BLACK & WHITE TAXI. & T. CO. v. BROWN & YELLOW TAXI. & T. CO.

• Decision Date: 06 November 1926
• Docket Number: No. 4703.,4703.
• Citation: 15 F.2d 509
• Parties: BLACK & WHITE TAXICAB & TRANSFER CO. v. BROWN & YELLOW TAXICAB & TRANSFER CO.
• Court: U.S. Court of Appeals — Sixth Circuit

15 F.2d 509 (1926)

BLACK & WHITE TAXICAB & TRANSFER CO. v. BROWN & YELLOW TAXICAB & TRANSFER CO.

No. 4703.

Circuit Court of Appeals, Sixth Circuit.

November 6, 1926.

N. P. Sims, of Bowling Green, Ky. (Guy H. Herdman, of Bowling Green, Ky., on the brief), for appellant.

M. M. Logan, of Bowling Green, Ky. (Thomas, Thomas & Logan, of Bowling Green, Ky., on the brief), for appellee.

Before DONAHUE, MOORMAN, and KNAPPEN, Circuit Judges.

KNAPPEN, Circuit Judge.

The appellee is a corporation organized under the laws of Tennessee, with authority¹ — not only in that state, but in other states — to carry on the business of operating for hire taxicabs, trucks, and other vehicles for transporting passengers, baggage, freight, etc. It was carrying on a general transfer business at Bowling Green, Ky. December 1, 1925, it made written agreement with the Louisville & Nashville Railroad Company, a Kentucky corporation, whereby, on sufficient consideration, it was given for a term of five years (with certain renewal rights and subject to certain conditions and limitations) "the exclusive right and privilege, in so far as it the railroad company can legally do so, to solicit the handling or hauling of baggage and passengers on the trains of the railroad company and in and around the railroad company's passenger depot and on the surrounding premises, with privilege to have an agent go into the waiting rooms or upon the platform of the depot to take orders for the conveyance of passengers on inbound trains," with an assignment of a designated plot of ground adjoining the railway platform for the use of appellee to park its taxicabs while awaiting the arrival of trains. While a like plot at the opposite end of the station was reserved for private vehicles, "not including public taxicabs of outside parties," appellee was given the right, when necessary, to use such space as is not occupied by private motor cars; the railroad company reserving the right to change the location of such parking space from time to time, as it might deem necessary or advisable.

Appellant refusing to recognize the validity of such exclusive contract, and accordingly violating the same, and the railroad company, while not consenting to or permitting such violation, not having prevented appellant therefrom, appellee filed its bill in equity herein for the enforcement of the contract. Admittedly the plaintiff company (appellee) was originally a Kentucky corporation; the incorporators and stockholders being three brothers and their wives. About September 24, 1925 (the precise date is not material), the Kentucky corporation was dissolved, and plaintiff corporation formed under the same name, the incorporators being the same as in the Kentucky corporation. The properties of the Kentucky corporation were turned over to the Tennessee corporation; otherwise, no cash or real estate was paid for the stock in the latter, as the articles of incorporation required. The plaintiff corporation has no property in Tennessee, and transacts no business there. Its designated office is in the residence of a brother, at a stated location in Nashville, Tenn., but plaintiff corporation keeps no books there, nor has it there any offices for business.²

It is conceded that plaintiff corporation dissolved its Kentucky corporation and reincorporated in Tennessee "for protection in this controversy or any controversy that may arise out of this or any contracts." The railroad company was made codefendant with the appellant taxicab company, which denied plaintiff's right to maintain its bill and moved to dismiss the same for the reasons — so far as now important — (1) that under the settled law of Kentucky the contract sued on was contrary to public policy, unauthorized by the railway company's charter, monopolistic, null, and void; (2) that the contract is in violation of section 214 of the Kentucky Constitution and section 818 of the Kentucky Statutes; (3) that plaintiff's action in dissolving the Kentucky corporation while having a similar contract with the railway company, and in attempting reincorporation under the same name in Tennessee, for the purpose of bringing this action in the court below, and evading the settled law of Kentucky governing the contract sued on, was a collusion and fraud on this court for which plaintiff's bill should be dismissed under section 37 of the Judicial Code (Comp. St. § 1019).

The District Court held that plaintiff was guilty of no fraud on the jurisdiction of the court, and that the contract was valid and enforceable. Relief was decreed accordingly.

1. The suit was not collusive within the Code section in question. The motives which induced the plaintiff company to incorporate under the Tennessee statute can have no influence on its validity. Upon the subject of collusion generally the rule is well settled that where, as here, the proposed suit involves a substantial controversy, the fact that plaintiff and the railway company preferred that litigation be had in the federal courts, instead of in the courts of the state, is not wrongful. "So long as no improper act was done by which the jurisdiction of the federal court attached, the motive for bringing the suit there is unimportant." In re Metropolitan Ry. Receivership, 208 U. S. 90, 111, 28 S. Ct. 219, 225 (52 L. Ed. 403) and cases cited on the latter page; Lehigh Mining, etc., Co. v. Kelly, 160 U. S. 327, 332, 333, 16 S. Ct. 307, 40 L. Ed. 444. In the Metropolitan Case the defendant not only admitted the averments of the bill, but joined in the request for the appointment of receivers. It was not necessary to the jurisdiction "that the defendant should controvert or dispute the claim. It is sufficient that he does not satisfy it." In re Metropolitan Ry. Receivership, supra, at page 108 (28 S. Ct. 223). Equally with or without the presence of the railroad company as defendant, and whether or not it was a necessary party, the court below had jurisdiction on account of diverse citizenship, as both defendants were citizens of Kentucky.

The ultimately decisive question is merely whether the Tennessee incorporation is real or fictitious, having in mind that the incorporation is none the less real because of the motive which occasioned it. McDonald v. Smalley, 1 Pet. 620, 624, 7 L. Ed. 287; Smith v. Kernochen, 7 How. 198, 216, 12 L. Ed. 666; Barney v. Baltimore, 6 Wall. 280, 288, 18 L. Ed. 825; Lehigh Mining, etc., Co., supra. The last-cited case, while relied upon by appellant, contains nothing inconsistent with the proposition herein stated, as applied to the instant case. There the stockholders of a Virginia corporation organized themselves into a corporation under the laws of Pennsylvania, the Virginia corporation conveying its lands in question to the Pennsylvania corporation, which brought in the federal court a suit in ejectment for the land. The Virginia corporation, however, was not dissolved. Both corporations still existed.³

In the case here, on the contrary, the title had actually passed from the Kentucky corporation to the Tennessee corporation. The former had been actually dissolved and its existence terminated. The latter became the sole owner of the right of action. Its Tennessee citizenship was complete and unassailable. The federal court thus could not be imposed upon with respect to either citizenship or subject-matter of litigation. There was no other corporation clothed with power to compel conveyance by the Tennessee corporation. It seems too plain for argument that the practical wiping out of the stock in the Kentucky corporation was a sufficient consideration for the receipt of the stock in the Tennessee corporation.

Nor is there anything in Miller & Lux v. East Side Canal Co., 211 U. S. 293, 29 S. Ct. 111, 53 L. Ed. 189, opposed to the conclusion above stated. There a California corporation transferred its property to a corporation organized by it and its stockholders under the laws of Nevada. The Nevada corporation brought suit in the federal court, asking substantially the same relief as sought in a pending suit brought by the California corporation in a state court, the latter case not having been decided when the suit in the federal court was brought.⁴ It may be noted that in the Miller & Lux Case (page 304 29 S. Ct. 114) it was expressly said: "If before the institution of this suit the California corporation had distributed among those entitled to it the stock of the Nevada corporation, issued to it as fully paid up stock, and had then ceased to exist or been dissolved, a different question might have been presented. But such is not this case." And see the Lehigh Case, supra, at page 336 (16 S. Ct. 307) — middle paragraph.

We find in the record of the instant case no tangible evidence that the Tennessee corporation was not intended to be permanent. Not only was the Kentucky corporation actually dissolved and the Kentucky citizenship given up, but presumably the Tennessee incorporation would thereafter be as convenient and desirable as an incorporation in Kentucky.

In Morris v. Gilmer, 129 U. S. 315, 328, 329, 9 S. Ct. 289, 293 (32 L. Ed. 690), where a suit in the federal court was dismissed for bad faith on the part of the individual plaintiff in attempting to acquire a Tennessee residence, the court affirmatively found that "his sole object in removing to that state Tennessee was to place himself in a situation to invoke the jurisdiction of a Circuit Court of the United States. He went to Tennessee without any present intention to remain there permanently or for an indefinite time, but with the present intention to return to Alabama as soon as he could do so without defeating the jurisdiction of the federal court to determine his new suit. He was therefore a mere sojourner in the former state when this suit was brought. He returned to Alabama almost immediately after giving his deposition."

The record in the instant case supports no such conclusion....