Woodward v. DH Overmyer Co.

• Decision Date: 09 June 1970
• Docket Number: No. 800,801 and 802,34748 and 34749.,Dockets 34606,800
• Citation: 428 F.2d 880
• Court: U.S. Court of Appeals — Second Circuit
• Parties: Richard J. WOODWARD, Ned P. Clyde, James I. Sherard, Raymond Lundgren, Douglas C. Moorhouse, and David M. Greer, doing business as Woodward-Clyde-Sherard & Associates, a partnership, Plaintiffs-Appellees, v. D. H. OVERMYER CO., Inc., a New York corporation, D. H. Overmyer Co., Inc., an Ohio corporation, Defendants-Appellants.

428 F.2d 880 (1970)

Richard J. WOODWARD, Ned P. Clyde, James I. Sherard, Raymond Lundgren, Douglas C. Moorhouse, and David M. Greer, doing business as Woodward-Clyde-Sherard & Associates, a partnership, Plaintiffs-Appellees, v. D. H. OVERMYER CO., Inc., a New York corporation, D. H. Overmyer Co., Inc., an Ohio corporation, Defendants-Appellants.

Nos. 800, 801 and 802, Dockets 34606, 34748 and 34749.

United States Court of Appeals, Second Circuit.

Argued May 11, 1970.

Decided June 9, 1970.

James H. Reidy, New York City, (Gerard L. Goettel, New York City, of counsel), for defendants-appellants.

William D. Powers, New York City (Leslie A. Hynes, New York City, of counsel), for plaintiffs-appellees.

Before FRIENDLY and KAUFMAN, Circuit Judges and BRYAN,^* District Judge.

FRIENDLY, Circuit Judge.

This action by six partners of Woodward-Clyde-Sherard & Associates (sometimes hereafter "the Woodward partners") to foreclose a second mortgage on property in Albany County, N.Y., executed by D. H. Overmyer Co., Inc., a New York corporation (Overmyer N.Y.), in order to secure notes signed by D. H. Overmeyer Co., Inc., an Ohio corporation (Overmyer Ohio), and for a deficiency judgment, has given rise to a number of procedural problems.

The most important is whether the action is properly in federal court at all. The complaint was filed in the Supreme Court of New York for Albany County, and Overmyer Ohio and Overmyer New York petitioned for removal. The petition alleged that "none of the individual parties plaintiff is a citizen of the State of New York or the State of Ohio but are all citizens of the State of California or of the State of New Jersey"; that Overmyer Ohio is an Ohio corporation with its principal place of business in New York; and that Overmyer New York is a New York corporation with its principal place of business in that state. The petition was bad under the second sentence of 28 U.S.C. § 1441(b), providing that an action not founded on the existence of a federal question "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." While the action should therefore have been remanded if the plaintiffs had moved for such relief,¹ no suggestion on this score was made until the Overmyer corporations brought the point to our attention. Nevertheless under the "strong" rule that federal jurisdiction may be challenged at any stage, even by the party who invoked it, see Wright, Federal Courts § 7 (1970),² we must consider the problem.

The severity of this rule stimulated judicial ingenuity to avoid it with respect to the issue with which we are here concerned. In Handley-Mack Co. v. Godchaux Sugar Co., 2 F.2d 435 (6 Cir. 1924), Judge Knappen drew a distinction between § 2 of the Act of March 3, 1875, 18 Stat. 470, authorizing removal, inter alia, of actions "in which there shall be a controversy between citizens of different States," which he deemed to be jurisdictional in the true sense, and the provision limiting removal in diversity cases to a defendant not a resident of the state where the action was brought. Drawing on Baggs v. Martin, 179 U.S. 206, 21 S.Ct. 109, 45 L.Ed. 155 (1900), he held that where only the latter provision was violated and the plaintiff made no timely request for remand, the situation could be considered to be as if the plaintiff had brought the action in the federal court and, if jurisdiction would have existed in that event, objection on the score of nonremovability would be deemed waived. Although the historical argument was rather shaky,³ the result was desirable and Judge L. Hand, writing also for Judge Swan and Judge A. N. Hand, found Judge Knappen's opinion "conclusive." Bailey v. Texas Co., 47 F.2d 153, 155 (2 Cir. 1931). We are quite content to follow our distinguished predecessors, especially since the two cases were cited in American Fire & Casualty Co. v. Finn, 341 U.S. 6, 16-17 n.14, 71 S.Ct. 534, 95 L.Ed. 702 (1951), with what could be regarded as approval and certainly was not disapproval.

Not seriously disputing this, appellants question whether there would have been jurisdiction had the action been originally brought in a federal court. The only doubt arises from the fact that the Woodward partnership has its principal office in New York and is alleged to have been organized under New York law, whatever that may mean. Although New York permits partners to sue or be sued in the partnership name, CPLR § 1025, this does not alter the long-standing rule that, for purposes of diversity jurisdiction, the court looks to the citizenship of the partners, Great Southern Fireproof Hotel Co. v. Jones, 177 U.S. 449, 456, 20 S.Ct. 690, 44 L.Ed. 842 (1900); A. D. S. Developers, Inc. v. Tucker, 263 F.Supp. 986 (E.D.Pa.1967); contrast Colonial Realty Corp. v. Bache & Co., 358 F.2d 178, 183-184 (2 Cir. 1966), dealing with a limited partner. We thus uphold federal jurisdiction and must now recount the proceedings below.

Immediately upon the action being removed, defendants, on January 2, 1968, filed a motion to dismiss the complaint. This was based on a contention concerning improper presentment of the allegedly defaulted note of Overmyer Ohio, a contention so utterly trivial and unmeritorious as not to warrant statement here. Three weeks later they filed a motion for a change of venue to the District of Massachusetts. This motion, almost certainly ill-founded in a mortgage foreclosure action, see 1 Moore, Federal Practice ¶ 0.142 2.-1 and cases there cited in n.16, alleged that the notes in suit had been given for plaintiffs' performance of engineering services in many states; that after delivery of the notes and payment of some, defendants learned that plaintiffs had "unwarrantably and negligently" delegated their duties to others; and that as a result defendants' affiliate, Green & White Construction Company, Inc., on whose behalf the notes had been given by Overmyer Ohio, had instituted an action to recover damages in the District of Massachusetts in which Overmyer New York had joined to seek an injunction against the mortgage foreclosure.

After submitting affidavits in opposition to both motions, plaintiffs, in June 1968, cross-moved for summary judgment. The moving affidavit recited that the Massachusetts action, brought by Green & White and Overmyer New York against Goldberg-Zoino & Associates, Inc., a Massachusetts corporation, and two of the Woodward partners, had been dismissed with respect to the latter on jurisdictional grounds. A supplemental affidavit later apprised the court that the judge in Massachusetts had allowed Green & White but not Overmyer New York to file an amended complaint naming all the Woodward partners. In October 1968 defendants responded with an affidavit of their general counsel again raising the presentment issue and mentioning the claim of professional misconduct in a conclusory fashion, as hereafter noted. At the same time Green & White moved for leave to intervene as a plaintiff; its proposed complaint asserted the same claim against the Woodward partners it had alleged in Massachusetts. All four motions were argued in November. A year later, on November 20, 1969, the court denied defendants' motions to dismiss the complaint and for change of venue and Green & White's motion to intervene, and granted plaintiffs' motion for summary judgment. The portion of the opinion relating to the last discussed only the argument about presentment and said nothing about the claim of professional negligence. The judge directed plaintiffs' attorneys to prepare an order which, unless consented to, should be settled on notice.

Defendants responded with a renewed motion, served December 18, 1969, this time made by them as well as by Green & White, to allow the latter to intervene as a plaintiff in order to assert its claim against the plaintiffs and in the meanwhile to stay the summary judgment. Circumstances were alleged to have changed because of the discontinuance of the Massachusetts action due to inability to serve all the Woodward partners. In one of the moving affidavits, by the...