Carey v. Houston & Texas Central Railway Company/Opinion of the Court

By the fifth section of the judiciary act of March 3, 1891 (26 Stat. 826, c. 517), it is provided that appeals may be taken from the circuit courts directly to this court 'in any case in which the jurisdiction of the court is in issue; in such cases the question of jurisdiction alone shall be certified to the supreme court from the court below for decision.' And we held, in respect of the direct appeal to this court taken from the decree of the circuit court in this cause, that such an appeal was not authorized simply because the jurisdiction of the circuit court over another suit previously determined by the same court might be involved, and we said: 'It is the jurisdiction of the court below over the particular case in which the appeal from the decree therein is prosecuted that, being in issue, and decided against the party raising it, and duly certified, justifies such appeal directly to this court. This suit to impeach the decree of May 4, 1888, and to prevent the consummation of the alleged plan of reorganization, was a separate and distinct case, so far as this inquiry is concerned, from a suit to foreclose the mortgages on the railroad property; and no question of jurisdiction over the foreclosure suit or the rendition of the decree passed therein can be availed of to sustain the present appeal from the decree in this proceeding.' Cary v. Railway Co., 150 U.S. 170, 180, 14 Sup. Ct. 63.

We are quite content with the conclusion there reached, for this suit is in itself unquestionably a distinct suit in the sense in which those words were used in disposing of the former appeal; and in respect of it the jurisdiction of the circuit court was not in issue, nor was any question of jurisdiction certified. Carey and his co-complainants did not intervene in consolidated cause No. 198, and seek to have the question of the jurisdiction of the circuit court therein certified to this court, and appeal directly therefrom; nor did they file a bill of review for error of law apparent in that the circuit court took jurisdiction as a court of the United States. The gravamen of the bill they did file was fraud and collusion, and the allegations of want of jurisdiction relate to prematurity in the attempt to foreclose, or to other matters not bearing on the jurisdiction of the federal courts as such. And the prayer was that the decree be vacated, and adjudged fraudulent, collusive, illegal, and void; that complainants might be permitted to intervene, and become parties defendant; that the sale of the railroad and lands of the company under the decree be vacated and set aside, 'and the said railway and lands be restored to the possession of the receivers appointed by this court, or such other officers or receivers as the court may name,' for injunction, and general relief.

But the question now before us is whether the decree of the circuit court of appeals affirming the decree of the circuit court upon the merits is made final by the sixth section of the act of March 3, 1891, which provides that 'the judgments or decrees of the circuit courts of appeals shall be final in all cases in which the jurisdiction is dependent entirely upon the opposite parties to the suit or controversy, being aliens and citizens of the United States or citizens of different states; also in all cases arising under the patent laws, under the revenue laws, and under the criminal laws and in admiralty cases.'

The suits 'of a civil nature, at common law or in equity,' of which the circuit courts of the United States have original cognizance, are enumerated in the first section of the judiciary act of March 3, 1887 (24 Stat. 552, c. 373), as corrected by the act of August 13, 1888 (25 Stat. 433, c. 866).

It is denied that the jurisdiction of the circuit court in the present suit depended entirely, or at all, upon the fact that the opposite parties were citizens of different states, and insisted that jurisdiction was entertained because it was a bill to set aside a foreclosure decree entered in the circuit court by consent, and in pursuance of a fraudulent plan to reorganize the company, and the res was in possession of the court, whether 'rightfully or wrongfully.' The ground of jurisdiction thus suggested is not a ground of federal jurisdiction, but of the exercise of the powers of courts of superior general jurisdiction; and it undoubtedly exists over all suits and proceedings ancillary, auxiliary, or supplemental to other suits, of which the circuit courts have cognizance as courts of the United States.

The character of this jurisdiction is thus treated by Mr. Justice Miller in Minnesota Co. v. St. Paul Co., 2 Wall. 609, 633, where, speaking for the court, he said: 'The question is not whether the proceeding is supplemental and ancillary or is independent and original, in the sense of the rules of equity pleadings, but whether it is supplemental and ancillary, or is to be considered entirely new and original, in the sense which this court has sanctioned with reference to the line which divides the jurisdiction of the federal courts from that of the state courts. No one, for instance, would hesitate to say that, according to the English chancery practice, a bill to enjoin a judgment at law is an original bill in the chancery sense of the word. Yet this court has decided many times that when a bill is filed in the circuit court to enjoin a judgment of that court, it is not to be considered as an original bill, but as a continuation of the proceeding at law; so much so that the court will proceed in the injunction suit without actual service of subpoena on the defendant, and though he be a citizen of another state, if he were a party to the judgment at law.'

In Rouse v. Letcher, 156 U.S. 47, 15 Sup. Ct. 266, we have already adjudged that the sixth section authorizes no appeal to this court from a decree of a circuit court of appeals in an ancillary or supplemental suit or proceeding in the circuit court, where the jurisdiction of that court in the main or original suit depends entirely upon the parties being citizens of different states. In that case the main foreclosure suit was between citizens of different states and receivers had been appointed. A proceeding by intervention was afterwards instituted in the circuit court against the receivers, who appealed to this court from the decree of the circuit court of appeals against them, and the appeal was dismissed because the opposite parties to the foreclosure suit were citizens of different states, and the decree was therefore made final by the statute. And we said:

'And since, where jurisdiction would not obtain in an independent suit, an intervening proceeding may nevertheless be maintained as ancillary and supplemental under the jurisdiction already subsisting, such proceeding is to be regarded in that aspect even in cases where the circuit court might have had jurisdiction of an independent action. Here, as we have said, the jurisdiction of the circuit court was invoked in the first instance by the filing of the bill, and it was under that jurisdiction that appellee intervened in the case, and that jurisdiction depended entirely upon diverse citizenship. * *  * If the word 'controversy' added anything to the comprehensiveness of the section, the fact remains that the exercise of the power of disposition over this intervention, whether styled 'suit' or 'controversy,' was the exercise of power invoked at the institution of the main suit, and it is to that point of time that the inquiry as to the jurisdiction must necessarily be referred. Mining Co. v. Turck, 150 U.S. 138, 14 Sup. Ct. 35. Nor can the conclusion be otherwise because separate appeals may be allowed on such interventions. Decrees upon controversies separable from the main suit may, indeed, be separately reviewed; but the jurisdiction of the circuit court over such controversies is not, therefore, to be ascribed to grounds independent of jurisdiction in the main suit'

Rouse v. Letcher was followed in Gregory v. Van Ee, 160 U.S. 643, 16 Sup. Ct. 431, and it was there observed:

'The circuit courts of the United States have cognizance of suits as provided by the acts of congress, and when their jurisdiction as federal courts has attached, they possess and exercise all the powers of courts of superior general jurisdiction. Accordingly, they entertain and dispose of interventions and the like on familiar and recognized principles of general law and practice, but the ground on which their jurisdiction as courts of the United States rests is to be found in the statutes, and to that source must always be attributed. Manifestly, the decree in the main suit cannot be revised through an appeal from a decree on ancillary or supplemental proceedings, thus accomplishing indirectly what could not be done directly. And even if the decree on such proceedings may be in itself independent of the controversy between the original parties, yet if the proceedings are entertained in the circuit court because of its possession of the subject of the ancillary or supplemental application, the disposition of the latter must partake of the finality of the main decree, and cannot be brought here on the theory that the circuit court exercised jurisdiction independently of the ground of jurisdiction which was originally invoked as giving cognizance to that court as a court of the United States.'

Complainants and defendants in the bill under consideration were not all citizens of different states, and the jurisdiction of the circuit court over the suit did not purport to be founded upon diverse citizenship. Independently, therefore, of the foreclosure suit, the decree in which was sought to be impeached, the bill was not sustainable in the circuit court.

It is very well settled that a bill in equity by a corporation or the stockholders of a corporation in the circuit court to set aside a final decree of that court against the corporation in a foreclosure suit upon the ground that such a decree was obtained by collusion and fraud, and the court had no jurisdiction to make it, is an ancillary suit, and a continuation of the main suit, so far as the jurisdiction of the circuit court as a court of the United States is concerned. Minnesota Co. v. St. Paul Co., 2 Wall. 609; Krippendorf v. Hyde, 110 U.S. 276, 4 Sup. Ct. 27; Pacific R. Co. v. Missouri Pac. Ry. Co., 111 U.S. 505, 522, 4 Sup. Ct. 583. The bill in the latter case was brought in the circuit court for the Eastern district of Missouri by a corporation, a citizen of Missouri, against another corporation, also a citizen of Missouri, other citizens of Missouri, and others, alleging fraud and collusion in the original foreclosure suit, and praying that the decree of foreclosure and sale be set aside. Mr. Justice Blatchford, delivering the opinion of the court, said:

'The bill falls within recognized cases which have been adjudged by this court, and have been recently reviewed and reaffirmed in Krippendorf v. Hyde, 110 U.S. 276, 4 Sup. Ct. 27. On the question of jurisdiction the suit may be regarded as ancillary to the Ketchum suit [101 U.S. 289], so that the relief asked may be granted by the court which made the decree in that suit without regard to the citizenship of the parties, though partaking so far of the nature of an original suit as to be subject to the rules in regard to the service of process which are laid down by Mr. Justice Miller in Pacific R. R. v. Missouri Pac. Ry. Co., 1 McCrary, 647, 3 Fed. 772. The bill, though an original bill in the chancery sense of the word, is a continuation of the former suit on the question of the jurisdiction of the circuit court. Minnesota Co. v. St. Paul Co., 2 Wall. 609, 633.'

The same principle was applied to a bill by the stockholders of a corporation, filed for the purpose of impeaching a decree of foreclosure and sale, by Mr. Justice Jackson, then circuit judge, in Foster v. Railroad Co., 36 Fed. 628, in the circuit court for the Northern district of Ohio, where he said:

'There is no want of jurisdiction growing out of the fact that some of the defendants to the present suit are citizens of the same state (Ohio) with the complainant, inasmuch as this suit may properly be regarded as ancillary or supplemental to the original suit in which the decree complained of was made. It is well settled that in such cases suit may be maintained without regard to the citizenship of the parties. Minnesota Co. v. St. Paul Co., 2 Wall. 609; Krippendorf v. Hyde, 110 U.S. 276, 4 Sup. Ct. 27; Pacific R. Co. v. Missouri Pac. Ry. Co., 111 U.S. 505, 4 Sup. Ct. 583. It is also well settled that a shareholder may interpose and set the machinery of the law in motion for the protection of corporate rights, or the redress of corporate wrongs, when the corporate management, after proper demand, refuse or fail to act in the matter.'

The decree in that case was affirmed by this court (146 U.S. 88, 13 Sup. Ct. 28), and there is a marked resemblance between the bill exhibited there and that before us.

We regard it as not open to argument that the jurisdiction of the circuit court, as a court of the United States, over this suit, rested on the jurisdiction of that court over the suit in which the decree of May 4, 1888, was rendered, and we think it clear that that jurisdiction depended entirely upon diverse citizenship.

The bill in No. 201 was filed by the Farmers' Loan & Trust Company, trustee, a citizen of New York, against the Houston & Texas Central Railway Company, a citizen of Texas, April 24, 1886, to foreclose the general mortgage, and no other party was named as defendant. The ground of federal jurisdiction was diverse citizenship. How efficacious a decree could have been rendered in that cause if it had stood alone we need not consider, nor inquire when persons who might be considered necessary parties may be dispensed with as such. It may be noted, however, that the general mortgage was the last mortgage, and prior incumbrancers, the validity of whose incumbrances is not drawn in question, are not indispensable parties to a bill to foreclose a mortgage so situated. Hagan v. Walker, 14 How. 29, 37; Jones, Mortg. § 1439.

The bills in Nos. 198 and 199 were filed by Easton and Rintoul, trustees, citizens of New York, January 21, 1886, against the Houston & Texas Central Railway Company and Benjamin A. Shepherd, trustee, both citizens of Texas, to foreclose the Main Line first mortgage and the Western Division first mortgage, and it was alleged that the Farmers' Loan & Trust Company, trustee under subsequent mortgages, should be made a party defendant and brought in by the order and direction of the court, in view of the fact that the property was in the circuit court's possession, and complainants had therefore been obliged to institute their suit therein. These cases were consolidated by the order of May 26, 1886, the parties being arranged for the purposes of jurisdiction on the one side or the other of the matters in dispute, as indicated in Railroad Co. v. Ketchum, 101 U.S. 289; and, unless that order is to be disregarded, the question whether either case lacked an indispensable party became immaterial. Thereafter cross bills and answers were filed, as has been stated. The jurisdiction over these three separate suits and over the consolidated cause depended entirely upon diverse citizenship, and, if maintainable as to either of them, could be maintained as to all by reason of lawful possession of the res.

In No. 185, the Southern Development Company, a corporation and citizen of California, filed its bill against the railway company as a corporation and citizen of Texas, February 16, 1885, the jurisdiction resting upon diverse citizenship, and in that suit the court appointed receivers February 20, 1885, and took and retained possession of the property under that receivership up to May 26, 1886, when it was transferred to the receivers appointed in the consolidated cause, who thereby became receivers under each of the separate bills so consolidated, all of which had in fact been filed long after the property was in the possession of the court. Certainly, possession under one or the other of these bills drew to the court the right to decide upon conflicting claims to the ultimate possession and control of the property, to marshal all liens upon it, and to enforce them. Morgan's, etc., Co. v. Texas Cent. Ry. Co., 137 U.S. 171, 201, 11 Sup. Ct. 61.

We conclude, therefore, that as the jurisdiction of the circuit court for the Eastern district of Texas as a court of the United States was invoked throughout the litigation upon the ground of diverse citizenship, and as this bill must be regarded as ancillary, auxiliary, or supplemental to the foreclosure suit, or, as it were, in continuation thereof, the decree of the circuit court of appeals was made final by the sixth section of the act of March 3, 1891, and the appeal to this court from that decree will not lie.

Appeal dismissed.

Mr. Justice PECKHAM was not a member of the court when this motion was submitted and took no part in its disposition.