Great American Ins. Co. v. Louis Lesser Enterprises, Inc.

• Citation: 353 F.2d 997
• Decision Date: 16 December 1965
• Docket Number: No. 18048.,18048.
• Parties: GREAT AMERICAN INSURANCE COMPANY, a Corporation, Appellant, v. LOUIS LESSER ENTERPRISES, INC., a Corporation, and D & L Construction Company, a Corporation, and Ft. Leonard Wood C-9 Housing, Inc., a Corporation, and Ft. Leonard Wood C-10 Housing, Inc., a Corporation, and Continental Casualty Company, a Corporation, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

353 F.2d 997 (1965)

GREAT AMERICAN INSURANCE COMPANY, a Corporation, Appellant, v. LOUIS LESSER ENTERPRISES, INC., a Corporation, and D & L Construction Company, a Corporation, and Ft. Leonard Wood C-9 Housing, Inc., a Corporation, and Ft. Leonard Wood C-10 Housing, Inc., a Corporation, and Continental Casualty Company, a Corporation, Appellees.

No. 18048.

United States Court of Appeals Eighth Circuit.

December 16, 1965.

Bernard A. Reinert, of Kenney, Reinert & Hespen, St. Louis, Mo., made argument for appellant and filed brief with Francis L. Kenney, Jr., of Kenney, Reinert & Hespen, St. Louis, Mo.

Harvey L. Zuckman, Atty., Dept. of Justice, Washington, D. C., made argument for appellees Fort Leonard Wood C-9 and C-10 Housing, Inc. and filed brief with John W. Douglas, Asst. Atty. Gen., and David L. Rose, Atty., Dept. of Justice, Washington, D. C., and F. Russell Millin, U. S. Atty., Kansas City, Mo.

John A. Biersmith, of Rafter, Biersmith & Walsh, Kansas City, Mo., made argument for appellees Louis Lesser Enterprises, Inc., D & L Const. Co. & Continental Cas. Co. and filed brief with Charles J. Fraas, Jr., of Rafter, Biersmith & Walsh, Kansas City, Mo.

Before VAN OOSTERHOUT, MATTHES and MEHAFFY, Circuit Judges.

MATTHES, Circuit Judge.

Great American Insurance Company, plaintiff below, has appealed from the order of the United States District Court (Honorable John W. Oliver) sustaining motions of all of the defendants to dismiss the complaint and cause of action, and the separate motion of defendants Louis Lesser Enterprises, Inc., D & L Construction Company, and Continental Casualty Company to dissolve and quash the order and writs of attachment.¹

The basic questions at issue are (1) whether the court possessed jurisdiction of the subject matter; (2) whether venue was properly laid; and (3) whether service of process was sufficient to vest the court with personal jurisdiction.

In order to place these questions in proper perspective, it is essential that we engage in a review of the background facts, which appear from the complaint and the motions and documents attached thereto; admissions; interrogatories; and the hearing in the district court.

From the original and amended complaints, which were filed on June 22, 1964, and October 14, 1964, respectively, it appears that the plaintiff, Great American Insurance Company (appellant), is a New York corporation, having its principal place of business in that state; defendant, Louis Lesser Enterprises, Inc. (Lesser), is a Delaware corporation, having its principal place of business in Beverly Hills, California; defendant, D & L Construction Company, is a California corporation, having its principal place of business in North Hollywood, California; defendants, Ft. Leonard Wood C-9 Housing, Inc. (C-9) and Ft. Leonard Wood C-10 Housing, Inc. (C-10), are Delaware corporations. The complaint does not allege the location of the principal place of business of C-9 and C-10. Continental Casualty Company (Continental) is organized under the laws of Illinois and has its principal place of business in Chicago. (Hereinafter, we shall refer to all of the defendants collectively as appellees).

Appellant's complaint is in four counts. Count I alleges, in summary: (a) that on or about August 18, 1959, D & L, collaborating with two limited partnerships known as Louis Lesser Enterprises, Ltd., and Lesser Industrial Properties, Ltd., in a joint venture under the name of D & L Construction Company and Associates, entered into a contract with the United States Department of the Army for construction of 700 units of Capehart Military Housing at Ft. Leonard Wood, Missouri, (neither of the limited partnerships, nor the joint venture, is a party to this action); (b) December 31, 1961, Lesser, the corporation here sued, acquired 50% ownership interest in the assets, subject to liabilities, of the joint venture, D & L Construction Company and Associates; (c) September 11, 1959, the joint venture entered into a subcontract with Clarence W. Franks, Jr., for work and labor to be performed on the housing project, at the contract price of $658,525.52; (d) Franks executed a performance bond, appellant being surety thereon; (e) May 9, 1962, Franks assigned to appellant all of his rights, claims and causes of action against appellees; (f) Franks and appellant have fully performed under the subcontract but appellees have failed to pay the sum of $82,348.38, due under the subcontract, and the sum of $151,172.71 due for additional work resulting from changes in the specifications and from failure of appellees to properly coordinate and supervise the job.

In this count appellant prays for judgment against Lesser and D & L, but not against C-9, C-10 or Continental, for $233,521.09, plus interest.

Count II alleges that C-9 and C-10 were alter egos of Lesser and D & L; that the acts performed in the construction of the project by C-9 and C-10 were, in fact, performed and done by Lesser and D & L, and that the acts performed by Lesser and D & L were, in fact, performed by C-9 and C-10. The prayer of this count is for judgment against only Lesser and D & L for $233,521.09; and that C-9 and C-10 be declared alter egos and agents of Lesser and D & L.

Count III alleges, in some detail, fraud and deceit on the part of Lesser and D & L. Again, the prayer is for judgment against only Lesser and D & L for $233,521.09 actual damages and for punitive damages in the amount of $50,000.

Count IV alleges that, pursuant to the scheme and plan of Lesser, D & L, C-9 and C-10 (but not Continental) to avoid payment of the obligations due Franks and appellant, as alleged in Counts I, II and III, appellees met at, or near, Beverly Hills, California, where they agreed to, and did, establish a fund for job claimants and job creditors having claims against appellees; that when the fund was established, Continental was named as a co-signer of all amounts to be disbursed from the fund; that in this fund are monies owed to Franks and appellant; and, that by virtue of the establishment of the fund, Lesser and Continental "have funds in their hands and under their control" in which appellant has acquired an equitable lien.

This count does not ask for any monetary judgment, but prays that Lesser and Continental be enjoined from disbursing the fund and for an accounting to appellant.

Other pertinent facts will be discussed as we consider each of the issues before us.

SUBJECT MATTER JURISDICTION

The district court did not file a memorandum opinion, but stated its findings and conclusions orally from the bench. The court sustained the motions to dismiss on the ground that venue was lacking. Although Lesser, D & L, and Continental had, by timely motion, challenged the subject matter jurisdiction, this issue was not discussed or ruled on by the court. We, therefore, infer that the court was satisfied that jurisdiction had been established.

Appellees Lesser, D & L and Continental, renew their jurisdictional objection in this appeal.² They concede that there is complete diversity between them and the appellant. They also agree that C-9 and C-10 are Delaware corporations and "assume * * * their principal place of business is in Washington, D. C., * * *". They argue, however, that, when this action was instituted (concededly the critical time, see Russell v. New Amsterdam Casualty Co., 325 F.2d 996, 998 (8 Cir. 1964)), "C-9 and C-10 were no longer citizens of any state for diversity purposes. Since May of 1962 these corporations were officered, owned, controlled and operated by the United States Department of Army." We do not find Postal Telegraph Cable Co. v. State of Alabama, 155 U.S. 482, 15 S.Ct. 192, 39 L.Ed. 231 (1894); Chicago, R. I. & P. R. Co. v. Long, 181 F.2d 295 (8 Cir. 1950); State Highway Commission v. Kansas City Bridge Co., 81 F.2d 689 (8 Cir. 1936), cert. denied, 298 U.S. 661, 56 S.Ct. 682, 80 L.Ed. 1386, relied upon by complaining appellees, controlling. These cases enunciate that, inasmuch as a state is not a citizen, a suit between a state and a citizen or a corporation of another state is not between citizens of different states.

Assuming, for the present discussion, that C-9 and C-10 are Government instrumentalities and have not consented to be sued, it does not follow that they are not corporate citizens of Delaware, where they were incorporated. The complaint so alleges, and, in the hearing before Judge Oliver, it was so stipulated. The showing that has been made convinces us that the status of C-9 and C-10 does not destroy diversity of citizenship for jurisdictional purposes.

Moreover, it is arguable that C-9 and C-10 are necessary and indispensable parties. Appellant seeks no relief against either. In the district court and here, appellant concedes that these corporations were made parties defendant, on an alter ego theory, solely for the purpose of obtaining valid service upon Lesser and D & L. Since C-9 and C-10 are, at most, nominal parties, the court could have dropped both of these defendants in order to retain jurisdiction of the subject matter. Rule 21, F.R.Civ.P. See also, Kerr v. Compagnie De Ultramar, 250 F.2d 860 (2 Cir. 1958); Padbury v. Dairymen's League Cooperative Ass'n, 15 F.R.D. 484 (D.C.M.D.Pa.1954).

Therefore, the circumstances impel the holding that the court was vested with jurisdiction of the subject matter.

VENUE

Title 28, U.S.C.A., § 1391(a), provides that a civil action founded on diversity of citizenship may, except as otherwise provided by law, be brought only in the judicial district where all of the plaintiffs or all of the defendants reside. Subsection (c), § 1391, provides: "A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes".

The district court held, as previously stated, that proper...