Puget Sound Power & Light Co. v. Asia

2 F.2d 485, 1921 U.S. Dist. LEXIS 812

• Court: District Court, W.D. Washington
• Decided: March 12, 1921
• Docket: No. 236
• Status: Published

Opinion

NETERER, District Judge

(after stating the facts as above). The rights for all parties to this proceeding are fixed and limited by the provisions of sections 8005-8008, Rem. & Bal. Code of Wash. Section 8005 authorizes the acquiring of a public utility. Section 8006 provides the method of procedure when it is deemed advisable to purchase any public utility mentioned in 8005, and if in the acquisition a general indebtedness is to be incurred: “Such proposition shall be adopted and assented to by three-fifths of the qualified voters of the said city or. town voting at said election.” Such proceedings were had by the city under its charter provisions and the sections of the statute, supra, that ordinances were enacted for the purchase of the street railway lines of the plaintiff company in which in Ordinance 39025 is the following provision: “Said bonds shall be an obligation only against the special fund created and established in section 5 of this ordinance.”

Section 5 creates a special “Municipal Street Railway Bond Fund, 1919,” and provides for the payment into this fund of the gross revenues of the street railway system, and in the form of the proposed bonds set out in the ordinance appears “payable solely out of the special fund of the city of Seattle known as the Municipal Street Railway .Bond Fund, 1919.”

Section 8008, provides:

“In creating any such special fund * * * the common council * * * shall have due regard to the cost of operation and maintenance of the plant or system * * * and shall not set aside into such special fund a greater amount or proportion of the revenue and proceeds than in their judgment will be .available over and above such cost of maintenance and operation. * * * ”

By section 6, Ordinance 39025, it is provided that the city “does hereby irrevocably obligate and bind itself to pay into such fund out of the gross revenues of the municipal street railway system the necessary amounts to meet interest and principal payments upon the bonds as they mature, * * * and

such fixed amounts out of such gross revenues are hereby pledged to such semiannual payments of interest and such annual payments of principal, and shall constitute a charge upon such gross revenues superior to all other charges whatsoever, including charges for maintenance and operation.”

The Supreme Court in Twichell v. Seattle, 106 Wash. 32, at page 49, 179 P. 127, 130, speaking of the “due regard” clause of the statute, says:

“Whether or no't the ordinance and bonds provide for a preference in favor of the bonds and interest out of the gross revenues of the system is unimportant to the integrity of the obligations, as demands upon the special fund, because the latter part of section 8008 of the Code covers the matter by providing as follows:

“ ‘When any such special fund shall have been heretofore or shall be hereafter created and any such obligation shall have been heretofore or shall hereafter be issued against the same, * * * a fixed amount without regard to any fixed proportion, of revenue shall be set aside and paid into said special fund as provided in the ordinance creating such fund, and in case any city or town shall fail to thus set aside and pay said fixed proportion or amount as aforesaid, the holder of any bond or warrant against such special fund may bring suit or action against the city or town and compel such setting aside and payment.’ ”

Having in mind the limitations of section 8008 supra, which among other things provides, “The * * * corporate authorities shall have power to create a special fund or funds for the sole purpose of defraying the cost of such public utility or addition, betterment or extension thereto, into which special fund or funds the * * * corporate authorities of such city or town may obligate and bind the city * * * to set aside and pay a fixed proportion of the gross revenues of such public utility, * * * ” it seems clear that the obligation of the ordinance, supra, is limited to the special fund.

An examination of the issue in the state court cause and the cause pending in this court show that the issues are several, separate, and distinct. The provisions of the statute under which the utility was acquired did not obligate the general fund of the city to the payment of any portion, and the obligation of the city is distinctly limited to the special fund. Clearly the recourse of the plaintiff is to maintain the integrity of the special fund. It is stated that the design and purpose of the plaintiffs in the state court, defendants here, is to preserve the general fund from invasion for the purpose of repleting the special fund for any purpose. The prayer of the complaint in the state court, it is stated, is out of harmony with the contentions of plaintiff at bar. The prayer in the complaint usually controls as to the relief demanded within jurisdictional facts well pleaded. An examination of the complaint, I think, discloses that the only facts well pleaded within the jurisdiction of that court are facts going to the integrity of the general fund and cannot be said to be an attack upon the integrity of the special fund devoted to the purposes which have been pleaded within the limitations of section 8008 as construed and applied by the Supreme Court in Twichell v. Seattle, supra. The payment of the interest by the city of Seattle maintaining the integrity of the plaintiff’s security has removed the contingency which no doubt caused the plaintiff to move in this cause, and this was done without any order or suggestion from this court. The special, and general funds are as separate and distinct as are two separate sections of land. A mortgage on one may not he said to cover the other. An action against one may not be said to involve both. To maintain the integrity of the special fund as pledged to plaintiff’s security the action is instituted in this court. The existence, maintenance, and integrity of the special fund is provided by the sections of statute and ordinances supra, and is supplied from the revenues of the Seattle Municipal Railway. The motion of the state court is to maintain and preserve the integrity of the general fund, which is supplied by general taxation, the disbursement of which is provided by statute, from which it is alleged the defendant city without authority has diverted many thousand dollars to the special fund and is threatening to divert further sums to the special fund without first submitting the matter of payment to the electors of the city. The state court had jurisdiction of the subject-matter of the general fund and of the real parties; whether this plaintiff is a, proper or necessary party it is not necessary here to decide.

Section 720, Rev. St. (Comp. St. § 1242):

“The writ of injunction shall not he granted by any court of the United States to stay proceedings in any court of a state, except in eases where such injunction may bo authorized by any law relating to proceedings in bankruptcy.”

Federal courts may not interfere by injunction or otherwise with the proceedings of the state courts which have first acquired jurisdiction of the subject-matter. Swift v. Black Panther Oil & Gas Co., 244 F. 20, 156 C. C. A. 448.

In Lang v. Choctaw, O. & G. R. Co., 160 F. 355, at page 359, 87 C. C. A. 307, 311, the rule is thus stated:

“The court which first acquires jurisdiction * * * by the due commencement of a suit in that court, from which it appears that it is, or will become, necessary to a complete determination of the controversy involved, or to the enforcement of the judgment or decree therein, to seize, charge with a lien, sell, or exercise other like dominion over it, thereby withdraws that property from tho jurisdiction of every other court and entitles the former to retain the control of it requisite to effectuate its judgment or decree in the suit free from the interference of every other tribunal. Farmers’ Loan & Trust Company v. Lake Street Railroad Co., 177 U. S. 51, 61, 20 Sup. Ct. 564, 44 L. Ed. 667. * * * Tho jurisdiction of a court over a subject-matter or a cause once lawfully acquired includes the power to enforce its judgment or decree, and to protect the title of those holding under it,from every attempt to avoid or annul it. Chicot Co. v. Sherwood, 148 U. S. 529, 533, 534, 13 Sup. Ct. 695, 37 L. Ed. 546.”

The controversy in this court is distinct from that in the state court. The scope and purpose of each fund in litigation is fixed and limited. De La Vergne Ref. Mach. Co. v. Palmetto Brewing Co. (C. C.) 72 F. 579; Knudsen v. F. T. & S. Bank, 245 F. 81, 157 C. C. A. 377.

Comity and the necessity of avoiding conflict between state and federal courts where possible imperatively demands that such power shall be exercised with the greatest caution, and only after the most careful consideration and abiding conviction that its exercise cannot he avoided under the rules of law enunciated by the courts of last resort.

Jackson v. Parkersburg & O. V. Ry. Co. (D. C.) 233 F. 764:

“The right must he clear, the injury impending, and threatened so as to be averted only by the protecting preventive process of injunction.” Truly v. Wanzer et al., 5 How. 141, 143, 12 L. Ed. 88; Irwin v. Dixion, 9 How. 10, 13 L. Ed. 25.

The Court of Appeals of the Fifth Circuit in Oliver v. Parlin et al., 105 F. 272, at page 276, 45 C. C. A. 200, 203, said:

“An examination of the cases * * * will show that in every well-considered ease, when an injunction restraining already instituted proceedings in a state court has been issued by a United States court, it was either based on a decree or judgment of the United States court which it was necessary and proper to enforce; or, if issued prior to judgment or decree, it was directed against a party who, after jurisdiction over him and the eause was fully vested, had resorted to proceedings in the state court necessarily conflicting with, if not ousting, tho jurisdiction of tho United States court. See Shoemaker v. French, Fed. Cas. No. 12,800; Sharon v. Terry (C. C.) 36 F. 337; Mutual Life Ins. Co. v. University of Chicago (C. C.) 6 F. 443; Railroad Co. v. Kuteman, 4 C. C. A. 503, 54 F. 551; Abeel v. Culberson (C. C.) 56 F. 333; President v. Merritt (C. C.) 59 F. 7.”

The Court of Appeals of this circuit, in Mills v. Provident L. & T. Co., 100 F. 344-347, 40 C. C. A. 394, indorsed the sentiment that section 720, Rev. St., was passed to prevent unseemly conflict of courts of different sovereigns exercising concurrent jurisdiction over the same territory, and that the purpose of the statute is so important that a liberal construction should be given to accomplish it.

The prohibition extends to parties engaged in proceedings in state courts. Cœur d’ Alene Ry. & Nav. Co. v. Spalding, 93 F. 280, 35 C. C. A. 295, writ denied, 174 U. S. 801, 19 S. Ct. 884, 43 L. Ed. 1187; Peek v. Jenness, 7 How. 612, 12 L. Ed. 841. Also, orders entered by the federal court which necessarily have that effect. W. U. T. Co. v. L. & N. R. Co., 201 F. 919, 120 C. C. A. 257; Haines v. Carpenter, 91 U. S. 254, 23 L. Ed. 345.

The language employed by the Court, of Appeals of the Third Circuit in Essanay Film Mfg. Co. v. Kane, 264 F. 959, at page 960, has application to this case:

“The sole purpose of the bill is to obtain an injunction to prevent the defendant proceeding in the state court. The practical effect of such injunction would be to enjoin the state court from proceeding in the action. Such an injunction, except under the Bankruptcy Act (Comp. St. § 9585 et seq.), no court of the United States can grant. With this exception it is expressly forbidden by statute. Judicial Code, § 265; Diggs v. Wolcott, 4 Cranch, 179, 2 L. Ed. 587; Dial v. Reynolds, 96 U. S. 340, 24 L. Ed. 644. The ban of the statute is not evaded by directing the injunction to the litigating party. Peek v. Jenness, 7 How. 612, 12 L. Ed. 841; Cœur d’Alene Ry. & Nav. Co. v. Spalding, 93 F. 280, 35 C. C. A. 295. This rule is not modified by Simon v. Southern Railway Co., 236 U. S. 115, 35 Sup. Ct. 255, 59 L. Ed. 492. The crux of that decision, as we understand it, is embodied in the following sentence appearing on page 124 of 236 U. S., on page 258 of 35 Sup. Ct. (59 L. Ed. 492): ‘But 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 statute, may arise.’ ”

This action clearly is ancillary to or in aid of the suit for “specific performance.” No right to relief other than by way of an injunction is sought. “Such an injunction, as stated, except under the Bankruptcy Act, no court of the United States can grant.” Dial v. Reynolds, 96 U. S. 340, 24 L. Ed. 644; Hull v. Burr, 234 U. S. 712, 34 S. Ct. 892, 58 L. Ed. 1557.

Rodgers v. Pitt (C. C.) 96 F. 668, affirmed Pitt v. Rodgers, 104 F. 387, 43 C. C. A. 600, was’an equitable action, adjudicating rights between the parties upon the same subject-matter, pending in the state and federal courts, of which the federal court had first obtained jurisdiction of the parties by provisions of a Nevada statute, and the subject-matter and the order of injunction issued out of the action in which the subject-matter was litigated.

In St. Louis M. & M. Co. v. Montana M. Co. (C. C.) 148 F. 450, the court held that a party may not appear in court and wage a contest through the nisi prius and appellate courts to judgment against him and render such judgment ineffectual by instituting a new suit in a state court with a view of relitigating the question of such judgment.

In Miller & Lux v. Rickey, 152 F. 11, 81 C. C. A. 207, the federal court in Nevada acquired jurisdiction by suit to quiet title to an appropriation of water to a stream in that state, as against defendant a resident of California. The court maintained such jurisdiction as against subsequent similar action brought by the defendant against the same parties in the state court of California. The court having jurisdiction of the parties, the res—the land—protected its jurisdiction against the encroachment, and held that it was immaterial whether the encroachment was from within or without the state. The right asserted was in the action seeking equitable rights and not in an ancillary proceeding.

In Kansas City Gas Co. v. Kansas City (D. C.) 198 F. 500, the court held that the enforcement of a municipal ordinance purporting to be an exercise of the police power will be enjoined where it is unequal, unjust, or altogether unreasonable, where obedience would require an expenditure which would render its operation confiscatory or it impairs the obligation of a contract under the mere guise or pretext of contributing to the public safety, health, and welfare which it is not adapted or intended to secure, and the courts will go behind its letter for the purpose of determining its real substance and effect.

Allington & Curtis Mfg. Co. v. Booth, 78 , 24 C. C. A. 378, is a patent case and has no application to this issue.

City of Newton v. Levis, 79 F. 715, 25 C. C. A. 161; Allison v. Corson, 88 F. 581, 32 C. C. A. 12; Indianapolis Gas Co. v. City of Indianapolis (C. C.) 82 F. 245; Charles v. City of Marion (C. C.) 98 F. 166—are cases involving the validity of municipal ordinances, not a state statute, and have no application to the issue at bar.

There is no controlling force in the statement that the state court is without jurisdiction and should be enjoined. The presumption is that the state court will only act within its jurisdiction, and if it does proceed without jurisdiction, its decree will be a nullity, and if it is sought to enforce such decree, as said by the Circuit Court in Essanay Film Mfg. Co. v. Kane, supra, a new state of facts not within the language of section 720, Rev. St., may arise. This appears to be in harmony with Wells Fargo & Co., Petitioner, v. Taylor (December 6, 1920) 254 U. S. 175, 41 S. Ct. 93, 65 L. Ed. 205.

The motion for temporary injunction must be denied.