Clarence Venner v. Great Northern Railway Company

Decision Date24 February 1908
Docket NumberNo. 485,485
Citation52 L.Ed. 666,28 S.Ct. 328,209 U.S. 24
PartiesCLARENCE H. VENNER, Appt., v. GREAT NORTHERN RAILWAY COMPANY and James J. Hill
CourtU.S. Supreme Court

Messrs. Abram J. Rose, George H. Yeaman, Alfred C. Pett e, and Stephen M. Yeaman for appellant.

[Argument of Counsel from pages 25-27 intentionally omitted] Mr. Julius F. Workum for appellees.

[Argument of Counsel from pages 27-28 intentionally omitted] Mr. Justice Moody delivered the opinion of the court:

The appellant, a citizen of New York, brought this suit in equity in the supreme court of New York against the defendant railroad, a citizen of Minnesota, and the other defendant, its president, also a citizen of Minnesota. The complaint set forth in substance the following facts upon which the right to relief was claimed: The plaintiff was a stockholder in the defendant railroad at the time of the beginning of the suit in 1906. Whether or not he was a stockholder at the time when the alleged wrongful acts were committed by the defendants does not appear by any allegation in the complaint. The defendant James J. Hill was a director and the president of the other defendant, the Great Northern Railway Company, and that railroad and its board of directors were under his absolute control. While holding these offices and exercising this control, in 1900 and 1901, Hill purchased, or caused to be purchased for his use, stock of the Chicago, Burlington, & Quincy Railroad Company of the par value of $25,000,000, at an average price of $150 a share. This purchase was made with the design of selling the stock at a higher price to the company of which he was a director and president. Subsequently, in 1901, while still holding his offices in the Great Northern Railway and exercising the same control over that corporation, he sold to it a large amount of the stock of the Chicago, Burlington, & Quincy Railroad Company owned by him, and made an unlawful profit of $10,000,000 on the transaction. Before bringing this suit the plaintiff demanded of the Great Northern Railway Company that it bring suit against Hill to compel him to account for and pay over to it the wrongful profit which he had obtained. The railroad refused to comply with this demand, and thereupon the plaintiff brought this suit as a stockholder, in his own behalf, and in the behalf and for the benefit of other stockholders similarly situated. The prayer was that Hill should account for his profit and pay it to the Great Northern Railway Company with interest, and for general relief. On the defendants' petition the case was removed to the United States circuit court for the southern district of New York, on the ground of diversity of citizenship of the plaintiff and the defendants. In that court the plaintiff was ordered to 'replead the complaint herein according to the forms and practice prevailing in equity.' This was done on November 9, 1906. The new complaint set forth the facts in greater detail and with some variations, but its substance and effect was similar to that of the first complaint. The complaint did not conform to the requirements of the 94th equity rule, relating to suits of this nature, in that it failed to allege that the plaintiff was a shareholder at the time of the transactions of which he complains, or that his shares had devolved on him since by operation of law, or that the suit was not collusive, or the particulars of his efforts to procure action by the corporation defendant. The defendants then demurred separately to the bill, and the defendant Hill subjoined to his demurrer an affidavit denying every allegation in it tending to show wrongful conduct on his part. Thereafter the plaintiff moved to remand the cause to the state court on the ground that the circuit court was without jurisdiction over it. This motion was denied. The demurrer was sustained and the bill dismissed. The correctness of the ruling on the demurrer and the dismissal is not before us. The case comes here on direct appeal from the circuit court on the question of jurisdiction alone, certified in the following terms: 'Now, therefore, the court hereby certifies to the Supreme Court of the United States the question of jurisdiction which has arisen upon the aforesaid motion to remand and the demurrers to the complaint, to wit: Whether or not the complainant's amended bill of complaint showed that there was such diversity of citizenship between the party complainant and the parties defendants in this cause as would be sufficient, under the provisions of the United States Revised Statutes, to confer jurisdiction upon the United States circuit court for the southern district of New York of this cause, and whether this cause, as brought in the supreme court of the state of New York, was one over which this court would have had original jurisdiction, and was therefore removable into this court.'

We consider nothing but the question of jurisdiction, and express no opinion upon the decision upon the demurrer, which is not properly here. Schunk v. Moline, M. & S. Co. 147 U. S. 500, 37 L. ed. 255, 13 Sup. Ct. Rep. 416; Smith v. Mckay, 161 U. S. 355, 40 L. ed. 731, 16 Sup. Ct. Rep. 490; Mexican C. R. Co. v. Eckman, 187 U. S. 429, 47 L. ed. 245, 23 Sup. Ct. Rep. 211; Hennessy v Richardson Drug Co. 189 U. S. 25, 47 L. ed. 697, 23 Sup. Ct. Rep. 532; Chicago v. Mills, 204 U. S. 321, 51 L. ed. 504, 27 Sup. Ct. Rep. 286.

The cause was removable to the circuit court by the defendants if it was one of which that court was given jurisdiction. 25 Stat. at L. 434, chap. 866, U. S. Comp. Stat. 1901, p. 508; Mexican Nat. R. Co. v. Davidson, 157 U. S. 201, 39 L. ed. 672, 15 Sup. Ct. Rep. 563; Madisonville Traction Co. v. St. Bernard Min. Co. 196 U. S. 239, 49 L. ed. 462, 25 Sup. Ct. Rep. 251. The only ground of original jurisdiction or of removal was that the suit was a controversy between citizens of different states. In that case Congress has given the circuit court jurisdiction over it, with certain limitations not material here. 25 Stat. at L. 434, chap. 866, U. S. Comp. Stat. 1901, p. 508. The plaintiff contends that the circuit court was without jurisdiction of the cause, and should therefore have remanded it to the state court, for two reasons: First, because, upon a proper alignment of the parties, there was not a controversy between citizens of different states. Second, because the cause of action, as disclosed by the pleadings, showed that the circuit court had no jurisdiction over the subject-matter. These reasons are entirely independent of each other and require separate consideration. First, was there a controversy between citizens of different states? As the parties were arranged by the plaintiff himself, on the face of the record there was a diversity of citizenship. The plaintiff was a citizen of New York and the two defendants were citizens of Minnesota. But the plaintiff insists that, by looking through the superficial aspects of the controversy to its real substance, it is seen that the railway company's interest is adverse to that of the other defendant, and the same as that of the plaintiff, and that therefore, for the purpose of determining the jurisdiction, the defendant railroad should be regarded as a plaintiff. If this should be done there would be a citizen of Minnesota, a plaintiff, and another citizen of Minnesota, a defendant, and the diversity of citizenship which is indispensable to the jurisdiction of the circuit court would no longer exist. Let it be assumed for the purposes of this decision that the court may disregard the arrangement of parties made by the pleader, and align them upon the side where their interest in and attitude to the controversy really place them, and then may determine the jurisdictional question in view of this alignment. Removal Cases, 100 U. S. 457, 25 L. ed. 593; Pacific R. Co. v. Ketchum, 101 U. S. 289, 25 L. ed. 932; Harter Twp. v. Kernochan, 103 U. S. 562, 566, 26 L. ed. 411, 412; Wilson v. Oswego Twp. 151 U. S. 56, 63, 38 L. ed. 70, 73, 14 Sup. Ct. Rep. 259; Merchants' Cotton Press Storage Co. v. Insurance Co. of N. A. 151 U. S. 368, 385, 38 L. ed. 195, 204, 4 Inters. Com. Rep. 499, 14 Sup. Ct. Rep. 367; Evers v. Watson, 156 U. S. 527, 532, 39 L. ed. 520, 522, 15 Sup. Ct. Rep. 430. If this rule should be applied it would leave the parties here where the pleader has arranged them. It would doubtless be for the financial interests of the defendant railroad that the plaintiff should prevail. But that is not enough. Both defendants unite, as sufficiently appears by the petition and other proceedings, in resisting the plaintiff's claim of illegality and fraud. They are alleged to have engaged in the same illegal and fraudulent conduct, and the injury is alleged to have been accomplished by their joint action. The...

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