Rust v. United Waterworks Co., 609.

• Decision Date: 07 October 1895
• Docket Number: 609.
• Citation: 70 F. 129
• Parties: RUST v. UNITED WATERWORKS CO., Limited.
• Court: U.S. Court of Appeals — Eighth Circuit

70 F. 129

RUST v. UNITED WATERWORKS CO., Limited.

No. 609.

United States Court of Appeals, Eighth Circuit.

October 7, 1895

On September 18, 1894, in an action in the court below in which the United Waterworks Company, a corporation of the state of New York, was plaintiff, and the American Waterworks Company a corporation of the state of New Jersey, was defendant, a judgment for the sum of $118,512.50 was rendered in favor of the former, and against the latter. On September 26, 1894, E Hyde Rust, the receiver of the defendant corporation, the plaintiff in error, filed in that court a petition that the execution upon that judgment be stayed, that the judgment be vacated, and that he be permitted to appear specially in the action, and plead to the jurisdiction of the court to enter the judgment, and to make such other defenses to the action as there might be on behalf of the defendant corporation. The United Waterworks Company answer this petition, the plaintiff in error filed a reply to this answer, a hearing was had upon these pleadings, and a judgment was rendered in the court below that the prayer of the petition be denied. The writ of error in this case was sued out to review this judgment.

The material facts admitted by these pleadings are these: The American Waterworks Company was a corporation organized under the general laws of the state of New Jersey. Those laws provided that whenever a corporation organized under them became insolvent, and was not about to resume its business with safety to the public and advantage to its stockholders the chancellor might enjoin its officers and agents from exercising any of its privileges or franchises, from collecting or receiving any debt, or from paying out selling, assigning, or transferring any of the estate, moneys, funds, lands, tenements, or effects of the company, and might appoint a receiver or trustee, with full power to demand, sue for, collect, receive, and take into his possession all the goods and chattels, rights and credits, moneys and effects, lands and tenements, books papers, choses in action, bills, notes, and property of every description, belonging to the company at the time of its insolvency or suspension of business, and to sell, convey, or assign all the said real or personal estate. Those laws further provided that the receiver or trustee so appointed should be taken to be a receiver or trustee for the creditors and stockholders of the company for which he was appointed, with full power and authority to institute suits at law or in equity in his or its name, as receiver or trustee, for the recovery of any property or demands existing in favor of the company, and with full power and authority to compound and settle with any debtor of the company, or any person having possession of the property, or in any way responsible to the company on such terms as the receiver or trustee should deem beneficial. Revision 1877, p. 189 et seq. Secs. 70, 72, 77. On April 8, 1892, certain creditors and certain stockholders of the American Waterworks Company, which was then insolvent, filed a bill in the court of chancery in the state of New Jersey for an injunction against its officers and agents, and for the appointment of a receiver or trustee, pursuant to these statutes. On July 20, 1892, the chancellor appointed the plaintiff in error receiver of the property of said corporation, upon this bill, with power to discharge all the duties imposed upon him by the statutes of New Jersey and by the appointment of the chancellor, and enjoined the corporation, its officers, directors, agents, and attorneys, from receiving any debts due to the corporation, from paying or transferring any of its money or property, from continuing its business, from exercising any of the franchises and privileges of its charter, and from attempting to use the name of the corporation, or any of its privileges or franchises, for any purpose whatever. In February, 1892, Clarence H. Venner was, and ever since has been, one of the vice presidents of the American Waterworks Company, and that corporation had no president. In February, 1892, he employed Messrs. Teller & Orahood as attorneys for the American Waterworks Company in the state of Colorado, and authorized them to appear for that company in all litigation in which the corporation was interested in that state. Teller & Orahood subsequently became members of the firm of Teller, Orahood & Morgan. Clarence H. Venner and the American Waterworks Company appeared in the chancery court of New Jersey, and defended the suit, which resulted in the appointment of the plaintiff in error as receiver and trustee for the creditors and stockholders of that corporation, and in enjoining him, his corporation, and all its agents and attorneys, from exercising any of the powers or franchises, or using the name, of that corporation, for any purpose whatever. In January, 1894, Messrs. Teller & Orahood were fully advised of this injunction, and of the appointment of the plaintiff in error as receiver and trustee under these statutes of New Jersey, and of his qualification as such, pursuant to the decree of the chancery court of New Jersey, Clarence H. Venner was in 1894 the president of the defendant in error, the United Waterworks Company, at the same time that he was vice president of the American Waterworks Company. On August 18, 1894, the United Waterworks Company filed its complaint in the court below for the recovery from the American Waterworks Company of $100,000 and interest, upon certain promissory notes, which had been made in 1891 by the American Waterworks Company, by C. H. Venner and another of its officers, which were payable to the order of C. H. Venner & Co., and which, the United Waterworks Company alleged, had been purchased by it for value. The American Waterworks Company was not then doing business in the state of Colorado, nor had it been for many months, but the summons in that action was, on the same day that the complaint was filed, served on Clarence H. Venner, in Denver, Colo., as a stockholder and a vice president of that corporation. On the same day Messrs. Teller, Orahood & Morgan entered the general appearance of the American Waterworks Company in that action, but they never demurred, answered, or took any further steps therein. Upon this service and appearance a default was entered, and the clerk of the court, on September 18, 1894, entered a judgment on this default for $118,512.50. The plaintiff in error alleged, in his petition to vacate this judgment, and the United Waterworks Company, in its answer, denied, that the American Waterworks Company had a defense to the promissory notes on the ground that C. H. Venner & Co. owed the Waterworks Company more than the amount of the notes, and that the United Waterworks Company took them subject to this defense. Upon this state of the case, the court below denied the application of the plaintiff in error for a stay of execution on the judgment, for its vacation, and for leave to interpose pleas to the jurisdiction of the court, and defenses to the recovery this judgment evidences. This ruling is the foundation of all the assignments of error in this case.

Joel F. Vaile, for plaintiff in error.

Caldwell Yeaman, for defendant in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge (after stating the facts).

Before considering the merits of this case, it is necessary to dispose of a preliminary question. The defendant in error challenges the jurisdiction of this court to hear and determine the questions presented by the assignment of error. It moves to dismiss the writ of error on four grounds.

1. Because the jurisdiction of the court below to render the judgment against the American Waterworks Company, which the plaintiff in error, the receiver of that company, sought by his petition to vacate and to defend against, was in issue at the hearing below, which resulted in the judgment denying the prayer of the petition, and it maintains that this question of jurisdiction can only be reviewed by the supreme court of the United States. But the plaintiff in error, by the allegations in his petition, placed his claim for an order vacating the judgment against the American Waterworks Company, and permitting him to answer for that company, on two grounds: That the court had no jurisdiction to render the judgment; and, if it had, that the judgment was obtained by collusion, in fraud of the rights of the corporation and of the plaintiff in error, and that they had a meritorious defense to the action, which he ought to be permitted to interpose. The judgment below denied him relief on either of these grounds, and the latter did not necessarily involve any question of jurisdiction. When a final judgment or decision has been rendered in a district or a circuit court of the United States, the party against whom it is rendered may elect to take his writ of error to the supreme court, upon the question of jurisdiction alone, or to the circuit court of appeals, upon the whole case. When he chooses the latter course, the circuit court of appeals has jurisdiction to determine the question of the jurisdiction of the court below, as well as all other questions in the case properly presented to it for consideration. McLish v. Roff, 141 U.S. 661, 668, 12 Sup.Ct. 118; Crabtree v. Madden, 4 C.C.A. 408, 410, 54 F. 426; Crabtree v. Byrne, 4 C.C.A. 414, 54 F. 432; Sugar-Refining Co. v. Tatum, 9 C.C.A. 121, 60 F. 514.

2. Because the judgment which denied the prayer of the petition of the plaintiff in error was not a final judgment or decision. But that judgment denied the plaintiff in error all relief in the action in which he filed his petition, and finally determined all his rights therein....