Nunn v. Feltinton

• Decision Date: 12 December 1961
• Docket Number: No. 18771.,18771.
• Citation: 294 F.2d 450
• Parties: G. C. NUNN, Receiver, Horace Smith, Fred Nemerovski and Harry Ballis, Appellants, v. Robert L. FELTINTON et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

294 F.2d 450 (1961)

G. C. NUNN, Receiver, Horace Smith, Fred Nemerovski and Harry Ballis, Appellants, v. Robert L. FELTINTON et al., Appellees.

No. 18771.

United States Court of Appeals Fifth Circuit.

September 15, 1961.

Rehearing Denied December 12, 1961.

Maurice R. Bullock, Fort Stockton, Tex., F. H. Pannill, Tom Sealy and Garland Casebier, Midland, Tex., Stubbeman, McRae, Sealy & Laughlin, Midland, Tex., of counsel, for appellants.

Pinkney Grissom, H. F. Thompson, Morris Harrell, Dallas, Tex., Thompson, Knight, Wright & Simmons, Dallas, Tex., of counsel, for appellees.

Before HUTCHESON, RIVES and WISDOM, Circuit Judges.

RIVES, Circuit Judge.

On the merits the question is whether the district court correctly held that a valid sale of real properties located in Texas had been made by a statutory liquidator for an Illinois bank pursuant to a decree of an Illinois state court. Before reaching the merits, a question of the requisite diversity of citizenship to confer federal jurisdiction must first be decided. That question is whether a Receiver appointed by a Texas state court to administer such properties and assets of the Bank as remained at the time of dissolution was the exclusive representative of the former stockholders of the Bank to the extent that the joinder with the Receiver of three such stockholders, residents of Illinois, would not defeat federal jurisdiction.

The action was commenced by the appellants in the District Court of Pecos County, Texas, and was removed to the State District Court on the ground of diversity of citizenship.¹ The district court denied the plaintiffs' motion to remand. The plaintiffs were G. C. Nunn, Receiver, a resident of the State of Texas, acting under appointment of the State District Court in a different case; Horace Smith, a Texas resident; and three Illinois residents, Fred Nemerovski, Harry Ballis and Myrtle Ballis. The defendants were four Illinois residents and two New York residents. Thus, on the face of the pleadings residents of Illinois appeared as plaintiffs and as defendants, and there was not that complete diversity of citizenship requisite to federal jurisdiction.²

The action concerned nonparticipating royalty interests on the oil, gas and other minerals in and under described lands in Pecos County, Texas, and was in trespass to try title, to quiet title, for cancellation and removal of clouds on title, and for declaratory judgment. The nonparticipating royalty interests in suit had been owned by the West Side Trust & Savings Bank, an Illinois corporation, through whom all parties claim. The plaintiffs claim as successors in interest of the Bank on its dissolution.³ The defendants claim that all of the assets of the Bank were disposed of before dissolution, and that through such disposition the defendants acquired title to the royalty interests.

Attached as an exhibit to the petition for removal was a copy of the order appointing Nunn as Receiver and of another order entered shortly after such appointment. The Receiver had been appointed at the instance of the individual parties plaintiff. That part of the order of appointment defining the Receiver's powers and duties provides that G. C. Nunn

"* * * be, and he is hereby, appointed Receiver of the property, rights, claims, causes of action, both real and personal, situated within the State of Texas, and particularly is appointed Receiver to take charge and control of and manage and control the right, title, interest, claim, demand, cause of action or other interest of the West Side Trust and Savings Bank of Chicago, and which it had at the time of its dissolution, and the interest of the stockholders or former stockholders, officers, agents or directors, or their successors, as well as the depositors and creditors of such bank and which remained vested in such bank at the time of its dissolution, in and to the following described real estate situated in Pecos County, Texas, to-wit:

* * * * * *

"* * * and that after qualifying as Receiver herein, he exercise all of the right, power, custody and control over such assets and property as may be conferred upon receivers by the statutes and rules of procedure of this State and the further Orders of this Honorable Court."

A week after appointing the Receiver, the Texas District Court approved a contract between the Receiver and Horace Smith, one of the plaintiffs, and certain attorneys, containing the following provisions:

"In consideration of such agreement and the services performed and to be performed by such attorneys the undersigned Receiver agrees that he will, out of any property, assets, demands, claims, causes of action or other interests which may be discovered or reduced to possession and title established in the Receiver or the Receivership estate, transfer, assign, grant, sell and convey unto said attorneys an undivided ¼ interest. * * *

"G. C. Nunn, Receiver, in consideration of the obligation herein set out to be performed by Horace Smith agrees that he will, out of any property, assets, demands, claims, causes of action or other interests which may be discovered or reduced to possession and title established in the Receiver or the Receivership estate, transfer, assign, grant, sell, and convey unto said Horace Smith an undivided ¼ interest. * * *

* * * * * *

"This agreement and any transfer, assignments, conveyances, deed or other instrument presumptive hereto shall be binding on all stockholders, depositors, creditors, and other persons having an interest in such property and is assigned free and clear of all liens, claims and encumbrances with full warranty of title in so far as the Receiver is permitted by law to warrant title.

"Any legal action that may be instituted shall be in the name of the Receiver * * *."

The pertinent Texas statutes relating to the appointment power and authority of the Receiver are Articles 2293, subd. 3, 2297 and 2310, Vernon's Ann.Rev.Civ. Stat. of Texas:

"Art. 2293. Appointment

"Receivers may be appointed by any judge of a court of competent jurisdiction of this State, in the following cases:

* * * * * *

"3. In cases where a corporation is insolvent or in imminent danger of insolvency; or has been dissolved or has forfeited its corporate rights."

"Art. 2297. Receiver\'s power

"The receiver shall have power, under the control of the court, to bring and defend actions in his own name as receiver, to take charge and keep possession of the property, to receive rents, collect, compound for, compromise demands, make transfers, and generally to do such acts respecting the property as the court may authorize."

"Art. 2310. Suit by or against

"When property within the limits of this State has been placed in the hands of a receiver who has taken charge of such property, such receiver may, in his official capacity, sue or be sued in any court of this State having jurisdiction of the cause of action, without leave of the court appointing him. If judgment is recovered against said receiver, the court shall order said judgment paid out of any funds in the hands of said receiver as such receiver."

The position of the defendants, sustained by the district court, is that the Receiver has capacity to sue for title and in so doing to represent shareholders, depositors and creditors of the Bank, and that it is the citizenship of the Receiver, and not that of those he represents, which determines jurisdiction.

The plaintiffs, on the other hand, insist that the appointment of the receiver did not divest the shareholders of title to the property, nor vest it in the Receiver, and that the shareholders have the right to sue for title to the property subject to the Receiver's right of possession.

It has been established from an early date that the joinder of formal or unnecessary parties cannot prevent the removal of an action to a federal court.⁴ As the cases just cited show, the right of removal depends upon the case disclosed by the pleadings when the petition for removal is filed, subject to the right of the defendant in its petition to show that parties joined by the plaintiff are not necessary parties.⁵ It is also well established "* * * that representatives may stand upon their own citizenship in the federal courts irrespectively of the citizenship of the persons whom they represent, — such as executors, administrators, guardians, trustees, receivers, etc." City of New Orleans v. Gaines' Administrator, 1891, 138 U.S. 595, 606, 11 S.Ct. 428, 431, 34 L.Ed. 1102. See also Mexican Central Ry. Co. v. Eckman, 1903, 187 U.S. 429, 433, 434, 23 S.Ct. 211, 47 L.Ed. 245; Fallat v. Gouran, 3 Cir., 1955, 220 F.2d 325, 326, 327.

The question in this case depends upon the extent of the capacity of the Receiver, under the laws of Texas, to represent the stockholders, including the three Illinois residents who were joined with the Receiver as plaintiffs. The basis and theory upon which they were joined is thus alleged in the complaint:

"The Plaintiff G. C. Nunn has the right to the possession, control, income, rents and revenues from the above lands and interests in his capacity as receiver under order and appointment of this Honorable Court in Cause No. 2458 pending on the docket of this Court to which reference is made. The Plaintiff Horace Smith is the owner of an undivided interest in the fee simple title to the above lands and interests by purchase and transfer from certain persons who are stockholders, or former stockholders, of the West Side Trust & Savings Bank in Chicago, Illinois, their heirs, successors and assigns. The Plaintiffs Fred Nemerovski, Harry Ballis and Myrtle Ballis were stockholders of the West Side Trust & Savings Bank in Chicago, Illinois, at the time it ceased doing business and at the time of its dissolution and are the owners of undivided interests in the above lands and property by virtue of having been such stockholders. The Plaintiffs Horace Smith, Fred Nemerovski, Harry Ballis and Myrtle Ballis are

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