1. Whether, in a suit involving the possession and control of
property which is the subject of a suit pending in a federal
district court, a state court has given proper effect to the
proceedings and order of the federal court is a federal question
reviewable on appeal. P. 294 U. S.
2. It is an established principle, applicable to both federal
and state courts, that where these courts have concurrent
jurisdiction of suits in rem
or quasi in rem,
court first assuming jurisdiction over the property may maintain
and exercise that jurisdiction to the exclusion of the other. This
is the settled rule with respect to suits in equity for the control
by receivership of the assets of an insolvent corporation . P.
294 U. S.
3. When the two suits have substantially the same purpose and
the jurisdiction of the courts is concurrent, that one whose
jurisdiction is first invoked by the filing of the bill is treated
as in constructive possession of the property and as authorized to
proceed with the cause, at least where process subsequently issues
in due course. P. 294 U.S.
4. The jurisdiction conferred on the federal district courts by
the Constitution and laws of the United States cannot be restricted
by state legislation. P. 294 U. S.
Page 294 U. S. 190
5. Where the object of a suit in a state court is the
liquidation by a State officer of an insolvent domestic insurance
company, and there is no showing that the interests of creditors an
shareholders will not be adequately protected by this procedure,
the case is a proper one for the federal district court, in the
exercise of judicial discretion, to relinquish its jurisdiction,
though previously acquired, in favor of the administration by the
state officer. Pennsylvania v. Williams, ante,
294 U. S. 176
294 U. S.
6. Although the federal district court first acquired
jurisdiction of a suit to liquidate an insolvent insurance
corporation, a state court may properly exercise its jurisdiction
to authorize a state officer to make application to the District
Court to relinquish its jurisdiction in favor of the State
administration. P. 294 U. S.
316 Pa. 1, 173 A. 637, reversed.
Certiorari, 293 U.S. 547, to review a judgment of the Supreme
Court of Pennsylvania which affirmed a decree directing the state
Insurance Commissioner to take possession of and liquidate the
property of an insolvent domestic insurance company. Prior to the
institution of proceedings in the state court, a suit for the
appointment of receivers and for an injunction was filed in the
federal district court, which the state supreme court held was
MR. JUSTICE STONE delivered the opinion of the Court.
This case comes here on certiorari, directed to the Supreme
Court of Pennsylvania, to resolve questions of public importance
growing out of the conflicting claims of the federal district court
and of the Insurance Commissioner
Page 294 U. S. 191
of the Commonwealth of Pennsylvania, to jurisdiction over the
liquidation of the business and affairs of appellant, an insolvent
Pennsylvania insurance corporation.
The case was heard in the state supreme court upon an agreed
statement of facts, deemed "necessary to a determination of the
question involved in the appeal," which was filed in the state
trial court. It purports to outline the substance of proceedings
had in that court and in the federal district court. The question
is stated to be whether the state court, "in view of the prior
pendency of the suit . . . in the federal court, had jurisdiction
to enter the decree from which this appeal is taken." The records
of the pleadings and proceedings in those courts are not included
in the record, and are not before us.
Appellant was organized under the Insurance Company Law of May
17, 1921, P.L. 682. On September 14, 1933, appellant's officers and
directors appeared at a hearing before the Insurance Commissioner
at which the president of the company was ordered to return to it
assets which he had improperly withdrawn from the company, with
consequent serious impairment of its financial condition. On
October 14, 1933, a further hearing was held before the Attorney
General of the state at which it appeared that the company was in
an unsafe and unsound condition.
On November 17, 1933, a shareholder of the insurance company
filed his bill of complaint against the company in the District
Court for Eastern Pennsylvania. At this time, negotiations,
conducted by the Commissioner with the stockholders of the company,
for its rehabilitation were pending. The complaint alleged that the
stockholder was a resident of West Virginia; that the requisite
jurisdictional amount was involved; that officers of the company
had misappropriated and wasted its assets; that
Page 294 U. S. 192
the company was insolvent and in a financially unsafe and
unsound condition. The bill prayed the appointment of receivers,
the liquidation of its property and business, and the usual
injunction. Upon the filing of the bill, subpoena was issued and
was served on the corporation on November 22, 1933.
On December 8, 1933, while the suit in the District Court was
pending, the Attorney General of the state, acting pursuant to §
502 of the Insurance Department Act of May 17, 1921, P.L. 789,
filed a suggestion with the Court of Common Pleas of Dauphin County
alleging that the company was in a financially unsound condition,
that the conduct of its business would be detrimental and hazardous
to its policy-holders, creditors, and the public, that certain
officers of the company had made illegal investments of the funds
of the company and had appropriated to their own use other assets
of the company. He prayed for an order that the defendant show
cause why the business of the company should not be closed, its
charter vacated, and its assets taken into possession of the
Insurance Commissioner for liquidation under his direction, and for
an injunction. On the same day, the Court of Common Pleas granted
the order to show cause and enjoined the company from transacting
any business and from disposing of its property until further order
of the court. The order to show cause was served upon the company
on December 11, 1933.
On December 14, 1933, the company filed an answer in the suit
pending before the federal district court, substantially admitting
the alleged withdrawal of assets and illegal investment and denying
the other allegations of the complaint, and alleging the pendency
of the proceedings in the Court of Common Pleas.
On the same day, the Court of Common Pleas entered a further
order restraining the company and its officers or agents from
transacting any business and from disposing
Page 294 U. S. 193
of its property and restraining all persons other than the
Insurance Commissioner and his agents from taking possession of it.
On the following day, the federal district court entered an order
which recited the pendency of the proceedings in the Court of
Common Pleas and restrained the company and its officers or agents
from permitting anyone to receive or take possession of its
property and enjoining all persons from interfering with it in any
way. On that day, both the last-mentioned restraining order of the
Court of Common Pleas and that of the federal district court were
served on the company.
After further proceedings, the Court of Common Pleas entered its
final decree, March 14, 1934, that the company be dissolved, and
directing the acting Insurance Commissioner to take possession of
and to liquidate the business and property of the casualty company
in accordance with the provisions of the state Insurance Department
Act. No final hearing has been held, and no receiver has been
appointed in the suit pending in the district court, but, because
of the restraining order of that court, the company has refused to
comply with the demand of the Commissioner for the surrender of its
property in conformity with the decree of the state court.
On appeal from the Court of Common Pleas, the state supreme
court treated the case as one involving only a conflict of
jurisdiction between the state court and the federal court. It
viewed the comprehensive statutory scheme of the Commonwealth for
liquidating insurance companies by the Insurance Commissioner as
binding on the company and its shareholder. It therefore thought
that there could be no controversy between them which would be a
proper subject of suit in the federal courts, and that this was
sufficient to preclude the exercise of jurisdiction of the federal
court. It accordingly affirmed the decree. 316 Pa. 1, 173 A.
Page 294 U. S. 194
The state court and the federal court have thus reached an
impasse; each asserts the right to exercise its jurisdiction with
respect to substantially the same subject matter, the liquidation
of the business, and assets of the insolvent corporation; each
asserts its authority to enjoin interference, by the state officer
on the one hand, and by any person except the state officer, on the
other, and each is unable to perform its function without acquiring
possession and control of the property. In the state of the record
before us, we confine our review to the single question of this
conflict of jurisdiction considered and decided by the state
Section 502 of the Insurance Department Act, authorizes the
Commissioner to liquidate an insurance company when its condition
is such that further transaction of its business will be hazardous;
such liquidation is permitted only on an order or decree of the
Court of Common Pleas, granted on application of the Attorney
General of the state. Upon such application, the court is
authorized by § 505 to enjoin the company from transacting any
business and from disposing of its property, and after a hearing to
direct the Insurance Commissioner to take possession of the
property and to liquidate it pursuant to the statute. By §§ 506,
507, the order of the court vests the Commissioner with the title
to the property and supersedes the authority of any receiver
appointed by any other state court.
It is plain that the state court, in the absence of the suit
pending in the district court, would have acquired jurisdiction to
proceed with the cause and to grant the relief sought. But the
question now presented is whether its authority to proceed is
affected by the pendency of the suit in the district court, which
the state supreme court, on the record before it, treated as
exercising a conflicting jurisdiction. The federal question,
reviewable on appeal, is whether the state court has given proper
effect to the
Page 294 U. S. 195
proceedings and the order of the federal court. Buck v.
3 Wall. 334, 70 U. S. 340
Crescent City Live-Stock Co. v. Butchers' Union Slaughter House
Co., 120 U. S. 141
120 U. S. 142
Moran v. Sturges, 154 U. S. 256
154 U. S. 267
Central National Bank v. Stevens, 169 U.
, 169 U. S. 456
Farmers' Loan & Trust Co. v. Lake Street Elevated R.
Co., 177 U. S. 51
Wabash R. Co. v. Adelbert College, 208 U. S.
, 208 U. S. 44
208 U. S.
Where the judgment sought is strictly in personam,
the recovery of money or for an injunction compelling or
restraining action by the defendant, both a state court and a
federal court having concurrent jurisdiction may proceed with the
litigation, at least until judgment is obtained in one court which
may be set up as res adjudicata
in the other. See Buck
v. Colbath, supra,
70 U. S. 342
; Kline v. Burke Construction Co.,
260 U. S. 226
cases cited at pages 260 U. S.
-231. But, if the two suits are in rem
quasi in rem,
requiring that the court or its officer have
possession or control of the property which is the subject of the
suit in order to proceed with the cause and to grant the relief
sought, the jurisdiction of one court must of necessity yield to
that of the other. To avoid unseemly and disastrous conflicts in
the administration of our dual judicial system, See Peck v.
7 How. 612, 48 U. S. 625
20 How. 583, 61 U. S. 595
24 How. 450, 65 U. S. 459
Buck v. Colbath, supra, 70 U. S. 341
Farmers' Loan & Trust Co. v. Lake Street Elevated R. Co.,
supra, 177 U. S. 61
and to protect the judicial processes of the court first assuming
jurisdiction, Wabash R. Co. v. Adelbert College, supra,
208 U. S. 54
Palmer v. Texas, 212 U. S. 118
212 U. S.
-130, the principle, applicable to both federal and
state courts, is established that the court first assuming
jurisdiction over the property may maintain and exercise that
jurisdiction to the exclusion of the other. This is the settled
rule with respect to suits in equity for the control by
receivership of the assets of an insolvent corporation.
Page 294 U. S. 196
Co. v. McCreery, 141 U. S. 475
141 U. S. 477
Porter v. Sabin, 149 U. S. 473
149 U. S. 480
Farmers' Loan & Trust Co. v. Lake Street Elevated R. Co.,
supra; Wabash R. Co. v. Adelbert College, supra; Palmer v. Texas,
supra; Lion Bonding & Surety Co. v. Karatz, 262 U. S.
, 262 U. S. 88
Harkin v. Brundage, 276 U. S. 36
Where the assertion of jurisdiction by the two courts is nearly
simultaneous, it becomes important, as in the present case, to
determine the precise time when the jurisdiction attaches. If the
two suits do not have substantially the same purpose, and thus the
jurisdiction of the two courts may not be said to be strictly
concurrent, and if neither court can act effectively without
acquiring possession and control of the property pendente
the time of acquiring actual possession may perhaps be
the decisive factor. Compare Moran v. Sturges, supra,
154 U. S. 284
Harkin v. Brundage, supra, 276 U. S. 43
But, when the two suits have substantially the same purpose and the
jurisdiction of the courts is concurrent, that one whose
jurisdiction and process are first invoked by the filing of the
bill is treated as in constructive possession of the property and
as authorized to proceed with the cause. Harkin v. Brundage,
supra, 276 U. S. 43
Jurisdiction thus attaches upon the filing of the bill of complaint
in court, at least where process subsequently issues in due course.
Palmer v. Texas, supra, 212 U. S. 129
Farmers' Loan & Trust Co. v. Lake Street Elevated R. Co.,
supra, 177 U. S. 60
Smith Purifier Co. v. McGroarty, 136 U.
, 136 U. S. 240
The confusion and uncertainty are thus avoided which might
otherwise result from the attempt to resolve the troublesome
question of what constitutes actual possession and to determine
priority of service of process in the two suits.
In the present case, there are outstanding injunctions by both
courts restraining any interference with the property in the hands
of the insolvent corporation, and neither the Insurance
Commissioner nor the district court has
Page 294 U. S. 197
taken possession. The suits relate to substantially the same
subject matter. Each sought relief by injunction against creditors,
marshaling and conservation of the corporate assets, and their
liquidation and distribution among the creditors and shareholders.
The jurisdiction invoked by the two suits was concurrent, see
Harkin v. Brundage, supra, 276 U. S. 45
and, since the bill was filed in the district court before the
application of the Attorney General to the state court, the
jurisdiction of the district court first attached; it has asserted
this jurisdiction by its injunction order. Hence, it alone can
rightfully assert control over the property and proceed with
litigation which affects that control, Palmer v. Texas,
supra, 212 U. S.
-130; Wabash R. Co. v. Adelbert College,
supra, 208 U. S. 54
and it alone can determine how far it will permit any other court
to interfere, People's Bank v. Calhoun, 102 U.
, 102 U. S. 262
See Riggs v. Johnson
6 Wall. 166. Its authority as a federal
court to entertain the suit is not restricted by the procedure
established by local statutes for the liquidation of insurance
companies. The jurisdiction conferred on the district courts by the
Constitution and laws of the United States cannot be affected by
state legislation. See
No. 394, Pennsylvania v.
decided this day, ante,
p. 294 U. S. 176
Although the district court has thus acquired jurisdiction, the
end sought by the litigation in the state court is the liquidation
of a domestic insurance company by a state officer. In the absence
of a showing that the interests of creditors and shareholders would
not be adequately protected by this procedure, the case was a
proper one for the district court, in the exercise of judicial
discretion, to relinquish the jurisdiction in favor of the
administration by the state officer. See
Pennsylvania v. Williams et al., supra.
The authority of the Insurance Commissioner to proceed with the
liquidation under state law, it is true, rests on the decree of the
state court entered after the district
Page 294 U. S. 198
court had acquired jurisdiction. But, even though the
jurisdiction of the district court had attached, the state court
was not without power to designate the Insurance Commissioner as
the vehicle of the state authority to control the property whenever
that could lawfully be done. While it is often said that, of two
courts having concurrent jurisdiction in rem,
taking possession acquires exclusive jurisdiction, see Peck v.
Jennes, supra, 48 U. S.
-625; Wabash R. Co. v. Adelbert College,
supra, 208 U. S. 54
Harkin v. Brundage, supra, 276 U. S. 43
is exclusive only so far as its exercise is necessary for the
appropriate control and disposition of the property. The
jurisdiction does not extend beyond the purpose for which it is
allowed -- to enable the court to exercise it appropriately and to
avoid unseemly conflicts. See Leadville Coal Co. v. McCreery,
supra, 141 U. S. 477
The other court does not thereby lose its power to make orders
which do not conflict with the authority of the court having
jurisdiction over the control and disposition of the property.
21 Wall. 276; Heidritter v. Elizabeth
Oil-Cloth Co., 112 U. S. 294
112 U. S. 304
Byers v. McAuley, 149 U. S. 608
it has appointed a receiver, it may and should give him directions
for the surrender of the property to the court having prior
jurisdiction, or it may make suitable orders permitting him to take
possession and proceed with the liquidation when the court having
jurisdiction over the property relinquishes it. See Harkin v.
Brundage, supra, 276 U. S. 57
The confirmation by the Court of Common Pleas of the right of the
Insurance Commissioner to liquidate the company did not infringe
the authority of the district court to make appropriate disposition
of the property. But it did confer on the Commissioner the
requisite authority to ask the district court to relinquish its
jurisdiction in favor of the state administration.
Since the district court had first acquired jurisdiction to
liquidate the property of the insurance company, and
Page 294 U. S. 199
had authority to proceed with the cause for that purpose, the
Supreme Court of the Commonwealth erred in affirming so much of the
decree of the Court of Common Pleas as directed the Insurance
Commissioner to take possession of the business and property of the
company, and so far as it affirmed the order of that court which
enjoined the company from surrendering its books, records, and
assets to any person other than the Commissioner, and enjoined
others from taking possession of them. The decree must accordingly
be reversed, and the cause remanded for further proceedings not
inconsistent with this opinion, but without prejudice to an
application by the Commissioner to the district court for an order
relinquishing its jurisdiction over the property of the company and
vacating its injunction against surrender of it to the Commissioner
for liquidation under the Insurance Department Law of the state.
No. 394, Pennsylvania v. Williams, supra.