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JAMES v. NATIONAL POOL EQUIPMENT CO.

September 20, 1960

GERALDINE B. JAMES, DORIS L. DIXON, FRANK J. DIXON AND ESTHER L. DIXON, PLAINTIFFS,
v.
NATIONAL POOL EQUIPMENT CO., INC., A CORPORATION, MIDWEST POOL & COURT CO., A CORPORATION, CHARLES O. HILL, KENNETH D. WILLIAMSON AND ROBERT MARTIN, DEFENDANTS.



The opinion of the court was delivered by: Mercer, Chief Judge.

  This suit, commenced in the Circuit Court of Peoria County, Illinois, names as defendants, National Pool Equipment Co., Inc., Midwest Pool & Court Co., Charles O. Hill, Kenneth D. Williamson, and Robert Martin. All of the plaintiffs and the defendant, Hill, are citizens of the State of Illinois. The defendants, except Hill, are citizens of States other than Illinois.

Upon the verified petition of the defendants, National and Robert Martin, in which the defendants, Midwest and Kenneth D. Williamson later joined, on July 15, 1960, the cause was ordered removed to this court for trial. As its jurisdictional basis, the petition for removal alleged diversity of citizenship of the parties. The requisite amount for diversity jurisdiction is alleged in the complaint. The defendants, National and Robert Martin are citizens of the State of Alabama, and the defendants, Midwest and Kenneth D. Williamson are citizens of the State of Missouri.

Relevant to the jurisdictional situation with respect to defendant, Hill, defendants alleged in their petition for removal that Hill is merely an employee of the defendant, National, and that all acts done by him in relation to the matters alleged in plaintiffs' complaint were done in his capacity as an employee of that defendant, that Hill had at no time had any contact whatsoever with the plaintiffs, that he had never entered into any agreement with the plaintiffs, or made any commitments or promises to them, that he does not know any of the plaintiffs personally, and that he had never been in Peoria, or in the vicinity of Peoria, on any business in connection with the plaintiffs herein. On those facts, it is averred in the petition that Hill was joined as defendant in this suit in bad faith and for the fraudulent purpose of defeating the jurisdiction of this court and for the purpose of defeating the defendants' right to remove the case to a federal court for trial.

Thereafter, on June 24, 1960, plaintiffs filed their "Motion to Dismiss Petition for Removal to the United States District Court" which, for purposes of disposing of the issue now presented for decision, is construed as a motion to remand the cause to the state court. That motion, which we treat as a motion to remand, is grounded on the basis "that the District Court lacks jurisdiction" and "that the petitioners (defendants) failed to establish diversity of citizenship necessary for removal to the United States District Court". The cause is now before the court upon that motion to remand.

Defendants' petition for removal of the cause to this court is predicated upon the established principle that a suit, filed in a state court, may be removed to a federal court for trial and diversity jurisdiction may be invoked, notwithstanding the fact that a resident defendant is named in the complaint, if the joinder of such resident defendant as a party appears to the court to be not in good faith and a fraudulent attempt to defeat the right of the defendants as to whom diversity of citizenship does exist to have the cause removed to a federal court. Wecker v. National Enameling Co., 204 U.S. 176, 27 S.Ct. 184, 51 L.Ed. 430; Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 42 S.Ct. 35, 66 L.Ed. 144; Chesapeake & O. Ry. Co. v. Cockrell, 232 U.S. 146, 34 S.Ct. 278, 58 L.Ed. 544; Lobato v. Pay Less Drug Stores, 10 Cir., 261 F.2d 406; Covington v. Indemnity Ins. Co., 5 Cir., 251 F.2d 930. The majority opinion in the Lobato case suggests that bad faith and fraudulent intent are proved when the undisputed facts before the court reveal that the plaintiff, in a cause as above described, does not have and does not state any cause of action against the resident named. Supra, 261 F.2d at page 409.

In Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144, it is said that, the requisite amount for diversity jurisdiction being invoked in a given suit, the right of a defendant as to whom diversity of citizenship exists to remove the cause to a federal court "cannot be defeated by a fraudulent joinder of a resident defendant having no real connection with the controversy." The court then continues, at pages 97 and 98 of 257 U.S., at page 37 of 42 S.Ct.:

    "If in such a case a resident defendant is joined,
  the joinder, although fair upon its face, may be
  shown by a petition for removal to be only a sham or
  fraudulent device to prevent a removal; but the
  showing must consist of a statement of facts rightly
  leading to that conclusion apart from the pleader's
  deductions. * * * The petition must be verified * *
  *, and its statements must be taken by the state
  court as true * * *. If a removal is effected, the
  plaintiff may, by a motion to remand, plea, or
  answer, take issue with the statements in the
  petition. If he does, the issues so arising must be
  heard and determined by the District Court * * *, and
  at the hearing the petitioning defendant must take
  and carry the burden of proof, he being the actor in
  the removal proceeding. * * * But if the plaintiff
  does not take issue with what is stated in the
  petition, he must be taken as assenting to its truth,
  and the petitioning defendant need not produce any
  proof to sustain it."

Following the substantive and procedural principles set forth in the Wilson case, I turn to the pleadings filed and proof adduced in the present case to determine whether, under any reasonable intendment, plaintiffs have, or state a cause of action against, the Illinois citizen, Hill.

The complaint, as it relates to Hill, is grounded upon charges of fraud and deceit and conspiracy to defraud. Count I thereof, grounded upon fraud and deceit, is expressly drafted as a claim against National. Pertinent to the defendant Hill, that Count states as follows:

    "4. That at all times hereinafter mentioned, and
  prior and subsequently thereto, defendant, Charles O.
  Hill, was and is a resident of Decatur, Macon County,
  Illinois, and is a licensed engineer in the State of
  Illinois, and in such capacity designs and prepares
  plats and specifications for construction of swimming
  pools."

Count I then alleges that plaintiffs desired to have constructed and to operate in Peoria County certain swimming pools. The count then alleges in general terms that plaintiffs discussed the selection of a site for three swimming pools "with the Defendants or their agents or servants;" that the plaintiffs, on June 18, 1959, entered into an agreement with defendant, National, whereby the latter agreed to furnish plans, specifications and estimated costs of the project, and that thereafter, on October 19, 1959, plaintiffs entered into an agreement with defendant, Midwest, whereby the latter agreed to construct three swimming pools and a bath house upon real estate owned by plaintiffs for a contract price of $134,782.00; that "the defendants or through their agents or servants" falsely and fraudulently represented to plaintiffs that a survey had been made by a qualified engineer establishing that the site selected was suitable for swimming pool locations, the plans and specifications for construction had been made by a qualified engineer selected by "said defendants" after the engineer had examined the premises, that the condition of the soil and terrain were inducive to a good sewage system, that the Illinois Department of Public Health had approved the proposed sewage facilities and that defendants would arrange for adequate financing for the swimming pool project; that plaintiffs relied upon those representations to their detriment, and that "as defendants well knew at the time of the making thereof" the representations were entirely false and were made with the intent of deceiving and defrauding the plaintiffs. Judgment is prayed against National, and no specific reference to Hill is made in Count I, with the exception of paragraph 4 thereof, which is above quoted in its entirety.

In Count III plaintiffs, by reference, reallege all of the paragraphs of Count I, and, without any additional allegations, pray for judgment against Hill. In Count VI, plaintiffs reallege all paragraphs of Count I by reference, and, without any additional allegations, pray judgment against all of the defendants, jointly, including Hill.

It is clear that Count III and VI do not state any claim against Hill upon which any relief can be granted. If the complaint alone is considered, there is no allegation that Hill had any connection whatsoever with plaintiffs' swimming pool project. As appears from the quotations and summary of Counts I, III and VI above, the complaint alleged only that Hill is a resident of Illinois and is an engineer licensed by the State of Illinois who designs and prepares plats and specifications for construction of swimming pools. There is not a semblance of any allegation that Hill had any connection whatsoever with the agreements with Midwest and National or with any facet of plaintiffs' project.

Moreover, the complaint does not stand alone in support of the conclusion that no cause of action exists or is stated against Hill. The allegations of the petition for removal, that Hill is merely an employee of National, that he made no contact whatsoever with the plaintiffs and entered into no agreements, commitments or any promise to plaintiffs relating to their swimming pool project, that he doesn't know any of the plaintiffs personally and had never been in Peoria or the Peoria vicinity on any business connected with plaintiffs' project, are admitted by plaintiffs by their failure to controvert such allegations in their motion to remand. Also, at the hearing upon the motion to remand, plaintiff, Doris Dixon, ...


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