Schell v. Food Machinery Corporation

• Decision Date: 13 January 1937
• Docket Number: No. 8218.,8218.
• Parties: SCHELL et al. v. FOOD MACHINERY CORPORATION et al.
• Court: U.S. Court of Appeals — Fifth Circuit

87 F.2d 385 (1937)

SCHELL et al. v. FOOD MACHINERY CORPORATION et al.^*

No. 8218.

Circuit Court of Appeals, Fifth Circuit.

January 13, 1937.

Seiforde M. Stellwagen and Wm. J. Neale, both of Washington, D. C., Lawson Magruder and Dewey A. Dye, both of Bradenton, Fla., and Alvan B. Rowe, of Palmetto, Fla., for appellants.

O. K. Reaves, E. C. Johnson, and Morris E. White, all of Tampa, Fla., and Wm. L. Kimball, of Bradenton, Fla., for appellees.

Before SIBLEY, HUTCHESON, and HOLMES, Circuit Judges.

SIBLEY, Circuit Judge.

This cause was removed to the District Court from a state court on the ground that a separable controversy appeared between citizens of different states; a motion to remand was denied and several weeks later, the state court having vacated as improvident the order of removal granted by it, the District Judge enjoined Manatee River Bank & Trust Company, the original complainant, and Frank R. Schell and Rodney B. Harvey who before removal had filed a joint answer and cross-bill, from acting further in the state court. The three named parties appeal from this interlocutory injunction under Judicial Code, § 129, as amended (28 U.S.C.A. § 227).

We find it necessary to examine only the question of the jurisdiction of the District Court. If it has not jurisdiction of the cause it of course should not have granted the injunction. A federal court may sometimes enjoin proceedings in a state court to protect its own jurisdiction lawfully acquired, but may not interfere even temporarily when it has none. The state court's order of removal is not conclusive, but if wrongly entered could be, as it was, rescinded. St. Louis & S. F. Ry. Co. v. Kirk, 136 Miss. 608, 101 So. 377. The refusal of the District Court to remand is also not conclusive. The jurisdiction of the District Court comes only from the law and not from its own assertion of or judgment on it, nor from any action of the state court. The refusal to remand if erroneous is reviewable by this court, ordinarily after final judgment, but also in connection with a reviewable interlocutory order. If the District Court has not jurisdiction, its activities ought at once to cease. In reviewing an interlocutory order under Judicial Code, § 129 a bill may be ordered dismissed if without equity. Smith v. Vulcan Iron Works, 165 U.S. 518, 17 S.Ct. 407, 41 L.Ed. 810; Meccano v. Wanamaker, 253 U.S. 136, 40 S.Ct. 463, 64 L. Ed. 822. With much more reason when federal jurisdiction is lacking ought the appellate court so to declare. Judicial Code, § 37 (28 U.S.C.A. § 80) expressly says, if at any time it appears that a removed suit "does not really and substantially involve a dispute or controversy properly within the jurisdiction of said district court * * * the said district court shall proceed no further therein, but shall dismiss the suit or remand it to the court from which it was removed, as justice may require." The question of federal jurisdiction is ever present and self-asserting. The court must of its own motion and even against the consent or the protest of parties consider it. Mansfield, etc., R. Co. v. Swan, 111 U.S. 379, 4 S.Ct. 510, 28 L. Ed. 462; Morris v. Gilmer, 129 U.S. 315, 9 S.Ct. 289, 32 L.Ed. 690; International, etc., R. Co. v. Hoyle (C.C.A.) 149 F. 180. The District Court, in refusing to remand, found a separable controversy to be presented by the cross-bill of Schell and Harvey, citizens of Florida, on the one hand, and Food Machinery Corporation, organized under the laws of Delaware, on the other, involving more than $3,000, and justifying the removal of the entire cause. Appellants, on the other hand, say that one Jagan M. Sharma, an alien, is an actual and a necessary party to the cross-bill and to be aligned with Food Machinery Corporation in the controversy; also that the original complainant, Manatee River Bank & Trust Company, a Florida corporation, is a necessary party defendant to the cross-bill, and the presence of either Sharma or the Trust Company on the Food Corporation's side of the controversy prevents it from being one wholly between citizens of different states. The original complainant, the Trust Company, also contends that its suit rightly brought in the state court cannot be made removable later by some of the defendants getting up a separable controversy among themselves. It becomes necessary to understand the pleadings in the state court, because, since no fraudulent joinder of parties or other issue of fact was raised in the petition for removal, removability depends on the face of the pleadings.

On September 9, 1935, the Trust Company brought its bill against Schell, Sharma, and Food Machinery Corporation setting up that Schell and Harvey (who was not made a party) had made an agreement with Food Machinery Corporation to develop, improve, and put into commercial use a patent belonging to Schell and Harvey and to pay them certain royalties. Schell, with the consent of Harvey and Food Machinery Corporation, had assigned and set over to the Trust Company as a trustee for the benefit of certain of Schell's creditors all of Schell's right and interest in the said royalties, with directions to the Food Corporation to pay them to the Trust Company. The Trust Company was to have compensation for handling the trust. At about the same time Schell signed a written assignment of one-half of his royalties to Sharma, who was and is a chemist in the employ of Food Machinery Corporation, for executory considerations to be paid and performed by Sharma, the assignment being deposited in escrow meanwhile. Sharma's payments were to be sent to the Trust Company as trustee. The Trust Company exhibited all these contracts, alleged that it had royalties in hand of $1,557 with more constantly coming in, that it had received nothing from Sharma, but he was claiming one-half of them as his, but Schell was claiming that Sharma had defaulted in his payments and that the escrow was at an end; but that Food Machinery Corporation had deposited with the escrow agent the money which Sharma was to pay and it and Sharma had gotten possession of the assignment; although the money for it had not been paid to the Trust Company, the Food Machinery Corporation was threatening to pay Sharma his part of the royalties direct and that Sharma was so insisting; but that Schell contended that his agreement with Sharma was at an end; that the Trust Company as trustee could not safely determine what it should do either as to the money in hand or that to accrue; and it prayed for an ascertainment of the rights of the parties and a construction of its duties as trustee; for direction in handling the present and future funds; and for allowance of its commissions and of reasonable solicitor's fees. This is not a pure bi...