Dixon v. Cleveland, 57.

• Decision Date: 18 March 1940
• Docket Number: No. 57.,57.
• Citation: 31 F. Supp. 1010
• Parties: DIXON v. CLEVELAND.
• Court: U.S. District Court — District of South Carolina

31 F. Supp. 1010

DIXON v. CLEVELAND.

No. 57.

District Court, W. D. South Carolina.

March 18, 1940.

Donald Russell, of Spartanburg, S. C., for plaintiff.

George S. DePass, of Spartanburg, S. C., for defendant.

WYCHE, District Judge.

By this action, filed under the Federal Declaratory Judgment Act, 28 U.S.C.A. § 400, the plaintiff seeks to establish his title and transferable interest in and to certain corporate stock, freed of any claim of lien over or interest in same on the part of the defendant. Plaintiff brings the suit in his capacity as an officer of the United States, charged with the liquidation and winding up of the First National Bank of Spartanburg, South Carolina, against the defendant Chevillette Cochran Cleveland as executrix of the Estate of Arthur F. Cleveland, deceased, and the subject matter of the controversy is forty-nine shares of the Mechanics Building and Loan Association, registered on the books of the association in the name of W. B. Harrison, title to which is set up by the plaintiff and the sale of which, free of any claim by the said defendant, is sought by the plaintiff incident to the winding up of a national banking association. There is no dispute about the facts.

The basis of plaintiff's claim to the shares, arises out of a collateral note originally executed by W. B. Harrison to the First National Bank on November 27, 1931, in the principal amount of $1,375 to secure which note W. B. Harrison, after endorsing the certificate evidencing the ownership of the stock in blank and delivering same to the First National Bank, pledged the forty-nine shares of stock in the Association to the First National Bank. W. B. Harrison several times renewed the original note and debt, pledging as collateral to each renewal the stock and the note and debt was at the suspension of the bank represented by a note executed by W. B. Harrison in favor of the bank in the principal amount of $1,350, dated May 24, 1932, and secured by a pledge of the stock. The certificates evidencing the stock so pledged, though endorsed in blank by W. B. Harrison, were not transferred on the books of the association to the name of the bank. With the suspension of the bank on or before June 26, 1932, the ownership of the note, for the payment of which the stock was pledged, passed to and has remained since in the receiver of the bank. On May 22, 1937, in a compromise settlement had between W. B. Harrison and the receiver of the bank, as approved under order of Honorable T. S. Sease, Circuit Judge, in the Court of Common Pleas of Spartanburg County, South Carolina, W. B. Harrison released forever to the receivership of the bank any right to redeem the stock already delivered to the bank and held by it as collateral under the aforesaid pledge agreement. It is the position of the plaintiff that he is the owner of the interest of the association evidenced by the stock and entitled to all rights as such owner and that the asserted lien of the defendant does not exist.

The asserted lien of the defendant over the stock arises out of a loan in the original amount of $4,000 made by the defendant's testator to W. B. Harrison in 1924, upon the security represented by a real estate mortgage in and over two lots located in the so-called Garlington Estates just without the City of Spartanburg. On August 15, 1938, the defendant served on W. B. Harrison summons and complaint in a certain action commenced in the Court of Common Pleas of Spartanburg County, though such summons and complaint was not filed until February 17, 1939, in the office of the Clerk of said Court. Decree of foreclosure was entered in such action on February 16, 1939, and by such decree the defendant, after being awarded judgment for about $6,000 against W. B. Harrison, was given leave to sell the mortgaged premises upon which a substantial and valuable home was located. The defendant bought in the mortgaged premises for $50 and is now in possession thereof. After the entry of the said decree, the defendant prepared and delivered to the Sheriff of Spartanburg County on March 22, 1939, a general execution against W. B. Harrison and his properties subject to execution. Without purporting to set aside to the judgment debtor a homestead, the Sheriff delivered on March 23, 1939, to J. C. Grier a copy of the execution, and wrote across the back of it the words: "Served copy of Execution on Jim Grier March 23, 1939." No further acts were taken by the defendant, who asserts that by reason of the foregoing facts she acquired a lien in and over all stock registered in the name of W. B. Harrison on the books of the Association.

The Mechanics Building and Loan Association is a building and loan association duly chartered as such with its principal place of business in the City of Spartanburg. After many years of operations, it was placed in voluntary liquidation by appropriate resolution of its stockholders on May 5, 1935. On April 23, 1938, an action was commenced in the Court of Common Pleas for said Spartanburg County for the appointment of a receiver for said association and by order dated June 4, 1938, J. C. Grier and A. C. Willard were appointed receivers of the association and were directed to liquidate, under orders of said Court, such association.

The plaintiff has sold the stock in the association and has delivered the same to the receivers of such association to make appropriate transfer of the interest thereby evidenced to the purchaser but the receivers have refused to take any action because of the action of the defendant, who, in turn, has through her counsel, advised the receivers of the association not to recognize any interest of the plaintiff in the distributable share allocable to W. B. Harrison in the liquidation of the association as represented by any certificates of stock pledged by W. B. Harrison to the bank.

The defendant first contends that this Court has no jurisdiction to entertain the proceeding, and asserts that the Mechanics Building and Loan Association (by which Association the subject matter of this controversy was issued in the form of corporate stock) is now in receivership under orders of the Court of Common Pleas of Spartanburg County, South Carolina, and that any dispute over the ownership of stock in such Association must be litigated in such receivership action. Comity does not, however, invest one Court with priority over another save in those exceptional cases in rem or quasi in rem, so that the Court, or its officer, has possession or must have control of the property which is the subject of the litigation in order to proceed with the cause and grant the relief sought, and specifically will comity not deny the exercise of jurisdiction by a federal court, even though another action is already pending in the state court, when the plaintiff "seeks merely an adjudication of his right or his interest as a basis of a claim against a fund in the possession of a state court." Princess Lida v. Thompson, 1939, 305 U.S. 456, 59 S.Ct. 275, 281, 83 L.Ed. 285, 292. The administration of properties through a receivership proceeding in one court does not render another court powerless to adjudicate issues not necessarily interfering with the former court's possession of the receivership res, for, to employ the language of the Court in United States v. Klein, 1938, 303 U.S. 276, 281, 58 S.Ct. 536, 538, 82 L.Ed. 840: "While a federal court which has taken possession of property in the exercise of the judicial power conferred upon it by the Constitution and laws of the United States is said to acquire exclusive jurisdiction, the jurisdiction is exclusive only in so far as restriction of the power of other courts is necessary for the federal court's appropriate control and disposition of the property. Penn General Casualty Co. v. Pennsylvania ex rel. Schnader, 294 U.S. 189, 55 S.Ct. 386, 79 L.Ed. 850; see Leadville Coal Co. v. McCreery, 141 U.S. 475, 477, 12 S.Ct. 28, 35 L.Ed. 824. Other courts having jurisdiction to adjudicate rights in the property do not, because the property is possessed by a federal court, lose power to render any judgment not in conflict with that court's authority to decide questions within its jurisdiction and to make effective such decisions by its control of the property. Penn General Casualty Co. v. Pennsylvania ex rel. Schnader, supra; see ...