160 U.S. 556
MISSOURI PAC. RY. CO.
January 13, 1896. [160 U.S. 556, 557] This was a petition filed December 24, 1888, in the district court for Lancaster county, Neb., by John Fitzgerald, suing on behalf of himself and all other stockholders of the Fitzgerald & Mallory Construction Company against that company and the Missouri Pacific Railway Company, a corporation organized under the laws of Missouri, Kansas, and Nebraska. The petition was based on two contracts (copies of which were annexed), one bearing date April 28, 1886, between the Fitzgerald & Mallory Construction Company and the Denver, Memphis & Atlantic Railway Company, a corpora- [160 U.S. 556, 558] tion organized under the laws of the state of Kansas. By this contract the Construction Company agreed to build a railroad in Kansas from the east to the west line of that state; to furnish all materials and money; to equip the same with at least $1,000 of rolling stock per mile; to grade the line according to the engineer's surbeys; to furnish oak ties on curves, not less than 2,600 to the mile, and steel rails not less than 26 pounds to the yard; to build such depot and stations as the Denver Company should require, and all necessary sidings or turnouts, and, generally, to construct the road equal to railroads then being built in Southern Kansas. The Denver Company agreed to pay $16,000 per mile of its full-paid capital stock for every mile of completed road constructed, and $16,000 in its first mortgage bonds per mile of single track of the road which bonds were each to be for $1,000, or such other denomination as the parties should agree upon, draw interest at 6 per cent., be dated July 1, 1886, run 30 years from date, and be secured by a trust deed on the line and branches. They were to be delivered as the Construction Company required them. The Denver Company was also to deliver to the Construction Company all municipal and county bonds voted and to be voted in aid of the railroad, and all donations thereto, and procure the right of way in advance of the work, so as not to delay the construction, but the Construction Company was to pay for the right of way.
The other contract, dated May 4, 1886, was between the Missouri Pacific Railway Company and the Construction Company. It recited the contract of April 28th, and also that the Missouri Pacific Company desired to obtain control of the railway. The Construction Company agreed to sell to the Missouri Pacific Company all the securities which it should receive under the first contract, for which the Missouri Pacific Company was to deliver to it 5 per cent. bonds at the rate of $12,000 per mile of completed road. The Missouri Pacific Company also agreed to transport at cost the men and material of the Construction Company while it was carrying on the work.
The petition alleged that the Construction Company was a [160 U.S. 556, 559] corporation of Iowa, having a capital of a million and a half, divided into shares of $100 each, of which Fitzgerald held 1,500, S. H. Mallory 1, 500, and Gould and other citizens of New York something over 10,000; that the holders of over 8,000 shares were officers and directors of the Missouri Pacific Company; and that the bankers of the latter company held 2,000 shares. It was further alleged that shortly after the execution of the two contracts all the directors of the Denver Company, except Fitzgerald and Mallory, resigned, and their places were filled by officers and directors of the Missouri Pacific Company; that the directory of the Construction Company was changed so that of its five directors three were connected with the Missouri Pacific Company, Fitzgerald and Mallory being the other two. The work in the field was carried on by Fitzgerald and Mallory, and the financial dealings of the Denver and the Construction Companies were in the hands of the New York directors. Fitzgerald complained of many transactions of the New York directors of the Construction Company which were prejudicial to himself and other creditors and stockholders and in the interest of the Missouri Pacific Company.
The road was built by the Construction Company, and Fitzgerald alleged that, after that was accomplished, he made efforts to secure an accounting between the Missouri Pacific and the Construction Companies, which were unsuccessful, and he brought the suit as a stockholder for the purpose of settling the dealings between the two companies.
The petition also averred that the Denver Company failed to comply with the provisions of the contract in reference to procuring the right of way, to the damage of the Construction Company, for which it charged that the Missouri Pacific Company was liable.
It was also alleged that the Construction Company not only owed Fitzgerald individually a large amount of money, but for money expended in the bringing of this as well as other suits, for attorney's fees, and other like matters, for which he asked reimbursement. [160 U.S. 556, 560] The prayer of the petition was that an accounting be had between the Missouri Pacific Company and the Construction Company; that certain action of the board of directors and arrangements between the Missouri Pacific Company and the Construction Company be declared null and void; that the Missouri Pacific Company be compelled to account in relation to certain enumerated matters and generally, and pay over all moneys found due to the Construction Company; also that complainant 'be reimbursed for all expenses and attorneys' fees in other suits that he has been forced by the action of said directors to commence, as well as in this case'; and for general relief.
The answer of the Missouri Pacific Company was filed January 19, 1889, and admitted that defendant was a corporation duly organized under the laws of Missouri, Kansas, and Nebraska; but averred that the liability proceeded on, if any, was a liability of the company incorporated under the laws of the state of Kansas. It charged that, while the contract between the Denver and Construction Companies required the Denver Company to acquire the right of way, the Construction Company undertook to procure it, and became responsible to the Missouri Pacific Company for a good title; that some 15 or more miles of the railroad were built over the public lands without complying with the act of congress of March 3, 1875, granting to railroads the right of way through the public lands, so that for that distance of road the Missouri Pacific Company did not acquire such title as it was entitled to; and it claimed that, if there should be an accounting between the Construction Company and itself, it should not be required to pay or account for any portion of the line where the lawful right of way had not been secured, and that a deduction of $12,000 per mile of railroad so situated should be made. The answer further alleged that Fitzgerald had theretofore commenced suit in the district court of Lancaster county, Neb., against the Construction Company, to recover a sum exceeding $50,000, and caused garnishee proceedings to be instituted against the Missouri Pacific Company, upon which it was required to an- [160 U.S. 556, 561] swer as to all moneys in its hands or under its control belonging to the Construction Company, or due from the Missouri Pacific Company thereto; but that it had no interest in Fitzgerald's individual claim or knowledge concerning the merits thereof. Various other admissions, denials, and averments were made in the answer upon the merits, which it is unnecessary to set forth. The Construction Company filed a demurrer to the petition.
On the same day, January 19, 1889, the Missouri Pacific Company filed its petition to remove the cause to the circuit court of the United States for the district of Nebraska on two grounds,-diverse citizenship and the question raised by the claim of the Missouri Pacific Company in respect of part of the road constructed over the public lands. It appeared from the pleadings that Fitzgerald was a citizen of Nebraska, and that the Construction Company was a corporation of Iowa; that the Missouri Pacific Company was a corporation organized under the laws of Kansas, Missouri, and Nebraska; but in its answer, as already stated, the Missouri Pacific Company claimed that it was not the corporation referred to in the petition, and that the liabilities arising under the contract were liabilities of the company organized and existing under the laws of Kansas. The Construction Company also filed a petition for removal.
The district court denied the petitions, and refused to accept the bonds. The Missouri Pacific Company, however, filed the record in the circuit court of the United States, and Fitzgerald filed a motion to remand, and a plea to the jurisdiction, which motion was denied, and the plea overruled, and the cause was referred to a special master to take proofs.
May 6, 1891, the cause came on to be heard upon the pleadings, proofs, and the report of the master, and the circuit court held that the cause had been improperly removed from the state court, and ordered it remanded, at the costs of the Missouri Pacific Company. The reasons for this conclusion are given in an opinion reported 45 Fed. 812. The cause having been returned to the district court of the state, the parties entered into a stipulation that the action be con- [160 U.S. 556, 562] tinued to the next September term then to be tried and that the depositions taken in the circuit court might be read as if taken in the state court. An amended petition and an amended and supplemental answer were filed. Trial was had as agreed in the district court of Lancaster county, which made a finding of facts, and rendered judgment against the Missouri Pacific Company.
The forty-seventh finding of fact was as follows: '(47) That about fifteen miles of railroad was laid out over government land; that no maps were filed with the secretary of the interior showing the lines of was over said government land in the state of Kansas, but maps were filed with the local land officers of the United States at Wa Keeney, Kansas, duly certified to, showing said right of way.'
Both parties appealed to the supreme court of the state, and that court rendered a judgment against the Missouri Pacific Company. 41 Neb. 374, 59 N. W. 838. The Missouri Pacific Company made application for a rehearing, pending which Fitzgerald died, and Mary Fitzgerald, as his administratrix, filed her petition for revivor and for a receiver of the Construction Company to collect the judgment. In support of the application for a receiver, it was alleged that about the time Fitzgerald recovered judgment, the Missouri Pacific Company caused a suit to be brought against the Construction Company in the name of the Kansas & Colorado Pacific Railway Company, which was owned by the missouri Pacific Company, and it was charged on various grounds that the action was collusive, and contrived to deprive the supreme court of the state of its jurisdiction, and Fitzgerald of the fruits of its judgment, and that a receiver had been procured to be appointed by the circuit court in that action in furtherance of that object.
The Missouri Pacific Company filed an answer and plea to this petition, denying collusion, and urging objections to the application for a receiver in this case, which, so far as necessary, are hereafter stated. A reply was filed by Mrs. Fitzgerald to this answer and plea. The supreme court, having granted a rehearing, entered an order of revivor, rendered judgment [160 U.S. 556, 563] against the Missouri Pacific Company, and appointed a receiver. 62 N. W. 899. The pending writ of error was then sued out, and a motion to dismiss the writ for want of jurisdiction or to affirm the judgment was made.
The following are the errors assigned:
J. M. Woolworth, for defendant in error. [160 U.S. 556, 568] John F. Dillon, Winslow S. Pierce, and B. P. Waggener, for plaintiff in error.
Mr. Chief Justice FULLER, after stating the facts in the foregoing language, delivered the opinion of the court.
Was any title, right, privilege, or immunity under the constitution or any statute of, or authority exercised under, the United States, especially set up or claimed by plaintiff in error denied by the decision of the state court? [160 U.S. 556, 575] An assignment of errors cannot be availed of to import questions into a cause which the record does not show were raised and passed on in the court below, but we may refer to such assignment by way of convenience toascertain the contentions of plaintiff in error.
Of the errors assigned here those which do not involve matters purely within the jurisdiction of the state courts may be grouped as follows:
That the supreme court of Nebraska erred-
First. In that the court decided against a right set up by plaintiff in error under the act of congress of March 3, 1875, entitled 'An act granting to railroads the right of way through the public lands of the United States' (18 Stat. 482, c. 152), by its refusal to allow damages for the failure of the Construction Company to properly comply with the act.
Second. In that the court in maintaining jurisdiction decided against the claim of plaintiff in error that by reason of process of garnishment in attachment against the Missouri Pacific Company in the action brought by Fitzgerald against the Construction Company to recover an amount alleged to be due him individually, in the state court, and removed into the circuit court, the circuit court acquired exclusive jurisdiction and custody of the fund or moneys due from the Missouri Pacific Company to the Construction Company, and of any controversy in respect thereof.
Third. In that the court, in appointing a receiver of the Construction Company to collect the amount of the decree against the Missouri Pacific Company, and disburse the same under the direction of the court, decided against the claim of plaintiff in error that a receiver appointed by the circuit court in the cause therein pending in favor of the Kansas & Colorado Pacific Railway Company and against the Construction Company was entitled to the possession of the latter's assets.
Fourth. In that the court, in exercising jurisdiction, notwithstanding the cause had been wrongfully remanded by the circuit court, decided against the claim of plaintiff in error that the cause had been properly removed. And [160 U.S. 556, 576] herein also that the court, in maintaining jurisdiction, decided against the claim of plaintiff in error that the state district court erred in denying its application to remove.
1. We repeat what we said in Powder Works v. Davis, 151 U.S. 389, 393 , 14 S. Sup. Ct. 350, that: 'It is axiomatic that, in order to give this court jurisdiction on writ of error to the highest court of a state in which a decision could be had, it must appear affirmatively, not only that a federal question was presented for decision by the highest court of the state having jurisdiction, but that its decision was necessary to the determination of the cause, and that it was actually decided, or that the judgment as rendered could not have been given without deciding it. And where the decision complained of rests on independent ground, not involving a federal question, and broad enough to maintain the judgment, the writ of error will be dismissed by this court without considering any federal question that may also have been presented.' Eustis v. Bolles, 150 U.S. 361 , 14 Sup. Ct. 131, and cases cited.
In the case at bar the state court did not decide a federal question in this connection, but its decision rested on an independent ground broad enough to sustain the judgment.
The contention of plaintiff in error was that, although the contract between the Denver Company and the Construction Company required the Denver Company to secure the right of way, it was understood that when the Missouri Pacific Company and the Construction Company entered into their contract the Construction Company should use the name of the Denver Company, exercise its power of eminent domain, comply with the act of congress, and secure the right to build the road over the public lands; that the Construction Company failed to secure the lawful right of way as to a portion of the road; that the Missouri Pacific Company should be allowed a deduction for each and every mile so situated; and that the controversy in this regard depended upon a right construction of the act of congress. It would seem that this dispute between the parties turned on whether the Construction Company had failed in its duty to the Missouri Pacific Company, and not on any difference between them as to the proper [160 U.S. 556, 577] meaning of the act; but it is sufficient to say that the validity of the act of congress was not questioned, and that the decision of the state courts denied no right claimed under it. The finding of fact was that about 15 miles of road was laid out over government land, and that no maps were filed with the secretary of the interior showing the lines of way thereon, though they were filed with the local land officers. In Real v. Hollister, 20 Neb. 112, 29 N. W. 189, it was decided that in an action for breach of the covenant for quiet enjoyment the plaintiff must allege and prove that he has been turned out of possession, or has yielded to a paramount title, and, applying that doctrine in this case, the state courts held that the Missouri Pacific Company could not maintain its claim for damages, because its possession had not been disturbed or its title questioned. 41 Neb. 451, 59 N. W. 838.
2. The answer and plea of the Missouri Pacific Company to Mrs. Fitzgerald's petition for an order of revivor and the appointment of a receiver, filed January 29, 1895, set up that on December 24, 1888, which was the same day that he instituted this suit as a stockholder, Fitzgerald brought an action against the Construction Company to recover an amount alleged to be due him; that notice of garnishment was served on the Missouri Pacific Company; that the cause was then removed into the circuit court, and there Fitzgerald recovered judgment; and that control over the indebtedness of the Missouri Pacific Company to the Construction Company and of the accounting between them was thus transferred to the circuit court.
The matter of the garnishment proceedings was referred to in the original answer of the Missouri Pacific Company, filed in this cause January 19, 1889, but the position now taken was put forward for the first time in the answer and plea to Mrs. Fitzgerald's petition in the supreme court. Apart, however, from the objection that the course of proceedings could not be obstructed in this way at so late a date, and in the court of appellate jurisdiction, the position cannot be maintained, for it was not made to appear but that the [160 U.S. 556, 578] notice of garnishment may have been issued and served after jurisdiction had attached in this suit; and, moreover, it did not appear that the garnishment process was prosecuted, or that any order or judgment charging the Missouri Pacific Company was rendered. Under sections 224 and 225 of the Code of Nebraska (Comp. St. Neb. 1895, 1170, 1171), the garnishee must deliver the property of the defendant in the action, or pay the money due, as disclosed on his examination, into court, or give bond that the amount shall be paid or the property be forthcoming, as directed by the court; or, if the garnishee fail to appear and answer, or his disclosure is not satisfactory, or he fail to comply with the order of the court, etc., the plaintiff may proceed against him by action, and recover judgment as in other cases, defendant being substituted as plaintiff when plaintiff is satisfied.
The supreme court of Nebraska disposed of this objection by saying 'that the attachment proceeding was evidently abandoned in the circuit court, where the record shows an ordinary judgment for damages, unaccompanied by an order against the Missouri Pacific Company as garnishee.'
We are unable to perceive that that court, in declining to entertain the objection, so passed upon a federal question as to furnish ground for the interposition of this court.
3. By the amended petition filed May 4, 1891, the appointment of a receiver was prayed, but the judgment of the district court was rendered December 28, 1891, for $429,573.43, to be paid to the clerk of the court, to abide its further order, execution to issue on failure of payment.
The cause having been taken to the supreme court by appeal, judgment was there rendered, June 26, 1894, for $764,942.08, with interest from December 24, 1893, and the cause remanded to the district court, with instructions to enforce the collection of said judgment, and to appoint a receiver to collect and pay out the proceeds thereof, and of such other assets of the Construction Company as might be within the jurisdiction of the court. December 30, 1894, pending an application for a rehearing, Fitzgerald died, and Mrs. Fitzgerald, having been appointed special administratrix [160 U.S. 556, 579] of his estate, filed January 15, 1895, her petition for an order of revivor, and also that a receiver be appointed by the supreme court.
January 5, 1895, a rehearing was granted, and on April 4th the supreme court entered the order of revivor, and modified its former judgment by reducing the amount to $300,906.33. And on April 6, 1895, the court appointed a receiver, having reviewed and overruled the Pacific Company's objections thereto presented by its answer and plea to Mrs. Fitzgerald's application. 62 N. W. 899, 910.
July 2, 1891, the Kansas & Colorado Pacific Railway Company brought its action in the state district court against the Construction Company with garnishee notice to the Missouri Pacific Company, which cause was removed into the circuit court on July 3, 1891. January 12, 1895, the Kansas Company filed an amended and supplemental complaint, and a receiver was appointed by the circuit court, the district judge presiding.
As the state courts had been in possession of the res for years before January 12, 1895, when, pending the modification by the supreme court of its judgment of June 26, 1894, the circuit permitted the amended and supplemental complaint to be filed by the Kansas Company against the Construction Company, and thereupon appointed a receiver, the supreme court of Nebraska held that the rule that the court which first acquires jurisdiction of the subject-matter of an action will retain it until the controversy is finally determined applied, and that the appointment of a receiver by the circuit court was, under the circumstances, ineffectual to divest the control of the supreme court over the assets of the Construction Company, or defeat its right to enforce its judgment in the accounting.
In our opinion, the supreme court, in so holding, denied no federal right of the Missouri Pacific Company.
4. It is contended that by its judgment the supreme court affirmed the order of the state district court denying the application to remove, and that that order was erroneous. But as the Missouri Pacific Company, notwithstanding such denial, [160 U.S. 556, 580] filed the record in the circuit court, and the cause proceeded in that court to final hearing, when it was remanded, and as the state court in the meantime awaited the action of the circuit court, the order worked no prejudice; and, if any error were committed in that regard, it became wholly immaterial.
5. We are thus brought to the remaining and most important question arising on this motion.
Under the act of congress of March 3, 1887 (24 Stat. 552, 553, c. 373 ), as re-enacted for the purpose of correcting the enrollment by the act of August 13, 1888 (25 Stat. 433, 435, c. 866), is the order of the circuit court remanding the cause to the state court open to review on this writ of error? If not, then we cannot take jurisdiction to revise the proceedings of the state court. Nor can the inquiry be affected by the fact that a motion to remand had been previously made and denied. That order was subject to reconsideration, as the question of jurisdiction always is, until final judgment; and, indeed, it was the duty of the circuit court, under the statute, if it appeared at any time that jurisdiction was lacking, to dismiss or remand as justice might require. 18 Stat. 470, c. 137, 5.
Prior to the passage of the act of March 3, 1875, just cited, an appeal or writ of error would not lie to review an order of the circuit court remanding a suit which had been removed, because such an order was not a final judgment or decree. This was expressly held in Railroad Co. v. Wiswall, 23 Wall. 507, decided at October term, 1874, and it was also ruled that the remedy was by mandamus. But by the last paragraph of section 5 of the act of March 3, 1875 (18 Stat. 470, c. 137), it was provided that 'the order of said circuit court dismissing or remanding said cause to the state court shall be reviewable by the supreme court on writ of error or appeal as the case may be.'
By section 6 of the act of March 3, 1887, however, this paragraph was expressly repealed, and by the last paragraph of section 2 it was enacted that 'whenever any cause shall be removed from any state court into any circuit court of the United States, and the circuit court shall decide that the cause was improperly removed, and order the same to be re- [160 U.S. 556, 581] manded to the state court from whence it came, such remand shall be immediately carried into execution, and no appeal or writ of error from the decision of the circuit court so remanding such case shall be allowed.'
These provisions were referred to by Mr. Chief Justice Waite in Morey v. Lockhart, 123 U.S. 56, 57 , 8 S. Sup. Ct. 65, and the chief justice said:
It was subsequently decided in the case of In re Pennsylvania Co., 137 U.S. 451, 454 , 11 S. Sup. Ct. 141, that the power to afford a remedy by mandamus when a cause removed from a state court is improperly remanded was taken away by the acts of March 3, 1887, and August 13, 1888
Adverting to the clause just quoted from section 2 of those acts, Mr. Justice Bradley said:
We see no reason for reconsidering these conclusions, and it may be regarded as settled that an order of the circuit court remanding a cause cannot be reviewed in this court by any direct proceeding for that purpose.
If a state court proceeds to judgment in a cause notwithstanding an application for removal, its ruling in retaining the case will be reviewable here after final judgment under section 709 of the Revised Statutes. Stone v. South Carolina, 117 U.S. 430 , 6 Sup. Ct. 799.
If a case be removed to the circuit court, and a motion to remand be made and denied, then, after final judgment, the action of the circuit court in refusing to remand may be reviewed here on error or appeal. Graves v. Corbin, 132 U.S. 571 , 10 Sup. Ct. 196.
If the circuit court and the state court go to judgment, respectively, each judgment is open to revision in the appropriate mode. Removal Cases, 100 U.S. 457 .
But if the circuit court remands a cause, and the state court thereupon proceeds to final judgment, the action of the circuit court is not reviewable on writ of error to such judgment.
A state court cannot be held to have decided against a federal right when it is the circuit court, and not the state court, which has denied its possession.
The supreme court of Nebraska rightly recognized the courts of the United States to be the exclusive judges of their own jurisdiction, and declined to review the order of the circuit court.
As under the statute a remanding order of the circuit court is not reviewable by this court on appeal or writ of error from or to that court, so it would seem to follow that it cannot be reviewed on writ of error to a state court, the prohibition being that 'no appeal or writ of error from the decision of the circuit court remanding such cause shall be allowed.' [160 U.S. 556, 583] And it is entirely clear that a writ of error cannot be maintained under section 709 in respect of such an order, where the state court has rendered no decision against a federal right, but simply accepted the conclusion of the circuit court.
We regard this result as intended by congress, in effectuation of the object of the act of March 3, 1887, to restrict the jurisdiction of the circuit court, and to restrain the volume of litigation, which, through the expansion of federal jurisdiction in respect of the removal of causes, had been pouring into the courts of the United States. Smith v. Lyon, 133 U.S. 315 , 10 Sup. Ct. 303; In re Pennsylvania Co., 137 U.S. 451 , 11 Sup. Ct. 141; Fisk v. Henarie, 142 U.S. 459, 467 , 12 S. Sup. Ct. 207.
So far as the mere question of the forum was concerned, congress was manifestly of opinion that the determination of the circuit court that jurisdiction could not be maintained should be final, since it would be an uncalled for hardship to subject the party who, not having sought the jurisdiction of the circuit court, succeeded on the merits in the state court, to the risk of the reversal of his judgment, not because of error supervening on the trial, but because a disputed question of diverse citizenship had been erroneously decided by the circuit court; while as to applications for removal on the ground that the cause arose under the constitution, laws, or treaties of the United States, that this finality was equally expedient, as questions of the latter character, if decided against the claimant, would be open to revision under section 709, irrespective of the ruling of the circuit court in that regard in the matter of removal.
It must be remembered that when federal questions arise in causes pending in the state courts, those courts are perfectly competent to decide them, and it is their duty to do so.
As this court, speaking through Mr. Justice Harland, in Robb v. Connolly, 111 U.S. 624, 637 , 4 S. Sup. Ct. 544 said: 'Upon the state courts, equally with the courts of the Union, rests the obligation to guard, enforce, and protect every right granted or secured by the constitution of the United States and the laws made in pursuance thereof, whenever those rights are involved in any suit or proceeding before them; for the judges of the state courts [160 U.S. 556, 584] are required to take an oath to support that constitution, and they are bound by it, and the laws of the United States made in pursuance thereof, and all treaties made under their authority, as the supreme law of the land, 'anything in the constitution or laws of any state to the contrary notwithstanding.' If they fail therein, and withhold or deny rights, privileges, or immunities secured by the constitution and laws of the United States, the party aggrieved may bring the case from the highest court of the state in which the question could be decided to this court for final and conclusive determination.'
Writ of error dismissed.