MR. JUSTICE STONE delivered the opinion of the Court.
In this case certiorari was granted, directed to the Court of Appeals for the Third Circuit, to resolve questions of public importance growing out of the rival claims of a federal district court and the Department of Banking of the Commonwealth of Pennsylvania; each asserts authority to liquidate the business and affairs of an insolvent
On February 9, 1933, a New York shareholder in Mortgage Building and Loan Association, a Pennsylvania corporation, on behalf of himself and other shareholders filed a bill of complaint in the district court for eastern Pennsylvania, naming the Association as defendant, and alleging that it was the result of the merger of several building and loan associations, in one of which the plaintiff in the suit was a shareholder, and that he had refused to participate in the merger and had demanded of the Association cancellation and payment of his shares. The bill alleged the insolvency of the Association and a threatened race of diligence by its creditors to satisfy their claims from the assets of the corporation, and prayed the appointment of receivers for the corporation, the liquidation of its business and assets, and the usual injunction restraining creditors and others from interfering with or taking possession of its property. Thereupon, on the same day, and on the appearance of the defendant corporation, which interposed no objection, the district judge appointed temporary receivers. No notice of the application was given to the corporation's creditors or other shareholders, or to the Department of Banking of the Commonwealth. On the following day the corporation filed its answer, admitting the material allegations in the bill of complaint and joining in its prayer.
On that day the Secretary of Banking informally requested the district judge not to make the appointment of the receivers permanent and to allow the property of the defendant to be surrendered to the Secretary, to be liquidated and administered in accordance with the state statutes. On March 27, 1933, the Commonwealth filed its petition in the district court, asking leave to intervene in the pending equity proceeding and for an order directing the receivers to surrender the assets
The district court denied the petition of the Commonwealth and later appointed the temporary receivers, with another, as permanent receivers, who are respondents here. It treated the case as though it were one of the rival claims of a state and a federal court to jurisdiction over the same subject matter and property, see Harkin v. Brundage, 276 U.S. 36, and held that the jurisdiction of
The Attorney General of the Commonwealth argues here, as he did in both courts below: (a) that the federal court is without jurisdiction to direct the liquidation in a suit brought against the corporation by a shareholder, since both parties are subject to and bound by the local law, which provides for liquidation of a domestic corporation exclusively through the agency of a state supervisory officer; and (b) that, in any event, the court in its discretion should have refused the appointment of receivers or, having appointed them, it should have granted the petition of the Commonwealth and directed the receivers to surrender the property of the association to the state official.
1. The statutes of the United States, as incorporated in the Judicial Code, c. 231, § 24, 36 Stat. 1087, 1091; 28 U.S.C. § 41 (1), provide that district courts shall have original jurisdiction "of all suits of a civil nature, at common law or in equity, . . . where the matter in controversy exceeds, exclusive of interest and costs, the sum or value of three thousand dollars, and . . . is between citizens of different states." We do not doubt that the allegations in the present bill of complaint are sufficient to establish the jurisdiction of the district court as a federal court; that is to say, it properly invokes the power and the authority, conferred upon the district court by the Constitution and statutes of the United States, to entertain the suit. The bill alleges diversity of citizenship and the requisite jurisdictional amount, both of which allegations stand unchallenged, see Philadelphia, Wilmington
Although, as will presently appear, the district judge in the exergise of his discretion might appropriately have given notice, to the officers of the Department of Banking, of the application for the appointment of receivers, such notice was not prerequisite to the exercise of its jurisdiction. See Harkin v. Brundage, supra; Re Metropolitan Railway Receivership, 208 U.S. 90; cf. Marin v. Augedahl, 247 U.S. 142.
The objection that the suit was brought by a shareholder of the insolvent corporation rather than by its judgment creditor, see Burnrite Coal Briquette Co. v. Riggs, 274 U.S. 208, as well as the opposing contention that under Pennsylvania law the present shareholder has the status of a creditor, see Nice Ball Bearing Co. v. Mortgage Building & Loan Association, 310 Pa. 560; 166 Atl. 239, need not now be considered. Even if valid it does not go to the jurisdiction of the district court as a federal court, but only to the propriety of its action as a court of equity. See Smith v. McKay, 161 U.S. 355, 358, 359; Blythe v. Hinckley, 173 U.S. 501, 507; Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 500; Twist v. Prairie Oil & Gas Co., 274 U.S. 684, 690. Unlike the objection that the court is without jurisdiction as a federal court, see Mansfield, Cold Water & Lake Michigan Ry. Co. v. Swan, 111 U.S. 379, 382, the parties may waive their objections to the equity jurisdiction by consent, Hollins v. Brierfield Coal & Iron Co., 150 U.S. 371, 380; Re Metropolitan Railway Receivership, supra, 109, 110, or by failure to take it seasonably, Brown v. Lake Superior Iron Co., 134 U.S. 530, 535, 536; Southern Pacific R. Co. v. United States (No. 1), 200 U.S. 341, 349. Even if
2. The question remains whether, in the special circumstances of the case, the district court rightly retained its jurisdiction. The relief prayed in the bill of complaint is equitable in its nature, and the prayer was addressed to the sound discretion which is the controlling guide of judicial action in every phase of a suit in equity. The relief sought, an injunction and the appointment of receivers, was aimed at the prevention of irreparable injury, from the waste of the assets of the insolvent corporation which would ensue from a race of creditors to secure payment of their claims by forced sale of the corporate property. By local statutes elaborate provision is made for accomplishing the same end, through the action of a state officer, in substantially the same manner and without substantially different results from those to be attained in receivership proceedings in the federal courts.
The question is not the ordinary one of comity between a federal and a state court, each asserting jurisdiction over the same subject matter and the same property, and where there are shown no special reasons addressed to the discretion of the court first acquiring jurisdiction for relinquishing its jurisdiction in favor of the other. Compare McClellan v. Carland, 217 U.S. 268, 281, 282;
Here, upon presentation of the application for appointment of receivers, which would involve such an interference, the district judge might appropriately have required notice of the application to be given to the state officers. It was his duty to do so if satisfied that the delay
That course should be pursued now. For that purpose the decree will be reversed and the cause remanded. The district court will direct that all assets and property in the possession of the receivers be, with all convenient speed, surrendered to the Secretary of Banking, the receivers retaining only sufficient of the assets of the defendant association to pay their reasonable fees and any obligations lawfully incurred by them. Jurisdiction will be retained by the district court only for that purpose and for the purpose of promptly discharging the receivers and settling their accounts, after which the suit will be dismissed. See Harkin v. Brundage, supra, 57, 58.