Baltimore & Ohio Railroad v. Flaherty

Per Curiam. A majority of-the Judges who heard the argument of this case are of opinion that the order appealed against should be reversed, and that the petition of the appellee should be dismissed. We are of that opinion for two reasons : First. Because the Circuit Court of Baltimore City did not heretofore assume jurisdiction and control over the whole fund mentioned in the proceedings, but only over that portion thereof which belonged to the non-assigning members of the extinct Relief Association ; the other part of the ¹⁰⁵ fund, assigned to the Railroad Company, and held by it in trust for the relief department, having been alluded to in the consolidated cases merely for the purpose of ascertaining the amount or proportion of the entire fund distributable to the non-assigning members.

And, secondly, because the assets of the Baltimore and Ohio Railroad Company having gone into the hands of receivers appointed by the United States Court, the petitioner, if he has any standing whatever to claim the relief prayed for, must seek that relief in the tribunal that now has jurisdiction over the a'ssets of the Railroad Company, >and, of course, therefore, over the funds held or due by the company,.as trustee, to its. relief department. An opinion giving at length our reasons in support of these conclusions will be filed hereafter. (June 24, 1897). Roberts, J., delivered the opinion of the Court.

From the views which we entertain of the various questions arising on this appeal and the conclusions to which we have arrived and heretofore indicated in th& per curiam opinion filed, it will not be necessary for us to do more than state briefly the reasons which have controlled us in arriving at the result announced. This Court has heretofore on three different occasions been called upon to consider and pass upon the conflicting interests and views of the members of the Relief Association and the appellant company. The cases will be found reported in 72 Md. 493 ; 77 Md. 566 , and 79 Md. 442 . This appeal is taken from an order of the Court entered on an intervening petition of the appellee filed in the consolidated cases, directing the appellant company as trustee to pay into Court on or before the 29th of January, 1897, to be deposited to the credit of the case, the sum of $390,273.04, subject to the further order of the Court, &c.

The primary question which this appeal presents is, did the lower Court under the facts and pleadings in this case have the jurisdiction requisite to make the order appealed from ? We have already said that it did not. Without going into a detailed statement of the various ¹⁰⁶ questions which have occupied the attention of this Court in the cases heretofore referred to, we think the Court below erred in assuming that it possessed jurisdiction of the case made by the appellee's petition by virtue and in consequence of the action and course of conduct of the appellant company, in the cases passed upon by this Court. To understand the question brought before us on this appeal, it will be necessary for us to make reference to some of the facts contained in the reported cases relating to this controversy.

In 1888 the charter of the association was repealed. Just prior to this Act going into effect nineteen thousand and two hundred of the twenty thousand three hundred and sixty-five members of the association, in consideration of certain covenants made on the part of the Railroad Company, assigned in due form to the Baltimore and Ohio Railroad Company, in trust for the new relief department organized by it, all their interest in the funds of the Employees’ Relief Association. The obligations undertaken by the Railroad Company are set forth in .its agreement with the Relief Association, dated March the twenty-ninth, 1889 ; and amongst other things it expressly stipulated that if any member should refuse to join the new relief department, the value of his membership and interest in the old association should be ascertained by a competent actuary, and paid in money. Eleven hundred and sixty-five of the members did not make any assignment of their interests, and did not join the new relief department, and so became entitled to the surrender value of their interests in the old association. 79 Md. 444 -5.

Referring to this bill the Court below has said, “ The whole trust created by the agreement of March 29, 1889, was brought before the Court, although it is quite manifest that the occasion for doing so was the fact that some of the members of the old association had refused to become members of the new relief department, and it was necessary to have the aid of the Court in ascertaining their interests.” In the whole trust is included the obligations of the Railroad Company to the ¹⁰⁷ 19,200 members of the old association who had assigned their interests °to the appellant company and become members of the department, and the company’s obligations to the relief department as an unincorporated association, as well as the obligations of the company to the 1,165 members who did not assign and who were named as defendants in the bill. We think it quite clear, from the language of the 6th section of the bill referred to, what the obligations were in the discharge of which the company sought the Court’s aid, and that they were its obligations to the dissenting members, and those only. The jurisdiction of the Court extends only to the rights of the parties before it, and no use of language in the bill can extend the jurisdiction to the relations between the plaintiff and parties not brought into Court under the bill, even though such parties be named as defendants. Here, no defendants are named except the 1,165 non-assigning members, and no process of any kind was ever prayed or issued against the assigning members of the relief department.

This Court has said in Oliver v. Palmer, 1 x G. & J., 448-9, that, “It is a fundamental rule of equitable jurisprudence, to the universality of which the case before us forms not one of the exceptions, that where a bill is filed to affect a fund in which diffei'ent persons have an interest, all the persons interested therein must be made parties, nt finis sit litium, that a multiplicity of actions may be avoided.” Grier, Mills & Co. v. Stoller, 77 Fed. Rep. 1; Scott v. McNeal, 154 U. S. 34, 46 ; Reynolds v. Stockton, 140 U. S. 254 . The appellant contends that the rights and obligations which existed between the appellant company and the 1,165 defendants, whose rights were passed upon in 77 Md. 566 , were not created or determined by the agreement of March 29th, 1889, and had nothing to do with the regulations of the relief department. These rights and obligations arose as between the appellant company and said defendants by reason of the fact that the former had come into possession of the assets of the old association, in which the defend ¹⁰⁸ ants as members of the association had each an equitable interest. It mattered not whether the company’s possession was lawful or unlawful, the simple fact of possession charged it with obligations to said defendants in reference to the property.

But after a careful examination of the record of this appeal and of the appeals heretofore alluded to, we think it very clear that the relief department of the appellant company is an entirely distinct association from the Baltimore and Ohio Employees’ Relief Association and is composed of entirely separate and distinct members and it no where appeal's from the records of the three former appeals, which have been decided by this Court, that the lower Court has at anytime assumed jurisdiction and control over th e whole fund mentioned in the proceedings in this cause, but only over that portion of said fund which belonged to the non-assigning members of the extinct Employees’ Relief Association. The other part of the fund assigned to the appellant company and held in trust for the new relief department having been alluded to in the consolidated cases merely for the purpose of ascertaining the amount or proportion of the entire fund distributable to the non-assigning members. On the 29th of February, 1896, the appellant company passed into the hands of receivers appointed by the Circuit Court of the United States for the District of Maryland. The fourth paragraph of the order of said Court appointing said receivers reads as follows : “ That the said receivers be further fully authorized and instructed to continue the operation as heretofore, of the several features of the relief department of said defendant, in accordance with the regulations adopted by the president and directors of the said defendant for the government of same; to continue to collect, and receive, and to disburse the funds of said department in its several features, as provided by said regulations, and generally to fulfill and discharge all the duties and obligations of said defendant in connection with said reli ef department.” Mr. Smith in his recent work on ReR ¹⁰⁹ eceiverships, sec. 7, p. 23, says,' “The primary and proximate effects that follow the appointment of a receiver are: The property, funds, or whatever maybe the subject-matter of the litigation that come to the hands of the receiver are in custodia legis, and being so, will not be permitted to be interfered with, either by the parties to the suit, strangers to the suit, or other Courts of co-ordinate jurisdiction.” Again the same author says, “ Neither will the Court permit its receiver to be sued or harrassed by litigation without its express permission, to be granted only in exceptional cases for judicious and special reasons.

The Court first obtaining jurisdiction and appointing a receiver retains that jurisdiction, as a rule, for all purposes, settling and adjusting in the same suit, all conflicting interests of whatsoever nature between the parties that grow out of or relate to the subject-matter in controversy.” In Beverley v. Brooke, 4 Gratt. 187 , the Court says, “ By the order of appointment the Court takes the whole subject into its own hands ; and ultimately disposes of all questions, whether legal or equitable, growing out of the proceeding.” To the same effect are Covell v. Heyman, 11 1 U. S. 176 ; Heidritter v. Elizabeth Oil Cloth Co., 112 U. S. 294 ; Leadville Coal Co. v. McCreery, 141 U. S. 475 ; Hyland v. The James Roy, 59 Fed. Rep. 784; Ga. R. Co. v. Atlanta & F. R. Co., 49 Fed. Rep. 608. The State and Federal Government, while they are distinct parts of a complete system, are each supreme within the limits of the authority confided to them ; each government is possessed of a judiciary power commensurate with its own objects and purposes, and partaking of its supreme authority; and the exercise of the judicial power in each is confided to the tribunals of the respective governments, and they can never come in conflict while they exercise only the authority which rightfully belongs to each. These tribunals are invested with the general as well as incidental powers necessary to the complete administratipn of justice.

It is needless to pursue this inquiry further. If there was error in the passage, by the ¹¹⁰ Circuit Court of the United States, of the order appointing the receivers of the appellant company, there were wellrécognized methods by which that error could have been corrected; either by direct application to the Court which passed the order, or by an appeal to the appropriate tribunal to correct the error if any such there was. It is certainly not within the province or jurisdiction of this Court to supervise the conduct of the receivers, or to interfere in any way with the discharge by the Circuit Court of its important functions. That Court has taken jurisdiction in the premises, and the fourth paragraph of its order has clearly outlined its relation to and control over the relief department of the appellant; we fail to recognize any other consequence that could be reasonably expected to follow an affirmance of the order of the lower Court, than loss and disaster to the many whose interests are involved in this controversy.

It follows from what we have said that the order of the lower Court must be reversed with costs: (Decided January 5th, 1898). Order reversed with costs. Bryan, J., dissented and delivered the following opinion: The charter of the Baltimore and Ohio Employees’ Relief Association was repealed by the Act of 1888, chapter 527. It was provided by this Act that it should go into effect on the first day of April, eighteen hundred and eighty-nine.

We have already had before us on three several occasions controversies which have ensued in consequence of the repeal of this enactment. The cases are reported in 72 Maryland, 493 ; 77 Maryland, 566 ; and in 79 Maryland, 442 . The greater portion of the facts which bear on the questions now before us are stated in the opinions which were filed in the cases mentioned. Nevertheless some repetition is unavoidable for the purpose of explaining the present case, and of showing the grounds of the opinion which we have formed, A couple of days before the day appointed for the ex ¹¹¹ piration of the charter of the Relief Association, it made a contract with the Baltimore and Ohio Railroad Company for a conveyance to it of all its property upon certain conditions, and for certain purposes specially and distinctly set forth in the contract.

It was recited in the contract that the Railroad Company had established the relief department under regulations issued by its president, which relief department was intended and was adapted to carry out the purposes and continue the business of the relief savings fund, and the building and pension features respectively of the Relief Association ; and that it was desired to wind up the business of the several features of the Relief Association, and to afford opportunity to the members of the relief feature, the depositor's in the savings fund, and the pensioners of the association to retain and continue the privileges and advantages afforded them respectively in the association by becoming members of the relief feature, depositors in the savings feature, and pensioners respectively in the relief department. And the contract was made to carry into effect the purposes mentioned in these recitals. The railroad covenanted and agreed that the property of the relief feature to be conveyed should be held and applied to the payment of the liabilities of the association in connection with the business of its relief feature, and thereafter for the benefit and advantage of the members of the relief feature of the relief department; and that the property of the pension feature and of the savings fund and. building feature to be conveyed should in like manner be held, and applied to the payment of their proper liabilities, and thereafter for the benefit of the members of said features respectively. And it further covenanted and agreed that if any member of the relief feature of the association should refuse to become a member of the relief department, the value of his membership and interest in the association should be paid to said member in money.

And it further covenanted and agreed that all the property, assets, credits and securities, the conveyance and transfer of which is provided for in this agree ¹¹² ment, should be kept and remain distinct and separate from the property of the company held for its railroad purposes. After the making of this contract the Relief Association transferred to the Railroad Company a large amount of assets. This amount will be a subject of consideration in another part of this opinion. More than nineteen thousand of the members of the Relief Association became members of the relief department, and executed assignments to the Railroad Company of their interest in the assets of the association.

By these assignments they became members of the relief department; and these instruments each contained a clause by which they agreed to be bound by all the regulations of the relief department then in force, and which might thereafter be adopted. There was also in each assignment a clause declaring assent to, and confirmation of, the transfer of the assets made by the Relief Association to the Railroad Company “for the purposes of the like features of the relief department respectively.” Eleven hundred and sixty-five members of the Relief Association declined to join the relief department, and, of course, made no assignment of their interests. In March, eighteen hundred and eighty-nine, Conley filed a bill in equity against the Baltimore and Ohio Railroad Company and the Relief Association ; and soon afterwards another bill in equity was filed by Cannon against the same defendants. Both of these complainants, were non-assigning members of the Relief Association, and the scope and purpose of each suit were the same.

Both bills were filed by the complainants in their own behalf, and also in behalf of all the members and creditors of the Relief Association who might choose to become parties. They both alleged that the assignment made to the Baltimore and Ohio Railroad Company by the Relief Association was ultra vires and void, and they prayed for the appointment of receivers to take charge of the assets of the dissolved corporation and make distribution of them. Shortly afterwards, the Railroad Company filed a bill in equity in the same Court against the Relief Association, and each and every of ¹¹³ the eleven hundred and sixty-five non-assigning members of the said association. The bill set forth the trust created by the contract with the Relief Association, and prayed the Court to take jurisdiction of the matter and direct the complainant in the administration of the trust.

These three cases were consolidated by the order of the Court. After a long litigation the Court passed a decree requiring the .Railroad Company to account with all the members of the Relief Association who were in good standing at the time of its dissolution on March 31st, 1889; and after prescribing the terms of accounting gave the following direction (among others) to the auditors, to-wit: “ They shall audit the amount due all the members when ascertained as above directed, who have assigned their interest in said association to the Baltimore and Ohio Railroad Company, upon proof of said assignment to said Railroad Company in one sum to be held by it for the benefit of the members of the relief feature of the relief department of said company.” An appeal was prayed by the Railroad Company, and this Court in 77 Maryland, 566 , reversed the decree in a particular not connected with the matter now in hand. In due course the auditors made their report, and after having distributed their share of the assets to the non-assigning members, distributed to the Baltimore and Ohio Railroad Company in trust for the benefit of the relief feature of the relief department of said company the sum of $548,399.04, in which sum were included certain securities. This account was duly ratified and confirmed on the fourteenth day of December, 1895.

On the twenty-sixth day of February, 1896, John Flaherty, a member of the relief department, filed a petition praying that the Railroad Company should be required to pay into Court the trust fund distributed to it by order of the Court in trust for the relief department. After hearing in the regular order (answer having been filed, testimony having been taken and argument of counsel having been heard) the Court passed an order requiring the Railroad Company to pay into Court the amount of money embraced in the dis ¹¹⁴ tribution made to it by the auditor’s report. The Railroad •Company has appealed. It has been maintained by the appellant that the Court had no jurisdiction to pass this order.

We shall examine this question. Cannon’s bill was filed in behalf of all the persons interested in this fund who chose to become parties to the suit, and it prayed' the decision of the Court on the responsibilities of the Baltimore and Ohio Railroad Company to all of them. . This Court decided that the case did nbt justify the appointment of a receiver; but it was fully recognized that Cannon had a right to demand an adjustment of the interests of the members of the Relief Association. Conley’s bill does not appear in the transcript of the record, but we are given to understand that it was of similar import with Cannon’s.

The bill of the Baltimore and Ohio Railroad distinctly brought before the Court the rights of all the parties concerned in the affairs of the Relief Association. As has been stated, all these