Sioux City Terminal Railroad & Warehouse Co. v. Trust Co. of North America

• Decision Date: 02 August 1897
• Docket Number: 801.
• Citation: 82 F. 124
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: SIOUX CITY TERMINAL RAILROAD & WAREHOUSE CO. et al. v. TRUST CO. OF NORTH AMERICA. [1]

82 F. 124

SIOUX CITY TERMINAL RAILROAD & WAREHOUSE CO. et al. v. TRUST CO. OF NORTH AMERICA. ^[1]

No. 801.

United States Court of Appeals, Eighth Circuit.

August 2, 1897

John C Coombs and Henry J. Taylor, for appellants.

Asa F Call, for appellee.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

This is an appeal by the mortgagor and subsequent lienholders from a decree of foreclosure of a first mortgage for $1,250,000 upon the property of the Sioux City Terminal Railroad & Warehouse Company of Sioux City, Iowa (hereafter called the 'Terminal Company '). The appellants challenge this decree on many grounds. At the threshold of the investigation they meet the complainant with the charge that the court below had no jurisdiction of the case, because some of the defendants were citizens of the same state as the complainant. The complainant was the Trust Company of North America of Philadelphia, Pa. (hereafter called the 'Trust Company'), and it was a corporation of the state of Pennsylvania. It was the trustee for the bondholders secured by the first mortgage made by the Terminal Company, and it brought this suit to foreclose that mortgage on April 17 1894. The Terminal Company was a corporation of the state of Iowa. The Trust Company made the Terminal Company and a large number of individuals and corporations parties defendant Among the latter were several banks which had liens upon the mortgaged property subsequent to that of the first mortgage, and which were corporations of the state of Pennslyvania. On June 19, 1894, the Terminal Company and several other defendants demurred to the bill on the ground that the circuit court had no jurisdiction because the Pennsylvania banks were corporations of the same state as the complainant. On the next day the complainant, by leave of the court, dismissed its suit as to the Pennsylvania banks; and the court on the same day overruled the demurrer', and consolidated with this suit another which had been previously brought in that court to foreclose a second mortgage upon the property of the Terminal Company. One of the defendants in the latter suit was a citizen of the same state as one of the complainants therein. On June 24, 1895, the Pennsylvania banks presented a petition in this suit in which they alleged that they had judgment liens upon the property, and asked that they be admitted to the consolidated suit as parties defendant. Their request was granted, and the suit then went to decree.

The general rule in chancery is that all those whose presence is necessary to a determination of the entire controversy must be, and all those who have no interest in the litigation between the immediate parties, but who have an interest in the subject-matter of the litigation, which may be conveniently settled therein, may be, made parties to it. The former are termed the necessary, and the latter the proper, parties to the suit. The limitation of the jurisdiction of the federal courts by the citizenship of the parties, and the inability of those courts to bring in parties beyond their jurisdiction by publication, has resulted in a modification of this rule, and a practical division of the possible parties to suit in equity in those courts into indispensable parties and proper parties. An indispensable party is one who has such an interest in the subject-matter of the controversy that a final decree between the parties before the court cannot be made without affecting his interests, or leaving the controversy in such a situation that its final determination may be inconsistent with equity and good conscience. Every other party who has any interest in the controversy or the subject-matter which is separable from the interest of the parties before the court, so that it will not be immediately affected by a decree which does complete justice between them, is a proper party. Every indispensable party must be brought into court, or the suit will be dismissed. The complainant may join every proper party, and he must join every proper party who would have been a necessary party under the old chancery rule, unless his joinder would oust the jurisdiction of the court as to the parties before it, or unless he is incapable of being made a party, or if his joinder would oust the jurisdiction of the court as to the parties before it, the suit may proceed without them, and the decree will not affect his interests. Rev. St. Secs. 737, 738; Equity Rule 47: Chadbourne's Ex'rs v. Coe, 10 U.S.App. 78, 83, 2 C.C.A. 327, 51 F. 479, 480, 481; Shields v. Barrow, 17 How. 130, 139; Ribon v. Railroad Co., 16 Wall. 446, 450; Coiron v. Millaudon, 19 How. 113; Williams v. Bankhead, 19 Wall. 563; Kendig v. Dean, 97 U.S. 423; Alexander v. Horner, 1 McCrary, 634, Fed.Cas.No. 169; Cole Silver Min. Co. v. Virginia & Gold Hill Water Co., 1 Sawy. 685, Fed.Cas.No. 2,990. The Pennsylvania banks held judgment liens upon the mortgaged property later in date than, and inferior in equity to, the lien of the Trust Company's mortgage.

They were not indispensable parties to the suit, because their interests were separable from those of the other parties to it, and a final decree which would do complete justice between them might be rendered without immediately affecting the interests of these banks. A decree of foreclosure in a suit to which they were not parties would have left their liens upon the equity of redemption unforeclosed and unaffected. Moreover, their joinder would oust the jurisdiction of the court as to the other parties to the suit, because they were corporations of the same state as the complainant. When this suit was commenced, therefore the Trust Company had the option to join or to fail to join these banks as parties defendant; and the court had the right to proceed without making them parties, under the decisions which we have cited, and under the forty-seventh equity rule, which embodies these decisions and reads:

'In all cases where it shall appear to the court, that persons, who might otherwise be deemed necessary or proper parties to the suit, cannot be made parties by reason of their being out of the jurisdiction of the court, or incapable otherwise of being made parties, or because their joinder would oust the jurisdiction of the court as to the parties before the court, the court may in their discretion proceed in the cause without making such persons parties. and in such cases the decree shall be without prejudice to the rights of the absent parties.'

If the complainant had not joined these banks, the jurisdiction of the court would have been impregnable. Was it destroyed because the Trust Company made them parties defendant, and then, with the leave of the court, dismissed them from the suit? In Cameron v. McRoberts, 3 Wheat. 591, McRoberts, a citizen of Kentucky, brought a suit in equity in the district court of the United States for the district of Kentucky, which then had the jurisdiction of a circuit court, and obtained a final decree. There were three defendants to this suit, one of whom (Cameron) was stated in the bill to be a citizen of the state of Virginia, but the citizenship of the others did not appear. A motion to set aside the decree was made on the ground that the court had no jurisdiction because the two defendants who citizenship was not stated were in fact citizens of Kentucky. Two of the questions certified to the supreme court were:

'Had the district court jurisdiction of the cause as to the defendant Cameron and the other defendants? If not, had the court jurisdiction as to the defendant Cameron alone?'

The answer was:

'If a joint interest vested in Cameron and the other defendants, the court had no jurisdiction over the cause. If a distinct interest vested in Cameron, so that substantial justice, so far as he was interested, could be done, without affecting the other defendants, the jurisdiction of the court might be exercised as to him alone.'

Courts do not require the performance of idle ceremonies. The Trust Company might have prevented this objection to the jurisdiction of the court by neglecting to join the Pennsylvania banks as defendants. The circuit court could have removed it by permitting the complainant to dismiss this suit, and to commence another against all the defendants except the Pennsylvania banks. No reason occurs to us why it might not have obviated it by permitting the complainant to dismiss the banks from this suit. Our conclusion is that the complainant in an equity suit in the federal courts is not required to join any but indispensable parties to the suit, when their joinder will oust the jurisdiction of the court, and, if he does join them, the court may permit their dismissal, and thereupon it has the same jurisdiction and power to proceed to a decree in the case that it would have had if they had never been made parties to it. Nor could the subsequent introduction of these banks and other parties into this suit for the purpose of protecting their own interests affect the jurisdiction of the court. When the banks had been dismissed the circuit court had jurisdiction of the subject-matter and of the parties to the suit. It also had the possession of the mortgaged property, which was then in the hands of its receiver. A suit which had been previously commenced in the same court was consolidated with this suit to foreclose the first mortgage, and all the parties thus brought into this suit were, in effect, interveners for their own benefit. It was immaterial that some of them were citizens of the same state as the complainant. Consolidations and interventions do not oust the jurisdiction of the court in the main suit, whatever the citizenship of the parties thus brought into it may be. Phelps v. Oaks, 117 U.S. 236,...