MR. JUSTICE BRANDEIS delivered the opinion of the Court.
These two cases arise out of the insolvency of the Lion Bonding and Surety Company, a Nebraska insurance corporation. They are here on writs of certiorari to the United States Circuit Court of Appeals for the Eighth Circuit. In the Karatz case, it affirmed a decree of the federal court for Minnesota which appointed receivers in a suit brought by an unsecured simple contract creditor. See 280 Fed. 532. In the Hertz case, it reversed a decree of the federal court for Nebraska, which dismissed a suit brought by those receivers for possession of the company's property, 280 Fed. 540. At the date of each decree the property of the company in Nebraska was held by the Department of Trade and Commerce of that State, with the usual powers of a receiver, under a decree of a state court. The Circuit Court of Appeals directed, in the Hertz case, that the lower court enjoin the Department from doing any act in relation to the property, except to hold custody thereof subject to the further order of the federal court for Minnesota. Petitioners ask that the judgments of the appellate court be reversed and that the bills in the
The Lion Bonding & Surety Company had for some years prior to 1921 been licensed to conduct the business of insurance in Nebraska; and was doing business and had property also in eighteen other States. A statute of Nebraska commits to its Department of Trade and Commerce the supervision of insurance companies and control thereof in case of insolvency and otherwise. (Compiled Statutes, Nebraska, 1922, §§ 7745-7748.) Nebraska Laws, 1919, c. 190, Title 5, Article III, p. 576-581. Paragraph 1 of § 4 of that act provides:
"Whenever any domestic company is insolvent . . . or is found, after an examination, to be in such condition that its further transaction of business would be hazardous to its policy holders, or to its creditors, or to its stock-holders, or to the public; .. . the department . . . may apply to the district court . . . in the county . . . in which the principal office of such company is located, for an order directing such company to show cause why the department . . . should not take possession of its property, records and effects and conduct or close its business, and for such other relief as the nature of the case and the interest of its policy holders, creditors, stockholders or the public may require."
On April 12, 1921, the Department applied to the District Court of Douglas County, Nebraska, for an order directing it to take possession of the property and to conduct the business of the company, under paragraph 2 of § 4, which provides:
"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
The petition prayed also for an order restraining the company from the transaction of its business or from disposing of any of its property; and for other and further relief. The company immediately filed an answer, by which it admitted the material allegations of the petition, and joined in the prayer thereof. On the same day the state court entered a decree in accordance with the prayer; the Department entered upon the duties prescribed by the decree; it immediately took possession of all the property of the company in Nebraska; has since held possession thereof subject to the orders of the state court; and has also obtained like possession of property of the company in other States. On May 28, 1921, the Department filed, in that court, a supplemental petition, in which it prayed for an order directing it to liquidate the business under paragraph 3 of § 4, which provides:
"If, on a like application and order to show cause, and after a full hearing, the court shall order the liquidation of the business of such company, such liquidation shall be made by and under the direction of the department . . ., which may deal with the property, records, effects and business of such company in the name of the department . . . or in the name of the company, as the court may direct and it shall be vested by operation of law with title to all the property, effects, contracts and
The supplemental petition prayed, among other things, that the orders theretofore made, so far as applicable, and necessary to further the liquidation, remain in full force. The company filed an answer by which it admitted the material allegations contained in the supplemental petition and joined in the prayer thereof. On the same day that court entered an order in accordance with the prayer of the supplemental petition, all action of the Department being made subject to the direction of the court.
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
The Minnesota receivers secured the appointment of themselves as ancillary receivers by the federal courts for twelve other districts, but not for the Nebraska district. On May 11 and May 12, 1921, they filed, in purported compliance with § 56 of the Judicial Code, certified copies of the bill and of the order of appointment with the clerks of the federal district courts for Nebraska and other States in the Eighth Circuit. On May 14, 1921, the company moved the Circuit Court of Appeals under that section for an order of disapproval of the appointment of receivers, so far as it may be operative outside the District of Minnesota. This motion was denied on May 31, 1921.
On September 6, 1921, the Minnesota receivers filed in the federal court for the District of Nebraska, Omaha
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;
The decrees of the Circuit Court of Appeals in both cases must be reversed.
First. In the Karatz case the motion to dismiss the bill should have been granted. There was want of equity; for it was brought by an unsecured simple contract creditor. Pusey & Jones Co. v. Hanssen, 261 U.S. 491. But there was also the fundamental objection that the district court was without jurisdiction as a federal court.
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
As the bill should have been dismissed on motion, there is no occasion to consider whether the provisions of the Nebraska statute and the proceedings taken thereunder in the courts of that State, which the defendant set up, constituted a bar to the Karatz suit.
Hertz and Levin were not appointed ancillary receivers for Nebraska. They sue in the Nebraska district as Minnesota receivers, relying upon § 56 of the Judicial Code. That section, by its terms, applies only, where in a suit "in which a receiver shall be appointed the land or other property of a fixed character, the subject of the suit, lies within different States in the same judicial circuit." It relates to those cases where the fixed property is a unit, extending into several States, like interstate railroads and pipe lines.
Moreover, even if the federal court for Minnesota would have had jurisdiction to appoint the receivers, and these receivers had secured ancillary appointment in the Nebraska district, the Hertz bill should still have been dismissed; because the property was then in the possession of the state court. What the federal court undertook to do was not to adjudicate rights in personam (as the state court did in Kline v. Burke Construction Co., 260 U.S. 226), but to take the res out of the possession and control of the state court, and to enjoin all action on its part, except as directed by the federal court for Minnesota. It sought to do this, although the state court alone had jurisdiction of the parties and of the subject-matter, at the time when the proceeding before it was begun; at the time its decree directing the Department to take possession was entered; and at the time possession was taken thereunder. Moreover, the proceeding in the state court was confessedly an appropriate one; the possession taken was actual; and it has been continuous. All this occurred before any suit was begun in any federal court. The federal court did not seek to gain possession and control of the Nebraska property until three months after entry of the decree of the state court directing the Department (which had possession of the res) to proceed with the liquidation. The case is, thus, free of those features which sometimes create difficulty in determining conflicts between courts of concurrent jurisdiction.
Where a court of competent jurisdiction has, by appropriate proceedings, taken property into its possession through its officers, the property is thereby withdrawn
The assertion of control by the federal courts over property in the possession of the state court, is sought to be justified on the following ground: The possession taken by the Department under the state court's decree of April 12, 1921, was only for a temporary purpose; namely, to conduct the business until the company could properly resume the conduct thereof. True, the supplemental decree entered by the state court on May 28, 1921, directed the Department to liquidate the business as provided in the statute. But, meanwhile, on May 2, 1921, suit had been brought by Karatz in the federal court for Minnesota; and it had obtained jurisdiction over the company's assets by its appointment ex parte of receivers. So, the court says, 280 Fed. 542, "its right to the possession by its receivers is superior to that of the state court. It follows that the receivers appointed by it are entitled to the possession of the company's records and assets as against the Department of Trade and Commerce."
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