Cray, McFawn & Co. v. Hegarty, Conroy & Co.

• Decision Date: 10 August 1936
• Docket Number: No. 402.,402.
• Citation: 85 F.2d 516
• Court: U.S. Court of Appeals — Second Circuit
• Parties: CRAY, McFAWN & CO. v. HEGARTY, CONROY & CO., Inc., et al.

85 F.2d 516 (1936)

CRAY, McFAWN & CO. v. HEGARTY, CONROY & CO., Inc., et al.

No. 402.

Circuit Court of Appeals, Second Circuit.

August 10, 1936.

Spence, Hopkins, Walser & Hotchkiss, of New York City (Kenneth E. Walser, Henry G. Hotchkiss, and Thomas S. Hale, all of New York City, of counsel), for complainant-appellant.

Mack, McCauley, Spiegelberg & Gallagher, of New York City (George A. Spiegelberg, of New York City, of counsel), for defendant-appellee Hegarty, Conroy & Co., Inc.

Simpson, Thacher & Bartlett, of New York City (Robert H. O'Brien and Walter E. Beer, Jr., both of New York City, of counsel), for appellee Atlas Corporation.

Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

This suit was removed by the defendant Atlas Corporation (hereinafter referred to as Atlas) on the ground that there was a separable controversy between the complainant and that corporation. When Atlas filed its petition and bond for removal in the New York Supreme Court, Justice Shientag declined to approve the bond on the ground that there was no separable controversy. Atlas filed the petition and bond with the clerk of the state court. A certified copy of the record in the state court was filed with the clerk of the United States District Court for the Southern District of New York. A few weeks thereafter the complainant moved in the state court to examine Hegarty, Conroy & Co., Inc. (hereinafter called Hegarty). Thereupon the defendants obtained from the District Court an order to show cause why the complainant Cray, McFawn & Co. should not be enjoined from proceeding in the suit in the state court. Judge Coxe made an order granting the injunction and also denied a motion by the complainant to remand the cause. The complainant has appealed from the order granting the injunction which, in our opinion, was a proper order.

The first question that arises is whether the separability of the controversy, and hence the removability of the cause can be reviewed on this appeal. The appellees say that they cannot because the District Court denied the motion to remand and its decision can only be reviewed on appeal from a final judgment. It is true that the order denying the motion to remand could not be directly attacked on appeal because it was interlocutory. 28 U.S.C. § 225, 28 U.S.C.A. § 225. But an appeal is specially provided from an interlocutory order granting an injunction. 28 U.S.C. § 227, 28 U.S.C.A. § 227. Accordingly it would seem inevitable that upon an appeal from such an order as the one before us, grounded as it was on a decision of the court that the cause had been properly removed, we have a right to consider the basis of that order. There are, however, authorities in which the order denying a motion to remand has been treated as of rare sanctity, potent "semper ubique ab omnibus," unless reversed on an appeal from a final decree. Why the validity of an order of removal, if made without jurisdiction, cannot be questioned on an appeal from an injunction, specifically allowed by statute, we cannot imagine.

In Young v. Southern Pac. Co., 15 F.(2d) 280, where the situation was like the present, except that there had been no motion to remand, we held that an appeal would lie because definitely allowed by 28 U.S.C. § 227, 28 U.S.C.A. § 227. Hough, J., said at page 281 of 15 F.(2d): "And this appeal cannot be decided without passing on the validity of this removal, for, if removal was unlawful, so was the injunction."

In Madisonville Traction Company v. St. Bernard Mining Company, 196 U.S. 239, 25 S.Ct. 251, 49 L.Ed. 462, a condemnation proceeding was removed to the United States court and an ancillary bill was filed to enjoin the state court from proceeding. An injunction was granted and on appeal from the order allowing it the Supreme Court considered at length whether the removal was justified. Although there was no discussion in the opinion of the point that the court was without power to pass on whether the cause was removable, it is significant that a court always careful to observe the limits of its appellate jurisdiction should have taken that jurisdiction for granted.

In Lake Street El. R. Co. v. Farmers' Loan & Trust Co., 77 F. 769, 773 (C. C.A.7), there was a removal, a motion to remand which was denied, and an injunction to prevent further action in the state court. While the Circuit Court of Appeals did not finally decide the question whether the order of removal was valid, it discussed the matter and said that it had "no doubt that it was within the power of the circuit court to determine for itself whether the case had been properly removed, and that, on this appeal from the order dissolving the injunction granted by the state court, the same question is involved." Compare Goldwyn Pictures Corporation v. Howells Sales Co., 287 F. 100, 102 (C.C.A.2). There, Judge Hough, citing Lake Street El. R. Co. v. Farmers' Loan & Trust Co., supra, remarked that: "On such appeals our power to review cannot be `hampered or restricted by any prior ruling of the trial court, * * * though made in an order from which a direct appeal is not allowed, especially where such ruling relates to the jurisdiction of the court.'"

Three decisions are cited which seem to be contrary to the view we have expressed. McCabe v. Guaranty Trust Co., 243 F. 845 (C.C.A.2); Mestre v. Russell & Co., 279 F. 44 (C.C.A.1); Dillinger v. Chicago, B. & Q. R. Co., 19 F.(2d) 196 (C.C.A.8). In each of them injunctions were granted in suits ancillary to actions at law which had been removed from state courts and in which motions to remand had been denied. The injunctions restrained further proceedings in the state courts and appeals were taken from the restraining orders. In all three cases the courts treated the orders denying the motions to remand as conclusively determining whether the causes were removable until appeals from final judgments were had. The chief, if not the sole, ground of decision in the McCabe Case, followed in the two subsequent cases, was that jurisdiction over the principal action could not be questioned in an ancillary suit. This we do not conceive to be the rule when the basis for objecting to the injunction was adequate; if it was improper because of lack of jurisdiction to retain the case in the District Court, it was void and might be disregarded. It is necessary to determine which view is correct in order to make any intelligent disposition of the appeal. Johnson v. Manhattan Ry. Co., 289...