Kerrigan's Estate v. Joseph E. Seagram & Sons

• Decision Date: 12 November 1952
• Docket Number: No. 10750.,10750.
• Parties: KERRIGAN'S ESTATE v. JOSEPH E. SEAGRAM & SONS, Inc. et al.
• Court: U.S. Court of Appeals — Third Circuit

199 F.2d 694 (1952)

KERRIGAN'S ESTATE v. JOSEPH E. SEAGRAM & SONS, Inc. et al.

No. 10750.

United States Court of Appeals Third Circuit.

Argued October 14, 1952.

Decided November 12, 1952.

Henry Arronson, Philadelphia, Pa., for appellant.

H. Eugene Heine, Philadelphia, Pa. (Frank M. Lario, Camden, N. J., on the brief), for appellee.

Before GOODRICH, McLAUGHLIN and STALEY, Circuit Judges.

GOODRICH, Circuit Judge.

This action, brought by an executor against J. Grant Kerrigan and three distilling corporations, raises two questions. The first has to do with federal jurisdiction. If federal jurisdiction may be maintained, the second question involves a rule of conflict of laws and a rule of contracts.

We shall deal with the jurisdictional point first. The plaintiff is a Pennsylvania domiciliary who has qualified as the executor of a New Jersey decedent. He sued in federal court Seagram & Sons, an Indiana corporation, Jameson & Co., a Delaware corporation, the Carstairs Bros. Co., a Maryland corporation, and J. Grant Kerrigan, a domiciled Pennsylvanian. Two of the distilling companies were sued on contracts made by them with Joseph P. Kerrigan, the plaintiff's testator, and J. Grant Kerrigan. Seagram is sued because it assumed the obligation of these contracts. J. Grant Kerrigan is sued because the plaintiff-executor alleges that he received payments upon the contract after the testator's death to which the executor was entitled.

The theories of the claims against the distillers and the individual defendants are thus wholly different. The distillers are being sued upon a contract to which plaintiff's testator was a party. J. Grant Kerrigan is being sued by the executor because it is claimed that he has received money to which he is not entitled. As between J. Grant Kerrigan and the plaintiff there is no diversity of citizenship. It is immaterial that the testator died domiciled in New Jersey. The plaintiff-executor is a Pennsylvanian and it is his domicile that counts, not that of his decedent. Coal Company v. Blatchford, 1870, 11 Wall. 172, 20 L.Ed. 179.

How then can this case come to and stay in federal court? The parties have lightheartedly disregarded this question and it evidently did not trouble the district court either. The only thing we have to go on which helps maintain the existence of federal jurisdiction here is a stipulation entered into among the parties following the filing of a counterclaim by the corporate defendants. Under that stipulation J. Grant Kerrigan and the plaintiff-executor "are hereby required to interplead and settle among themselves their rights to the money deposited pursuant to this stipulation."

If this can be construed to turn the action against Seagram into one in the nature of interpleader under rule 22(1), Fed. Rules Civ.Proc. 28 U.S.C. then we may treat the action by the executor of Joseph P. Kerrigan against J. Grant Kerrigan as a cross-claim under rule 13(g) which, since it arises out of the same general transaction, may be brought into this litigation and cleared up along with the settlement of the claim to the larger sum for which Seagram is liable under the contract it made. Bank of Neosho v. Colcord, D.C.Mo.1949, 8 F.R. D. 621. No further pleadings were filed to clarify the application of this interpleader theory and the whole matter was left in the somewhat informal fashion to which it was brought by the stipulation.

Nevertheless, with some hesitancy, we shall uphold the exercise of federal jurisdiction. We are accustomed to the application of the rule that pleadings may be treated as amended to conform to proof. F.R.C.P.Rule 15. 3 Moore's Federal Practice 846. Analogous situations include treating an action erroneously brought at law as transferred to equity (3 Moore's Federal Practice 822), and treating issues actually tried as having been raised in the pleadings (Id. at 843). Certainly a pleading is judged by its substance and not its form, e. g. whether a claim is a counterclaim or cross-claim depends not on what it is labeled but whether the party against whom it is asserted is an opposing party or a co-party. 3 Moore's Federal Practice 15. Amending to show jurisdiction is liberally granted when the court in fact has jurisdiction. 3 Moore 831, 836. As a practical matter the only reason for not allowing an amendment is prejudice to the opposing party and no prejudice can arise here where all parties concerned joined in the stipulation.

We are also accustomed to a pretty informal type of complaint in federal court under the present rules. So we think it is not too great a stretch to allow the parties to shift this particular lawsuit around so that an original defendant who is perfectly willing to pay what he is alleged to owe becomes a plaintiff in an interpleader action, and thereby permit the two contesting parties to fight out their issue between themselves. In such an action the diversity need only be between the plaintiff stakeholder and the individual claimants. Diversity among these individual claimants is not required. Hunter v. Federal Life Ins. Co., 8 Cir., 1940, 111 F.2d 551; Mallers v. Equitable Life Assur. Soc., 7 Cir., 1936, 87 F.2d 233, certiorari denied, 1937, 301 U.S. 685, 57 S.Ct. 786, 81 L.Ed. 1343.

Return now to the merits of the case. These can be disposed of very quickly. The problem may be stated more clearly in hypothetical terms than by cluttering up the statement of the question with the details.¹ P, promisor, buys a business from its owners, A and B. P is to pay for his purchase in a given number of annual installments. By the terms of the agreement the division of each annual payment between A and B is to be determined by agreement between them so long as both live. If one dies during the continuance of the period of annual payments, then P agrees to pay all of the remaining installments to the survivor. A and B in this case are the Kerrigans. P, the promisor, is Seagram who succeeded to the obligations of the other corporate defendants. The legal question is: Does this arrangement constitute a testamentary disposition which must conform to the formalities legislatively established for wills? The district court said that it did.

For clarification the issue needs a few more words. P, the promisor (Seagram), is quite obviously not making any testamentary disposition. It, no doubt, intends to keep on...