St. Louis Sw. Ry. Co. v. United States, 262 U.S. 70 (1923)

Prior to July 1, 1910, claimant entered into a contract with the Post Office Department to carry the mails over a part of its line for the period of four years from that date. Prior to July 1,1911, it entered into a like contract to carry the mails over another part of its lines. These contracts were in form and substance similar to that involved in New York, New Haven & Hartford R. R. Co. v. United States, 258 U. S. 32, and other recent cases? By them the amount of compensation was fixed by a weighing prior to the date of the contract. While the mails [p. 72] were being carried by claimant under these contracts, the parcel post system was established pursuant to the Act of August 24, 1912, c. 389, § 8, 37 Stat. 539, 557-559. From the inauguration of the service, on January 1, 1913, to the end of the contract periods, claimant carried the parcel post together with the other mail. For rendering this service, during the first six months, no additional compensation has been paid claimant. For rendering it during the remainder of the contract periods, claimant received, under later legislation, sums in addition to the compensation provided by the contracts. These sums it deems inadequate. On February 1, 1919, this suit was brought to recover, as reasonable compensation for the service rendered, the several amounts which it insists should have been paid. The Government demurred to the petition. The Court of Claims dismissed it on the ground that there was neither a contract express or implied in fact, nor a law of Congress to support the claims for additional compensation. The case is here on appeal.

The Act of August 24, 1912, provided that the establishment of parcel post zones and postage rates should go into effect January 1, 1913. It increased the weight of fourth class mail matter from four to eleven pounds and the size to seventy-two inches in length and girth. It also authorized further increases of the weight limit, by order of the Postmaster General with the consent of the Interstate Commerce Commission. But that act, while it authorized the Postmaster General to “ readjust the compensation of star route and screen wagon contractors if it should appear that as a result of the parcel post system the weight of the mails handled by them has been materially increased,” made no provision whatsoever for increasing the pay of railroads because of carrying parcel post matter. Act of March 4, 1913, c. 143, 37 Stat. 791, 797, authorized the Postmaster General “ to add to the compensation paid for transportation on railroad routes [p. 73] on and after July 1,1913, for the remainder of the contract terms ” not exceeding five per cent, thereof per annum “ on account of the increased weight of mails resulting from the enactment of ” the parcel post provision of the preceding year. The Postmaster General allowed claimant, under this act on some routes the full five per cent.; on some less; on some nothing additional. But the latter act, also, contained no provision authorizing additional pay to the railroads for carrying parcel post matter from January 1, 1913, to June 30, 1913.

Second. The first six months’ period presents a different situation; but the legal result is the same. There is no claim of an express contract to pay additional compensation; nor is there any basis for a claim on a contract implied in fact. The petitioner alleges that the parcel post matter was radically different in character [p. 74] from the ordinary mails as constituted before January 1, 1913. It may be, that claimant might legally have refused, for this reason, to carry the parcel post mail under then existing contracts; even if additional compensation had been offered. Compare United States v. Utah, Nevada & California Stage Co., 199 U. S. 414; Hunt v. United States, 257 U. S. 125. But the petition contains no allegation' that it refused to perform this extra service, unless the Government would agree to pay additional compensation. The petition contains allegations apparently designed to show that objection to carrying the parcel post matter would have been largely futile;3 but the allegations fall far short of showing a demand that the parcel post matter be eliminated, or a protest against carrying it under the conditions then existing. If the parcel post act, or other legislation, gives a right to compensation, the refusal or failure of the Postmaster General to allow the claim could not, of course, defeat recovery. Compare Campbell v. United States, 107 U. S. 407, 411; [p. 75] United States v. Knox, 128 U. S. 230. But, unless there is such legislation, claimant cannot recover without showing a contract, express or implied in fact to pay the extra compensation. Compare United States n. North American Transportation & Trading Co., 253 XT. S. 330, 335; Sutton v. United States, 256 U. S. 575, 581. No basis for such a contract is afforded by the further allegation that when the Act of 1912 was passed, and when the parcel post system was established, railroads, high officials of the Post Office Department, and members of both houses of Congress, in charge of postal legislation, understood that Congress would provide additional compensation to the railroads.

The legislation makes no provision for additional compensation to the railroads for the period prior to July 1, 1913; and its history makes clear that Congress concluded not to allow any. For some time prior to the passage of the Act of August 24, 1912, there had been much discussion in Congress concerning the pay of railroads for carrying the mail. The carriers urged generally that the pay was inadequate; and there were proposals for increase of compensation. On the part of the public, there was a widespread belief that the railroads were overpaid; and there were proposals to reduce the compensation. When Congress passed the 1912 Act, it was not prepared to decide this controverted question. It, therefore, appointed a special committee to enquire into the subject, and also others, relating to parcel post, and directed the committee to report at the earliest date possible. Meanwhile, the discussion continued in Congress. That the parcel post would result in largely increased weight of mail was repeatedly asserted; but it was insisted that the pay under existing contracts would give the railroads even more compensation than they deserved. The fact was recognized that the appropriation bill enacted March 4, 1913, provided increased pay only for parcel post service [p. 76] rendered after June 30, 1913/ The failure of Congress to make any provision for the preceding six months was not inadvertent. It was the deliberate purpose of Congress not to give the railroads additional pay for carrying the parcel post mail during that period.5

Certiorari to two decrees of the Circuit Court of Appeals, the first, affirming a decree of the District Court for Minnesota appointing general receivers for a Nebraska insurance company; the second, reversing a decree of the District Court for Nebraska which dismissed a bill [p. 79] brought by the receivers for the possession of the company’s property.

“ On such application, or at any time thereafter, such court or judge may, in his discretion, issue an order restraining such company from the transaction of its business, or disposition of its property, records, and effects until the further order of the court. On the return of such order to show cause, and after a full hearing, the [p. 81] court shall either deny the application or direct the department . . . forthwith to take possession of the property, records and effects, and conduct the business of such company, and retain such possession . . . until on application of the department ... or of such company, it shall, after a like hearing, appear to the court that the cause of such order directing the department ... to take possession has been removed, and that the company can properly resume possession of its property, records and effects, and the conduct of the business.”

51826°—23----- 6 [p. 82] rights of action of such company as of the date of the order so directing it to liquidate. . . .”

On May 2, 1921, while the decree of the Nebraska court entered April 12, 1921, was in full force and the Department was in actual possession thereunder of the property in that State, Karatz, a citizen of Minnesota, purporting to sue also on behalf of others similarly situated, filed a bill in equity against the company in the federal court for the District of Minnesota, Fourth Division. No disclosure was made of the proceedings taken against the company in the state court of Nebraska, nor that under its decree the Department was in possession of all the company property in that State, and, at least, of some of its property elsewhere. The bill alleged that the company had been admitted to do business in Minnesota; that through its operation there plaintiff had become an unsecured simple contract creditor to the amount of $2,100; that the company had ceased to do business and was insolvent; that it had assets within that district valued at $20,000; and that there was danger that the property of the company would be wasted. The bill prayed that the amount due plaintiff be ascertained and declared a first lien upon all the assets of the company in Minnesota; that, for the purpose of protecting the general public, creditors and stockholders, receivers be appointed to collect all its assets, wherever situated, and to realize upon and distribute the same; that the company be directed to deliver possession to them of all the [p. 83] 77 Opinion of the Court. ,

On September 6, 1921, the Minnesota receivers filed in the federal court for the District of Nebraska, Omaha [p. 84] Division, a bill in equity (called the Hertz suit) against the company, the Department of Trade and Commerce and others. It charged that there was a conflict of authority between the federal court for Minnesota and the Nebraska state court concerning the administration of the company’s property; that the Department threatened to liquidate the company under the order of the state court entered May 28, 1921; that its rights were limited to the temporary possession and listing of the property authorized by the order of April 12, 1921; and that it had no longer any right to the possession or control of the property either for the administration of the affairs of the company under direction of the state court or otherwise. The bill prayed that defendants be restrained from interfering with the Minnesota receiver’s possession and control; that they be directed to surrender possession to plaintiffs; and for other relief. A motion of defendants to dismiss the bill for want of jurisdiction and for want of equity was granted; and the receivers appealed to the Circuit Court of Appeals.

Meanwhile the Karatz case had proceeded to final hearing. On August 11, 1921, a decree was entered adjudicating Karatz’s claim for $2,100; making permanent the appointment of the receivers and continuing their powers to administer the property of the company; and perpetually enjoining it from interfering with the receiver’s control. The company appealed to the Circuit Court of Appeals. That court then heard together appeals in the two cases. On April 28, 1922, it rendered the opinions, 280 Fed. 532, 540, by which, in the Minnesota case, it affirmed the order appointing receivers; 2 [p. 85] and in the Nebraska case, reversed the decree dismissing the bill. The decree in the latter was later enlarged by directing the district court to reinstate the bill, and to restrain the Department, the company and their employees: “ from removing, secreting or disposing of the moneys, books, papers, records, assets, property, accounts or choses in action, of or derived from the Lion Bonding and Surety Company, and from doing any other act in relation thereto, except to hold the custody thereof subject to the further order of the United States District Court for the District of Minnesota, Fourth Division.”3 The decrees of the Circuit Court of Appeals in both cases must be reversed.

The only ground of jurisdiction alleged is diversity of citizenship. The facts specifically stated show that the amount in controversy was less than $3,000. Plaintiff’s claim against the company was $2,100. He prayed that this debt be declared a first lien on the assets within the State. His only interest was to have that debt paid. The amount of the corporation’s assets, either within or without the State, is of no legal significance in this connection. Nor is the amount of its debts to others. The case is not of that class where the amount in controversy [p. 86] is measured by the value of the property involved in the litigation. Hunt v. New York Cotton Exchange, 205 U. S. 322, 335; Western & Atlantic R. R. Co. v. Railroad Commission of Georgia, 261 U. S. 264. Nor is it like those cases in which several plaintiffs, having a common undivided interest, unite to enforce a single title or right, and in which it is enough that their interests collectively equal the jurisdictional amount. Troy Bank v. G. A. Whitehead & Co., 222 U. S. 39, 41. In the case at bar, if several creditors of the company, each with a debt less than $3,000, had joined as plaintiffs, the demands could not have been aggregated in order to confer jurisdiction. Rogers v. Hennepin County, 239 U. S. 621; Scott v. Frazier, 253 U. S. 243. Nor can Karatz’s allegation that he sued on behalf of others similarly situated help him. Compare Title Guaranty Co. v. Allen, 240 U. S. 136; Eberhard v. Northwestern Mutual Life Ins. Co., 241 Fed. 353, 356.4 Since the bill in this case discloses that the amount in controversy was less than the jurisdictional amount, the general allegation that it exceeds this amount is, therefore, of no avail. Vance v. W. A. Vandercook Co. (No. 2), 170 U. S. 468.

Where a court of competent jurisdiction has, by appropriate proceedings, taken property into its possession through its officers, the property is thereby withdrawn [p. 89] from the jurisdiction of all other courts. Wabash R. R. Co. v. Adelbert College, 208 U. S. 38, 54. Compare Oklahoma v. Texas, 258 U. S. 574, 581. Possession of the res disables other courts of coordinate jurisdiction from exercising any power over it. Farmers’ Loan & Trust Co. v. Lake Street Elevated R. R. Co., 177 U. S. 51, 61. The court which first acquired jurisdiction through possession of the property is vested, while it holds possession, with the power to hear and determine all controversies relating thereto. It has the right, while continuing to exercise its prior jurisdiction, to determine for itself how far it will permit any other court to interfere with such possession and jurisdiction. Palmer v. Texas, 212 U. S. 118, 126,129.

This contention is opposed to the settled principles which govern the relations of courts of concurrent jurisdiction. It is inconsistent, also, with § 265 of the Judicial Code, which prohibits courts of the United States from [p. 90] staying proceedings in courts of a State. Essanay Film Manufacturing Co. v. Kane, 258 U. S. 358. The Nebraska court was confessedly a court of competent jurisdiction. While it was in possession of the res, it entered a supplemental decree directing the Department to liquidate the company. The statute of the State expressly provides for such liquidation. The original petition of April 12, 1921, clearly contemplated it and contained a prayer for general relief. The claim is that the application for liquidation is a new and independent proceeding; and that jurisdiction over the res had terminated before entry of the supplemental decree, although the courts’ possession of the res continued. The claim is groundless. But if the legality of the state court’s action was to be questioned, it could be done only by laying the proper foundation through appropriate proceedings in that court. Covell v. Heyman, 111 U. S. 176, 179; Byers v. McAuley, 149 U. S. 608, 614. Compare Laing v. Rigney, 160 U. S. 531; Metcalf v. Barker, 187 U. S. 165; Pickens v. Roy, 187 U. S. 177; Murphy v. John Hofman Co., 211 U. S. 562, 569. If such action had been taken and relief had been denied there, resort could thep have been had to appellate proceedings. Wiswall v. Sampson, 14 How. 52. But the judgment of the state court, which had possession of the res, could not be set aside by a collateral attack in the federal courts. Mutual Reserve Fund Life Association v. Phelps, 190 U. S. 147, 159, 160. Nor could it be ignored. Shields v. Coleman, 157 U. S. 168. Lower federal courts are not superior to state courts.