Koehring Co. v. Hyde Construction Co.

424 F.2d 1200
Court of Appeals for the Seventh Circuit·Decided March 19, 1970·No. Nos. 17502-17504·Published·Cited by 19 cases

Opinion

DILLIN, District Judge.

This appeal was taken by the plaintiff, Koehring Company (Koehring), a Wisconsin corporation, from a ruling of the District Court dismissing its statutory action in the nature of interpleader, filed pursuant to 28 U.S.C. §§ 1335,1397. Defendant Fidelity and Deposit Company of Maryland (Fidelity), plaintiff’s co-debtor in a Mississippi judgment recovered by the defendant Hyde Construction Company, Inc. (Hyde),1 appeals from a similar ruling dismissing its cross-claim for interpleader against its codefend-ants. We affirm.

The history of the antecedent litigation between Koehring and Hyde, including ancillary matters involving Varda-man S. Dunn, one of Hyde’s attorneys, is contained in some seventy-eight pages of federal and state reports, the order from which this appeal is taken being reported at 297 F.Supp. 731.2 This formidable body of legal literature discloses that Hyde commenced its simple suit for breach of warranty in the Chancery Court of Hinds County, Mississippi in 1961, having first initiated the same as a diversity action in the United States District Court for the Southern District of Mississippi only to have that action transferred to the Northern District of Oklahoma, pursuant to 28 U.S.C. § 1404 (a). Koehring could clearly have removed the Chancery Court action to the same Mississippi District Court, 28 U.S. C. § 1441(a), but declined to do so and answered on the merits. The result is that the Chancery Court has had jurisdiction of the principal action, long since final but for collection of the judgment, since 1961.

Having failed to extricate itself from the jurisdiction of the Chancery Court by the simple expedient of removal, Koehr-ing has nevertheless resisted the exercise of that jurisdiction by other means for nearly a decade. Specifically, it first prevailed upon the Oklahoma District Court to enjoin proceedings in the Chancery Court, and when the Chancery Court nevertheless proceeded to try the case, it obtained a further Oklahoma injunction enjoining Hyde from attempting to collect its judgment. All of such injunction proceedings were in deroga[1202] tion of 28 U.S.C. § 2283, as held in Hyde Construction Company v. Koehring Company, 10 Cir., 1968, 388 F.2d 501, cert. den. 391 U.S. 905, 88 S.Ct. 1654, 20 L.Ed.2d 419. Even after the Tenth Circuit's decision became final by the denial of certiorari by the Supreme Court on May 6, 1968, Koehring persisted in its efforts to thwart the Chancery Court by intervening in a criminal contempt proceeding pending against Hyde in the Oklahoma court, again seeking an injunction to prevent Hyde from proceeding in Mississippi to collect its judgment. This time the Oklahoma court wisely declined, by order dismissing Koehring's petition on May 23, 1968.

Free at last, Hyde sought to enforce its judgment, so bitterly won. On May 24, 1968, it proceeded in accordance with normal practice to cause a writ of execution to issue to the sheriff, who in turn issued several writs of garnishment against firms indebted to Koehring and Fidelity. Its freedom proved illusory. Time and the course of litigation had not left all parties in the status quo ante. By 1968 Hyde had become insolvent and the judgment had been twice assigned and was subject to attorneys’ liens and other claims. On this pretext Koehring, alleging fear of being exposed to multiple claims, commenced its inter-pleader action on March 27, 1968 and secured yet another ex parte injunction, this time from the Wisconsin court, enjoining Hyde and its codefendants in the Wisconsin case from enforcing the judgment. Fidelity echoed Koehring’s demands by way of cross-claim. Although the Wisconsin court eventually dismissed the action and cross-claim, giving rise to this appeal, the injunction, as modified by our own Court on April 29, 1969, has been continued in effect.3

Complex as the factual and legal history of this case may be, there is but one issue before this Court: Has a federal district court the discretion to dismiss an action in statutory interpleader on grounds of equity and comity, when the interests of the stakeholder and all claimants will be adequately protected in a pending state court proceeding? The short answer is yes.

II

Stating the question as we have makes an assumption about an issue which was strenuously controverted by Koehring in the District Court, and by both Koehr-ing and Fidelity on this appeal — the adequacy of the protection afforded by Mississippi law against the hazard of multiple claims. Of course, with the benefit of hindsight it is easy to show that the Mississippi procedure was quite adequate.4 Treating the matter as it was [1203] before Judge Reynolds, as we must do, there can be no different answer.

A Mississippi statute specifically provides for interpleader in garnishment proceedings,5 under which the Chancery Court proceeded. Indeed, Koehring itself caused one of its debtors-garnishee to invoke the interpleader provisions of such statute, as a result of which all interested parties, including Koehring and Fidelity, were interpleaded. Appointment of a receiver to receive and disburse the judgment proceeds under the court’s order is likewise statutory.6 Even in the absence of statute, it is elemental that a Chancery Court, a court of general equitable jurisdiction, would possess the inherent power to discharge judgment debtors upon payment of the debt, and to provide for proper distribution of the fund. Koehring’s argument to the contrary is to argue, in effect, that a judgment debtor in Mississippi may never be free from duplicitous claims to the proceeds of the judgment — an argument which would seem ridiculous on its face, and is totally unsupported by authority. Fidelity has no independent claim of jeopardy since a discharge of the principal by payment would of course operate to discharge the surety.

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Koehring Co. v. Hyde Construction Co., 424 F.2d 1200 (7th Cir. 1970).

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