Court Opinion

ID: 9307144
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:17:58.407658+00
Date Added: 2024-06-11T17:13:57.825762
License: Public Domain

HANFORD, District Judge
(concurring). The argument against: entertaining the present application may all be arranged under two heads: First. As to the foreclosure of the mortgages on the Northern Pacific Railroad, and whatever is incidental thereto, including the receivership, the United States circuit court: for the Eastern district of Wisconsin is the court: of primary jurisdiction, and, by the rule of comity in such matters, this court, instead of taking original cognizance of a motion to change the personnel of the receivership, should send the parties, to initiate proceedings for such *880change, to the court of primary jurisdiction. Second. This application is a collateral attack upon a final judgment of a court of co-ordinate jurisdiction which had complete jurisdiction of the parties and of the subject-matter. Other considerations have been urged upon our attention, such as the vast amount of the aggregate loss by depreciation of the Northern Pacific securities which may result from our decision; but the distinctively legal grounds for rejecting the application qf the defendant company for a change of receivership are covered by the foregoing propositions. I find that I can express my individual views more concisely by discussing both propositions together, under the general issue as to the jurisdiction and duty of this court.
This court is not called upon, by the application under consideration, to vacate or modify any order or decree made by the circuit court for the Eastern district of Wisconsin. We are asked simply to remove from office receivers under appointment of this court, and to appoint others in their places, to serve as the receivers of this court, and to exercise such power as it is within the jurisdiction of this court to confer. The only direct effect of granting the application now made by the defendant will be to strip from the receivers now acting such power as they have become vested with by virtue of the orders of this court, and to confer the same powers upon other individuals. Incidentally the effect may be, and probably will be, far-reaching, for such action will be a recognition by this court of its duty to exercise independently, within the territorial boundaries of its jurisdiction, such powers as have been by the laws of the land conferred upon it, and such as parties having rights to be protected may see fit to invoke, and an assertion that the assumption of paramount authority over the railroad, and business transactions in the operation thereof, by a court located at a distance from the situs of its operations, is contrary to sound principles of government, and unjustifiable. But consequences do not change facts. The fact of the matter is, this application is a direct proceeding, relating entirely to matters as to which all the parties to the record must stand committed as having, from the inception of the case, conceded that this court has jurisdiction. The attack now being made is not collateral. It is not directed against a final judgment. The second proposition above stated is based upon false premises, and is untenable for that reason; but if it were not so, and this proceeding could be regarded as being purely an attack upon an adjudication of the circuit court for the Eastern district of Wisconsin, finally determinative of the particular questions, still the defendant has the right to make such an attack, and this court is bound- to entertain it, because want of jurisdiction, apparent upon the face of the record, is the ground upon which the attack is made, and on such ground the right of the parties to litigate is not concluded by any decree of the court whose jurisdiction is questioned.
It has been assumed throughout the argument, and I am therefore justified in assuming, that the jurisdiction of the court at Milwaukee over the entire subject-matter of the receivership of the *881Northern Pacific Railroad lias never been challenged, nor put to the test of an argument there by adverse parties, as it lias been upon the argument of this motion. I feel greater freedom in discussing the questions than I should if the able judges of the Beventh circuit, or any one of them, had ever been called upon to define the jurisdiction of that court with reference to this receivership.
In its inception, the present administration of the Northern Pacific Railroad Company’s estate and business, through receivers acting under appointment from courts of chancery, was a proceeding in rein. Tlie creditors’ bill filed by Winston, Bheldon & Co., and Urn Farmers’ Loan & Trust Company, the answer of the Northern Pacific Railroad Company, and all the papers filed in the original case, and the first order of the court appointing Messrs. Payne, Oakes, and Rouse to be receivers, show that the primary object and purpose of the suit was to place the railroad, its equipments, lands, and all of Us assets- in the actual and legal custody o£ the court, and to have the court assume control, and, under such control, continue Us operations as an active and going concern. The pleadings raised no issue between the plaintiffs and the defendant. The bill prayed for no relief which the defendant, opposed. All the-parties had a common object, and that was to shelter the property from judicial writs and process which they anticipated would be sued out by creditors in the different courts having jurisdiction within the numerous counties in which parts of the road and its property are situated. The only adverse parties, in the sense of persons having interests, rights, or claims liable to be damaged, invaded, or prejudiced by any proceedings, order, or decree in the case, were creditors of the defendant, its employés, and parties having contract relations with it, who are not named in the record, and not made parties to the suit otherwise than as in any proceeding purely in rem, in which any person having an interest in property taken into custody may come in and contest for his rights. In such a proceeding, actual manual possession of the res is essential to the jurisdiction. This proposition is elementary, and as undisputable as the proposition that a man cannot grasp things which are beyond his reach. Manifestly, in full recognition of this essential, the parties attempted to create jurisdiction by averring in the bill and admitting in the answer as a fact that part of the Northern Pacific Railroad is situated within the Eastern district of the state of Wisconsin; and we are now fold that, this fact having been so averred, admitted, and established by the decree of the court based thereon, it must, for all purposes of litigation between these parties, and in all jurisdictions, be taken as trut', although in fact untrue. In refutation of this claim, L deem it proper to say that the Northern Pacific Railroad is a national highway, provided for by national law's, and its location is as much within the judicial knowledge of the court as any other geographical fact. To such facts, winch are not dependent for evidence of their existence upon the testimony of witnesses or the preservation of documents, the law of estoppel cannot be properly applied. Í1 would certainly be an absurdity for court in with ini*882portant rights to be controlled by a record in which the parties alleged and admitted, and the court found as a fact, the state of Oregon to be situated within the corporate limits of the city of Tacoma. The facts shown by the record and within the knowledge of the court limit the power of the court at Milwaukee, in the granting of relief prayed for by the original creditors’ bill of Winston and others, to the appointment of receivers for the purpose of talcing into manual possession and under control such assets of the defendant corporation as were movable and detached from the railroad. The railroad and real estate of the defendant, being immovable, could not be brought within the jurisdiction of that court. Neither could jurisdiction over the same be acquired by taking possession of such assets as money, bonds, and other securities, or even railroad materials or supplies, or railroad cars while migrating over other lines. Custody of things movable, and not indispensable to the operation of the railroad, will not draw jurisdiction in rem over a railroad situated beyond the jurisdiction, any more than it will bring the road itself within the boundaries of jurisdiction. The rule which recognizes as the court of primary jurisdiction the one which is first in point of time in acquiring custody of one part of the line of railroad extending into more than one judicial district, and requires other courts to defer to the court of 'primary jurisdiction as the court of paramount authority in managing the operations of a railroad so situated, arises from necessity, and is a rule of reason. An accurate statement of the rule itself excludes the idea that any court can be a court of primary jurisdiction, or have supremacy, in the control of a railroad situated outside of the boundaries of its jurisdiction. Necessity, which is the mother of the rule, is absent in such a case. The liabilities, litigation, and contentions arising from the practical operation of a railroad, affecting the employés and patrons of the road, and the community served by it, should, according to American ideas of local self-government, be adjudicated in a forum having jurisdiction at the place where the transactions occur and the subject-matter is situated. Judicial process, to be of any use in protecting an estate and the interests of its owners, must be potential at the place where the estate is. These considerations require each court of the United States to exercise within its district the powers conferred upon it by law for the benefit of the public, and of each individual having rights to be protected, untrammeled, and not controlled except by law and by tribunals having appellate jurisdiction to revise its judgments. To defer'to the judgment of a court of coordinate jurisdiction in the management of a railroad is justifiable upon the ground that without a head to control it is impossible to operate a continuous line of railroad, and it would be an unseemly spectacle for courts to seize the different ends of a line and engage in a tug of war for mastery over it, and there is no other reason for what is termed the “rale of comity” in such matters. When the reason of the rule is considered, it must be admitted, as a plain proposition, that a railroad extending through different judicial districts, upon going into the hands of receivers, must be controlled *883by (lie court of one or the other of (.he districts into which it extends, and a distant court, whose process is without virtue where a. railroad is situated, and its business transactions take pla.ce, is incompetent to manage its affairs. The utter want of power to protect this railroad, or conserve (he interests of the people whose capital is invested therein, is shown in a practical way by the fact that when the property was menaced by the so-called industrial army, and afterwards by sympathizers with die American Railway Union strike of d80-1, the court silting at Milwaukee was not called upon to vindicate its authority, but the courts having jurisdiction within the territory traversed by the road were required to exert their power, and did so in numerous instances. As a further test, lot it be supposed that the courts of the Eighth and Ninth circuits should assume full control of all of the Northern Pacific property within the territory over which their jurisdiction extends, independent of the proceedings pending in the courts of the Seventh circuit, and then inquire what would be the consequences to the railroad or its business? Would there be a collision of the forces emanating from the different courts? Would any part of the property necessary to the operation of the railroad in its entirety be left unprotected? Would the courts acting thus inharinoniously present the unseemly spectacle of grasping the ends of a single line and engaging in a tug of war? To answer these ques-1 ions correctly is but to assert that necessity for the joint and harmonious action of the circuit court for the Eastern district of Wis- < on sin wrilh (he courts of the Eighth and Ninth circuits, in order to maintain the integrity and autonomy of the Northern Pacific Railroad, is not necessary.
The fact that the Northern Pacific Railroad Company owns a stub line extending from West, Superior to Ashland, in the West-era district of Wisconsin, is unimportant, for the reason that the circuit court for the Western district of Wisconsin has never assumed supremacy as a court of primary jurisdiction in the administration of Northern Pacific Railroad affairs, and, so far as the record before us discloses, the proceedings in that court were not in fact commenced anterior to the proceedings in this court. The only fact upon which a reasonable argument in favor of the jurisdiction of the circuit court for the Eastern district of Wisconsin to entertain the creditors’ bill can be predicated is this, viz. that, at the time of filing said bill the Northern Pacific Railroad Company was engaged in operating other lines of railroad, extending into (lie Eastern district of Wisconsin, under a lease from the Wisconsin Central Railroad Company; but this fact is not sufficient to support the jurisdiction. The argument that, because of its control of lines of railroad oilier than its own line, it was necessary io have its entire property, including leased railways which were being operated as one great railway system, under the management of the same receivers, is fully answered by the fact that, within six weeks from the date of the first appointment of these receivers, it was found to he not necessary for the Northern Pacific receivers to continue in control of the leased lines, and sufficient *884reasons were shown for discontinuing their control, and they were actually required, by an order of the. circuit court for the Eastern district of Wisconsin, to surrender said leased lines.
The mortgage foreclosure bill filed by the Farmers’ Loan & Trust Company in October, 1893, after there had been a default in the payment of interest on bonds secured by the mortgages for which said company is the trustee, has been styled in the argument a i-dependent bill,” the meaning of which is that the foreclosure suit, being commenced after the property had gone into the hands of the receivers, must necessarily hang or depend upon the case in which the receivers were already proceeding in the administration of the defendant’s estate; and it is said that the complainant was compelled to initiate the foreclosure suit in the circuit court for the Eastern district of Wisconsin because the court had acquired complete jurisdiction over the corpus of the defendant corporation by the proceedings in the creditors’ suit. It is because of this argument that I have examined closely the grounds for jurisdiction shown by the record in the creditors’ suit, and, for the reasons stated, it is my conclusion that the record shows affirmatively want of jurisdiction in that court, because I must regard that suit as a proceeding purely in rem in a court which did not have jurisdiction of the res. The foreclosure suit, viewed as a dependent upon the creditors’ bill, adds nothing to the jurisdiction of the court at Milwaukee, for it must certainly fall whenever the original case upon which it is hung falls.
It has been argued that a suit to foreclose a mortgage upon a railroad or other real estate is a transitory action, and the court at Milwaukee acquired jurisdiction of this case by the voluntary appearance of the mortgagor and mortgagee. It is true that a, mortgage may be foreclosed by a suit in personam in a court having jurisdiction of the parties, and such a court may, by coercive measures, compel the mortgagor to transfer the title to mortgaged premises situated beyond its jurisdiction. A mortgage may also be foreclosed in a court having no jurisdiction of the person of the mortgagor, by a proceeding in rem, if it has jurisdiction of the res. The proceedings may be of a double nature; that is to say, both in personam and in rem. This argues nothing, for the elementary principle that a purely personal judgment is not valid against a person who has not been by due process or his voluntary appearance brought within the jurisdiction of the court which pronounced it remains in full vigor. And proceedings in rem are impossible in a court having no jurisdiction of the res. Now, as the custody, control, and operation of a railroad through receivers must be pursuant to proceedings in rem, jurisdiction thereof cannot be acquired by a distant court, although it may have jurisdiction to foreclose the mortgage by a suit in personam.
Many authorities have been cited, but none to controvert the foregoing proposition. In the case of Muller v. Dows, 94 U. S. 444, the supreme court affirmed the validity of a decree foreclosing a mortgage upon a railroad situated partly in Iowa and partly in Missouri by the United States circuit court for the district of' Iowa. *885But in that case, although the couib rendered a decree foreclosing the equity of redemption, and ordered a sale of the railroad as an entirety, it did not assume to transfer title to that part of the railroad situated in Missouri, but compelled the owner to convey the title; and it was the act of the mortgagor in conveying the title which the supreme court sustained. In commenting upon the law of the case, Mr. Justice Strong uses the following significant language :
“It is here imiloirtitedly a recognized doctrine that a court of equity, sitting-in a state and having juiisdietion of the person, may decree a conveyance by him of land in another state, and may enforce the decree by process against the defendant. True, it cannot send its process into that other state, nor can it deliver possession oí land in another jurisdiction, but it can command and enforce a transfer of the title. And there seems to be no reason why it cannot, in a proper case, effect the transfer by the agency of the trustees when they are complainants.”
The case in hand is one in which creditors and stockholders first commenced the suit for the avowed purpose of placing the operation of Cue railroad under control of a court of chancery, and in which, afterwards, the trustee for the mortgage bondholders has commenced a second suit for the purpose of foreclosing the mortgage; but in vietv of the lime which lias elapsed since the foreclosure suit has been pending, and the manner in which the case has been suffered to slumber, the court is justified in saying that it has not: been intended to really foreclose the mortgage in the usual maimer of foreclosing mortgages. It is not the wish or purpose of the parties to sell the mortgaged property as an entirety, at least not until some scheme for reorganization can be perfected. In short, the real purpose of the foreclosure suit is the same as in the original suit of Winston and others. The case of Muller v. Dows certainly cannot support the claim of jurisdiction in the court at Milwaukee of that part of this case which is essentially a proceeding in ran.
It is my conclusion that it is the plain duty of this court to take cognizance of the charges made against the receivers and the allegations of the defendant in asking for their removal. Although it is true that this court appointed Messrs. Oakes, Payne, and Rouse, because they had been previously appointed by another court, and did not, in the choice of receivers, exercise its independent judgment, still their appointment stands as the act of this court, and before the court can, consistently with justice, vacate its order appointing them, it must gire them an opportunity to make full answer to the allegations of the defendant: contained in the affidavit of Mr. Ives. The court; therefore orders that the case be set down for further hearing, upon a date to be fixed, as to questions relating to the fitness of the receivers to serve in that capacity, a.nd the grounds for their removal from office set: forth in said affidavit, and that, at least 30 days prior to the date of said hearing, they respond to said affidavit, by answer, plea, or demurrer, as they may elect.