Source: https://supreme.justia.com/cases/federal/us/215/246/
Timestamp: 2019-04-19 02:51:52+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 215 › Lathrop Shea & Co. v. Interior Construction Co.
Where plaintiff in good faith insists on the joint liability of all the defendants until the close of the trial, the dismissal of the complaint on the merits as to the defendants who are citizens of plaintiff's state does not operate to make the cause then removable as to nonresident defendants and to prevent the plaintiff from taking a verdict against the defendants who might have removed the cause had they been sued alone, or if there had originally been a separable controversy as to them.
The facts, which involve the validity of the removal of a cause to the federal court, are stated in the opinion.
The parties were, respectively, plaintiff and defendant in the court below, and we shall so designate them.
of $43,038.88, upon a contract entered into between the defendant, the Interior Construction & Improvement Company, and the plaintiff by which the construction company agreed to construct certain portions in Pennsylvania and New York of the line of the railroad company, and for materials and the use of certain articles by the railroad. It is alleged in the petition of the plaintiff that the railroad company was organized by the consolidation of other railroad companies, and, for the purpose of carrying out the plans of such consolidation, undertook the construction of a railroad from certain points in Pennsylvania to the Village of Angelica, in the State of New York. That, in pursuance of this purpose, the railroad company entered into a contract with the construction company, and in payment for the construction of the railroad agreed to issue and did issue to the company its stock and bonds, which were largely in excess of cost of construction. That the construction company was organized solely for the purpose of building the railroad, and to secure to the promoters and organizers thereof the profits to be made by the construction of the railroad and the manipulation of securities. That the officers, directors, and owners of the majority of the capital stock of the railroad had like relation to the construction company, and the management of the latter was controlled by them. And it is averred that the construction company was the agent and representative of the railroad company, and that the latter became and is responsible and liable for the acts and obligations of the construction company. Due performance by plaintiff of its contract is alleged.
It is further alleged that the railroad company is a New York corporation and the construction company is a New Jersey corporation.
"until the determination of the appeal by the codefendant, in the absence of fraud or improper joinder of defendants for the purpose of interfering with or obstructing the construction company's right of removal, it is not thought that a separable controversy exists."
default of the construction company having been filed, an order was made in the supreme court reciting the fact and the facts showing such default and appointing a referee "to take proofs of the cause of action set forth in the plaintiff's complaint." The referee reported that there was due plaintiff the sum of $47,323.91. The report was confirmed and judgment entered for that amount.
Subsequently, the appellate division having sustained the judgment dismissing the action as to the railroad company, the case was again, on the motion of the company, removed to the circuit court and a motion made in that court to set aside the service of summons on the construction company, and to vacate the judgment. Concurrently with that motion, plaintiff moved to remand the case to the state court. The motion of the construction company was granted, and the action dismissed for want of jurisdiction over the company. Lathrop, Shea & Hanwood Co. v. Interior Construction & Improvement Co.,150 F. 666.
The motion was granted on the ground that the facts showed that the company had ceased to do business in the state, and held no property therein.
"that no evidence was introduced upon the hearing of the motion, the issue being:"
"I. Whether this court had obtained jurisdiction over this defendant by the service of a summons upon the Secretary of State of the State of New York, as provided by section 16 of the General Corporation Law of said State of New York."
"II. Whether the proceedings in and the decisions of the courts of the State of New York, construing said corporation law, were controlling upon this Court."
"III. Whether the proceedings taken by said defendant in said state court are res judicata upon defendant."
plaintiff, but, against its contention, by the supreme court of the state, whose judgment was affirmed, also against its contention, by the appellate division of that court. This did not take jurisdiction from the state court to proceed against the construction company, nor make the judgment against it invalid.
"This might have been so if, when the cause was called for trial in the state court, plaintiff had discontinued his action against the railway company, and thereby elected to prosecute it against the receivers solely, instead of prosecuting it on the joint cause of action set up in the complaint against all of the defendants. Powers v. Chesapeake & Ohio Railway, 169 U. S. 92. But that is not this case. The joint liability was insisted on here to the close of the trial, and the nonliability of the railway company was ruled in invitum. . . . This was a ruling on the merits, and not a ruling on the question of jurisdiction. It was adverse to plaintiff and without his assent, and the trial court rightly held that it did not operate to make the cause then removable, and thereby to enable the other defendants to prevent plaintiff from taking a verdict against them."
The Whitcomb case and the Powers case are commented on and impliedly approved in Chesapeake & Ohio Ry. Co. v. Dixon, 179 U. S. 137, 179 U. S. 138, and again in Kansas City Suburban Belt Ry. Co. v. Herman, 187 U. S. 63; Fritzlen v. Boatmen's Bank, 212 U. S. 372. See also Alabama Great Southern Ry. v. Thompson, 200 U. S. 206.
Reversed, and the cause remanded with directions to grant the motion of plaintiff to remand the case to the supreme court of the State of New York. So ordered.

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