La Varre v. International Paper Co.

• Decision Date: 04 December 1929
• Citation: 37 F.2d 141
• Parties: LA VARRE v. INTERNATIONAL PAPER CO. et al.
• Court: U.S. District Court — District of South Carolina

37 F.2d 141 (1929)

LA VARRE v. INTERNATIONAL PAPER CO. et al.

District Court, E. D. South Carolina.

December 4, 1929.

COPYRIGHT MATERIAL OMITTED

Melton & Belser, of Columbia, S. C., and Perrin & Tinsley, of Spartanburg, S. C., for plaintiff.

Nelson & Mullins, of Columbia, S. C., for defendants.

GLENN, District Judge.

This matter came before me on motion of the defendants to set aside the service of the summons and complaint and to dissolve the attachment obtained by the plaintiff over certain properties and property rights alleged to belong to the two defendants, one or both of them. The matter was heard by me in open court on October 23d and October 25th in Columbia, S. C. Affidavits and records were submitted and exhibits were introduced as the investigation covered a wide field. On Tuesday, November 5th, this court announced its decision in open court at Columbia, S. C., the court then being in session, and this opinion contains the views of the court as expressed at that time.

This action was originally commenced in the court of common pleas for Richland county, and in due time was removed by the defendants to the federal District Court of South Carolina within proper time, and after due notice the defendants made this motion to dismiss the action, set aside the service of the summons and complaint, and to dissolve the attachments theretofore obtained.

On the call of the motion for hearing, the plaintiff filed with the court certain objections to proceeding to hear the motion. These objections are stated by counsel for the plaintiff and presented under five separate heads. These five heads are summarized, and the original papers are filed with this opinion, and are necessary to a complete understanding of the case. They, therefore, should be printed as part of the record in order to clearly present the questions before the courts and its ruling thereon. They may be summarized as follows:

1. Objection to jurisdiction and procedure.

2. Petition and motion to reject defendant's affidavits.

3. Notice of exception to the court's consideration of the affidavit of D. H. Hanley.

4. Notice of a motion to require the framing of appropriate issues for trial by the court as to the relation between the defendant companies and the Columbia Railway & Navigation Company and the Santee-Cooper River Canal Power Development.

5. Notice of a motion to dismiss the plaintiff's motion upon the ground that the said plaintiff's motion to dismiss and the grounds thereof are not sufficiently definite and specific.

Let it be understood at the outset that in a matter of this kind (i. e., where service has been effected and an attachment obtained in a state court before the removal of the action to the federal court), this court, in passing upon a motion to dismiss and dissolve, follows the state law as far as possible. This has been decided as the correct rule in many cases.

This is a removed case, and we look to the local law. Under the South Carolina law regulating attachment, there is no doubt at all about the right of a nonresident defendant to move for the dissolution of the attachment on the ground that it does not own the property attached. See: Greenwood Grocery Co. v. Canadian County Mill & Elevator Co., 72 S. C. 450, 52 S. E. 191, 192, 2 L. R. A. (N. S.) 79, 110 Am. St. Rep. 627, 5 Ann. Cas. 261. In that case Mr. Justice Woods, who was later a member of the Circuit Court of Appeals for the Fourth Circuit says: "The general rule is that an attachment will not be dissolved, on the ground that the defendant has no title to the property, or that it is the property of the plaintiff. The defendant's lack of interest in the property would affect the title of the purchaser under the attachment, but not the validity of the process. * * * But it is manifest this reasoning does not apply where the court obtains jurisdiction of a nonresident by virtue of the attachment of his or its property in the state. In such case, the jurisdiction and the validity of the attachment depend upon the defendant having property in the state, and if this fact does not appear, it is fatal."

It is readily seen that the other objections of the plaintiff go to the manner of conducting the hearing. This is largely a matter of discretion, it being impossible to ascertain at the outset as to whether or not such serious questions of fact would arise which would cause the court to feel that any affiants should be present for cross-examination. As the evidence was introduced it soon became evident that there was practically no contest as to the questions of fact involved, and that the issues presented were ones of law. The plaintiff was not in any way taken by surprise on any evidentiary showing. Counsel for the defendants raised no objection to introduction of any records which the plaintiff sought to introduce. It was impossible to see how the plaintiff could have made any stronger showing, as to the affiliation of the various allied corporations with each other, than was made. To have required the presence of the affiants for cross-examination would have been, in the opinion of this court, an abuse of its discretion and would have served no useful purpose. The proceedings of the Federal Trade Commission, where these same affiants were examined very fully about the very matters on which they would have been examined here, were admitted in evidence. These records abundantly sustained the very same questions of fact which the plaintiff was seeking to establish on the hearing of this motion.

A study of the record and exhibits therefore leads the court to the conclusion that there was no necessity for adjourning the hearing and requiring the presence of the nonresident witnesses for cross-examination. Nor was there in the opinion of this court any serious doubt as to any question of fact which would require a submission of an issue to a jury. It is urged that the plaintiff could have introduced other records and produced additional evidence bearing upon the agency of one Hanley and of the South Carolina Timber Company and Columbia Railway & Navigation Company for the two defendants (named here). This court points out that this motion was noticed on September 26th and was not heard until October 23d. Counsel had ample time to prepare his showing, and from this court's knowledge of counsel's ability and vigilance it is safe to say that all possible investigations were made. Here again it is pointed out that the records of the investigations, as conducted by the Federal Trade Commission at Washington (which records are in evidence), developed the relations existing between the defendants here and the two South Carolina corporations as fully as they could have been developed in this court. As to the agency of Hanley, counsel had nearly one month to investigate this and prepare to offer any proof which might have been obtainable along this line.

And as to all of these matters, the court takes into consideration the sworn allegations of the complaint that the plaintiff had formerly had extensive negotiations and dealings with these defendants and was not ignorant of their affairs. Even further, we point out that there was introduced in evidence the record of a suit in the federal District Court for the Middle District of Georgia, wherein the relations between these parties had been investigated was received in evidence. (This record, as introduced in evidence, covered the proceedings in that suit, Harold Hall, plaintiff, v. William La Varre, defendant no opinion handed down, in equity, removed from superior court of Richmond county, Ga., up to and including the order of Judge Deaver signed on September 30, 1929.)

Therefore, all of the objections of the plaintiff, both as to hearing the motion and as to the manner of hearing, are overruled.

This brings us to consider the motion on its merits.

The plaintiff submits that his claim to jurisdiction over the two defendants should be sustained on five grounds, any one, or all of them. We are arranging these claims in the logical order of consideration.

1. Service on officers and agents of subsidiary corporations as agents of defendants.

2. Defendants' interest in Santee-Cooper Development and Columbia Railway & Navigation Company attached.

3. Debts due by newspaper corporations for newsprint attached.

4. Defendants' claim to debt due by La Varre and Hall attached.

5. Defendants' claim to interest in stock attached.

The Plaintiff's First Claim to Jurisdiction.

Upon considering the evidence and the authorities cited, this question is easily determined.

The only reasonable inference from the evidence is that at the time of the attempted service of process upon D. H. Hanley he was not an agent of either of the defendants. This being true, it is elementary that the attempted service was ineffectual and invalid, and should be set aside.

If it be assumed that the South Carolina Timber Company is a wholly controlled subsidiary of International Paper Company or International Paper & Power Company, it does not follow that the service of process upon D. H. Hanley, an officer of the subsidiary, bestowed upon the courts of the state of South Carolina jurisdiction of the parent corporation. In fact such contention has been definitely repudiated by the Supreme Court of the United States in many cases.

It is well settled that ownership of stock in a subsidiary which is doing business within a state does not bring the company owning or controlling the stock within the state in the sense of "transacting business" therein, and does not subject the parent company to local jurisdiction for the purpose of service of process upon it. Peterson v. Chicago, R. I. & P. R. R. Co., 205 U. S. 364, 27 S. Ct. 513, 523, 51 L. Ed. 841; Mechanical Appliance Co. v. Castleman, 215 U. S. 437, 30 S. Ct. 125, 54 L. Ed. 272; Philadelphia & Reading R. R. Co. v. McKibbin, 243 U. S. 264, 37 S. Ct. 280, 282, 61 L. Ed. 710; People's...