May v. Printup

Jacson, Judge. In 1812 Henry Clews & Co. filed a bill in the circuit court of the United States against John W. Wofford and others, alleging that complainants were creditors of the Cherokee Railroad Company to a very large amount, and held its bonds therefor; that the proceeds of their credit to the said company, in fact, built the road and bought the iron rails therefor; that there were other creditors of the road for various sums who were made defendants, and some who were unknown, but might be made parties when discovered; that the road had been illegally and fraudulently sold under judgments wrongfully obtained by some of these creditors; and it prayed that the sale be set aside; that injunction be granted against the possession and control of the road under such illegal sale by Wofford and others; that a receiver be appointed; that the road be sold; that the illegal sale be set aside, and its proceeds be applied to the payment of all its debts according to the priorities thereof, and that the assets be marshaled for that purpose. [133] This bill was amended afterwards by a prayer to the effect that the Cherokee Railroad Company be made a party, and that the company be decreed to pay complainants’ debt, and that the earnings be applied1 thereto, claiming that complainants held a first lien thereon. The injunction was granted, and a receiver appointed. Subsequently a consent order was had, revoking the appointment, and turning over the road to the management of its own officers, but without having the effect to change at all the status or rights of the several parties, as the order of revocation of the receiver, taken by consent, expressly provided. A reference to an auditor was afterwards made — exceptions to his report were heard and overruled — and a decree had in favor of Clews & Co., for a large amount. The case was then taken to the supreme court of the United States'; and pending its consideration, or the preparation to consider it there, to-wit, in September, 1876, a bill was filed by May and others — some parties to the Clew’s bill, and others not —in the superior court in the county of Bartow, as creditors of the railroad company, praying for a marshaling of assets, and a sale of the road to pay their debts, and the appointment of a receiver to take charge thereof. On the 2d of' October, 1876, the chancellor, lion. C. I). McOutchen, passed an order for a hearing of the application on the 23d of October, 1876 — afterwards by consent of counsel for both sides, the hearing for the appointment of a receiver was set for the 10th of October, only six days after the order of the chancellor, which order was to have been served ten days before the contemplated hearing, and at the hearing on the 10th the receiver, Samuel E. Stephens, was appointed by the chancellor in the state court. Meanwhile, in September, 1876, pending the appeal to the supreme court of the United States, application for a receiver was made by Henry Clews & Go., or rather their assignee in bankruptcy, J. Nelson Tappan, and the 20th of October was appointed to hear that application, and an or [134] der was passed that all proceedings be stayed, and the road remain in statu quo until the hearing on the 20th. On the 20th of October, D. S. Printup was appointed receiver by the United States circuit court, and when he went to possess himself of the road, he found Stephens in possession under the state court. Printup reported this fact to the United States court, and the judge of that court passed an order that he apply to the state coui’t for relief, by asking that court to revoke its appointment of Stephens, and to direct that the road be turned over to Printup. Printup accordingly made application to the state court, and that court, on full consideration of all the facts, passed an order revoking Stephen’s appointment, and turning over the road to Printup. Whereupon Henry May et. al. excepted, and bring this judgment revoking Stephen’s appointment, and complying with the application of Printup by turning the road over to him, for review here. Two legal questions are made on the above facts. First, can the circuit court of the United States pass an order for the appointment of a receiver to protect the property in litigation in a suit like this, while the case is pending on appeal in the supreme court of the United States ? And, secondly, did the United States circuit court have such jurisdiction over this property, by the suit brought there, as to forbid that, by comity, the state court should interfere with the property, and put its receiver over it % 1. In respect to the first question, it appears to us plain that either the supreme court of the United States, or its circuit court, must have the power to preserve the fund— the property in litigation — and to prevent its waste and destruction. It seems to us that it would be very inconvenient- — almost impracticable — for the supreme court to pass such interlocutory orders as the appointment of receivers, the grant of injunctions, and the like orders,' to preserve the property; and that unless the power remained in the court ■below, it would be nowhere for all.practical purposes. We [135] are aware of no instance in which such powers have been exercised by that appellate tribunal, and we have been cited to none. The circuit court granted the order in this case and exercised the jurisdiction, and that with full knowledge of the fact that the case had gone to the supreme court, and in what manner it went there, and what its own practice was in such cases. We should be loth to deny its jurisdiction in such a case, to preserve the property still pending in some one of the United States courts, and ultimately to be sold, and the fund distributed, by the direction of the supreme court, it is true, but through the machinery of the circuit court at last. Accordingly, we find that the circuit court has, in cases somewhat analogous, preserved the property by its owners, after appeal to the supreme court, of the United States. See High on Receivers, §41; 12 Wall., 86 ; 6 Wheaton, 519 4 Otto., 672; 10 Wall., 273. 2. The second question is, did the court of the United States, by the bill filed in 1872 — the appointment of a receiver under it — the revocation of that appointment, and the turning over the property to the Cherokee Eailroad Company itself, but with the proviso that everything should remain in statu quo, in respect to the rights of all parties, the application for another receiver in September, 1876, before this bill in the state court was filed and a receiver under it asked for, on which application an order was passed enjoining the railroad company from changing the status of things until that application was acted upon — did the circuit court have such jurisdiction and possession as to make it improper for the state court to seize the road and put its receiver in charge? We think that it did. There is some difference of opinion on the question whether the mere filing a bill seeking-.to subject property like this in case of insolvency, and where the only recovery can be out of the property, gives such jurisdiction and control of the res, as to prevent another court from appointing [136] a receiver, but tbe better opinion, we think, is that it does. See High on Receivers, p. 38, §50 et seq., and cases there cited — also p. 105, §152. It is true that in 2nd Woods’ Circuit Court Reports, 409, Mr. Justice Bradley, Judge Erskine concurring, overruled a decision of Judge Woods, holding the other way on the naked question, but he says in that case, that in case of collusion, the state court would correct its own proceeding. The facts here make a case of collusion apparently. The case was set for hearing in the statQ court, on the application of receiver, after it was set for hearing in the United States court, but by arrangement of counsel, it was altered and brought on first. The counsel for defendants, too, there in the state court, was a party in the federal court, against Clews & Co. It seems, too, that the order required ten days’ notice to that counsel, and that the hearing was had in six days after the bill was filed. Moreover, it appears that Judge McCutchen knew nothing of the state of things in the federal court, and if he had known the facts, that he would not have appointed the receiver. See his opinion in the report of this case. We think that in this case the federal ?udge — Judge Erskine — pursued the very course suggested by Mr. Justice Bradley in case of collusion, and that the state judge did right in revoking the order. Both courts acted in a spirit of comity, to be commended and approved by all who would avoid unpleasant conflicts between the state and-federal authorities. Judgment affirmed.