Arkansas Southeastern R. v. Union Sawmill Co.

SHELBY, Circuit Judge, having made the foregoing statement of the case, delivered the opinion of the court. The learned counsel for the appellant cites many authorities bearing on the question raised by the first assignment of error, but we have concluded that it is only necessary to consider and decide the question involved in the second assignment, which we have quoted in the statement. The complainant — -appellee in this court — the Union Sawmill Company, is an Arkansas corporation, owning large tracts, of timber land in Union parish, La. The defendant — appellant in this court — the Arkansas Southeastern Railroad Company, is a Louisiana corporation, chartered to construct a railroad through Union parish, Louisiana. The beginning or northern terminus of the railroad was at the mill [310] of the Summit Lumber Company, a corporation organized under the laws of Arkansas, but having its principal place of business in Union parish, La. The railroad of the defendant was a logging road constructed and operated to serve the Summit Lumber Company. There was litigation between the complainant and the defendant and the Summit Lumber Company. This litigation was compromised or agreed to be settled by agreements between the three corporations. Two agreements were made, which are described in the bill. As they are described in the bill, which we have set out in the statement, the two agreements constitute one transaction by which the pending litigation between the three corporations was intended to be settled. This settlement was to be effected by the dismissal of the litigation between them, and by the purchase by the complainant of certain lands and timber and rights of way in which the defendant and the Summit Lumber Company were both interested. The bill avers performance on the part of the complainant, and alleges that it has “made repeated demands upon the Summit Lumber Company and the Arkansas Southeastern-Railroad Company to carry out and perform their obligations thereunder, but without avail.” It is alleged that the complainant has deposited its certified check for $50,000 with the Fourth National Bank of St. Louis, Mo., to be held by that bank and paid to the Summit Lumber Company as a part of the purchase price of the lands and timber and rights of way embraced in the contracts. It clearly appears that the Summit Lumber Company has a larger interest -in the subject-matter of the contracts than the defendant railroad company. The connection and interest of the Summit Lumber Company with the controversies between the complainant and the defendant is apparent in every material paragraph of the bill. It was interested in the suits dismissed, in the rights of way and property agreed to be sold; it is to receive the purchase money; the railroad, the construction and operation of which are sought to be enjoined, begins at its mill and is operated to convey timber to its mill, and it has no other means of being furnished with timber. It is expressly alleged in the bill that the railroad “is being constructed only for temporary use as a logging or turn (tram) road for the conveyance of timber to the mill of the said Summit Lumber Company, which is the northern terminus and point of origin of the said Arkansas Southeastern Railroad Company.” Again it is alleged: “That, unless restrained, the said company will continue the construction of the said railroad or logging or tram road, and will run locomotives and cars over the same for the purpose of transporting timber to the Summit Lumber Company.” One main purpose of the bill is to enjoin the railroad company from serving the Summit Lumber Company. If the Union Sawmill Company gets the relief prayed for, it would put the Summit Lumber Company out of business and close its mills.' That was the aim of the suit in the state court, and is the chief purpose of the injunctive feature of the bill here. It is clear to us that a decree affecting the rights of the Summit Lumber Company so vitally ought not to be rendered without giving that company an opportunity to defend. [311] The aim of a court of equity is to do complete justice by deciding upon and settling the rights- of all persons directly interested in the subject of the suit, so as to make the performance of the order of the court safe to those who are required to obey it, and to prevent,future litigation. To accomplish this end, all persons materially interested in the subject ought generally to be parties to the suit. There is a class of persons who are not only termed necessary parties, but who are indispensable parties, to wit, persons who not only have an interest in the controversy, but an interest of such a nature that a final decree cannot be made without either affecting that interest or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and .good conscience. California v. Southern Pacific Co., 157 U. S. 229, 250, 15 Sup. Ct. 591, 39 L. Ed. 683; Gregory v. Stetson, 133 U. S. 579, 10 Sup. Ct. 422, 33 L. Ed. 792; Minnesota v. Northern Securities Co., 184 U. S. 199, 22 Sup. Ct. 308, 46 L. Ed. 499. W;e think that the application of this rule shows that the Summit Number Company is a necessary party to this suit. Although the appeal is taken from an interlocutory order continuing in force an injunction, if the court is of opinion that relief cannot be granted, and that on the final hearing the bill must be dismissed, it is the duty of the court to save both parties the expense of further litigation by making a final disposition of the case. Smith v. Vulcan Iron Works, 165 U. S. 518, 17 Sup. Ct. 407, 41 L. Ed. 810. The Summit Lumber Company and the complainant both being corporations- created under the laws of the same state, and, for the purposes of jurisdiction, citizens of the same state, the jurisdiction of the Circuit Court will be defeated when it is made a party; and yet its interest in the case is such that the relief called for by the bill cannot be granted without having it before the court as a party. It follows that the decree continuing the injunction must be reversed, and the cause remanded, with directions to dismiss the bill (Cabaniss v. Reno Min. Co., 116 Fed. 318, 323, 54 C. C. A. 190), and it is so ordered.