Where plaintiff in good faith insists on the joint liability of
all the defendants until the close of the trial, the dismissal of
the complaint on the merits as to the defendants who are citizens
of plaintiff's state does not operate to make the cause then
removable as to nonresident defendants and to prevent the plaintiff
from taking a verdict against the defendants who might have removed
the cause had they been sued alone, or if there had originally been
a separable controversy as to them.
The facts, which involve the validity of the removal of a cause
to the federal court, are stated in the opinion.
MR. JUSTICE McKENNA delivered the opinion of the Court.
The parties were, respectively, plaintiff and defendant in the
court below, and we shall so designate them.
The plaintiff brought suit against the defendant and the
Pittsburgh, Shawmont & Northern Railroad Company in the Supreme
Court of Erie County, New York, for the sum
Page 215 U. S. 247
of $43,038.88, upon a contract entered into between the
defendant, the Interior Construction & Improvement Company, and
the plaintiff by which the construction company agreed to construct
certain portions in Pennsylvania and New York of the line of the
railroad company, and for materials and the use of certain articles
by the railroad. It is alleged in the petition of the plaintiff
that the railroad company was organized by the consolidation of
other railroad companies, and, for the purpose of carrying out the
plans of such consolidation, undertook the construction of a
railroad from certain points in Pennsylvania to the Village of
Angelica, in the State of New York. That, in pursuance of this
purpose, the railroad company entered into a contract with the
construction company, and in payment for the construction of the
railroad agreed to issue and did issue to the company its stock and
bonds, which were largely in excess of cost of construction. That
the construction company was organized solely for the purpose of
building the railroad, and to secure to the promoters and
organizers thereof the profits to be made by the construction of
the railroad and the manipulation of securities. That the officers,
directors, and owners of the majority of the capital stock of the
railroad had like relation to the construction company, and the
management of the latter was controlled by them. And it is averred
that the construction company was the agent and representative of
the railroad company, and that the latter became and is responsible
and liable for the acts and obligations of the construction
company. Due performance by plaintiff of its contract is
alleged.
It is further alleged that the railroad company is a New York
corporation and the construction company is a New Jersey
corporation.
There was personal service of the summons on the railroad
company on the twenty-fourth of October, 1904. That company
appeared and answered. The service upon the construction company
was made on the sixteenth of November, 1904, by serving the summons
on the Secretary of State
Page 215 U. S. 248
of the State of New York. The construction company made a motion
to set aside the service of summons on the ground that it was
irregular and void. The company made no other appearance. The
motion was denied, and appeal was taken to the appellate division
of the court. That court affirmed the ruling, and denied leave to
appeal to the Court of Appeals. The construction company's time to
answer was extended to February 6, 1905, and, upon motion of the
company, the case was removed to the United States circuit court on
the ground of a separable controversy, but was subsequently
remanded upon motion of the plaintiff. The motion to set aside the
service of summons was denied. 135 F. 619. Upon the return of the
case to the state court, a motion was made by the construction
company to extend its time to appear and answer in the action until
twenty days after the determination of the motion then pending,
made in behalf of the railroad company, to compel the plaintiff to
elect which defendant it would proceed against, to the exclusion of
the other. The motion was denied, also that made by the railroad
company. The referee to whom the issues raised by the railroad
company had been referred to hear and determine reported dismissing
the complaint as to that company, and judgment thereon was entered
on the twenty-sixth of October, 1905. The judgment was affirmed by
the appellate division of the supreme court. But, pending the
appeal, upon motion of the construction company, the case was
removed to the circuit court, but that court remanded the case,
saying that,
"until the determination of the appeal by the codefendant, in
the absence of fraud or improper joinder of defendants for the
purpose of interfering with or obstructing the construction
company's right of removal, it is not thought that a separable
controversy exists."
143 F. 687.
On the twenty-third of September, 1905, an affidavit of the
Page 215 U. S. 249
default of the construction company having been filed, an order
was made in the supreme court reciting the fact and the facts
showing such default and appointing a referee "to take proofs of
the cause of action set forth in the plaintiff's complaint." The
referee reported that there was due plaintiff the sum of
$47,323.91. The report was confirmed and judgment entered for that
amount.
Subsequently, the appellate division having sustained the
judgment dismissing the action as to the railroad company, the case
was again, on the motion of the company, removed to the circuit
court and a motion made in that court to set aside the service of
summons on the construction company, and to vacate the judgment.
Concurrently with that motion, plaintiff moved to remand the case
to the state court. The motion of the construction company was
granted, and the action dismissed for want of jurisdiction over the
company.
Lathrop, Shea & Hanwood Co. v. Interior
Construction & Improvement Co.,150 F. 666.
The motion was granted on the ground that the facts showed that
the company had ceased to do business in the state, and held no
property therein.
It will be seen that a question of jurisdiction alone is
presented, the circuit court certifying
"that no evidence was introduced upon the hearing of the motion,
the issue being:"
"I. Whether this court had obtained jurisdiction over this
defendant by the service of a summons upon the Secretary of State
of the State of New York, as provided by section 16 of the General
Corporation Law of said State of New York."
"II. Whether the proceedings in and the decisions of the courts
of the State of New York, construing said corporation law, were
controlling upon this Court."
"III. Whether the proceedings taken by said defendant in said
state court are
res judicata upon defendant."
But there is a question of jurisdiction paramount to that passed
on by the circuit court. It will be observed that the action
against the railroad company was not dismissed by
Page 215 U. S. 250
plaintiff, but, against its contention, by the supreme court of
the state, whose judgment was affirmed, also against its
contention, by the appellate division of that court. This did not
take jurisdiction from the state court to proceed against the
construction company, nor make the judgment against it invalid.
It was held in
Powers v. C. & O. Ry. Co.,
169 U. S. 92, that
a case may become removable after the time prescribed by statute,
upon the ground of a separate controversy, upon the subsequent
discontinuance of the action by the plaintiff against the
defendants, citizens of the same state with the plaintiff. In
Whitcomb v. Smithson, 175 U.S. at
175 U. S. 637,
the
Powers case was commented on, and a different effect
was ascribed to a ruling of the court dismissing the action as to
one of the defendants than to a discontinuance by the voluntary act
of the plaintiff. The action was against Whitcomb and another, who
were receivers of the Wisconsin Central Company and the Chicago
Great Western Railway Company, for personal injuries received by
Smithson while serving the Chicago Great Western Railway Company as
a locomotive fireman in a collision between the locomotive on which
he was at work and another locomotive operated by the receivers
appointed by United States circuit court. The case came to trial,
and at the close of the testimony, counsel for the Chicago Great
Western Railway Company moved that the jury be "instructed to
return a verdict in behalf of that defendant," which motion the
court granted. An application was then made by the receivers to
remove the case to the circuit court of the United States, which
was denied. The court instructed the jury to return a verdict for
the railway company, which was done, and thereupon the case went to
the jury, who returned a verdict against the receivers, upon which
judgment was entered. The judgment was affirmed by the Supreme
Court of Minnesota, to which a writ of error was issued from this
Court. Passing on motions to dismiss or affirm, and answering the
contention of the receivers that they
Page 215 U. S. 251
acquired the right of removal as though they were the sole
defendants when the court directed a verdict in favor of the
railway company, this Court said by the Chief Justice:
"This might have been so if, when the cause was called for trial
in the state court, plaintiff had discontinued his action against
the railway company, and thereby elected to prosecute it against
the receivers solely, instead of prosecuting it on the joint cause
of action set up in the complaint against all of the defendants.
Powers v. Chesapeake & Ohio Railway, 169 U. S.
92. But that is not this case. The joint liability was
insisted on here to the close of the trial, and the nonliability of
the railway company was ruled
in invitum. . . . This was a
ruling on the merits, and not a ruling on the question of
jurisdiction. It was adverse to plaintiff and without his assent,
and the trial court rightly held that it did not operate to make
the cause then removable, and thereby to enable the other
defendants to prevent plaintiff from taking a verdict against
them."
The
Whitcomb case and the
Powers case are
commented on and impliedly approved in
Chesapeake & Ohio
Ry. Co. v. Dixon, 179 U. S. 137,
179 U. S. 138,
and again in
Kansas City Suburban Belt Ry. Co. v. Herman,
187 U. S. 63;
Fritzlen v. Boatmen's Bank, 212
U. S. 372.
See also Alabama Great Southern Ry. v.
Thompson, 200 U. S. 206.
It follows from these views that the order of the circuit court
setting aside the service of the summons on the construction
company and vacating the judgment against it and dismissing the
action must be
Reversed, and the cause remanded with directions to grant
the motion of plaintiff to remand the case to the supreme court of
the State of New York. So ordered.