Shields v. Coleman

This appeal was taken under the provisions of section 5 of the judiciary act of March 3, 1891, upon a question of the jurisdiction of the circuit court.

The facts in this case are as follows: On June 6, 1892, in a suit in the circuit court of the United States for the Eastern district of Tennessee, brought by John Coleman against the Morristown & Cumberland Gap Railroad Company and Allison, Shafer & Co., an order was entered appointing Frank J. Hoyle receiver of all the property of the railroad company. The bill upon which this order was made alleged that in 1890 the defendant railroad company had contracted with its codefendants, Allison, Shafer & Co., for the construction of its line of railroad from Morristown to Corryton, a distance of about 40 miles, which work was partially completed in February or March, 1892; that there was yet due from the railroad company to Allison, Shafer & Co. more than $50,000; that Allison, Shafer & Co. were indebted to the complainant for work and labor done in the construction of such railroad; that notice, claiming a lien, had been duly given the railroad company; and that it was insolvent, as were also Allison, Shafter & Co. The prayer was for judgment against Allison, Shafer & Co., that the amount thereof be declared a lien upon the railroad property, and for the appointment of a receiver pending the suit.

In pursuance of this order, the receiver took possession of the railroad. On June 8, 1892, the railroad company appeared, and filed a petition for leave to execute a bond for whatever sum might be decreed in favor of the complainant, and that the order appointing the receiver be vacated. This petition was sustained, the bond given and approved, and an order entered discharging the receiver. Thereupon the receiver turned the property over to the railroad company, receiving the receipt of its general manager therefor.

On June 20, 1892, T. H. McKoy, Jr., filed his petition in the same case, setting up a claim against the railroad company for services rendered as an employ e and vice president of the railroad company and for expenses incurred on its behalf. On July 4 and July 7, 1892, other petitions were filed, setting up further claims against the railroad company.

On July 27, 1892, each of the defendants filed a separate answer to the complainant's bill. No further order was made by the circuit court until November 12, 1892, when, as the record shows, a demurrer of the railroad company to the petitions filed on July 4th and July 7th was argued and overruled, and leave given to answer on or before December rules. The record of proceedings on that day contains this further recital:

'On motion of complainant, and it appearing that the bill in this cause is properly filed as a general creditors' bill to wind up the affairs of an insolvent corporation, it is ordered by the court that the bill be sustained as such, and that all creditors of said Morristown and Cumberland Gap Railroad Company and all other persons interested therein come forward and exhibit their demands, and have themselves made parties to this bill, on or before the 2d Monday of January next, and show in their petitions the nature and extent of their claims, and whether they have security or lien therefor; and, if so, the nature thereof, and the property upon which their liens rest. But parties having suits now pending in other courts against said Morristown and Cumberland Gap Railroad Company for rights of way or other claims or demands may prosecute the same to judgment, and file their judgments in this court as evidence of the amount and character of their demands. And the clerk of this court will make publication, notifying all creditors of said Morristown and Cumberland Gap Railroad Company of the contents of this order, which publication will be inserted at least twice a week for the next four weeks in the Knoxville Daily Tribune. And thereupon complainant moved the court for the restoration of the receivership in this case and the appointment of a receiver to take possession and custody of all the property of said Morristown and Cumberland Gap Railroad Company, and W. S. Whitney is appointed temporary receiver of the railroad and its property, and ordered to take custody and control of said railroad, its operations, and all other property of said railroad company.'

On November 29, 1892, an amended and supplemental bill was filed, naming as complainants, not merely the original complainant, John Coleman, but also the various subsequent intervening petitioners. It is enough to say of this amended and supplemental bill that it stated facts sufficient to justify the appointment of a receiver.

On October 28, 1892, a bill was prepared addressed 'To the Honorable John P. Smith, Chancellor, &c., Presiding in the Chancery Court at Morristown, Tennessee.' This bill was in the name of sundry creditors of the railroad company against it, and other parties, setting forth certain judgments in favor of the complainants against the railroad company, its insolvency as well as that of the firm of Allison, Shafter & Co., the existence of a multitude of unpaid claims, and prayed the appointment of a receiver. This bill having been presented to the Honorable Joseph W. Sneed, one of the judges of the state of Tennessee, he signed the following 'fiat,' as it is called in the practice of that state:

'State of Tennessee:

'To the Clerk and Master of the Chancery Court at Morristown:

'Upon the presentation of the foregoing bill, and on consideration of its averments, it is ordered:

'(1) That the temporary restraining order prayed for be granted upon complainants' executing bond, to be approved by the clerk, conditional, as in ordinary injunction cases, in the penalty of ten thousand dollars ($10,000.00).

'(2) That the prayer for a temporary receiver of the Morristown and Cumberland Gap Railroad Company be granted, and James T. Shields, Jr., is hereby appointed such temporary receiver; and he shall, before en ering upon the discharge of his duties, file with the clerk and master a good and sufficient bond, to be approved by the master, in the penalty of twenty thousand dollars ($20,000.00).

'(3) Immediately after his qualification, said receiver is directed to take possession of said railroad and all other property belonging thereto or in possession of said company by lease or otherwise, and shall accurately inventory same, and file a copy of said inventory with the master. Said receiver is directed to operate said road, and to take charge of its tolls and incomes, and to continue and preserve the same in like condition, as at present, if practicable; and to that end he is directed to employ or continue the employment, as justice may demand, all necessary agents and employees whose services are essential to the continued operation of the road or the preservation of its property; and to that end he is authorized to contract, in his official capacity as receiver, for the payment of such reasonable sums as may be necessary to defray the expenses penses of such services.

'(4) It is further ordered that a copy of this order be served upon the defendant the M. & C. G. R. R. Company, along with other process, and that said company be and appear before the Hon. John P. Smith, presiding chancellor of said division, on the second Thursday, being the 10th day of November, 1892, at 10 o'clock a. m., at chambers, at the courthouse, in Rutledge, Tenn., and then and there show any reason which may be made to appear to the court why a permanent receiver shall not be appointed of said railroad company in this cause, and why the temporary restraining order granted herein shall not be made permanent.

'(5) In the event that it shall become necessary to issue a writ of possession to put said receiver in the quiet and peaceable possession of all the property of said corporation, it is ordered that the master issue writs of possession, directed to the sheriffs of Hamblen, Grainger, and Knox counties, for that purpose, commanding said sheriffs to place said receiver in the possession of that portion of said company's property which may be in their several counties.

'Given under my hand, this October 28, 1892.

Jos. W. Sneed, Judge.' This fiat was on the same day filed in the office of the clerk of the chancery court, and the receiver therein named immediately took possession of the railroad property, and commenced the operation of the road. His possession continued until November 14, 1892, when the receiver appointed by the circuit court of the United States took the property out of his hands.

Notice was thereafter given that on January 7, 1893, an application would be made to the chancellor for the appointment of a permanent receiver, and on that day this order was entered by the chancellor:

'In the Chancery Court of Hamblen County, Tennessee.

'Thomas B. Crosby et al. vs. The Morristown & Cumberland Gap Railroad Company et al.

'Be it remembered that this cause came on for hearing on this January 7, 1893, before the Hon. John P. Smith, chancellor at 2 o'clock p. m., at chambers, at Jonesboro, upon the motion of the complainants for the appointment of a permanent receiver of the defendant, the Morristown and Cumberland Gap Railroad Company, and notice thereof.

'And it appearing to the court that on October 28, 1892, under the order and fiat of Hon. Joseph W. Sneed, one of the judges of this state, James T. Shields, Jr., was appointed, at the suit of complainants in this cause, temporary receiver of Morristown and Cumberland Gap Railroad Company and all the property of said company or in its possession, by lease or otherwise, and that said receiver so appointed proceeded forthwith to qualify and took possession of the property of said corporation and everything of which it had possession; and it further appearing to the court by an order made thereafter in the United States circuit court at Knoxville for the Northern division of the Eastern district of Tennessee, in the cause of John Coleman v. Morristown and Cumberla d Gap Railroad Company et al., W. S. Whitney was appointed receiver of said railway company, and that under orders made by said court in said cause the property of the said railway company was taken from the possession of the receiver of this court, and placed in the possession of the receiver of that court; and the court, being of the opinion that to appoint a permanent receiver in advance of a determination of the question of superior jurisdiction would be unseemly, and not in conformity with that spirit of comity which exists between the state and federal courts of concurrent jurisdiction, doth order that said motion for a permanent receiver be entered and continued, with leave to call the same up upon notice at any time after said question of jurisdiction is settled.

'It is further ordered that James T. Shields, Jr., the temporary receiver of said corporation and its property, under the order of appointment in this case, intervene in said cause of John Coleman v. The Morristown and Cumberland Gap Railroad Company et al., and there test and contest the question of jurisdiction in such manner and form as he may be advised by counsel; and, on application of said James T. Shields, Jr., John K. Shields and Tully R. Cornick are appointed his counsel for that purpose.

'Done at chambers, at Jonesboro, this January 7th, 1893.

John P. Smith,

'Chancellor 1st Div., Tenn.'

On January 24, 1893, the receiver J. T. Shields, Jr., in obedience to the direction of the chancellor, filed his motion in the circuit court of the United States, setting forth the facts herein stated, and praying that court to vacate its order appointing W. S. Whitney receiver of the road, and for an order restoring the possession to him. This motion was on January 30, 1893, overruled, and exception duly taken. Subsequent proceedings were had in the circuit court, culminating on January 31, 1894, in a final decree which decree established certain liens, and ordered the property to be sold.

Thereafter an appeal to this court was prayed for and allowed in behalf of the receiver appointed by the state court, the petition and the order allowing the appeal being in these words:

'Your petitioner, James T. Shields, Jr., suing as receiver of the Morristown and Cumberland Gap Railroad Company, respectfully represents that there is manifest error committed, to the injury of the petitioner, by the final decree pronounced in this cause on the 31st day of January, 1894, and by the interlocutory orders and decrees theretofore pronounced in these _____, in and by which said interlocutory orders and final decrees this court assumed and asserted jurisdiction of the property and effects belonging and constituting the estate of the defendant Morristown and Cumberland Gap Railroad Company as against the lawful custody and possession of this petitioner, under orders and decrees theretofore pronounced by the chancery court of Hamblen county, Tennessee, in the cause pending in said chancery court entitled 'Thomas B. Crosby et al. v. Morristown and Cumberland Gap Railroad Company et al.,' under jurisdiction theretofore lawfully exercised and assumed, said chancery court being a court of equity of concurrent jurisdiction with this court, and which said chancery court of Hamblen county, Tennessee, was thereby ousted of the lawful jurisdiction, and this petitioner, as such receiver, became deprived of the lawful custody of the property and estate of said Morristown and Cumberland Gap Railroad Company, the subject-matter of controversy in the cause then and there peding in said court.

'Wherefore, petitioner, James T. Shields, Jr., receiver, &c., considering himself aggrieved, prays an order granting an appeal from said final decree and interlocutory orders, taking and exercising jurisdiction as aforesaid, to the supreme court of the United States, as authorized by section 'V' of the act of congress of the United States approved March 3, 1891; and petitioner herewith files his bond in the penal sum of five hundred dollars, which bond is approved by the onorable D. M. Key, one of the judges of this court.

'Upon consideration of the petition for appeal to the supreme court of the United States filed herein by James T. Shields, Jr., as receiver of the M. & C. G. R. R. under appointment by the chancery court of Hamblen county, Tennessee, it is ordered that said appeal be granted; bond therefor in the penalty of five hundred dollars having been executed and approved by the court.

'It is further ordered that the petition for supersedeas be denied.

'This appeal is granted solely upon the question of jurisdiction; and unless counsel shall agree by stipulation, filed with the clerk, in respect to the portions of the record to be transcribed and filed in said United States supreme court under said appeal as prayed and granted, the appellant has leave to present the record to the court on Saturday, the 29th of July inst., for the determination of what portion of the record shall be certified to said supreme court under said appeal.'

Subsequently the court made the entry suggested in the latter part of this order, and directed the portions of the record to be certified to this court, and under that direction the record was prepared.

Heber J. May, J. K. Shields, and Tully R. Cornick, for appellant.

Henry H. Ingersoll, for appellees.

Mr. Justice BREWER, after stating the facts in the foregoing language, delivered the opinion of the court.