Haas v. Jefferson National Bank of Miami Beach, 30231.
Decision Date | 22 April 1971 |
Docket Number | No. 30231.,30231. |
Citation | 442 F.2d 394 |
Parties | William M. HAAS, Plaintiff-Appellant, v. JEFFERSON NATIONAL BANK OF MIAMI BEACH, Defendant-Appellee, and Charles H. Glueck, New Party Defendant-Appellee. |
Court | U.S. Court of Appeals — Fifth Circuit |
William B. Webber, Robert W. Boughton, Roemisch & Wright, Cleveland, Ohio, for plaintiff-appellant.
Ely R. Katz, Michael H. Salmon, Miami Beach, Fla., for appellee, Jefferson National Bank of Miami Beach.
Thomas R. Spencer, Jr., Kenneth M. Myers, Myers, Kaplan, Porter, Levinson & Kenin, Miami, Fla., Jerome N. Curtis, Murray K. Lenson, Ulmer, Berne, Laronge, Glickman & Curtis, Cleveland, Ohio, for appellee, Charles H. Glueck.
Before GEWIN, AINSWORTH and ALDISERT,* Circuit Judges.
Following a pre-trial conference, the district court entered an order finding that Charles H. Glueck was an "indispensable party" under Fed.R.Civ.Pro. 19, and dismissing the action on the ground that Glueck's presence in the case "violates the requirements of complete diversity." We must determine whether the court's action was appropriate at a pre-trial stage, and, if so, whether it abused its discretion in dismissing the action instead of proceeding without Glueck.
Invoking jurisdiction on the basis of diversity of citizenship, 28 U.S.C. § 1332, Haas, a citizen of Ohio, sought a mandatory injunction from the district court directing the Jefferson National Bank, a citizen of Florida, to issue to him 169½ shares of its common stock. Alternatively, he asked for damages reflecting the stock's value. He alleged a 1963 agreement with Glueck, also an Ohio citizen, under which they were to jointly purchase 250 shares of the bank's stock; the certificates were to issue in the name of Glueck but Haas was to have a one-half ownership of the shares. He also pleaded a similar 1966 agreement with Glueck to purchase 34 additional shares. According to Haas, he paid Glueck amounts representing one-half ownership, the bank had knowledge of his ownership interest, and the certificates and subsequent dividends were issued to Glueck.
Haas contends, however, that in 1967 he requested Glueck to order the bank to issue certificates in Haas' name, reflecting his ownership of 169½ shares, and that pursuant to this request Glueck presented to the bank properly endorsed certificates for 250 shares with instructions to reissue 170 shares to Haas and the balance to Glueck.
In its answer, the Bank explained that it had refused to make the assignment because at the time of the transfer request Glueck was indebted to it under the terms of a promissory note which required that Glueck pledge, assign, and transfer to the bank property of any kind owned by Glueck and coming into the possession of the Bank. The Bank averred that Glueck withdrew the transfer request and instead pledged the stock certificates with a second bank as collateral for a loan there.
With these contentions forming the backdrop of the pre-trial conference, the parties stipulated to the questions of fact which remained to be litigated at trial:
Following the pre-trial conference and the entry of these stipulations, the district court entered an order directing Haas to amend his complaint to join Glueck as a party. The court then denied his motion to dismiss Glueck as a party, and granted the Bank's motion to dismiss the amended complaint on the jurisdictional ground of incomplete diversity.1
We have no difficulty in concluding that the district court did not enter its joinder order prematurely. It was entirely appropriate to resolve Glueck's status on the basis of the pleadings and stipulations of the parties which posed the trial issues with completeness and precision. The vital factual issues having been joined, there was no reason to postpone the resolution of the indispensability problem until after the commencement of trial.2
Moreover, if the district court did not err in ordering the joinder of Glueck, it was obviously correct in finding a jurisdictional defect. It is clear beyond any doubt that the diversity statute requires complete diversity of citizenship. Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 62 S.Ct. 15, 86 L.Ed. 47 (1941); Treinies v. Sunshine Min. Co., 308 U.S. 66, 60 S.Ct. 44, 84 L.Ed. 85 (1939); Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed.2d 435 (1806). "The policy of the statute calls for its strict construction." Healy v. Ratta, 292 U.S. 263, 270, 54 S.Ct. 700, 703, 78 L.Ed. 1248 (1934). It is of course inmaterial that the nondiverse party has been required to be joined as an indispensable party. Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968). "It is settled that failure of the district court to acquire jurisdiction over indispensable parties to an action deprives "the court of jurisdiction to proceed in the matter and render a judgment." Schuckman v. Rubenstein, 164 F.2d 952, 957 (6 Cir. 1947).3
As Mr. Justice Harlan declared in Provident Tradesmens Bank & Trust Co. v. Patterson, supra, 390 U.S. 102, 124, 88 S.Ct. 733, 746, 19 L.Ed.2d 936, the generalizations of Shields It is essential, however, to bear in mind that the broad statements in Shields "are not a substitute for the analysis required by that Rule." Id.
Fed.R.Civ.Pro. 19, as amended in 1966, provides:
The Rule thus commands that we address ourselves to two broad questions: (1) Was Glueck a party "to be joined if feasible" under section (a)? If so, (2) was the court correct, under section (b), in dismissing the action or should it have proceeded without the additional party?
It is readily apparent that Glueck "falls within the category of persons who, under § (a), should be `joined if feasible,'" Provident Tradesmens Bank & Trust Co. v. Patterson, supra, 390 U.S. at 108, 88 S.Ct. at 737, 19 L.Ed.2d 936, for his presence is critical to the disposition of the important issues in the litigation. His evidence will either support the complaint or bolster the defense: it will affirm or refute Haas' claim to half ownership of the stock; it will substantiate or undercut Haas' contention that the Bank had knowledge of his alleged ownership interest; it will corroborate or compromise the Bank's contention that Glueck rescinded the transfer order; and it will be crucial to the determination of Glueck's obligation to the Bank under the promissory note. The essence of Haas' action against the Bank is that it "unlawfully and recklessly seized, detained, and exercised improper dominion" over his shares in transferring and delivering them to the second bank as collateral for Glueck's loan. Thus, Glueck becomes more than a key witness whose testimony would be of inestimable value. Instead he emerges as an active participant in the alleged conversion of Haas' stock.
Applying the criterion of Rule 19(a) (2) (ii), we believe that Glueck's absence would expose the defendant Bank "to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest." If Haas prevailed in this litigation in the absence of Glueck and were adjudicated owner of half of the stock, Glueck, not being bound by res adjudicata, could theoretically succeed in later...
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