MR. JUSTICE BRANDEIS delivered the opinion of the Court.
This case is here on certiorari to the United States Circuit Court of Appeals for the Sixth Circuit. Whether the injunction granted in this cause by the federal court for northern Ohio stays a judgment of ouster rendered by the Court of Appeals of the State in violation of Judicial Code § 265 is the main question requiring decision.
In May, 1925, The Ohio Electric Power Company acquired the electric light and heating system then serving
In May, 1926, the State brought, in the Court of Appeals of Ohio, at the relation of the prosecuting attorney for Huron County, an action in quo warranto against the Power Company to oust it from such use of the streets, alleys and public places. That court, holding that the franchise granted had expired, entered a judgment of ouster, State ex rel. Martin v. Ohio Electric Power Co., 35 Ohio App. 481; 172 N.E. 615; and the judgment was affirmed by the Supreme Court of the State. Ohio Electric Power Co. v. State ex rel. Martin, 121 Ohio St. 235; 167 N.E. 877. The action had been instituted at the request, and had been prosecuted with the aid, of the City; but it was not a party thereto. The mortgage given by the Power Company and the bonds thereby secured were then (and still are) outstanding. But the State did not make the trustee a party respondent; and the trustee did not intervene, or seek to intervene, in the action. Neither the State nor the Power Company made mention of the existence of the mortgage either in its pleadings
Before any step had been taken by the State to enforce the judgment of ouster, the then trustee under the mortgage deed of trust, a citizen and resident of New York, brought this suit in the federal district court for northern Ohio. The Chase National Bank, likewise a citizen and resident of New York, has since been substituted as trustee and plaintiff. The City of Norwalk alone was made defendant. The bill set forth in addition to the facts stated above, that the plaintiff as such trustee is entitled to the continued use of the poles, wires and electrical equipment by the Power Company; that the judgment of ouster has not yet been executed; that the Power Company is still serving the Norwalk public; that the City is threatening to destroy, or forcibly remove, the poles, wires and equipment from the streets, alleys, and public places and to prevent the operation of the system or to seek to have enforced the judgment of ouster; and that such acts would result in irreparable injury to the plaintiff.
The District Court held that the plaintiff has as mortgagee a good and valid lien upon the poles, wires and electrical equipment, and the rights and franchises to use the streets, alleys and public places therefor; that "for the purpose of protecting, preserving and enforcing the lien of the mortgage" the Power Company "is and was at the time of the filing of the bill of complaint herein the owner"; that these rights were granted "in perpetuity as against any right or power of the City of Norwalk with reference thereto . . ."; and that the "franchises, rights and physical properties will be destroyed and rendered worthless" unless a permanent injunction issues. The decree enjoined the City, its officers, agents and employees, "and all persons whomsoever to whom notice of this order shall come," from destroying, or interfering with the continued
The Circuit Court of Appeals did not pass upon the question whether the plaintiff has, as mortgagee, an interest in or lien upon the alleged property and rights; nor upon the question whether the Power Company retains for the protection of the mortgagee, an existing right to use the streets, alleys and public places as claimed; nor specifically upon the question whether the franchises granted had expired. It held, one judge dissenting, that, although the District Court had jurisdiction of the parties and of the subject matter, that court was not justified in granting an injunction; and it reversed the decree with directions to dismiss the bill, 63 F.2d 911, for the following reasons:
(a) That the proceedings in the District Court came within the inhibitions of Judicial Code, § 265, in that the effect of the decree was to stay the quo warranto proceeding in the state courts.
(b) That the case does not fall within the exceptions which permit a federal court to interfere with the judgment of a state court, because there was no showing that the judgment in the action in quo warranto was void for lack of jurisdiction, or was based upon fraud or upon such accident or mistake as made its enforcement unconscionable.
There was error in the decree entered by the District Court; but the Circuit Court of Appeals was not justified in ordering that the bill be dismissed.
First. Independently of the prohibition of Judicial Code, § 265, the decree entered by the District Court was clearly erroneous in so far as it enjoined "all persons to whom notice of the order of injunction should come from taking any steps or action of any kind to cause the enforcement of the ouster in the state court." The City alone was named as defendant. No person other than the City was served with process. None came otherwise before the court. The prayer of the bill sought relief solely against the City and "its officers, officials, agents, employees and representatives."
Second. On the other hand, the decree of the Circuit Court of Appeals was clearly erroneous in so far as it refused to enjoin the "city and its agents from forcibly removing the wires and poles without state warrant." The trustee claimed that it had a valid mortgage lien upon the poles, wires and electrical equipment, and upon the right and franchise in perpetuity to use them on the streets, alleys and public places; and the bill alleged that removal by the City of the poles and wires would result in irreparable injury to the trustee. Neither the trustee nor the City had been a party, or privy, to the litigation in the state courts. These courts did not purport to pass
The contention is that in essence this "is a suit by a mortgagee to obtain a readjudication of the law and facts adjudicated by a state court of competent jurisdiction in a proceeding to which the mortgagor was a party"; and that, since the controlling question is one of the construction and application of statutes of Ohio, a federal court would, in any event, follow the decision of the highest court of the State. It is true that, in the absence of special circumstances, federal courts consider themselves bound by the construction theretofore given by the highest court of a State to its statutes. But, under well settled principles of jurisdiction, governing all courts, a decree against a mortgagor with respect to property does not bind a mortgagee whose interest was acquired before the commencement of the suit, unless he was made a party to the proceedings. Old Colony Trust Co. v. Omaha, 230 U.S. 100, 122.
Third. The contention that the decree violates Judicial Code § 265, is rested mainly upon the clause which enjoins the City, its officers and attorneys "from taking any steps or action of any kind whatever to cause the enforcement or carrying out by the sheriff of Huron County, Ohio, or any of his deputies, or by any other officer of any of the courts in the State of Ohio of the judgment of ouster" and "from applying to any of the courts of the State of Ohio for any writ or process of any kind whatever for the purpose of enforcing and carrying out said judgment of ouster."
To enjoin the City from taking steps to enforce the judgment of ouster obviously does not stay that judgment. The City was not, and could not have been a party to the action in quo warranto.
Fourth. The contention is also made that the Circuit Court of Appeals properly ordered the bill dismissed because the trustee failed to allege, or prove, that it did not have knowledge of the proceeding in the state court or that it could not have intervened therein, as mortgagee, and asserted there the claims that it now makes as the basis of the relief sought. Where equitable relief is sought on the ground that a judgment entered upon proper service in a court of competent jurisdiction was obtained
The decree of the Circuit Court of Appeals is reversed. As it did not pass upon the merits of the trustee's claim, the cause is remanded to that court for further proceeding in conformity to this opinion.