Dennison Brick & Tile Co. v. Chicago Trust Co.

• Decision Date: 09 February 1923
• Docket Number: 3609.
• Parties: DENNISON BRICK & TILE CO. et al. v. CHICAGO TRUST CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

286 F. 818

DENNISON BRICK & TILE CO. et al. v. CHICAGO TRUST CO. et al.

No. 3609.

United States Court of Appeals, Sixth Circuit.

February 9, 1923

Smith W. Bennett, of Columbus, Ohio (Louis Welty, of New Philadelphia, Ohio, on the brief), for appellants.

Brooklyn Bridge, of Dennison, Ohio (Dawson & Dawson, of Chicago, Ill and J. S. Hare, of Dennison, Ohio, on the brief), for appellees.

Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.

KNAPPEN Circuit Judge.

This appeal presents, at the threshold, a question of conflict of jurisdiction between state and federal courts. Appellant Sturgeon purchased at bankruptcy sale certain real estate in Tuscarawas county, Ohio, subject to certain purported liens thereon, which included a mortgage given by the bankrupt to appellee Prescott and the predecessor of appellee Chicago Trust Company, as trustees. Sturgeon entered into possession of the premises by virtue of this purchase, and thereafter began in the court of common pleas for Tuscarawas county an action under the Ohio statute (G.C. Sec. 11,901), the pertinent provision of which we quote in the margin ^[1] making defendants the two mortgage trustees, as well as claimants of other liens, and asking that his title be quieted (among other respects) as against the trust mortgage in question, which petitioner alleged was wholly null and void for reasons set forth in the petition. The mortgage trustees being nonresidents of Ohio and not being found therein, petitioner proceeded to make service by publication, under section 11292 (9) of the Ohio Code, which provides for such service--

'in an action which relates to or the subject of which is real or personal property in this state, when the defendant has or claims a lien thereon, or an actual or contingent interest therein, or the relief demanded consists wholly or partly in excluding him from any interest therein, and such defendant is not a resident of this state, or is a foreign corporation.'

The mortgage trustees appeared, demurred, and answered, asserting the validity of the trust mortgage, also default in payment of interest and of a matured portion of the principal declaring the entire of the principal due, and asking decree establishing the validity of the mortgage as a first mortgage lien on the premises, and for judgment against Sturgeon for the amount thereof, as well as for general relief. Certain beneficiaries under the mortgage were permitted to appear, and made answer, praying relief similar to that asked by the trustees. ^[2]

During the pendency of this suit to quiet title, and after the appearance of the mortgage trustees therein but before answer was filed, the trustees and beneficiaries began suit in the District Court below, in equity, for a foreclosure of the mortgage, making defendants (so far as here important) not only the bankrupt corporation and Sturgeon, but the appellant brick and tile company, ^[3] to whom Sturgeon had conveyed the premises pending the state court action to quiet title. A motion by Sturgeon, in the court below, to stay proceedings in the foreclosure suit until the final determination of the suit in the state court was denied, as was also his motion to dismiss the mortgage beneficiaries from the record as plaintiffs. The brick and tile company then answered, asserting the complete invalidity of the mortgage, and set up in bar of the foreclosure suit priority of jurisdiction over the subjectmatter acquired by the state court in the then (and still) pending suit to quiet title. Since the joining of issue in the state court no further proceeding seems to have been taken therein. Hearing on pleadings and proofs was had in the foreclosure suit in the court below, and decree of foreclosure and sale made. This appeal is from that decree.

In Kline v. Burke Construction Co., 43 Sup.Ct. 79, 67 L.Ed. . . ., lately decided by the Supreme Court (and since the instant case was brought into this court), the distinction between actions in personam and actions in rem, as regards the effect of prior assertion of jurisdiction by state or federal courts is plainly pointed out, viz. that the pendency in a federal court of an action in personam is not ground for abating a subsequent action in a state court, or vice versa-- each court being at liberty to proceed to final judgment, such judgment first rendered being binding upon both parties; but where the action is one in rem, that court, whether state or federal, which first acquires jurisdiction over the res has exclusive authority to control and dispose of it. Concretely stated, and as applied to the situation before us, 'where the jurisdiction of the state court has first attached, the federal court is precluded from exercising its jurisdiction over the same res to defeat or impair the state court's jurisdiction. ' The Supreme Court there quotes the holding in Covell v. Heyman, 111 U.S. 176, 182, 4 Sup.Ct. 355, 358 (28 L.Ed. 390) that the rule just stated is, as between state courts and those of the United States, something more than comity. 'It is a principle of right and of law, and therefore of necessity. It leaves nothing to discretion or mere convenience,' and when the court 'takes into its jurisdiction a specific thing, that res is as much withdrawn from the judicial power of the other as if it had been carried physically into a different territorial sovereignty. ' ^[4] As applied to the instant case, the controlling question is whether, by virtue of the suit to quiet title, the state court took into its jurisdiction a res, a thing, and not merely a personal suit involving no potential conflict of the authority and process of the respective courts.

In our opinion the state court acquired exclusive jurisdiction of the subject-matter of this litigation. While the rule that priority of jurisdiction over the res gives exclusive jurisdiction is limited to actions which, speaking broadly deal either actually or potentially with specific property or objects, yet the res, the subject-matter, is not necessarily a tangible thing; it may be merely a status, such as marriage, affected by a suit for divorce, or a proceeding to probate a will. The rule that the tribunal, state or federal, whose jurisdiction first attaches, holds it to the exclusion of the other until its duty is fully performed, and the jurisdiction involved is exhausted, applies to enforcement of liens against specific property, including the foreclosure of mortgages, and is not limited to cases where property has been actually seized under judicial processes before the second suit is instituted in another court. The test is jurisdiction over the res, not possession of the property. B. & O.R.R. Co. v. Wabash Ry. Co. (C.C.A. 7) 119 Fed.at page 680, 57 C.C.A. 322, cited and quoted from, with apparent approval, in Kline v. Burke Co., supra; Farmers' Loan & Trust Co. v. Lake St. R.R. co., 177 U.S. 51, 61, 20 Sup.Ct. 564, 44 L.Ed. 667; Roller v. Holly, 176 U.S.at page 405, 20 Sup.Ct. 410, 44 L.Ed. 520. Nor are proceedings in rem limited to suits directly against...