Old Dominion Oil Co. v. Superior Oil Corporation

• Decision Date: 25 July 1922
• Citation: 283 F. 636
• Parties: OLD DOMINION OIL CO. et al. v. SUPERIOR OIL CORPORATION et al.
• Court: U.S. District Court — Western District of Kentucky

283 F. 636

OLD DOMINION OIL CO. et al. v. SUPERIOR OIL CORPORATION et al.

United States District Court, W.D. Kentucky.

July 25, 1922

James R. Duffin, Matt O'Doherty, Helm Bruce, and Bruce &amp Bullitt, all of Louisville, Ky., for plaintiffs.

Edmund F. Trabue, of Louisville, Ky., Edward C. O'Rear, of Frankfort, Ky., and Trabue, Doolan, Helm & Helm and Harris W Coleman, all of Louisville, Ky., for defendants.

COCHRAN District Judge (sitting by designation).

This cause is before me on plaintiffs' motion to remand. It was removed on the sole petition of the defendant Superior Oil Corporation, hereafter referred to as the defendant. To dispose of this motion correctly, an understanding should be had of what plaintiffs' petition sets forth and what relief it seeks. Note, however, need not be taken of all its allegations. Only such as are necessary to a correct disposition of the motion will be referred to. The fundamental fact which it alleges is the making, August 5, 1920, of a written contract between plaintiffs and defendant, which it copies in full. The contract recites that it amends, and is substituted for, a prior agreement between the parties, dated May 15, 1920. It related to the sale by the plaintiffs to the defendant of all its properties and assets. The consideration therefor was 343,750 shares of the defendant's capital stock. Deeds for the properties and assets to be conveyed and certificates for such numbers of shares of such stock were to be placed in escrow with the defendant bank, to be thereafter, upon the happening of certain conditions, delivered by it to the parties respectively entitled thereto. The whole of the 343,750 shares were not to be so delivered to plaintiff. Only 150,000 shares thereof were. The defendant was to purchase the other 193,750 shares, and the purchase price thereof which was to be paid to the bank, was to take the place thereof. So far as appears from the contract of August 5, 1920, the price to be so paid was $2,910,000, but according to the allegations of the petition it was $3,100,000, or $16 per share.

This suggests the possibility that, in order to a full understanding of the contract between the parties, the original contract of May 15, 1920, of which that of August 5, 1920, is recited to be an amendment, must be taken into consideration. That of August 5, 1920, contains two other provisions, of which note should be taken. One is that the defendant was to have a certain time in which to examine and approve the title to the oil leases which plaintiff was to convey, and to check up the inventory of plaintiff's other property, any deficiencies in either of which were to be made good out of the cash in the defendant bank's hands from the proceeds of the 193,750 shares. The other is that plaintiff was to indemnify the defendant from certain liabilities, and 25,000 of the 150,000 shares, which were ultimately to go to the plaintiff, were to be held by the bank to secure such indemnification.

The petition alleges, further, the making of two other agreements between plaintiff and defendant. One was a verbal one, and is alleged to have been made contemporaneously with the making of the written contract of August 5, 1920. It related to the properties and assets of the Log Cabin Oil Company. Thereby plaintiff agreed to secure a conveyance thereof to the defendant for $100,000 cash, which plaintiff was to pay, and 6,000 shares of the defendant's capital stock, which it was to furnish to plaintiff to that end, and the defendant was to retain $190,000 of the purchase price of the 193,750 shares of stock to secure performance of such agreement, leaving $2,910,000 thereof to be paid to the bank, as hereinbefore set out.

The other agreement was in writing, was made August 9, 1920, and is copied in full in the petition. Thereby it was provided that the bank was to hold 25,000 of the 150,000 shares of stock which plaintiff was to ultimately get, in addition to the 25,000 shares, hereinbefore referred to, as security for four purposes, to wit: To cover any defects in the title of the properties conveyed by plaintiff to defendant, for performance of plaintiff's agreement in relation to the Log Cabin properties, to cover any deficiencies in the inventory, and to cover any deficiency in material and supplies, estimated to be worth $90,000. It was further expressly provided therein that this 25,000 shares was not to be held as security for the things which the other 25,000 was to be held. The bank was a party to this agreement.

The petition, after thus setting forth these several agreements between plaintiff and the defendant, alleged that plaintiff had fully performed all its obligations and satisfied all the conditions, to secure performance of which the 50,000 shares of stock were to be held by the defendant bank, and the $190,000 was to be retained by the defendant, that it had demanded the stock of the defendant bank, and that it had refused to deliver same to plaintiff, because the defendant had notified it not so to do. The relief which the petition seeks is a recovery of the 50,000 shares of stock, as against both defendants, and a judgment for $190,000, with interest from September 1, 1920, until paid, against the defendant. What it seeks against both defendants is a recovery of personal property of which plaintiff claims to be the owner. What it seeks against the defendant is a personal judgment, which it claims it is entitled to have.

The removability of the cause depends on the question whether plaintiff's right to such a personal judgment is a separable controversy, within the meaning of the removal statute. If it is, the cause was removable; otherwise, it was not. The provision of that statute applicable to such a case is contained in the third sentence of section 28 of the Judicial Code (Comp. St. Sec. 1010). That sentence is in these words:

'And when in any suit mentioned in this section there shall be a controversy which is wholly between citizens of different states, and which can be fully determined as between them, then either one or more of the defendants actually interested in such controversy may remove said suit into the District Court of the United States for the proper district.'

The word 'controversy,' in the provision, is the key which unlocks its contents. To use it to that end, we want to know, not what the word itself means, for that is plain enough, but what it connotes as used here. The provision itself expressly places two limitations upon it: It must be a controversy that is 'wholly between citizens of different states,' and it must be one that 'can be fully determined as between them. ' But these are not the only limitations upon the word as here used. There are two others to be gathered from its context.

One of these has to do with what the controversy is about. The provision may be read as if it said a 'matter in controversy,' adopting a phrase used in the section relating to original jurisdiction. What is the matter in controversy that the provision has in mind? What is the controversy as to which it relates? I take it that it is a controversy about relief sought by the suit in which it exists, and, more particularly, as to whether the plaintiff, who seeks it, is entitled thereto. In the case of Schunk v. Moline M. & S. Co., 147 U.S. 500, 13 Sup.Ct. 416, 37 L.Ed. 255, the Supreme Court, through Mr. Justice Brewer said:

'The claim of the plaintiff was to recover $2,194.13 and interest. The right to recover this, or any part thereof, was challenged by the demurrer. In Gaines v. Fuentes, 92 U.S. 10, 20, this court said: 'A controversy was involved, in the sense of the statute, whenever any property or claim of the parties capable of pecuniary estimation was the subject of litigation and was presented by the pleadings for judicial determination.' Hilton v. Dickinson, 108 U.S. 165. Within the letter of the statute there was, therefore, a controversy between citizens of different states, in which the matter in dispute was over the sum or value of $2,000.'

The other arises from the fact that the petition for removal is required to be filed before there has been any controversy, so far as the suit is concerned, and the right thereto is based solely on plaintiff's pleading, by which the suit was initiated. It is a potential, and not an actual, controversy that is contemplated by the provisions.

What the provision in question yields, then, is this: When, in any suit mentioned in section 28, Judicial Code, there is a potential controversy as to whether plaintiff is entitled to relief sought by him therein, and such controversy is wholly between citizens of different states, and can be fully determined as between them, the suit is removable at the instance of one or more of the defendants actually interested in such controversy. The controversy so provided for is usually characterized as a separable controversy. But it will be noticed that the provision in question does not so characterize it. If such is a true characterization of every controversy which can come within it, then it is so by virtue of what it provides, and not of what it says. Its use in this connection is by the courts which have had to do with the interpretation and application of the provision. The word implies that the only cases calling for its application are those where the suit involves more than one controversy as to whether plaintiff is entitled to relief sought, and that it cannot have application where there is but a single controversy. But in 34 Cyc.p. 1264, I find this statement:

'It is usually, although not universally, held that this refers to a case in which there are two controversies, one of which is separable from the other.'

I have not examined the decisions...