Waterloo Creamery Co. v. National Bank of Commerce of Toledo, Ohio

• Decision Date: 30 June 1922
• Docket Number: 465.
• Citation: 282 F. 197
• Parties: WATERLOO CREAMERY CO. et al. v. NATIONAL BANK OF COMMERCE OF TOLEDO, OHIO, et al.
• Court: U.S. District Court — Eastern District of Michigan

282 F. 197

WATERLOO CREAMERY CO. et al. v. NATIONAL BANK OF COMMERCE OF TOLEDO, OHIO, et al.

No. 465.

United States District Court, E.D. Michigan, Southern Division.

June 30, 1922

William J. Hotz, of Omaha, Neb., and Corliss, Leete & Moody, of Detroit, Mich., for plaintiffs.

Smith Beckwith & Ohlinger, of Toledo, Ohio, F. J. Shields, of Howell, Mich., and E. C. Froehlich, of Toledo, Ohio, for defendants.

TUTTLE District Judge.

This cause is before the court on motion to dismiss the bill of complaint on the ground of lack of jurisdiction of this court over the parties hereto. The only question involved is that of jurisdiction.

One of the plaintiffs is a citizen and resident of Iowa, and the other plaintiff is a citizen and resident of Nebraska. One of the defendants (the defendant receiver hereinafter mentioned) is a resident and citizen of Michigan, and of this district the other defendants being citizens and residents of New York. As, therefore, not all of the plaintiffs nor all of the defendants are citizens and residents of this district, the jurisdiction of this court cannot be successfully invoked on the ground of diversity of citizenship accompanied by the proper venue, in view of the language of section 51 of the Judicial Code, providing that--

'Where the jurisdiction is founded only on the fact that the action is between citizens of different states, suit shall be brought only in the district of the residence of either the plaintiff or the defendant. ' Comp. St. Sec. 1033; Camp v. Gress, 250 U.S. 308, 39 Sup.Ct. 478, 63 L.Ed. 997.

It is urged by the plaintiffs that the court has jurisdiction herein under the provisions of section 57 of the Judicial Code (formerly section 8 of the Act of March 3, 1875; chapter 137, 18 Statutes at Large, 472). This section provides that--

'When in any suit commenced in any District Court of the United States to enforce any legal or equitable lien upon or claim to, or to remove any incumbrance or lien or cloud upon the title to real or personal property within the district where such suit is brought, one or more of the defendants therein shall not be an inhabitant of or found within the said district, or shall not voluntarily appear thereto,' service upon the absent defendant or defendants may be obtained by publication in the manner prescribed in such section, and that 'upon proof of the service or publication of said order, and of the performance of the directions contained in the same, it shall be lawful for the court to entertain jurisdiction and proceed to the hearing and adjudication of such suit in the same manner as if such absent defendant had been served with process within the said district.'

It is further provided that--

'Said adjudication shall, as regards said absent defendant or defendants without appearance, affect only the property which has been the subject of the suit and under the jurisdiction of the court therein within such district. ' Comp. St. Sec. 1039.

Unless the court has jurisdiction of the parties to this suit by reason of these provisions of section 57, it is without the necessary jurisdiction herein. Whether this suit is within the scope of said section must be determined by an examination of the allegations of the bill of complaint in the light of the language of the statute referred to.

The material averments in the bill are that the plaintiffs purchased from the defendant Ekenberg Company, a New York corporation, under written contract, certain real estate buildings, and equipment, comprising two milk product factories situated within this district, for the sum of $50,000, leaving a balance due amounting to $70,000, with interest; that plaintiffs gave said defendant several notes representing said balance, of which notes two were retained by said defendant and the others were negotiated by the latter to the several defendant banks; that later (in some manner not explained in the bill, except by inference) the plaintiffs gave to the defendant Kramer, as trustee for all of the other defendants, as additional security, about $40,000 worth of additional equipment, which had been delivered to said plant by the plaintiffs and installed by them therein after their purchase of such property as aforesaid; that plaintiffs went into possession of said property and operated the same from January 3, 1920, until September 23, 1920, at which latter date there was due and owing to the defendants herein, under said contract of purchase for said property, the sums herein-before mentioned; that the legal title to all of said real and personal property remained in said Ekenberg Company and the said Kramer, trustee, and is now vested in them; that on September 23, 1920, the defendants instituted proceedings against the plaintiffs in one of the Michigan state courts for the foreclosure of the said land contract, in which proceedings said defendants procured the defendant Steadman to be appointed receiver of all of said property; that the defendants thereupon immediately took possession of such factories and properties, and have ever since operated the same, and are now in possession thereof, exercising complete control and management thereof; that on April 5, 1921, a decree was entered by said state court in said proceedings in favor of the plaintiffs in said proceedings (the defendants herein) for the payment to the latter of the unpaid balance of the purchase price hereinbefore mentioned, with the interest due thereon, amounting to a sum in excess of $75,000, and for a sale of the said property to satisfy said decree; that the defendants then took possession of said property under said receiver; that said decree provided that said receiver should sell said property and immediately after such sale make return of his proceedings thereunder; that an appeal from said decree was taken by plaintiffs herein to the Michigan Supreme Court, which affirmed such decree and ordered said property sold by said receiver for the use and benefit of the defendants herein on April 13, 1922 (the bill in the present case in this court being filed on April 12, 1922); that from and after September 23, 1920, the defendants herein have assumed to operate said plants and properties as their own, and are now so doing; that during such period said defendants have taken in as the gross sales of milk products in conducting said business over $500,000, and have dispensed the same as they have seen fit; that during such period said property handled over 24,000,000 pounds of milk; that the total of the fair, reasonable profit thereon would be $36,000; that during such operation and control of said plant by said defendants there have been lost and destroyed 2,400 milk cans, which, on December 23, 1920, were valued at $12,000, which cans belonged to the plaintiff Creamery Company and were excluded from any of the contracts of purchase or the security, as well as by the said decree in the said state court; that the defendants in the unlawful use and occupation of said premises voluntarily took possession of and used...