Armstrong v. Alliance Trust Co., 10065.

• Decision Date: 26 February 1942
• Docket Number: No. 10065.,10065.
• Citation: 126 F.2d 164
• Parties: ARMSTRONG v. ALLIANCE TRUST CO., LIMITED, et al. ALLIANCE TRUST CO., LIMITED, v. ARMSTRONG.
• Court: U.S. Court of Appeals — Fifth Circuit

126 F.2d 164 (1942)

ARMSTRONG v. ALLIANCE TRUST CO., LIMITED, et al. ALLIANCE TRUST CO., LIMITED, v. ARMSTRONG.

No. 10065.

Circuit Court of Appeals, Fifth Circuit.

February 26, 1942.

COPYRIGHT MATERIAL OMITTED

Chas. F. Engle, of Natchez, Miss., and W. Calvin Wells, III, of Jackson, Miss., for George W. Armstrong.

William C. Keady and H. P. Farish, both of Greenville, Miss., for Alliance Trust Co. and others.

Before FOSTER, HUTCHESON, and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

For the history of this litigation prior to the suits now before us on appeal, see Armstrong v. Alliance Trust Co. et al., 5 Cir., 88 F.2d 449; Alliance Trust Co. et al. v. Armstrong, 185 Miss. 148, 186 So. 633; Armstrong v. Alliance Trust Co., 5 Cir., 112 F.2d 114.

These appeals are from judgments of the district court disposing of two suits consolidated for trial. Each case involves a determinative jurisdictional issue: the first arises in a cause removed from a state court; the second involves a question of federal ancillary jurisdiction. We shall refer to each case according to its docket number in the district court.

No. 63. This suit was filed by Armstrong in the Chancery Court of Adams County, Mississippi, seeking an injunction against the foreclosure of a certain deed of trust, dated the 22d day of December, 1919, given by him to the Alliance Trust Co. to secure an indebtedness for money borrowed. The complainant alleged that he had paid all he owed under the trust deed, and that an accounting would disclose that the defendant, Alliance Trust Co., was indebted to him for usurious interest collected by it on the debt. He further alleged that, notwithstanding the above facts, the Alliance Trust Co. caused an advertisement of his property, given to secure said indebtedness, to be published in a newspaper while a bankruptcy proceeding was pending, being cause No. 9366 on the docket of the United States Circuit Court of Appeals for the Fifth Circuit, 112 F.2d 114; and that said advertisement was so negligently prepared and published as to include property not owned by him, which injured his credit and reputation, and caused him great humiliation and financial embarrassment; for which he claimed damages in the sum of $150,000.

Although the above advertisement was inserted while said bankruptcy petition was pending, it was voluntarily withdrawn; and, before this suit was filed, the bankruptcy court had entirely lost jurisdiction of the debtor and his property.¹ This case was removed to the United States District Court on petition of the defendants therein. There is no diversity of citizenship, and the sole basis relied upon to sustain removal jurisdiction is that a federal question is involved. We look solely to the facts set out in the complaint to determine this issue. The federal question necessary to sustain jurisdiction must be an essential element of the plaintiff's cause of action.

Not every question of federal law emerging in a suit is the basis of the suit. Even an action that takes its origin in the laws of the United States is not necessarily one arising under those laws. It must really and substantially involve a controversy respecting the validity or construction of such laws, and the determination of the cause must depend upon such validity or construction.² The removal jurisdiction of the United States District Court in this case is no broader than its original jurisdiction would be if the suit had been instituted there in the beginning.

In Gully v. First National Bank, 299 U. S. 109, pages 113, 114, 57 S.Ct. 96, 98, 81 L.Ed. 70, the court pointed out that the early cases were less exacting than the recent ones in respect to some of the conditions necessary to remove a cause as one arising under the laws of the United States: "If a federal right was pleaded, the question was not always asked whether it was likely to be disputed. * * * Partly under the influence of statutes disclosing a new legislative policy, partly under the influence of more liberal decisions, the probable course of the trial, the real substance of the controversy, has taken on a new significance. * * * Today, even more clearly than in the past, `the federal nature of the right to be established is decisive — not the source of the authority to establish it.'"

In order to eliminate many trials, the state practice may permit numerous unrelated causes of action between the same parties to be tried together, but such local practice cannot enlarge the removal jurisdiction of the United States district courts on the ground of a federal question. If separate and unrelated non-federal controversies are joined in the same complaint, they should not be removed, or, if removed, should be remanded. Where the federal question is basic, not merely collateral, and where the dispute as to the validity or construction of the federal law is real and substantial, not feigned, the federal courts in exercising their original or removal jurisdiction will decide all issues necessary for decision, whether they be local or federal; but the rule does not go so far as to permit a federal court to assume jurisdiction of a separate and distinct cause of action because it is joined in the same controversy with one involving a federal question.³

In order to sustain the jurisdiction of the United States District Court on the ground of a federal question in a case removed thereto from a state court, it is not sufficient for the question to be raised in the answer of the defendant or in the petition for removal. The federal question must clearly appear on the face of the declaration or complaint as an essential and integral part of the plaintiff's statement of his own case, not in anticipation of a defense that may be interposed by an adversary party. A federal question merely incidental or collateral to the main controversy is not the basis of the suit and is not enough to deprive the state court of jurisdiction upon petition for removal by the defendant.

When we apply these principles to the alleged federal immunity from foreclosure that is the origin of the violated right for which damages are sought in one of the tort claims here asserted, we do not find on the face of the complaint the elements of federal removal jurisdiction. The bill of complaint filed by the appellant in the Chancery Court of Adams County contains several distinct claims or causes of action, in only one of which is there any suggestion that a federal question may be raised either by way of a defense or otherwise. It is impossible to tell from the allegations of the complaint what this federal question is other than that it arises under the bankruptcy law.

The allegation that the advertisement for sale under the deed of trust was published while bankruptcy proceedings were pending in the United States Circuit Court of Appeals for the Fifth Circuit, being cause No. 9366 on the docket, 112 F.2d 114, means little or nothing with reference to disclosing a federal question, because neither the Chancery Court of Adams County nor the United States District Court for the Southern District of Mississippi takes judicial notice of the records of said Circuit Court of Appeals; and many questions, remote, frivolous, or otherwise, might be raised under the bankruptcy laws. It would be unreasonable to expect either the Chancery Court or the United States District Court to make its own researches into the mass of records of said bankruptcy proceedings for the purpose of informing itself as to the status of the bankrupt or his property so that it might pick out the federal question on which the plaintiff relied as the basis of his claim.⁴

In ascertaining and declaring the law applicable to any issue before them, this court and the court below take judicial knowledge of the decisions of all courts (state and federal but not foreign) and of the facts that limit each decision; but in ascertaining the facts out of which a federal question arises in a matter of federal removal jurisdiction, the courts, with exceptions not pertinent here, are restricted to a consideration of the well-pleaded facts that appear on the face of the plaintiff's declaration or complaint. So limited, we only know that a federal question relating to bankruptcy may lurk in the background of one of the tort claims pleaded, but the Bankruptcy Act covers a large field, and the complaint does not allege what the question is or any facts that disclose a dispute or controversy as to the effect or construction of said Act as a whole or of any provision thereof.

Among the claims or causes of action embraced in Armstrong's suit in the Chancery Court, with...