UNDERGROUND ELECTRIC RYS. CO. OF LONDON, Limited, v. OWSLEY et al.

(Circuit Court of Appeals, Second Circuit. August 17, 1909.)

No. 294.

1. COURTS (§ 262*)—EQUITY JURISDICTION OF FEDERAL COURT-APPOINTMENT OF RECEIVER FOR ESTATE OF DECEDENT.

A Circuit Court of the United States as a court of equity has no jurisdiction of a purely probate proceeding, which is not a matter of equity cognizance, nor has it power to undertake the general administration of the estate of a deceased person, but it may, as a court of equity, having the full jurisdiction of the English Courts of Chancery as they existed at the time of the adoption of the Constitution, in a suit where it has jurisdiction of the parties, appoint a receiver of an estate pending the probate of a will, in the absence of the appointment of a custodian by the probate court, and this although proceedings for the probate of the will and the appointment of an executor are pending in such court which have been delayed by reason of litigation between parties in interest.

[Ed. Note.-For other cases, see Courts, Cent. Dig. § 798; Dec. Dig. § 262.*]

2. EXECUTORS AND ADMINISTRATORS (§ 431*)-ACTION BY CREDITORS-RIGHT OF ACTION TO PROTECT ESTATE.

A creditor of the estate of a decedent whose claim has been allowed by the court of principal administration and is not disputed is not required to be a judgment creditor to entitle him to maintain a suit in equity for the preservation and protection of property of the estate in another jurisdiction.

[Ed. Note.-For other cases, see Executors and Administrators, Cent. Dig. 1679; Dec. Dig. § 431.*]

3. COURTS (§§ 262, 490*)-EQUITY JURISDICTION OF FEDERAL COURTS-APPOINTMENT OF RECEIVER FOR ESTATE-COMITY BETWEEN STATE AND FEDERAL COURTS.

The will of a testator was probated in Chicago as his place of domicile and a general executor appointed. Decedent owned property in New York City of the value of perhaps $3,000,000, including a valuable residence and art collection, but the executor took no steps for ancillary administration there for three years, and in the meantime the property there was in possession of the widow, who asserted an adverse claim to a large part of it. The art collection was given no care, and taxes amounting to $200,000, were unpaid, and a mortgage on a part of the real estate was being foreclosed for nonpayment of interest. When the executor applied for appointment as ancillary administrator, his application was contested by the widow, who procured an injunction in Chicago restraining him from proceeding therewith. The estate was largely indebted, and a foreign creditor whose claim for a large amount had been allowed filed a bill in equity in the federal court in New York on behalf of itself and all other creditors, praying the appointment of a receiver, that the court administer the property there, and for general relief. Held that, while the court was without jurisdiction to grant all the relief prayed for, it had and properly exercised jurisdiction to take charge of and preserve the property by its receiver, but that the receivership should be pro-isional until an application to the Surrogate's Court for the appointment of a temporary administrator under Code Civ. Proc. N. Y. § 2670, could be made and determined, and be continued only in case such appointment was refused.

[Ed. Note. For other cases, see Courts, Dec. Dig. §§ 262, 490.*]

For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

RECEIVERS ( 27*)—GrounDS FOR APPOINTMENT-PRESERVING PROPERTY OF ESTATE.

The fact that a part of the property was in the possession of the widow under an adverse claim thereto was not ground for denying a receiver.

[Ed. Note. For other cases, see Receivers, Dec. Dig. § 27.*]

Coxe, Circuit Judge, dissenting.

Appeal from the Circuit Court of the United States for the Southern District of New York.

Suit in equity by the Underground Electric Railways Company of London, Limited, against Louis F. Owsley, executor, and others. From an order appointing a receiver, Mary Adelaide Yerkes, defendant, appeals. Affirmed.

For opinion below, see 169 Fed. 671.

Appeal from orders of the Circuit Court, Southern District of New York, appointing a receiver of the property situated within said district of Charles T. Yerkes, late of Chicago, Ill., deceased.

The following is a summary of the facts in the case:

On December 29, 1905, said Charles T. Yerkes died leaving surviving him the defendant Mary Adelaide Yerkes, his widow, and the defendants Charles E. Yerkes and Bessie L. Rondinella, his only children and heirs at law, and a will which on March 15, 1906, was admitted to probate by the probate court for Cook county, Ill. Letters testamentary were issued to the defendant Owsley only; the other persons named in the will as executors having declined to serve. Notice was given requiring the creditors of the decedent to present their claims to said probate court. Claims amounting to upwards of $3,000,000 were duly presented and were allowed by said court. Among them was the claim of the complainant, a British corporation, for $796,619.01 for unpaid calls upon 32,000 shares of its capital stock subscribed for by the defendant. Other claims were presented which have not yet been allowed.

The will of the decedent has never been admitted to probate in the state of New York nor have ancillary letters testamentary ever been granted in said state. On January 18, 1909, however, a petition for such letters was filed in the Surrogate's Court of the county of New York by the defendant Owsley, and those proceedings are now pending in that court, objections having been filed by the defendant Mary` Adelaide Yerkes. It does not appear that the complainant or any other creditor or person interested in said estate has ever applied under the New York statute for the appointment of a temporary administrator by reason of the delay in the ancillary proceedings. Soon after the filing of the application for ancillary letters, the defendant Mary Adelaide Yerkes petitioned the Illinois probate court to remove the defendant Owsley from his position as executor for misconduct. This petition was denied and an appeal from the order of denial is now pending.

Shortly after this action of the probate court the defendant Mary Adelaide Yerkes brought a suit in equity in the superior court for said Cook county, Ill., against the defendant Owsley, praying that he be enjoined from further acting as executor and that a receiver of the estate be appointed. A temporary injunction was thereupon issued restraining the defendant Owsley from prosecuting his application for ancillary letters testamentary in the New York Surrogate's Court. The defendant Owsley moved to dissolve this injunction, but no decision thereon has yet been rendered. The parties to said suit have, however, entered into a stipulation that further proceedings in the Surrogate's Court shall be postponed until after the disposition of said motion.

The property of the estate of said Charles T. Yerkes in the city of New York, other than securities pledged as collateral, consists of:

•For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

(1) The valuable residence and picture gallery known as No. 864 Fifth avenue and comprising several parcels of land.

(2) A stable on East Sixty-Ninth street.

(3) An art collection in said residence consisting of pictures, statuary, tapestries, and other works of art.

This property is estimated to be worth over $2,000,000.

The assets of the Yerkes estate outside the state of New York consist principally of street railway securities of large face value, but of problematical market value. The indebtedness of the estate is very large. It is not contended that the estate is insolvent, but it is claimed that it will be necessary to use the proceeds of the New York real estate to pay the debts. Prior to the institution of these proceedings no person representing the estate was in charge of the New York property. It was not insured. Taxes aggregating $200,000 had remained unpaid. A part of the real estate was subject to a mortgage which was in process of foreclosure. The art collection-according to the testimony of the complainant's expert witness-was neglected and deteriorating. The defendant Mary Adelaide Yerkes was provided for in the will of her husband, but elected to renounce her rights under it and to accept her widow's portion under the Illinois law-one-third of the personalty and dower in the real estate. After her husband's death she continued to live as before in the Fifth avenue residence, and has remained there ever since. An affidavit filed in her behalf in these proceedings states that she occupies the premises under a claim of right. The foundation of such claim is not stated. Counsel, by way of explanation, assert in their brief that title to the most valuable part of the real estate was in Mrs. Yerkes' name for several months prior to February, 1893, when she deeded it to a third person, who immediately reconveyed to Mr. Yerkes. The contention seems to be that this deed was invalid for want of delivery. It is also stated that in 1893 Mrs. Yerkes executed another deed conveying this same property as well as a rear lot and the stable to another person, who also reconveyed to Mr. Yerkes. The contention with respect to this deed seems to be that it was without consideration and was obtained by false representations. One parcel of the real estate -that subject to the mortgage-was never in Mrs. Yerkes' name.

With respect to the art collection and other personal property, it is asserted that Mrs. Yerkes is the owner thereof by virtue of certain bills of sale executed in 1884 and 1887 relating to the contents of a certain house in Chicago and a bill of sale dated in 1896 covering the then contents of the Fifth avenue residence. On April 5, 1909, the complainant filed its bill of complaint, stating many of the facts already mentioned and others, and in effect praying for the administration of the estate of the decedent situated in the state of New York, the appointment of a receiver, and other relief.

On the same day a temporary receiver was appointed, and an order to show cause why the receivership should not be continued issued. Thereafter the parties defendant appeared, but only the defendant Mary Adelaide Yerkes appeared in opposition. Affidavits were filed in behalf of the complaint and of said defendant, and on April 28, 1909, an order was entered continuing the receivership. These two receivership orders are the subjects of this appeal.

James Russell Soley and Wm. B. Hornblower, for appellant Yerkes. Paul D. Cravath, for appellee Railways Co.

W. O. Underwood, for appellee executor.

Before COXE and NOYES, Circuit Judges, and HOUGH, District Judge.

NOYES, Circuit Judge (after stating the facts as above). The question upon the surface of this case is whether the receivership orders were proper. The question underlying is whether the Circuit. Court had power to make them. The latter is a jurisdictional question, and is duly raised upon the record. Under a recent decision of

the Supreme Court it is our duty to decide it. Boston, etc., R. Co. v. Gokey, 210 U. S. 155, 28 Sup. Ct. 657, 52 L. Ed. 1002.

The question of jurisdiction should first be considered. And this question in its essence is not whether the Circuit Court had power to grant all the relief prayed for, but whether it had power to afford any such relief. If the orders appealed from were within its jurisdiction and were proper, they must stand even if the court had no power to grant the other measures of relief sought. Strictly speaking, if the appointment of the receiver was within the jurisdiction of the court, it is not material just here whether it had power to proceed with the general administration of the estate. And yet the broad jurisdictional question has been fully presented. The determination of the basis of the power to appoint receivers, as well as its existence, may settle something in this intricate litigation. While, therefore, the result in either case will be the same, we think it of importance to ascertain at the commencement of our examination--whether such power, if it exists, is to be found as a part of the general power of the Circuit Court to administer the estates of deceased persons or as a particular power for the protection of property pending litigation.

The inquiry is, then, whether the Circuit Courts of the United States, as courts of equity, have jurisdiction to administer the estates of decedents. The appellant contends that no such power exists, and lays especial stress upon the fact that the inquiry relates to federal courts. But this is not the fundamental objection. If the Circuit Courts are without power to entertain probate proceedings, it is not primarily because they are courts of the United States, but because the subject does not belong to general equity jurisdiction. No limitations. attach to the purely equitable relief which these courts can grant when they have jurisdiction of the parties. They have the full equity jurisdiction formerly exercised by the English Courts of Chancery, and are not limited by the chancery system adopted by any state.

Now, as long ago as 1727 it was settled in England that a court of equity could not entertain jurisdiction of a bill to set aside a will or the probate thereof. So in the case of Broderick's Will, 21 Wall. 503, 509, 22 L. Ed. 599, Mr. Justice Bradley said in a suit of that nature:

"As to the first point, it is undoubtedly the general rule, established both in England and this country, that a court of equity will not entertain jurisdiction of a bill to set aside a will or the probate thereof. The case of Kerrick v. Bransby (decided by the House of Lords in 1727) 7 Brown's Parl. Cas. 737, is considered as having definitely settled the question. Whatever may have been the original ground of this rule (perhaps something in the peculiar constitution of the English courts), the most satisfactory ground for its continued prevalence is that the Constitution of a succession to a deceased person's estate partakes in some degree of the nature of a proceeding in rem, in which all persons in the world who have any interest are deemed parties, and are concluded as upon res judicata by the decision of the court having jurisdiction."

Similarly, in Ellis v. Davis, 109 U. S. 485, 494, 3 Sup. Ct. 327, 332, 27 L. Ed. 1006, which was a suit brought in the Circuit Court to set aside a will and annul probate, Mr. Justice Matthews, following Broderick's Will, supra, and denying the power of the court to grant the relief sought, said:

"It is well settled that no such jurisdiction belongs to the Circuit Courts of the United States as courts of equity, for courts of equity, as such, by virtue of their general authority to enforce equitable rights and remedies, do not administer relief in such cases."

In Farrell v. O'Brien, 199 U. S. 89, 116, 25 Sup. Ct. 727, 736, 50 L. Ed. 101, it was said that:

"The Circuit Courts of the United States had no jurisdiction to admit a will to probate or to entertain a pure probate proceeding."

See, also, Garzot v. De Rubio, 209 U. S. 283, 28 Sup. Ct. 548, 52 L. Ed. 794. And in the very recent case of Goodrich v. Ferris (decided by the Supreme Court May 17, 1909) 214 U. S. 80, 29 Sup. Ct. 583, 53 L. Ed. 914, Mr. Justice White said:

"A case involving the devolution and administration of the estate of a decedent (is) a subject peculiarly within state control."

The principles underlying these decisions have a two-fold basis. In the first place, courts of equity cannot act in probate proceedings because the subject is statutory. In this country the laws of the several states determine the succession to the property of deceased persons intestate and provide for the probate and establishment of wills. Statutes confer upon various tribunals jurisdiction over probate proceedings. The courts in exercising the powers conferred exercise statutory, and not equitable, powers. In the second place, courts of equity will not entertain jurisdiction over probate proceedings because they are in the nature of proceedings in rem. In the case last referred to (Goodrich v. Ferris), the Supreme Court also said:

"It is elementary that a probate proceeding by which jurisdiction of a probate court is asserted over the estate of a decedent for the purpose of administering the same is in the nature of proceedings in rem, and is therefore one as to which all the world is charged with notice."

It may be regarded then as settled that the Circuit Courts, because they are courts of equity and because the subject is not one of equity cognizance, have no jurisdiction of purely probate proceedings, such as relate to the probate of wills and distribution of estates. But this does not carry us far enough. While much of the relief which the bill of complaint asks for could only be granted in a strictly probate proceeding, it goes further. It prays the court (1) to appoint a receiver; (2) to sell the property of the decedent; (3) to ascertain and determine. the indebtedness of the estate; (4) to set apart the widow's dower right; and (5) to distribute the estate. Taking the bill as a whole, it must be regarded as asking the Circuit Court to undertake the general administration of the estate-to do something more than act in a purely probate proceeding.

The distinction between a strictly probate proceeding and one involving the general administration of an estate is pointed out in Martin v. Ellerbe's Adm'r, 70 Ala. 339:

"The term 'administration,' in this respect, is of comprehensive meaning. It includes more than the mere collection of the assets, the payment of debts and legacies, and distribution to the next of kin. It involves all which may be done rightfully in the preservation of the assets, and all which may be done legally by the administrator in his dealings with creditors, distributees or legatees, or which may be done by them in securing their rights; and it