Fifty Associates v. Prudential Insurance Co. of America

Citation446 F.2d 1187
Decision Date06 October 1970
Docket NumberNo. 23936.,23936.
PartiesFIFTY ASSOCIATES, a Massachusetts corporation, Appellant, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

James Powers (argued), of Powers, Boutell, Fannin & Ridge, Phoenix, Ariz., for appellant.

Daniel T. Bergin (argued), Robt. H. Carlyn, Robt. P. Robinson, of Fennemore, Craig, von Ammon & Udall, Phoenix, Ariz., for appellee.

Before MERRILL and KOELSCH, Circuit Judges, and BYRNE,* District Judge.

BYRNE, District Judge.

This case presents an excellent example of the problems confronting a pleader in a federal court of limited jurisdiction, who is accustomed to preparing pleadings in a state court of general jurisdiction.

Appellant Fifty Associates and its lessee of Arizona real estate, Mayer-Central Building Company, executed a mortgage on certain property in Phoenix, to Prudential Insurance Company of America. After Mayer defaulted in making payments due to Prudential, the appellee filed a foreclosure action in federal court. Jurisdiction purportedly was based on the diversity of citizenship provisions of Title 28 U.S.C. § 1332. Prudential named as defendants the parties set forth in the margin.1

Within the body of the complaint Prudential alleged with respect to diversity jurisdiction:

"At all times herein mentioned plaintiff was and is a New Jersey corporation and a citizen of the State of New Jersey with its principal place of business in said state; the defendant, Fifty Associates, a Massachusetts corporation, is a citizen of the State of Massachusetts with its principal place of business in the State of Massachusetts; the defendant, Mayer Central Building Corporation, an Arizona corporation, is a citizen of Arizona with its principal place of business in the State of Arizona; defendant, Federated Mortgage Investors, a New York investment trust, is a citizen of New York with its principal place of business in the State of New York; defendant, Walter E. Fulford, is a citizen and resident of the State of Arizona and defendant, Dick Searles, is a citizen and resident of the State of Arizona, and they are duly qualified and acting co-trustees of Mayer Central Building Corporation, an Arizona corporation, a petitioner for reorganization under Chapter 10 of the Bankruptcy Act in Cause B-13806-Phx. in the United States District Court for the District of Arizona. Defendants, John Doe One through Ten, Jane Doe One through Ten, Brown and Smith, a partnership, and Black Corporations One through Ten, whether singular or plural, are fictitious names designating an individual or individuals, masculine or feminine, or legal entities unknown to plaintiff, none of which are citizens of New Jersey nor having principal places of business within said State of New Jersey. Plaintiff prays that when the true name or names of said fictitious defendants are discovered, that the same may be inserted herein as if correctly named originally herein. The amount in controversy exceeds $10,000 exclusive of interest and costs. This court has jurisdiction pursuant to 28 U.S.C. 1332."

After considering the cause without a jury, the district court entered a "Judgment and Decree of Foreclosure and Sale" in favor of Prudential titled:

"The Prudential Insurance Company of America, Plaintiff, vs. Fifty Associates, a Massachusetts corporation; Mayer-Central Building Corporation, an Arizona corporation; Rex Maughan, Trustee of the Estate of Mayer-Central Building Corporation; Federated Mortgage Investors, a New York Investment Trust; Consolidated Roofing & Supply Company, an Arizona corporation; Mayer Development Corporation, an Arizona corporation; Mayer-Central Plaza Company, a partnership; Eric D. Mayer; Francine Mayer, wife of Eric D. Mayer; Lawrence D. Mayer; Pauline Mayer; wife of Lawrence D. Mayer; Arizona State Tax Commission, an agency and department of the State of Arizona, Defendants."

The district court noted that each of the defendants had been served regularly with process, that all defendants, except Fifty Associates and the State of Arizona (Arizona State Tax Commission), failed to answer the complaint or otherwise plead, and that defaults had been entered against all defendants, except Fifty Associates and the State of Arizona,2 according to law.

A motion for summary judgment was made and granted. After entry of the foreclosure judgment, this appeal of Fifty Associates followed.

It is clear that the district court did not have jurisdiction. "A plaintiff suing in a federal court must show in his pleading, affirmatively and distinctly, the existence of whatever is essential to federal jurisdiction, and, if he does not do so, the court, on having the defect called to its attention or on discovering the same, must dismiss the case, unless the defect be corrected by amendment." Smith v. McCullough, 270 U.S. 456, 459, 46 S.Ct. 338, 339, 70 L.Ed. 682.

Federal courts being courts of limited jurisdiction, the presumption is that it is without jurisdiction unless the contrary affirmatively appears. Grace v. American Central Ins. Co., 109 U.S. 278, 3 S.Ct. 207, 27 L.Ed. 932; Robertson v. Cease, 97 U.S. 646, 649, 24 L.Ed. 1057.

Failure to make proper and complete allegations of diversity jurisdiction relegates a litigant to the jurisdictional purgatory described by Chief Justice Hughes in McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1935);

"The prerequisites to the exercise of jurisdiction are specifically defined * * * They are conditions which must be met by the party who seeks the exercise of jurisdiction in his favor. He must allege in his pleading the facts essential to show jurisdiction. If he fails to make the necessary allegations he has no standing."

Measured against Federal requirements that the existence of diversity jurisdiction must be sufficient on the face of the complaint, Prudential's allegations appear to be infirm on a number of grounds.

First, although Prudential did allege that it had its principal place of business in New Jersey, the averment that "plaintiff is and was a New Jersey corporation and a citizen of the State of New Jersey" is plainly inadequate. An allegation that an individual is a citizen of a certain state is an allegation of fact. However, a corporation is a creature of statute and its citizenship can be established only by compliance with the statutes. It follows that an allegation that a corporation is a citizen of a certain state (without more) is not an allegation of fact, but a mere conclusion of law. For the purpose of federal jurisdiction, "a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." (28 U.S.C. § 1332c).

Prudential alleges its principal place of business is in New Jersey — therefore, it is "deemed" to be a "citizen" of New Jersey, but that is not sufficient to establish diversity jurisdiction because there is no affirmative allegation as to the state in which it is incorporated. It could be incorporated in the State of Arizona, and be a citizen of New Jersey and a citizen of Arizona, thus destroying diversity between it and other citizens of Arizona as well as New Jersey. Similarly, the allegation about being a "New Jersey corporation" is also defective because it is a conclusion of law. The facts must be alleged from which it may be determined of which state, or states, the corporation is "deemed" to be a citizen — i. e. the state in which it was incorporated and the state in which it has its principal place of business.

Next, we find a complete absence of any allegations about the citizenships of Consolidated Roofing, Mayer Development Corporation, Mayer-Central Building Associates, Eric D. Mayer, Francine Mayer, Lawrence D. Mayer, and Pauline Mayer.

In compounding its errors, Prudential also failed to make proper allegations about the citizenship of each of the partners constituting Mayer-Central Building Associates. The citizenship of each member of an unincorporated association must be alleged, even though the entity might be recognized at state law as having the ability to sue and the liability to be sued. Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 20 S.Ct. 690, 44 L.Ed. 842 (1900). See also Underwood v. Maloney, 256 F.2d 334, 338 (C.A. 3 1958); United Steelworkers of America, A.F.L.-C.I.O. v. R. H. Bouligny, Inc., 382 U.S. 145, 86 S.Ct. 272, 15 L.Ed.2d 217 (1965). No attempt to comply with this rule was made by Prudential.

Perhaps in the belief that these numerous errors could be corrected in the district court by the use of fictitious "John Doe" defendants, Prudential requested in its complaint that the true names of these defendants be inserted in the complaint when discovered.

In the federal courts "John Doe" casts no magical spell on a complaint otherwise lacking in diversity jurisdiction. There is no provision in the Federal Statutes or Federal Rules of Civil Procedure for use of fictitious parties. See Craig v. United States, 413 F.2d 854 (C.A. 9 1969); Roth v. Davis, 9 Cir., 231 F.2d 681; Molnar v. National Broadcasting Company, 9 Cir., 231 F.2d 684.

In Molnar, supra, a California citizen plaintiff claimed diversity of citizenship between herself and the defendants — N. B.C. and ten Does. She specifically alleged that "defendants, and each of them, are citizens and residents of the State of Delaware." Molnar's complaint was dismissed by the trial court because it did not affirmatively appear that none of the Does was a citizen of California.

Affirming the dismissal, this court stated:

"If the identity of defendants were known so that the pleader could state they were citizens of Delaware, she could also state their names * * * But, if the allegation that they are citizens of Delaware be, as on the face of the complaint it is, unfounded
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