O'Neill Bros. v. Crowley

• Decision Date: 08 October 1938
• Docket Number: No. 2775.,2775.
• Citation: 24 F. Supp. 705
• Court: U.S. District Court — District of South Carolina
• Parties: O'NEILL BROS., Inc., v. CROWLEY et al.

24 F. Supp. 705

O'NEILL BROS., Inc., v. CROWLEY et al.

No. 2775.

District Court, W. D. South Carolina, Spartanburg Division.

October 8, 1938.

Osborne, Butler & Moore, of Spartanburg, S. C., for plaintiff.

J. Davis Kerr, Jr., of Spartanburg, S. C., for defendants.

WYCHE, District Judge.

The plaintiff, a corporation under the laws of the State of Pennsylvania, instituted an action in the court of common pleas for Spartanburg County against the defendants, both of whom are citizens and residents of South Carolina, and engaged in business as partners under the firm name of United Waste Company. By its complaint plaintiff seeks to recover of the defendants the sum of Two Thousand, Five Hundred, Twenty and 67/100 ($2,520.67) Dollars. In due time the defendants answered the complaint, and among other allegations contained in the answer, is a section designated as a counterclaim, whereby the defendants seek by way of counterclaim to recover of the plaintiff the sum of Four Thousand, Seven Hundred, Fifty Eight and 75/100 ($4,758.75) Dollars. Upon the filing of this answer, and within the time in which plaintiff was allowed under the statutes and rules of the courts of South Carolina to reply to said counterclaim, a petition and bond for the removal of the cause in due form were duly filed by the plaintiff, and the matter is now before me on the application of the defendants to remand the cause to the state court.

The question is therefore whether a non-resident plaintiff, who has instituted an action in the state court against resident defendants for an amount not within the jurisdiction of the United States Court, may remove the cause to the United States Court upon the filing of a counterclaim by the defendants seeking an amount within the jurisdiction of this court.

There is a direct conflict in the authorities on the question. Some of the courts hold to the view contended for by the defendants, that the removal statutes must be strictly and technically construed, and that the words "defendant" or "defendants" mean only the titular defendants. Other courts have decided that the language of the removal act, where it refers to "defendant" or "defendants," must be practically construed with regard to the actual position of the parties in the case.

The determination of the question involves a construction of that portion of Section 28 of the Judicial Code, as amended, 28 U.S.C.A. § 71, which is as follows: "Any other suit of a civil nature, at law or in equity, of which the district courts of the United States are given jurisdiction, in any State court, may be removed into the district court of the United States for the proper district by the defendant or defendants therein, being nonresidents of that State."

The only decision coming from the fourth circuit on this question seems to be American Fruit Growers v. La Roche, D.C., 39 F.2d 243, decided in the eastern district of South Carolina by the late Judge Ernest F. Cochran. This opinion of Judge Cochran, while not binding upon me, is naturally persuasive, and in the absence of a decision on this question by the Circuit Court of Appeals of this Circuit or by the Supreme Court, I am constrained to follow it unless it should appear to me that it is clearly wrong in the reasons assigned therein. In deciding this question Judge Cochran said page 244: "In the present case, the plaintiff had no choice but to bring its suit in the state court. It, therefore, cannot be said to have waived any right it may have as to any other cause of action. If the defendant had brought his case against the plaintiff in the state court, there could be no doubt about the right to a removal. When he filed his counterclaim in the case brought by the plaintiff, then, so far as the counterclaim is concerned, he became the actor and therefore the plaintiff; and the American Fruit Growers, Inc., became, as to the counterclaim, the defendant. In that aspect the case is literally within the terms of the Removal Act (28 U.S.C.A. § 71). In any aspect of the case, there can be no doubt but that the case is within the spirit of that act. It is only by the most technical reasoning, and by laying aside the actualities of the case and the real position of the parties, that the right to remove can be denied. If the removal cannot be had in this case, then a nonresident who has a small claim, less than the jurisdictional amount in the federal courts, against a citizen of another state, must either forego that claim or must forego his right to a trial in the federal court of any claims that the resident citizen may have against him. I think this would be most unreasonable."

The question of the status of parties to this litigation must be determined by the law of the state where the controversy arises,—therefore, in this case by the decisions of the South Carolina Supreme Court.

The position of the parties in the instant case with respect to the counterclaim is clearly defined by decisions of the Supreme Court of South Carolina. In Kentucky Refining Company v. Saluda Oil Mill Company, 70 S.C. 89, 48 S.E. 987, the Supreme Court of this state, in discussing the effect of counterclaims and the position of the parties with respect thereto, says page 988: "Our construction of the defenses (as they are denominated in the answer) is that the defendant attempted to set up counterclaims arising out of a breach of contract, for it will be observed that it seeks affirmative relief. Co-operative Pub. Co. v. Walker, 61 S.C. 315, 39 S.E. 525. When an answer sets up a counterclaim, the defendant makes himself, in respect to such demand, a plaintiff in fact, though not in name, and the sufficiency of the facts to constitute a counterclaim is to be determined in the same manner as when a demurrer is interposed to a complaint on the ground that it does not state facts sufficient to constitute a cause of action."

And in Inman & Co. v. Hodges, 80 S. C. 455, 61 S.E. 958, the same court said page 959: "But the very general rule now is that the defendant who has filed a cross-bill or counterclaim setting up affirmative relief is deemed a plaintiff therein. * * * A counterclaim is in the nature, and has all the characteristics, of a separate and independent action." Citing Kentucky Refining Company v. Saluda Oil Mill Co., supra.

It is perfectly clear therefore that under the decisions of the Supreme Court of South Carolina, binding upon this court on such a question, a defendant who files a counterclaim is really a plaintiff with respect to such counterclaim, asserting a separate and independent action, even though he continues to be denominated in the title of the pleadings as defendant. Since he is in fact the plaintiff in respect to such counterclaim, the titular plaintiff is the...