Noxon Chemical Products Co. v. Leckie, 4243.

• Decision Date: 01 April 1930
• Docket Number: No. 4243.,4243.
• Citation: 39 F.2d 318
• Parties: NOXON CHEMICAL PRODUCTS CO., Inc., v. LECKIE et al.
• Court: U.S. Court of Appeals — Third Circuit

39 F.2d 318 (1930)

NOXON CHEMICAL PRODUCTS CO., Inc., v. LECKIE et al.

No. 4243.

Circuit Court of Appeals, Third Circuit.

February 21, 1930.

Rehearing Denied April 1, 1930.

Isidor Unger, of New York City (George F. Seymour, Jr., of Newark, N. J., of counsel), for appellant.

M. M. Stallman, of Newark, N. J., for receivers.

Edwards & Bryan, of New York City, and Collins & Corbin, of Newark, N. J. (Duncan Edwards and William C. Cannon, both of New York City, and Robert J. Bain, of Jersey City, N. J., of counsel), for W. J. Robb and others.

Edward J. Fox, Jr., of Easton, Pa., as special master.

Before WOOLLEY and DAVIS, Circuit Judges, and THOMSON, District Judge.

THOMSON, District Judge.

It must, of course, be understood, that the decision of the court in the proceedings in which the receivers were appointed is not open for reconsideration, either directly or indirectly, on these appeals. That chapter is closed. The well-established principles of the law, as there enunciated and applied, fully justify the conclusion reached, if any justification is necessary.

But in order to better understand the present status of the parties, and their resulting rights, a brief review of the action of the court in that case, and the legal situation which impelled that action, might be of value here.

The central, and practically the sole, question for determination in this case, is the question of the court's jurisdiction in the original action. That being determined, there is no question as to the legal results which follow.

William J. Robb, the plaintiff, filed, on February 25, 1925, an unverified bill against the corporation, supported as to certain averments by his own accompanying affidavit, praying for the appointment of receivers and an injunction against the corporation and its officers, based mainly on its alleged insolvency. Immediately, on the same day, the court, without notice to the Noxon Company, or to any of its stockholders or creditors, and without verification of the allegations of the bill as to insolvency, etc., entered a final decree on the merits, appointed receivers, and issued an injunction against the defendant and its officers in the broadest possible form, preventing them from exercising the company's franchises or doing business of any kind.

It will be observed that in addition to the fact that the defendant was not before the court when the receivers were appointed and the injunction issued, there was not even a notice to the defendant to show cause. The only notice required in the decree was a rule on the creditors and stockholders to show cause why the receivers should not be continued, a copy of the decree being directed to be mailed to such creditors and stockholders.

Without elaboration of the facts set forth in our former opinion, on which the judgment therein was based, an examination of the record discloses with clearness that no subsequent act of the corporation could in any way be construed as an approval or ratification of the proceedings, by which its property was wrested from it, without notice or an opportunity to be heard.

We thus reach the question of jurisdiction.

The elements of jurisdiction, as laid down in Corpus Juris, vol. 15, p. 734, are: (1) The court must have cognizance of the class of cases to which the one to be adjudged belongs; (2) The proper parties must be present; (3) The point to be decided must be in substance and effect within the issue.

It is further stated that in a personal action, jurisdiction of the subject-matter and of the person are absolutely essential to the power of the court to decide a legal controversy. Unless both exist, it is the imperative duty of the court to decline to do more than ascertain and declare that it has no power to examine and decide the merits of the case.

With reference to jurisdiction of the subject-matter, or cause of action, it is stated: "Jurisdiction of the subject matter is the power to hear and determine cases of the general class to which the proceedings in question belong; the power to deal with the general subject involved in the action."

In the sense in which the term is ordinarily used, jurisdiction may be concisely stated to be the right by a court to act and adjudicate concerning the subject-matter in a given cause. 7 R. C. L. 1029.

Before a "cause can be determined by a court and judgment given against defendant, the court must have jurisdiction of subject-matter and defendant's person." 28 USCA § 41(1) note 9, p. 52.

"Jurisdiction of the person is ordinarily understood to mean the power, obtained by the service of a summons or other proper process or notice, on a defendant personally within the territorial limits of the jurisdiction, or by a voluntary appearance in person or by attorney to render a personal judgment; and the State Court can acquire no jurisdiction of an action where neither the person nor any property of the defendant can be found within the State." Corpus Juris, vol. 15, p. 786.

This author also says that there must be some service on the defendant in some mode authorized by law or the court cannot proceed, and a judgment rendered without such service is a nullity; and that service of process or the prescribed legal or statutory notice is always a prerequisite to jurisdiction over either the person or the property and that the statutory mode of service or of giving notice must be followed, including requirements as to time. A person's knowledge of the existence of an action, no matter how clearly brought home to him, does not supply the want of compliance with the statutory or legal requirements as to service; even a person's presence in court does not give the court jurisdiction to enter a judgment against him when he was not brought there by any legal means.

While any judicial proceeding may be instituted, no judicial proceeding can be maintained, against any person until he has been notified by lawful process, or voluntary appearance. This is absolutely fundamental. There is, of course, a clear distinction between the institution of a proceeding and the action by a court in a proceeding after its institution; just as there is a recognized division of jurisdiction between jurisdiction of the subject-matter and jurisdiction of the person. On the face of the bill here, the court had a prima facia jurisdiction when the bill was filed. It had power to "put the wheels in motion," seeking to acquire personal jurisdiction of the defendant corporation. This the court did not do. On the contrary, it proceeded to finally determine the case by resolving the facts averred in the bill in favor of the complainant and against the defendant before it issued any process and before it obtained any personal jurisdiction of the defendant.

There was thus a want of jurisdiction in the court, either under the laws of New Jersey or the laws of the United States. In this situation, the appointment of the receivers immediately, and of itself, divested the defendant of title to all its property, assets, and business, and the issuance of the injunction, which deprived the defendant of the exercise of its corporate powers and franchises, constituted a clear taking of its property, without due process of law, in violation of the Constitution of the United States.

In this legal situation, the reversal of the court's orders, under which the receivers were appointed and the injunction granted, which deprived the company of its property, without due process of law, followed as a necessary consequence. The...