Halpin v. Savannah River Electric Co.

• Decision Date: 10 May 1930
• Docket Number: No. 2930.,2930.
• Citation: 41 F.2d 329
• Parties: HALPIN v. SAVANNAH RIVER ELECTRIC CO.
• Court: U.S. Court of Appeals — Fourth Circuit

41 F.2d 329 (1930)

HALPIN v. SAVANNAH RIVER ELECTRIC CO.

No. 2930.

Circuit Court of Appeals, Fourth Circuit.

May 10, 1930.

D. W. Robinson, of Columbia, S. C., and E. H. Callaway, of Augusta, Ga. (George E. O'Connor, of Waterford, N. Y., and T. B. Greneker, of Edgefield, S. C., on the brief), for appellant.

M. G. McDonald, of Greenwood, S. C. (J. W. Thurmond, of Edgefield, S. C., Hull, Barrett & Willingham, of Augusta, Ga., and Grier, Park & McDonald, of Greenwood, S. C., on the brief), for appellee.

Before PARKER and NORTHCOTT, Circuit Judges, and HAYES, District Judge.

PARKER, Circuit Judge.

The Twin City Power Company is a South Carolina corporation which owns lands and riparian rights on the South Carolina side of the Savannah river. It also owns all of the stock in a Georgia corporation of similar name which owns similar lands and rights on the Georgia side of the river. These corporations have issued bonds, which are held by the same persons who own the stock of the South Carolina corporation, and to secure these bonds have executed a joint mortgage embracing the lands on both sides of the river. Daniel J. Halpin, a resident of the state of New York, whom we shall hereafter refer to as complainant, has been appointed trustee under this mortgage.

On April 2, 1929, the Savannah River Electric Company, a South Carolina corporation, to which we shall refer as defendant, served notice on complainant, Halpin, and the Twin City Power Company of South Carolina, pursuant to section 4990, vol. 3, of the Code of South Carolina of 1922, that it would condemn the lands and rights of the Twin City Power Company in the state of South Carolina covered by the mortgage in which Halpin was trustee. Within thirty days of the notice, both Halpin and the power company served notice upon defendant that they refused to consent to its entering upon or taking possession of the lands; and on April 18th Halpin filed this suit in the District Court of the United States for the Western District of South Carolina, asking that defendant be enjoined from instituting the condemnation proceedings. The Twin City Power Company was not made a party to the suit, but six days later, through the same counsel, it instituted in the state courts a similar suit to which complainant was not made a party and which is still pending. The suit here was dismissed in the court below on the ground that the power company was an indispensable party, and that, even if not indispensable, it bore such a relationship to the subject-matter of the controversy that the court, in the exercise of the discretion vested by the Thirty-Ninth Equity Rule (28 USCA § 723), should refuse to proceed with the case without its being joined. From the decree dismissing the bill, complainant has appealed.

We think that the suit was properly dismissed for failure to join the power company. In considering the necessity of joinder, parties group themselves into three classes: (1) Those who are merely proper parties; (2) those who are necessary, or what have been called "conditionally necessary," parties; and (3) those who are indispensable parties. In the first class are formal parties and those who, while not interested in the controversy between the immediate litigants, have an interest in the subject-matter which may be conveniently settled in the litigation. The absence of such parties is no ground for dismissal. In the second class are those who have an interest in the controversy, but one which is separable from that of the parties before the court and which will not be affected by a decree made in their absence. These should be made parties if possible, in order that there may be a complete determination in one suit of all questions involved. If, however, they are beyond the jurisdiction of the court, or if their joinder would result in ousting the jurisdiction, the court may in its discretion proceed, without their joinder, under Equity Rule 39. In the third class are those who have an interest in the controversy of such a nature that a final decree cannot be made without either affecting that interest, or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and good conscience. Unless these are made parties, the court will not entertain the suit. Shields v. Barrow, 17 How. 130, 139, 15 L. Ed. 158; Barney v. Baltimore, 6 Wall. 280, 284, 18 L. Ed. 825; Williams v. Bankhead, 19 Wall. 563, 571, 22 L. Ed. 184; Niles-Bement-Pond Co. v. Iron Moulders' Union Local No. 68, 254 U. S. 77, 80, 41 S. Ct. 39, 41, 65 L. Ed. 145. In this case we think that the Twin City Power Company falls within the third class, but, if not there, unquestionably within the second.

We think, in the first place, that the case is clearly one where a final decree cannot be made without affecting the interests of the Twin City Power Company. The injunction sought is to prevent the condemnation of the property of that company, and the rights asserted by complainant are rights arising out of that property and dependant upon the power company's ownership thereof. If the condemnation be allowed to proceed, the property will be taken from the power company. If it be enjoined, that company will be deprived of whatever rights it may have under the proposed condemnation. In either event, its interests will necessarily be affected by the decree entered in a suit to which it is not a party. It matters not that the company does not desire the condemnation and regards same as detrimental to its interests; for the determining factor on the question of joinder is that its interests will necessarily be affected by any decree which may be entered in the suit.

It has been expressly held that, in suits for condemnation, there is no severable interest between the owner of the land and a mortgagee, and that a nonresident may not remove such suit to the federal court on the ground that it involves a separable controversy. In re City of Seattle (D. C.) 237 F. 100; Fishblatt v. Atlantic City (C. C.) 174 F. 196, 198; Helena Power Transmission Co. v. Spratt (C. C.) 146 F. 310. In the Fishblatt Case, Judge Rellstab stated the rule thus:

"In condemnation proceedings such as these, the land and all rights therein are taken (P. L. N. J. 1894, p. 146 1 Comp. St. N. J. 1910, p. 1075, §§ 1748-1755), and if the mortgage covers all or any part of such property, both the mortgagee and the owner of the equity of redemption are indispensable parties to the suit. Each has an interest in the whole covered by such mortgage. No part of such mortgaged premises can be taken from one party without affecting the others' estate. A lienholder, in a controversy over the taking of the fee, cannot be separated from the owner of the equity of redemption."

In the case of Bellaire v. B. & O. Ry. Co., 146 U. S. 117, 13 S. Ct. 16, 17, 36 L. Ed. 910, the Supreme Court used the following pertinent language as to the nature of a condemnation proceeding and the rights thereunder of persons having an interest in the property condemned:

"The cause of action alleged, and consequently the subject-matter of the controversy, was whether the whole lot should be condemned; and that controversy was not the less a single and entire one because the two defendants owned distinct interests in the land, and might be entitled to separate awards of damages. Kohl v. U. S., 91 U. S. 367, 377, 378 23 L. Ed. 449. The ascertaining of those interests, and the assessment of those damages, were but incidents to the principal controversy, and did not make that controversy divisible, so that the right of either defendant could be fully determined by itself, apart from the right of the other defendant, and from the main issue between both defendants on the one side and the plaintiff on the other."

It is sought to distinguish the above cases on the ground that the mortgagee in South Carolina acquires no title to the property but merely a lien thereon. We think, however, that this might render it unnecessary to join the mortgagee as a party to condemnation proceedings (see 20 C. J. 922 and cases there cited), but certainly could not be a reason for not joining the owner of the land. We know of no case holding that the owner need not be joined in such a proceeding; and it is clear that, if he is indispensable in a suit for condemnation, he is equally so in a suit to enjoin condemnation; for his interest in the land is necessarily affected by the outcome of the suit in either event. In the condemnation suit, his interest is taken, whereas in the injunction suit the condemnor is forbidden to take it, or it is adjudged to be subject to condemnation.

While there seem to be no cases holding directly that the owner of property is a necessary party to a suit by a mortgagee to restrain condemnation, there are a number which lay down the general rule applicable in such a case. In Niles-Bement-Pond Co. v. Iron Moulders' Union, supra, complainant had a contract with a subsidiary corporation under which the latter was to manufacture goods which complainant had contracted to sell. Suit was instituted to enjoin defendants from interfering with the employees of the subsidiary corporation, and it was held that the latter was an indispensable party to the suit. In that case complainant's cause rested upon the rights of the subsidiary corporation as against its employees; here it rests upon the rights of the mortgagor as against the company seeking to condemn its property. In holding that the subsidiary corporation was a necessary party to the suit and should be aligned with the complainant for the purpose of determining jurisdiction, the court used language which is very pertinent here. It said:

"Petitioner's claim of right, the validity of which we are not called upon to determine, is rested wholly upon the contract of the Tool Company with its employees, and the character and construction of that contract of employment must inevitably...