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April 21, 1980

THEODORE LANG, JR., also known as TED LANG, JR.
WINDSOR MOUNT JOY MUTUAL INSURANCE COMPANY, 21 West Main Street, Ephrata, Pa. and THE CLOISTER RELIEF ASSOCIATION, 21 West Main Street, Ephrata, Pa. and CRISFIELD SHIPYARD, INC., 21 West Main Street, Ephrata, Pa. and MICHAEL KLINEFELDER, 21 West Main Street, Ephrata, Pa. and J. RANDY KLINEFELDER, 21 West Main Street, Ephrata, Pa. and G. R. KLINEFELDER, 21 West Main Street, Ephrata, Pa. and RUSSELL THOMAS, 21 West Main Street, Ephrata, Pa.

The opinion of the court was delivered by: TROUTMAN


Late in 1976 plaintiff purchased from defendants the Crisfield Shipyard in Crisfield, Maryland. Plaintiff alleges that defendants unlawfully and contrary to their agreement of sale removed substantially all of the inventory, furniture, machinery and equipment which defendants had sold to plaintiff, who further alleges the following concatenation of events: Defendants defaulted on the terms of the agreement of sale and in delivery of the consideration for the debt underlying the mortgage. Notwithstanding defendants' default, plaintiff continued to pay installments under the mortgage. Plaintiff placed these payments in escrow when defendants refused to "make good their default". Despite the escrow tender of payments defendants declared plaintiff in default under the mortgage and foreclosed at a sale which defendants advertised in a manner calculated to discourage bidders for the premises to be sold. *fn1" At the sale defendants purchased the shipyard for a sum of money substantially less than the principal balance due thereon. Plaintiff seeks compensatory, consequential and punitive damages in excess of two million dollars. Moving to dismiss, defendants contend that the lack of diversity between plaintiff and them divests this Court of jurisdiction.

 Plaintiff commenced this litigation when he filed his complaint on March 7, 1980. *fn2" At that time he alleged that he was a citizen of the Commonwealth of Virginia and that defendants were all citizens of or incorporated by the Commonwealth of Pennsylvania. *fn3" However, in connection with the motion to dismiss, defendants adduced an affidavit which indicates that four members of defendant Cloister Relief Association are residents and domiciliaries of Virginia. *fn4" Plaintiff argues that his change of domicile to the District of Columbia after filing suit provides the requisite diversity and cures any previous flaw in jurisdiction.

 The burden of proving diverse citizenship falls upon the party invoking federal jurisdiction *fn5" and remains there even if the other party challenges this assertion *fn6" because the diversity statute *fn7" is strictly construed. *fn8" Generally, diversity jurisdiction is determined, not when the cause of action arose, *fn9" but at the time plaintiff commenced the action. *fn10" This rule enjoys uniform acceptance throughout the circuits, *fn11" and commands a long history of allegiance. *fn12" Diversity must be complete. *fn13" Normally, subsequent events fail to defeat the Court's jurisdiction. *fn14" However, when the nature of the action remains the same, subsequent events cannot create diversity jurisdiction, for federal jurisdiction is "limited . . . (and) conferred only as the Constitution and Congress direct", *fn15" and parties cannot waive, *fn16" agree to *fn17" or create *fn18" federal jurisdiction.

 In Hagen v. Payne, *fn19" for example, plaintiff sued the driver of a school bus in which she was riding for injuries she sustained when the bus went over an embankment and overturned. At the time plaintiff initiated the litigation both she and defendant were Arkansas domiciliaries. Later, the defendant moved to Oklahoma. The court held that


the departure from the State by the defendant . . . after the suit was commenced did not create diversity of citizenship, and since at the time the suit was commenced, the defendant . . . was a citizen and resident of Arkansas, there was not complete diversity of citizenship between the plaintiffs and the two defendants. *fn20"


In E. K. Carey Drilling Co. v. Murphy, *fn21" plaintiff and defendants signed a stipulation dismissing plaintiff and leaving only the defendants and non-diverse third-party defendants. The court, rejecting the notion that the change in residence of one of the original defendants would satisfy the requirements of diversity jurisdiction, concluded that "no change of citizenship by either party after suit . . . has begun will effect . . . jurisdiction." *fn22" In Lyons v. Weltmer, *fn23" the Court of Appeals affirmed a district court order dismissing an action for damages by a former inmate against the superintendent of a Maryland asylum for the insane. At the time plaintiff filed the complaint he was a citizen of Maryland. The court rejected the argument that his subsequent removal to Virginia would confer diversity jurisdiction because "questions of jurisdiction are to be determined on the basis of conditions existing at the time the action was instituted". *fn24"


In the case at bar plaintiff and several defendants were residents and domiciliaries of the Commonwealth of Virginia at the time plaintiff instituted this litigation. Accordingly, the Court lacks jurisdiction *fn25" and the complaint must be dismissed, although plaintiff may be able to reinstitute the action. *fn26"


Alternatively plaintiff argues that he should be given leave to file an amended complaint omitting any defendant that might be considered non-diverse. Diversity, however, may not be perfected in this manner if the court determines that the non-diverse party to be dropped is indispensable to a fair adjudication of the controversy. *fn27" Although no prescribed formula exists for determining whether a person is an indispensable party, *fn28" the concept includes elements of prejudice, equity and good conscience. *fn29" An indispensable party possesses a material interest in the controversy. *fn30" The relief requested by plaintiff is also pertinent. *fn31" Ultimately, resolution depends on the context in which the question arises. *fn32" Otherwise stated, an indispensable party is "one as to whom any judgment, if effective, would necessarily affect his interest, or would, if his interest is eliminated, constitute unreasonable, inequitable, or impractical relief." *fn33"


Plaintiff has identified the Cloister Relief Association, which contains non-diverse members, as a "formal seller identified in the agreement" of sale of the shipyard. *fn34" Plaintiff further implicated the Association with the questioned transaction by noting that supplemental agreements and mortgages were executed at settlement with the Association. *fn35" In view of the nature of plaintiff's cause of action, present contentions and requested relief, the Court could not dismiss the Association in good conscience, for the Association's rights would be affected by an adjudication and the Court could not proceed to final decision without one of the named sellers to the transaction. *fn36"


Accordingly, defendants' motion to dismiss the complaint will be granted.

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