Boston Acme Mines Corp. v. Salina Canyon Coal Co. , 3 F.2d 729 ( 1925 )

MUNGER, District Judge

(after stating the facts as above). Much of the argument of appellants is given to questioning the propriety of the order remanding the ease of the Salina Company against Klemm and the Development Company to the state court. It is claimed that after the order of consolidation was made there was only- one suit in the United States court, and therefore there was no suit to be remanded. The order provided that the two actions were consolidated, both for settling the pleadings and for trial on the merits, and for all purposes of appeal or review, until final disposition of the eases as one case. The two eases had been known by their docket numbers, 6889 and 6792. After this order was made the Salina Company filed a reply in cause No. 6889, and the Development Company filed another amended bill of complaint, joining with it as a eoplain-tiff the Boston Acme Mines Corporation. This was entitled as follows: “Boston Acme Mines Corporation and Boston Acme Mines Development Company, Corporations, Complainants (No. 6792), v. Salina Canyon Coal Company, a Corporation, R. M. Lehman, Carl A. Mattsson, Nora Matts-son, Banard E. Mattsson, Maude Matts-son, and Emil J. Klemm, Respondents, Consolidated with Salina Canyon Coal Company, a Corporation, Plaintiff (No. 6889), v. Emil J. Klemm, Boston Acme Mines Development Company, Boston Acme Mines Corporation, Defendants, R. M. Lehman, Carl A. Mattsson, Nora Mattsson, Banard E. Mattsson, and Maude Mattsson, Defendants to counterclaim.”

The amended bill begins as follows: “Come now the above-named Boston Acme Mines Corporation and Boston Acme Mines Development Company, and humbly complaining of the several parties above named as respondents in case No. 6792, * * * and alleges,” etc. Thereupon the plaintiffs set forth their claims to the property in question, and pray for a decree finding that the defendants named have no right, title, or interest in the property, except as in trust for the plaintiffs, and for an order requiring a conveyance to the Development Company, and for costs. The bill then continues: ' “And by way of answer to the complaint of the Salina Canyon Coal Company in its suit No. 6889 herein, begun and filed in the district court of Sevier county, Utah, and removed into this court, the complainants admit,” etc., following by admissions and denials and averments.

, The Salina Company, Lehman, and the Mattssons answered this amended bill, and the Salina Company set up as a counterclaim substantially the same allegations contained in the original bill filed in the state court, except that the Development Company and the Boston Acme Mines Corporation, as well as Klemm, were alleged to claim some interest in the property and a decree was prayed quieting the title of the Salina Company as against each of these three defendants. Klemm answered the “amended bill” and “the complaint of the Salina Canyon Coal Company in ease No. 6889,” adopting all the allegations of the Boston Companies and also denied the allegations of the “complaint in ease 6889 and ’ in its replica, the counterclaim of the Sa-lina Canyon Coal Company in Case No. 6792.” It will be seen that the parties, after the order of consolidation, kept the pleadings separate and distinct in the two cases, treating each case as if it still existed as a separate suit. At the trial there was continued reference to each of the eases by the separate numbers, and finally motions were made by the Salina Company to remand the case No. 6889, and to dismiss the case No. 6792.

The order of the court made on September 26, 1923, was that case No. 6889 he remanded to the state court, and the order made September 27, .1923, was that case No. 0792 be dismissed, that the plaintiff take nothing by its bill in equity, and that the defendants go hence without day. In this condition of the record, it cannot be said that there was but one suit pending at the time of the orders complained of. By their pleadings the parties had kept the issues separate in each of the cases. Furthermore, the court had power to make an order setting aside the order of consolidation (Col-burn v. Hill, 101 F. 500, 507, 41 C. C. A. 467; 1 Corp. Jur. 1137, 1138), and the order remanding' one of the cases and dismissing the other had the effect of vacating the order of consolidation. The trial court was of the opinion that ease No. 6889 was improperly removed, because the defendant Klemm was a necessary party, and both he and the plaintiff were citizens of Utah. We are precluded from a review of the action of the court remanding this ease, both by the terms of section 28 of the Judicial Code¹ which provides, “Whenever any cause is removed from any state court into any District Court of the United States, and the District Court shall decide that the cause was improperly removed, and order the same to be remanded to the state court from whence it came, such remand shall bo immediately carried into execution, and no appeal or writ of error from the decision o'i: the District Court so remanding such case shall be allowed,” and by the fact that the appeal was taken only from the decree of September 27, 1923, and did not purport to be taken from the order of remand entered September 26, 1923.

The appellees object to a review of the decree of dismissal on the ground that the trial court dismissed the suit for want of jurisdiction, and therefore an appeal should have been taken to the Supreme Court. On the face of the decree the judgment appears to have been on the merits, but, looking at the grounds for the dismissal, as the appellees do in their discussion of this proposition, it appeal's that the appellees made a motion for a dismissal of case No. 6792 for lack of jurisdiction, and the court was of the opinion that, after having remanded case No. 6899 to the state court, there was such a conflict of jurisdiction between the state court in that case and the United States Court in case No. 6792 that the latter court was prevented from exercising jurisdiction to determine the issues in case No. 6792, and therefore the dismissal was entered.

The review that is given to the Supremo Court and denied to this court by sections 128 and 238 of the Judicial Code (Comp. St. §§ 1120, 1215), in cases where the jurisdiction of the District Court is in issue, is given only in those eases where the jurisdiction of the District Court as a federal court is involved; hut, where the dismissal is on the ground that a prior action is pending in the state court of such a nature as may lead to a conflict between the courts as to matter in controversy, the dismissal is not for lack of jurisdiction as a federal court, but because of the general principles of jurisprudence and of the rules governing the action generally of courts of concurrent jurisdiction in their relations to each other. Louisville Trust Co. v. Knott, 191 U. S. 225, 233, 235, 24 S. Ct. 119, 48 L. Ed. 159; Bache v. Hunt, 193 U. S. 523, 525, 24 S. Ct. 547, 48 L. Ed. 774; Fidelity Trust Co. v. Gaskell, 195 F. 865, 869, 115 C. C. A. 527. This court, therefore, has jurisdiction of this appeal.

The appellants claim that there was no conflict of jurisdiction between the cases in the state and federal court, because the suit in the state court was not an action in rem, and that court had not taken possession of the property involved. The suit in the state court alleged the ownership and possession in the Salina Company of coal, mineral, and timber in and upon 2,410,35 acres of land in Utah, asserted that the defendant Klemm claimed, without right, some interest therein, and prayed a decree barring him from asserting any further claim. This was a suit to quiet the plaintiffs’ title, permitted in this form by section 7247 of the Compiled Laws of Utah 1917. Parley’s Park Silver Mining Co. v. Kerr, 130 U. S. 256, 261, 9 S. Ct. 511, 32 L. Ed. 906; Glasmann v. O’Donnell, 6 Utah, 446, 450, 24 P. 537. It was not an ordinary action in personam, but was in the nature of a suit in rem, and sought a decree declaring the title to the property. The rule governing as to suits of this nature was stated by this court in Zimmerman v. So Relle, 80 F. 417, 420, 25 C. C. A. 518, 521, as follows:

“But when, as in the ease at bar, two suits in chancery are pending between the same parties, the one in a state and the other in a federal court, the object of both suits being to quiet the title to the same tract of land, that court which first acquires jurisdiction by the issue and service of process must be allowed to proceed with the hearing apd determination of the ease; and, so long as the first suit remains pending and undetermined, the action of the court in which it is pending should not be embarrassed by proceedings- taken..or orders made in the ease which was last brought.”

And substantially the same rule was announced in Dennision Brick & Tile Co. v. Chicago Trust Co. (C. C. A.) 286 F. 818, 820. See, also, 6 Pom. Eq. Jur. § 743.

Appellants also claim that.the suits do not involve the same specific property and are not between the same parties. For the purpose of the discussion of this claim, it may be conceded that the original suit in the state court involved only the personal claim of Klemm to the property stated, and not any rights that he possessed as an agent or trustee for others; but the Development Company on July 1, 1922, filed an answer and petition of intervention in that case, wherein it denied the ownership and pos-, session of the Salina Company and set forth in detail its claim to the property, asserting that Klemm had been the intervener’s agent in making the contracts for the’ purchase of the property, and that the intervener was the real party in interest. It further alleged that Lehman had also acted as an agent and trustee for the intervener, in consummating the purchase and conveyance of the land, but had acted in breach of his agency and trust in taking title to himself, and in organizing the Salina Company, and conveying the property to it, as well as in obtaining appropriations of water rights for use in connection with this property.

• The intervener averred that all the rights claimed by the Salina Company in the lands and in the water rights in fact belonged to the intervener, and prayed permission to intervene and to remove the case to the United States Court. By thus assuming in that case the defense of the agent, Klemm, and especially by an answer alleging its relationship to Klemm and to Lehman and the Salina Company, it became a party to that case. Lovejoy v. Murray, 3 Wall. 1, 18, 18 L. Ed. 129; Plumb v. Goodnow, 123 U. S. 560, 561, 8 S. Ct. 216, 31 L. Ed. 268; Souffront v. Compagnie Des Sucreries, 217 U. S. 475, 487, 30 S. Ct. 608, 54 L. Ed. 846; Cushman v. Warren-Scharf Asphalt Paving Co., 220 F. 857, 860, 135 C. C. A. 289.

It is true that the Development Company had filed a suit in the United States court on June 12, 1922, after the suit had been filed in the state court, and before it filed its answer and petition in intervention; but the record does not show anything of this bill, except the names of the parties-the number of the ease, 6792, the date of its filing, and a portion of the first paragraph, reading as follows: “Your petitioners respectfully allege and show to the court as follows, to wit.' * * * ” The amendment thereto, filed on June 14, is also limited to the title, and to three paragraphs, Nos. 20, 21, and 22, stating the citi- ' zenship of the parties and the amount in controversy. It was again amended on August 12, 1922, but only the title, the introductory address, and the paragraphs as to the citizenship and the amount in controversy are in the record. The stipulation and order for consolidation of the cases recite that “the parties, subject-matter, and issues to be tried in the two above-entitled actions now pending in this court are substantially the same throughout”; but what the claim of the appellants was, or what re-lief was asked for on the part of the appellants, or what, if any, property was involved at that time, as shown by the pleadings, does not appear from the record. The last amended bill on behalf of the appellants, filed on November 25, 1922, is contained in the record in this court. This bill asserts, at length, the relations existing between the plaintiffs therein and Klemm and Lehman and the Salina Company, whereby it claimed that the property was held by the Salina Company wrongfully and in trust for the Development Company, and it prayed for a decree declaring the trust and ordering a conveyance to the Development Company. The allegations of this amended bill are generally similar to the allegations of the answer and petition in intervention that had been filed in the state court.

The question of priority between the two suits, as between the Development Company and the Salina Company, cannot be determined, except by a comparison of the original bill filed in the United States court with the answer and petition of intervention filed in the state court and the original bill filed in the state court. If the Development Company submitted itself to the jurisdiction of the state court by that answer and petition in intervention, before it had invoked, the jurisdiction of the United States court over the res involved, then the United States court should have deferred final action in the ease as to these issues until the action of the state court. We are unable to determine from the last amended bill of appellants, or from other portions of the record, what was alleged in the original bill filed in the United States court before the answer was filed in the state court. The several amendments and amended bills filed in the United States court may have materially added to or changed the averments of the original bill. Error must appear, and cannot be presumed, and therefore the decision of the trial court that the issues involved in the state court wore so much the same as those in the United States court that the trial should not proceed in the latter court is not shown to be erroneous by anything appearing in the record, so far as the issues made between the Development Company an'd the Salina Company are concerned. ’

The last amended bill in the United States court, as has been stated, joined the Boston Acme Mines Corporation as a party plaintiff and joined Lehman and the Mattssons as defendants. None of these parties were parties to the original bill in the state court. The bill claims that the Boston Acme Mines Corporation was a parent corporation to the Development Company and the latter was a subsidiary; that the former held the stock control of the latter and provided it with working capital; and that the stock of the Development Company represented all of the property of the Mines Corporation in Utah. It is alleged that Lehman was a stockholder in the Boston Acme Mines Corporation, and made agreements with it to advance and to loan funds to it, to be used on behalf of the Development Company in acquiring the property involved in this ease, and to act on behalf of the Development Company in completing the acquisition of the property from the Mattssons, and that the Boston Acme Mines Corporation advanced money to him for this purpose; that Lehman failed to execute his trust or to account for the money advanced to him. The prayer asks that the defendants be declared to hold the property in trust for the plaintiffs, but that it be ordered conveyed to the Development Company and for general relief.

Before making the order of dismissal the court inquired of complainant's counsel if he sought a personal judgment, and the counsel replied that the object of the bill was a decree that would operate as declaring a resulting or constructive trust in the Salina Company as trustee of this property, which it should be required to execute by making a conveyance to the Development Company. It may not have been the intention of the plaintiff, the Boston Acme Mines Corporation, to forego, by reason of this statement, any right to claim a personal judgment against Lehman. In view of the fact that no suit in the state court prevented the exercise of jurisdiction to proceed in this ease as to the issues between the Boston Acme Minos Corporation or the Boston Acme Mines Development Company, as a plaintiff, and Lehman and the Mattssons, we think the Suit should not have been dismissed or stayed as to such plaintiff and defendants, if the parties wished to proceed with the suit on these issues. Nor was the issue between appellants and Klemm involved in the suit in the state court. If appellants desired to proceed as against Klemm, they should have been allowed to procure a determination of the issues, if any, between themselves and him. Likewise the order of dismissal, as to the Salina Company, was erroneous, as the order should have gone no further than to have granted stay of - further proceedings until the suit in the state court was concluded, or that court had relinquished dominion over the suit or ample time had elapsed for a determination there. Zimmermann v. So Relle, 80 F. 417, 420, 25 C. C. A. 518; Mound City Co. v. Castleman, 187 F. 921, 927, 110 C. C. A. 55; Bunker Hill & Sullivan Min. & C. Co. v. Shoshone Min. Co., 109 F. 504, 508, 47 C. C. A. 200.

The decree of the trial court will be modified, without costs to either party, so that the order of dismissal will be set aside, with directions to the court to proceed, if the parties shall be so advised, with the trial of the issues between the Boston Acme Mines Corporation and the Boston Acme Mines Development Company, as plaintiffs, and the defendants B. M. Lehman, Carl A. Mattsson, Nora Mattsson, Banard E. Matts-son, Maude Mattsson, and Emil J. Klemm, and to stay further action on the issues between the plaintiff the Boston Mines Development Company and Salina Canyon Coal Company, as already indicated in this opinion.

1 Comp. St. £ 1010.