Source: https://supreme.justia.com/cases/federal/us/296/463/
Timestamp: 2019-04-25 21:56:46+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 296 › United States v. Bank of New York & Trust Co.
United States v. Bank of New York & Trust Co.
1. The court first assuming jurisdiction over property may maintain and exercise that jurisdiction to the exclusion of other courts. P. 296 U. S. 477.
2. This principle governs the state and federal courts, and is so applied by this Court as to insure harmony and cooperation between them P. 296 U. S. 477.
3. The principle is not restricted to cases where property has been actually seized under judicial process before a second suit is instituted. It applies as well where suits are brought to marshal assets, administer trusts, or liquidate estates, and in suits of a similar nature, where, to give effect to its jurisdiction, the court must control the property. P. 296 U. S. 477.
4. The jurisdiction granted to the District Court over suits by the United States, Jud.Code, § 24(1); 28 U.S.C. 41, is not exclusive, and the propriety of its exercise in a given case is determined by the particular circumstances. P. 296 U. S. 479.
5. Upon the state courts, equally with the courts of the Union, rests the obligation to guard and enforce every right secured by the Constitution and laws of the United States whenever those rights are involved in any suit or proceedings before them. P. 296 U. S. 479.
6. In intervening to present a claim in proceedings in a state court, the United States is a voluntary actor, not a defendant. P. 296 U. S. 480.
7. Separate funds which had been deposited with the Superintendent of Insurance of the New York by three Russian insurance companies to qualify them for local business were liquidated and administered by him, under direction of the state court, for the satisfaction of local claims and of other claims that had been filed with him. In two of the cases, this administration was over, but the surpluses had, by order of court, been deposited with local trust companies, and proceedings were going on in the state court to determine the rights of other creditors and shareholders. In the other case, the statutory administration by the Superintendent was still in progress. In this posture, the United States brought three suits in the federal court against the three depositaries, respectively, in which it demanded accountings for and delivery of the funds in their hands. Its bills alleged that the companies had been dissolved and their assets confiscated by the Russian Government, and that that Government, in connection with its recognition by this one in 1933, had assigned the property in controversy to the United States.
(1) That the statutory proceeding was essentially in rem, the Superintendent being virtually a receiver. P. 296 U. S. 475.
(2) In the other two cases, the proceedings in the state court were quasi in rem, control of the funds being essential to the exercise of the court's jurisdiction to protect the rights of claimants. The funds being already in the hands of depositaries appointed by the court and subject to its direction, appointment of receivers was unnecessary. P. 296 U. S. 476.
(3) The suits of the Government were not merely in personam to establish a right to share in property; their object was to take the property from the depositaries and from the control of the state court, and to vest it in the United States to the exclusion of all those whose claims were being adjudicated in the state proceedings. P. 296 U. S. 478.
(4) Whatever the effect of the recognition of the Russian Government, it did not terminate the state proceedings. The state court still had control of the property, and questions as to the rights of the parties who were before it, or of those who might come before it, were legal questions which that court had jurisdiction to decide. P. 296 U. S. 478.
(5) The fact that the complainant in the federal court is the United States does not justify a departure from the rule which would otherwise be applicable. The United States is free to invoke the jurisdiction of the state court for the determination of its claims, and the decision by the state court of any federal question which may be presented upon such an invocation may be reviewed by this. Court, and thus all the questions which the Government seeks to raise in these suits may be appropriately and finally decided. Jud.Code, § 237; 28 U.S.C. 344. P. 296 U. S. 479.
(6) The claimants in the state proceedings are entitled to be heard, and are indispensable parties to any proceeding for the disposition of the property involved; convenient and orderly administration of justice requires that the jurisdiction of the state court should be respected. P. 296 U. S. 480.
77 F.2d 866, 880, 881, affirmed.
Certiorari to review decrees which affirmed in three cases decrees of the District Court 10 F.Supp. 269, dismissing bills brought by the United States for an accounting and delivery of funds in the custody of the respondents.
The United States, claiming to be the owner of certain funds which originally had belonged to Russian insurance companies, brought these suits for accounting and delivery. The companies had made deposits with the superintendent of insurance of the State of New York in order to obtain authority to transact business within the state. The complaints alleged that, in 1917 or 1918, the companies had been dissolved, and their properties had been "confiscated and appropriated," by decrees of the Russian State. The claim of the United States is based upon an assignment made by the Russian Government, on November 16, 1933, in connection with the recognition of that Government. Defendants hold the funds in question under orders and judgments of the state court in New York providing for liquidation and distribution.
Court. 77 F.2d 866, 880, 881. Because of the nature and importance of the questions presented, we granted writs of certiorari, October 14, 1935.
(1) The case against the Bank of New York & Trust Company (No.195) relates to the deposit made by the Moscow Fire Insurance Company. By order of the Supreme Court of the State of New York, in 1925, the superintendent of insurance was appointed liquidator of the United States branch of the company pursuant to § 63 of the state insurance law, and creditors were enjoined from pursuing their legal remedies against the assets so sequestered. The superintendent of insurance took possession of the assets and proceeded in the course of liquidation to satisfy the claims of domestic creditors and policyholders. There remained a substantial surplus.
proofs of claim had been filed and diligently pressed while the superintendent was still in charge and the injunction was still in force. As the creditors so proving were acting in response to an invitation -- published in accordance with the order of liquidation -- to submit claims of every kind without reference to the place of origin, and were meanwhile stayed, the court thought that there would be manifest inequity if, at that late day, they were remitted to their legal remedies and compelled to prove anew. A court of equity having assumed control over a fund might continue to grant relief if justice so required. But the court took the view that, after the liquidator had made provision for the payment of claims already filed, the surplus then remaining "should be paid to the corporations, represented by directors, a quorum of the board." Matter of People (Russian Reinsurance Co.), 255 N.Y. 415, 420-424, 175 N.E. 114, 117.
People (Moscow Fire Insurance Co.), 255 N.Y. 433, 435, 175 N.E. 120, 121. On the remittitur of the Court of Appeals, judgment was entered in the Supreme Court of the state on August 11, 1931, and provided, in the stated alternative, that the superintendent should deliver the surplus assets to the Bank of New York & Trust Company. The Moscow Company and Paul Lucke, "its sole surviving director and conservator," took advantage of this alternative and gave the required stipulation, whereupon the Trust Company received the surplus assets, of about $1,000,000, on April 18, 1933.
and expenses, ordering the distribution of the residue in liquidating dividends to the shareholders of the Moscow Company. There was also provision that any shareholder or any party to the action or successor in interest might apply at the foot of the judgment for further directions. On the same day. the United States brought the present suit.
Company of Moscow." In July, 1934, the state court appointed a referee to take and state the account of the assignee, and to take proof and report as to the claims of creditors and those entitled to share in the disposition of the fund. That proceeding was in progress when the present suit by the United States was begun on August 25, 1934.
(3) The third case (No.197) relates to the assets of the United States branch of the First Russian Insurance Company, which the state court, in 1925, placed in the hands of the superintendent of insurance as liquidator. This case differs from the others in that the superintendent is still in possession. After the payment of domestic creditors, the surplus assets were retained by the superintendent under the order of the state court for the purpose of satisfying valid claims founded upon foreign business, where proofs of claim had been filed with him during the statutory liquidation. Matter of People (First Russian Insurance Co.), 255 N.Y. 415, 423, 175 N.E. 114. It appears that some of these foreign claims had been allowed by the liquidator, and payments on account had been made under orders of the state court, and that other claims which the liquidator had disallowed were being heard before a referee appointed by the state court when the United States brought the present suit on November 14, 1934. The Government states that the fund then held by the superintendent amounted to over $1,000,000.
unimpeded liquidation of the sequestered property. Matter of People (Russian Reinsurance Co.), supra, p. 420, 175 N.E. 114. Under § 63 of the state statute (Insurance Law, Consol.Laws, c. 28), the liquidator had rights and duties such as had previously been "exercised by and imposed upon ancillary receivers of foreign corporations." Id., p. 424.
When the statutory trust was satisfied by the payment of domestic creditors and policyholders, it did not follow that the remaining assets were automatically released and the state court was ipso facto shorn of its jurisdiction. The court still had control of the property, and necessarily had the pertinent equitable jurisdiction to decide what should be done with it. In such a case, the court might direct that the surplus assets should be remitted to a domiciliary receiver -- if there were one -- on appropriate conditions. Matter of People (Norske Lloyd Insurance Co.), 242 N.Y. 148, 151 N.E. 159. Or the court might direct further liquidation, in order to provide for the payment of other claims, if that course appealed to the sense of equity in the particular circumstances. Matter of People (Russian Reinsurance Co.,) supra, p. 423. The latter action was taken, and the superintendent of insurance was continued in possession of the assets subject to the control of the court. He was virtually its receiver for the purposes specified. In No.197, the superintendent still holds possession by virtue of that authorization, and the res thus remains under the court's jurisdiction.
Moscow Fire Insurance Company, suit was brought in its name, and by the sole surviving director and conservator, against the depositary and those alleged to be creditors and shareholders of the insurance company to determine the disposition of the fund. Claims of creditors and shareholders were in course of adjudication in that proceeding when the present suit was brought. At that time, also, in the case of the Northern Insurance Company, the depositary, which had received an assignment for the benefit of creditors, was accounting in the state court for the fund in its hands and the claims of creditors and of those entitled to share in the fund were being heard.
"methods of procedure as shall serve to conciliate the distinct and independent tribunals of the States and of the Union, so that they may cooperate as harmonious members of a judicial system coextensive with the United States."
Taylor v. Carryl, 20 How. 583, 61 U. S. 595. See also Peck v. Jenness, 7 How. 612, 48 U. S. 625; Buck v. Colbath, 3 Wall. 334, 70 U. S. 341; Wabash R. Co. v. Adelbert College, 208 U. S. 38, 208 U. S. 54; Palmer v. Texas, 212 U. S. 118, 212 U. S. 129; Lion Bonding & Surety Co. v. Karatz, 262 U. S. 77, 262 U. S. 89; Harkin v. Brundage, 276 U. S. 36, 276 U. S. 43.
The Government urges that the present suits for an accounting are not suits in rem, but in personam; and that to allow the federal court to pass upon the right asserted would not necessarily interfere with the jurisdiction or control by the state court over the res. See Kline v. Burke Construction Co., 260 U. S. 226, 260 U. S. 230. But these suits are not to enforce a personal liability, but to obtain possession of the respective funds. The suits are not merely to establish a debt or a right to share in property, and thus to obtain an adjudication which might be had without disturbing the control of the state court. Compare Waterman v. Canal-Louisiana Bank & Trust Co., 215 U. S. 33, 215 U. S. 44-46; Riehle v. Margolies, 279 U. S. 218, 279 U. S. 223-224. Complainant demands that the depositaries account and pay over to the complainant, as "the sole and exclusive owner," the entire funds in their hands. Thus, the object of the suits is to take the property from the depositaries and from the control of the state court, and to vest the property in the United States to the exclusion of all those whose claims are being adjudicated in the state proceedings.
the effect of recognition, it is manifest that it did not terminate the state proceedings. The state court still had control of the property, and questions as to the rights of the parties who were before it, or of those who might come before it, were legal questions which the court had jurisdiction to decide.
Second. The fact that the complainant in these suits is the United States does not justify a departure from the rule which would otherwise be applicable. The Government invokes § 24(1) of the Judicial Code (28 U.S.C. § 41), which confers jurisdiction upon the District Court to entertain all suits of a civil nature brought by the United States. The Government insists that the United States is entitled to have its claim determined in its own courts. But the grant of jurisdiction to the District Court in suits brought by the United States does not purport to confer exclusive jurisdiction. It is a general rule that the grant of jurisdiction to one court does not, of itself, imply that the jurisdiction is to be exclusive. See Gittings v. Crawford, Taney's Dec. 1; Ames v. Kansas, 111 U. S. 449, 111 U. S. 464; Plaquemines Tropical Fruit Co. v. Henderson, 170 U. S. 511, 170 U. S. 517-518; Merryweather v. United States, 12 F.2d 407, 409, 410. Upon the state courts, equally with the courts of the Union, rests the obligation to guard and enforce every right secured by the Constitution and laws of the United States whenever those rights are involved in any suit or proceedings before them. Robb v. Connolly, 111 U. S. 624, 111 U. S. 637. In this instance, it cannot be doubted that the United States is free to invoke the jurisdiction of the state court for the determination of its claim, and the decision of the state court of any federal question which may be presented upon such an invocation may be reviewed by this Court, and thus all the questions which the Government seeks to raise in these suits may be appropriately and finally decided. Jud.Code, § 237, as amended, 28 U.S.C. § 344.
The statutory grant of jurisdiction to the District Court leaves open the question of the propriety of its exercise in particular circumstances. Even where the District Court has acquired jurisdiction prior to state proceedings, the character and adequacy of the latter proceedings in relation to the administration of assets within the state, and the status of those assets, may require in the proper exercise of the discretion of the federal court that jurisdiction should be relinquished in favor of the state administration. Pennsylvania v. Williams, 294 U. S. 176, 294 U. S. 185; Gordon v. Ominsky, 294 U. S. 186, 294 U. S. 188; Penn General Casualty Co. v. Pennsylvania, supra, p. 294 U. S. 197. In the instant cases, not only had the state court first acquired jurisdiction, but there are numerous persons whose claims in relation to these funds are in course of adjudication. Whether or not their claims are valid against the claim of ownership by the United States, they are entitled to be heard, and they are indispensable parties to any proceeding for the disposition of the property involved. They have not been made parties to the present suits, and this fact, in itself, would be a sufficient reason for the District Court to refuse to proceed in their absence. Only the stakeholders are defendants. The adverse claimants are parties to the respective proceedings in the state court and, from every point of view, the principles governing the convenient and orderly administration of justice require that the jurisdiction of the state court should be respected.
possess, or any sacrifice of its proper dignity as a sovereign, if it prosecuted its claim in the appropriate forum where the funds are held.
As we are dealing simply with the question of the exercise of jurisdiction by the District Court, we intimate no opinion upon the merits.
* Together with No.196, United States v. President and Directors of the Manhattan Co., and No.197, United States v. Louis H. Pink. Both cases were on writs of certiorari to the Circuit Court of Appeals for the Second Circuit. In No.197, Mr. Louis H. Pink, Superintendent of Insurance of New York, was substituted by an order of the court below for his predecessor in office, Mr. George S. Van Schaick, the original defendant in that case.

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