103 F.2d 765 (2nd Cir. 1939), 309, Neirbo Co. v. Bethlehem Shipbuilding Corporation

Docket Nº:309.
Citation:103 F.2d 765
Case Date:April 10, 1939
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 765

103 F.2d 765 (2nd Cir. 1939)

NEIRBO CO. et al.



No. 309.

United States Court of Appeals, Second Circuit.

April 10, 1939

Robert P. Weil, of New York City (Laurence A. Tanzer, of New York City, of counsel), for appellants.

William Dwight Whitney, of New York City (Cravath, deGersdorff, Swaine & Wood, and Robert D. Blasier, all of New York City, of counsel), for appellee.

Before L. HAND and CLARK, Circuit Judges.

CLARK, Circuit Judge.

This appeal assigns error in the action of the District Court in granting the motion of Bethlehem Shipbuilding Corporation,

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Ltd. to quash service of process upon it and in dismissing the action as to it on the ground that it was not a resident of the Southern District of New York within the requirements of the federal venue statute, Jud. Code Sec. 51, 28 U.S.C.A. §112. Appellants, plaintiffs below, ground their appeal on two claims: first, that appellee, the Bethlehem corporation, is a resident of the District, notwithstanding its incorporation in the State of Delaware, because of the location of its chief business and executive offices within the District and its designation of an agent to accept process there, in compliance with the conditions under which a foreign corporation is legally permitted to do business within the State of New York, and second, that such designation of an agent to accept process in connection with appellee's qualification to do business in New York is a waiver of the venue defense. In the light of the statutory language and of the well settled rule that lack of venue is a personal privilege which a defendant can waive, a reversal of the order of dismissal would become necessary if either the claim of residence in the district or that of waiver could be sustained. But whatever objections of policy may be urged against it, we feel that law to the contrary is too well established to be now overturned.

The action was originally brought by the appellants, who are citizens and residents of New Jersey, against United Shipyards, Inc., a New York corporation of which they are stockholders, to restrain the carrying out by the latter of a contract for the sale of drydocks in the waters of New York Harbor and other property to Bethlehem Shipbuilding Corporation, Ltd. The court refused to stay the sale, but added certain other persons as parties on the plaintiffs' motion. Then the plaintiffs filed an amended and supplemental bill alleging the consummation of the sale and praying relief in respect thereof. In this bill they asked that the Bethlehem corporation be added, and they described it as 'a corporation organized and existing under the laws of the State of Delaware, and * * * a citizen and resident of the State of Delaware. ' The court ordered that Bethlehem be added as a defendant. Upon being served with process, Bethlehem appeared specially and moved to quash the service and the Marshal's return thereof. The appeal is taken from the other granting Bethlehem's motion and dismissing the action as to it.

The material provisions of Jud. Code Sec. 51, 28 U.S.C.A. § 112, applicable to this action are as follows: ' * * * no civil suit shall be brought in any district court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant; but where jurisdiction is founded only on the fact that the action is between citizens of different States, suit shall be brought only in the district of the residence of either the plaintiff or the defendant.'

Since jurisdiction of the present action is founded on the diversity of citizenship of the parties, the latter part of this statute applies. It is settled, however, that except for the limitation of suit to a single district--that whereof the defendant is an inhabitant-- in suits other than those based on diversity of citizenship, the requirements of the two parts of the statute are identical, and precedents as to one part are equally authoritative as to the other. In re Keasbey & Mattison Co., 160 U.S. 221, 16 S.Ct. 273, 40 L.Ed. 402. The defense of lack of venue was open to this defendant, notwithstanding the presence in the action of other defendants properly sued in the district. Camp v. Gress, 250 U.S. 308, 39 S.Ct. 478, 63 L.Ed. 997; McLean v. State of Mississippi, 5 Cir., 96 F.2d 741, 119 A.L.R. 670, certiorari denied 59 S.Ct. 84, 83 L.Ed.-- .

We shall consider successively the two claims of error urged by appellants.

First. Suits by and between corporations as citizens of different states have always presented troublesome problems of jurisdiction to the federal courts. For half a century after the passage of the first judiciary act, a corporation was allowed to sue or be sued in the circuit courts only when all its members were citizens of the state which created it. Bank of United States v. Deveaux, 5 Cranch 61, 3 L.Ed. 38. But in 1844, it was held in Louisville, C. & C. R. Co. v. Letson, 2 How. 497, 11 L.Ed. 353, that for the purposes of determining federal jurisdiction a corporation was to be deemed a person or an inhabitant, and thus a citizen, of the state in which it was incorporated. Although this conclusion has been assailed as unreal, it has been consistently followed every since, and attempts at legislative

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change, even when made under distinguished sponsorship, have proven unsuccessful. 1 Hence on all questions of jurisdiction involving diversity of citizenship, this appellee is conclusively determined to be a citizen of the State of Delaware by reason of its incorporation there

It was perhaps not logically necessary that a like conclusion should be reached as to the residence of a corporation under the requirements as to venue; but such a conclusion was a natural one, in the light of the language of the Letson case and the policy involved. And it was the meaning ascribed to the residence requirement in Ex parte Schollenberger, 96 U.S. 369, 377, 24 L.Ed. 853, decided in 1877. Yet the question was not then important, for the venue statute, from the time of the original judiciary act, had provided that a defendant might be sued in a district in which he should be 'found' at the time of serving the writ. Act of Sept. 24, 1789, c. 20, § 11, 1 Stat. 79; Act of Mar. 3, 1875, c. 137, 18 Stat. 470. Hence the court held that a corporation doing business within the state was to be found within it for the purposes of venue. Ex parte Schollenberger, supra. This part of the statute was, however, eliminated in 1887. Act of Mar. 3, 1887, c. 373, § 1, 24 Stat. 552, as corrected by the Act of Aug. 13, 1888, c. 866, § 1, 25 Stat. 433. From that time the statute has required residence in (or being an inhabitant of) the district to support the action. Jud. Code Sec. 51, 28 U.S.C.A. § 112, supra. After the change in the statute it has been held uniformly by the Supreme Court and generally by the lower federal courts that residence is limited to the state of incorporation of the corporation and is not satisfied by the doing of business within the state. Shaw v. Quincy Mining Co., 145 U.S. 444, 12 S.Ct. 935, 36 L.Ed. 768; Southern Pacific Co. v. Denton, 146 U.S. 202, 13 S.Ct. 44, 36 L.Ed. 942; In re Keasbey & Mattison Co., 160 U.S. 221, 16 S.Ct. 273, 40 L.Ed. 402; Macon Grocery Co. v. Atlantic Coast Line R. Co., 215 U.S. 501, 30 S.Ct. 184, 54 L.Ed. 300; Seaboard Rice Milling Co. v. Chicago, R.I. & P. Ry. Co., 270 U.S.. 363, 46 S.Ct. 247, 70 L.Ed. 633; Yanuszauckas v. Mallory S.S. Co., 2 Cir., 232 F. 132; McLean v. State of Mississippi, 5 Cir., 96 F.2d 741, 119 A.L.R. 670, certiorari denied, 59 S.Ct. 84, 83 L.Ed.--; Central West Public Service Co. v. Craig, 8 Cir., 70 F.2d 427; De Dood v. Pullman Co., 2 Cir., 57 F.2d 171, affirming D.C.E.D.N.Y., 53 F.2d 95.

Among the several decisions of district courts to the same effect may be cited that of A. N. Hand, D.J., in Beech-Nut Packing Co. v. P. Lorillard Co., D.C.S.D.N.Y., 287 F. 271, in 1921, relied on by the court below in the present case. The only exception in recent years to this uniform current of decision seems to be Dodge Mfg. Co. v. Patten, 7 Cir., 60 F.2d 676, affirming D.C. Ind., 23 F.2d 852, which was based upon the decision of Mr. Justice Harlan on circuit in U.S. v. Southern Pacific R. Co., C.C.N.D. Cal., 49 F. 297. The court, however, failed to note the later contrary decisions of the Supreme Court, in several of which Mr. Justice Harlan dissented. Cf. Shaw v. Quincy Mining Co. and Macon Grocery Co. v. Atlantic Coast Line R. Co., supra. 2

Appellants, however, criticize the policy followed in these cases as applied to the modern private corporation doing business in many different places and suggest ingenious distinctions to lessen their force as precedents. But so far as the policy is concerned, Congress has shown itself as yet distinctly uninterested in a change in

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the direction urged by appellants. Indeed, so long as the...

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