Opinion — Realty Holding Co. v. Donaldson

REALTY HOLDING COMPANY v. DONALDSON,

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE EASTERN DISTRICT OF MICHIGAN.

No. 348. Argued April 28, 1925—Decided May 25, 1925.

1. An allegation that a defendant in the District Court is a “ resi-

dent ” of the State in which the suit is brought.is not a sufficient

allegation of citizenship there; but the defect is amendable when

such citizenship is conceded; and on appeal the amendment will be

considered. as made rather than send the case back for that pur-

pose. P. 399.

2. A suit for specific performance of the covenants of a lease js a suit

to recover upon a chose in action, within the meaning of Jud. Code,

REALTY CO. v. DONALDSON. 399

398 Opinion of the Court.

§ 24, “ First”, and cannot be maintained in the District Court on

the ground of diverse citizenship if the plaintiff sues as assignee of

the lease and seeks only such additional relief as is purely incidental

to the main object. P. 400.

294 Fed. 541, affirmed.

Appgax from a decree of the District Court dismissing a

bill for specific performance, for want of jurisdiction.

Mr. John R. Rood, for appellant.

Mr. John C. Spalding, with whom Messrs. Sidney T.

Miller, George L. Canfield, Lewis H. Paddock, Ferris D.

Stone, Sidney T. Miller, Jr., Grant L. Cook, Joseph H.

Clark, Harold H. Emmons, W. G. Bryant, George H.

Klein, L. B. Gardner, and Frank L. Dodge were on the

brief, for appellee.

Mr. Justice SUTHERLAND delivered the opinion of the

Court.

The jurisdiction of the court below was invoked upon

the ground of diverse citizenship, Jud. Code, § 24, First;

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 subse-

quent 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 Fed. 541.

The bill alleges that appellant is a Delaware corpora-

tion 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; Wolfe v. Hartford

Life Ins. Co., 148 U. S. 389; Ozley Stave Company v.

400 OCTOBER TERM, 1924.

Opinion of the Court. 268 U.S.

Butler County, 166 U.S. 648, 655. It was, however, con-

ceded 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 amend-

ment made and dispose of the case. Norton v. Larney,

266 U.S. 511, 515-516; Howard v. De Cordova, 177 U.S.

609, 614.

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 cor-

poration; that the Clifford Land Company had under-

taken 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 prop-

erty in Michigan as security for the erection of such build-

ing 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., pro-

cured 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 assign-

ment 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 per-

formance of a contract or otherwise to enforce its stipula-

tions. Corbin v. County of Black Hawk, 105 U. S. 659,

665; Shoecraft v. Blozham, 124 U.S. 730; Plant Invest-

ment Co. v. Key West Railway, 152 U. S. 71, 76; New

Orleans v. Benjamin, 153 U.S. 411, 432. An examination

REALTY CO. v. DONALDSON. 401

398 Opinion of the Court.

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 seg.; Citizens Savings Bank v. Sexton, 264 U. 8.

310, 314.

The cases relied upon by appellant are not in point.

Brown v. Fletcher, 235 U. S. 589, 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 (p. 599): “ 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 fraud-—

ulent, the Federal statutes have always permitted the

vendee or assignee to sue in the United States courts to

55627°—25——26

bd

402 OCTOBER TERM, 1924.

Syllabus. 268 U.S.

recover property or an interest in property when the

requisite value and diversity of citizenship existed.”

Crown Orchard Co. v. Dennis, 229 Fed. 652, 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 § 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 per- |

formance, 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 obliga-

tions of the assigned contract. Deshler v. Dodge, 16 How.

622, 631; Ambler v. Eppinger, 137 U.S. 480. 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 con-

veyed as security, and they are affected only collaterally

and incidentally. See Kolze v. Hoadley, supra.

Judgmen Aff med. ES