In re Pollitz

James Pollitz, a citizen of the state of New York, brought suit in the supreme court of the state of New York for the county of New York against the Wabash Railroad Company, a consolidated railroad corporation existing under the laws of the states of Ohio, Michigan, Illinois, and Missouri, and a citizen of the state of Ohio; and sundry other defendants, chiefly citizens and residents of the state of New York, being individual directors of the railroad company; the trust company, registrar of the stock of the railroad company; a committee representing debenture holders; mortgage trustees, etc. The complaint alleged in substance that the railroad company, in 1906, entered into certain negotiations for the retirement of the debenture mortgage bonds of the company through the issue of other securities, both bonds and stocks, and that the plan to accomplish that end was subsequently authorized and approved by the stockholders of the company and debenture mortgage bondholders, at a meeting at Toledo, October 22, 1906, at which the issue of certain new bonds and preferred and common stock of the company and the exchange of certain new bonds, preferred and common stock, for the company's debenture mortgage bonds, was authorized and approved. The complaint alleged that the plan of exchange was unlawful, unauthorized, and contrary to the laws of the states in which the company was organized, and was unjust, inequitable, and injurious to complainant, who claimed to be the owner of one thousand shares of the common capital stock of the railroad company. It was also alleged that 90 per cent of the debenture holders voted in favor of the exchange, and that the plan had been carried out as to more than nine tenths of the debenture bonds, and new bonds and stocks to the requisite amount had been issued. And it was prayed that the plan 'be decreed and adjudged to be utr a vires, and that all said bonds and the preferred and common stock, used and issued and applied by the said Wabash Railroad Company for the purpose and plan of said scheme, be decreed and adjudged of no effect.' The complaint prayed in the alternative that if the court should decree that Pollitz was not entitled to the main relief he had asked, then that he might have an accounting by the defendant officers and directors of the railroad company, etc., in respect of the new bonds and common and preferred stock which had been issued under the plan of exchange.

The railroad company filed its petition to remove the case into the circuit court of the United States for the southern district of New York, which set forth in substance the foregoing matters, and further averred:

'That your petitioner disputes the claim against it as set forth by the plaintiff in his complaint, and denies that the plaintiff is entitled to the judgment and relief prayed for against this petitioner or to any judgment or relief against it; and this petitioner alleges that the fundamental and primary controversy, as set forth in said complaint, is whether or not the plan for the exchange of the debenture mortgage bonds by this petitioner, the authorization and creation by it of the new securities in the said complaint set forth, and the issue of the same by it for the purpose of carrying said plan into effect, is, as alleged in said complaint, illegal, unlawful, void, and prohibited by the charter of this petitioner and the laws under which it is incorporated; and whether said new securities are, as alleged in said complaint, invalid and void; and that such controversy is a separable and distinct controversy between the plaintiff and this petitioner.

'That a complete determination of said controversy can be had without the presence of any of the defendants in this action other than this petitioner; and that all of said other defendants are neither indispensable nor necessary parties to the complete determination of said controversy.

'That the foregoing controversy, which is solely between the plaintiff and the petitioner, must be determined before any other controversy alleged in the complaint can be considered and determined; and that said controversy between the plaintiff and this petitioner, as above set forth, is separate and distinct from any other or further controversy.

'That said fundamental and primary controversy herein between the plaintiff and this petitioner is a controversy wholly between citizens of different states,-to wit: Between the plaintiff, a citizen of the state of New York, and this petitioner, a citizen of the state of Ohio.'

The cause was removed, and Pollitz made a motion to remand, which was denied by the circuit court, Lacombe, J., presiding.

Pollitz thereupon applied to this court on March 18 for leave to file a petition for a writ of mandamus directing the cause to be remanded to the state court. Leave to file was granted March 25, and a rule was entered thereon returnable April 8, to which return was duly made to the effect that the order denying the motion of Pollitz to remand the cause had been made and entered in the exercise of the jurisdiction and judicial discretion conferred upon the circuit judge by law, and for the reasons expressed in his opinion filed with the order. The case was heard on the return to the rule.

Mr. Roger Foster for petitioner.

[Argument of Counsel from pages 325-329 intentionally omitted]

Messrs. Rush Taggart and Lawrence Greer for respondents.

Mr. Chief Justice Fuller delivered the opinion of the court: