Grant County Deposit Bank v. McCampbell

Decision Date14 February 1952
Docket NumberNo. 11393.,11393.
Citation31 ALR 2d 909,194 F.2d 469
PartiesGRANT COUNTY DEPOSIT BANK v. McCAMPBELL et al.
CourtU.S. Court of Appeals — Sixth Circuit

L. M. Ackman, Williamstown, Ky., John E. Shepard, Covington, Ky., for appellant.

Weldon Shouse, Lexington, Ky., for appellees.

Before ALLEN, McALLISTER and MILLER, Circuit Judges.

MILLER, Circuit Judge.

The appellees, partners engaged generally in the business of dealers in live stock, recovered judgment in the District Court against J. W. Eckler and the appellant Bank in the sums of $4,046.99 and $3,385.13 with 6% interest thereon, representing the purchase price of two shipments of cattle purchased by Eckler and for failure on the part of the Bank to properly handle two drafts in said respective amounts, drawn on Eckler and forwarded through banking channels by the appellees to the appellant for collection. The bank has taken this appeal. In addition to its defense on the merits, the Bank contends that the District Court was without jurisdiction in the matter.

With respect to the jurisdictional question, the facts are as follows: The complaint was filed on January 30, 1950 by R. H. McCampbell and Ray McCampbell, partners doing business as Kennett Murray Company of Montgomery, Alabama. It alleged that the partners were residents of Alabama, that the defendant Grant County Deposit Bank was a Kentucky corporation, and the defendant J. W. Eckler a citizen and resident of Kentucky. The Grant County Deposit Bank filed its answer on March 13, 1950. In taking depositions on May 8, 1950, it developed that the plaintiff partnership actually consisted of R. H. McCampbell and Ray McCampbell, and Kennett Murray Company, a partnership of Chicago, Illinois. An amendment to the complaint was filed on May 26, 1950 which stated this fact, and gave the names of the executive, general and managing partners of the Chicago partnership, and asked that they be added as parties plaintiff to the action. Thereafter, an Amended and Substituted Complaint was filed which named as parties plaintiff R. H. McCampbell, Ray McCampbell and numerous partners of the Kennett-Murray Company of Chicago, all non-residents and non-citizens of the State of Kentucky. This pleading stated that W. D. Brooks, a citizen and resident of Kentucky, was a partner in the firm of Kennett-Murray Company of Chicago and had refused to join the other partners as parties plaintiff, and he was therefore made a party defendant. Following service of summons upon him, W. D. Brooks, on July 13, 1950, filed an "Answer and Disclaimer" to the Amended and Substituted Complaint in which he stated that he was a partner in the Kennett-Murray Company of Chicago, and that he declined and refused to join the other partners as parties plaintiff in the action. For further answer, he stated that "any interest that I may have in this litigation is both nominal and insignificant and at most my interest would be a sum less than Seventy-Five ($75.00) Dollars. My said interest, if any, is hereby waived, released by me and I disclaim fully and completely any right that I may have to collect my said interest, if any, in the sum or amount against the defendants, Grant County Deposit Bank, a corporation, and J. W. Eckler; and, further, I disclaim and waive any and all interest that might accrue to my benefit to the partnership known as Kennett, Murray & Company of Montgomery, Alabama, and also the partnership known as Kennett-Murray Company of Chicago, Illinois." He asked that his name be stricken and that the action be dismissed insofar as it pertained to him. The Bank, on September 12, 1950, filed an amended answer, which in addition to denying the material allegations of the claim as set up by the Amended and Substituted Complaint, denied the jurisdiction of the Court on the ground that Brooks was a partner of the plaintiffs and was required by law to be joined with them as parties plaintiff, with the result that his Kentucky citizenship destroyed the required diversity of citizenship between the plaintiffs and the Bank. It also asked that the Answer and Disclaimer of Brooks be stricken from the record as being without warranty or authority in law. The record shows the filing date of the Amended and Substituted Complaint to be September 27, 1950, which is subsequent to the filing dates of both the Answer and Disclaimer of Brooks and the Amended Answer of the Bank. However, apparently, the Amended and Substituted Complaint was tendered for filing and summons issued against Brooks prior to July 13, 1950, and the parties have treated it as having been filed as of that time. We will also consider it in that way. Rule 15(b), Rules of Civil Procedure 28, U.S.C.A.

Following the filing of affidavits and depositions, dealing with the merits of the claim, the Court ruled that it had jurisdiction in the matter and sustained a motion for default judgment against Eckler and a motion for summary judgment against the Bank. It dismissed the action insofar as it pertained to the defendant W. D. Brooks. This ruling and the assumption of jurisdiction was based upon the finding of the District Judge that Brooks, although a partner of the Chicago firm, had only a remote nominal interest, if any, in the recovery by the Montgomery firm and had expressly disclaimed any interest in the recovery.

In order for jurisdiction, based on diversity of citizenship, to exist there must exist a controversy between citizens of different states, all of whom on one side of the controversy are citizens of different states from all parties on the other side. It is not conferred by the parties' own determination of who are plaintiffs and who defendants. It is the duty of the Court to look beyond the pleadings and arrange the parties according to their real interests in the suit. If such a realignment of parties by the Court destroys diversity of citizenship, jurisdiction does not exist. City of Indianapolis v. Chase National Bank, 314 U.S. 63, 62 S.Ct. 15, 86 L.Ed. 47. The rule is the same where one whose interest lies with the plaintiff is made a party defendant because of its refusal to sue. Hamer v. New York Railways Co., 244 U.S. 266, 274, 37 S.Ct. 511, 61 L.Ed. 1125. In the present case, Brooks' interest in the controversy, on account of his membership in the plaintiff partnership, was with the plaintiffs, and he must be realigned so as to make him a party plaintiff.

Where a partnership is a party to litigation, diversity of citizenship depends upon the citizenship of each individual partner. Levering & Garrigues Co. v. Morrin, 2 Cir., 61 F.2d 115, affirmed, 289 U.S. 103, 53 S.Ct. 549, 77 L.Ed. 1062; Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 457, 20 S.Ct. 690, 44 L.Ed. 842. Since Brooks, realigned as a plaintiff, is a citizen of Kentucky, diversity of citizenship ceases to exist, and under the general rule jurisdiction would be lacking.

Appellees contend that the rule is not applicable where such a party is merely a formal one and not an indispensable party to the litigation. Ban v. Columbia Southern Railway Co., 9 Cir., 117 F. 21. As shown by the facts in that case, a formal party is one who has no interest in the result of the suit and need not have been made a party thereto. Hamer v. New York Railways Co., supra, 244 U.S. 266, 271, 37 S.Ct. 511, 61 L.Ed. 1125. We recognized such an exception in the opinion in Schuckman v. Rubenstein, 6 Cir., 164 F.2d 952, 956. However, we held in that case that where a party is an indispensable one to the action, and his joinder in the suit destroys diversity of citizenship, he must nevertheless be joined as a party with the resulting loss of jurisdiction by the trial court. This is the well settled rule. Baltimore & O. R. R. v. Parkersburg, 268 U.S. 35, 45 S.Ct. 382, 69 L. Ed. 834; Kentucky Natural Gas Corp. v. Duggins, 6 Cir., 165 F.2d 1011, 1015. In our opinion, a partner has an interest in a partnership account arising out of a partnership transaction and is an indispensable party to an action seeking its enforcement. Snodgrass v. Broadwell, 12 Ky. 353, 2 Litt. 353, 356-357; Vinal v. West Virginia Oil & Land Co., 110 U.S. 215, 4 S.Ct. 4, 28 L.Ed. 124; City of Orlando v. Murphy, 5 Cir., 77 F.2d 702, 703; Minez v. Merrill, D.C.S.D.N.Y., 43 F.2d 201; Charne v. Essex Chair Co., D.C. 92 F.Supp. 164.

Appellees, however, contend that the disclaimer by Brooks of his interest in the claim changed him...

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