Metropolis Theatre Co. v. Barkhausen

• Citation: 170 F.2d 481
• Decision Date: 20 December 1948
• Docket Number: No. 9630.,9630.
• Parties: METROPOLIS THEATRE CO. v. BARKHAUSEN et al.
• Court: U.S. Court of Appeals — Seventh Circuit

170 F.2d 481 (1948)

METROPOLIS THEATRE CO. v. BARKHAUSEN et al.

No. 9630.

United States Court of Appeals Seventh Circuit.

November 11, 1948.

Rehearing Denied December 9, 1948.

As Modified December 20, 1948.

Walter Bachrach, Robert Bachrach, Walter H. Moses, and Arthur C. Bachrach, all of Chicago, Ill. (B. B. Fensterstock, of New York City, of counsel), for appellant.

Carl H. Zeiss, Herbert Friedlich, Edward R. Johnston, Samuel W. Block, Louis M. Mantynband, George L. Siegel, and Edward Blackman, all of Chicago, Ill., for appellees.

Irvin F. Richman, of Chicago, Ill., for Oriental Entertainment Corporation, S & S

Theatres Corporation, and Edwin Silverman, appellees.

William D. Doggett, of Chicago, Ill., for Continental Illinois Nat. Bank & Trust Co. of Chicago, appellee.

Before MAJOR and KERNER, Circuit Judges, and BRIGGLE, District Judge.

BRIGGLE, District Judge.

This suit is by Metropolis Theatre Company, a New York corporation, against L. H. Barkhausen and Randolph Bohrer, individually and doing business as The Doubleby Co., Herman Brash, individually and as Trustee for L. H. Barkhausen and Randolph Bohrer under agreement dated January 29, 1946; Edward Blackman, Lucille K. Smith; Oriental Entertainment Corporation; Essaness Theatres Corporation, Edwin Silverman, 32 West Randolph Corporation, Continental Illinois National Bank and Trust Company of Chicago, I. V. Cage, The Northern Trust Company and Harold L. Costello, citizens of Illinois, except Essaness which is a Delaware corporation.

Plaintiff's suit is primarily for termination of the ground lease upon part of Lots 5 and 6 of Block 36 in the Original Town of Chicago, Cook County, Illinois, more familiarly known as 32 West Randolph Street, in which it is lessor. The basis for termination of the lease and recovery of the demised premises is in part that certain assignments of the ground lease were in violation of its terms.

There is situated upon the demised premises the larger portion of a theatre contained within the lower floors of a 22-story office building. The remainder of said theatre and of said building is situated upon adjoining premises owned by the trustees under the will of John R. Thompson, deceased.

The jurisdiction of the federal court was predicated upon diversity of citizenship and the requisite amount involved. Defendants by their motion to dismiss contended that John R. Thompson, Jr., Henry M. Henriksen, and Harris Trust and Savings Bank, as such Trustees (hereinafter called the "Thompson Lessors" or "Thompson"), were indispensable parties to be aligned on the side of plaintiff, and since the Thompson lessors are citizens of Illinois, their joinder would destroy the requisite diversity of citizenship.

The District Court found that the Thompson Lessors were indispensable parties plaintiff to the action, as their interest in the subject matter was joint and not distinct and severable from the interest of the plaintiff; that a decree in this matter could not be made without affecting their interest; that a final determination of the controversy in their absence, would be inconsistent with equity and good conscience, and dismissed the complaint.

The evidentiary facts considered by the court were contained in the complaint, exhibits attached thereto and affidavits supporting the motion together with attached exhibits. Reference is made to Footnote¹ for a somewhat detailed statement of the facts. There appears to be no conflict in respect to those facts but only as to their effect.

The complaint prayed that the court decree (a) that termination and forfeiture of the Metropolis lease be enforced as of December 31, 1945; (b) that the theatre sublease be held at naught and be nullified as of December 31, 1945; (c) that the rights of the defendants under the Metropolis lease and the theatre sublease be forever barred; (d) that possession of the demised premises be surrendered to plaintiff and that defendants be enjoined from interfering with the possession of plaintiff; (e) that said encumbrances be removed from plaintiff's title to said premises; and (f) that defendants account to plaintiff for the profits from said premises.

Under section 24(1) of the Judicial Code, 28 U.S.C.A. § 41(1) now § 1332, the federal court does not have jurisdiction unless all parties on one side of the controversy are of a citizenship diverse to all those on the other side. City of Indianapolis v. Chase Nat. Bank, 314 U.S. 63, 52 S.Ct. 15, 86 L.Ed. 47, 48; Treinies v. Sunshine Mining Co., 308 U.S. 66, 60 S.Ct. 44, 84 L.Ed. 85.

The requirement for complete diversity cannot be brought about by a party failing to join, either with himself or on the opposite side, a party who is an indispensable party to the action, even though joining the absent party would result in a loss of jurisdiction by the federal court. Calcote v. Texas Pacific Coal & Oil Co., 5 Cir., 157 F.2d 216, 222, 167 A.L.R. 413; Cohen v. Maryland Casualty Co., D.C., 4 F.2d 564, 565; Small v. Frick, D.C., 40 F.Supp. 778; Kentucky Natural Gas Corp. v. Duggins, 6 Cir., 165 F.2d 1011, 1015. If the Thompson lessors should be joined as parties, they will, for the purpose of determining the question of diversity of citizenship, be aligned according to their real interest in the controversy, regardless of whether they are technically named as plaintiffs or defendants. City of Dawson v. Columbia Ave. Saving Fund, Safe Deposit, Title, & Trust Co., 197 U.S. 178, 25 S.Ct. 420, 49 L.Ed. 713, 716; Niles-Bement-Pond Co. v. Iron Moulders' Union, Local No. 68, 254 U.S. 77, 41 S.Ct. 39, 65 L.Ed. 145, 148; City of Indianapolis v. Chase Nat. Bank, 314 U.S. 63, 52 S.Ct. 15, 86 L.Ed. 47, 48. The pertinent Federal Rule of Civil Procedure is Rule 19, 28 U.S.C.A., which is merely declaratory of the law as it existed before the adoption of the rule. United States v. Washington Institute of Technology, 3 Cir., 138 F.2d 25, 26; Society of European Stage Authors and Composers v. W.C.A.U. Broadcasting Co., D.C., 1 F.R.D. 264, 266; Wesson v. Crain, 8 Cir., 165 F.2d 6, 9; Shell Development Co. v. Universal Oil Products Co., 3 Cir., 157 F.2d 421, 424; Currier v. Currier, D.C., 1 F.R.D. 683, 684; Spanner v. Brandt, D.C., 1 F.R.D. 555, 556.

In United States v. Washington Institute of Technology, supra, the Court stated:

"Rule 19(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, requires that those having `a joint interest shall be made parties * * *.' This means those who were indispensable parties prior to the rules. 2 Moore's Federal Practice (1938) § 19.02."

Indispensable parties are persons who have an interest in the controversy of such a nature that a final decree without them cannot be made without either affecting that interest or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and good conscience. In Niles-Bement-Pond Co. v. Iron Moulders' Union, Local No. 68, 254 U.S. 77, 41 S.Ct. 39, 41, 65 L. Ed. 145, 147, the Court said:

"There is no prescribed formula for determining in every case whether a person or corporation is an indispensable party or not; but a rule early announced and often applied by this court is sharply applicable to the case at bar. In Shields v. Barrow, 17 How. 130, 139, 15 L.Ed. 158, 160, this language — quoted with approval in Barney v. City of Baltimore City, 6 Wall. 280, 284, 18 L.Ed. 825, 826, and again in Waterman v. Canal-Louisiana Bank & Trust Co., 215 U.S. 33, 48, 30 S.Ct. 10, 54 L.Ed. 80, 86 — was used to describe parties so indispensable that a court of equity will not proceed to final decision without them, viz.:

"`Persons who not only have an interest in the controversy, but an interest of such a nature that a final decree cannot be made without either affecting that interest, or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and good conscience.'"

The rule so expressed has been followed by this Court in DeKorwin v. First Nat. Bank, 7 Cir., 156 F.2d 858. Another statement of the rule by this Court is found in Montfort v. Korte, 7 Cir., 100 F.2d 615, 617, as follows:

"The courts make a distinction between necessary and indispensable parties. Typical of such is State of Washington v. United States et al., 9 Cir., 87 F.2d 421, where on page 427 is found the citation to a large number of such authorities. The court there on the same page lay down the rule for making such determination as follows:

"`After first determining that such party is interested in the controversy, the court must make a determination of the following questions applied to the particular case: (1) Is the interest of the absent party distinct and severable? (2) In the absence of such party, can the court render justice between the parties before it? (3) Will the decree made, in the absence of such party, have no injurious effect on the interest of such absent party? (4) Will the final determination, in the absence of such party, be consistent with equity and good conscience?'

"It then determined that * * * if any one of the four questions * * * is answered in the negative, then the absent party is indispensable."

Whether the Thompson lessors are indispensable parties must be determined from all the facts in the case, and the nature of the relief sought. A single 22-story office and theatre building has been erected on the adjoining properties of Metropolis and Thompson by the lessee under the ground lease, pursuant to the provisions of both the Metropolis and Thompson leases, at a cost exceeding $2,900,000. Both leases were executed concurrently, contain substantially the same provisions except for difference in the amount of rental, and run for a term of 77 years from May 1, 1924 to April 29, 2001. Reference to the Thompson lease is made in the Metropolis lease and vice versa. In 1935 both leases were amended by a single document executed by Metropolis,...