Fidelity Insurance, Trust & Safe-Deposit Co. v. Norfolk & W.R. Co.

• Citation: 88 F. 815
• Parties: FIDELITY INSURANCE. TRUST & SAFE-DEPOSIT CO. v. NORFOLK & W.R. CO.
• Decision Date: 02 July 1898
• Court: U.S. Court of Appeals — Fourth Circuit

88 F. 815

FIDELITY INSURANCE. TRUST & SAFE-DEPOSIT CO. v. NORFOLK & W.R. CO.

United States Circuit Court, W.D. Virginia.

July 2, 1898

Sipe &amp Harris and E. M. Pendleton, for petitioner.

William A. Anderson and C. B. Guyer, for respondent.

PAUL District Judge.

In this cause the petitioner, the Norfolk & Western Railway Company heretofore filed its petition praying for an injunction against Baxter Lilly, to restrain said Lilly from prosecuting an action at law instituted by him against said petitioner in the corporation court of the city of Buena Vista, Va., to recover damages for injury to his property alleged to have occurred by reason of the negligence of said railway company by permitting a certain water course to be dammed and impeded by the embankment and roadbed of said railway company, and by not having an adequate outlet for such water course. A temporary restraining order was granted by this court enjoining said Lilly from further proceeding with his suit in the state court. The defendant Lilly demurs to the petition on the following grounds:

'(1) That, by the terms of the decree confirming the sale, the receivership, and the possession of the receivers as the representatives of this court, terminated with the making and delivery of the deed unreservedly conveying the entire property of the Norfolk & Western Railroad Company to the Norfolk & Western Railway Company, thereby constituting the latter company the absolute owner of said property. (2) That from the instant of the delivery of said deed the title and control of the property was, as a question of law and of fact, vested absolutely in the grantee, and the jurisdiction of this court in the suit for which the sale was made finally at an end in respect to the control of the property conveyed, and as to all transactions and rights arising in respect to that property. (3) That it does not appear from the record that this court intended to extend its jurisdiction, or to retain the control and custody of the property sold and conveyed, beyond the moment of the conveyance consummated. On the contrary, the decree expressly limits the possession of the receivers, as such, until the conveyance to the purchaser, his successors or assigns, in the following explicit language: 'Until the conveyance to the purchaser, his successor or assigns, of the mortgaged premises, railroad property, and franchises sold under this decree, the receivers shall continue in possession thereof, and to discharge the duties imposed upon them by the order of their appointment, with the rights and powers thereby conferred.' (4) That the receivers had no right or power under said decree to retain possession and control of said property for a moment after the completion of the conveyance. If they did so, it was as the agents and representatives of the purchaser, and not of the court. It was merely for the convenience of the purchaser that the formal transfer of the possession was postponed till September 30, 1896. In contemplation of law, the real transfer of the possession took place instanter with the delivery of the deed to the purchaser. In such case, 'possession follows the title.' If it was in the power of the receivers to prolong the receivership and extend their control and custody of the property for six days, it was in their power to do this for six months, or any longer period. They could only retain the possession at all after the conveyance with the consent of the purchaser, and as his agent in law and in fact. Their possession after September 24, 1896, was the possession of the Norfolk & Western Railway Company. (5) This court did not by its decree of confirmation undertake to prolong its control and custody of the property sold beyond the consummation of the sale and transfer of the railroad property by the completion of the conveyance, and, if its decree could bear such construction, it would be, in such particular, erroneous and inoperative. (6) To place such a construction upon the decree would be to render nugatory the provisions of the constitution and laws of the United States which give to the state courts exclusive original jurisdiction of all suits between citizens of the same state, by undertaking to compel a citizen of Virginia, who has a cause of action against the Norfolk & Western Railway Company, to assert his demand in the federal court. (7) The prayer of the petition is in contravention of the inhibition of the judiciary act of 1793 (Rev. St. U.S. Sec. 720): 'The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a state except where such injunction may be authorized by any law relating to proceedings in bankruptcy.' The allegation of the petitioner that the demurrant has sued the wrong party--that his suit should have been brought against the receivers, and not against the petitioner-- is no answer to this. If true, that would be an ample defense to the suit in the state court. But it cannot be availed of by this collateral proceeding, by invoking the writ of injunction from this court, without violating the explicit prohibition of the act of 1793. That defense, in a suit like the one enjoined, between two citizens of Virginia, can only be rightfully and properly asserted by way of direct defense to that suit in the Virginia forum. (8) The fact that this court retained jurisdiction of the case for the purpose of enforcing the terms of the decree of sale for the benefit of any claimants against the receivers does not justify the extension of that jurisdiction to a party who is asserting no claim against the receivers, who is not claiming the benefit of the lien retained under the terms of sale, but who is suing the Norfolk & Western Railway Company upon a cause of action which has arisen between these two parties after said railway company had become the actual and the only responsible owner of the property.'

The petition shows the following state of facts:

In February, 1895, receivers were appointed of the Norfolk & Western Railroad Company in a foreclosure suit brought by the Fidelity Insurance, Trust & Safe-Deposit Company. A decree of sale of the railroad property was entered on the 26th day of June, 1896; and on the 16th day of September, 1896, a deed conveying the same to the Norfolk & Western Railway Company (which will hereafter be styled the 'Railway Company') was executed and delivered, and the Railway Company took possession thereof at midnight on the 30th day of September, 1896. The injury of which Lilly complains, and for which he brings in the state court his suit for damages, occurred on the 29th day of September, 1896. The decree of sale contained a provision, very common in decrees of sale of railroad property, as to the payment of existing liabilities against the receivers. It is as follows:

'The purchaser shall, as part consideration for the railroad property and franchises purchased, take the same and receive the deed therefor upon the express condition that, to the extent that the assets or proceeds of assets in the receivers' hands not subject to any other lien or charge

...