Austin v. Texas-Ohio Gas Company

• Decision Date: 02 February 1955
• Docket Number: No. 14442.,14442.
• Parties: Clyde AUSTIN et al., Appellants, v. TEXAS-OHIO GAS COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

218 F.2d 739 (1955)

Clyde AUSTIN et al., Appellants, v. TEXAS-OHIO GAS COMPANY, Appellee.

No. 14442.

United States Court of Appeals, Fifth Circuit.

February 2, 1955.

COPYRIGHT MATERIAL OMITTED

Harry S. Pollard and Charles L. Krueger, Austin, Tex., for appellant.

Fred W. Moore, Houston, Tex., Vernon Booth Lowrey, Washington, D. C., for appellee.

Before BORAH, RIVES and TUTTLE, Circuit Judges.

TUTTLE, Circuit Judge.

This is an appeal by J. O. Mack and Oil Well Processing Company jointly, and Glenn C. Browne, individually, three of the thirty-seven defendants in the court below who here complain of the action of the trial court in overruling their motions to dismiss appellee's complaint, in taking jurisdiction of the cause and in granting a preliminary injunction against them and the other defendants.

The action, commenced by Texas-Ohio Gas Company, sought to join the defendants, each of whom, it was alleged, claimed an interest, either as fiduciary or as beneficiary, in a block of 95,000 shares of its stock which it alleged to have made available to Austin, one of the defendants, in full settlement of any claims he personally had against it and in full settlement of the claims against the company which it had been alleged had arisen through Austin's activities. In substance, Texas-Ohio complained that the stock was not being used for the purpose agreed upon, but that certain of the defendants were disposing of parts of it improperly, and in a manner that would create, or leave unsatisfied, claims against the company. The plaintiff alleged that it was being harassed by the filing of several lawsuits in the state courts and being threatened as to others. It further alleged that defendant Austin and a group of associates, all of whom were joined as defendants (but not all the defendants), were conspiring to destroy plaintiff and that the several suits and threats of suits were calculated to destroy its principal assets in the nature of contracts with others for substantial quantities of natural gas; and further that plaintiff was currently appearing before the Federal Power Commission in Washington seeking a certificate of convenience and necessity for the building of the pipe lines for which plaintiff had been organized, and that the actions of Austin and his associates were jeopardizing the plaintiff's case. Other defendants were joined so that they could assert their claims as to the stock in issue.

The plaintiff tendered into court 23,700 shares of the stock involved, the same being the only shares of the 95,000 which it had still in its possession, and declared in its complaint that it would not transfer on its books any of the remaining shares except on the order of the trial court, and offered a tender of such right or control which it had over the said remaining shares.

On the day before the complaint was filed in the trial court a suit was filed in the state court by J. O. Mack and Oil Well Processing Company against Texas-Ohio and thirty-five other defendants. Of these thirty-five, ten were not included in the Federal suit; on the other hand twelve of the defendants in the Federal suit were not defendants in the state suit, although two of them, Mack and Oil Well Processing Company, were plaintiffs, and thus were before the court.

Mack's state suit was for a declaratory judgment as to the title to some 330,000 shares of Texas-Ohio's stock, including the 95,000 referred to above. The state court entered an ex parte restraining order which in effect stayed all who had been served or were put on notice of the order and properly brought into the litigation from changing the status of any of the stock of the company. This restraining order was by its terms to remain in effect until the show-cause hearing, which was held on September 3, 1952. On that occasion, the trial judge declined to continue this restraining order unless bond was made by Mack. None was made, and the restraining order was dissolved.

In the Federal court action the trial judge entered an ex parte restraining order on August 30th, set the matter down for hearing on September 9th, at which time it was continued in force upon the making of a $10,000 bond, and a further hearing was set for September 16th, at which time the Court heard further evidence and argument and took under advisement the matter of a permanent injunction. In an order dated September 26, 1952, the trial court found that, unless the injunction issued, "immediate and irreparable injury, loss or damage will result to plaintiff and the 95,000 shares of stock here involved would be sold and disposed of and the proceeds converted, contrary to the purpose and intent of the settlement agreement." The court further found that "the existence of plaintiff and its success as a commercial enterprise depend upon its being relieved of the continuous harassment and litigation and the filing of numerous suits * * * all of which greatly hinders and damages plaintiff in obtaining its proper Certificate of Public Convenience and Necessity from the Federal Power Commission and likewise endangers its contracts with reference to the supply of gas and the marketing of gas."

The court thereupon granted the temporary injunction against all served defendants and a restraining order against those not yet served, prohibiting any change in the status of any of the stock and prohibiting the filing or further prosecution of any suit or legal action against complainant without first obtaining the consent of the court.

1. Although originally commenced as an action in equity and for declaratory judgment this action became, by an amendment to the complaint, an action of interpleader or in the nature of interpleader. The complaint refers the jurisdiction of the district court to 28 U.S. C.A. § 1335, and the applicability of that section is not questioned by such of the defendants as have been served and have appeared. Clearly jurisdiction exists, though there may be doubt as to whether it is referable to § 1335¹ or to § 1332² of Title 28, U.S.C.A. Without prejudice to the absent defendants, we proceed to a consideration of the appeal upon the assumption that § 1335 is applicable. Since we would reach the same result on the issue now before us whether § 1332, § 1335, or both are applicable, we consider it appropriate to proceed on such assumption.

Under the provisions of 28 U.S.C.A. § 2361 the trial court had the power to enjoin the prosecution of any legal proceedings in the state court affecting the stock here involved if the action was really one of interpleader or in the nature of interpleader. Under the ordinary equitable powers of the trial court it could enjoin any suits against this plaintiff whether or not affecting the stock, in order to terminate all such litigation in a single suit. State of Texas v. State of Florida, 306 U.S. 398, 412, 59 S.Ct. 563, 830, 83 L.Ed. 817.

2. There are ample grounds for the finding of the trial court that the state court suit, being an action in personam, could not fully and finally adjudicate all the matters here sought to be brought in issue. For example, not all the interested parties could be brought within the jurisdiction of the state court. Although the appellants J. O. Mack and Oil Well Processing Company there sought to get some of the unknown or non-resident claimants in by speaking of his action as a suit against them as a class, this was not effective because the claimants were not persons having a substantial identity of interest in the stock in question. See Knioum v. Slattery, Tex.Civ.App., 239 S.W.2d 865, 868; Matthews v. Landowners Oil Ass'n, Tex. Civ.App., 204 S.W.2d 647, 651; Hicks v. Southwestern Settlement & Development Corp., Tex.Civ.App., 188 S.W.2d 915, 923; Restatement, Judgments, § 86, p. 422.

The defendants in the state suit had a variety of different claims against the stock of Texas-Ohio and they could in no way be bound by denominating them as a class. Moreover, many of the parties joined in the federal court suit were not even made parties in the state court action.

3. There was also ample basis for the trial court's finding that irreparable damage would result from a continuance of the trend of litigation and threat and controversy between parties, all of whose interests should have been furthered by a prompt and inclusive end of inter-company disputes. In fact appellants here make no point of an insufficiency of evidence to sustain the trial court's findings except on the matter of the propriety of his retaining jurisdiction as against the state court.

4. Appellants complain that the trial court, in issuing its injunction, went too far. The statute that specifically authorizes the trial court to enjoin state court proceedings relates to those "affecting the property, instrument or obligation involved in the interpleader action". Here the court enjoined the defendants from taking any other legal action of any kind and from prosecuting any other pending suit against plaintiff without first obtaining the consent of the court.

Oil Well Processing Company, which brings a joint appeal here with its president, Mack, takes the position that it only sought clarification of its contract rights in the suit pending in the state court, and that this did not affect the property involved in the interpleader. Reference to the Mack-Oil Well Processing Company suit in the state court clearly refutes this claim. That was a suit brought by Mack and his company, Oil Well Processing Company, joint plaintiffs, in which they sought and obtained a restraining order against any change in the status of the stock of Texas-Ohio, specifically referring to the 95,000 shares in issue here. There cannot be any serious contention that the state court suit sought a complete accounting of the stock of Texas-Ohio. There is nothing in the record to show that the trial court would not have relaxed the injunction to permit Oil Well Processing Company...