Opinion
14855
April 5, 1939.
Before LIDE, J., Florence, August, 1938. Affirmed.
Action by Davis Clanton, a corporation, against the C.I.T. Corporation and others, wherein the named defendant filed its bond and petition for removal of the cause to the United States District Court for the Eastern District of South Carolina. Thereafter, an order was signed approving the petition and bond, but subsequently counsel for plaintiff reopened the matter by motion to rescind the removal order. From an order overruling the motion to rescind, the plaintiff appeals.
The order of Judge Lide follows:
The plaintiff is a South Carolina corporation. The defendant C.I.T. Corporation is a corporation under the laws of the State of West Virginia; the defendant W.N. Gause is a resident of the County of Florence, State of South Carolina; and the defendant T.H. Stryker is a resident of the State of North Carolina. Within due time after the service of the summons and complaint herein the defendant corporation filed its bond and petition for removal of the cause to the District Court of the United States for the Eastern District of South Carolina. Thereafter Hon. E.C. Dennis, Circuit Judge, signed an order approving the petition and bond, but subsequently counsel for the plaintiff reopened the matter by a motion before me, which may be treated as a petition to rescind the removal order, and the matter was very fully argued before me both orally and by written briefs; and I have given somewhat extended consideration to the questions involved.
The petition for removal herein shows that the grounds relied on by counsel for the defendant corporation are:
(1) That there is a separable cause of action or controversy as to the defendant corporation.
(2) That the joinder of W.N. Gause, resident defendant, is fraudulent.
As to whether there is a separable controversy depends of course on the allegations of the complaint. As I read the complaint herein the foundation of plaintiff's claim is an alleged contract set forth in Paragraph IV. It is true that the plaintiff insists that the cause of action is one in tort for fraud and deceit only, and that the "so-called contract" was alleged only to give the background of the action. But Paragraph IV alleges an offer and an acceptance; the offer consisting of a promise that the defendant corporation would furnish and supply all credit necessary to the proper and efficient conduct of plaintiff's business, provided plaintiff would execute to defendant corporation a blanket mortgage covering all of its used cars and shop equipment, and deliver to the defendants all of its house notes, and would permit defendants to take all of its new cars to Florence for periodic redelivery to plaintiff together with new cars as needed for sales. It is further alleged that plaintiff complied with the terms and conditions above stated in full, which of course constituted an acceptance of the offer. Clearly this made a contract, and the gravamen of plaintiff's complaint is that instead of furnishing and supplying the needed credit the defendant corporation breached its said contract and refused to furnish credit as promised, but on the contrary, acting through its agents, Gause and Stryker, in furtherance of a fraudulent scheme and with a fraudulent intention, committed acts, alleged to be fraudulent and malicious, resulting in the destruction of plaintiff's business, the depreciation of its assets, and the wiping out of its credit, to its damage in the sum of $100,000.00.
If the foregoing brief summary of the complaint is correct, the alleged cause of action may be correctly termed as a fraudulent breach of contract. Our own Supreme Court has frequently dealt with this general subject, more often in cases relating to policies of insurance. A very recent case is that of Branham v. Wilson Motor Company, 188 S.C. 1, 198 S.E., 417, in which the opinion was filed August 16, 1938. In this case it is alleged that the "defendant had no intention of carrying out the said agreement at the time of entering into it," a somewhat similar allegation to that involved in the case at bar, because it is here alleged that the original promises were "fraudulent and faithless." In the Branham case the Court held that while there were allegations of fraudulent intention, there was no sufficient allegation of a fraudulent act accompanying the breach with fraudulent intent to cheat and defraud; and affirmed the action of the Circuit Judge in striking out the cause of action for punitive damages. But where there is a breach of contract with fraudulent intention, and there is a fraudulent act or acts accompanying the breach, punitive damages may be recovered as well as the actual damages arising from a breach of the contract.
In the case of Broome v. Travelers Insurance Co., 183 S.C. 413, 191 S.E., 220, 221, the Court says: "It is true that, in Dyson v. Commonwealth Life Insurance Company, 176 S.C. 411, 180 S.E., 475, 476, we approved the holding of the trial judge `that a fraudulent breach of a contract is a tort.' Whether such holding is in conflict with expressions used by the court in some prior decisions, is not here important. We have held in several recent cases of the kind before us, where the question here raised was indirectly involved, that actual damages are recoverable, although the recovery of punitive damages, as no fraud was proved, was not allowed."
The individual defendants in the case at bar were of course not parties to the alleged contract; and if this action had been brought solely for actual damages for an alleged breach of such contract, then the individual defendants would have been neither necessary nor proper parties. Since in the instant cause actual damages would be recoverable from the defendant corporation alone upon proof of the alleged contract and its breach, then it must logically follow that there is a separable controversy; that is to say, one existing solely between the plaintiff corporation and the defendant corporation, even if there is also another controversy alleged in the complaint based upon the joint and concurrent fraudulent and malicious acts of all the defendants.
In the case of Hamilton v. Empire Gas Fuel Company, 297 F., 422, the Circuit Court of Appeals for the Eighth Circuit held that there was a separable controversy, since the suit involved the violation of an oil lease, although there were also allegations that the defendant corporation and its managing agents, the other defendants, had conspired to commit certain tortious acts against the plaintiffs. The Court said that proof of the contract or lease was essential to proof of the cause of action, and that the complaint might be construed as containing two causes of action, one against the defendant company on the contract or lease, and the other against the defendant company and the individual defendants in tort; and hence that there was a separable controversy as to the cause of action on the contract, although the plaintiffs insisted throughout that there was but one cause of action and that it was a joint one against all of the defendants. It seems to me that the principles laid down in this case are quite applicable to the case at bar. A somewhat similar case is that of the Genuine Panama Hat Works v. Webb, D.C., 36 F.2d 265, in which there was a like holding.
A very clear and full discussion of the controlling principles will be found in an unreported opinion of Hon. H.H. Watkins, District Judge of the United States for the Western District of South Carolina, dated March 15, 1929, in the case of Helen Dupre Moseley, plaintiff, v. The Union Central Life Insurance Company, a corporation, and F.P. Sessions, defendants. This was an action for the recovery of a certain sum of money on a life insurance policy issued upon the life of plaintiff's deceased husband, and the complaint also alleged that the defendant corporation and its agent, F.P. Sessions, resident defendant, had fraudulently conspired with each other, pursuant to which the defendant corporation procured from the insured an affidavit releasing the defendant corporation from liability upon the policy of insurance.
The Court held that the defendant F.P. Sessions was not a party to the contract of insurance and hence was not liable thereon, and that if it be conceded that there were two causes of action stated in the complaint the Court would still be of the opinion that there was a separate or separable controversy because the first cause of action was certainly a full and complete action solely against the defendant corporation upon a contract of insurance, while the second cause of action, if any, was against both of the defendants for a tort.
In the case of Harrison v. Harrison, D.C., 5 F., 2d 1001, 1003, the Court says: "The term `controversy,' as so used, means something less than the whole suit — that is to say, the cause of action, included within the suit, which can be separated and disentangled therefrom — and when so separated and distinguished is of such a character that a separate suit might have been brought thereon and complete relief afforded without the presence of others made plaintiff or defendant in the original suit, or without the joinder of any other controversy which is not wholly between citizens of different states. In other words, the right of removal exists in a case brought in a state Court in which there are two or more controversies or causes of action, capable of separation into two or more independent suits, one of which controversies is wholly between citizens of different states, and in the absence of allegations of fraud the existence of a separable controversy must be determined by the state of the pleadings or record in the State Court at the time of the application for removal, without reference to the petition for removal itself."
Measured by these standards, I think that there is a separable controversy as between the plaintiff corporation and the defendant corporation; and hence that the case is a removable one.
Having reached this conclusion, I do not think it is necessary for me to consider the second ground relied on by the defendant corporation if it be assumed that it would be proper for me to do so. A traverse to the petition for removal was filed by the plaintiff, but it is contended by counsel for the defendant corporation that the traverse is insufficient because it is in the form of a general denial in violation of the rules of the Federal District Court, 28 U.S.C.A. following Section 723c. However, it seems to me that this is a matter for that Court, including the determination of any issues of fact so arising.
It follows, therefore, that this case was properly removed to the Federal Court by the order of Judge Dennis signed February 22, 1938, accepting and approving the bond and accepting the petition; and that the motion of the plaintiff should be overruled and refused; and it is so ordered.
Messrs. Royall Wright and McEachin Townsend, for appellant, cite: Contracts: 183 S.C. 413; 191 S.E., 220; 297 F., 422; 36 F.2d 265. Fraud: 27 C.J., 50; 12 R.C.L., 430; 79 Am. Dec., 255; 84 S.E., 937; 176 S.C. 207; 180 S.E., 13; 1 Strob., 220; 47 Am. Dec., 550; 13 N.E., 465; 161 S.C. 540; 159 S.E., 923; 194 S.C. 636; 186 S.E., 77; 186 S.E., 897. Pleadings: 174 S.C. 150; 177 S.E., 29; 54 F.2d 933; 160 S.E., 84; 144 U.S. 527; 127 S.C. 508; 121 S.E., 547; 133 S.E., 174. Separable controversy: 53 S.E., 244; 163 S.E., 116; 5 F.2d 1001; 304 U.S. 64; 58 S.Ct., 817; 70 S.C. 108; 49 S.E., 232; 176 S.C. 411; 180 S.E., 476; 40 F.2d 951; 232 U.S. 146; 58 L.Ed., 544; 229 U.S. 102; 57 L.Ed., 1090.
Messrs. Samuel Want and Willcox, Hardee Wallace, for respondent, cite: Separable controversy: 183 S.C. 413; 191 S.E., 220; 297 F., 422; 36 F.2d 265. As to acts of agent: 48 S.C. 165; 26 S.E., 224; 124 S.C. 19; 115 S.E., 900; 121 S.C. 324; 113 S.E., 637; 193 S.E., 426; 90 F.2d 637. Fraudulent joinder: 300 F., 812; 152 S.C. 322; 150 S.E., 309.
April 5, 1939. The opinion of the Court was delivered by
The cardinal question in this case is this: Does the complaint show a separable controversy between residents of different states, which entitles the defendant to have the case removed to the Federal Court for trial?
The matter was heard by Hon. L.D. Lide, Judge of the Twelfth Judicial Circuit, who granted the order for the removal of the cause to the United States District Court for the Eastern District of South Carolina. From his decree, this appeal comes to us.
The well-considered order of Judge Lide meets our approval. Let it be reported.
Judgment affirmed.
MR. CHIEF JUSTICE STABLER and MESSRS. JUSTICES BAKER and FISHBURNE concur.
MR. JUSTICE CARTER did not participate on account of illness.