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Ingen v. Connolly

decided: August 5, 1955.


Author: Hastie

Before McLAUGHLIN, KALODNER and HASTIE, Circuit Judges.

HASTIE, Circuit Judge.

These appeals question the dismissal of an action of interpleader instituted under Section 1335 of Title 28 of the United States Code by B. J. Van Ingen & Co., Inc., hereinafter designated as Van Ingen or appellant, to obtain in the District Court of the District of New Jersey an adjudication determining the lawful disposition of a balance of $1,170,319.80 held by Van Ingen in an account to the credit of the firm of Ketcham and Nongard and admittedly owed to someone. The defendants include David Connolly and William Wells, receivers appointed by the Superior Court of New Jersey to collect a judgment entered in the case of Driscoll v. Burlington Bristol Bridge Co., 1950, 10 N.J.Super. 545, 77 A.2d 255, modified on appeal, 1952, 8 N.J. 433, 86 A.2d 201. On the day before this interpleader suit was filed, the New Jersey Superior Court had ordered Van Ingen to pay the fund in question to these receivers.

On motion of the receivers, the District Court dismissed the present complaint as lacking in equity, meaning, as we understand the matter, that on the undisputed facts compliance with the New Jersey court's order is not likely to subject Van Ingen to such hardship or hazard as should induce a federal court to relieve this party to state litigation of its normal duty to obey the orders of the state court. On this appeal we consider whether the District Court's conclusion constituted a permissible exercise of judgment in an equitable cause.

In comprehensive view this interpleader is an attempt to obtain in a federal forum a separate adjudication of a controversy which has arisen in the attempted enforcement of a decree of a state court designed to undo an elaborate scheme of illegal profit-making at public expense. The New Jersey suit was instituted by the Governor on behalf of the people of that State to invalidate transactions whereby a public agency, the Burlington County Bridge Commission, purchased certain toll bridges at an excessive price pursuant to a scheme conceived and engineered by a group of adventurers to obtain an unjustified profit of some three million dollars at the ultimate expense of the traveling and tollpaying public. The New Jersey court found that an involved series of financial transactions did yield such an improper profit. It also found that Tuthill Ketcham, Richard Nongard and Rowland Murray, who are partners and the sole members of the brokerage and trading firm of Ketcham and Nongard, were members of the wrongdoing group. In addition, the partnership was found to have participated actively in the illegal transactions. The decree, as modified pursuant to the mandate of the Supreme Court of New Jersey on appeal, obligated the wrongdoing individuals to pay $3,050,347 to the Burlington County Bridge Commission. Certain wrongdoers, among them Tuthill Ketcham and Richard Nongard, were made liable for the entire sum. The third partner, Rowland Murray, was made liable for $76,258.68.

The receivers were charged with collecting this judgment. In due course they asked the Superior Court, which had retained jurisdiction over the matter, for an order requiring Van Ingen to pay them the money which is now in litigation. The matter came on for hearing with Van Ingen, Ketcham and Nongard, and each of the judgment debtors participating after due notice. It was admitted that in the course of the doing and undoing of the financial aspects of the bridge scheme, Van Ingen, as the manager of a bond account in which Ketcham and Nongard and certain of the judgment debtors were interested, found itself on liquidation of that account in possession of a balance of $1,170,319.80 standing to the credit of Ketcham and Nongard. Moreover, affidavits presented to the New Jersey court and later submitted without contradiction to the District Court in support of the motion to dismiss this interpleader, aver that more than $1,300,000 of the illegal gain realized by various participants in the wrongdoing scheme against whom the New Jersey judgment ran, was reflected and represented by the balance payable by Van Ingen to Ketcham and Nongard.

On the basis of this showing, the New Jersey court entered its order which reads in part as follows:

"And it appearing that B. J. Van Ingen & Co., Inc., now has in its custody and control the sum of One Million, one hundred seventy thousand, three hundred, nineteen dollars and eighty cents ($1,170,319.80), and that all or some of the judgment debtors claim that said sum is due and owing to them;

"And it further appearing that both the said B. J. Van Ingen & Co., Inc., and all of the judgment debtors who claim said above-mentioned sum have heretofore participated as Defendants in the proceedings in the above-entitled action which culminated in the entry of a Final judgment on March 14, 1952;

"It Is, Therefore, on this 30th day of June, 1954, Ordered that said B. J. Ingen & Co., Inc., transfer and pay over to David J. Connolly and William H. Wells, as Receivers, within 10 days from the date hereof, the said sum of One Million, one hundred seventy thousand, three hundred, nineteen dollars and eighty cents ($1,170,319.80), and the said Receivers are hereby directed to maintain the same in a special bank account separate and apart from any other funds until the further order of this Court.There is hereby reserved to the judgment debtors all of the rights which they may now have in and to said above-mentioned fund or any part thereof."

Twenty-four hours later Van Ingen filed this federal interpleader suit, showing requisite diversity of citizenship and jurisdictional amount and asserting that several circumstances would make compliance with the New Jersey order so hazardous as to justify federal intervention.

Van Ingen first points out that before obtaining the order in question the New Jersey receivers had sued several of the judgment debtors on the New Jersey judgment in a New York state court and had caused warrants of attachment to be served on various persons including Van Ingen, and that this matter is pending. However, this situation would be vexatious and dangerous to Van Ingen after its compliance with the New Jersey order only if the receivers should then refuse to discontinue and release the New York proceedings as to Van Ingen or to pay all New York costs. Nothing is suggested which might make Van Ingen fearful that the receivers would not promptly take these normal and proper steps. And in moving to dismiss the interpleader the receivers have formally represented that they will discontinue the New York action and pay all costs promptly upon Van Ingen's compliance with the New Jersey order. Moreover, they are officers of a responsible court which can be relied upon to see that this obviously proper action is taken. In these circumstances we think the District Court was clearly right in concluding that the New York litigation would not make obedience to the New Jersey order hazardous or burdensome in any way.

Appellant also says that it fears to obey the New Jersey order because Ketcham and Nongard and various judgment debtors have warned it that the New Jersey decree is invalid and that it will make payment pursuant thereto at its peril. Moreover, in a separate action for declaratory judgment, Ketcham, Nongard and Murray are asking the federal district court in New Jersey to entertain a collateral attack upon the New Jersey state judgment and to declare it invalid.*fn1 But in that action it is not contended that the New Jersey court lacked personal jurisdiction over any of those against whom it rendered judgment. It is recognized that this was a conventional equity suit before a court of general equitable jurisdiction. The only complaint is that the judgment ultimately rendered departed in some measure from the theory upon which the case was tried. Van Ingen is not a party to the declaratory judgment action. Moreover, if Van Ingen was concerned about the possible merits of this challenge to the New Jersey judgment the matter could have been raised in resisting the application of the receivers for the order requiring payment by Van Ingen to them. Any such jurisdictional issue could as well have been decided there as in the present federal proceeding; the same personal jurisdiction over all interested parties exists in both forums. Cf. Mutual Life Ins. Co. v. Egeline, D.C.N.D.Cal.1939, 30 F.Supp. 738. But cf. Maryland Casualty Co. v. Glassell-Taylor and Robinson, 5 Cir., 1946, 156 F.2d 519.

In addition, we think the position and role of appellant in this total scheme was properly considered and given weight by the District Court in deciding that appellant might equitably be left to have its responsibility and duty with reference to the fund in question decided in the comprehensive New Jersey suit. The District Court somewhat cryptically described the position in which Van Ingen found itself in the New Jersey litigation as "an occupational hazard" of such financing as it had undertaken. This does not mean that appellant has done anything corrupt. Yet, in disregard of notably suspicious circumstances, sufficient to suggest the need for further inquiry, it elected to handle the financial transactions which the New Jersey court is now trying to unsnarl in a ...

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