Russell v. Farley

• Decision Date: 01 October 1881
• Parties: RUSSELL v. FARLEY
• Court: U.S. Supreme Court

105 U.S. 433

105 U.S. 433

26 L.Ed. 1060

RUSSELL v. FARLEY.

October Term, 1881

APPEAL from the Circuit Court of the United States for the District of Minnesota.

The case is fully stated in the opinion of the court.

Mr. Richard L. Ashurst and Mr. Thomas H. Hubbard for the appellant.

Mr. Henry J. Horn for the appellee.

MR. JUSTICE BRADLEY delivered the opinion of the court.

This case comes before us by appeal from a decree in a case in equity wherein Jesse P. Farley, as receiver of certain branch lines of the St. Paul and Pacific Railroad Company, and of all lands and other property appurtenant thereto, was complainant, and the firm of De Graff & Co., the Northern Pacific Railroad Company, the Lake Superior and Mississippi Railroad Company, B. S. Russell, G. W. Cass, receiver of the Northern Pacific Railroad Company, and C. W. Mead, general manager of said company, were defendants. The complainant was appointed receiver Aug. 1, 1873, in a foreclosure suit brought of John S. Kennedy and others, trustees under a mortgage given by the St. Paul and Pacific Railroad Company to secure fifteen millions of dollars of bonds issued by a subsidiary corporation called the First Division of the St. Paul and Pacific Railroad Company, which had a contract to build the railroad, and a lease of the road for ninety-nine years. Amongst the assets supposed by the receiver to be subject to this mortgage was certain railroad iron, which had been purchased in England with the money raised by the sale of the bonds, to wit, 1,700 tons lying at Glyndon, on the line of the road, and 1,000 tons at Duluth, claimed by De Graff & Co., and 1,860 tons at Duluth, claimed by B. S. Russell,—that at Duluth being mostly held in the custom-house for unpaid duties, but some of it being about to be reshipped. The bill in this case was filed by the receiver in the State District Court for the county of Ramsey on the 21st of June, 1875, seeking to set aside the respective transfers of iron by virtue of which De Graff & Co. and Russell claimed to hold it, and for an injunction to restrain them from removing it, or taking it from the custom-house.

By a statute of Minnesota it is declared that, 'when no special provision is made by law as to security upon injunction, the court or judge allowing the writ shall require a bond on behalf of the party applying for such writ, in a sum not less than two hundred and fifty dollars, executed by him or some person for him, as principal, together with one or more sufficient sureties, to be approved by said court or judge, to the effect that the party applying for the writ will pay the party enjoined or detained such damages as he sustains by reason of the writ, if the court finally decide that the party was not entitled thereto. The damages may be ascertained by a reference or otherwise as the court shall direct.' 2 Bissell's Statutes, 806, sect. 121.

On filing the bill in this cause, the complainant (the said receiver) obtained a temporary injunction upon giving to the defendants a bond in the penalty of $10,000, with the following condition, to wit: 'Whereas the said plaintiff is about to apply to this court for a temporary injunction enjoining and restraining the defendants, and each of them, from shipping, removing, selling, hypothecating, transporting, interfering, or intermeddling with 4,560 tons of iron rails now lying at Glyndon and Duluth, Minnesota, or any part thereof: Now, therefore, if the plaintiff will pay the parties enjoined by such writ, or detained thereby, such damages as they or either or any of them may sustain by reason of the writ, if the court finally decide that the party was not entitled thereto, the above obligation shall be void, else of full force and virtue.'

De Graff & Co. having by consent rebonded 1,000 tons of the iron claimed by them, the court, on the 11th of August, 1875, required a further bond from the complainant in the sum of $79,000, the condition of which was as follows, to wit: 'Whereas an injunction has heretofore been granted in this court enjoining and restraining the said defendants, and each of them, from shipping, removing, selling, hypothecating, transferring, or interfering, or intermeddling with 4,500 tons of iron rails now lying at Glyndon and Duluth, Minnesota, or any part thereof; and whereas said injunction is still in force and effect except as to one thousand tons of said iron, claimed by said De Graff & Co., at Duluth, aforesaid; and whereas the said court has ordered, as a condition for the continuance of said injunction, that the plaintiff execute to the defendants herein a bond in the sum of seventy-nine thousand dollars, in addition to the bond for ten thousand dollars heretofore given by the plaintiff on the issuanc of the injunction: Now, therefore, if the plaintiff will pay the parties enjoined by such injunction, or detained thereby, such damages as they, or either or any of them, may sustain by reason of such injunction, if the court finally decide that the party was not entitled thereto, the above obligation shall be void, else of full force and virtue.'

The defendants severally answered the bill, and on the 1st of March, 1876, on application of the complainant, the cause was removed to the Circuit Court of the United States for the District of Minnesota. After taking a large amount of evidence, it was brought to a hearing, and on the 13th of October, 1877, a final decree was made dismissing the bill as to De Graff & Co., without costs to either party. As to the defendant Russell, who was charged with holding 1,860 tons of the iron, it appeared that he was acting as agent for William G. Morehead, who was trustee or agent for the First Division Company in procuring the iron and carrying on the work of construction, and who had sold to De Graff & Co., sub-contractors, the iron claimed by them, in part payment of moneys due them for work; and had pledged a portion of the 1,860 tons of iron (claimed by Russell) to pay Jay Cooke & Co. for advances of money, and Jay Cooke & Co. had pledged and sold it to the United States (the Navy Department) for a debt due to it. Some 1,090 tons of the 1,860 tons in question remained at Duluth unsold, and this was claimed by Edward M. Lewis, trustee in bankruptcy of Morehead; but the court held that it was subject to the mortgage, and that the receiver was entitled to it. The decree on this part of the case was as follows, to wit:——

'It is also further ordered, adjudged, and decreed that the said Farley, as receiver, as against the defendant B. S. Russell, and against the defendant Edward M. Lewis, trustee in bankruptcy of William G. Morehead and others, is entitled, for the benefit of the trust which he represents, to all the iron rails in controversy herein not sold to De Graff & Co., and not pledged and sold to the Navy Department; which said iron rails, subject to the customs duties to the United States, thus decreed to the said Farley as receiver, he is authorized to use in the construction of the said extension lines, or to sell at the best prices and on the best terms practicable, and apply the net proceeds thereof to the credit of the mortgage, dated April 1, 1871, executed by the St. Paul and Pacific Railroad Company to Horace Thompson, George L. Becker, and William G. Morehead, trustees, who in the said trust have been succeeded by the said Wetmore, Pearsal, and Denny, as trustees, and which mortgage is now being foreclosed in this court, neither party as against the other to recover costs or damages. It is further adjudged and decreed that all transfers of the 1,860 tons of iron in controversy herein claimed by defendant Russell from William G. Morehead to said Russell, except transfers relating to the iron pledged to the Navy Department, are null and void, and that said Russell has no right, title, or interest therein as against the said Farley and said trustees. It is further ordered, adjudged, and decreed that said Farley has no right, title, or interest in the iron transferred to the Navy Department, and which is claimed herein by defendants Russell and Lewis; and it is further adjudged that neither the plaintiff nor the defendant Russell is entitled to costs or damages herein.'

Russell alone appealed from this decree, and appealed only from that portion of it which declared that neither party as against the other is entitled to costs or damages.

That an appeal does not lie from a decree in equity as to the costs merely, is well settled. Canter v. American & Ocean Insurance Co., 3 Pet. 307; Elastic Fabrics Company v. Smith, 100 U. S. 110. But it is contended by the appellant that the Circuit Court had no power to decree that he was not entitled to damages, thereby precluding him from recovering damages on the injunction bond; and, if it had ny power to make a decree on the subject of damages, the decree denying him damages in this case is erroneous.

Had the cause remained in the State court, there can be no doubt that that court, under the Minnesota statute which required an injunction bond to be given, could have determined the question of damages. The statute expressly declares that 'the damages may be ascertained by a reference, or otherwise, as the court shall direct.' But the Circuit Court of the United States is not governed in its practice in equity by the laws of the State in which it sits, but by the rules of practice prescribed by this court and by the Circuit Court not inconsistent therewith; and, when these are silent, by the practice of the High Court of Chancery in England prevailing when the equity rules were adopted, so far as the same may reasonably be applied. Equity Rule 90. The injunction bond taken by the State court, it is true, comes into the Circuit Court with the other proceedings in full force; but the power of the Circuit Court to deal with it depends upon the principles which govern the practice of that court, the same as if it had been originally taken by...