McLaughlin Bros. v. Hallowell

delivered the opinion of the court.

This writ of error is sued out under § 709, Rev. Stat., and brings up a judgment of the Supreme Court of Iowa affirming a judgment of the District Court of one of the counties of that State in an action brought by the defendants in error against “McLaughlin Brothers, a Copartnership,” named-among the plaintiffs in error. The individual' plaintiffs in error, John R. McLaughlin and James B. McLaughlin, who allege themselves to be “sole

It is claimed by the plaintiffs in error that they were entitled to remove the cause to the appropriate Federal Circuit Court on the ground of diversity of citizenship (there being no question that the matter in dispute, exclusive of interest and costs, exceeded $2,000), and that the decision of the state court deprived them of the right of removal. The cause was once removed to the Federal court and by that court remanded. A subsequent petition for removal was refused by.the County District Court. It is the decision of the Supreme Court in affirming thé judgment of the District Court, notwithstanding such refusal, that is now assigned for error. The circumstances of the case are peculiar and require a somewhat particular recital.

The action was commenced by petition filed by defendants in- error in the District Court naming as defendant "McLaughlin Brothers, a copartnership,” and claiming three thousand dollars damages for breaches of warranty in the sale of certain horses. The petition alleged {inter alia) that defendant was a non-resident of the State of Iowa,'*' and that it was .a partnership, with headquarters at Columbus, Ohio, and with a branch at Emmetsburg, Iowa. The transactions out of which the alleged causes of action arose were stated to have occurred in- Iowa, and the alleged contracts to have been , made in that State. At the same time the plaintiffs filed in the District Court an attachment bond, and caused a writ of attachment to be issued to the Sheriff of the county, who, according to the record, "thereunder garnisheed the United States Express Company, by serving, on such garnishee notice of garnishment, and made return of such service.” -

Thereafter the defendants filed a petition and bond for removal of the cause into the .Unitéd States Circuit Court

After some time the Federal court made an order remanding it, the substance of which is as follows, viz.: “The Court, being advised.in the premises, finds that this court has not jurisdiction of said cause, and sustains said motion (for a remand). It is ordered and adjudged that said cause be and the same is hereby remanded to the District. Court of Iowa in and for Pocahontas County, from whence the same came, this court not having juris; diction by reason of lack of evidence in the transcript filed herein, that said defendant had been served with notice. of said proceedings.”

The record shows that after a duly authenticated copy of this order had been filed in the District Court, “John R. McLaughlin and James B. McLaughlin appeared in said cause” — but without previous, leave of the court — and filed a written-motion setting up — “That they are the sole members and partners in the above-mentioned firm of McLaughlin Brothers, and the sole parties defendant

Upon the same date, “The said defendants, McLaughlin Brothers, appeared in said cause and filed therein their application for substitution of parties,” etc., adopting the statements and allegations. contained in the motion of the individuals as above quoted, and thereupon moving the court that the said individuals be either substituted in place of the defendants, McLaughlin Brothers, as sole defendants, or else joined as co-defendants with the firm.

And at the same time the partnership and the individuals filed a petition, in the name of the individuals, for the removal of the cause to the United States Circuit Court, upon the same ground of diversity of citizenship that was set up in the first petition for removal. A proper bond was also filed'.

To this second petition for removal and to the accom

Thenceforward the action appears to have proceeded in the District Court as against the partnership alone. “A Plea to Jurisdiction and Answer” was filed, which repeated the averments upon which the petitions for removal had been based, set up the filing of those petitions and bonds and the several applications for substitution or joinder of the individuals as parties defendant, and averred that by reason of the premises the state court had no jurisdiction to proceed further. Answer was at the same time made" to the merits, and the action was . thus brought to an issue.

There appears to have been a trial, resulting in a directed verdict for the defendants and a judgment thereon, from which the plaintiffs appealed to the Supreme Court of Iowa, where there was a reversal and award of a new trial. The transcript of the record as presented here is silent on the subject, but we are referred to the report of the case on the first appeal, 136 Iowa, 279 .

Upon the second trial the defendants offered evidence to support the averments of the plea to the jurisdiction, which was overruled as irrelevant. A motion to direct a verdict in favor of defendant on the ground that because

Except for the opinion delivered by the Supreme Court upon the second appeal there is nothing in the record to show what questions were raised in that court. After referring to the first appeal, as reported in 136 Iowa, 279 , which admittedly raised no question of Federal right, the opinion proceeds as follows: “But one new question is here presented, and that arises on the following facts: This action was commenced in December, 1903. It was transferred to the United States Circuit Court upon the defendants’ application, where it was remanded to the state court, because of want of jurisdiction of the Federal court. In January, 1905, the defendants filed an application in-the District Court for the substitution of John R. and James B. McLaughlin as defendants. . This was denied-, and since such denial both trials have taken place and more than three years elapsed, and the defendants now appeal from the order denying substitution. There was no” right of substitution. The statute, Code, § 3468, expressly provides that a partnership may sue or be sued as a distinct legal entity. (Citing cases.) Under this statute the plaintiffs had the absolute right to sue the partnership alone or to join in such suit the individual members of the partnership. They chose the former course, and they cannot be deprived of such right upon the application of the partnership, or of the individual members thereof. (Citing cases.) The plaintiffs clearly had the right to sue McLaughlin Brothers, the partnership, alone. This they could not do in the Federal Court, and the case was therefore not removable. Ex parte Wisner, 203 U. S. 449 .”

• The statute under which plaintiffs brought their action is as follows:

“Actions may be brought by or against a partnership as such, or against all or either of the individual members thereof, or against it and all or any of the members thereof; and a judgment against the firm as such.may be enforced against the partnership property, or that of such members as have appeared or been served with notice. A new action may bé brought against the members not made parties, on the original cause of action.” Code, 1897, §3468.

The gist of the argument for the plaintiffs in error is that this section, whatever its effect upon the practice of the state courts, cannot interfere with a right of removal to the Federal courts given by the act of Congress; that the real parties in interest as defendants in the state court were the individual partners, and since they were citizens of Ohio, while the plaintiffs in the state court were citizens of Iowa, the defendants had the right of removal although sued in the partnership name; that the order of the Federal Circuit Court remanding the cause after thé first removal was limited in its effect because based upon lack of evidence in the transcript that plaintiffs in error had been served with notice of the proceedings; and that the defendants, on thereafter appearing and filing motions for substitution, etc., were entitled to renew the application for removal, and, since they did this, the state court ought to have admitted the individual partners as defendants in order to enable them to assert the right of removal that is alleged to result from their interest in the suit and the diversity of citizenship between them as individuals and the plaintiffs; and that in denying the applications of the plaintiffs in.error made in this behalf after the re

We are confronted, at the outset, with the question of the jurisdiction of this court to review the action of the state court in the premises.

That the order of the United States Circuit Court remanding the cause to the state court is not reviewable here is settled by Missouri Pacific Ry. Co. v. Fitzgerald, 160 U. S. 556 . In that case this court declared (at p. 582):-" — '“If the Circuit Court remands a cause and the state court thereupon proceeds to final judgment, the action of the Circuit Court is not reviewable on writ of error to such judgment. A state court cannot be held to have decided against a Federal right when it is the Circuit Court, and not the state court, which has denied its possession. The Supreme Court of Nebraska rightly recognized the courts of the United States to be the exclusive judges of their own jurisdiction and declined to review .the order of the Circuit Court. As under the statute a remanding order of the Circuit Court is not reviewable by this court on appeal or writ of error from or to that court, so it would seem to follow that it cannot be reviewed on writ of error to a state court, the prohibition being that 'no appeal or writ of error from the decision of the Circuit Court remanding such cause shall be allowed.’ And it is entirely clear that a writ of error cannot be maintained under § 709 in respect of such an order where the state court has rendered no decision against a Federal right but simply accepted the conclusion of the Circuit Court.”

It is fundamental that plaintiffs in error, being debarred from bringing the remanding order under the review of this court, cannot accomplish the same object by indirection. And if the state court in denying the second petition for removal did no more than bow to the decision and order of the Federal court when it remanded the

This brings us to the question whether between the filing of the first petition for removal and the second there had been any change in the situation, presenting the right of removal upon a better ground than that which was overruled by the United States Circuit Court when it remanded the cause. As already mentioned, the insistence is that the remanding order was based upon the fact that the defendants- had not been served with notice of the proceedings; and it is insisted that this difficulty was obviated by the subsequent appearances and motions. In order to pass upon this contention we should first examine the state practice.

Under the Iowa Code, 1897, § 3514, action in a court of record is commenced by serving the defendant with a notice, informing him of . the name of the plaintiff, that a petition is, or by a date named therein will be, filed- in the office of the clerk of the court wherein action is brought, naming it, and stating in general terms the cause of action, and that unless the defendant appears and defends before a stated time his default will be entered and judgment or decree rendered against him. The sections following provide the method of making personal and substituted service and, in . case of absent defendants, service by publication in certain cases. By § 3541 it is prescribed that the mode of appearance may be by delivering to the plaintiff or the clerk of the court a written memorandum of Appearance signed by the defendant or his attorney; or by entering an appearance in the appearance docket or judge’s calendar, or by announcing to the court an

By §§3876 to 3878 it is-provided that the plaintiff in a civil action may cause the property of the defendant not exempt from execution to be attached at the commencement or during the progress of the proceedings, but if this be done subsequent to the commencement of the action a separate petition must be filed, and “in all cases the proceedings relative to the attachment are to be deemed independent of the ordinary proceedings and only auxiliary thereto.” The grounds upon which an attachment may be procured are, that the defendant is a foreign corporation, or acting as such, or is a nonresident of the State, or is about to remove his property -out of the: State, or has disposed or is about to dispose of his property with intent .to defraud his creditors, etc., etc.- By § 3897, property of defendant in the possession of another, or debts due to defendant, may be attached by garnishment. By § 3924, if judgment is rendered for the plaintiff in any case in which an attachment has been issued, the court is to apply in satisfaction thereof any money seized by or paid to the sheriff under the attachment, and the proceeds of sales of other attached property. Subsequent sections provide for the mode of giving notice to. a garnishee, and for obtaining a judgment against him. By § 3947 such judgment shall not be entered until the principal defendant shall have had ten days’ notice of the garnishment proceedings. Section 3948 permits the . defendant in the main action to set up by a suitable pleading filed in the garnishment proceedings, facts

The state courts have held that the effect of § 3541 is to subject a defendant who comes into court for any purpose connected with the cause (even under a “special” appearance) to the general jurisdiction of the court. Des Moines Branch &c. v. Van, 12 Iowa, 523 ; Robertson v. Eldora R. Co., 27 Iowa, 245 , 248; McFarland v. Lowry, 40 Iowa, 467 ; Johnson v. Tostevin, 60 Iowa, 46 ; Lesure Lumber Co. v. Mutual Fire Ins. Co., 101 Iowa, 514 , 519; Locke v. Chicago Chronicle Co., 107 Iowa, 390 , 395; Rummelhart v. Boone, 126 N. W. Rep. 338 , 339. As to whether this is “due process of law” in the state courts within the meaning of the Fourteenth Amendment, see York v. Texas, 137 U. S. 15 ; Kauffman v. Wooters, 138 U. S. 285 . As to the, applicability of the rule of practice to the Fiederal courts under the Conformity Act (Rev. Stats., § 914), see Southern Pacific Co. v. Denton, 146 U. S. 202 , 208; Mexican Central Ry. v. Pinkney, 149 U. S. 194 , 203.

With respect to § 3468, permitting actions to be brought against a partnership as such, or against all or either of the individual members thereof, or against the partnership and all or any of the members thereof, and declaring that a judgment against the firm as such may be enforced against the partnership property, or that of such members as have appeared or been served with notice, the courts of Iowa have construed this as dealing with the partnership as an .entity distinct from the individual members, and as conferring upon the plaintiffs the option of suing the partnership alone instead of joining in the suit the individual members of the firm. In so holding in the present case the Supreme- Court of Iowa did but follow previous decisions of the same court. Brumwell v. Stebbins, 83 Iowa, 425 , 428; Ruthven v. Beckwith, 84 Iowa, 715 , 717; Baxter v. Rollins, 110 Iowa, 310 .

It is clear, therefore, that the Federal court, in remanding the present case, did so upon the ground that the individual members of the firm had not been joined as parties, and that under the Iowa practice of suing the partnership as- a separate entity there was, within the meaning of the Removal Act, no diversity of citizenship. And it is equally plain that the clause — “This court not having jurisdiction.by reason of lack of evidence in the transcript filed herein that said-defendant had béen served

The construction we have placed upon the qualifying clause quoted from the remanding order is evidently correct from what has already been said.. Such was the construction placed upon it by the subsequent conduct of the defendants in the state court. And the same construction is, in effect, conceded in their briefs in this court, which state that “the order remanding the cause upon the first removal was upon the specific ground of lack of evidence in the transcript that plaintiffs in error had been served with notice of the proceedings.” And again,; — “The case having been remanded solely because of absence of notice, the defendants on appearing and filing motions for a substitution were entitled to renew their applications for removal.” And still again, — “The plaintiffs in error sought by motion for substitution, in accordance with the suggestion in Ralya Market Co. v. Armour, 102 Fed. Rep. 530 , to eliminate this question,”— referring to the question of “the supposed inability of the Federal court to entertain an action against a partnership, which has been the constant claim of the defendants in error in the lower courts, and which plaintiffs in error sought to obviate.”

The clause quoted from the remanding order hardly admits, we think, of the construction that the reason for denying the jurisdiction was that the copartnership defendant (as distinguished from the individual partners), had not been served with notice of the suit or of the. attachment proceedings; for such non-service, if it rendered the proceedings defective, was not waived by-the pres

Having, as already pointed out, no jurisdiction to review the remanding order, we intend no expression of opinion upon the correctness of the grounds upon which it was. based, and have dealt thus at length with the construction of its language only because we are concerned with the effect that was given and ought properly to have been given to it by the state court.

Whatever construction may be placed upon it, we

Reliance is placed, upon Powers v. Chesapeake & Ohio Ry., 169 U. S. 92 , 100, and Fritzlen v. Boatmen’s Bank, 212 U. S. 364 , 372. But those cases dealt with a change in the situation in the state court after an order of remand had been made, and resulting from subsequent dealings or conduct of the parties in which the opposing party participated. They are not pertinent here, where there was no change in the situation of the parties on the record, and merely an unsuccessful application to change it, made by the parties asserting the right of removal, and opposed, and successfully opposed, by the other parties.

The mere entry of appearances in the state court, after the filing of the remanding order, made no substantial change in the situation, for reasons that have been indicated. And whether the state court, at the instance of the defendants, should have admitted the individual members of the partnership as additional parties, or should have substituted them in place of the firm as sole defendants, is a question of local law and practice, the decision of which by the state court does not concern us, saving so far as it may affect the right of the defendant firm or the individual partners thereof to have the cause heard and determined in the Federal court. If, therefore, the action of the state court in refusing to allow the substitution is reviewable upon the present writ of error, it is only because the application for such substitution was made as a step towards the assertion of the right of removal. But, from what has been said, it is sufficiently clear that the grounds, and the only grounds, set up as the basis alike for the motion for substitution and the second petition for removal are the same grounds that were

Therefore, if any Federal'right of the plaintiffs in error was denied, it was denied by the United States Circuit Court, and not by the state court.

In discussing the matter we have assumed, in favor of the plaintiffs in error, that the question here dealt with was raised by them in the Supreme Court of Iowa;.a matter that is not entirely clear, since the opinion makes no reference to the second petition for removal, and aside from the opinion the. record does not disclose what questions were raised.

We have also assumed that the second petition for removal was filed in due season, and was not subject to certain other objections raised .against it by the defendants iii error. We must not be understood as having passed upon these questions.

Writ of error dismissed.