1. Upon an appeal to this Court from a decree of the district
court dismissing a petition for want of ancillary jurisdiction, the
equity of the petition, and questions whether it should be denied
because of acquiescence or laches, are not open. P.
270 U. S.
115.
2. As ancillary to a decree of railway foreclosure, by which the
purchaser of the property was allowed a fixed time in which to
elect not to assume outstanding leases and contracts, and which
reserved for future adjudication all questions not disposed of, and
permitted all parties, including the purchaser, to apply to the
court for further relief at the foot of the decree, the district
court had jurisdiction, irrespective of citizenship, over a
petition of the purchaser seeking to be relieved of agreements made
by its predecessors with a terminal company, upon the ground that
the purchaser's failure to relieve itself of them by a valid
election was due to a mistake. P.
270 U. S.
115.
3. A delay of two years in filing such petition is not a reason
for dismissing it for want of jurisdiction. P.
270 U. S.
114.
Reversed.
jurisdictional appeals from decrees of the district court
dismissing ancillary petitions.
See 279 F. 356.
Page 270 U. S. 110
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
These are appeals under ยง 238 of the Judicial Code, allowed
February 18, 1925, in two cases between the same parties from
identical decrees of the District Court for the Southern District
of Ohio. By agreement, they are to be treated in every respect as
one. The certificate of the district court is that the petition as
amended
"does not show the existence of the requisite diversity of
citizenship, nor the existence of a federal question, and that this
Court, not having found the said petition to be ancillary to any
prior suit, but having found the said petition to be original, did
thereupon dismiss the same upon the sole ground of want of
jurisdiction."
The question of jurisdiction is whether a petition by the
purchasing company at a railway foreclosure sale, in seeking to
Page 270 U. S. 111
reform, because of mistake, its contract of purchase in imposing
upon it liability for rentals under a terminal facilities contract,
is a suit ancillary to the original foreclosure suit, so that
jurisdiction exists in the federal district court to hear it
without regard to the citizenship of the necessary parties to the
petition.
The two original foreclosure suits were brought, one by the
Equitable Trust Company of New York and Elias J. Jacoby as
trustees, against the Cincinnati, Indianapolis & Western
Railway Company, and the other by the Central Trust Company of New
York and Mason, trustees, against the same railway company. There
was the necessary diversity of citizenship in each case, and the
appellant in this present suit, the Cincinnati Indianapolis &
Western Railway Company, is a newly organized company, the assignee
of the purchaser at the foreclosure sales of the whole railroad
property covered by all the mortgages foreclosed. It became a party
to each cause as such assignee, as permitted in the decree of
foreclosure in each case, and it will be hereafter called the
purchasing company.
The Indiana, Decatur & Western Railway Company owned the
part of the railway from Indianapolis to Springfield, Illinois. The
Cincinnati, Hamilton & Indianapolis Railway Company owned the
part from Indianapolis to the East. In 1902, they were merged into
a corporation called the Cincinnati, Indianapolis & Western
Railway Company, which gave a first refunding mortgage upon the two
properties. It was expected that the bonds secured by this mortgage
would be used in refunding two underlying mortgages on the eastern
part, and a single underlying mortgage on the western part. The
refunding was not completed, and the two foreclosure suits already
referred to were filed at the same time in the same court, so that,
by an identical decree in each case, the purchaser was enabled to
acquire title to the consolidated
Page 270 U. S. 112
railway free from the liens of the four mortgages. The decree of
foreclosure in each case contained a provision giving the purchaser
under the foreclosure sale, and his successors or assigns, the
right for a period of 30 days after the delivery of the master's
deed to elect
"whether or not to assume or adopt any lease or contract made by
the defendant consolidated company, or its predecessors in title,
and such purchaser, his successors or assigns, shall be held not to
have adopted or assumed any such lease or contract in respect of
which he or they shall have filed a written election not to assume
or adopt the same with the clerk of this Court within the said
period of thirty days."
Within the thirty days, the purchasing company filed in the two
foreclosure cases what it called an election
"not to assume or adopt the contract dated September 20, 1883,
and the amendment of August 20, 1906, under which the tracks of the
Union Railway Company are occupied in Indianapolis insofar as such
rights are conferred by the signature of the Indianapolis, Decatur
& Springfield Railway Company to said contract. This assignee
hereby expressly accepts such contract as made with the Cincinnati,
Hamilton & Indianapolis Railroad Company, and desires to accept
the benefits of the contract with said company, and the right to
occupy the tracks of the Union Railway Company and the Indianapolis
Belt Railway Company therein conferred."
The Indianapolis Union Railway Company is a company engaged in
operating a union railway depot and union railway tracks for the
use of several railroads entering that city, its properties having
been owned by five so-called proprietary companies and conveyed by
them to it. It had acquired a perpetual lease of a belt line.
September 20, 1883, an agreement was made between the Union Railway
Company and five proprietary companies by which each of the
companies, in the use of the terminals,
Page 270 U. S. 113
became liable for a fixed rental which was to be paid by each
company whether the terminal was used or not. Then there were
admitted seven nonproprietary companies to the joint use of the
Belt Railway and Union Railway Company property under the same
agreement as to a fixed rental, in addition to which there was to
be a payment in proportion to the use on the basis of wheelage. At
this time, the Indianapolis, Decatur & Springfield Railway
Company owned the part of the railroad here in question west of
Indianapolis, and it bound itself for one-thirteenth of the rental,
and the Cincinnati, Hamilton & Indianapolis Railroad Company,
owning the other part of the railroad here in question east of
Indianapolis, became bound for another one-thirteenth of the
rental. In 1902, the two companies were united under the name of
the Cincinnati, Indianapolis & Western Railroad Company, and
from that time until the foreclosure in 1915, the united company
paid two-thirteenths of the rentals. When, however, the decrees
were made in the foreclosure of the two parts of the railway, the
purchasing company, the appellant here, sought to reduce its rental
from two-thirteenths to one-thirteenth by electing to take the
contract for rental of its predecessor in title of the eastern part
of the united railway, and to refuse to elect to take the contract
of rental of its predecessor in title for the western part of the
railway, and, having filed such an election, it declined to pay
more than one-thirteenth of the rental.
There then intervened in the original foreclosure suits the
Indianapolis Union Railway Company and the then proprietary parties
to the terminal agreement by petitions asking that the purchasing
company show cause why it should not be ordered to make payment to
the Indianapolis Union Company of the full amount that would have
been payable to that company by the Cincinnati,
Page 270 U. S. 114
Indianapolis & Western Railway Company, the defendant in the
foreclosure in both suits. Jurisdiction was taken of this petition,
and the district court held that the so-called election was
unauthorized and improper, and that the purchasing company, for
failure to elect to reject the contracts entirely, was responsible
for two-thirteenths of the total rentals. This controversy was
carried to the Circuit Court of Appeals for the Sixth Circuit,
which affirmed the district court.
Cincinnati, I. & W. R.
Co. v. Indianapolis Union Railroad Co., 279 F. 356.
The order of the circuit court of appeals was made in 1922. In
1924, the present intervening petition was filed by appellant as
purchaser against the Indianapolis Union Railway Company and the
proprietary companies, which had been parties to the preceding
controversy. In this the petitioner, the present appellant, sought
to have the court relieve it from the effect of its so-called
ineffective election by which it made itself responsible according
to the decree of the circuit court of appeals for two-thirteenths,
on the ground of its mistake in not electing to reject the whole
contract for use of the terminals. On the hearing of the petition,
to which the Indianapolis Union Railway Company and the other
defendants filed answers, the district court held that the delay of
two years between the coming down of the decree from the circuit
court of appeals in 1922 until 1924, when the petition was filed,
was a delay constituting acquiescence which would prevent the
consideration of the petition. The petitioner then filed an
amendment to its petition in which it set out reasons thought by it
to justify the delay, including a statement that attempts had been
made to secure relief by a personal negotiation with the interested
parties to whom it had indicated from the first that it did not
intend to acquiesce in an obligation to pay the rentals. The
district court, conceiving that, by reason of the delay of two
years, such relief as the petitioners
Page 270 U. S. 115
sought must be obtained by an independent suit, and not by an
ancillary proceeding, held that there being no diversity of
citizenship or federal question to justify jurisdiction, the
petition must be dismissed.
The sufficiency of the petition in equity is not for us to
consider. We have here only the question of jurisdiction. On that
issue, we think the district court was in error. The present
proceeding deals with the effect of the decree upon which the
petitioner became the owner of the property. The previous
litigation between the parties to this petition as to the effect of
the attempted election, in which the petitioner was defeated,
involved a construction of the decree of sale and the purchaser's
action under it in the foreclosure proceedings. That decree
provided that
"all questions not hereby disposed of are reserved for future
adjudication. Any party to this cause may at any time apply to this
Court for further relief at the foot of this decree."
It also provided "that the purchaser had the right to enter
appearance in this Court and to become a party to this cause," and
it made itself a party under that order. The circuit court of
appeals, in its opinion in the case already cited, said:
"Notwithstanding the property had passed from the possession of
the court, appellant [that is, petitioner], as the purchaser, would
have an undoubted right to apply to the court for relief respecting
the controversy over its right of election under the sale."
At the instance of the defendants here, the purchaser was held
by its so-called election to be bound to the two contracts, and,
having been thus defeated, it seeks the equitable intervention of
the court, on the ground of mistake, to secure relief from this
adjudicated effect of its unsuccessful attempt at election.
Assuming that it has a right to seek such a remedy (and we must do
so in this hearing), we do not see why it may not obtain that
relief in the same forum by ancillary proceeding in the original
suit in foreclosure in which it was held to have bound
Page 270 U. S. 116
itself by its purchase and ineffective election. It may be that
equity will not give it relief from mistake under the
circumstances. It may be that it has acquiesced, and may be denied
relief on that account. It may be that it has been guilty of
laches. But these are questions on the merits. We cannot see that
they affect the jurisdiction of the court to consider the issue
thus raised.
The present proceeding is only another phase of the same
litigation, carried on as ancillary to the foreclosure suit, in
which the purchasing company was found to be bound by its purchase
to pay two-thirteenths of the rentals to the Indianapolis Union
Railway. The purchaser seeks to recur to the circumstances under
which it attempted to accept liability to pay one-thirteenth of the
rental and to reject the other one-thirteenth. It says that, as the
circuit court of appeals has held that its attempted election was
invalid and ineffective for the purpose, it should have equitable
relief from the oppressive obligation to pay two-thirteenths on the
ground of its mistake, and be permitted to make an election which
will relieve it from the contract to pay any rental at all, as it
might have done when it became the purchaser. Such a proceeding is
certainly ancillary to the enforcement of the decree of sale and
the contract of purchase.
Rosenbaum v. Council Bluffs Insurance
Co., 37 F. 724;
Bradshaw v. Miners' Bank of Joplin,
81 F. 902. Clearly it is a natural and closely proximate sequence
of the sale by the court, and requires the interpretation of its
decree and the attempted election of the purchaser under it, and
the consideration of its effort to correct the alleged inequitable
result.
"A purchaser or bidder at a master's sale in chancery subjects
himself
quoad hoc to the jurisdiction of the court, and
can be compelled to perform his agreement specifically. It would
seem that he must acquire a corresponding right to appear and claim
at the hands of the court, such relief as the rules of equity
proceedings entitle him to."
Blossom v. Railroad
Co.,
Page 270 U. S. 117
1 Wall. 655,
68 U. S. 656.
It is well settled that, where a bill in equity is necessary to
have a construction of an order or decree of a federal court, or to
explain, enforce, or correct it, a bill of this kind may be
entertained by the court entering the decree even though the
parties interested for want of diverse citizenship could not be
entitled by original bill in the federal court to have the matter
there litigated.
Julian v. Central Trust Co., 193 U. S.
93,
193 U. S. 113;
Minnesota Co. v. St. Paul
Co., 2 Wall. 609,
69 U. S. 633;
Wabash Railroad v. Adelbert College, 208 U. S.
38;
Hoffman v. McClelland, 264 U.
S. 552.
The district court had jurisdiction, and the decree dismissing
the petition should be reversed.