Reed v. Robilio, 17174.
| Decision Date | 11 April 1967 |
| Docket Number | No. 17174.,17174. |
| Citation | 376 F.2d 392 |
| Parties | Martha Cuneo REED, Plaintiff-Appellant, v. Albert F. ROBILIO, Mrs. Jennie G. Robilio, John S. Robilio, Rose Ann Robilio, Florence Rita Robilio Radogna, Union Planters National Bank of Memphis, Tennessee, and Roane Waring, Jr., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Leo Kissam, New York City, for plaintiff-appellant, Chandler, Manire, Johnson & Chandler, Memphis, Tenn., Davis, Polk, Wardwell, Sunderland & Kiendl, Kissam & Halpin, New York City, on the brief.
Jack Petree, Memphis, Tenn., for defendants-appellees, Evans, Petree, Cobb & Edwards, Memphis, Tenn., on the brief.
Before WEICK, Chief Judge, and EDWARDS and PECK, Circuit Judges.
The sole question presented on this appeal is whether the District Court had jurisdiction of the case based upon diversity of citizenship. 28 U.S.C.A. § 1332.
Appellant is the sole heir of her late parents, Mr. and Mrs. Cuneo, who until their deaths owned a 50% interest in the Memphis, Tennessee, partnership of Robilio & Cuneo. In 1961 appellant commenced the instant action in the United States District Court for the Western District of Tennessee against the individual defendants, members of the Robilio family, seeking to establish a constructive trust upon the 30.66% interest of the partnership formerly owned by her late father and purchased by the defendants, and to cancel and reform a partnership agreement entered into between the Robilio defendants and Mrs. Cuneo with respect to the remaining 20% interest.
The basis for the first cause of action was that the defendants, as surviving partners, allegedly breached a fiduciary obligation to the estate of Mr. Cuneo, by concealing and failing to disclose material facts regarding the fair value of the 30% interest to the executor, Union Planters National Bank, and by purchasing the interest at a grossly inadequate price. The ground for the second cause of action was that the defendants allegedly breached their fiduciary obligation to their then partner, appellant's mother, by compelling her to enter into a partnership agreement which was grossly unfair to her when, as defendants allegedly knew, she was seriously ill and unable to comprehend the true significance of the agreement. The executors of the estates of both Mr. and Mrs. Cuneo, Union Planters National Bank and Roane Waring, Jr.,* respectively, were made parties defendant, because of their refusal to bring suit on behalf of the estates. A more complete history of the case may be found in the District Court's opinion reported at 248 F.Supp. 602.
Although appellant neither sought any relief as against the executors, nor charged them with any wrongdoing, both executors filed answers denying the material allegations of the complaint and asserting affirmatively the fairness of the respective transactions challenged. Union Planters National Bank (hereinafter the "Bank") also raised in its answer the defenses of laches and res judicata and asked that the complaint be dismissed. Further, the Bank participated in both the pretrial proceedings and the trial itself as a party adversary to appellant.
Appellant is a citizen of New York and the individual defendants and executors are, for diversity purposes, citizens of Tennessee. Several months after a five-week trial on the merits, but before a decision had been handed down, the District Court, sua sponte, dismissed the action for lack of jurisdiction, holding that the executors must be realigned as parties plaintiff for jurisdictional purposes since their interests in recovering anything lawfully due the respective estates from the Robilios coincided with plaintiff's interests. The court recognized the hostile attitude of the executors toward the claim asserted by appellant, but ruled that the executors would not be deemed defendants for diversity purposes unless their antagonistic and hostile attitude toward the claim was "reasonably required by the matters in controversy in support of some legitimate interest of the estate * * *." The court then proceeded to find that the estates had no valid interests opposed to the action brought on its behalf, and accordingly held that the antagonism on the executors' part was "irrelevant."
The rationale underlying the District Court's ruling that antagonism was irrelevant unless supported by some legitimate interest of the estate is embodied in the following:
This approach to the jurisdictional problem raised by the Bank's hostility toward the claim asserted on its behalf appears to be novel, and to the extent that the basic premise that jurisdiction once existing can be defeated is contrary to the generally accepted principle, it is of dubious validity.
Subsequent to argument in this Court, Roane Waring, Jr. was by order of the Probate Court of Shelby County, Tennessee, discharged as executor of the estate of Mrs. Cuneo. He is therefore no longer an indispensable party to any action involving that estate. With respect to this development, we adhere to our decision of Grant County Deposit Bank v. McCampbell, 194 F.2d 469, 31 A. L.R.2d 909 (6th Cir. 1952). In that case a party who at the time the action commenced was indispensable voluntarily disclaimed all his rights and interests in the subject matter in controversy, and as to him, the action was dismissed. This court upheld jurisdiction, stating:
Id. at 472-473. (Original emphasis.)
As to the second cause of action, the judgment of the District Court should be vacated and the cause remanded so that leave may be granted appellant to dismiss the action as to Roane Waring, Jr.
The remaining issue presented is whether, with respect to the first cause of action, the Bank was properly realigned as a party plaintiff for jurisdictional purposes.
At the outset, there appears to be no dispute over the generally recognized proposition that a federal court is not bound, in ascertaining whether jurisdiction exists because of diversity of citizenship, by the pleader's arrangement of the parties. See e.g., Venner v. Great Northern R. R. Co., 209 U.S. 24, 28 S.Ct. 328, 52 L.Ed. 666 (1908); City of Indianapolis v. Chase Nat. Bank, 314 U.S. 63, 62 S.Ct. 15, 86 L.Ed. 47 (1941). The dispute here centers around the propriety of the test employed by the District Court in realigning the Bank. Appellant's contention is basically that the Bank, because of its antagonism — evidenced by its refusal to sue and by its joinder with defendants in affirmatively trying to defeat the claim asserted on its behalf — is properly a party defendant. As might be expected, appellees support the decision of the District Court which, in effect, held that the interests of the Bank were controlling.
Parties to a lawsuit are, as a general rule, aligned for jurisdictional purposes in accordance with their real interests in the matter in controversy. Steele v. Culver, 211 U.S. 26, 29 S.Ct. 9, 53 L.Ed. 74 (1908); City of Indianapolis v. Chase Nat. Bank, supra; Koster v. Lumbermens Mut. Cas. Co., 330 U.S. 518, 523, 67 S.Ct. 828, 91 L.Ed. 1067 (1947); Grant County Deposit Bank v. McCampbell, supra. This test is not, however, the exclusive one. In numerous cases, particularly stockholders' derivative suits where the question arises as to the proper alignment of the corporation, a party's "antagonism" is deemed controlling, regardless of that party's interests.
In the Supreme Court case of Smith v. Sperling, 354 U.S. 91, 77 S.Ct. 1112, 1 L.Ed.2d 1205 (1957), a stockholder's derivative case upon which appellant relies, the sole issue before the Court was whether the District Court had diversity jurisdiction. In that case the complainant sought to enforce the corporation's cause of action based on alleged fraudulent wastage of the corporate assets for the benefit of another party. After a preliminary hearing the District Court held that the interests of the corporation lay with the complainant, and that the management was not antagonistic to the "financial interests" of the corporation. The corporation was thus aligned with plaintiff, and the case dismissed for lack of complete diversity. The Supreme Court, in reversing the affirmance by the Court of Appeals, upheld jurisdiction, stating that the issue of antagonism should be determinable from "the face of the pleadings and by the nature of the controversy." The Court further stated:
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