Guardian Trust Co. v. Kansas City Southern Ry. Co.

• Decision Date: 02 April 1909
• Docket Number: 2,827.
• Parties: GUARDIAN TRUST CO. v. KANSAS CITY SOUTHERN RY. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

171 F. 43

GUARDIAN TRUST CO. v. KANSAS CITY SOUTHERN RY. CO. et al.

No. 2,827.

United States Court of Appeals, Eighth Circuit.

April 2, 1909

(Syllabus by the Court.)

In a suit in the United States Circuit Court founded on a creditors' bill against the Belt Company, a debtor, the Trust Company, a secured creditor, and others, the Southern Company, a purchaser at foreclosure sales, intervened. The purpose of the suit was to apply the property which the Trust Company had received from the Belt Company and from others to the payment of the claims of the creditors of the latter company. The issue of the state of the accounts between the Trust Company and the Belt Company had arisen, and they had stipulated that there should be an accounting between them in the creditors' suit, and that judgment for the amount due should be rendered against the party found to be the debtor. The Belt Company had alleged that certain of its promissory notes held by the Trust Company were void, and prayed that they be canceled. The Southern Company had intervened and claimed the property which the Trust Company had received from the Belt Company and from the other corporations. Thereupon the Trust Company brought three actions at law in a state court against the Southern Company, on the grounds that the Belt Company was indebted to it upon the promissory notes and upon an open account, and that the Gulf Company was also indebted to it, and that the Southern Company had assumed and agreed to pay to it all these debts. Upon these facts the Southern Company, upon a dependent bill in the equity suit secured an injunction against the prosecution of the actions at law in the state court. Held:

(1) The prosecutions of the actions at law would not prevent the effectual decision of the issues and the administration of the rights and remedies involved in the equity suit.

(2) It would not withdraw or interfere with the legal custody of any specific property which the national court had acquired, or prevent in any degree its subsequent disposition of that property.

(3) The Trust Company had the legal right to prosecute its actions at law in the state court, and the issue of the injunction was an error.

The pendency in another jurisdiction of an action in personam for the same cause which involves no claim to or lien upon any specific property in the possession or under the dominion of a national court of equity, and no issue of which it has acquired exclusive jurisdiction, presents no ground for a dependent bill or an injunction to stay the action at law.

A court may, by means of a dependent bill and by the use of injunctions and writs of assistance, prevent the prosecution in other courts by the parties to a suit before it of all subsequent actions at law or suits in equity, (1) which will prevent its effectual determination of the issues and its administration of the rights and remedies of which it has acquired exclusive jurisdiction in the litigation before it or (2) which will withdraw or interfere with the dominion it has acquired over specific property to such an extent that its determination of the controversy about it and the enforcement of its ultimate decree concerning it may be in any degree prevented.

Where a complainant presents a part of the existing and known facts which it claims entitles it to an injunction, and fails to secure it, and subsequently presents by another bill the other part of those facts, thereby splitting its cause of action, it exhibits a lack of diligence which is fatal to its second application.

Where on appeal from an order granting a temporary injunction, or appointing a receiver, it clearly appears that there is no equity in the bill, the appellate court may consider and determine that question and direct its dismissal in order to save the parties to the suit further expense resulting from the endeavor to secure impossible relief.

This is an appeal from an order which enjoined the Guardian Trust Company, a corporation, from prosecuting three actions at law against the Kansas City Southern Railway Company, another corporation, which the Trust Company had commenced on March 15, 1905, March 28, 1905, and July 2, 1906, in the circuit court of the county of Jackson, in the state of Missouri, to recover personal judgments against the Southern Company for about $545,000. The first and second actions were founded upon the claim of the Trust Company that the Kansas City Suburban Belt Railroad Company originally owed it about $500,000, and that the Southern Company had assumed and agreed to pay that debt. The third action was based upon the claim of the Trust Company that the Kansas City, Pittsburg &amp Gulf Railroad Company originally owed it several thousand dollars, and that the Southern Company had assumed and agreed to pay that debt.

The Southern Company had succeeded to the rights and had assumed the liabilities of a committee of reorganization which had purchased at foreclosure sales in March, 1900, and in December, 1901, the property of the Gulf Company and the property of the Belt Company, respectively, and it was in those years that the Trust Company alleged that its causes of action against the Southern Company accrued. The injunction in this case was issued upon a dependent bill filed on November 16, 1907, by the Southern Company, the Belt Company, and its receiver, in a creditors' suit instituted by the Cambria Steel Company, a judgment creditor of the Belt Company, on September 6, 1900, for the purpose of subjecting the property of the Belt Company to the payment of the judgment of the Cambria Company and to the payment of claims of other creditors of the Belt Company similarly situated. In that suit the Cambria Company made the Belt Company and the Trust Company, but neither the Gulf Company nor the Southern Company, parties defendant, alleged that the Trust Company held the promissory notes of the Belt Company, and that by the account books of the companies the Belt Company appeared to be heavily indebted to the former upon the notes and upon open accounts, and that the Trust Company held a large amount of property which had been delivered to it by the Belt Company to secure this indebtedness, but that in fact the Belt Company was not indebted to the Trust Company, but the latter owed the former, and the Cambria Company prayed for an accounting between the Trust Company and the Belt Company, for the payment of any balance owing by the Trust Company to the Belt Company, for the application of the property which the Trust Company had received from the Belt Company to the payment of the creditors of the latter, for an injunction, and for other relief. Thereupon the court issued a restraining order which forbade the Trust Company to assign, pledge, or dispose of any of the property mentioned in the bill. The Trust Company denied by its answer the equities of the bill, and prayed that it be dismissed. On November 20, 1901, the Belt Company, the Trust Company, and their receivers, stipulated in the Cambria Company's suit that the accounting between the Trust Company and the Belt Company should be expedited, and that a judgment for the amount found due should be rendered against the debtor in that suit. The receivers of the Belt Company then filed a cross-bill in which they alleged that the promissory notes, which evidence a part of the indebtedness of the Belt Company to the Trust Company which the latter company avers in its actions at law was assumed by the Southern Company, were without consideration, and they prayed for an accounting, that these notes be delivered up and canceled, and that they recover of the Trust Company the amount that it should be found indebted to the Belt Company. The Trust Company answered this cross-bill that the notes were made for a valuable and full consideration, that the Belt Company was indebted to it upon the notes and upon other accounts, that the Trust Company was entitled to all the property it had ever received from the Belt Company; and it prayed that its title to that property might be protected, and that it might have judgment against the Belt Company and its receivers for the amount due it.

On February 27, 1905, under a stipulation with the Trust Company and others, the Southern Company filed its intervening petition in the Cambria Company's case, and on May 1st its amended intervening petition, wherein it set forth certain property that had been received by the Trust Company at various times, alleged that by virtue of the foreclosures of the mortgages of the Belt Company, of the Gulf Company, and of other corporations, under which it had become the purchaser, it was entitled to some of this property, to the proceeds of another part of it, and to the value of still another part of it; and it prayed for a recovery thereof from the Trust Company. The Trust Company by an answer denied all the equities of this intervening petition, alleged that the Belt Company was indebted to it, that the Southern Company had assumed and agreed to pay that indebtedness, and prayed that the intervening petition of the Southern Company be dismissed. Meanwhile the three actions at law had been brought in the state court, and in August, 1905, the Southern Company filed a bill in equity and obtained a temporary injunction from the court below against the prosecution of the first two actions at law, and in May, 1906, the order granting that injunction was reversed by this court. Guardian Trust Company v. Kansas City Southern Ry. Co., 76 C.C.A. 615, 146 F. 337.

The Southern Company answered in the actions at law, and in May 1907, it made a motion to stay the proceedings therein upon the same grounds upon which the bill for this injunction rests. The state court denied the motion in June,...