Hagan v. Central Avenue Dairy, Inc. ( 1950 )

GOODRICH, Circuit Judge.

This case raises the question of the scope of jurisdiction of the United States District Court in an interpleader action.

The Title Insurance and Trust Company was the escrow holder of the sum of $1,750 deposited by Evert L. Hagan on an agreement between himself and Central Avenue Dairy, Inc., an Arizona corporation. Alleging that both Hagan and the Dairy company had made adverse claims against it for the $1,750, the Title Insurance and Trust Company brought in the United States District Court for the Southern District of California an action of inter-pleader as provided in the federal statutes, 28 U.S.C.A. §§ 1335, 1397, 2361, joining the two claimants as defendants in this suit. Service was made upon the Dairy-company in Arizona.¹ It filed no answer and made no appearance in the inter-pleader suit. The District Court awarded the sum to Hagan. Hagan, in the meantime, had filed a cross-claim against Central Dairy asking for money damages and alleging that the claim for them grew out of the same contract which was the subject-matter of the escrow deposit. Central Dairy appeared specially and objected to the assertion of the court’s jurisdiction over it with regard to this cross-claim. The trial court dismissed the cross-claim and Hagan appeals.

The interesting question raised by the appeal is whether the court, which undoubtedly bad jurisdiction of the inter-pleader action under the very terms of the statute, was correct in limiting itself to the disposal of the fund involved in the interpleader suit. Hagan urges that it is a well settled principle of equity that “Equity delights to do justice and that riot by halves.”² He also presses upon us Rule 13(g) of the Federal Rules of Civil Procedure, 28 U.S.C.A., which provides that “A pleading may state as a cross-claim any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counter-claim therein or relating to any property that is the subject matter of the original action. * * * ” Both contentions are plausible. But equity can only do complete justice if it has before it both the party for whom justice is to be done and against whom justice is to be required. Again, the Federal Rule quoted is, we think, one for the conduct of actions, not to provide a substantive rule governing the extent of the jurisdiction of a court. There is no use in talking about how an action is to be conducted unless a court has jurisdiction of the person and competency as to the subj ect-matter.

We think the District Court of California did not have personal jurisdiction over the absent non-consenting Arizona corporation except to the extent of that corporation’s interest in the escrow fund. That the court had jurisdiction that far is clear from the statute. Furthermore, if Congress had so provided, we think there is no reason why process from the United States District Court could not run countrywide. But Congress has not so provided, generally, and a District Court’s power to hear and decide cases involving personal liability of an individual is limited to those served within the state where the court sits.³ The absentee defendant was not personally before the court here. The court could adjudicate rights in the fund, but could affect no other interest of the absentee.

It would be a startling conclusion, we think, to give to Rule 13(g) and the Inter-pleader statute the effect of enlarging the jurisdiction of a court to create rights going beyond those to the fund which is the subject of the interpleader action. Such a construction would go far beyond the situation which called for the Inter-pleader statute in the first place.⁴ Situations of considerable hardship could re-suit. .In this case, for instance, suppose Central Dairy to be a Delaware corporation not engaged in business in California. Is it to be held subject to personal liability in the District Court for California because an interpleader plaintiff says it claims an interest in an escrow fund? That would indeed be going pretty far, and we cannot think that any such result was intended by Congress when it passed the Interpleader statute or the Supreme Court when it promulgated the Federal Rules of Civil Procedure.

The attachment process furnishes a useful analogy here. Attachment is available against a non-resident, absentee defendant if he has goods or rights which are subject to seizure in the state where suit is brought. The judgment against the absentee, assuming due process has been followed, deprives him of his rights in the thing seized. But the adjudication cannot, for want of jurisdiction, create further personal liability against him nor does it act generally as res judicata upon the questions answered in awarding the seized property to the plaintiff.⁵ Attachment is often classified as an action quasi in rem, and the description does no harm so long as it is recognized as a name given to a type of legal proceeding, not an explanation of a result.

Such authority as there is upon the precise point so holds with regard to inter-pleader. , Stitzel-Weller Distillery, Inc. v. Norman, D.C.1941, 39 F.Supp. 182; Eschger, Ghesquirer & Co. v. Morrison, Kekewich & Co., 6 T.L.R. 145 (C.A.1890).⁶

The judgment is affirmed.

1 . Nation-wide service is provided for in interpleader by 28 U.S.C.A. § 2361.

2 . 30 C.J.S., Equity, § 104, page 500.

3 . Rule 4(f), Fed. Rules Civ.Proc., is the most recent articulation of long-standing congressional mandate that process of the federal courts shall bn territorially restricted. It provides that “All process other than a subpoena may bo served anywhere within the territorial limits of the state in which the district court is held and, when a statute of the United States so provides, beyond the territorial limits of that state. * * *” Before the adoption of Rule 4(f), process could issue only within the district in which the court sat. See Mississippi Publishing Co. v. Murphree, 1946, 326 U.S. 438, 06 S.Ct. 242, 90 L.Ed. 185; Munter v. Weil Corset Co., 1923, 261 U.S. 276, 43 S.Ct. 347, 67 L.Ed. 652; Toland v. Sprague, 1838, 12 Pet. 300, 9 L.Ed. 1093.

4 . The first federal interpleader statute, providing for nationwide process, carne after the decision of New York Life Insurance Co. v. Dunlevy, 1916, 241 U.S. 518, 36 S.Ct. 613, 60 L.Ed. 1140, which held that the Constitution precluded adjudication by a state court of the rights of a non-resident claimant who had not been served. Tbe purpose of the Federal Interpleader Act of 1917, 39 Stat. 929, was to provide relief for the vexed stakeholder, and there is no indication that Congress was also concerned with settling whatever other disputes might lie between the claimants in the second stage of the interpleader proceeding. The 1917 statute became by several legislative stages the present Judicial Code Sections 1335, 1397, 2361. See 3 Moore, Federal . Practice 3014-3018 (2d ed. 1948).

5 . Authorities are collected in Goodrich, Conflict of Laws § 71 (3d ed. 1949).

6 . To be distinguished is Bank of Neosho v. Colcord, D.C.1949, 8 F.R.D. 621, in which the claimant against whom a cross-claim was asserted had already appeared to claim the fund deposited by the stakeholder. But the court in that case gave broader scope to Rule 13(g) than we think proper.