FEDERAL COURTS - JURISDICTION - DIVERSITY OF CITIZENSHIP - REALIGNMENT OF PARTIES

Authors

Michigan Law Review, University of Michigan Law School

Abstract

Plaintiff, a New York corporation, was trustee under a mortgage deed to secure a bond issue executed by A, an Indiana corporation, in 1902. In 1906, B, an Indiana corporation, was formed, its franchise providing, inter alia, that after the expiration of twenty-five years, the company should be wound up and its property conveyed to C, the city of Indianapolis, subject to B's "outstanding legal obligations." In 1913, A leased all of its plant property to B for a term of ninety-nine years, B agreeing to pay as rental the interest on A's outstanding bonded indebtedness, and a six per cent return on A's common stock. In 1935, pursuant to the franchise, B conveyed its entire property to C, including that covered by its lease from A. C refused to regard itself bound by this lease, and plaintiff brought an action in the federal district court praying (1) that the lease from A to B be declared valid and binding upon the defendants, and as such be deemed part of the security for the performance of the mortgage obligations; (2) that C be ordered to perform all of B's obligations in the lease and to pay directly to plaintiff all of the interest payments as they come due; (3) that judgment for overdue interest be entered against the defendants "liable therefor"; (4) that plaintiff be awarded costs and attorneys' fees. The district court realigned A as a plaintiff and dismissed the suit for want of jurisdiction. The circuit court of appeals reversed, and certiorari was denied by the Supreme Court. On remand to the district court, it was held that the lease was not enforceable against B, or C, and judgment for the amount of unpaid interest was entered against A. Holding that the lease was valid and enforceable against B and C, the circuit court of appeals again reversed, and certiorari was granted by the Supreme Court. Held, four judges dissenting, that on the merits the question whether the lease is valid and binding on C is the primary and controlling matter in dispute, and everything else in the case is incidental to this dominating controversy. With respect to this controversy, A and C, citizens of the same state, are on opposite sides, so the requisite diversity of citizenship is lacking. City of Indianapolis v. Chase National Bank of City of New York, 314 U.S. 63, 62 S. Ct. 15 (1941).

Recommended Citation

Michigan Law Review, FEDERAL COURTS - JURISDICTION - DIVERSITY OF CITIZENSHIP - REALIGNMENT OF PARTIES, 40 Mich. L. Rev. 1109 (1942).
Available at: https://repository.law.umich.edu/mlr/vol40/iss7/12