Guaranty Trust Co. of New York v. McCabe

• Decision Date: 11 March 1918
• Docket Number: 169.
• Citation: 250 F. 699
• Parties: GUARANTY TRUST CO. OF NEW YORK v. McCABE et al. [1]
• Court: U.S. Court of Appeals — Second Circuit

250 F. 699

GUARANTY TRUST CO. OF NEW YORK v. McCABE et al. ^[1]

No. 169.

United States Court of Appeals, Second Circuit.

March 11, 1918

Myers &amp Goldsmith, of New York City (Emanuel J. Myers, Gordon S. P. Kleeberg, and Josiah Canter, all of New York City, of counsel), for plaintiff in error.

Miller & Auchincloss, of New York City (David Hunter Miller and Williams St. John Tozer, both of New York City, of counsel) for defendants in error.

Before WARD, Circuit Judge, and LEARNED HAND and MAYER, District Judges.

MAYER District Judge.

At the threshold of this case is the question of jurisdiction. It is necessary to state only such facts as are germane to this question.

On June 14, 1916, plaintiff, as substituted trustee of S.H.P. Pell &amp Co., a partnership (hereinafter called Pell & Co.), commenced an action in the New York Supreme Court, New York county, to recover $133,328.34 with interest, as assignee of three claims: (1) A balance due on account between defendants and Pell & Co. (first and second causes of action); (2) a balance due on account between defendants and W.R. Craig & Co., which was assigned to Pell & Co. (third cause of action); and (3) a balance due on account between defendants and E. & C Randolph which was assigned to Pell & Co. (fourth cause of action).

On November 25, 1914, Pell & Co. and the several members thereof were adjudicated involuntary bankrupts in proceedings duly had in the Southern district of New York. On January 25, 1915, their offer of composition in bankruptcy was duly confirmed and carried out.

The court appointed receivers, but a trustee in bankruptcy was not appointed; the bankruptcy proceeding having been terminated by the order confirming the composition offer and its performance.

The offer provided, among other things, that the receivers and the bankrupts should convey the entire bankrupt estate (both partnership and individual) to John W. Jay, who had been selected by the creditors to act as trustee in their behalf in carrying out the details of the composition, and this was approved and confirmed by the order of the District Court on January 25, 1915, directing the transfer of the entire bankrupt estate to Jay.

The offer of composition provided for the contingency of Jay's resignation and for filling the resultant vacancy by selection by seven creditors called an 'executive committee.' Under this procedure, plaintiff ultimately was selected as substituted trustee, and Pell & Co. and the receivers transferred all their assets to Jay, and, the terms of the composition having been fully performed, the bankrupts were released as provided in their offer and by section 14, subd. c, of the Bankruptcy Law (Act July 1, 1898, c. 541, 30 Stat. 550 (Comp. St. 1916, Sec. 9598)).

Among the assets which came into plaintiff's hands were the three claims referred to supra.

Plaintiff obtained a warrant of attachment for $91,566.14 (first and second causes of action) in the New York Supreme Court, and the New York sheriff levied on property of defendants within the New York jurisdiction. The warrant did not apply to the third and fourth causes of action, and as these causes of action were stricken out by order of the court, and no error is assigned, no further reference need be made to them. The first cause of action was also stricken out, but the second cause of action on which plaintiff went to trial included all the allegations of the first cause of action.

Thereafter removal proceedings were had in the state court on the ground of diversity of citizenship, and, the cause having been removed to the District Court of the United States for the Southern District of New York, plaintiff, on October 2, 1916, as its first step, appeared specially, objected to the jurisdiction of the District Court, and moved to remand the case to the New York Supreme Court because of lack of jursidiction, for reasons which will be discussed infra. This motion was denied by order dated October 5, 1916.

Defendants at all times were inhabitants of Charleston, in the Eastern district of South Carolina. The partnership of S.H.P. Pell & Co. (assignors of the first and second causes of action) was composed of three citizens of the state of New York, two of whom were residents of the Southern district of New York and one of the Eastern district of New York. The present plaintiff is a New York corporation, having its principal place of business in the Southern district of New York.

At the trial, immediately after plaintiff's opening, defendants, addressing themselves to the merits, moved to dismiss, whereupon plaintiff moved to amend the complaint in certain respects and leave so to amend was granted and the trial then proceeded, with the result, as heretofore stated, that a verdict was directed in favor of defendants.

The contentions of defendants in support of the judgment are that: (1) Plaintiff, by moving to amend at the trial, waived the question of venue and submitted to the jurisdiction; (2) plaintiff was not the assignee of a chose in action; and (3) in any event, removal was a matter of absolute right.

1. We are unanimous in the view that, after plaintiff had specially appeared and moved to remand, it had protected and preserved its rights in that regard. The cases, inter alia, where waivers have occurred, are those where an amendment of a pleading has been made by the party seeking remand prior to his motion to remand.

It would be plainly unjust to deny to a litigant who, against his will, is compelled to submit to the jurisdiction, the same rights and privileges as to amendments to pleadings, as those which are accorded to any other litigant who may seek or submit to the jurisdiction.

2. Jay and this plaintiff were voluntary assignees of the choses in action and not trustees in the sense that title devolved upon them by operation of law. The offer of composition comprehended a method of distribution through Jay or his successors, and for that purpose Jay was selected as the medium to whom the bankrupts' property should be intrusted and by whom it should be distributed.

He was thus a mere assignee of these choses in action selected by agreement between the bankrupts and the creditors. The approval of the offer of composition by the court and its sanction of the assignment put the property of the bankrupt estate outside the court's power and terminated the jurisdiction of the court over both the property and the transferee or assignee thereof. In re Hollins, 229 F. 349, 143 C.C.A. 469; Id., 238 F. 787, 151 C.C.A. 637; In re Frischknecht, 223 F. 417, 139 C.C.A. 11.

We are unanimous in holding that Jay, and therefore plaintiff, each became a voluntary assignee of the controverted choses in action.

3. Whether the cause should have been remanded depends on whether the Southern district of New York is the 'proper district' as provided in section 28 of the Judicial Code.

Considering first the citizenship and residence of the members of the firm of Pell & Co., the assignors, plaintiff could have brought its action against defendants in the United States District Court for the Eastern District of South Carolina, but at no time could it have brought its action in the United States District Court for the Southern District of New York because all the members of Pell & Co. were not residents of the Southern district of New York. Smith v. Lyon, 133 U.S. 315, 10 Sup.Ct. 303, 33 L.Ed. 635; Interior Construction Co. v. Gibney, 160 U.S. 217, 16 Sup.Ct. 272, 40 L.Ed. 401.

In Ex parte Wisner, 203 U.S. 449, at page 451, 27 Sup.Ct. 150, 51 L.Ed. 264, it was held:

'In order to make a suit removable under section 2 of the act of 1887-1888, it must be one which the plaintiff could have brought originally in the United States Circuit Court, to which it would be removed by original process.'

It has long been settled that a defendant may insist upon or waive his objection to venue (Interior Construction Co. v. Gibney, supra), but it is also settled by Ex parte Moore, 209 U.S. 490, 506, 28 Sup.Ct. 706, 52 L.Ed. 904, 14 Ann.Cas. 1164, that in a case where jurisdiction depends upon diversity of citizenship (Judicial Code, Sec. 51) the plaintiff, in case of removal, also has the right to insist upon or waive his objection to the jurisdiction because the district is not the 'proper district,' i.e., either the residence of plaintiff or of defendant.

As therefore Pell & Co. could not have brought the action originally in the District Court for the Southern District of New York, and as, on removal, plaintiff objected and moved to remand, there was no waiver by plaintiff, and the court had not jurisdiction.

This conclusion, we agree, must be arrived at under the authority of Ex parte Wisner, supra, and Ex parte Moore, supra, unless the latter case has been overruled, and it is urged in that connection that Matter of Tobin, 214 U.S. 506, 29 Sup.Ct. 702, 53 L.Ed. 1061, and Matter of Nicola, 218 U.S. 668, 31 Sup.Ct. 228, 54 L.Ed. 1203, have overruled Ex parte Moore.

Some confusion has arisen in the interpretation of the Tobin and Nicola Cases. It has been thought by some (for instance, in Sagara v. Chicago, R.I. & P. Ry. Co. (C.C.) 189 F 220) that the holding in the Tobin and Nicola Cases was based on the proposition that mandamus was not the proper remedy; but neither the opinion in the Tobin Case nor the chronological history of the cases of Matter of Tobin, Nicola, and Ex parte Harding, 219 U.S. 363, 31 Sup.Ct. 324, 55 L.Ed. 252, 37 L.R.A. (N.S.) 392, justify this conclusion. Ex parte Harding, supra, was submitted and decided after the Tobin and Nicola Cases. In Ex parte Harding the court frankly disapproved Ex parte Wisner so far as that case held mandamus to be the proper remedy. Surely, if the Supreme...