Miles v. New South Building & Loan Ass'n

99 F. 4, 1900 U.S. App. LEXIS 4981

• Court: U.S. Circuit Court for the Northern District of Georgia
• Decided: January 5, 1900
• Docket: No. 1,077
• Status: Published

Opinion

XEWMAN, District Judge.

In determining the demurrers filed hy Mrs. Feliciana R. Miles, complainant in the original hill, and Armstrong, receiver, to the intervening petition of the American Trust & Banking Company, it is unnecessary at this time to pass upon some of the interesting questions ably argued by counsel at the bar and in briefs subsequently filed. It is necessary, however, to decide: (1) Is the intervener a proper party to this litigation? (2) May if come into the litigation by intervening petition in the circuit court for this district? (3) Can it proceed at all before default in the payment of interest on the bonds secured by the trust agreement in which it is named as trustee?

As to the first question, it can scarcely be doubted that the intervening tru^t company is a proper party. It was named as trustee to hold certain notes and mortgages of the association which were placed in its hands to secure bonds and other obligations of the association. As the association is now in the hands of a receiver* and its business is being wound up for the benefit of persons at interest, the trust company is not only a proper, but probably a necessary, party to the cause.

It is contended, however, that the trust company cannot come into the circuit court for this district, even if it is a proper party to the case. The claim is that, if it becomes a party at all, it should be in the cause in the court of primary jurisdiction in the Eastern district of Louisiana. So far as the demurrer on this ground by the receiver is concerned, it may be answered that he has brought the trust company into the litigation in this district by his motion filed in this court for the purpose of having the assets of the association in the hands of the trust company turned over to him as receiver. He filed his petition in the court in this district. It was answered here by the trust company, and heard and decided by Circuit Judge Shelby on the pleadings in this district. The status of the trust company in the litigation, so far as it has been determined, is to be gathered from proceedings in this district. Judge Shelby, in the motion referred to (95 Fed. 919), while directing that the assets held by the trust company should be turned over to the receiver to be collected, ordered that the money realized from the same should be deposited by the receiver with the trust company. He seems to have reserved any rights of the trust company for further determination, and simply decided the question of possession for the purpose of reducing the securities to money. In concluding his opinion on the motion to turn over the assets to the receiver, Judge Shelby says: “Whether or not the trust company is a necessary party defendant to the bill is a question not necessary to be now decided. "If it is, and is not made a party, it would be permitted to intervene in the cause by petition if it became necessary to do so to protect or assert any interest involved in the suit.” While learned counsel endeavor to give this expression a different construction, I think it is fair to infer that, as he was discussing the case in this district, the judge had reference to the right of the trust company to intervene in the suit in this district. Especially is this true as the judge directed, as has been stated, that the money be deposited by the receiver with the trust company in this district. But, independently of the decision of Judge Shelby, and of anything to be gathered from that proceeding, or his order and opinion, an ancillary bill is pending, in the circuit court for this district, and this is the home of the trust company. The securities of the association deposited with the trust company are still probably in contemplation of law, in this district, the naked possession being in the receiver for collection; and it would seem to he eminently proper that any peculiar rights the trust company may have should he enforced, and any duly that may be upon it discharged, by applying to the circuit court for this district. There is no reason whatever why there should be any conflict between the court for the Eastern district of Louisiana and the court for this district. The circuit court in Louisiana is the court of primary jurisdiction, and 1ms the general control of this case, and any orders that may be entered or any decree made in this district must he in accordance with the recognized equity practice in federal courts concerning courts of ancillary jurisdiction.

As to the right of the trustee to come into court before there is default in the payment of interest on the bonds secured by the trust agreement, it is only necessary to say that the affairs of the association are being liquidated and wound up by a receiver, and its inability to carry out the purposes for which it was organized is conceded. It is certainly the right, if not the positive duty, of the trustee, to come into the litigation, and set up the trust agreement, and the rights of the beneficiaries under the same. What relief will be granted It is a question which must he determined as the case proceeds. Much, necessarily, may depend upon the action of the circuit court in Louisiana having general control of the litigation, when its orders and decrees are brought to the attention of this court.

There is no question about the correctness of the argument that there should be harmonious and concentrated management of the affairs of the association, the collection of its assets and the disposition of the same, and nothing whatever will be done in this court to retard or prevent it. An order will be entered overruling the demurrer, and the ease made by the intervening petitioner will he retained in this court for such further action as may be necessary and proper.

The bill in this case was first presented to Circuit Judge PARDEE, who made the order appointing the receiver, and who authorized and directed the filing of the ancillary bill in this district. He has been present in this district while I have had the case under consideration, and I have conferred with him about it, and have also shown him this opinion. He authorizes me to state that he concurs both in the conclusion reached, and in the reasons I have briefly given for the same.