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PROCTOR v. SAGAMORE BIG GAME CLUB

January 13, 1955

Thomas E. PROCTOR, 2nd, John Riker Proctor, Esther B. Proctor, Mary P. Case, Emma M. Rice, Geraldine M. Craig, Neil W. Rice, Hilda R. Ayer, Thomas E. P. Rice, and Thomas M. Reynolds, David Broude and Boston Safe Deposit and Trust Company, Trustees under the Last Will and Testament of Thomas E. Proctor, Deceased, Plaintiff,
v.
THE SAGAMORE BIG GAME CLUB, The Sylvania Corporation, United Natural Gas Company, National Fuel Gas Company, Frank G. Altman, H. P. Boarts, F. E. Carroll, W. L. Carroll, A. J. Eisenhuth, H. U. Flickinger, John W. Flickinger, Bertha E. Jones Shearer, John Rummel, A. C. Thomas, William Walker, D. D. Flickinger, Antonia Johnson, Clyde K. Moore, George C. Schrecongost, R. L. Seger, L. E. Thomas and E. C. Wareham, Defendants



The opinion of the court was delivered by: WILLSON

Plaintiffs aver that the subject matter of this litigation is the ownership of the natural gas and other minerals in 1100 acres of land, being Warrant No. 5343, situate in Benezette Township, Elk County, Pennsylvania. Elk County is one of those counties comprising the Western District of Pennsylvania.

Briefly stated, the plaintiffs claim to be the owners of the gas in said Wearrant by reason of being heirs, next of kin or otherwise successors in ownership of the title acquired by Thomas E. Proctor, who in 1894 owned a fee interest in the property. In 1894, Proctor granted and conveyed the Warrant, excepting and reserving the natural gas, etc. and all other minerals. It is alleged in the complaint that the ownership and right to possession of all the natural gas has been maintained either in Proctor or plaintiffs' predecessors in title from the time of the reservation until presently. It is alleged that the individual defendants are the members of the The Sagamore Big Game Club, who acquired the surface and thereafter leased the land to The Sylvania Corporation, (hereinafter called 'Sylvania'), which drilled it and which sold the gas to the United Natural Gas Company, (hereinafter called 'United'), and that National Fuel Gas Company, (hereinafter called 'National'), is the holding company which owns the controlling stock interest in both Sylvania, the driller and producer, and United, which purchased the gas on the property. The land is situate on what is known as the Benezette Field and which in recent years has proved valuable for production of gas, so that it is alleged that there has been $ 3,214,750 worth of natural gas removed from the property on which plaintiffs would be at least entitled to the royalty in an amount equal to one-eight thereof, or the sum of $ 401,843.75.

 All defendants have filed motions to dismiss, assigning numerous reasons. Generally speaking, the motions raise questions of jurisdiction and venue. Also, the motions raise the question that when an action is one of a local nature to enforce a claim to real property in the District, the complaint must be considered as a whole, and if any substantial part of the relief sought cannot be afforded in a suit in rem, without personal service on the defendants, then the action must be dismissed. Specifically, the question is raised whether service under 28 U.S.C.A § 1655 is sufficient in this case.

 As to diversity, plaintiffs allege that they are residents and citizens of various States other than Pennsylvania. They reside in the States of Massachusetts, New Hampshire, New York, and one is a resident of Canada. Defendant National is a New Jersey Corporation, which the complaint alleges owns and controls Sylvania and United as its subsidiaries, in that it owns all of the capital stock of each of these corporations and has profited by the operations on the property conducted by the other defendants. Plaintiffs do not allege specifically that this defendant does business within this District or within Pennsylvania but does allege that its principal place of business is Hoboken, New Jersey, Sylvania and United are both Pennsylvania corporations and both of them have principal offices and places of business within this District. Of the eighteen individual defendants, all but four reside within the Western District of Pennsylvania. The four nonresidents reside, one in New Mexico, one in North Carolina, one in Indiana and one in Connecticut.

 Thus it appears that the federal court has jurisdiction as there is diversity of citizenship as required by 28 U.S.C.A. § 1332, the parties residing in different States and the amount in litigation being over $ 3,000, with the further provision that the complaint alleges title to property within this District. The motions require consideration of the venue of the district courts set forth in 28 U.S.C.A., particularly Sections 1391 and 1655. It being certain that none of the plaintiffs reside in this District, and it being apparent that not all of the defendants reside in this District, the question remains whether the Court has venue nevertheless. Plaintiffs point to 28 U.S.C.A. § 1655, and say that the question is one primarily of title which the Court may adjudicate.

 The position of defendant National appears distinct and different from the other defendants on the question of venue. Its motion to dismiss will be discussed first.

 From the motion and affidavit filed in connection therewith, this defendant is admittedly a New Jersey corporation with its principal place of business at Hoboken, in that State. This defendant is a public utility holding company, registered as such with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79 et seq., and it claims that is sole business is the holding of voting stocks of corporations which inter alia engage in the business of producing, purchasing, transporting, storing and supplying natural gas from and by use of lands, etc., among which corporations it owns and controls the two defendant corporations, Sylvania and United. The return of service as to this defendant indicates that service upon it was attempted to have been secured by serving on its Vice President personally at 213 Second Avenue, warren, Pennsylvania. Another return as to personal service indicates that the summons and complaint were served upon this defendant at its principal office at Hoboken, State of New Jersey. Defendant's motion goes to the question of the legality of the service in view of the admitted facts as to the operation of its business as set forth in the complaint and in the affidavit. In the cause of action against this defendant, plaintiffs seek to accomplish what has been commonly called 'piercing the corporate veil.' Such a theory of liability rests on an action in personam and not in rem. It is based upon the proposition that as the other two corporate defendants which this defendant owns are responsible to plaintiffs in money damages, then this defendant can be held responsible to plaintiffs because of the domination and ownership of the stock of the other two defendants. Therefore, the fact that the property is in this District and that some of the defendants may be held to answer under Section 1655 does not clothe this Court with the authority to adjudicate any rights involving this defendant under the circumstances presented in this complaint, unless it does business within this State. There is no contention that it does business in this District, except that if ownership of the stock of the two other corporations can be considered as doing business within the purview of the statutes.

 The law is that foreign corporations can be served with process in a State only when doing business therein and such service must be upon an agent who represents said corporation in business. If it be admitted that National does not do business in this District, then the mere fact that service has been had upon the Vice President, either at his home at Warren or while he was in Warren, is of no avail to the plaintiffs. See Peterson v. Chicago, Rock Island & Pacific Railway Co., 205 U.S. 364, 27 S. Ct. 513, 51 L. Ed. 841; Lumiere v. Mae Edna Wilder, Inc., 261 U.S. 174, 43 S. Ct. 312, 67 L. Ed. 596; and particularly Consolidated Textile Corp. v. Gregory, 289 U.S. 85, 53 S. Ct. 529, 77 L. Ed. 1047. Examination of the facts disclosed by this complaint before me indicates that National is not presently doing business in the State of Pennsylvania. It is not, therefore, subject to the service of process in this instance. The mere fact that it owns the stock of two of the other corporate defendants is insufficient. See Peterson v. Chicago, Rock Island & Pacific Railway Co., supra; Consolidated Textile Corp. v. Gregory, supra; and also Kaffenberger v. Kremer, D.C., 63 F.Supp. 924. Therefore, assuming the truth of all facts well pleaded in the complaint and viewing the complaint in the light most favorable to the plaintiffs, the motion of National to dismiss the complaint against it will be granted. See Frederick Hart & Co. v. Recordgraph Corporation, 3 Cir., 169 F.2d 580.

 The remaining motions to dismiss may be considered by groups. In one group is the motion of United and Sylvania. both these defendants do business in and have their principal offices in this judicial district and no question is raised as to the service upon them. Group II is the motion to dismiss on behalf of the Sagamore Big Game Club and the individual defendants who reside within this judicial district. No objections are raised as to the service upon these defendants. Group III comprises the motions on behalf of four individual defendants, George P. Schrecongost, A. C. Thomas, John W. Flickinger and L. E. Thomas. The latter motions assert that the venue is improper as these defendants do not reside in this judicial district. In the complaint, it is alleged that Schrecongost resides in North Carolina; A. C. Thomas resides in Indiana; Flickinger resides in New Mexico; and L. E. Thomas resides in Connecticut.

 As to the motions made by these nonresident defendants, it is apparent that they must be granted on the ground of improper venue unless the complaint alleges a cause of action within the jurisdiction of the Court, regardless of venue. Generally speaking, venue is determined by Section 1391. The plaintiffs here are nonresidents. The defendants under discussion are also nonresidents of the District and the State. However, the complaint states, in paragraph 4:

 '4. The subject matter of this section is a tract of land, or an estate therein, which lies in Benezette Township, Elk County, Pennsylvania, * * *.'

 and which is described in paragraph 5 of the complaint as containing 1100 acres of land. Plaintiffs assert that because the real property, being the subject of the suit, is within the district, then 28 U.S.C.A. § 1655 applies. One of the prayers of the complaint is that plaintiffs recover their right, title, interest and estate in Warrant 5343. It has been held in many cases that the provisions of Section 1655, if followed, are an exception to the venue sections and give the Court authority to try a case is an action to enforce any lien or claim to real property within the district. This section provides that when a defendant cannot be served within a state or does not voluntarily appear the Court may order the absent defendant to appear or plead by a day certain. The section further provides for the manner of service and in the event that personal service is not practicable, service by publication is authorized. There are many decisions both of the Supreme Court and of the Courts of Appeals of the several Circuits to the effect that service under Section 1655 is proper where real property is the subject of the lawsuit and is situate within the judicial district of a particular court. See Greeley v. Lowe, 155 U.S. 58, 15 S. Ct. 24, 39 L. Ed. 69; Citizens' Savings & Trust Co. v. Illinois Central R.R., 205 U.S. 46, 27 S. Ct. 425, 51 L. Ed. 703; Wilhelm v. Consolidated Oil Corp., 10 Cir., 84 F.2d 439; Weaver v. Atlas Oil Co., D.C., 31 F.2d 484; Carney v. Commonwealth Oil & Gas Co., D.C., 5 F.Supp. 304; and Campbell v. Murdock, D.C., 90 F.Supp. 297.

 However, as said by Judge Phillips in Wilhelm v. Consolidated Oil Corp., supra (84 F.2d 746):

 'Unless a defendant is personally served in the district or personally appears, the decree may only affect the property over ...


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