Koehring Company v. Hyde Construction Company

CourtUnited States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
Citation297 F. Supp. 731
Docket NumberNo. 68-C-144.,68-C-144.
PartiesKOEHRING COMPANY, a Wisconsin corporation, Plaintiff, v. HYDE CONSTRUCTION COMPANY, Inc., a Mississippi corporation, Vardaman S. Dunn, an individual, Charles Clark, an individual, Jack N. Hays, an individual, David H. Sanders, an individual, Gable, Gotwals, Hays, Rubin & Fox, a partnership, Cox, Dunn & Clark, a partnership, United States Fidelity and Guaranty Co., a Maryland corporation, the First National Bank of Jackson, a Mississippi corporation, Circle "L" Electric Company, a partnership, and Fidelity & Deposit Company of Maryland, a Maryland corporation, Defendants.
Decision Date06 February 1969

Steven E. Keane and Maurice J. McSweeney, Milwaukee, Wis., for plaintiff, William A. Denny, Milwaukee, Wis., of counsel.

Walter A. John, Milwaukee, Wis., for defendant Fidelity & Deposit Co. of Maryland.

Ward Dunphy and John A. Kluwin, Milwaukee, Wis., for defendant United States Fidelity and Guaranty Co.

Robert P. Harland and Reginald W. Nelson, Milwaukee, Wis., for defendants Hyde Const. Co., Inc. and others, Cox, Dunn & Clark, Jackson, Miss., of counsel.

OPINION AND ORDER

REYNOLDS, District Judge.

This cause of action is a bill in the nature of an interpleader filed pursuant to Title 28 U.S.C. § 1335.1 The matter is now before the court on a motion of the defendants Hyde Construction Company, et al.,2 for an order dismissing plaintiff's action or, in the alternative, transferring it to the United States District Court for the Southern District of Mississippi.

On April 8, 1964, the Chancery Court of Hinds County, Mississippi, entered a judgment against plaintiff Koehring Company3 and in favor of Hyde Construction Company, one of the defendant-claimants in the present action. Subsequently, on May 24, 1968, Hyde Construction Company secured a writ of execution from the Chancery Court which led to service of writs of garnishment on several of Koehring's Mississippi debtors.

Koehring Company, confronted with several conflicting claims to the judgment in addition to the possibility of a subsequent offset in its favor, filed the present action on May 27, 1968, having deposited with this court an amount equal to the Mississippi judgment with interest. Later the same day this court enjoined all enforcement or collection of the Chancery Court judgment. The Chancery Court, taking cognizance of that injunction, stayed all further enforcement proceedings pending the disposition of this action.

Koehring Company then filed answers to the writs of garnishment on behalf of the several garnishees. The Chancery Court abated those proceedings pending this court's determination, but ordered the garnishees to retain the funds in question and reserved jurisdiction to grant the statutory interpleader relief requested in the garnishees' answers.

The central issue in the motion to dismiss is a conflict of jurisdiction between this court and the Chancery Court of Hinds County, Mississippi. The Chancery Court obtained jurisdiction over the subject matter on September 27, 1961,4 when Hyde Construction Company instituted suit against Koehring Company for breach of warranty. A jurisdictional dispute ensued between the Chancery Court and the United States District Court for the Northern District of Oklahoma. Trial commenced in the Chancery Court on March 11, 1964, despite a temporary restraining order issued by the United States District Court for the Northern District of Oklahoma. On April 7, 1964, judgment was granted in favor of Hyde by the Chancery Court. Hyde's execution on the judgment at this time was prevented by an order of the United States District Court for the Northern District of Oklahoma on September 1, 1964, and by Koehring Company's appeal from the Chancery Court judgment. Koehring's appeal to the Supreme Court of Mississippi was subsequently denied on October 4, 1965.

On May 23, 1968, the United States District Court for the Northern District of Oklahoma denied a petition by Koehring Company for a restraining order prohibiting Hyde Construction Company from executing on the Mississippi judgment. The issuance of this denial removed the last obstacle preventing Hyde's execution on the Mississippi judgment. Hyde then proceeded to file its request for a writ of execution with the Chancery Court. The writ was granted on May 24, 1968.

In comparison, the jurisdiction of this court did not attach until the filing of Koehring's interpleader action on May 27, 1968. This forum's jurisdiction over the subject matter is based on the residence of a defendant-claimant (United States Fidelity & Guaranty Company) in this district.5 Residence in this case is established by the fact that the above-mentioned claimant is doing business in Wisconsin.

When faced with such a jurisdictional conflict, it becomes pertinent to look to the relationship that each of these courts bears to the other in this controversy and to put such relationship in proper perspective under the facts and circumstances of this case. This is necessary in order to determine which court, if either, should yield to the other where, as here, jurisdiction for federal intervention is based solely on diversity of citizenship. Preston Corporation v. Raese, 236 F. Supp. 135, 141 (N.D.W.Va.1964), aff'd Kelly v. Raese, 377 F.2d 263 (4th Cir.), cert. denied 389 U.S. 931, 88 S.Ct. 294, 19 L.Ed.2d 283 (1967).

On the one hand, the courts have concluded that the interpleader statute, being remedial in nature, should be liberally interpreted so as not to result in injustice. Douglas-Guardian Warehouse Corp. v. Ramy Seed Co., 271 F.2d 24, 28 (8th Cir. 1959); Austin v. Texas-Ohio Gas Co., 218 F.2d 739, 746 (5th Cir. 1955). On the other hand, it is a well-established proposition as stated in Prudential Insurance Co. v. Shawver, 208 F. Supp. 464, 469 (W.D.Mo.1962), that:

"The Federal Courts should, and do, wherever possible without injury to one of the parties, respect the priority and competency of state courts to adjudicate matters within their jurisdiction involving the application of state law. * * *"

Flanagan v. Marvel, 94 F.Supp. 145 (D. Minn.1950).

Having studied the relationships which the Chancery Court and this court have to the subject matter and to each other, I have concluded that the equitable basis for this court's assumption of jurisdiction under the interpleader statute is wanting in the present action, and that therefore the defendant's motion to dismiss should be granted. As between these two forums, it is clear to me that the Chancery Court has the only real interest in the subject matter of this litigation. The Chancery Court acquired jurisdiction long before this court; the Chancery Court proceedings afford the plaintiff complete and adequate relief; and the Chancery Court is the forum best able to adjudicate the present controversy.

Koehring Company maintains that the Chancery Court is unable to provide it with complete and adequate relief. Although it is true, as Koehring has pointed out, that the present state court proceeding does not involve all of the defendant-claimants that have been joined in this interpleader, those not already parties to the state proceeding are subject to the Chancery Court's jurisdiction. Furthermore, the Mississippi garnishment interpleader statute, § 2804, affords plaintiff ample opportunity to interplead them in the state proceeding. In fact, plaintiff-garnishees' answers in the state proceeding alternatively invoke the Mississippi statutory provision and pray that the missing defendant-claimants be interpleaded.

Plaintiff, however, contends that the possibility of joining the missing defendant-claimants is an insufficient ground for declining jurisdiction under the federal interpleader statute and cites Jefferson Standard Life Ins. Co. v. Smith, 161 F.Supp. 679 (E.D.S.C.1956), to that effect. In that case the court was faced with the same situation—all of the parties to the federal interpleader were not represented in the state proceeding, but state law provided for their joinder. The Jefferson court reasoned that a plaintiff should not be required to risk his rights on the possibility that the state court will act to protect those rights, especially when all of the parties are present in the federal action.

In so holding, the court declined to follow the reasoning of Flanagan v. Marvel, supra, which held that dismissal for want of equity is proper where state law permits the plaintiff to implead the missing defendant-claimants and affords the plaintiff a complete determination of the controversy. Because of the following reasons, this court is of the opinion that under the...

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4 cases
  • Koehring Co. v. American Mut. Liab. Ins. Co.
    • United States
    • U.S. District Court — Eastern District of Wisconsin
    • 23 mai 1983
    ...Inc., 391 U.S. 905, 88 S.Ct. 1654, 20 L.Ed.2d 419 (1968); Morgan v. USF & G, 222 So.2d 820 (Miss.1969); Koehring Company v. Hyde Construction Company, 297 F.Supp. 731 (E.D.Wis.1969); Hyde Construction Co. v. Koehring Company; Vardaman S. Dunn v. Koehring Company, 321 F.Supp. 1193 (S.D.Miss.......
  • Koehring Company v. Hyde Construction Company
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 19 mars 1970
    ...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 C......
  • Koehring Co. v. Hyde Const. Co.
    • United States
    • Mississippi Supreme Court
    • 18 mai 1970
    ...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. This formidable body of legal literature discloses that Hyde commenced its simple suit for breach of warranty in the Chancery Court of Hinds Co......
  • Flournoy v. Peyton
    • United States
    • U.S. District Court — Western District of Virginia
    • 20 mars 1969

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