Source: https://supreme.justia.com/cases/federal/us/208/38/
Timestamp: 2019-04-25 20:01:51+00:00

Document:
Where the federal questions are clearly presented by the answer in the state court, and the decree rendered could not have been made without adversely deciding them, and, as in this case, they are substantial as involving the jurisdiction of the Circuit Court over property in its possession and the effect to be given to its decree, this Court has jurisdiction and the writ of error will not be dismissed.
The taking possession by a court of competent jurisdiction of property through it officers withdraws that property from the jurisdiction of all other courts, and the latter, though of concurrent jurisdiction, cannot disturb that possession, during the continuance whereof the court originally acquiring jurisdiction is competent to hear and determine all questions respecting the title, possession, and control of the property. Under this general rule, ancillary jurisdiction of the federal courts exists over subordinate suits affecting property in their possession although the diversity of citizenship necessary to confer jurisdiction in an independent suit does not exist.
The possession of property in the circuit court carries with it the exclusive jurisdiction to determine all judicial questions concerning it, and that jurisdiction continues after the property has passed out of its possession by a sale under its decree to the extent of ascertaining the rights of, and extent of liens asserted by, parties to the suit, and which are expressly reserved by the decree and subject to which the purchaser takes title, and anyone asserting any of such reserved matters as against the property must pursue his remedy in the circuit court, and the state court is without jurisdiction.
It will be presumed that the circuit court, in determining the validity of liens affecting property in its possession, will consider the decision of the courts of the state in which the property is situated with that respect which the decisions of this Court require.
A suit brought by the holder of some of a series of bonds, the complaint in which alleges that the suit is brought on complainant's behalf and also on behalf of all others of like interest joining therein and contributing to the expenses, and of which no other notice of its pendency is given to the other bondholders, is not a representative or class suit the judgment in which binds those not joining therein or not privies to those who do. Compton v. Jesup, 68 F. 263, concurred in.
See also p. 208 U. S. 609, post.
This is a writ of error directed to the Supreme Court of the State of Ohio. In that court, the defendants in error obtained a decree declaring that certain negotiable notes held by them, which had been made by the Toledo & Wabash Railway Company, were entitled to a lien on property once owned by that company and now owned by the plaintiff in error, and ordering a sale in satisfaction of that lien. The federal questions presented and such facts as are deemed material to their decision are stated in the opinion.
question, this Court and the Supreme Court of Ohio have, in the past, arrived at opposite conclusions, this Court holding (Wabash, St. Louis & Pac. Ry. v. Ham, 114 U. S. 587) that the equipment bonds remained unsecured, and the Ohio court holding ( Compton v. Railway Co., 45 Ohio St. 592) that the effect of the consolidation was to create the lien claimed. This suit was brought by the defendants in error, holders of some of the equipment bonds, in the courts of Ohio for the purpose of enforcing the lien stated. They prevailed by the judgment of the supreme court of the state, which affirmed a decree of a lower court establishing the indebtedness upon the bonds, declaring a lien to secure the payment of that indebtedness upon the property owned, subject to the mortgages hereinbefore stated, by the Toledo & Wabash Railway Company in 1865, and directing a sale of such of that property as was within the State of Ohio in satisfaction of the lien.
company, and we think that they are substantial and important. The motion to dismiss is therefore overruled, and we proceed to the discussion of the merits of the questions.
proceedings for foreclosure of several other mortgages prior to it were begun in the circuit courts of the United States, consolidated, and resulted in decrees for foreclosure and sale under all the mortgages. These decrees were entered in the various circuit courts on March 23, 1889. In the meantime, the property remained in the possession of the circuit court, through its receivers. The sale under these decrees was made to a purchasing committee, by whom it was conveyed to a new corporation, the Wabash Railroad Company, the plaintiff in error. By order of the Circuit Court for the Northern District of Ohio, made on June 18, 1889, possession of the property was delivered by the receiver to the purchasing committee, and he was discharged. Since August, 1889, the plaintiff in error, the Wabash Railroad Company, has been in possession of the property under the terms of the decrees of March 23, which presently will be stated. None of the defendants in error were parties to the proceedings in the circuit courts of the United States, and an attempt to remove this case from the Ohio courts to the circuit court of the United States, resisted by the defendants in error, failed. Joy v. Adelbert College, 146 U. S. 355.
decision must rest. For the correct understanding of the decrees, and especially of the reservations contained in them, it is necessary to ascertain the progress and present status of still another litigation. James Compton, an owner of some of the equipment bonds, in a suit brought upon them in the Ohio courts in 1880, obtained a decree by the judgment of the supreme court of the state ascertaining the amount due him in respect of the bonds and accrued interest, declaring that he was entitled to an equitable lien on the property owned by the Toledo & Wabash Railway Company at the time of the consolidation of 1865, subject to the mortgages upon that property then existing, and ordering, in default of payment of the sum found due, a sale of that part of the property which was within the State of Ohio. Compton v. Railway Company, 45 Ohio St. 592. The entry of judgment on the mandate of the supreme court was made in the court of common pleas in October, 1888. Thereupon the Court of Appeals for the Northern District of Ohio, Western Division, made Compton a party to the consolidated foreclosure suit, and ordered him to appear and plead, answer, or demur. Compton appeared specially and set up his Ohio judgment. Various proceedings have been had with respect to his claim, including a judgment in this Court in May, 1897, Compton v. Jesup, 167 U. S. 1, affirming Compton's lien and right to a sale in satisfaction of it. After the decision of this Court, Compton's claim was sent to a master, who, after some ten years, made a report, which is now pending on exceptions in the circuit court. At the time of the decrees of foreclosure of March, 1889, the questions concerning Compton's claim were, of course, undecided, and account of them had to be taken in these decrees.
"shall vest in the grantee or grantees all the right, title, estate, interest, property, and equity of redemption, except as hereby reserved, of, in, and to"
be, charged against the property;"
"the effect of said provisions and reservations shall be to prevent this decree operating as an additional defense to claims, if any there are, prior in right to the lines of the mortgages upon said property heretofore and hereby foreclosed, and to preserve the prior right and lien of such claims and all allowances if found and decreed to exist."
This sweeping language, colored as it is by the last paragraph quoted, with its reference to claims which have liens prior in right to the mortgages, must be held to include claims under the equipment bonds. Such a reservation would be natural, in view of the facts that the rights under the equipment bonds were uncertain, and their holders not parties to the suit, and therefore not affected by the foreclosure. Wiswall v. Sampson, 14 How. 52, 55 U. S. 67; United Lines Tel. Co. v. Boston Trust Co., 147 U. S. 431, 147 U. S. 448; Pittsburgh &c. Railway. v. Loan & Trust Co., 172 U. S. 493, 172 U. S. 515. The effect of the decree is to say to any purchaser under it, you must take this property subject to all claims which this Court shall hereafter adjudge to be lawful, and you may be assured that you will be held to pay none other, and, for the purpose of making this statement good, the court reserves jurisdiction over the property and claims in respect to it, and the right to take it again into possession and exercise again the power of sale. It is obvious, therefore, that the court has parted with the possession of the property only conditionally, and that it has preserved complete control over it, and full jurisdiction over the claims which might be made against it. We may now consider the question whether the state court had the jurisdiction to render the judgment in the case at bar, as and when it was rendered.
Krippendorf v. Hyde, 110 U. S. 276; Pacific R. of Missouri v. Missouri Pacific Railway, 111 U. S. 505; Covell v. Heyman, 111 U. S. 176; Heidritter v. Elizabeth Oil Cloth Company, 112 U. S. 294; Gumbel v. Pitkin, 124 U. S. 131; Johnson v. Christian, 125 U. S. 642; Morgan's Co. v. Texas Central Railway, 137 U. S. 171; Porter v. Sabin, 149 U. S. 473.
"It is obvious that, by this decree of sale and confirmation it was the intention and purpose of the federal court to retain jurisdiction over the cause so far as was necessary to determine all liens and demands to be paid by the purchaser,"
"The circuit court, by the order made, retained jurisdiction of the case to settle all claims against the property, and to determine what burdens should be borne by the purchaser as a condition of holding the title conveyed."
"The federal court, in protecting the purchaser under such circumstances, was acting in pursuance of the jurisdiction acquired when the foreclosure proceedings were begun."
Compton is allowed to proceed, which sale will convey the better title? Who would be bold enough to determine for himself that question? How much longer would the litigation with respect to this property continue if two persons could be found to purchase at the two sales? It is no answer to these questions that Compton has been made a party to this suit in the state court. He is still a party to the proceedings in the federal court, and he must find satisfaction for his claim there. We are of the opinion that, by the effect of the reservation in the decree of March 23, 1889, the exclusive jurisdiction of the federal court over the property therein dealt with has continued notwithstanding the conditional conveyance, and that it still exists. The defendants in error must pursue their remedy in that court, which doubtless will consider the decisions of the state courts on questions of state law with the respect which the decisions of this Court require. It follows, therefore, that the state court was without power to decree a sale of the property, and its judgment must be reversed.
2. There remains for decision the question whether the court below erred in declining to hold that the case of Ham v. Wabash, St. Louis & Pacific Railway Company conclusively adjudicated the merits of the claims of the defendants in error.
"on their own behalf, as well as in behalf of all those in like interest who may come in and contribute to the expenses of and join in the prosecution of this suit."
no controlling authority which leads us to such a conclusion. We think that the Ham suit was not a representative suit in the sense that the judgment in it bound the defendants in error who were not parties to it. But, for the reasons already given, the judgment must be reversed.
MR. JUSTICE HARLAN and MR. JUSTICE PECKHAM dissent from that part of the judgment which decides that the jurisdiction of the federal court was exclusive after the delivery of the property to the purchaser under the foreclosure decree and the discharge of the receiver.
"All other questions arising under the pleadings or proceedings herein, not hereby disposed of or determined, are hereby reserved for future adjudication, including the claim for unearned interest on bonds not yet due."
"And, the defendant James Compton having in open court on the final hearing herein objected to the rendering or entry of any decree in this cause at this time, on the ground that the issues raised by the amendment to the complainants' amended and supplemental ancillary bill and to the cross-bill of the cross-complainants Solon Humphreys and Daniel A. Lindley, trustees, and the answers of the defendant James Compton to be filed herein have not been tried and determined, the court overrules such objection, and the defendant James Compton duly excepts to such ruling and the entry of this decree. But it is adjudged and decreed in the premises that the rendering and entry of this decree in advance in the trial and determination of such issues is upon and subject to the following conditions, to-wit:"
"If, upon the determination of such issues, it shall be adjudged by this court that the decree rendered by the Supreme Court of the State of Ohio in the suit brought by said James Compton against The Wabash, St. Louis & Pacific Railway Company and others, referred to in the pleadings herein, and the lien thereby declared and adjudicated in his favor, continue in full force and effect, then the purchaser or purchasers at any sale or sales had hereunder of that portion of the property sold, covered, and affected by the said lien, or the successors in the title of said purchaser or purchasers, shall pay to said James Compton or his solicitors herein, within ten days after the entry of the decree herein in favor of said James Compton, the sum of three hundred and thirty-nine thousand nine hundred and twenty dollars and forty cents, with interest thereon at six percent per annum from May 1, 1888, being the amount found due on the equipment bonds by him owned, by the Supreme Court of Ohio, in his said suit, upon the surrender by him of the bonds and coupons owned by him, referred to in his petition in such suit, and in default of such payment this court shall resume possession of the property covered and affected by the said lien of the defendant James Compton, and enforce such decree as it may render herein in his favor, by a resale of such property or otherwise, as this court may direct."
"And it is further ordered and adjudged that, notwithstanding the entry of this decree, the said issue concerning the claim and interest of said Compton shall proceed to a final determination and decree in accordance with the rules and practice of this court, and any decree rendered thereupon shall bind the purchaser or purchasers at any sale or sales had hereunder, and all persons and corporations deriving any title to or interest in said property affected by such lien from or through them or any of them, and nothing in this decree contained shall be construed as an adjudication of any matter or thing as against the said James Compton, or to prejudice, annul, or abridge any right, claim, interest, or lien which the said James Compton may have in, to, or upon the premises hereby directed to be sold or any part thereof, or in, to, or upon any property whatsoever embraced in this decree; it being the intention to hereby preserve the rights of said Compton in the relation in which he now stands towards the mortgagees, parties hereto."
"Any sale, conveyance, or assignment of the railway and property hereinabove described, made under this decree, shall not have the effect of discharging any part of said property from the payment or contribution to the payment of claims or demands chargeable against the same, whether for costs and expenses, the expenses of the receivership of said property, and the full payment of all the debts and liabilities of the receivers of the Wabash, St. Louis, & Pacific Railway Company, namely, Solon Humphreys and Thomas E. Tutt, Thomas M. Cooley and Gen. John McNulta, or upon intervening claims allowed or to be allowed, or upon any other claims or allowances that have been or may hereafter be charged against the property of the Wabash, St. Louis & Pacific Railway Company, or any part thereof, or said receivers or either of them, or the adjustment of any equities arising out of the same between the parties hereto, or their successors, either by this court or by the Circuit Court of the United States for the Eastern District of Missouri, or by any United States circuit court exercising either original or ancillary jurisdiction over said property of the Wabash, St. Louis & Pacific Railway Company, or any part thereof, or by any United States circuit court to which any of the parties in the consolidated cause of the Central Trust Company of New York and others against the Wabash, St. Louis & Pacific Railway Company and others in the Circuit Court of the United States for the Eastern District of Missouri, including the receivers, have been by the said circuit court of the United States remitted in proceedings or actions ancillary to the jurisdiction of said last-named court, or otherwise."
"Nor shall any such sale, conveyance, transfer, or assignment made under and pursuant to this decree withdraw any of said railroad property or interests to be sold under this decree, as hereinbefore directed, from the jurisdiction of this and the other courts aforesaid, but the same shall remain in the custody of the receiver until such time as the court shall on motion direct said property, in whole or from time to time in part, to be released to the purchaser or purchasers thereof, or any of them, and shall afterwards be subject to be retaken, and, if necessary, resold if the sum so charged or to be charged against said property or any part thereof or said receivers as aforesaid shall not be paid within a reasonable time after being required by order of this or said other courts."
"The conveyance and transfer of said property sold under this decree shall be subject to the powers and jurisdiction of the said courts, and the purchasers of the property sold under this decree or any part thereof, and the parties hereto or their successors, shall thereby become and remain subject to said jurisdiction of said courts so far as necessary to the enforcement of this provision of this decree, and such jurisdiction shall continue until all the claims and demands that have been or may be allowed against said property of the Wabash, St. Louis & Pacific Railway Company or any part thereof, or said receivers, by order of said courts, shall be fully paid and discharged."
"The provisions aforesaid shall apply to the purchasers of the same under this decree, and all persons taking such property through or under them, but the foregoing provisions shall not, nor shall any reservation in this decree contained, have the effect or be construed, nor are they or any of them intended, to give to any claims that may exist any validity, character, or status superior to what they now have, nor exist."
"The effect of said provisions and reservations shall be to prevent this decree operating as an additional defense to claims, if any there are, prior in right to the liens of the mortgages upon said property heretofore and hereby foreclosed, and to preserve the prior right and lien of such claims and all allowances, if found and decreed to exist."
And the court reserves the right to make such further order and direction at the foot of this decree as may seem proper.

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