Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


November 17, 1941

KELLEY et al.
QUEENEY et al.

The opinion of the court was delivered by: KNIGHT

KNIGHT, District Judge.

The plaintiff are trustees of the Transit Investment Corporation and the Pennsylvania Acceptance Corporation. The Pennsylvania Acceptance Corporation has no interest in the subject matter of this suit.

The plaintiffs allege that, as trustees of the Transit Investment Corporation, they are the owners of voting trust certificates representing shares of the capital stock and certain bonds of the defendant International Railway Company. On May 28, 1940, they were appointed as such trustees by the District Court of the United States for the Eastern District of Pennsylvania. The three individual defendants are the voting trustees of the capital stock of the defendant corporation under a voting trust agreement dated December 5, 1935, pursuant to which the voting trust certificates held by the plaintiffs were issued. The defendant corporation is made a party herein upon the theory that it is a corporate beneficiary of the voting trust agreement. The action is brought to compel the removal of the individual defendants as voting trustees and the cancellation of the aforesaid voting trust agreement; to compel the individual defendants to account to the plaintiffs for damages sustained by the plaintiffs; and also to restrain the defendant corporation from making any further payments to defray the expenses and compensation to said voting trustees and cancellation of management contract with a New Jersey corporation which is not a party to the action.

 Defendants International Railway Company, Emil Richter and Joseph A. Queeney now move to dismiss this action on the ground that the court lacks jurisdiction because all of the plaintiffs and two of the defendants are citizens of the same state. The defendant Joseph A. Queeney also moves to quash the service of summons upon him upon the ground of the lack of jurisdiction in the court because the action is not brought either in the district of the residence of the plaintiff or the district of the residence of the defendant Queeney. The defendant Joseph McIlhenney has not been served with process.

 The complaint alleges that the plaintiffs are citizens of the Commonwealth of Pennsylvania and the defendants Joseph A. Queeney and Joseph McIlhenney are citizens of the Commonwealth of Pennsylvania, and that the defendants Emil Richter and International Railway Company are citizens of the State of New York. The complaint alleges that jurisdiction is founded on diversity of citizenship and that the action involves a controversy wholly between the parties as citizens as aforesaid. No other ground of federal jurisdiction is alleged. The District Court has such jurisdiction only as is provided by statute. It has jurisdiction "where the matter in controversy exceeds * * *" and where the suit "is between citizens of a State" and foreign States, citizens, or subjects. Title 28, Section 41, subd. 1, U.S.C.A.; U.S.Const. Art. III, Section 2.

 The jurisdiction of the Federal Court is to be determined by the pleadings, and the plaintiff must allege jurisdictional facts. Salem Trust Co. v. Manufacturers' Finance Co., 264 U.S. 182, 44 S. Ct. 266, 68 L. Ed. 628, 31 A.L.R. 867; McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S. Ct. 780, 80 L. Ed. 1135; KVOS, Inc., v. Associated Press, 299 U.S. 269, 57 S. Ct. 197, 81 L. Ed. 183; Thompson v. Moore, 8 Cir., 109 F.2d 372. The court lacks jurisdiction unless all persons on one side of a suit are citizens of different states from all persons on the other side. Smith v. Lyon, 133 U.S. 315, 10 S. Ct. 303, 33 L. Ed. 635; Hooe v. Jamieson, 166 U.S. 395, 17 S. Ct. 596, 41 L. Ed. 1049; Treinies v. Sunshine Mining Co., 308 U.S. 66, 60 S. Ct. 44, 84 L. Ed. 85; Sweeney v. Carter Oil Co., 199 U.S. 252, 26 S. Ct. 55, 50 L. Ed. 178; Raphael v. Trask, 194 U.S. 272, 24 S. Ct. 647, 48 L. Ed. 973. Jurisdiction is lacking if any indispensible defendant is a citizen of the same state as any plaintiff. Blake v. McKim, 103 U.S. 336, 26 L. Ed. 563; Crump v. Thurber, 115 U.S. 56, 5 S. Ct. 1154, 29 L. Ed. 328; Hanrick v. Hanrick, 153 U.S. 192, 14 S. Ct. 835, 38 L. Ed. 685; People of State of Illinois, etc., v. Boyer, D.C., 40 F.Supp. 894, and cases there cited. The defendants Queeney and McIlhenney, residents of Pennsylvania, are indispensible parties. Their interest is "of such a nature that a final decree cannot be made without wither affecting that interest, or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and good conscience." Shields et al. v. Barrow, 17 How. 130, 139, 15 L. Ed. 158; Niles-Bement-Pond Co. v. Iron Moulders' Union, 254 U.S. 77, 41 S. Ct. 39, 65 L. Ed. 145; Berg v. Merchant, 6 Cir., 15 F.2d 990; Von Herberg v. City of Seattle, 9 Cir., 27 F.2d 457; Nagle v. Wyoga Gas & Oil Corp., D.C., 10 F.Supp. 905; Huester v. Gilmour, D.C., 13 F.Supp. 630; Stapleton Nat'l Bank v. Union Trust Co., D.C., 288 F. 380.

 Plaintiffs assert that the Federal Courts having jurisdiction over the Transit Investment Corporation, as it did in the Pennsylvania jurisdiction, this court has jurisdiction over this action as ancillary thereto and that under such circumstances jurisdiction does not depend on diversity of citizenship. It is not believed that this is the law. Without showing diversity of citizenship, ancillary action can be brought only in the court in which the main action was brought wherein the plaintiffs were appointed trustees, and this was the Eastern District of Pennsylvania. In Sullivan v. Swain, C.C., 96 F. 259, it was said: "Where a receiver * * * brings an action in the court which appointed him, such court has jurisdiction of the action * * *; but in such a case the jurisdiction is upheld on the ground that the action is but auxiliary to * * * the original suit * * *. This ground of jurisdiction, however, manifestly does not exist where the receiver sues in a jurisdiction other than that of his appointment."

 In Ferguson v. Omaha & Southwestern R.R. Co., 8 Cir., 227 F. 513, ancillary suit is defined as one "growing out of a prior suit in the same court." In Murphy v. John Hofman Co., 211 U.S. 562, 29 S. Ct. 154, 156, 53 L. Ed. 327, it is said: "Where a court of competent jurisdiction has taken property into its possession, through its officers, the property is thereby withdrawn from the jurisdiction of all other courts. * * * jurisdiction in such cases arises out of the possession of the property, and is exclusive of the jurisdiction of all other courts, although otherwise the controversy would be cognizable in them."

 In Raphael v. Trask, supra [194 U.S. 272, 24 S. Ct. 649, 48 L. Ed. 973], it was said: "Ancillary bills are ordinarily maintained in the same court as the original bill is filed, with a view to protecting the rights adjudicated by the court in reference to the subject-matter of the litigation, and in aid of the jurisdiction of the court, * * *."

 The facts in this last-cited case are fairly comparable to those in the case at bar. In Mitchell v. Maurer, 293 U.S. 237, 55 S. Ct. 162, 165, 79 L. Ed. 338, the court said that in Raphael v. Trask, supra, it was "intimated that the jurisdiction of a federal court cannot be based upon an original suit in another federal court" and Winter v. Swinburne, C.C., 8 F. 49, is there pointed out as an authority to the same effect as Raphael v. Trask, supra. In Raftery v. Senter, D.C.E.D.Pa., 41 F.Supp. 807, decided September 10, 1941, a citizen of Pennsylvania, certificate holder of a cooperative Wage Fund of the Philadelphia Rapid Transit Company, brought suit on his own and on behalf of other certificate holders against trustees of the Wage Fund asking their removal. Plaintiff and the trustees were citizens of Pennsylvania. There jurisdiction was claimed on the ground that the action was ancillary to the action in the same court in which the trustees, the plaintiffs in this suit, had been appointed. The court held that the action was not ancillary and dismissed the complaint. Vide also Krippendorf v. Hyde, 110 U.S. 276, 4 S. Ct. 27, 28 L. Ed. 145. Sullivan v. Swain, supra; Winter v. Swinburne, supra.

 Numerous cases are cited by the plaintiffs in support of this ground for claiming jurisdiction. Each of these cases, except Bluefields S.S. Co. v. Steele, 3 Cir., 184 F. 584, is a case in which the ancillary action was brought in the court in which the main action was brought. All of these are in accord with the holding in Security Trust Co. v. Village of Grosse Pointe, D.C., 32 F.2d 706, that the District Court which appoints a receiver has jurisdiction to entertain a suit by the receiver as ancillary to its jurisdiction, in a cause in which the receiver was appointed, notwithstanding all the parties to the suit by the receiver which was appointed were residents of the same state. In Goldman v. Staten Island National Bank & Trust Co., 2 Cir., 98 F.2d 496, 497, the court said: "* * * receivers appointed under a creditors' bill may file ancillary suits in the district court to collect the assets of the corporation, and that the court's substantive jurisdiction is independent of the diversity of citizenship between the parties."

 And with these conclusions there is no disagreement here. In Bluefields S.S. Co. v. Steele, supra, the plaintiff brought suit in the Eastern District of Pennsylvania for the appointment of ancillary receiver. He had theretofore brought suit against the same defendant and obtained the appointment of a receiver in Louisiana. Steele resided in Illinois. Defendant was a Louisiana corporation. The court overruled objection to the jurisdiction because neither party was a resident of the district where suit was brought, holding that the defendant "having invoked the judgment of the court on the merits of the case, the appellant cannot now properly object that the court had no jurisdiction of its person." [184 F. 586.] The court there did hold that its power to appoint an ancillary receiver was not dependent upon diversity of citizenship, but the difference in the facts in that case and in those present here are definite and clear. This case is, therefore, not an authority for plaintiffs' contention. (1) It was not a suit for the appointment of an ancillary receiver; (2) there was diversity of citizenship; (3) the action there was, and the action here is not, between the same parties.

 The whole theory of the appointment of an ancillary trustee or receiver is that where property in dispute is in the possession of the court, the court has ancillary jurisdiction to determine all questions respecting the title to, or the possession or control of such property. The ancillary jurisdiction is based upon the fact that the property is in the jurisdiction in which the ancillary receiver is appointed. The court "having possession of the property, has an ancillary jurisdiction to hear and determine all questions respecting the title, possession, or control of the property. In the courts of the United States this ancillary jurisdiction may be exercised, though it is not authorized by any statute. The jurisdiction in such cases arises out of the possession of the property, * * *." Murphy v. John Hofman Co., 211 U.S. 562, 29 S. Ct. 154, 156, 53 L. Ed. 327.

 As is said in Clark on Receivers, 2d Ed., Vol. 1, p. 760: "In order that the taking possession of and maintaining possession by the appointing court should not result in injustice, the appointing court has inherent ancillary jurisdiction, pending its possession, to hear and determine all petitions ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.