Walmac Company v. Isaacs, 4863.

CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)
Citation220 F.2d 108
Docket NumberNo. 4863.,4863.
PartiesThe WALMAC COMPANY, Inc., Plaintiff-Appellant, v. Irving A. ISAACS et al., Defendants-Appellees.
Decision Date10 March 1955

Walter I. Sundlun, Providence, R. I., with whom Albert A. Baker, Providence, R. I., was on the brief, for appellant.

Stephen B. Ives, Jr., Providence, R. I., with whom Matthew W. Goring, Providence, R. I., was on the brief, for Irving A. Isaacs, appellee.

Before MAGRUDER, Chief Judge, and WOODBURY and HARTIGAN, Circuit Judges.

WOODBURY, Circuit Judge.

This appeal from an order denying injunctive relief presents a question of federal jurisdiction under the interpleader statute.1 Title 28 U.S.C. § 1335. Since an earlier suit brought by Isaacs against Walmac under the diversity statute, Title 28 U.S.C. § 1332(a) (1), is directly involved, indeed entangled, in the present litigation, we must state that case as well as the one actually before us on this appeal. We shall describe the cases in the order in which they were brought.

In July 1952, Isaacs, a citizen of Massachusetts, brought suit in the court below against The Walmac Company, Inc., a Rhode Island corporation, for a judgment defining his rights under an alleged contract with Walmac to pay a real estate brokerage fee, and to recover such a fee in the amount of $10,230. Walmac answered admitting Isaacs' participation in negotiating a lease of part of a building which it owned in Providence, Rhode Island, and its liability to pay a brokerage fee calculated in accordance with the rates established by the Providence Real Estate Board, which it said amounted to $4,725, but denying that it had ever agreed to pay Isaacs any particular part or percentage of that fee. As its seventh defense to this action Walmac filed what it called a "Counter-claim for Interpleader" the substance of which, so far as we can make out from the tangled verbiage of that defense read in connection with its other defenses, is that Walmac, through its attorney Sundlun, a citizen of Rhode Island, agreed with Isaacs to pay $1,500 of the $4,725 fee to one Singer, a citizen of New York, and that Sundlun and Isaacs agreed to divide the remaining balance of the fee between them but had not been able to agree upon the amount thereof to which each was entitled. Wherefore Walmac asked that Singer and Sundlun be joined as parties defendant, and that they and Isaacs be ordered to interplead their respective claims. On Isaacs' motion the court below dismissed Walmac's counterclaim for interpleader on the ground of failure to deposit $4,725 in the registry of the court, or to give bond therefor, and also on the ground of lack of federal jurisdiction for the reason that Walmac and Sundlun were citizens of the same state, Rhode Island, D.C., 15 F.R. D. 341. Walmac filed an appeal from this order which we dismissed on motion under our Rule 26(3) for lack of appellate jurisdiction, 1 Cir., 212 F.2d 437. That case is still pending in the court below.

In the meantime in September 1952 Walmac, asserting federal jurisdiction under Title 28 U.S.C. § 1332 for diversity of citizenship and amount in controversy, began the instant suit by filing a complaint against Isaacs in the court below entitled "Complaint for Interpleader and Declaratory Relief" wherein it alleged substantially the same matter it had previously alleged in its seventh defense to the suit brought against it by Isaacs. Within the time limited for amendment as a matter of course by Rule 15(a) F.R.C.P., 28 U.S.C., however, Walmac amended its complaint to join Singer and Sundlun as parties defendant and to assert federal jurisdiction under the interpleader statute. Title 28 U.S.C. § 1335. At the same time it paid $4,725, the amount it admitted all along that it owed for a brokerage fee, into the registry of the court.

The impleaded defendants Singer and Sundlun were served with process and answered promptly. Singer in his answer claimed that by virtue of an agreement with Sundlun and Isaacs he was entitled to $1,500 out of the fund deposited in court, and asserted that he had made demand therefor upon Isaacs and Walmac but payment had been refused. Sundlun in his answer asserted that he had rendered valuable services to Walmac in connection with the leasing of its premises for which he was entitled to "no less than" $2,350, and that "it was agreed," he did not say by whom, that he was to be paid for his services out of the $4,725 that Walmac admitted it was obligated to pay for services rendered in connection with the leasing of its premises.

Isaacs, however, did not answer immediately but moved under Rule 12(f) to strike Walmac's amended complaint on the ground that the averments therein were not simple, concise and direct as required by Rule 8(e) (1). This motion was denied after hearing on the ground that although Walmac's pleading was not artistic (definitely an understatement), nevertheless its allegations related to the controversy and Isaacs had not shown any prejudice.

Upon disposition of this motion Isaacs answered alleging in the language of his earlier complaint against Walmac that the amount of the brokerage fee owed by Walmac was not $4,725, as it alleged, but was actually $10,230, and that he was entitled to all of it. Wherefore he asked that Walmac's complaint for interpleader be dismissed as to him for the reason that their dispute was the subject matter of his pending suit against Walmac.

We now interrupt our recitation of the pleadings to note that at this stage of the interpleader proceeding, assuming that Walmac had made out a case for relief, it had made out a case over which the District Court had jurisdiction under the interpleader statute.2 The reason for this is that at this point the complainant, Walmac, was a mere stakeholder and all of the claimants-defendants named in the interpleader suit, that is to say Isaacs, Singer, and Sundlun, are citizens of different states, and this satisfies jurisdictional requirements even though the plaintiff in interpleader, Walmac, and one of the claimants, Sundlun, are citizens of the same state. Treinies v. Sunshine Mining Co., 1939, 308 U.S. 66, 60 S.Ct. 44, 84 L.Ed. 85. Furthermore the venue provision of Title 28 U.S.C. § 1397 is satisfied, for one of the claimants, again Sundlun, resides in the judicial district in which the suit was brought.

Thus at this point the District Court had jurisdiction of Isaacs' suit against Walmac under the diversity statute, and it also had jurisdiction of Walmac's action against Isaacs, Singer, and Sundlun under the interpleader statute, with the result that, common questions being involved, the two suits could have been consolidated under Rule 42(a) and all of the issues raised in both suits threshed out in one trial.

The proceedings below, however, took a different turn, for in the interpleader suit Walmac deposited $5,505 (the difference between its original deposit of $4,725 and the $10,230 demanded by Isaacs in his answer) in the registry of the court "without prejudice" to its right to recover the same, and then moved in accordance with Title 28 U.S. C. § 2361 for an order restraining all defendants from prosecuting any action already commenced and from initiating any new one in any court, state or federal, affecting the matter in controversy. The court below after hearing denied Walmac's motion for injunctive relief and thereupon Walmac took the instant appeal.

In summary the situation which emerges from the verbose, involved, and confusing pleadings the essence of which we have recited above is this: There is a suit pending in the court below in which Isaacs, a citizen of Massachusetts, is seeking to recover a $10,230 real estate brokerage fee from Walmac, a Rhode Island corporation, wherein Walmac admits that it owes $4,725, and apparently also admits that it owes some undetermined part, but not all, of that amount to Isaacs. Also there is pending in the same court a suit by Walmac against Isaacs, Singer, and Sundlun wherein Walmac has deposited $10,230 in the registry of the court with a claim to recover $5,505 of that amount itself, and wherein Isaacs claims the entire deposit but Singer and Sundlun claim only fractional parts of the $4,725 which Walmac admits that it owes.

The District Court gave no reason for its refusal to grant Walmac the injunctive relief for which it asked. But, since that court dismissed Walmac's seventh defense to Isaacs' suit against it, wherein it sought like relief, in part for lack of jurisdiction for the reason that Walmac and one of the claimants, Sundlun, were citizens of the same state, we assume that the court denied injunctive relief in this interpleader suit for the same reason. At any rate, since federal jurisdiction over this controversy is fundamental, we must under established principles look into that matter before considering the merits. Treinies v. Sunshine Mining Co., 1939, 308 U.S. 66, 70, 60 S.Ct. 44.

We have already noted that the case last cited holds that there is federal jurisdiction under the interpleader statute of a straight bill of interpleader, i. e. one in which the plaintiff is a mere stakeholder, even though the complainant and one of the claimants are citizens of the same state. That case, however, does not rule this one, for when Walmac paid the $5,505 into the registry of the court below "without prejudice" to its right to recover the same, it transformed its pure bill of interpleader into a bill in the nature of a bill of interpleader, i. e. one in which the complainant asserts a claim to part of the fund in dispute, and thereby added the role of claimant to its original role of stakeholder.

Possibly under the early federal rule with respect to strict bills of interpleader, and perhaps under the rule still in force in some states, this action on Walmac's part would have ousted the court of its equity jurisdiction because of the rigid...

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