Kelley v. T. L. Smith Co.

BAKER, Circuit Judge (after stating the facts as above). [1] Appellees T. L. Smith Company and Buckley contend that the alleged error was waived through appellants’ having made a general [469] appearance by their demurrer. But when appellants added to their challenge of the court’s jurisdiction over their persons a further challenge of the. court’s jurisdiction over the subject-matter, we do not think that they thereby converted their special into a general appearance, abandoned their objections to the service of subpoena and notice, and asked the court to assume jurisdiction and determine the sufficiency of the bill. Clearly the intent was to urge only objections to jurisdiction. That substituted service was proper practice in this case is urged on the claim that this is an ancillary proceeding in aid of the court’s jurisdiction in the pending suit of American Trust & Savings Bank, as trustee in bankruptcy, against Smith and T. L,. Smith Company. True, the trustee prayed that T. L. Smith Company be enjoined from transferring on its books not only the Smith stock but also that of other co-conspirators who were not parties to the suit. But the prayer should be read in the light of the allegations of the bill. Therein the only demand, on account of the refusal of which the suit was instituted, was. upon Smith to turn over to the trustee the stock in his possession" or under his control (with no allegation that the Kelley stock was either) and to account to the trustee for the remainder of the stock and all the cash taken by the joint tort-feasors. Kelley was not a party to this suit. Just bow the court, without violating familiar principles, could proceed in Kelley’s absence to adjudge that he had no title to the 105 shares and that the true title was in the trustee in bankruptcy, and to order T. E. Smith Company to transfer those shares on its books to the trustee, is not perceived. In the circuit court of Cook county, Ill., the trustee was holding Kelley to show why these shares should not be turned over to the trustee and why additionally he should not pay for his part in the conspiracy. If the present proceeding was in aid of the jurisdiction of any court, it was of the Cook county court and not of the United States Circuit Court for the Eastern District of Wisconsin. Jurisdiction can be sustained only on the grounds: First, that the bill, not as a bill for the protection of the jurisdiction of any court, but as an independent and original bill for the protection of some equitable right existent in complainants, presented a subject-matter cognizable in a Circuit Court of the United States; and, second, the suit being in personam, that the court acquired jurisdiction of the persons of the defendants. [2] That T. U. Smith Company and its secretary, having no interest in the 105 shares, but being under a duty to recognize the rights of the lawful owner, should be pressed on the one hand by a suit in which the trustee in bankruptcy and T. U. Smith Company and Kelley were parties, and on the other hand by a suit in which Kelley, his as-signee, and the secretary of T. E. Smith Company were parties, but in which the trustee, the other claimant, was not a party, presented as subject-matter an equitable right to protection from harassment and jeopardy. Impending danger came to T. E. Smith Company, a Wisconsin corporation having its office and records in the Eastern District, from the acts of appellants’ agents who in that district were [470] in possession of the stock certificate and were asserting appellants’ rights of ownership. Equally with the local courts, the Circuit Court for the Eastern District of Wisconsin, if the requisite amount in controversy and diversity of citizenship appear, has jurisdiction of equitable subject-matters. Diversity of citizenship and due amount were alleged, and the matter was of equitable cognizance; but, of course, neither the sufficiency of the bill nor the legality of the injunction is considered. [3] Appellants insist that on the question of service Equity Rule 13 (29 Sup. Ct. xxvi) is controlling, as follows: “The service of all subpoenas shall be a delivery of a copy thereof by the officer serving the same to the defendant personally, or by leaving a copy thereof at the dwelling house or usual abode of each defendant with some adult person who is a member or resident in the family.” On the other hand, appellees present Equity Rule 90 (29 Sup. Ct. xxxvii) as applicable: “In all cases where the rules prescribed by this court or by the Circuit Court do not apply, the practice of the Circuit Court shall be regulated by the present practice of the High Court of Chancery in England, so far as the same may reasonably be applied consistently with" the local circumstances and local conveniences of the district where the court is held, not as positive rules, but as furnishing just analogies to regulate the practice.” Congressional authority for the Equity Rules is found in section 913 of the Revised Statutes (U. S. Comp. St. 1901, p. 683). English chancery practice as it existed at the time of the adoption. of this rule (March 2, 1842; Thomson v. Wooster, 114 U. S. 104, 5 Sup. Ct. 788, 29 L. Ed. 105) is thus described in Daniell on Chancery Practice .(2d Am. Ed.) p. 518: “The jurisdiction (on substituted service) is most frequently exerted where actions at law are brought by persons resident abroad to enforce demands which, although they have, strictly speaking, a legal right to make, it is against the principles of equity to permit it. In such cases, the court will interfere by injunction served upon the- attorney employed in this country to conduct the proceedings at law, to restrain further prosecution of such proceedings until his employer has submitted himself to the jurisdiction. In order to accomplish this purpose, it is permitted to the plaintiff in equity, in the first instance, to obtain an order directing that service of the subpoena upon the attorney employed in the cause at law shall be deemed good service.” And Daniell’s text seems to be amply sustained by Hobhouse v. Courtney, 12 Simon’s Chan. Rep. 140 (reviewing Hales v. Sutton [decided in 1716] 1 Dick. 26; Carter v. De Brune [1722] 1 Dick. 39; Hyde v. Forster & Myers [1745] 1 Dick. 102; Id., 2 Mer. 459, note; and Geledneki v. Charnock [1801] 6 Ves. 171); Murray v. Vipart, 1 Phillips’ Chan. Rep. 521; Hope v. Hope, 4 Deg., MacN. & G. Chan. Rep. 328. In the last-cited case the bill was brought by the Hope children, through their next friend, to require their custody to be transferred from their mother, residing in France, to their father, residing in England. Before their bill was filed, Mrs. Hope through a firm of English solicitors had begun in the English Ecclesiastical Court a suit for divorce from Mr. Hope. This divorce suit was pending, and the [471] Chancery Court ordered that service in the. children’s suit against Mrs. Hope be made upon her solicitors who were prosecuting her divorce case in the Ecclesiastical Court. Said the Eord Chancellor: “According to the rules of law, service ought either to he made personally, or at least by leaving notice at the dwelling house of the party. But the rule of this court differs in this respect from that of a court of law. Personal service, or service at the dwelling house, may be impossible, because the defendant may be abroad; and yet it might be very unfit that he should not be litigated with in the same manner as if he were here, as he might have agents competent to represent and actually representing him in this country. Therefore, in cases wixere a defendant is abroad, the question is whether there is any person here who may be fitly served, and service upon whom may he treated as equivalent to service upon the absent person himself. Now, this has been allowed in a variety of cases; for instance, where there has been an ag'ent in this country, managing all the affairs of a defendant who is abroad, and regularly communicating with him upon his affairs, or where he has an ag'ent specially managing the particular matter involved in the suit. In such cases, the court has felt that it might safely allow service upon the agent to be deemed good service upon the person abroad, because the inference is irresistible that service so made upon the agent is service on a person either impliedly authorized to accept that particular service, or who certainly will communicate the process so served to the party who is not in this country to receive it himself. The object of all service is, of course, only to give notice to the party on whom it is made, so that ho may be made aware of and may be able to resist that which is sought against him; and when that has been substantially done, so that the court may feel perfectly confident that service lias reached him, everything has been done that is required. Now, in this case, Messrs. Grover & Coare were the solicitors of Mrs. Hope in the proceedings which she instituted in the Ecclesiastical Court against her husband to obtain a divorce.” * * ® ****** “Under all the circumstances, my opinion is that the service upon Messrs. Grover & Coare was a perfectly good service, and that the order of the Master of the Bolls was strictly correct; because in such a case you are not to look at the mere form of service, but to the substance. It is true that their being Mrs. Hope’s agents with reference to the suit for the divorce does not necessarily imply that they were her agents with regard to the question of the custody of the children, but it is impossible not to see that they were acting for her on the question of her separation from her husband; and that question being one which in France, where Mrs. Hope is residing, has incident to it the further question respecting the custody of the children, it is impossible to suppose that Messrs. Grover & Coare did not communicate with her. Indeed, all doubt on that point is excluded by the evidence.” It will be observed tliat Mrs. Hope’s divorce suit did not directly involve the question of the custody of the children, and therefore that subject-matter was not explicitly within the solicitors’ agency. But in this case appellants’ agents had possession of the certificates and were asserting with authority appellants’ rights to the stock. It is inconceivable that notice to them and an injunction running against them as appellants’ agents would not in fact be as effective a notice as if the subpoena and motion for injunction had been served upon appellants personally in Milwaukee and as if the injunction had run against appellants alone. In our judgment Equity Rule 90 applies, and the decree is, accordingly, affirmed.