Investment Registry, Ltd. v. Chicago & M. Electric R.

251 F. 510, 163 C.C.A. 504, 1918 U.S. App. LEXIS 1724

• Court: Court of Appeals for the Seventh Circuit
• Decided: April 9, 1918
• Docket: No. 2521
• Status: Published

Opinion

ALSCHULER, Circuit Judge

(after stating the facts as above). In our view this controversy presents two questions: First, did the commencement of the suit in the state court pursuant to the order of the District Court granting leave to that end, preclude the District Court from thereafter recalling its leave to sue there, and taking jurisdiction of the subject-matter of that suit; and, second, in case the first proposition is negatively determined, was there any such impropriety in the action of the District Court vacating the order for leave and enjoining appellant from prosecuting its claim for lien elsewhere than in the federal court, as would require reversal of the order of vacation and restraint?

[1] It must be conceded that the District Court was, through its receivers, in complete possession of all the property of the railroad company, and had exclusive jurisdiction of the res. The prime end to be served is the due and proper conservation of the property in the hands of the court, in order that there may be prompt and proper administration thereof for the benefit of all having any interest therein. If at any stage of the proceedings the court deems it proper and advisable that any demand or question be litigated elsewhere than in the federal, court, it can authorize such litigation to be elsewhere instituted. But neither on principle nor authority does it follow that the court granting the leave to sue may not recall it, if before adjudication in such other tribunal the court granting the leave shall •consider, either because of facts subsequently arising, or of new light coming to it as to then existing conditions, it would best subserve the due administration of the estate to recall the granted leave.

Under such circumstances there is involved no question of comity between different courts, but only that of the best interest of the estate which the court is administering. In New York Security, etc., v. Illinois, etc., R. R. Co., 104 Fed. 710, 44 C. C. A. 161, this court referring to an order for leave to sue in the state court said “such an order is discretionary and administrative, and therefore, in the opinion of the court, is not appealable.” The order granting leave is not final in the sense that thereby a definite status is fixed. In Board of Com’rs v. Peirce (C. C.) 90 Fed. 764, it appears,leave was granted by the federal court to sue its receiver in the state court. The receiver petitioned to remove the suit from the state court to the federal court which had granted the leave. In retaking and holding jurisdiction of the action Taft, Circuit Judge, said:

“If be [the receiver] deems it wise, in the interest of the trust, to remove the suit to the jurisdiction to which the law gives him the right to remove it, there is nothing in the preliminary consent of the court appointing him which will prevent Ms taking such a course.”

The Supreme Court of Florida passed upon a somewhat similar situation, where leave to sue elsewhere than in the court of the receiver’s appointment had been revoked. It said:

“It seems to be well settled that the power to appoint a receiver and to grant leave that he shall be sued as a defendant in- the forum of his appointment, or in that of any jurisdiction, carries with it as a necessary concomitant the authority to revoke such leave to sue him.” Ray v. Trice, 53 Fla. 864, 42 South. 901.

If it appeared that any issue in the litigation had been determined by the state court in which the action was brought, pursuant to the leave granted, a different question might be presented. We are of opinion that under the circumstances the order granting leave to sue the receiver in the state court was revocable at the discretion of the court which granted it, and that the order revoking the leave and enjoining appellant from prosecuting the lien elsewhere than in the ■District Court ivas a proper order to be entered, unless from all the facts appearing the District Court abused its discretion in that regard.

[2] From the statement of facts it is apparent to us, not only that there was no such abuse of discretion, but that the course pursued was advisable under the circumstances. The petition upon which the order appealed from was entered was filed after it developed by amendment of the state court action, and depositions taken therein, that in the state court it was undertaken to invalidate the mortgage and all the bonds it secured, an issue which was the very essence of the controversy pending in the District Court. In the District Court the validity of the mortgage and the bonds was attacked, and was the subject of a fierce contest there; and it was proper that all issues and all litigation directly or indirectly involving such questions should be settled in the court which had possession of and was administering the property itself.

If in the matter of expense or convenience appellant is prejudiced by the order, the District Court is empowered to make such adjustment as equitable considerations would suggest; but we are aware of no complaint as to the fairness and equity of the conditions imposed by tie order, under which, if appellant desires to avail itself thereof, no apparent hardship can accrue to it, beyond the substitution of one court J:or another to hear and determine its rights.

The order is affirmed.