Case ID: wis_161/html/0079-01.html
Source: Caselaw Access Project
Author: {"author": "Siebecker, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Gist and another, Respondents, vs. Equitable Surety Company of St. Louis, Missouri, imp., Appellant.
    
      February 10
    
    May 18, 1915.
    
    
      Removal of action from state to federal court: Citizenship and residence of corporations: Garnishment: Release: Undertaking: Discharge of surety by amendment of complaint: Fraud: Estoppel: Interest.
    
    1. A suit commenced in a state court in a federal district of which neither plaintiff nor defendant is a resident, though they reside in different states, cannot he removed to the federal court of the-state wherein the action is pending, because such federal court, had no jurisdiction of the original suit
    2. Under the statute governing removal of cases from state to federal courts, the citizenship and residence of a corporation are conclusively presumed to be the state of its incorporation, and are limited thereto even though it may have been licensed to do business in another state.
    
      3. An. undertaking in release of garnishment under sec. 2-771, Stats., is to be liberally construed in furtherance of its purpose to protect the creditor.
    4. The rights of the surety in such an undertaking were not prejudiced by amendment of the complaint in the original action so that it asked a recovery upon quantum meruit instead of upon express contract, where no change in the substance of the claim was involved; and such amendment, therefore, did not discharge the surety.
    5. The allegation in the original complaint in such case that the work and labor for which recovery was sought was performed under an express contract, when in fact such contract was invalid because made on Sunday, did not constitute a misrepresentation in the nature of a fraud as to the surety which should estop plaintiff from enforcing the undertaking.
    6. Upon recovery of judgment against the surety on such an undertaking for the amount of the judgment in the original action, interest was properly allowed upon such amount from the date of the entry of the original judgment.
    Appeal from a judgment of the circuit court for Columbia county: Maetot L. Lueck, Judge.
    
      Affirmed.
    
    The plaintiffs, as copartners, brought action against the Equitable Surety Company upon a bond, which bond had been given in a previous action against defendant Johnson-Carey Company.
    Both parties are nonresidents. The previous action was brought first upon a complaint alleging an express contract entered into by the plaintiffs and the Johnson-Carey Company. This was later amended to one of quantum meruit. It appeared in that trial that the Johnson-Carey Company were -subcontractors of the Winston Brothers Company. This latter company was the principal contractor with the Milwaukee, Sparta & Northwestern Railway Company to do the grading for the construction of its railroad. They sublet a portion of this contract to the Johnson-Carey Company and they to the plaintiffs. The plaintiffs sued the Johnson-Carey Company, alleging that there was due them on the contract and for damages in delay in executing their contract the sum of $53,616.34. When that action was first commenced the Winston Brothers Company and the Milwaukee, Sparta & Northwestern Railway Company were sued as garnishees. The Equitable Surety Company upon petition of the Johnson-Carey Company entered into an undertaking to release these garnishees and the release was granted. By the undertaking of the Johnson-Carey Company as principal and the Equitable Surety Company as surety they undertook to pay the plaint-, ills the amount of the judgment that was recovered by the plaintiffs in the action against such defendant, not to exceed the sum of $55,000. The plaintiffs in that action recovered judgment against the Johnson-Carey Company for the sum of $44,915.37 and costs, which made a total of $45,440.27. None of this has ever been paid.
    It further appears in the original action that before the time to answer had expired the defendant Johnson-Carey Company appeared specially and petitioned the circuit court for Columbia county to allow a removal of the action to the district court of the United States for the Western district of Wisconsin. The circuit court refused to grant the petition and the defendant then answered. During the progress of the trial the defendant brought to tKe attention of the court the fact that the contract was in fact executed on a Sunday, although dated on Monday. This remained undisputed, and it was then that the court allowed the plaintiffs to amend the complaint and proceed on the basis of quantum meruit instead of upon the alleged express contract.
    After judgment was entered in the original action of Gist and others v. Johnson-Carey Company the plaintiffs demanded payment of the amount of the judgment from the Equitable Surety Company, but payment was refused. The present action was then commenced upon the undertaking of, the Equitable Surety Company by which the release of the original garnishees had been obtained. .
    The circuit court awarded judgment on the bond for the amount of the former judgment with interest at six per cent. from April 22, 1913, tbe date of tbe judgment. Prom sncb judgment this appeal is taken by tbe Equitable Surety Company.
    
    Por tbe appellant there was a brief signed by Grotophorst, Evans & Thomas, attorneys, and Boyle & Priest, of counsel, and oral argument by Evan A. Evans.
    
    To tbe point that the-amendment of tbe complaint changed tbe cause of action and either released tbe surety entirely or relieved it from any added liability, they cited Meinshausen v. A. Gettelman B. Go. 133 Wis. 95, 113 N. W. 408; Ball v. Olaflin,.5 Pick. 303; Gomm. v. A. B. Baxter & Go. 235 Pa. St. 179, 84 Atl. 136,. 42 L. E. A. N. s. 484; Gassidy v. Saline Go. Bank, 7 Ind. Terr. 543, 104 S. W. 829; Wood v. Benny, 7 Gray, 540; Fish v. Barbour, 43 Mich. 19, 4 N. W. 502; Prince v. Clark, 127 Mass. 599; Bolton v. Nitz, 88 Mich. 354, 358, 50 N. W. 291; Gampau v. Seeley, 30 Mich. 57, 61; 3 Am. & Eng. Ency. of Law (2d ed.) 637; 5 Cyc. 28; Langley v. Adams, 40 Me. 125; Sage v. Strong, 40 Wis. 575; Oconto Go. v. Esson, 112 Wis. 89, 87 N. W. 855.
    Por tbe respondents there was a brief by W. S. Stroud, N. F. Glark, and Olin, Butler, Siehbins, Gurkeet & Stroud, and oral argument by E. L. Butler and W. S. Stroud.
    
   Tbe following opinion was filed March 2, 1915:

Siebecker, J.

It is claimed that tbe court erred in denying removal of tbe original action from tbe state to tbe federal court. Tbe plaintiffs in tbe original suit, Wm. M. and George W. Gist, at tbe time they commenced action against tbe Johnson-Carey Company were residents respectively of tbe states of Missouri and Illinois and tbe defendant Jobn-son-Carey Company was a corporation created under tbe laws of Delaware, and for tbe purposes of tbe proceeding to remove tbe action to tbe federal court was a citizen and resident of tbe state of Delaware. Before defendant was required to answer it made an application to tbe Columbia county circuit court and prayed for “removal of said suit into tbe district court of tbe United States to be beld in tbe district where said suit is pending, viz. district court of tbe United States in and for tbe Western district of Wisconsin.” Tbe bond accompanying tbis application bound tbe obligors upon condition tbat tbe Jobnson-Carey Company enter, in tbe district court for tbe Western district of Wisconsin within tbe time therein specified, a certified copy of tbe record in tbe suit. Tbe face of tbe removal proceedings shows tbat it was an application to remove tbe action from tbe state court to tbe federal district court for tbe Western district of Wisconsin. It is manifest tbat tbe application for removal did not ask to have tbe case removed to tbe federal court of tbe district of tbe residence of either tbe plaintiffs or tbe defendant. Tbe record shows affirmatively tbat tbe case is not one arising under tbe laws of tbe United States and tbat tbe application for removal is based upon tbe diversity of citizenship of tbe parties. Tbe defendant is a Delaware corporation and hence under tbe federal statute for removal of tbe case from state to federal court is deemed to be a resident of tbat state and is accorded tbe same rights as a citizen. It is established by tbe adjudications of tbe federal courts tbat a suit commenced in a state court in a federal district of .which neither plaintiff nor defendant is a resident, though they are residents of different states, cannot be removed to tbe federal court of tbe state wherein tbe action is pending, for tbe reason tbat such federal court bad no jurisdiction of tbe original suit. Ex parte Wisner, 203 U. S. 449, 27 Sup. Ct. 150; Western L. & S. Co. v. Butte & B. C. M. Co. 210 U. S. 368, 28 Sup. Ct. 120; Stewart v. Cybur L. Co. 211 Fed. 343; Gruetter v. Cumberland T. & T. Co. 181 Fed. 248. Tbe citizenship of tbe defendant Jobnson-Carey Company is conclusively presumed to be tbe state of Delaware and under tbe federal removal statute is limited thereto, though it may have been licensed to do business in Wisconsin. St. Louis & S. F. R. Co. v. James, 161 U. S. 545, 16 Sup. Ct. 621; Baldwin v. Pacific P. & L. Co. 199 Fed. 291, and cases there cited.

It is strenuously contended that the defendant, the Surety Company, is released from the obligations of the undertaking given by it for the release of the garnishees, upon the ground that the amendment of the plaintiffs’ complaint at the trial' from one on express contract to one on quantum meruit so changed the grounds of liability of the defendants in the case' as to constitute a complete change in the cause of action and thereby released the surety. The rights of a creditor to proceed by garnishment in aid of a recovery on express or implied contract are to be liberally enforced in such proceedings and the undertaking given pursuant to the provisions of sec. 2111, Stats. 1913, is to be liberally construed. Smith v. Lockwood, 34 Wis. 12. The undertaking in terms is an agreement “on demand to pay to the plaintiffs the amount of the judgment, with all costs that may be recovered against such defendant in the action.” The purpose of the statute is to hold the parties to the undertaking for the full amount of the judgment in place of the garnishees, regardless of the amount impounded by the garnishment. The provisions of the statute have always received a liberal construction to accomplish the purpose of the remedy, namely, protection of a creditor to receive payment of the judgment awarded him in the main action. Sutro v. Bigelow, 31 Wis. 521; Smith v. Lockwood, 34 Wis. 12; Wilkinson v. United States F. & G. Co. 119 Wis. 226, 96 N. W. 560. As stated in the Sutro Case respecting the liability of the parties to an undertaking under this statute, “they make his [garnishee’s] liability to the plaintiffs in the action their liability to the extent named in the undertaking; and, identifying themselves in interest with him, agree to abide the results of the litigation so far as he is concerned.” The whole proceeding of substituting the undertaking in place of the garnishee presupposes that all the stops required to be taken in a judicial trial .of the original-action in prosecuting it to judgment are authorized as within the scope of such undertaking. It is clear that the right of amending the complaint existed and that the court on the trial of the original action properly amended the complaint from one on express contract to one on quantum meruit. Gist v. Johnson-Carey Co. 158 Wis. 188, 147 N. W. 1079. It is urged that this was a prejudicial proceeding against the sureties. How this operated to the sureties’ prejudice is not manifest. An inspection of the two complaints shows that, the allegations covered and embraced the identical transactions, resting on the same basic claim, namely, compensation for the work and labor performed, at the same price throughout, with this difference, that in the original complaint the agreements in relation thereto were alleged to be express,, while in the amended complaint they were implied, but in their totality and substance they were identical; the only difference being in the way these agreements were evidenced. Under such a state of affairs there is no difference in the substance of the claim made by plaintiffs in their two complaints, and allowance of the amendment was plainly authorized as. within the undertaking of the surety and cannot be held to-have prejudiced its rights. Thomas v. Hatch, 53 Wis. 296, 10 N. W. 393; Tilton v. Cofield, 93 U. S. 163.

The contention that the allegation in the original complaint, that the work and labor for which plaintiffs sought to-recover compensation was performed pursuant to an express contract, when in truth and fact no such contract existed, constituted a misrepresentation in the nature of fraud as to the-surety and should estop plaintiffs from enforcing the undertaking, has no foundation in fact and substance; nor did such allegation in fact induce the giving of the bond. - We have-already adverted to the proposition that the amendment in noway changed the nature of the claim "nor the grounds of recovery. The claim of 1jie original and amended complaints arose out of the same transaction and claimed recovery for-tbe same amount and for tbe identical items at tbe same cost. On tbis point tbe allegations in eacb pleading must control, and confining our view to them we discover no material difference in tbe grounds of recovery. “Tbe description of tbe cause of action was changed, but in tbe view of equity, and in point of fact, it was substantially tbe same witb that originally described. Allowing amendments is incidental to tbe exercise of all judicial power, and is indispensable to tbe ends of justice.” Tilton v. Cofield, 93 U. S. 163. Tbe very nature of tbe rights involved to change tbe pleadings precludes any inference of fraud and estoppel in relation thereto. Tbe contention of appellant on tbis point must be rejected as having no merit.

Within tbe rule of Eau Claire Nat. Bank v. Chippewa Valley Bank, 124 Wis. 520, 102 N. W. 1068, tbe plaintiffs were entitled to payment of their judgment in tbe original action upon its entry, and payment thereof by tbe surety who stood in place of tbe garnishees. For delay in such payment plaintiffs are entitled to interest. Tbe court properly awarded tbe recovery of interest against tbe surety.

By the Court. — Tbe judgment appealed from is affirmed.

A motion for a rehearing was denied, witb $25 costs, on May 18, 1915.