When, in pursuance of the jurisdiction conferred by the laws of
the United States, a circuit court of the United States takes
possession of the property of a defendant situated within a state
and proceeds to final decree, determining the rights of all parties
to that property, its decree is not superseded and its jurisdiction
ended by reason of subsequent proceedings in the courts of the
state looking to the administration of that property in accordance
with the laws of the state.
A decree in such case determining the claims of all creditors
and their right to share in the distribution of the property is
final as to all who had notice and knowledge of the
proceedings.
In this case, there were no irregularities in the proceedings
which can be challenged here.
In equity. The case is stated in the opinion.
The facts in this case are these: on February 21, 1883, a suit
was commenced in the Circuit Court of the United States for the
Northern District of Ohio by the Lake Superior Iron
Page 141 U. S. 476
Company and others against Brown, Bonnell & Co., a
corporation having large and extensive iron works. A receiver was
then appointed who took possession of the property of the company,
and such proceedings were thereafter had that in February, 1886, a
decree was entered ascertaining the claims of each creditor who had
appeared and proved his claim, 176 in number, and directing a sale
of the property. From that decree the defendant appealed to this
Court. On the hearing of the appeal, the decree was affirmed,
Brown v. Lake Superior Iron Co., 134 U.
S. 530, and a mandate sent to the court below directing
it to carry the decree into execution. An order of sale was
thereafter issued, and the property sold and purchased by the
present appellees, acting as trustees for all the creditors who
chose to enter into a proposed new corporation, and into such
corporation nearly all the creditors, over 96 percent in amount,
entered. On the coming in of the report of the master, a decree was
entered confirming the sale, 44 F. 539, from which decree these
appellants have taken this appeal. Two of the appellants, the
Leadville Coal Company and Charles S. Worden, claimed to have been
creditors of Brown, Bonnell & Co., and the other two to have
been stockholders in that corporation.
The first contention of appellants is that by proper proceedings
in the Court of Common Pleas of Mahoning County, Ohio, the
corporation defendant, Brown, Bonnell & Co., had been, on July
12, 1889, after the original decree in the circuit court of the
United States, and before the hearing of the appeal by this Court,
judicially dissolved, and one Hallett K. Taylor appointed receiver,
and charged with the statutory duties of holding, managing, and
disposing of all the corporate assets and distributing them among
creditors, and that thereafter the circuit court of the United
States ought not to have proceeded further, but should have turned
the property over to such statutory receiver in order that the
property might be distributed under the direction of the state
court. The argument is that the judicial decree of dissolution of
the corporation, the sole defendant, was equivalent to the death of
an individual defendant, and that all subsequent proceedings
Page 141 U. S. 477
in reference to the disposition of the property and assets of
this deceased defendant must be had according to the laws and in
the courts of the state creating the corporation. It is worthy of
notice that the case in which the decree of dissolution was entered
was not commenced till long after this suit was begun and the
receiver had taken possession of the property; that the receiver
thus appointed by the state court does not himself come into this
Court and ask possession of this property, and also that the state
court, in its decree of dissolution, expressly recognized the
possession of the United States court, and in the following words
declined to interfere therewith:
"But inasmuch as it appears to the court that the estate and
effects of said Brown, Bonnell & Co. are at the present time in
the hands of a receiver appointed by and acting under the orders of
the Circuit Court of the United States for the Northern District of
Ohio, it is ordered that the receiver hereby appointed shall not
interfere with the possession of the receiver appointed by said
federal court of the effects and assets of said corporation."
But we do not care to rest our conclusion on these
circumstances. The circuit court takes its jurisdiction not from
the State of Ohio, but from the United States, and the extent of
its jurisdiction is not determined by the laws of the state, but by
those of the United States. Doubtless, while sitting in the state
as a court of the United States, it accepts and gives effect to the
laws of the state so far as they do not affect its jurisdiction and
the rights of nonresident creditors. It nevertheless exercises
powers independent of the laws of the state, and when, in pursuance
of the jurisdiction conferred by the laws of the United States, it
takes possession of the property of a defendant and proceeds to
final decree, determining the rights of all parties to that
property, its decree is not superseded and its jurisdiction ended
by reason of subsequent proceedings in the courts of the state,
looking to an administration of that property in accordance with
the laws of the state. It would be an anomaly in legal proceedings
if, after a court with full jurisdiction over property in its
possession has finally determined all rights to that property,
subsequent proceedings in a court of another
Page 141 U. S. 478
jurisdiction could annul such decree and disturb all rights once
definitely determined. No such anomaly exists in the relative
jurisdiction of state and federal courts. The latter, having once
acquired full jurisdiction and proceeded to a final determination,
may rightfully proceed still further and to an execution of that
decree, irrespective of any proceedings in the courts of the state.
The first and principal contention of the appellants must therefore
be overruled.
Secondly, it is insisted that the circuit court erred in
refusing to allow a contest of the adjudication of the rights or
creditors made in its final decree, on the subsequently filed
petition of these appellants, and also that it refused to allow the
claim of one of these appellants, who now insists that he is a
creditor and entitled to share in the proceeds of the sale. In the
proceedings anterior to the final decree, it appears that notice
was given to all creditors to prove their claims, and that this
particular creditor had notice of those proceedings, but failed to
make proof of his right. It is now insisted that the decree in
respect to these several claims was merely interlocutory, and that
the matter is open to further and subsequent inquiry. There is no
pretense of want of notice or ignorance of the proceedings, and no
excuse given for failing to litigate all these matters when before
the court prior to the decree. Under such circumstances, we dissent
entirely from the contention that this decree was, as to these
matters, merely an interlocutory order. That decree determined the
rights of all parties interested in the proceeds of this property,
and if any one of these appellants after notice failed to assert
his rights or to challenge the allowances then made by the court,
his rights and challenge were lost. He has had his day in court,
and is concluded by the final decree.
The final contention is that there were certain irregularities
in the sale, and those irregularities are sought to be established
principally by the affidavits of counsel for appellants, based upon
hearsay testimony. So far as such affidavits rest on hearsay
testimony, it is enough to say that they prove nothing, and,
insofar as they refer to other matters, it is also enough to say
that we see no substantial error in the proceedings of
Page 141 U. S. 479
the sale. The defendant is not now contesting the sale, and, so
far as any trifling matters are concerned, it does not lie in the
mouth of these alleged creditors and stockholders to challenge the
regularity of the proceedings. Indeed, we cannot fail to observe
that the main scope and purpose of this appeal seem to be to
relitigate questions fully determined by the final decree appealed
from and affirmed.
We see no error in the record, and the decree of the circuit
court is
Affirmed.
MR. JUSTICE BRADLEY and MR. JUSTICE GRAY did not hear the
argument or take part in the decision of this case.