Realty Holding Company v. Donaldson/Opinion of the Court

by George Sutherland

United States Supreme Court

268 U.S. 398

Realty Holding Company  v.  Donaldson

 Argued: April 28, 1925. --- Decided: May 25, 1925

The jurisdiction of the court below was invoked upon the ground of diverse citizenship, Judicial Code, § 24, subd. 1 (Comp. St. § 991); and the court dismissed the bill under the limiting clause contained in that subdivision:

'No District Court shall have cognizance of any suit (except upon foreign bills of exchange) to recover upon any promissory note or other chose in action in favor of any assignee, or of any subsequent holder if such instrument be payable to bearer and be not made by any corporation, unless such suit might have been prosecuted in such court to recover upon said note or other chose in action if no assignment had been made.' 294 F. 541.

The bill alleges that appellant is a Delaware corporation and appellee a 'resident' of Michigan. This is not a sufficient allegation of appellee's Michigan citizenship. Robertson v. Cease, 97 U.S. 646, 648, 24 L. Ed. 1057; Wolfe v. Hartford Life Ins. Co., 148 U.S. 389, 13 S.C.t. 602, 37 L. Ed. 493; Oxley State Co. v. Butler County, 166 U.S. 648, 655, 17 S.C.t. 709, 41 L. Ed. 1149. It was, however, conceded by appellee in the court below, as well as here, that she was in fact a citizen of Michigan; and the court below assumed the point. Since the defect may be cured by amendment and nothing is to be gained by sending the case back for that purpose, we shall consider the amendment made and dispose of the case. Norton v. Larney, 266 U.S. 511, 515-516, 45 S.C.t. 145, 69 L. Ed. 413; Howard v. De Cordova, 177 U.S. 609, 614, 20 S.C.t. 817, 44 L. Ed. 908.

Shortly stated, the bill alleges that appellee was the owner of certain real property in Michigan which she had leased to the Clifford Land Company, a Michigan corporation; that the Clifford Land Company had undertaken to finance for appellee the erection of a building upon such property. That appellant had executed and delivered to appellee two conveyances of other real property in Michigan as security for the erection of such building in accordance with the promises of the land company; that appellee had violated the terms of the lease in certain particulars set forth; and that appellant, 'in order to protect its rights and property in the premises,' etc., procured an assignment to it from the land company of the said lease. The specific relief prayed is a decree for 'specific performance by the said defendant of her said several undertakings' and for an injunction against interferences with appellant under the lease.

The assignor, being a Michigan corporation, could not have prosecuted the suit in a federal court if no assignment had been made. The phrase 'to recover upon any * * * chose in action,' under the decisions of this court, includes a suit to compel the specific performance of a contract or otherwise to enforce its stipulations. Corbin v. County of Black Hawk, 105 U.S. 659, 665, 26 L. Ed. 1136; Shoecraft v. Bloxham, 124 U.S. 730, 8 S.C.t. 686, 31 L. Ed. 574; Plant Investment Co. v. Key West Railway, 152 U.S. 71, 76, 14 S.C.t. 483, 38 L. Ed. 358; New Orleans v. Benjamin, 153 U.S. 411, 432, 14 S.C.t. 905, 38 L. Ed. 764. An examination of the bill of complaint discloses that the suit is primarily for a specific performance of the covenants of the lease. Additional relief sought is purely incidental to this main object. The case, therefore, falls within the doctrine of the foregoing decisions, and the court below was right in adjudging a dismissal. Kolze v. Hoadley, 200 U.S. 76, 83 et seq., 26 S.C.t. 220, 50 L. Ed. 377; Citizens' Savings Bank v. Sexton, 264 U.S. 310, 314, 44 S.C.t. 338, 68 L. Ed. 703.

The cases relied upon by appellant are not in point. Brown v. Fletcher, 235 U.S. 589, 35 S.C.t. 154, 59 L. Ed. 374, was a suit against a trustee by an assignee to recover an interest in an estate under an assignment by the cestui que trust. This court held that the relation between trustee and cestui que trust was not contractual; that the rights of the beneficiary depended upon the terms of the will creating the trust; and that a suit by the beneficiary or his assignee against the trustee for the enforcement of rights in and to the property held for the benefit of the beneficiary could not be treated as a suit on a contract or a chose in action. The court then said (page 599 [35 S.C.t. 157]):

'The beneficiary here had an interest in and to the property that was more than a bare right and much more than a chose in action. For he had an admitted and recognized fixed right to the present enjoyment of the estate with a right to the corpus itself when he reached the age of fifty-five. His estate in the property thus in the possession of the trustee, for his benefit, though defeasible, was alienable to the same extent as though in his own possession and passed by deed. [Citing cases.] The instrument by virtue of which that alienation was evidenced-whether called a deed, a bill of sale, or an assignment-was not a chose in action payable to the assignee, but an evidence of the assignee's right, title, and estate in and to property. Assuming that the transfer was not colorable or fraudulent, the federal statutes have always permitted the vendee or assignee to sue in the United States courts to recover property or an interest in property when the requisite value and diversity of citizenship existed.'

Crown Orchard Co. v. Dennis, 229 F. 652, 144 C. C. A. 62, was a suit by the grantee of standing timber to enjoin the cutting and conversion of the timber-in effect, a suit to prevent waste. There was no attempt to enforce any contractual obligation; and the court very naturally held that the case did not fall within the exception in section 24 of the Judicial Code. It was expressly assumed by the court that if the suit had been to enforce a contract or for specific performance, the rule would have been otherwise.

The distinction is between a cause of action arising out of the ownership or possession of property transferred by the assignment of a contract-in which case the remedy accrues to the person who has the right of property or of possession at the time and a suit to enforce the obligations of the assigned contract. Deshler v. Dodge, 16 How. 622, 631, 14 L. Ed. 1084; Ambler v. Eppinger, 137 U.S. 480, 11 S.C.t. 173, 34 L. Ed. 765. The present suit falls within the latter class. It is brought, not to recover property or to redress an injury to property which appellant had acquired through an assignment of a lease, but to enforce contractual obligations of the lease. No direct relief is sought in respect of appellant's lands conveyed as security, and they are affected only collaterally and incidentally. See Kolze v. Hoadley, supra.

Judgment affirmed.

Notes