Farmers' Loan Trust Company v. Lake Street Elevated Railroad Company/Opinion of the Court

by George Shiras, Jr.

United States Supreme Court

177 U.S. 51

Farmers' Loan Trust Company  v.  Lake Street Elevated Railroad Company

 Argued: January 19, 1900. --- Decided: March 26, 1900

Whether the state courts erred in refusing to accept the petition and bond filed by the plaintiff in error, the Farmers' Loan & Trust Company, for removal of the cause to the circuit court of the United States, and whether the Lake Street Elevated Railroad Company, the American Trust and Savings Bank, and the Northern Trust Company, by appearing in the circuit court, by moving to remand, by demurring to the bill, after such motion had been overruled, and by appealing to the circuit court of appeals, were estopped from proceeding in the state court, are questions which have been argued at length before us, but which, for reasons presently to be stated, we have not found it necessary to decide.

Apart from those questions, the principal matters in dispute are the legal competency of the Farmers' Loan & Trust Company to act as trustee under the mortgage, and whether, in view of the controversy between the two sets of bondholders in regard to the right and expediency of a foreclosure proceeding, the Farmers' Loan & Trust Company can proceed to enforce the provisions of the mortgage. And these are matters which are necessarily involved, and can be properly raised and determined in the circuit court of the United States whose jurisdiction had attached by the filing of the bill of foreclosure before the commencement of the suit in the state court.

The contention that the jurisdiction of the state court first attached because, although the suit therein was not commenced till after the commencement of the suit in the Federal court, the summons issued by the state court was served before the service of the writ of subpoena issued by the Federal court, is not well founded.

A suit in equity is commenced by filing a bill of complaint. Story, Eq. Pl. 4th ed. § 7.

Such is also the rule by statute in Illinois. Ill. Rev. Stat. 1874, chap. 22; Hodgen v. Guttery, 58 Ill. 431.

It is true that in applying the doctrine of lis pendens to the case of a third person who is a bona fide purchaser, notice is held to begin from the date of service of the subpoena, and not from the filing of the bill. Miller v. Sherry, 2 Wall. 237, 250, 17 L. ed. 827, 830; 2 Maddock, Ch. Pr. 325; Haughwout v. Murphy, 22 N. J. Eq. 545; Grant v. Bennett, 96 Ill. 513.

But here no question is presented relating to rights acquired by any third person after the commencement of the suit and before the service of process on the defendants. As between the immediate parties, in a proceeding in rem, jurisdiction must be regarded as attaching when the bill is filed and process has issued, and where, as was the case here, the process is subsequently duly served, in accordance with the rules of practice of the court.

The defendants could not defeat jurisdiction thus acquired, and supplant the case, by bringing suit in another court and procuring an ex parte injunction seeking to restrain the service of process already issued.

As, then, the bill of foreclosure had been filed in the circuit court of the United, States, and the jurisdiction of that court had thus attached before the commencement of the suit in the state court, it follows upon principle and authority that it was not competent for the state court to interfere by injunction or otherwise with the proceedings in the Federal court.

The possession of the res vests the court which has first acquired jurisdiction with the power to hear and determine all controversies relating thereto, and for the time being disables other courts of co-ordinate jurisdiction from exercising a like power. This rule is essential to the orderly administration of justice, and to prevent unseemly conflicts between courts whose jurisdiction embraces the same subjects and persons.

Nor is this rule restricted in its application to cases where property has been actually seized under judicial process before a second suit is instituted in another court, but it often applies as well where suits are brought to enforce liens against specific property, to marshal assets, administer trusts, or liquidate insolvent estates, and in suits of a similar nature where, in the progress of the litigation, the court may be compelled to assume the possession and control of the property to be affected. The rule has been declared to be of especial importance in its application to Federal and state courts. Pack v. Jenness, 7 How. 612, 12 L. ed. 841; Freeman v. Howe, 24 How. 450, 16 L. ed. 749; Moran v. Sturges, ^[1] 154 U.S. 256, 38 L. ed. 981; Central Nat. Bank v. Stevens, 169 U.S. 432, 42 L. ed. 807, 18 Sup. Ct. Rep. 403; Harkrader v. Wadley, 172 U.S. 148, 43 L. ed. 399, 19 Sup. Ct. Rep. 119.

We think that this salutary rule is applicable to the present case. The bill filed in the Federal court looked to the enforcement of the trusts declared in the mortgage, the control of the railroad through a receiver, the sale of the railroad, and the final distribution of the assets of the company. Such a proceeding necessarily involves the right of the complainant trustee to act as such, and the determination of the controversy in respect to the ownership of the bonds and to the power of a majority of the bondholders, by an agreement with the stockholders, to dispense with an enforcement of the provisions of the mortgage by judicial proceedings. These questions are not for our consideration, unless and until they are brought before us on appeal from a final decree of the court whose jurisdiction was first legally invoked to determine them.

Our conclusion is that the superior court of Cook county erred in its decree perpetually enjoining and restraining the Farmers' Loan & Trust Company, the plaintiff in error, from proceeding with or prosecuting the said foreclosure suit in the circuit court of the United States, and from acting in any manner whatsoever under and by virtue of the terms, provisions, and conditions of the said mortgage; that the appellate court of the first district of Illinois erred in affirming said decree, and that the supreme court of Illinois erred in affirming the judgment of the said appellate court.

Accordingly, the judgment of the Supreme Court of Illinois is reversed, and the cause is remanded to that court for further proceedings not inconsistent with this opinion.

Notes

1. 14 Sup. Ct. Rep. 1019.