22, § 5, 1 Stat. 334. The act’s disconnected provisions were amendments to the statute establishing Judicial Courts of the United States. The short section in which § 265 appeared on the one hand enlarged
We are not relegated to such speсulations, however. This provision in one form or another has been embodied in our statute law since 1793. It was continued by the adoption of the Revised Statutes of 1878 and the Judicial Code of 1911. It and the cases interpreting it have been woven into the fabric of our law through the decades. What changes would have been made in its form to meet the needs of our expanding jurisprudence, were it not for the flexibility supplied by judicial interpretation, we can only conjecture. Certainly when the Code of 1911 restated its terms, the Congress took into consideration what had by that time come to be its accepted interpretation. Granted that § 265 is not a sentence or section of a legislative scheme whose meaning is to be sought in the purpose of the entire enactment or series of enactments,
The courts properly are hesitant to'depart from literalism in interpreting a statute.
There exists no divergence of view in regard to the power of federal courts to enjoin proceedings in state courts where the state action may embarrass or interfere with the federal court’s prior control over a res which is in its possession.
As early as 1893 this Court declared, in Root v. Woolworth,
Prout v. Starr,
In 193 U. S. appeared the case of Julian v. Central Trust Company. A railroad property in North Carolina had been sold under foreclosure proceedings in the federal circuit court. The decree was that the property be sold free of all claims of parties and the judicial sale was confirmed to the Southern Railway Company. Some years later a cause of action arose which was prosecuted to judgment in a state court against the original mortgagor without notice to or claim against the purchaser, the Southern. In the face of a threat to sell the property formerly conveyed by the federal decree, the circuit court enjoined the state proceedings. This Court said, рp. 112, 114: “In such case we are of opinion that a supplemental bill may be filed in the original suit with a view to protecting the prior jurisdiction of the Federal court and to render effectual its decree. ... In such cases where the Federal court acts in aid of its own jurisdiction and to render its decree effectual, it may, notwithstanding sec. 720, Rev. Stat., [§ 265 J. C.] restrain all proceedings in a state court which would have the effect of defeating or impairing its jurisdiction. ... It is conceded that the Federal right could be set up in the state court from which the execution issued, and, if denied, the ultimate rights of the parties can be determined upon writ of error to this court. In the view we have taken of this case the Federal court had not lost its jurisdiction to protect the purchaser at its sale upon direct proceedings such as are now before us.”
It is quite clear that the Court in both the Julian and the Riverdale cases was intent not on protecting a res, since that had long passed from its hands, but on avoiding relitigation by executing its decrees. This appears particularly from their reliance upon French v. Hay,
The Terry case, cited under the Riverdale Mills case, supra, is a good illustration of the permeation of our law by the principle of protection of federal decrees by injunctions against prosecuting state suits which relitigate settled issues. In Sharon v. Terry, a former decree had determined the fraudulent character of a marriage contract, and had enjoined all efforts to establish rights under any of its provisions. Notwithstanding this decree, a party thereafter sought and obtained a judgment of the highest court of the state determining the marriage contract valid. There was no plea of res judicata in the state proceedings. After the entry of the state judgment', the personal representative of the winning party in the federal suit revived that proceeding and obtained a
The opinion was by Justice Field of this Court, on circuit, and stated: “The decree of the federal court, when revived, may be used to stay any attempted enforcement of the judgment of the state court.” P. 364. It is true that the opinion shows that the circuit court was of the view that prior jurisdiction of an in personam cause gave the federal court authority to issue an injunction against state proceedings. P. 366. But the decision was directly on the point of enforcement of a decree. When the case came to this Court it was affirmed without consideration of § 265 on the ground that the propriety of the revivor was the only matter for decision,
In the later case of Missouri Pacific Ry. Co. v. Jones,
The last case in this Court, Local Loan Co. v. Hunt,
Other federal courts, since the adoption of the Judicial Code, have continued to enjoin relitigation of settled issues.
We think it may be accurately stated that for more than half a century there has been a widely accepted rule sup
We turn now briefly to the original and auxiliary decrees in the two cases under consideration. In the Toucey case, his suit in equity against the insurance company for restoration of an insurance policy and payments for benefits under it on the ground of the fraud of the company was decided against Toucey. An assignee of Toucey’s in privity with him sought to relitigate the same issues in a state court. The federal court which entered the original decree enjoined on supplemental bill “retrial, reconsideration or readjudication” of the settled issues and the prosecution of the state action.
These summary statements show plainly, it seems to us, that the injunctions now set aside by this Court were issued within the recognized rule that federal courts may protect their decrees by prohibiting relitigation, without violation of § 265 as heretofore understood and interpreted. Both decrees should be affirmed.
R. S. § 905; 28 U. S. C. § 687; Hancock National Bank v. Farnum,
Embry v. Palmer,
“The Supreme Court and the district courts shall have power to issue writs of scire facias. The Supreme Court, the circuit courts of appeals, and the district courts shall have power to issue all writs not specifically provided for by statute, which may be necessary for the exercise of their respective jurisdictions, and agreeable to the usages and principles of law.” (R. S. § 716; Act of Mar. 3, 1911, c. 231, § 262, 36 Stat. 1162.)
Cf. Steelman v. All Continent Corp.,
Story, Equity Pleadings (10th Ed.) § 429; Mitford, Pleadings in Chancery (1780) p. 38; Cooper, Equity Pleading, (1809) pp. 98, 99; Booth v. Leycester, 1 Keen 579 (1837); Kershaw v. Thompson,
Cf. United States v. American Trucking Assns.,
French v. Hay,
Dietzsch v. Huidekoper,
Cf. Princess Lida v. Thompson,
E. g., In re Chiles,
Cf. Southern Railway Co. v. Painter, post, p. 155.
United States v. American Trucking Assns.,
Kline v. Burke Construction Co.,
The doctrine of the Julian case finds illustrations in the lower federal courts. While it is true that those courts were enforcing foreclosure, that purpose had been accomplished and the enjoined state suits sought relitigation of closed issues. James v. Central Trust Co.,
Cf. Garner v. Second National Bank,
There are instances of the recognition of the power to prevent relitigation despite R. S. § 720 though the power was not actually exercised. Chicago, R. I. & P. Ry. v. St. Joseph Union Depot Co.,
II Pomeroy's Equitable Remedies (1905) § 640, p. 1079. After discussing § 265 — “Accordingly, a federal court may grant an injunction against a proceeding in a state court when necessary to render effective its own decree."
St. Louis-San Francisco Ry. v. McElvain,
See Taylor and Willis, The Power of Federal Courts to Enjoin Proceedings in State Courts, (1933) 42 Yale L. J. 1169,1176. Cf. Warren, Federal and State Court Interference, (1930) 43 Harv. L. Rev. 345, 378.
Senate Report No. 388, 61st Cong., 2d Sess., (1910), p. 2.
Cf. Toucey v. New York Life Ins. Co.,
See, for an understanding of the complexities of the issues already settled: Bechtel Trust Co. v. Iowa-Wisconsin Bridge Co.,
It might be noted that § 265 is recognized as merely a limitation on general equity powers, Smith v. Apple,