Cargile v. New York Trust Co.

• Decision Date: 06 December 1933
• Docket Number: No. 9789.,9789.
• Citation: 67 F.2d 585
• Parties: CARGILE et al. v. NEW YORK TRUST CO.
• Court: U.S. Court of Appeals — Eighth Circuit

67 F.2d 585 (1933)

CARGILE et al. v. NEW YORK TRUST CO.

No. 9789.

Circuit Court of Appeals, Eighth Circuit.

November 18, 1933.

Rehearing Denied December 6, 1933.

Walter L. Pope, of Pocahontas, Ark., and Roy D. Campbell, of Forrest City, Ark. (Hal L. Norwood, of Little Rock, Ark., on the brief), for appellants.

J. W. House, of Little Rock, Ark. (Eugene R. Warren, of Little Rock, Ark., on the brief), for appellee.

Before GARDNER, WOODROUGH, and VAN VALKENBURGH, Circuit Judges.

GARDNER, Circuit Judge.

This is a suit in equity in which the appellee as plaintiff below asked for the appointment of a receiver to take charge of the De Valls Bluff tollbridge, and for general relief. The parties will be referred to as they were designated in the lower court.

The plaintiff is a corporation, organized under the laws of New York, and is a trustee for bondholders designated in a deed of trust executed by the White River Bridge Corporation, former owner of the De Valls Bluff tollbridge, to secure a bond issue in the aggregate sum of $500,000. The defendants, other than the defendant Fred Watson, are members of and constitute the state highway commission of the state of Arkansas, and as such maintain and operate the tollbridge for highway purposes, and the defendant Fred Watson is state revenue commissioner, and as such officer collects the tolls paid by the traveling public for the use of the bridge.

The bill of complaint in substance alleges that the state highway commission had taken over the tollbridge on the 18th of August, 1930, pursuant to a judgment in a condemnation proceeding brought against the White River Bridge Corporation, the then owner of the bridge, by the state of Arkansas, a copy of the judgment being attached to and made a part of the bill of complaint; that under the terms of the deed of trust securing the bonds issued by the White River Bridge Corporation, a payment of $17,500 became due on the 28th day of April and the 28th day of October of each year succeeding the date of the deed of trust, such payments to be used in paying interest due May 1st and November 1st, respectively, of each year on the outstanding bonds, the remainder of the payments to be used in retiring bonds; that since taking over the bridge the state highway commission had collected approximately $200,000 in tolls; that by act of the Legislature of the state of Arkansas for the year 1933, authority to make collections of tolls was vested in the revenue commissioner; and that the Legislature failed to make any appropriation for the payment of the obligations existing against the tollbridges in the state.

It appears from the judgment in condemnation that the state of Arkansas assumed the balance of the bonded indebtedness due on the bridge in full payment for the bridge and all franchises, rights of way, and other properties connected with the bridge. On the date of the entry of the judgment in condemnation, the indebtedness against the bridge was $463,000. This judgment contains provision "that the State of Arkansas shall, in accordance with the terms of the above described deed of trust, assume and pay to the bondholders the outstanding bonds, aggregating $463,000.00, and interest"; that the defendant White River Bridge Corporation recover from the plaintiff the state of Arkansas the sum of $1 damages, which, together with the assumption by the state of the bonded indebtedness, "shall be in full payment and compensation of the above described bridge, franchises, rights of way, and other properties." The judgment also recites that the said properties "be and the same are hereby condemned for public use, and the title thereto divested out of said defendant, the White River Bridge Corporation, and invested in the State of Arkansas, for use and operation by its Highway Commission in such manner and under such terms as the said Highway Commission may determine."

It is also alleged in the bill of complaint that the deed of trust contains provision to the effect that, "If default shall have happened and shall be continued, a receiver may be appointed to take possession of and to operate, maintain and manage the trust estate, or any part thereof"; that the "deed of trust further provided that on or before the 1st day of March of each year 50% of the net tolls collected from the operation of the bridge up to an amount so that the total annual requirements to be paid by the said bridge corporation need not exceed the total sum of $52,000.00, said fund to be used as a sinking fund for the purpose of retiring said bonds in the manner specified in said deed of trust"; that the trustee was authorized to bring suit in the event of default in any of the payments provided for therein. It is further alleged that unless a receiver be appointed to take possession of the tollbridge, all tolls will be collected and spent by the state, in violation of the provisions of said trust agreement; that plaintiff has no adequate remedy at law; and that unless a receiver be appointed to take charge of the property and disburse the tolls in accordance with the order of the court, plaintiff and the bondholders will suffer irreparable injuries. Foreclosure of the deed of trust is not sought, but plaintiff prays for the appointment of a receiver to take charge of the bridge, with authority to collect all tolls, and to operate the bridge under direction of the court, and deposit all funds with the register of the court, and expend the same on the order of the court, and that the court restrain the interference of the receiver by any person, firm, or corporation, either public or private, and for general relief.

To this bill of complaint the defendants filed a motion to dismiss, upon the grounds, among others, that: (1) It does not state facts sufficient to constitute a cause of action against the defendants, or either of them; (2) that it fails to show that there was no adequate remedy afforded the plaintiff; (3) that it shows on its face that it is a suit against the state of Arkansas in its sovereign capacity, and cannot, therefore, be maintained.

On hearing, the court denied the motion to dismiss and entered its decree appointing two receivers, "for the purpose of collecting all tolls and emoluments derived from the De Valls Bluff Bridge, and the said receivers are hereby authorized and directed to take charge of said bridge for said purpose of collecting the said tolls and emoluments, and are authorized and directed to collect all tolls now authorized to be collected by law or by rules and regulations of the Highway Department, and deposit the same daily as directed by this court, and to hold all such collections subject to the further order of this court with respect thereto.

"It is further ordered and decreed that the State Highway Commission and each of the individual members composing the same, their officers, agents and employees, the State Revenue Commissioner, his agents and employees, and all other persons, be, and they are hereby, restrained and enjoined from in any manner interfering with the receivers in the collection of said tolls."

From this decree defendants prosecute this appeal, urging as grounds for reversal: (1) That the appointment of a receiver was the ultimate and only relief sought by the complaint, and the court was without jurisdiction to appoint receivers, except as an incident to some other ultimate relief; (2) that the plaintiff had an adequate remedy at law in the courts of the state of Arkansas for the collection of the interest due on the bonds, and for the enforcement of the terms of its deed of trust; and (3) that this was a suit against the state of Arkansas, interfering with the exercise of one of its sovereign powers, and the federal court was without jurisdiction to hear and determine the matter.

As this last contention goes to the jurisdiction of the court to enter the judgment appealed from, we shall consider it first, because if the court was without jurisdiction, that is determinative of the case, and the other issues presented need not be considered.

The Eleventh Amendment to the Constitution provides that the judicial power of the United States shall not be construed to extend to any suit in law or in equity, commenced or prosecuted against one of the United States by citizens of another state. Prior to the adoption of this amendment, the judicial power was held to extend to a suit by a citizen of one state against another state. Chisholm v. Georgia, 2 Dall. 419, 1 L. Ed. 440. This case led to the adoption of the Eleventh Amendment, since which time the federal judicial power does not extend to a suit brought against a state, without its consent, by a citizen of another state, even in cases arising under the Constitution or laws of the United States. Carolina Glass Co. v. South Carolina, 240 U. S. 305, 36 S. Ct. 293, 60 L. Ed. 658; Murray v. South Carolina, 213 U. S. 174, 29 S. Ct. 465, 53 L. Ed. 752; Murray v. Wilson Distilling Co., 213 U. S. 151, 29 S. Ct. 458, 53 L. Ed. 742; Hans v. Louisiana, 134 U. S. 1, 10 S. Ct. 504, 33 L. Ed. 842; Ex parte New York, 256 U. S. 490, 41 S. Ct. 588, 65 L. Ed. 1057; Pennoyer v. McConnaughy, 140 U. S. 1, 11 S. Ct. 699, 35 L. Ed. 363; Ex parte Ayers, 123 U. S. 443, 8 S. Ct. 164, 31 L. Ed. 216; Cunningham v. Macon & B. R. Co., 109 U. S. 446, 3 S. Ct. 292, 609, 27 L. Ed. 992; Louisiana v. Jumel, 107 U. S. 711, 2 S. Ct. 128, 27 L. Ed. 448; Hopkins v. Clemson Agri. College, 221 U. S. 636, 31 S. Ct. 654, 55 L. Ed. 890, 35 L. R. A. (N. S.) 243; Smith v. Reeves, 178 U. S. 436, 20 S. Ct. 919, 44 L. Ed. 1140; State Highway Commission v. Utah Constr. Co., 278 U. S. 194, 49 S. Ct. 104, 73 L. Ed. 262; O'Connor v. Slaker (C. C. A. 8) 22 F.(2d) 147; Hertz v. Knudson (C. C. A. 8) 6 F.(2d) 812.

It is contended on behalf of the appellee, however: First, that this is not a suit against the state of Arkansas; and, second, that even if it should be held to be such a suit, that the state...