Schindelholz v. Cullum

55 F. 885, 5 C.C.A. 293, 1893 U.S. App. LEXIS 2024

• Court: Court of Appeals for the Eighth Circuit
• Decided: May 1, 1893
• Docket: No. 192
• Status: Published

Opinion

THAYER, District Judge,

after stating the case as above, delivered the opinion of the court.

It is a doctrine which has recently been approved by the supreme court of the United States that the courts of one state or sovereignty have authority over their own citizens to restrain them from prosecuting suite by attachment in a foreign jurisdiction against other citizens of the home state or sovereignty, when the maintenance of such suit in the foreign jurisdiction is contrary to equity and good conscience, and tends to defeat the policy of local insolvent laws. The authority in question is said to he a part of the inherent power of a court of chancery over persons subject to its jurisdiction. But to warrant its exercise the complaint must show a clear equity. The courts of one state or sovereignty will not restrain a citizen of that state from suing another citizen by attachment in a foreign jurisdiction unless such proceeding dearly contravenes the policy of some local law or statute to which both parties owe obedience by reason of their common citizenship. Cole v. Cunningham, 133 U. S. 107, 10 Sup. Ct. Rep. 269; Dehon v. Foster, 4 Allen, 545; Warner v. Jaffray, 96 N. Y. 248; Jenks v. Ludden, 34 Minn. 482-487, 27 N. W. Rep. 188; Barnett v. Kinney, 147 U. S. 476, 13 Sup. Ct. Rep. 403.

It is evident, we think, that the doctrine last referred to has no application to the case in hand, and that it cannot be successfully invoked by the receiver of the Land Company. The statutes of Colorado provide that “no deed of general assignment * * * by an insolvent * * * for the benefit of creditors shall be valid unless * * * it be made for the benefit of all of his creditors, in proportion to the amount of their respective claims.” Section 171, Mill’s Ann. St. 1891. But the statute in question contains no provisions which can be held to preclude a citizen of that state from attaching the property of another citizen of the state, either at home or in a foreign jurisdiction, merely because the latter has become insolvent, and because such attachment may result in a preference. The insolvent laws of Colorado are of a purely voluntary character. They do not constrain persons to execute an assignment in the event of insolvency. Neither do they compel creditors to participate in the benefits of a general assignment, when made, or to relinquish any of the ordinary remedies for the collection of debts when a debtor is in failing circumstances, or has become bankrupt. In this connection it is also proper to remark that the receiver’s title to the assets of the Land Company, and the mode of administering upon the same, is not aided or affected by any existing statute of the state of Colorado relative to the dissolution of private business corporations when they become insolvent. The suit brought by Atwood and others to obtain the appointment of a receiver, and to wind up and liquidate the affairs of the Land Company, on the ground of its insolvency, does not appear to have been founded on the provisions of any local statute which authorized such a proceeding, but was an appeal to the ordinary jurisdiction of a court of chancery, whatever that may be.

We are of the opinion, therefore, that the conduct of the' appellants in causing suits to be brought against the Land Company in the territory of New Mexico, with a view of obtaining a preference, was not in contravention of any policy of the state of Colorado, as evidenced by its laws, and that an injunction such as was awarded by the circuit court, cannot be supported on such grounds. It goes without saying that the conclusion reached on this branch of the case would be the same if all of the persons concerned in the controversy, including John K. Woodburn, one of the attaching creditors, were citizens of Colorado.

In another class of eases, which are chiefly relied upon to sustain the decree of the circuit court, it is held that courts which have appointed receivers over property situated in a foreign jurisdiction may either restrain or punish persons who interfere with the receiver’s possession of such property, even though the interference consists in attaching it under process obtained from some court in the foreign state. Vermont & C. R. Co. v. Vermont Cent. R. Co., 40 Vt. 792; Chafee v. Quidnick Co., 13 R. I. 442; Sercomb v. Catlin, 128 Ill. 556, 21 N. E. Rep. 606; Langford v. Langford. 5 Law J. Ch. (N. S.) 60. In all of the cases last cited, however, the person proceeded against for interfering with the receiver’s constructive possession of property located in a foreign jurisdiction was either a party to the litigation in which the receiver had been appointed, or in privity with a party, or was otherwises subject to the jurisdiction of the court by virtue of his residence or citizenship. It is also worthy of notice that the properly involved was personalty, and that the owner thereof was domiciled In the state where the receivership was created. In considering the question of a receiver’s title to property located la a foreign jurisdiction a distinction has sometimes been taken between personalty ar.d realty, but, as the case at bar simply involves the right to attach realty? situated in a foreign state, we need not stop to inquire whether the distinction is well founded, or whether the power of a court to restrain persons from intermeddling with a receiver’s possession of personal property thus situated is iu any respect, or for any reason, more extensive than its power to restrain a like Interference with real property. For present purposes it will suffice to say that in our opinion a court has no power to enjoin a citizen of a foreign state or sovereignty from causing a levy to be made on lands which are situated in the foreign state, and beyond its territorial jurisdiction, because it lias appointed a receiver of such property, unless the person so enjoined is a party, either in person or by representation, to the litigation in which the receiver was appointed. Courts of chancery, doubtless, have power to compel persons subject to their jurisdiction to execute conveyances of property located in a foreign state, which will generally be respected by the courts of the latter sovereignty It l hey are executed in conformity with llieir laws. Phelps v. McDonald, 99 U. S. 298-308; Miller v. Sherry, 2 Wall. 237-249; Watkins v. Holman, 16 Pet 25-57; Mitchell v. Bunch, 2 Paige, 606-615. By means of such order's, and conveyances made thereunder, a court may be able to vest its receiver with the title? to realty situated in a foreign jurisdiction, which will be there recognized as valid. But; an order appointing a receiver of realty has no extraterritorial operation, and cannot affect the title to real property which is located beyond the jurisdiction of the court by which the order was made. Booth v. Clark, 17 How. 322-328. Bueh orders, therefore, only operate in personam, and upon those persons who are so related to the court, either an parties to the litigation, or by virtue of residence and citizenship, ilsat they are bound to yield obedience to its orders. In conformity with these views we are led to conclude that John K. Woodbum acquired a valid lien on the property of the Land Company in the territory of Hew Mexico, which' the circuit court for the district of Colorado was without power to divest. He was in nowise concerned, as a party or otherwise, in the Colorado suit wherein the receiver was appointed. He was a citizen and resident of Hew Mexico when the attachment suit was brought, and it is conceded that the indebtedness which he sought to enforce by that suit had Its origin in Hew Mexico, and grew out of business transactions between himself and the Land Company in the territory of New Mexico, while he was domiciled in that jurisdiction. We can attach no weight to the suggestion of counsel that a suit was first brought by Woodburn to recover the indebtedness in the courts of Colorado, and that the appeal bond was there executed, or to the further suggestion that, in the suit brought upon the appeal bond in New Mexico, Woodburn was described in the complaint as being at that time a citizen of Colorado. With reference to the first of these suggestions it is sufficient to remark that, if Woodbum’s right to maintain the attachment suit is at all dependent upon the place where the indebtedness was contracted, then we must look to the origin of the indebtedness, and to his citizenship at that time, rather than to the form which the indebtedness subsequently assumed. And with respect to the second suggestion we deem it sufficient to say that the appellants are not estopped in this suit from showing that Woodburn was in reality a citizen and resident of New Mexico when he sued on the appeal bond, by the fact that he was inadvertently and erroneously described by his attorney as being a citizen of Colorado. The averment as to citizenship in the attachment suit was not jurisdictional in its character, and seems to have had no bearing upon Woodbum’s right to maintain the action in the courts of New Mexico. We fail to perceive any reasonable ground, therefore, upon which an averment thus innocently and erroneously made could operate as an estoppel in this proceeding, whatever effect might be accorded to it in the suit in which the averment is found. Reynolds v. Adden, 136 U. S. 348, 10 Sup. Ct. Rep. 843.

The next question to be considered is whether Schindelholz, as assignee of the Woodburn judgment, has the same rights thereunder as his assignor. It is insisted by the appellee that Schindelholz is estopped from enforcing that judgment, and that the circuit court properly enjoined him from so doing, for the reason that Schindelholz is a citizen of Colorado, and a party to the suit in that, state to wind up the Land Company, and because he was also instrumental in procuring the appointment of a receiver of all of its property, including the New Mexico lands. These may be, and we think they were, adequate reasons for restraining him from enforcing the judgment in his own behalf, which was recovered in the name of Benkleman; but they are insufficient, we think, to deprive him of the right of subrogation, with which he became vested when, as a surety for the Land Company, he paid the amount of the Woodburn judgment, and caused it to be assigned to Benkleman for his benefit. There is no element of estoppel in the conduct of the appellants, so far as we can discover. When Woodburn secured a valid lien on the New Mexico lands, which the other creditors of the Land Company were without power to divest, they had already sustained whatever loss or damage the enforcement of such lien could possibly entail. It was thereafter a matter of no concern to the receiver, and to the other creditors of the Land Company, whether such lien was enforced by Woodburn, or whether Schindelholz, by assignment of the judgment, became subrogated to Ms rights. In either event the result would be the same. It is obvious, therefore, that the right to compel Schindelholz to relinquish his lien under the Wood-bum judgment, so that the lands may be sold, and the proceeds distributed ratably among the' general creditors of the Land ComXxany, must be predicated solely on the ground that he is a party to the suit wherein the receiver was appointed, and was instrumental in securing such appointment. With reference to that ground of recovery, we deem it sufficient to say that the fact that he was thus a party to the suit to wind up the Land Company did not deprive him of the right to purchase the Woodburn judgment. Neither does Ms connection with that suit give the other parties thereto a right to insist that he shall cancel the lien of the Woodburn judgment, to wMch he has become subrogated. As well might it be claimed that he should surrender other liens upon the property of the Land Company, lawfully acquired before the suit to wind up the company was instituted. Courts of equity have always gone to the extreme limit of their power in aiding a surety who lias discharged the debt of his principal to obtain the benefit of securities, liens, and priorities held by the original creditor, but we are not aware of an instance where they have lent their aid to deprive a surety of such benefits. Hunter v. U. S., 5 Pet. 173; Lidderdale v. Robinson, 12 Wheat. 594; Thompson v. Taylor, 72 N. Y. 32; Fleming v. Beaver, 2 Rawle, 128; Rice v. Rice, 108 Ill. 199; Brandt, Sur. 271-274.

Our conclusion is that Schindelholz has succeeded to all of the rights of Woodburn with respect to the judgment recovered by the latter in the courts of Hew Mexico, including Ms right, which we think was unquestionable, to enforce it in the mode provided by the laws of that territory. The decree of the circuit court, divesting Mm of those rights, was therefore erroneous. With respect to the other judgment the appellants occupy a less favorable attitude, as we have heretofore intimated. That judgment was recovered by Schindelholz in the name of Benkleman, after the former had joined in the suit to wind up the Land Company, and to obtain an equitable distribution of its assets among all of its creditors. At Ms solicitation the circuit court was induced to extend the receivership over the. lands located in New Mexico, and to make an order directing them to be advertised and sold. Under these circumstances, and without reference to the nature of the receiver’s title, we think it was competent for the trial court to restrain the appellants from taking any action under the Benkleman judgment that would prevent the receiver from obtaining possession of the property in Hew Mexico, or that would obstruct him in any way in the discharge of Ms trust, or that would interfere with the proceeding to wind up the Land Company, The jurisdiction which the court had theretofore acquired over Schindelholz was fully adequate, in our judgment, to warrant the exercise of such coercive powers.

For the reasons indicated the case must be reversed and remanded, and all of the provisions of the decree from which the appeal was taken must be canceled, which in any wise interfere with the appellant’s right to enforce the Woodbum judgment.

In view of possible future action which may be taken by the creditors of the Land Company, we think it would be unwise to require the appellants to execute a present release of the lien acquired under the judgment obtained in the name of Benkleman. Therefore the case will he remanded to the circuit court, with directions to vacate its former decree, and in lieu thereof to enter a decree restraining the appellants from taking any present action to enforce the judgment recovered in the name of Benldeman, or any future action in that behalf save such as may be first sanctioned and approved by the United States circuit court for the district of Colorado, and further requiring said appellants to take all such future proceedings with respect to said judgment as may be required of them by said court in the suit to wind up the Land Company.