Mohawk Oil Co. v. Layne

JACK, District Judge (after stating the facts as above). [1] If the judgments in question be void, or if they be void as to the plaintiff in this proceeding, the other requisites of jurisdiction being present, this court would have jurisdiction to enjoin their execution. The same right exists in the state courts under the well-established jurisprudence. See Sheriff v. Judge, 46 La. Ann. 29, 14 South. 427; Hibernia National Bank v. Standard Guano Chemical & Manufacturing Co., 51 La. Ann. 1321, 26 South. 274. As was said by the Supreme Court of the United States in Simon v. Southern Railway Co., 236 U. S. 123, 35 Sup. Ct. 257, 59 L. Ed. 492: “Of course, the jurisdiction of the United States courts could not be lessened or increased by state statutes regulating venue or establishing rules of procedure, but, manifestly, if a new and independent suit could have been brought in a state court to enjoin Simon from enforcing this judgment, a like new and independent suit could have been brought for a like purpose in a federal court, which was then bound to act within its jurisdiction and afford redress. * * * The United States courts could not stay original or — 846 — supplementary proceedings in a state court * * * or revise its judgment. But by virtue of their general equity jurisdiction they could enjoin a party from enforcing a void judgment.” Under section-720 of the Revised Statutes (Comp. St. § 1242), it is provided that a United States court shall not “stay proceedings in any court of a state,” but, as stated by the court in the Simon Case: “ * * * When the litigation has ended and a final judgment has been obtained — and when the plaintiff endeavors to use such judgment — a new state of facts, not within the language of the statute may arise. In the nature of the case, however, there are few decisions dealing with such a question, for where the state court had jurisdiction of the person and subject-matter, the judgment rendered in the suit would be binding on the parties until reversed and there would therefore usually be no equity in a bill in a federal court seeking an injunction against the enforcement of a state judgment thus binding between the parties. * * * “There have, however, been a few cases in which there was equity in the bill brought to enjoin the plaintiff from enforcing the state judgment, and where that equity was found to exist appropriate relief has been granted. For example, in Julian v. Central Trust Company, 193 U. S. 112, a judgment was obtained in a state court, execution thereon was levied on property which, while not in possession of the federal court, was in possession of a purchaser who held under the conditions of a federal decree. It was held that the existence of that equity authorized an injunction to prevent the plaintiff from improperly enforcing his judgment, even though it may have been perfectly valid in itself. , “Other cases might be cited involving the same principle. But this is sufficient to show that if, in a proper case, the plaintiff holding a valid state judgment can be enjoined by the United States court from its inequitable use— by so much the more can the federal courts enjoin him from using that which purports to be a judgment but is, in fact, an absolute nullity. Marshall v. Holmes, 141 U. S. 597; Gaines v. Fuentes, 92 U. S. 10; Barrow v. Hunton, 99 U. S. 85.” In the Simon Case, Simon had obtained in the state court in Louisiana a large judgment against the railway company for damages for personal injuries on a cause of action which arose in Alabama. Process was served on the Secretary of State on the allegation that the defendant was a foreign corporation doing business in the state, whereas, in fact, it was not doing business in the state. The suit proceeded to judgment by default for a fraudulently exaggerated sum, without the knowledge of the railway company, which, on learning of the judgment, and that an attempt would be made by Simon' to enforce it by "fieri facias, filed suit in the United States court and obtained an injunction restraining him from doing so. The case was first before the Supreme Court on Simon’s application for writ of habeas corpus, he having been sentenced to prison for violation of the injunction. Ex parte Simon, 208 U. S. 144, 28 Sup. Ct. 238, 52 L. Ed. 429. Later the case came up on Simon’s appeal from the decree granting the injunction. 236 U. S. 115, 35 Sup. Ct. 255, 59 L. Ed. 492. In passing on Simon’s appeal, the court, quoting from Marshall v. Holmes, 141 U. S. 597, 12 Sup. Ct. 65, 35 L. Ed. 870, said: “ ‘Authorities would seem to place beyond question the jurisdiction of the Oircuit Oourt to take cognizance of the present suit, which is none the less an original, independent suit, • because it relates to judgments obtained in the court of another jurisdiction. While it cannot require the state court itself to set aside or vacate the judgments in question, it may, as between the — 847 — parties before it, if the facts justify such relief, adjudge that Mayer shall not enjoy the inequitable advantage obtained by his judgments. A decree to that effect would operate directly upon him, and would not contravene that provision of the statute prohibiting a court of the United States from-granting a writ of injunction to stay proceedings in a state court. “It would simply take from him the benefit of judgments obtained by fraud.” ’ And if a United States court can enjoin a plaintiff from using a judgment, proved to be fraudulent, it can likewise enjoin him from using a judgment absolutely void for want of service. * * * “The ground of the decision in the Marshall Case, in Gaines v. Fuentes. 92 U. S. 10; Barrow v. Hunton, 99 U. S. 85; McDaniel v. Traylor, 196 U. S. 415; Arrowsmith v. Gleason, 129 U. S. 80; Johnson v. Waters, 111 U. S. 640; Sharon v. Terry, 86 Fed. Rep. 337, cited in Julian v. Central Trust Co., 193 U. S. 112; Dobbins v. Los Angeles, 195 U. S. 224; Howard v. De Cordova, 177 U. S. 609, is that while section 720 prohibits United States courts from ‘staying proceedings in a state court,’ it does not prevent them from depriving a parly of Ihe fruits of a fraudulent judgment, nor prevent the federal courts from enjoining a party from using that which he calls a judgment but which is, in fact and in law, a mere nullity. That conclusion is inevitable, or else the federal court must hold that a judgment — void for want of service — is ‘a proceeding in a state court’ even after the pretended litigation has ended and the void judgment has been obtained. Such a ruling would involve a contradiction in terms, and treat as \alid for some purposes that which the courts have universally held to be a nullity for all purposes.” In that case, finding that service on the Secretary of State under the Louisiana statute would not be effective to give the state court jurisdiction over a nonresident defendant as to a cause of action arising in another state, the Supreme Court, without passing on the question of fraud, affirmed the decree of the Court of Appeals granting the relief sought. The allegations of plaintiff’s bill, if true, bring the case within the jurisdiction of this court, so that the court may proceed to the inquiry as to whether the judgments attacked were, in fact, void. In the first case, Raines and Herndon v. Dunson, there was no question as to the court’s jurisdiction as between the parties to the suit, that is to say, the plaintiffs and defendants, and Rayne, a third party in interest, whose right to an appeal was specifically given by the Code of Practice. [2-4] The court in effect held that, while the Dunson leases were originally void, the plaintiffs, Raines and Herndon, were estopped from asserting it, by reason of their having acquiesced in the judgment of the lower court holding the leases valid, but that such acquiescence would not, of course, affect such rights as Rayne might have under a subsequent lease; and that, if Rayne’s lease was valid, it would take precedence over the Dunson leases, validated by the acquiescence of Raines and Herndon. It is true that Dunson’s assignees, including the present plaintiff, were not given an opportunity to be heard in the proceeding in which the Dunson lease was decreed invalid, but they had purchased pending the litigation, after the filing of a notice of lis pendens, which, though not specific as it should have been, was, I think, under all of the circumstances, sufficient. Their rights, therefore, were no greater than those of Dunson and his associates. The judgment did not attempt to pass on the validity of the Rayne lease which was not then in question, the court having to accept as true, for the purpose of his ap — 848 — peal, the allegation of Layne that he had a valid lease. Consequently, it follows that said judgment was not void, that it was binding as between the parties and the Mohawk Company claiming under' them, but had no effect, and was intended to have no effect, as against the rights of the assignees of Dunson to maintain their lease as against Raines and Herndon, and, likewise, as against Layne, if his lease was not valid. If the' Layne lease was valid, having been acquired from Raines and Herndon before the Dunson lease was made good by their acquiescence, such' lease would prevail over the latter. In the second case, Tex-la-homa Oil Corporation, Mohawk Oil Company, and Brown against Layne, the court had jurisdiction of the one plaintiff left in the suit, Tex-la-homa Oil Corporation, and as against it the judgment is valid and binding. [5] The assignees of the Dunson leases, made good by the acquiescence of Raines and Herndon, had the right, in a subsequent proceeding to directly attack the Layne lease, without any reservation to that effect in the judgment of the Supreme Court; and, consequently, the reference to such reservation in the subsequent suit filed against Layne had no effect whatever, as against the Mohawk Company, which, however, was bound by the judgment in the Dunson case for the reasons heretofore stated. [6] The Supreme Court of Louisiana, in dismissing the appeal in the suit against Layne, without remanding the case for evidence on the plea of estoppel, acted on certified copies of the record in the lower court in the suit of the receiver, of the Tex-la-homa against Mohawk Company. The court, however, took occasion to say that it did not appear that appellant had had notice of such plea, and that, if such were a fact, an application for rehearing would be favorably considered. Thereupon such application was filed by the receiver of the Tex-la-homa Corporation, but not on the grounds that he had received no notice of such plea, which the affidavit of opposing counsel showed he had, in fact, been given. The attorney for the Tex-la-homa Oil Corporation made an explanation of how the judicial allegations on which the plea of estoppel was based came to be made. The Supreme Court evidently did not consider such explanation sufficient, even though true, and refused to grant a rehearing. As to the Tex-la-homa Oil Corporation, the only party plaintiff then left in the case, the judgment on the plea of estoppel was not without hearing, and, so far as such corporation is concerned, is valid and binding. [7] There has been, however, no judgment obtained contradictorily with the Mohawk Oil Company, plaintiff herein, sustaining the validity of the Layne lease. At the very threshhold of the suit to determine that question, the Mohawk Oil Company was thrown out of court on an exception of misjoinder filed by Layne. To sustain the contention of defendant herein that the Mohawk Oil Company is bound by the judgment in the last-named case on the ground that after being dismissed from the suit, on such exception, it joined the remaining plaintiff in an application to the state Supreme Court for a rehearing from its judgment sustaining the plea of estoppel and dismissing the appeal, and that later on it again joined with such plaintiff in an application to thq Unit — 849 — ed States Supreme Court for writ of certiorari or review, would be to hold that, by very reason of its efforts to obtain a hearing, it lost its right to be heard. It cannot be said that the Mohawk Oil Company has had its day in court. The issues made by it in its attack on the Layne lease have never been met and determined., If the defendant has any rights, they consequently cannot be affected by such judgment. Therefore the query is: Has the plaintiff property rights which he has not been given the opportunity to defend, and, if he has, would the enforcement of such judgment constitute a taking of his property without due process of law ? [8] Although the Mohawk Company had transferred the leases in-question to the Tex-la-homa Oil Corporation, it was still the real party in interest. The credit portion of the price of the leases in question and others included with them was $1,500,000, and the contract of sale provided that, should the title to said Raines and Herndon leases be not valid, said Tex-la-homa Oil Corporation should be allowed a credit of $600,000 on such indebtedness. Not alone was the Mohawk Company warrantor of the validity of such leases, but it was the holder of a mortgage and vendor’s lien on same to secure the payment of the balance of the purchase price. It had, under such contract, even reserved ownership in the leases until all deferred payments should be made, though this provision was perhaps waived by its election to foreclose its mortgage, rather than to rescind the sale. The Tex-la-homa Corporation was at the time in the hands of a receiver — it is now in bankruptcy. The Mohawk Company was proceeding to foreclose this mortgage and enforce its lien, when, in its petition to enjoin such proceeding, the allegations were made by the attorneys for the receiver on which the plea of estoppel was based. Ordinarily, a warrantor is called in by the defendant to defend a petitory action or ejectment suit, but, in this case, the warrantor was not permitted to remain in the suit and establish the validity of the leases sold its vendee. Is the plaintiff to be deprived of this valuable property right because the receiver of its vendee corporation, through its attorney appointed by the court, unfamiliar with the previous litigation, had declared that the title to the lease had failed? Should plaintiff be deprived of such a property right, even had the receiver, in making such allegations, been fully cognizant of the fact that the title to the lease was then being litigated in a suit pending in the Supreme Court? If so, then a bankrupt defendant in a petitory action may, by a confession of judgment, deprive his vendor of his lien and mortgage, and this though he may have purchased the property entirely on credit, and without paying one dollar cash to his vendor. While one may be estopped by his own admissions or allegations, he cannot be estopped by the allegations of his adversary. After taking its appeal from the adverse judgment of the lower court, the effect of which was to invalidate its leases, the receiver of the Tex-la-homa Oil Corporation, thereafter appointed, could not, by shifting positions and declaring said leases void in a suit to rescind the contract by which they were acquired, in any wise prejudice the rights of the Mohawk Company if the leases were valid, in fact. Such allegations could be — 850 — pleaded as estoppel only to defeat the leases so far as the Tex-la-homa Corporation was concerned, just as the acquiescence of Raines and Herndon in the first suit was pleaded and held to have estopped them from denying the validity of the Dunson leases; but such acquiescence was held in no manner to have affected the rights of Dayne. It is true that rather an anomalous situation would be presented if the leases heretofore decreed invalid as to the party having the present title should now be decreed valid as to such party’s vendor. It is not for this court at the present time to say how such a situation might be equitably adjusted. Perhaps the practical effect of holding the lease valid as to the Mohawk Company, while invalid as to its vendee because of the latter’s judicial allegations, might be to give Layne the right to claim priority for his lease on payment to the Mohawk Company of the estimated balance due it by the Tex-la-homa Corporation on the Dunson leases, or, if this might be difficult to determine, owing to the fact that the Dunson leases were sold together with others, on payment to the Mohawk Company of the $600,000 agreed by it to be credited the Tex-la-homa Corporation on its obligation if the title to such leases failed. That it was not intended by the Supreme Court of the state that its judgment dismissing on the plea of estoppel the suit of the Tex-la-homa Corporation should have, as against the Mohawk Company, the effect of finally invalidating the Dunson leases, would appear evident from its ruling on Layne’s appeal in the Raines and Herndon Case. Referring to the cases cited in support of the contention, then made, that the effect of the judgment dismissing the appeal of Raines and Herndon on the ground of their acquiescence in the judgment was to cut off any claim that might be urged by Dayne, the court said: “In none of them (such cited cases) do we find that the courts have held that one litigant, by acquiescence, collusion, or otherwise, may bind or preclude other parties at interest against their consent or over their protest.” For a greater reason such allegations and acquiescence could not be held to bind a third party in interest when made in a suit seeking to avoid liability to such third party for the 'price of the lease alleged to be invalid. [9] This very question of the right of the Mohawk Company to be heard is now pending on its appeal to the Supreme Court of the state from the order of the trial court eliminating it as a party plaintiff from the suit against Dayne on the latter’s exception of misjoinder. If the state district court was in error in thus eliminating the Mohawk Company as one of the parties plaintiff in such suit against Dayne, it would seem that plaintiff would clearly have the right to enjoin the execution of the judgment, the effect of the enforcement of which would be to take from plaintiff valuable property before its rights could be heard and determined by the Supreme Court. On the other hand, if the state district court was not in error in holding that, under the state practice, the Mohawk Company had no standing in court to assert and defend the validity of the leases held by its vendee, in which the Mohawk Company was so materially interested, then, under the allegations of the — 851 — bill of complaint herein, this case is one in which it is peculiarly the province of a court of equity to grant its relief. The plaintiff in its bill avers that the Hayne lease is invalid and the grounds on which the allegations are based are serious. Whether they are sufficient, it is not for this court at this time to determine. It suffices to say that, taking for true the allegations of plaintiff’s bill, except as otherwise shown by affidavits and exhibits filed, until the plaintiff lias had a hearing and his rights have been adjudicated, he is entitled to the equitable writ of injunction under the Fourteenth Amendment of the federal Constitution, prohibiting the taking of one’s property without due process of law. While the first judgment complained of, that in the case of Raines and Herndon v. Dunson et al. (No. 23384) 145 La. 1011, 83 South. 224, in the Supreme Court of the state, is valid and binding against the plaintiff herein, that judgment did not, in itself, finally determine the validity of the Dunson leases, and can be enforced only in connection with the subsequent judgment in the case of Tex-la-homa Corporation v. Hayne (No. 23853) 86 South. 322, in the Supreme Court, the effect of which was to finally invalidate the Dunson leases as against those held by Hayne. But the judgment in the latter case was not against the Mohawk Company, which was not permitted to remain a party to the suit, and consequently such judgment was not, I think, intended to be binding on said company, as to whom it was void and of no effect. Consequently, plaintiff is entitled to an injunction as prayed for, restraining defendant from attempting to enforce said judgments. It follows that the preliminary writ of injunction herein issued should be continued in effect, and that the motion to dismiss plaintiff’s bill should be overruled. A decree will be prepared and entered in accordance with the views herein expressed.