source: Caselaw Access Project

author: ROCHE, District Judge.

license: Public Domain

text:
    FAIVRET v. FIRST NAT. BANK IN RICHMOND et al.
    No. 23334-R.
    District Court, N. D. California, S. D.
    Oct. 30, 1945.

      Arthur W. Brouillet, Robert H. Fouke, Frank J. Perry, and Arthur P. Shapro, all ■of San Francisco, Cal., for plaintiff.
    Irving C. Sugarman, Louis L. Bernheim, and James M. Popper, all of Richmond, Cal., for defendants.
   ROCHE, District Judge.

This is an action for damages for conver■sion of certain warehoused merchandise held by the defendant Bank as pledgee. The case was tried to the Court without a jury and the record discloses the following pertinent facts:

Faivret, the plaintiff, is a French refugee with a background of apparently successful experience as a merchandise jobber in his native France. In the late summer of 1943 he decided to establish a similar business in San Francisco but having only .$3200 as capital, he needed financial assistance. Through one A. B. Uhrich of the Douglas Guardian Warehouse Company he was introduced to the defendant Partridge, president of the defendant First National Bank in Richmond, and arrangements were made with the Bank for financing by a -system of field warehousing and assignment of accounts receivable. Under this plan, merchandise purchased by Faivret was to be placed in a field warehouse established on his premises and warehouse receipts covering the same were to be issued to the Bank. The Bank would then loan up to 85 per cent of the invoice price of the merchandise so purchased, with the proviso that all such purchases were to be subject to the Bank’s approval before advancing money thereon. A “blanket release” agreement provided for the release to Faivret of $3,000 worth of merchandise each week. When this was sold the resulting accounts receivable were assigned to the Bank which was to lend 90 per cent of the invoices covering such sales. These accounts were also subject to the Bank’s approval.

In the early part of 1944 the Bank advised Faivret that the accounts receivable entailed too much work and asked him to secure another financial arrangement, which he did. At that time, too, the warehouse receipt loans were reduced from 85 per cent to 60 per cent. Towards the end of March, 1944, the Bank advised Faivret that the National Bank Examiner had disapproved the loans and ordered the Bank to get its money out as quickly as possible. Faivret attempted to secure other warehouse receipt financing but was unsuccessful and on April 25, 1944, the Bank made formal demand on him for payment of all his notes. Efforts to liquidate the indebtedness without resort to foreclosure proved abortive, and sale of the pledged property was noticed for May 22, 1944. Plaintiff made formal written objections, proceeding on the theory that the warehouse receipt loans and accounts receivable loans were entirely separate transactions and, in the absence of a general pledge agreement, the existence of which was claimed but not proved, the pledged merchandise could be sold only to satisfy the amount it specifically secured and not the total indebtedness. Plaintiff also takes the position that his failure to tender the amount so specifically secured was excused by what he terms the Bank’s “excessive demand.”

Assuming that the plaintiff never signed a general pledge agreement, the Court is satisfied from the evidence that the loan transactions were so inter-related that the warehoused merchandise could legally be sold to satisfy all the indebtedness. However, even if they were not, the Bank’s alleged “excessive demand” would not excuse the tender of the sum plaintiff claimed was secured by the pledge of warehouse receipts. “The mere assertion, unaccompanied by any other act, of a lien greater in amount than that to which the lienor is entitled, will not dispense with the necessity of a tender.” Bell v. Bank of California, 153 Cal. 234, 242, 94 P. 889, 893.

The sale itself is attacked by plaintiff for asserted irregularities as to time, place and manner in which held and from these he seeks to spell out a conversion.

Sales of pledged property in California are governed by Sections 3005 and 3010 of the Civil Code and Section 694 of the Code of Civil Procedure. They provide that such sales must be made by public auction, to the highest bidder, between the hours of 9:00 a. m. and 5 :00 p. m. When the sale is of personal property, capable of manual delivery, it must be within view of those who attend the sale, and be sold in such parcels as are likely to bring the highest price. The pledgee or pledge-holder may become a purchaser.

It appears from the evidence that the instant sale was noticed for 9:00 a. m. on May 22, at the field warehouse on the plaintiff’s premises. Testimony as to the actual arrival time of all the parties is conflicting but they were all present by 9:20 and plaintiff alone was responsible for delaying the sale until 11 o’clock. When Baer and Friedman, the only two prospective bidders, sought permission to inspect the merchandise, it was refused until they had been made agents of the defendant Bank. Plaintiff then refused to allow the sale in the presence of the property because of a clause in his lease. As a result, the sale was conducted on the. sidewalk in front of the building, with Sugarman, the Bank’s attorney, acting as auctioneer. Baer and Friedman bid $30,000 and $32,500, respectively, for the whole amount of the merchandise, after declaring that they were not interested in bidding on it in lots. Plaintiff was offered the opportunity to bid, but declined, and when it appeared that the property might be sold for substantially less than his indebtedness, his attorney suggested that the Bank bid. Thereupon the defendant Partridge bid the property in for $52,000. Immediately thereafter the Bank’s attorney offered to let the plaintiff redeem the merchandise by payment in full with all expenses to date. The day following the sale the Bank began removing the property to another warehouse and subsequently sold it to Baer and Friedman for $60,000. Plaintiff made no move to redeem the merchandise but instead, on May 24, filed this action for conversion. ,

It is clear from the foregoing that the sale fell short of full compliance with the California code provisions but this resulted from the plaintiff’s conduct. He cannot now be heard to complain of irregularities which he himself invited. Even the fact that the pledgee, through its agents, acted as both seller and purchaser resulted, at most, in a voidable sale with the relation of pledgor and pledgee unchanged. First National Bank of Kansas City v. Rush, 10 Cir., 85 P. 539. Had the Bank refused to recognize plaintiff’s right to redeem, there would have been a conversion. The Bank, however, was diligent in reminding plaintiff of this right and it disposed of the property only after this action had been filed.

This is a very different situation from those cases where irregularities in the sale resulted in an over-reaching of the debtor, or where the debtor’s right to redeem was denied.

The record discloses no evidence that the failure to hold the sale at the advertised time, or in the presence of the merchandise, or by lots, or the delay in inspecting the goods, or the fact that the Bank acted as seller and purchaser, resulted in the loss to plaintiff of a single prospective bid. Whether they be considered separately or all together, there is no showing that the plaintiff suffered any prejudice from these irregularities of which he complains, and which resulted from his own conduct.

Defendant First National Bank’s counterclaim for the alleged balance due on plaintiff’s notes was not pressed on the trial and there is a failure of proof in support of it. Judgment, therefore, will be ordered entered, upon findings of fact and conclusions of law, in favor of the defendants on plaintiff’s complaint and in favor of the plaintiff and against the defendant Bank on the latter’s counterclaim.


author: KENNEDY, District Judge.

text:
    In re FINKELSTEIN.
    No. 26916.
    District Court, E. D. New York.
    Oct. 15, 1945.
    Henry W. Parker, of New York City, for petitioner (for the motion).
    Louis Bierfass, of New York City, for bankrupt (opposed).
   KENNEDY, District Judge.

The Morris Plan Industrial Bank of New York moves for an order correcting an order entered on December 21, 1934, discharging the bankrupt. The order of discharge was without qualification.

On August 24, 1928, the bankrupt was discharged in the first of three voluntary proceedings. On November 4, 1929, the moving creditor recovered judgment against him. On April 21, 1932, the bankrupt filed his second voluntary petition and scheduled the moving creditor’s claim. On November 18, 1932, discharge was denied the bankrupt because there was a prior discharge within the statutory period (six years). On August 24, 1934, the six year period after the first discharge order expired. On September 27, 1934, the bankrupt filed his third voluntary petition. Again he scheduled the claim of the moving creditor. The attention of the Court was not called to the denial of the discharge in 1932 (as to all the creditors listed except one Conlew, Inc.) and on December 21, 1934, an unqualified order of discharge was entered, this being the order to which the motion is addressed.

All these facts are undisputed. Indeed, there is only one factual controversy, and for reasons which will appear later I do not consider that important. The bankrupt claims that due notices of a meeting of creditors and application for discharge were given to all the creditors including the petitioner. The petitioning creditor in this proceeding does not deny that it received a notice. It says that its records fail to disclose whether it did or not.

The facts at bar bear a curious similarity to those in Chopnick v. Tokatyan, 2 Cir., 1942, 128 F.2d 521, certiorari denied 317 U. S. 667, 63 S.Ct. 72, 87 L.Ed. 536.

There, as here, there were three bankruptcies. There, as here, the petitioning creditor’s claim arose between the first discharge and the second voluntary petition. The District Court in that case stayed the proceedings of the petitioning creditor in the State court. The Circuit Court reversed, holding that the denial of discharge in the second proceeding was a bar to discharge, and that the petitioning creditor was free to exhaust his remedy in the State courts without interference. Judge Swan, writing in the case, refused to follow Prudential Loan & Finance Co. v. Robarts, 5 Cir., 1931, 52 F.2d 918. The rationale of the Robarts case is that mere denial of the discharge is not the equivalent of refusal of discharge on the grounds set forth in the statute. 11 U.S.C.A. § 32, sub. b. Judge Swan says that no matter what the ground of denial is, it still' acts as a bar on any application for discharge. I mention this only because the bankrupt in opposition to this motion strongly urges that the Robarts case rules this one. That case simply is not law in this Circuit. If I understand the Chopnick decision correctly there can be no doubt that power resides in the courts to grant the relief which here is sought. The real question before me is whether after inaction by the petitioning creditor for nearly eleven years the motion ought to be granted. In other words, the question to be decided is whether laches on the part of a creditor precludes the amendment of an unqualified order of discharge which has been secured by an imposition upon the Court. I think I am justified in stating the problem this way because the fact that there were three bankruptcies in this case and the other circumstances here present, in my judgment, bring this matter within the statement by Mr. Justice Sutherland in Freshman v. Atkins, 1925, 269 U.S. 121, 46 S.Ct. 41, 70 L.Ed. 193, where speaking of an application for discharge eight years after denial of discharge in the prior proceedings, he said (269 U.S. at page 124, 46 S.Ct. at page 42, 70 L.Ed. 193) : “To ignore it, and make a second application, involving a new hearing, was an imposition upon and an abuse of the process of the court, if not a clear effort to circumvent the statute by enlarging the statutory limitation of time within which an application for discharge must be made.” Judge Patterson dealt with this question in Re Zeiler, D.C., S.D.N.Y., 1937, 18 F.Supp. 539. There the order of discharge was entered on January 22, 1936. The moving creditor asked on January 19, 1937, that the order be amended so as to exclude his claim. Having decided that the merits were with the moving creditor, Judge Patterson said that the lapse of one year did not constitute laches on his part. ' But he then went on to say that he thought the question of laches not a critical point. He based this statement upon Freshman v. Atkins, supra. Judge Patterson’s remark is clearly obiter, because it is preceded immediately by a finding that in his case there was no laches. But now it is necessary to decide whether the lapse of a very long time (more than 10 years), which surely would be considered laches in the absence of a clear excuse for inaction, will operate to validate an order secured by an imposition upon the Court.

The Supreme Court has never said that an order secured under circumstances like those at bar is void. On the contrary, Bluthenthal v. Jones, 1908, 208 U.S. 64, 28 S.Ct. 192, 52 L.Ed. 390, indicates that such orders are not void. There, discharge was denied in the Georgia district in 1900. Subsequently, the bankrupt, in a new proceeding, secured a discharge in the Florida district. One of his creditors then sought to enforce a judgment by levy of execution in the Florida courts. The Supreme Court affirmed a holding by the Supreme Court of the State of Florida that an injunction against the levy of execution was proper. Mr. Justice Moody says that it was too much to expect that the District Court of Florida would search the records of all other District Courts, and that when a creditor intentionally remains away and lets the discharge order stand, he is bound by it and may not thereafter proceed under his judgment. On the other hand, in Freshman v. Atkins, supra, where the bankrupt had been denied discharge in 1915, the Supreme Court upheld an order made in a second proceeding in 1923 denying discharge. There the Court took judicial notice of the pendency of the former application. The opinion distinguishes Bluthen-thal v. Jones, supra, on the ground that while one district court is not bound to search the records of another, it may nevertheless give effect to its own records in another interrelated proceeding.

I know very well that a distinction can be made between a situation where the bankrupt, after long inaction, himself applies to the Court to effectuate or secure a discharge order unlawfully obtained, and one in which a creditor seeks to amend such an order. Freshman v. Atkins illustrates the first situation, and the case at bar the second. But no matter how the parties may be aligned, the root problem is whether a wrong-doer may keep the fruits of his wrong because the outcry by his victims has been belated. In behalf of the bankrupt it is said that because of the creditor’s inaction the debt is nearly doubled, and this furnishes a reason why it should be wiped out by a discharge secured under circumstances amounting to a fraud upon the Court. The bankrupt, in other words, criticizes the moving creditor because it failed to harass him promptly. I think these arguments answer themselves.

Although I admit it is in no way controlling, I mention the fact that in at least two instances the State courts have taken the position that a discharge improperly secured is a nullity. Broderick v. Gliicker, 174 Misc. 492, 21 N.Y.S.2d 472; In re Weiss, Sup., 24 N.Y.S.2d 257, not reported [in State reports]. It is true that there is one decision holding the contrary. Ehnes v. Pvinick,-Misc.-, 58 N.Y.S. 2d 363. Possibly the first two decisions are qualified by the fact that in both it was the bankrupt who applied for relief.

The moving creditor relies upon Rule 60(a), Federal Rules Civil Procedure, 28 U.S.C.A. following section 723c, which relates to clerical mistakes in judgments, orders or other parts of the record, and the correction of errors arising from oversight or omission. I suppose the failure of the Court to review its own records in connection with applications for discharge may be called “oversight,” or possibly even a “clerical mistake.” But I doubt that the framers of the rules intended to include within the scope of Rule 60(a) a situation where a suitor imposes upon the Court. If they did, I think they would have used much broader language. Moreover, to adopt petitioner’s argument would be to assent to the proposition that in every case where a discharge is sought the duty is up-on the Court to search its own records, and to edit the bankrupt’s papers where he wil-fully omits facts which would bar the granting of relief. I do not believe there is any such duty upon the Court. Discharge from debt in bankruptcy is not analogous to anything else in the law that I know of. It is a privilege given to an honest bankrupt. When he secures it by an act of dishonesty in connection with the very papers that he submits, surely the responsibility for the granting of the improvident order' should not be shared with him by the Court. He alone should bear the consequences.

I have the power to amend. In re Zeiler, D.C., 18 F.Supp. 539, 541. The merits, are with the petitioning creditor. I believe that its inaction does not require the denial of relief.

The motion is granted.

       The denial of discharge.


author: McCORMICK, District Judge.

text:
    UNITED STATES, for Use of RECONSTRUCTION FINANCE CORPORATION, v. CERTAIN PARCELS OF LAND IN CITY OF LOS ANGELES, LOS ANGELES COUNTY, CAL., et al.
    Civil Action No. 2454-B.
    District Court, S. D. California, Central Division.
    June 12, 1945.

      Eugene D. Williams, Sp. Asst, to Atty. Gen., Lands Division, for the Government.
    Bodkin, Breslin & Luddy, of Los Angeles, Cal., for Treasure Co. and Samarkand Oil Co., defendants.
   McCORMICK, District Judge.

This is a motion for an injunction by this court to restrain proceedings in an action filed and pending in the Superior Court of the State of California in and for the County of Los Angeles. The injunction is sought by the plaintiff as auxiliary to an action in condemnation pending in this court to preserve what plaintiff alleges to be the priority of jurisdiction in the United States District Court.

The crucial and ultimate question for decision may be thus stated: As between the applicable Federal and State tribunals, has this court under the record before it acquired a priority of jurisdiction necessitating injunction against further proceedings by two private corporations of the State of California against another corporation of the same State to recover the possession of specific personal property in civil actions pending therein under the laws of the State of California? We think the question should be answered in the negative. Accordingly the motion for injunction filed herein March 10, 1945 is denied. Exceptions allowed movants. See Rule 81(a) (7), Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.

Pursuant to investiture in the Second War Powers Act, 50 U.S.C.A. Appendix § 632, to the Reconstruction Finance Corporation, that body, under date of September 19, 1942, on behalf of the Defense Plant Corporation, an affiliate and subsidiary, ■caused proceedings to be instituted in this court to acquire by condemnation certain real property within the jurisdiction of this court. The complaint was filed September 28, 1942, and on that day an order for possession was entered. The only service as far as the property involved in this motion is concerned was by posting on the real property involved. Neither the letter of authority authorizing the institution of the action, the complaint in condemnation, nor the order for possession provided for the condemnation or acquisition of personal property. These instruments all specifically called for the condemnation of land only.

Notwithstanding the limitations of the order for possession, the seizure made by the Government on September 28, 1942, included personal property, as well as real property, of the Treasure Company and Samarkand Oil Company, the two defendants in this action that are resisting the instant motion for injunction.

The purpose of the acquisition of the subject properties was to provide gas storage facilities for defense needs on the site of depleted oil wells. However, the record discloses that personal property not affixed to the realty was seized by the agents of the Government and that, also, a producing oil well is now in the hands of the Government agents.

In August, 1943, the Defense Plant Corporation and the Union Oil Company of California entered into a contract for the operation of the acquisitioned property by the Union Oil Company of California.

On November 15, 1943, the Treasure Company and the Samarkand Oil Company filed claim and delivery actions against the Union Oil Company in the Superior Court of the State of California in and for the County of Los Angeles. Service of process therein upon the Union Oil Company followed on November 16, 1943. The Union Oil Company filed answers in such actions on January 3, 1944.

On November 24, 1943, an admittedly ineffectual amendment to the complaint in condemnation was filed in this court. Later, on January 12, 1944, an authorized amendment to the complaint in condemnation was filed herein. This pleading specified as within the scope of the condemnation proceeding the personal property which is the bone of contention in the proceeding before the court. On January 5, 1944, the Defense Plant Corporation filed in the State court actions in claim and delivery its application to intervene therein. Such application was granted. On February 5, 1945, the Defense Plant Corporation duly filed and presented in the Superior Court motions to abate the claim and delivery actions in such State court. These motions to abate the claim and delivery actions were by the said Superior Court denied. (See memorandum opinion by Judge William J. Palmer in Exhibit “E” herein). On March 10, 1945, the instant motion for injunction with its accompanying petition was filed in this court. The motion was argued and submitted for decision by the respective parties on March 29, 1945.

The question óf priority of jurisdiction necessarily involves the legal nature of an action to recover possession of personal property on one hand, and the legal nature of federal 'eminent domain proceedings on the other.

Preliminarily to a consideration under the record before us as to the legal nature of the actions in the State and Federal courts with which we are concerned we should keep in mind the restrictive terms of the ancient Act of March 2, 1793, now embodied in Section 265 of the Judicial Code, 28 U.S.C.A. § 379.

This sweeping prohibition of interference with proceedings in State courts by Federal injunction provides that “The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a State, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.”

In the recent decision in Toucey v. New York Life Insurance Co., 1941, 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100, 137 A.L.R. 967, the Supreme Court, after recounting the history and sensitive field of judicial authority involved in this legislation, reaffirmed the doctrine enunciated by the Court in its earlier decision in Kline v. Burke Construction Co., 260 U.S. 226, 43 S.Ct. 79, 83, 67 L.Ed. 226, 24 A.L.R. 1077, where it stated: “The rank and authority of the courts (Federal and State) are equal, but both courts cannot possess or control the same thing at the same time, and any attempt to do so would result in unseemly conflict. The rule, therefore, that the court first acquiring jurisdiction shall proceed without interference from a court of the other jurisdiction is a rule of right and of law based upon necessity, and where the necessity, actual or potential, does not exist, the rule does not apply. Since that necessity does exist in actions in rem and does not exist in actions in personam, involving a question of personal liability only, the rule applies in the former but does not apply in the latter.”

So important has been the Congressional circumspection in avoiding occasions for placing the tribunals of the States and of the Union in any collision that the Supreme Court has deemed it necessary to succinctly mark the bounds of priority of jurisdiction in the following graphic manner : “ * * * where a state court first acquires control of the res, the federal courts are disabled from exercising any power over it, by injunction or otherwise.” Toucey v. New York Life Ins. Co., supra [314 U.S. 118, 62 S.Ct. 145].

And “the restrictions of § 265 [of the Judicial Code, 28 U.S.C.A. § 379] upon the use of the injunction to stay litigation in the state court confine the district courts even though such an injunction is sought in support of an earlier suit in the federal courts.” Southern R. Co. v. Painter, 1941, 314 U.S. 155, 62 S.Ct. 154, 155, 86 L.Ed. 116.

We turn now to examine the nature and character of the two types of action which concern us in this motion under consideration.

An action to recover possession of personal property is a statutory remedy. Section 3379 of the Civil Code of California provides that: “A person entitled to the immediate possession of specific personal property may recover the same in the manner provided by the Code of Civil Procedure.” Sections 509 to 520 of the Code of Civil Procedure of the State of California provide for the provisional remedy of “Claim and Delivery of Personal Property.” These later procedural statutes merely provide an auxiliary remedy by which, when a party brings an action to recover personal property, he may, upon compliance with statutory requisites, “claim” that the property be immediately delivered to him at the commencement of the action and without awaiting trial. Faulkner v. First National Bank, 130 Cal. 258, 62 P. 463.

Thus it is clear that in an action under the laws of the State of California to recover the possession of personal property the statutory auxiliary process of “claim and delivery” is optional. The nature of the action to recover personalty is unaffected regardless of whether or not the provisional remedy is applied. In other words, the invoking of the provisional remedy is in no way a necessity to the cause of action. It is merely an additional aid to secure in advance the judgment that is sought by the plaintiff under the laws of the State of California.

It is settled under California decisions that an action for the recovery of personal property is what is termed a mixed action, being partly in rem and partly in personam. The action is in rem so far as the specific recovery of the chattels is concerned, and in personam in so far as damages are sought. Williams v. Atchison, etc., Ry. Co., 156 Cal. 140, 103 P. 885, 134 Am. St.Rep. 117, 19 Ann.Cas. 1260; Claudius v. Aguirre, 89 Cal. 501, 26 P. 1077; Well-man v. English, 38 Cal. 583.

Any argument that the actions in the State court did not bring into the judicial custody of such court the specific property to which the instant motion is directed as of their date of institution, stems, we think, from an erroneous conclusion that the failure to invoke the California provisional remedy of “claim and delivery” changes the nature and essential character of replevin actions. Inherently the actions in the State court are not determinable by the utilization of the auxiliary process provided by the local law. It is settled law that where the action is in rem the effect is to draw to the court attaching jurisdiction the control, actual or potential, of the res. And no matter how inadequate “res” may be as a descriptive label, it is not true that a money claim “in personam” cannot be a “res.” Such a claim in an action “quasi in rem” can be properly so characterized. Brooklyn Trust Co. v. Kelby, 2 Cir., 134 F.2d 105, at page 116.

The legal nature of a condemnation proceeding is thoroughly settled. A condemnation proceeding is a proceeding in rem. United States v. Dunnington, 146 U.S. 228, 13 S.Ct. 79, 36 L.Ed. 996; In re Condemnation Suits by United States, D.C., 234 F. 443.

It thus appears from pertinent authorities that the actions in the State court and the proceedings in this District court are both predicated on causes of action which seek to effect a specific res, and thus are in rem and quasi in rem in nature. See Lee v. Silva, 197 Cal. 364, 240 P. 1015.

But the solution of the problem before us is dependent also upon the time of acquisition of jurisdiction in the State court in the actions to recover the possession of personal property as well as the nature of the action. Under applicable law jurisdiction of a court in civil actions is acquired from the time of service of summons. Section 416, Code of Civil Procedure. Interpretations of this code section establish that the court whose process is first served has the prior jurisdiction. 7 Cal.Jur. 593. It has been shown at the time of the hearing of the motion for injunction that the process in the two local actions to recover the possession of personal property was served upon the defendant Union Oil Company of California before the amended complaint in the instant condemnation proceeding was filed. It is evident that the State court acquired jurisdiction at least nine days before there was any specific token of acquisition by the Government of the personal property in dispute.

Now as to the acquiring of jurisdiction in a Federal eminent domain proceeding it has been reliably stated that the filing of the petition is the first step in a condemnation proceeding of the judicial type and is a jurisdictional prerequisite to the authority of the court to entertain the proceeding. Federal Eminent Domain Manual, Lands Division, Department of Justice, page 371. See, also, Lewis on Eminent Domain, Volume 2, section 867; Nichols on Eminent Domain, Volume 2, page 1041.

While no eminent domain decision has been called to our attention and we have found none precisely holding that the court’s jurisdiction in eminent domain proceedings of the judicial type attaches as of the filing of the petition in condemnation, this appears to be the general rule in so far as in rem proceedings in general are concerned.

In the early case of Farmers’ Loan & Trust Co. v. Lake Street El. R. Co., 177 U.S. 51, 20 S.Ct. 564, 568, 44 L.Ed. 667, the rule followed since was announced by the court as follows: “As between the immediate parties, in a proceeding in rem, jurisdiction must be regarded as attaching when the bill is filed and process has issued, * * This rule as to priority of jurisdiction in actions in rem or quasi in rem has been confirmed in the comparatively recent decision in Princess Lida of Thurn et al. v. Thompson et al., 1939, 305 U.S. 456, 59 S.Ct. 275, 280, 83 L.Ed. 285, in the following pertinent language: “We turn to the suit instituted in the District Court to ascertain what relief was there sought. * * * Certain, it is, therefore, that if both courts were to proceed they would be required to cover the same ground. This of itself is not conclusive of the question of the District Court’s jurisdiction, for it is settled that where the judgment sought is strictly in personam, both the state court and the federal court, having concurrent jurisdiction, may proceed with the litigation at least until judgment is obtained in one of them which may be set up as res judicata in the other. On the other hand, if the two suits are in rem, or quasi in rem, so that the court, or its officer, has possession or must have control of the property which is the subject of the litigation in order to proceed with the cause and grant the relief sought the jurisdiction of the one court must yield to that of the other. We have said that the principle applicable to both federal and state courts that the court first assuming jurisdiction over property may maintain and exercise that jurisdiction to the exclusion of the other, is not restricted to cases where property has been actually seized under judicial process before a second suit is instituted, but applies as well where suits are brought to marshal assets, administer trusts, or liquidate estates, and in suits of a similar nature where, to give effect to its jurisdiction, the court must control the property. (Citing cases.) The doctrine is necessary to the harmonious cooperation of federal and state tribunals.” (Citing United States v. Bank of New York & Trust Co., 296 U.S. 463, 56 S.Ct. 343, 80 L.Ed. 331.)

The same jurisdictional principle enunciated in these decisions of the Supreme Court has been restated by our Circuit Court of Appeals in Hutchins v. Pacific Mut. Life Ins. Co. of California et al., 9 Cir., 1938, 97 F.2d 58, 60, wherein a specific res was in the possession of the California court and a dispute arose as to the priority of jurisdiction between such court and the Federal Court and wherein Judge Healy writing for the court stated: “It is settled law that where a state and a Federal court both have concurrent jurisdiction in suits in rem or quasi in rem, the court first assuming jurisdiction over the property may maintain and exercise that jurisdiction to the exclusion of the other.”

While it is probably true under the broad powers reposed by Congress in the Executive by Title II of the Second War Powers Act, 50 U.S.C.A. Appendix § 632, that the personal property involved in this controversy might have been acquisitioned with the land or acquired as incidental thereto, the record evidence before us clearly proves that no such situation existed. As previously adverted to, all of the memorials, instruments of authority and pleadings leading up to and accompanying the acquisition by the plaintiff pertain to land, and only to land. Nor is there any indication in the resolutions of the acquiring agency of September 19, 1942 and October 19, 1942 that evince any intention to acquire the personal property in dispute as part of the natural gas storage facility sought through the condemnation proceedings instituted in this court.

The fair preponderance of the evidence before us establishes, we think, that the present claim that it was the intention from the inception of the project to acquire the personalty is an afterthought conceived to avoid possible consequences of the seizure of September 28, 1942.

There can be no serious claim of ratification by plaintiff of the seizure of the personalty because before any adequate manifestation by plaintiff of an intention to acquire such property was evident, the State court had already acquired jurisdiction of the res. The factual situation here is dissimilar to that before the court in Yearsley v. W. A. Ross Construction Co., 309 U.S. 18, 60 S.Ct. 413, 84 L.Ed. 554. Moreover, the Yearsley decision does not enunciate the principle that ratification of a taking without condemnation proceedings ipso facto confers jurisdiction on the United States court.

The sole method chosen to acquire the necessary war facility to which the action in this court relates was by condemnation proceedings of the judicial type brought as Title II of the Second War Powers Act specifies in accordance with the Act of August 1, 1888, Sections 257, 258, 40 U.S.C.A. One of the jurisdictional essentials of a proceeding in condemnation of the judicial type is that the property sought to be taken shall be described in the petition (complaint). See Section 1244, California Code of Civil Procedure.

It is clearly established by the record before us that no specification whatever of any personalty was made in any of the proceedings until the month of October, 1943, when for the first time an authorization to amend the pleadings so as to include personal property was given, and it was not until the following January that the amended complaint directed to the acquisition of the personal property in issue was filed.

Thus we find that the earliest effectual and authorized acquiring of the personal property by the Government was subsequent to the acquiring of jurisdiction over the same res by the State court in the recovery actions pending therein. As no other type of authority than judicial has been invoked or applied by plaintiff in the acquisition under consideration, we consider argument and authorities as to the lodgment in the United States of other processes in eminent domain as academic and irrelevant to the motion before the court.

We conclude with the observation that the injunction to restrain proceedings in either of the State court actions is unnecessary under the record before us. In the local suits no relief to the oil companies other 'than money judgments appears to be now possible. Such an outcome in the State court would neither impair nor defeat the jurisdiction of this court in the condemnation proceeding.

The petition for injunction is denied, The motion for injunction is denied. Exceptions allowed movents.

There ¡s some doubt as t0 tbe necessity of formal ñndings of fact> conclusions of law and ju(jgment herein by reason of the inapplicability of the Federal Rules of Civil Procedure in condemnation proceedings, Rule 81 (a)7. However, should counsel desire formal findings of fact, conclusions of law and judgment they should be in conformity hereto prepared and presented to the Judge for consideration within five days from date hereof.


author: VanARTSDALEN, District Judge.

text:
    Edward HOOKS v. RCA CORPORATION.
    Civ. A. No. 84-2353.
    United States District Court, E.D. Pennsylvania.
    Oct. 25, 1984.
    Marla Soffer, Jablon, Epstein and Wolf, Philadelphia, Pa., for plaintiff.
    John H. Leddy, Schnader, Harrison, Se-gal & Lewis, Philadelphia, Pa., for defendant.
   MEMORANDUM AND ORDER

VanARTSDALEN, District Judge.

In this employment discrimination action Edward Hooks, a 59-year-old black man, alleges age and race discrimination in RCA Corporation’s failure to promote him from the employment position he has held since 1961. Defendant, RCA, has moved to dismiss Counts II, IV, V, VI and VII of plaintiff’s complaint and to strike the ad dam-num clause. Plaintiff has “agreed ... that Counts IV, V, VI, and VII of plaintiff’s Complaint be withdrawn with prejudice.” Plaintiff has also filed an amended ad dam-num clause which cures the defect proffered by the defendant. The only remaining issue is whether Count II should be dismissed.

Count II alleges racial discrimination in violation of Title VII, 42 U.S.C. §§ 2000e to 2000e-17. The issue presented on this motion to dismiss is the validity of a right to sue letter issued before charges have been pending before the Equal Employment Opportunity Commission (EEOC) for 180 days. Before suit can be brought in federal district court for a violation of Title VII, a plaintiff must file charges with the EEOC and receive notice from the EEOC of the right to sue. Ostapowicz v. Johnson, 541 F.2d 394 (3d Cir.1976), cert. denied, 429 U.S. 1041, 97 S.Ct. 741, 50 L.Ed.2d 753 (1977). After charges have been filed with the EEOC, the plaintiff can bring suit in district court if the charges are dismissed or if the EEOC fails to file a civil action or enter into a conciliation agreement within 180 days. The statute provides:

If a charge filed with the Commission ... is dismissed by the Commission, or if within one hundred and eighty days from the filing of such charge ... the Commission has not filed a civil action ... or ... entered into a conciliation agreement to which the person aggrieved is a party, the Commission shall so notify the person aggrieved and within ninety days after the giving of such notice a civil action may be brought against the respondent named in the charge ....

42 U.S.C. § 2000e-5(f)(l).

Plaintiff filed charges with the EEOC on November 24, 1983. He received notice of right to sue from the EEOC on February 28, 1984, less than 180 days after the charges were filed. EEOC regulations provide for the issuing of a right to sue letter prior to the expiration of 180 days from the filing of the charge provided that the EEOC determines “that it is probable that the Commission will be unable to complete its administrative processing of the charge within 180 days from the filing of the charge.” 29 C.F.R. § 1601.28(a)(2) (1983).

Although some courts have refused to enforce this regulation because it undermines the congressional policy favoring conciliation of employment discrimination disputes, e.g., Mills v. Jefferson Bank East, 559 F.Supp. 34 (D.Colo.1983), I find that the right to sue letter was properly issued in the present case and that jurisdiction lies in this court. The Third Circuit recently was presented with a case in which a right to sue letter was issued prior to the expiration of 180 days. Moteles v. University of Pennsylvania, 730 F.2d 913 (3d Cir.1984). The court “consider[ed] it inadvisable to rule on the validity of the regulation or the procedure” because it remanded the case for further factual development. Id. at 917. Nevertheless, the court did express some sentiments on the issue:

It may well be that the 180-day exhaustion period is not jurisdictional.... Even so, premature resort to the district court should be discouraged as contrary to congressional intent. The preference for conciliation as the dispute resolution method in employment discrimination proceedings should not be undermined by a party’s deliberate by-pass of administrative remedies. Accordingly, the plaintiffs actions in foreclosing EEOC conciliation efforts is one factor to be considered in determining whether equitable relief should be granted.

Id. (citations omitted).

Although conciliation is preferred, “[i]f the Commission determines that conciliation is unlikely, it serves no useful purpose to insist on the running of the full 180-day period before issuance of the right-to-sue letter.”' Milner v. National School of Health Technology, 409 F.Supp. 1389, 1392 (E.D.Pa.1976) (upholding validity of right to sue letter issued 150 days after EEOC assumed jurisdiction). Accord Vera v. Bethlehem Steel Corp., 448 F.Supp. 610 (M.D.Pa.1978).

In the present case there is no suggestion that the plaintiff deliberately attempted to by-pass the administrative process. An investigation and a conference between plaintiff and defendant were conducted by the EEOC. Apparently, no conciliation agreement was reached as a result of that conference and defendant has presented no evidence that plaintiffs subsequent receipt of a right to sue letter was a circumvention of the conciliation process. Under the circumstances, there was no need for the case to collect dust in the EEOC for another two or three months before making its way to this court.

ORDER

Upon consideration of defendant’s motion to dismiss Counts II, IV, V, VI and VII of the complaint and to strike plaintiff’s ad damnum clause, it is

Ordered that:

1. Counts IV, V, VI and VII of plaintiff’s complaint are dismissed with prejudice;

2. The ad damnum clause of plaintiff’s original complaint is stricken and plaintiff’s “Amended Addendum Clause,” filed August 15, 1984, is received as an amendment of plaintiff’s complaint;

3. As to Count II of plaintiff’s complaint, defendant’s motion to dismiss is denied.

       Plaintiffs Response to Defendant’s Motion to Dismiss Counts II, IV, V, VI, VII and the ad Damnum Clause of Plaintiffs Complaint, ¶ 3.
      Count IV is based on the Pennsylvania Human Relations Act § 5(a), 43 P.S. § 955(a). Count V is based on intentional infliction of emotional harm. Counts VI and VII are based on the collective bargaining agreement that covers plaintiffs employment.


author: VERON, District Judge.

text:
    LUNDAY-THAGARD COMPANY v. UNITED STATES DEPARTMENT OF the INTERIOR.
    Civ. A. No. 83-3006.
    United States District Court, W.D. Louisiana, Lake Charles Division.
    Dec. 6, 1984.
    Ruling on Motion for Reconsideration Feb. 4, 1985.
    Jerry E. Rothrock, Akin, Gump, Strauss, Hauer & Feld, Washington, D.C., A. Lane Plauche, Plauche, Smith & Nieset, Lake Charles, La., for plaintiff.
    Joseph S. Cage, Jr., U.S. Atty., Lawrence Moon, Asst. U.S. Atty., Shreveport, La., Richard K. Willard, Acting Asst. Atty. Gen., Stephen E. Hart, Thomas Millet, At-tys., Civ. Div., Dept, of Justice, Washington, D.C., for defendant.
   RULING ON MOTION TO DISMISS

VERON, District Judge.

A. Introduction

In December 1983, Plaintiff Lunday-Tha-gard Company (“Lunday-Thagard” or the “Company”) brought this action seeking recovery of, and treble damages for, the “overcharges” allegedly collected by the Department of the Interior (“DOI”) in the sale of crude oil to Lunday-Thagard from June 1976 through January 1981, in violation of the Department of Energy’s (“DOE”) Mandatory Price Regulations in effect during that period. The Company’s suit is based upon section 5(a)(1) of the Emergency Petroleum Allocation Act of 1973 (“EPAA”), 15 U.S.C. § 754(a)(1), which incorporates the private action provision, section 210, of the Economic Stabilization Act of 1970 (“ESA”), 12 U.S.C. § 1904 note. The DOI would have us dismiss the suit for want of subject matter jurisdiction, arguing that Congress has not waived the United States’ sovereign immunity for claims based upon section 210 of the ESA. Alternatively, the DOI seeks dismissal on the grounds that the suit has prescribed by the passing of one year under Article 3536 of the Louisiana Civil Code.

B. Facts

Between April 1973 and January 1981, the DOI entered into several contracts with Lunday-Thagard to supply it domestic crude oil, each incorporating the EPAA by reference. The EPAA empowered the President to allocate and price domestic crude in wake of the Arab Oil Embargo, see § 4(a) of the EPAA, and the DOE adopted a “two-tier” price ceiling to implement it: “old crude” carried a maximum price of $5.25 per barrel, but “new crude” could be sold for the then free-market price of $14.00 per barrel. See 39 Fed.Reg. 1924 (Jan. 15, 1974); 41 Fed.Reg. 4931 (Feb. 3, 1976). The DOE also required producers to certify to customers in writing the amount of oil they purchased in each category, prohibited producers from collecting administrative fees or “surcharges” for certification, and instructed them to continue their long-standing practice of reimbursing refiners for transportation payments made to third parties. See 10 C.F.R. §§ 212.73, 212.74, and 212.131. All producers of domestic crude oil, including federal agencies, were subject to these Mandatory Pricing Regulations. Mohawk Petroleum Corp. v. Department of Navy, 521 F.2d 1394, 1395 (Temp.Emer.Ct.Apps.1975). Lunday-Thagard complains that the DOI willfully failed to certify, either in timely fashion or in proper form, the oil it sold the Company after May 1976. This supposedly entitles the Company to treat all of that oil as “old crude,” notwithstanding the Company’s failure to allege that any portion was unqualified for the price category billed by the DOI. Lunday-Thagard calculates that it was “overcharged” nearly $6.08 million for that old crude, and $.11 million for administrative fees, “surcharges” and transportation charges. It now, as we note above, seeks to recover both its money and treble damages.

C. Analysis

We decide this motion upon the DOI’s argument that Lunday-Thagard’s suit has prescribed by the passing of one year. Neither the EPAA nor the ESA contains a statute of limitation, so the federal courts must apply the most analagous state limitation consistent with national energy policy to crude-oil overcharge actions. Johnson Oil Co. Inc. v. U.S. Dept. of Energy, 690 F.2d 191, 196 (Temp.Emer.Ct.Apps.1982) (“TECA”). The DOI characterizes this action as one for EPAA pricing violations rather than breach of contract, thus seeking to make the one-year prescription of Louisiana Civil Code Article 3536, which applies to actions “resulting from offenses and quasi offenses,” the applicable state limitation. The DOI seeks support in Johnson, supra, where the counter-claimant sought to recover crude oil overcharges on contracts requiring it to pay “the highest legal price,” to wit, the maximum price permitted under the EPAA. TECA held that the “dominant claim” was for “violation of the pricing regulations,” because “the elements necessary to prove a violation of the pricing regulations for overcharging must be proved to establish a breach of the parties’ contract for exceeding the ‘highest legal price’.” 690 F.2d at 196. TECA then applied Wyoming’s two-year limitation for “a liability created by federal statute” instead of its ten-year contract limitation.

Lunday-Thagard characterizes this case as a pure contract action, thus seeking to make the ten-year prescription of Article 3544, which applies to “all personal actions, except those before enumerated,” the applicable limitation. At the very least, the Company would have us follow the bifurcated approach of Ashland Oil Co. of Cal. v. Union Oil Co. of Cal., 567 F.2d 984 (TECA 1982). In Ashland, TECA applied California’s one-year limitation for “[a]n action upon a statute for a penalty or forfeiture” to plaintiff’s claim seeking treble damages for intentional overcharges. But in its next breath, TECA applied the state’s three-year limitation to plaintiff’s claim for reimbursement of the overcharges. TECA reasoned that given “the complexity of the [DOE’s] price regulations and the difficulty of determining compliance therewith,” endorsing one-year limitations for actual damage claims would eviscerate the ESA’s private action provision. 567 F.2d at 991.

Johnson’s holding that in an overcharge action, the predominant claim is for EPAA pricing violations, prevents us from characterizing this action as a purely contractual one. The limitations available under Louisiana law, the one-year and ten-year prescriptions, also foreclose our use of Ash-land ’s bifurcated approach, because Johnson also held (at least implicitly) that ten-year limitations are “inconsistent with national energy policy seeking to wind up regulation of the oil industry — ‘temporary’ ab initio.” 690 F.2d at 197. Had Lunday-Thagard alleged substantial difficulties in detecting DOI pricing violations, we might have preferred, however unpleasant the choice, to offend national energy policy by applying the ten-year prescription to the Company’s reimbursement claim than to eviscerate section 210 of the ESA by endorsing the one-year prescription. But in the absence of such allegations, we are forced to apply Article 3536’s one-year prescription to Lunday-Thagard’s entire suit. Accordingly, we GRANT the DOI’s Motion to Dismiss the Complaint.

RULING ON MOTION FOR RECONSIDERATION

This matter comes before the Court on Plaintiff Lunday-Thagard Company’s (“Lunday-Thagard” or the “Company”) Motion for Reconsideration of our December 6th Ruling that its crude-oil overcharge action, brought under the private action provision of the Emergency Petroleum Allocation Act, has prescribed by the passing of the Louisiana Civil Code’s one-year prescription period, Article 3536. We rejected Lunday-Thagard’s call for application of Article 3544 because the Temporary Emergency Court of Appeals (“TECA”) has held (at least implicitly) that ten-year limitations are “inconsistent with national energy policy seeking to wind up regulation of the oil industry — ‘temporary’ ab initio." Johnson Oil Co. Inc. v. U.S. Dept. of Energy, 690 F.2d 191, 196 (TECA 1982).

Now Lunday-Thagard would have us adopt the six-year limitation of 28 U.S.C. § 2401(a), for “civil action[s] commenced against the United States” which do not sound in tort, even though it conceded before our Ruling that Johnson, supra, and Ashland Oil Co. of Cal. v. Union Oil Co. of Cal., 567 F.2d 984 (TECA 1977), “clearly indicate the inapplicability of 28 U.S.C. § 2401(a) ..., since they state unequivocally that no federal limitation period applies.” Plaintiff’s Brief in Opposition to Motion to Dismiss, at 36, n. 28. Ironically, the Company now reveres Ashland, supra, for its supposed holding that we can apply the most analogous state limitation to an overcharge action “only in the absence of a statutory limitation provided by Congress.” Memorandum in Support of Motion for Reconsideration, at 5. Then it cites our recent Ruling in Geyen v. Marsh for the proposition that section 2401(a) is “jurisdictional” and thus its application mandatory, see 587 F.Supp. 539 (W.D.La.1984), and quotes Glenrock Refinery, Inc. v. United States Department of the Interior, holding that section 2401(a) is “definitive ... even though a shorter state or federal provision would apply to identical proceedings involving individual parties.” No. C84-0264-B, Slip op. at 6 (D.Wyo. Dec. 5, 1984). Finally, Lunday-Thagard argues that our reliance upon Johnson is misplaced, because the defendants there were private parties and thus without the reach of section 2401(a).

As to Johnson, TECA’s affirmation of national energy policy transcends the facts of that case. And neither Ashland nor Geyen addresses the issue before us: whether the courts can apply a general federal limitation that is wholly inconsistent with national policy. Ashland merely reaffirms the basic precept of interstitial lawmaking, that “[generally in the absence of a statutory limitation provided by Congress, a federal court will apply the most analogous state [rather than the most analogous federal] law of limitations.” 567 F.2d at 989. And in Geyen, supra, we held only that plaintiffs exhausting administrative remedies cannot toll section 2401(a).

Finally, we disagree with the court in Glenrock Refinery, supra, that section 2401(a) is “definitive.” We cannot apply it to overcharge actions, no matter how dis-positive we might find it in other contexts, because it is just as anathematic to our national goal of deregulating the oil industry as the ten-year limitation rejected in Johnson.

Accordingly, we DENY Lunday-Tha-gard’s Motion for Reconsideration.


author: SHAW, District Judge.

text:
    Kerney LOUVIERE, et al. v. AM GENERAL CORPORATION, et al.
    Civ. A. No. 82-2934.
    United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.
    May 13, 1985.
    Terry Theriot, Lafayette, La., Nan Landry, New Iberia, La., for plaintiff.
    C.G. Norwood, Jr., Michael Pulaski, New Orleans, La., Gary Crawford, Frank Mand-lebaum, New York City, for defendant.
    Phyllis Jackson Pyles, Dept, of Justice, Civ.Div., Washington, D.C., for U.S.
   WRITTEN REASONS FOR RULING

SHAW, District Judge.

After hearing oral arguments of counsel for the plaintiffs and for the United States of America in chambers on May 10, 1985, the Court granted the Government’s motion to dismiss based upon its finding that all of the actions of government employees which the plaintiffs claim contributed to causing the vehicular accident in which they were injured on December 26, 1981, are actions which Congress intended to shield from tort liability pursuant to the discretionary function exception to the Federal Tort Claims Act, 28 U.S.C. § 2680.

Counsel for the plaintiffs argues that three specific allegations of fact in this case place it outside the scope of the discretionary function exception and expose the Government to potential liability: (1) the failure of the government employee handling the sale transaction of the jeep to supply the vendee with the owner’s manual and to warn of the jeep’s “roll” propensity; (2) the failure of the Government to force AM General Corporation to manufacture the jeep in accordance with all specifications; (3) the decision to sell the jeep despite the fact that it had previously been wrecked.

This Court is, nevertheless, convinced that the decisions exercised by government employees concerning this jeep fall within the purview of a discretionary function or duty, and whether or not they abused their discretion, the plaintiffs’ claims herein are barred by 28 U.S.C. § 2680(a). Finally, it is worth noting that recent opinions of several district courts addressing the same and similar issues support this Court’s conclusion. See Shirey v. United States, 582 F.Supp. 1251 (D.S.C.1984); Julia Ford, et al v. United States, C.A. No. H-81-1922 (S.D.Tx.1984); Catherine Key v. United States, C.A. No. LR-C-83-163 (E.D.Ark.1984).

Counsel for the United States of America shall submit an appropriate judgment for the Court’s signature within ten (10) days of receipt of this document.

      . The record should reflect that this allegation was raised for the first time during oral argument and has not yet been the subject of discovery.


author: BAKER, Chief Judge.

text:
    BRH BUILDERS, INC., Plaintiff, v. UNITED STATES of America, et al., Defendants.
    No. 81-3118.
    United States District Court, C.D. Illinois, Springfield Division.
    June 3, 1985.

      Duane L. Traynor, Traynor, Hendricks & Reed, Springfield, Ill., for plaintiff.
    Angelynn C. Hall, Trial Atty., Tax Div., Department of Justice, Washington, D.C., Richard Cox Asst. U.S. Atty., Springfield, Ill., for defendants.
   ORDER

BAKER, Chief Judge.

This matter is before the court on the parties’ cross-motions for summary judgment. The parties do not dispute the facts underlying this action. Thus, summary judgment is appropriate. Fed.R.Civ.P. 56(c). Plaintiff has sought oral argument on the contested questions of law. The court, however, has determined that oral argument would not aid in the consideration of this cause.

FACTS

On May 16, 1983, “Raymur” (a nationwide developer of classroom buildings) entered into a lease agreement with Sanga-mon State University (SSU or University), the terms of which provided that Raymur would construct metal classroom buildings to SSU’s specifications and lease the buildings to SSU for five years, granting SSU an option to purchase the buildings at the end of the lease period. On the same day Raymur contracted for Plaintiff, BRH Builders, to assemble the prefabricated classrooms. As part of its financing arrangement, Raymur assigned the SSU lease to the Continental Illinois National Bank (the Bank). The assignment was recorded with the county clerk and acknowledged by the lessee (SSU) on November 14 and 15, 1973. At that time, the University had already made its first rental payment to the bank on August 20, 1973. BRH continued construction, the Bank remitted checks payable to BRH and Raymur, and Raymur assigned to BRH the amounts owed on completed construction. The Bank’s final payment, due October 15, 1973, was made directly to Raymur without obtaining a lien waiver from BRH. Ray-mur did not pay BRH the balance then owing.

The record does not so indicate, but it is assumed that BRH attempted to secure payment and in the process learned that Raymur was unwilling or unable to pay the amount due. BRH then faced several unattractive options:

1. Record and enforce a mechanic’s lien against Raymur. Raymur still held title to the improvements BRH had constructed but the title was subject to a lease with a purchase option and thus was essentially worthless.
2. Record and enforce a mechanic’s lien against the bank. The bank as leaseholder could be said to have benefited from BRH’s improvements. It certainly had knowledge of the improvements. But the bank had not requested the improvements. Having already paid the $115,000 final installment to Ray-mur, the bank could be counted on to resist strenuously BRH’s equitable claims for relief.
3. Record and enforce a mechanic’s lien against the University:
(a) as lessee or owner of the underlying land (if SSU was the owner of the underlying land, a fact not alleged here) on the theory that the University knew about, acquiesced in and stood to benefit from the improvements. (A few courts have recognized this theory, but the University would certainly resist this equitable claim.)
(b) as a public entity for which improvements had been constructed. Illinois law provides that a subcontractor may file a lien directly against a public entity where the prime contractor holding a contract to construct a “public improvement” for the public entity has failed to pay the subcontractor for work performed. Ill.Rev.Stat. ch. 82 § 23. The statute’s applicability to BRH was doubtful since Raymur, the prime contractor, held a lease not a construction contract with SSU and the buildings — technically belonging to Raymur — were not clearly “public improvements.”

BRH determined that a claim under Ill.Rev. Stat. ch. 82 § 23 had the best chance of succeeding and accordingly filed a lien against the University on January 3, 1974 (the tax year in question). To comply with the state statute’s requirements BRH filed an action for an accounting against Ray-mur on March 1, 1974. It is not clear what response Raymur made to this claim. The University, uncertain as to whom its second annual lease payment should be paid, instituted an interpleader action naming, among others, the bank, Raymur, and BRH as defendants.

The stipulated facts do not indicate but the Court may assume that BRH’s tax year 1974 ended on December 31, twenty-two days after the University filed its inter-pleader action.

BRH claims that as of December 31, 1974, it assessed the likelihood of recovering its $115,000 on its ch. 82 § 23 theory and determined to write off the debt. The IRS contends that at the end of 1974 the debt was not completely worthless as demonstrated by subsequent events:

1. On March 10, 1975, BRH entered a motion for summary judgment on its ch. 82 § 23 claim under Ill.Rev.Stat. ch. 82 § 23.
2. On March 15, 1975, BRH filed its 1974 tax return claiming the $115,000 as a bad debt deduction.
3. On April 10, 1975, the circuit court granted summary judgment to BRH in its action., for an accounting, and ordered Raymur to pay to BRH the $115,000 owing. Raymur did not appear at the hearing on the motion.
4. On June 3, 1975, BRH moved to amend the order granting summary judgment so as to require the bank to pay BRH from the University’s escrowed lease payments. Essentially this was a motion to enforce ch. 82 § 23.
5.On November 4, 1975, the circuit court approved a settlement of BRH’s claim whereby the bank would pay to BRH from escrowed funds $90,000 in satisfaction of BRH’s $115,000 claim. The court never ruled on BRH’s motion to amend the order granting summary judgment. The bank and the University later apportioned their liabilities in respect to the settlement payment.

The IRS granted Plaintiff a $25,000 bad debt allowance for the tax year 1975 (the $115,000 debt less the $90,000 settlement) and required Plaintiff to adjust its 1974 tax filings to erase the $115,000 bad debt deduction. Plaintiff complied with the IRS’ directive and brought this suit claiming a $11,865.66 tax refund resulting from va-gueries in the rules for computing tax liabilities which are not at issue here. This Court is asked to decide whether BRH’s claim against Raymur was a bad debt as of December 31, 1974.

LAW

The Internal Revenue Code provides for the deduction from income of all “wholly worthless debts,” I.R.C. § 166(a)(1) (1984). A taxpayer must claim a bad debt deduction in the year it becomes worthless. See, e.g., H.W. Findlay v. Commissioner, 236 F.2d 959 (3d Cir.1956). The burden of proving worthlessness rests with the taxpayer, Redman v. Commissioner, 155 F.2d 319 (1st Cir.1946), who must overcome a presumption in favor of the IRS’ determination, Lundsford v. Commissioner, 212 F.2d 878 (5th Cir.1954).

The worthlessness of a debt must be determined by “an examination of all the circumstances.” W.A. Dallmeyer v. Commissioner, 14 T.C. 1282, 1291 (1950). Relevant “circumstances” may exist before or after the end of the tax year for which the deduction is claimed. The strength of the creditor’s claim, the solvency of the debtor, and efforts to collect the debt (before and after the end of the relevant tax year) have been considered in determining a debt's worthlessness. Ultimately, “[t]he date of worthlessness is fixed by identifiable events which form the basis of reasonable grounds for abandoning any hope for the future.” Id. at 1291.

The IRS’ position is essentially: Where there is a law suit there is hope. This bright line definition of worthlessness does have intuitive appeal. No one sues over a worthless debt.

The Commissioner cites a tremendous amount of precedent for the standard he seeks, but the cases he offers appear to support a slightly different proposition: A debt is not worthless, if the parties continue to sue over it, and there appears to be some chance for recovery. See, e.g., Appalachian Trail Company v. Commissioner, ¶ 73, 119 P.H. Memo T.C. (continuing to do business with debtor establishes debt not worthless); J.B. Reilly v. Commissioner, ¶ 55,007 P.H. Memo T.C. (Some hope that taxpayer, creditor in bankruptcy proceedings, would recover some portion of his debt); Prescott v. United States, 4 AFTR 2d 5387 (S.D.Tex.1959) (“So long as the taxpayers were attempting to collect a claim ... which, if allowed, would result in the taxpayers receiving a substantial sum of money,” the debt is not worthless).

In the instant case, as of December 31, 1974, the taxpayer, even if his suit for an accounting was successful, was likely to collect nothing. (Raymur was insolvent and a mechanic’s lien against Raymur as title holder of the building would be worth nothing since the title was subject to the lease with option to buy). The validity of the taxpayer’s claim to protection under Ill.Rev.Stat. ch. 82 § 23 was never reached by any court — although taxpayer did broach it by filing in May of 1975 his motion to order the Bank to pay the accounting Raymur owed BRH. As indicated above, the statute’s applicability was doubtful.

The mere existence of a. suit at the time a debt is claimed to be worthless does not establish that the debt has value. See, Zeeman v. United States, 275 F.Supp. 235 (S.D.N.Y.1967) (Claimant in the Great Salad Oil Swindle was unlikely to recover a dime). The continued prosecution of a suit to quell rumors, Kugal v. Ryan, 289 F.2d 329 (2d Cir.1961), or to obtain a worthless judgment, Redfield v. Eaton, 53 F.2d 693 (D.Conn.1931), does not jeopardize a claim that the debt was worthless for tax purposes. Here, Plaintiff’s prosecution of his request for an accounting might well be seen as merely an attempt to obtain a worthless judgment. However, his subsequent effort to require the bank to pay the accounting out of the escrowed lease payments indicates that Plaintiff felt more sanguine about the collectibility of his debt than would be consistent with a bad debt deduction in 1974. Plaintiff’s subsequent recovery of $90,000 by way of settlement agreement demonstrates the judgment of all parties that Plaintiff’s claim was not worthless.

Rather than challenge the IRS’ bright-line definition of worthless debts, Defendant seeks to distinguish the lien he filed pursuant to 82 § 23 and the lawsuit he prosecuted for an accounting from a lawsuit to collect the debt. He cites Revenue Rule 80-24 in which a purchaser of worthless promissory notes, deducted the value of the notes from his taxable income and then filed suit against the sellers alleging securities fraud and claiming damages equal to the amount paid for the notes. The ruling is inapposite. Ill.Rev.Stat. ch. 82 § 23 was designed as an alternative means to ensure payment of subcontractors, not as any kind of anti-fraud provision. The statute creates a lien and, by implication, an action on the debt itself, not some alternative substantive right to fair dealing.

In light of Plaintiff’s continued pursuit of his claim — a claim that subsequent events demonstrate was not frivolous — this Court cannot adjudge the debt worthless as of the end of 1974. Essentially, Plaintiff cannot have it both ways. A well prosecuted effort to collect the debt cannot now be overlooked in this well prosecuted effort to declare the debt worthless.

CONCLUSION

As of December 31, 1974, it appeared unlikely that BRH would collect the money due. Nevertheless, BRH continued its suit beyond the end of 1974. Continuing to pursue a debt where there is a likelihood of at least partial collection establishes that a debt is not worthless. Here, the taxpayer continued to pursue a debt where there was little chance of success yet did receive satisfaction of the claim. The strength of BRH’s claim' against the University argues for declaring the debt worthless in 1974, but the taxpayer’s pursuit of the claim and subsequent recovery convinces this court that the claim was not worthless until 1975 and then only as to the $25,000 in excess of the amount received in the settlement agreement.

IT IS THEREFORE ORDERED that Defendants’ motion for summary judgment is hereby GRANTED.


author: SCHWARZER, District Judge.

text:
    Jose Bravilio Gaitan GARAY, Plaintiff, v. IMMIGRATION AND NATURALIZATION SERVICE, Defendant.
    No. C-84-7740-WWS.
    United States District Court, N.D. California.
    June 11, 1985.

      Martin Resendez Guajardo, San Francisco, Cal., for plaintiff.
    Larry Gallagher, Asst. U.S. Atty., San Francisco, Cal., for defendant.
   ORDER

SCHWARZER, District Judge.

Plaintiff Jose Bravilio Gaitan Garay brings this action pursuant to 28 U.S.C. § 2201 seeking a declaratory judgment that defendant Immigration and Naturalization Service (INS) abused its discretion in denying Garay permission to reapply for admission into the United States under 8 U.S.C. § 1182(a)(17). The INS now moves for summary judgment.

Facts

Garay, a native and citizen of El Salvador, illegally entered the United States in 1976 in violation of 8 U.S.C. § 1251(a)(2) and, on February 4, 1977, was deported from the United States at government expense. At the time of deportation, Garay was informed in writing and acknowledged receipt of the writing that any deported person who returns to the United States without first receiving permission commits a felony.

On January 28, 1979, Garay married a permanent resident of the United States. Garay’s wife applied for and received a second preference visa petition on behalf of Garay. On July 30, 1980, Garay applied for an immigrant visa at the United States Consulate in El Salvador, but his application was denied because he had not received permission from the Attorney General to reapply for admission into the United States pursuant to 8 U.S.C. § 1182(a)(17). In September, 1980, Garay entered the United States without receiving permission from the Attorney General and without inspection by an immigration officer.

On August 23, 1982, Garay again applied for permission to reapply for admission into the United States. The District Director of the INS denied Garay’s application and the INS Regional Commissioner dismissed an appeal of that decision.

Analysis

An alien seeking to reapply nunc pro tunc for admission into the United States has the burden of establishing that he merits a favorable exercise of discretion. Dragon v. I.N.S., 748 F.2d 1304, 1306 (9th Cir.1984). The denial of an application for permission to reapply is reviewed only for an abuse of discretion by the agency. Murillo-Aguilera v. Rosenberg, 351 F.2d 289, 290 (9th Cir.1965).

The following factors are relevant in considering an application for permission to reapply:

(1) the applicant’s ignorance of the need to reapply for admission because he was unaware that he had been deported; (2) the reason the alien was originally deported; (3) the length of time the applicant has legally resided in the United States; (4) his or her moral character; (5) his or her family responsibilities; and (6) hardships resulting from deportation.

Dragon v. I.N.S., 748 F.2d 1304, 1306-07 (9th Cir.1984). See also In re Lee, 17 I. & N.Dec. 275, 277-78 (Comm.1978); In re Tin, 14 I. & N.Dec. 371, 373-74 (R.C.1973). In determining whether discretionary relief is warranted in any particular application for permission to reapply, the INS must weigh all factors presented. Dragon v. I.N.S., 748 F.2d at 1306.

The District Director, after consideration of Garay’s basis for deportation, the recency of his deportation, the length of his legal residence in the United States, his moral character, his respect for law and order, evidence of Garay’s reformation and rehabilitation, his family responsibilities, the hardship to Garay and others, and the need for Garay’s services in the United States found that the only factor in Garay’s favor was that Garay was the spouse of a permanent resident. The District Director found that Garay had failed to establish unusual hardship for himself or others. The District Director decided that in light of Garay’s disregard for and abuse of the immigration laws- of the United States, the sole factor weighing in Garay’s favor did not warrant the favorable exercise of the Attorney General’s discretion. The Regional Commissioner dismissed the appeal of that decision on the same grounds.

First, Garay argues that in weighing these factors, neither the District Director nor the Regional Commissioner applied the test announced in In re Lee, 17 I. & N.Dec. 275 (Comm.1978), and hence placed undue emphasis on Garay’s prior and continuing violation of the immigration laws. In In re Lee, the Commissioner reversed a decision by the Regional Commissioner denying an alien permission to reapply. The Regional Commissioner had placed heavy emphasis on the alien’s lack of good moral character as evidenced by repeated violations of the immigration laws. The Commissioner reaffirmed the rule that a record of such violations will not, standing alone, be sufficient to support a finding of lack of good moral character. Because the alien had surrendered himself to immigration officials and had voluntarily deported himself, the Commissioner found that the alien had shown a sufficient character reformation to warrant a favorable exercise of discretion granting the alien permission to reapply for admission.

Garay, however, has done nothing to bring himself within the facts of In re Lee. He has not surrendered himself to the authorities nor voluntarily deported himself while awaiting resolution of his application for permission to reapply for admission to the United States. Garay’s sole recognition of his prior violation of the immigration laws is his offer to reimburse the INS for the costs of his prior deportation, an offer which can be characterized as self-interested at best. Because Garay has not shown any evidence of character reformation, In re Lee is inapposite and does not justify declaratory relief for Garay. Moreover, Garay’s continuing violation of the immigration laws is a substantial adverse factor weighing against granting him permission to reapply.

Second, Garay maintains that the INS did not give sufficient weight to the hardship to Garay and his spouse if Garay is denied permission to reapply for admission. There is no evidence in the record to indicate that anyone other than Garay or his spouse will suffer hardship as a result of deportation of Garay from the United States. See, e.g., Barrera-Leyva v. I.N.S., 653 F.2d 379 (9th Cir.1981). The couple apparently has no children, and there are no references to other relatives dependent on Garay for support. Cf. Bastidas v. I.N.S., 609 F.2d 101 (3d Cir.1979) (where father who has expressed deep affection for his child would be separated from the child, INS must make clear reasons for finding of no hardship). Furthermore, there is no evidence in the record that Garay’s spouse cannot relocate to El Salvador to be with him in the event Garay is deported. Cf. Slyper v. Attorney General, 576 F.Supp. 559 (D.D.C.1983) (hardship for purposes of waiving the foreign residency requirement for an exchange student was established on totality of circumstances where spouse would suffer career setbacks and would no longer be able to provide necessary support and comfort to aging relative if forced to relocate to a different country). The mere separation of Garay from his spouse, while obviously entailing some hardship, does not in and of itself require the favorable exercise of discretion by the INS. Since there is no evidence in the record indicating a greater hardship, the INS did not abuse its discretion in ruling that Garay’s hardships did not warrant granting his application for permission to reapply for admission. Barrera-Leyva v. I.N.S., 653 F.2d 379 (9th Cir.1981).

The INS did not abuse its discretion in denying the application for permission to reapply for admission. Summary judgment is hereby granted in favor of the INS.

IT IS SO ORDERED.

      . Garay's briefs make reference to personal and economic hardships he or his spouse will suffer as a result of Garay’s deportation. There is no evidence in the record to support these allegations nor has Garay introduced additional evidence in support of the allegations.


author: BRATTON, Chief Judge.

text:
    Lloyd WHEELER, Plaintiff, v. FURR’S, INC., d/b/a Clardy’s Dairy and James Benefits, Defendants.
    CV No. 85-0262 HB.
    United States District Court, D. New Mexico.
    June 27, 1985.
    Robert Waldman, Roswell, N.M., for plaintiffs.
    Ronald M. Gaswirth, Dan Hartsfield, Gar-dere & Wynne, Dallas, Tex., Duane C. Gil-key, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, N.M., for Furr’s, Inc.
   MEMORANDUM OPINION AND ORDER

BRATTON, Chief Judge.

This matter comes before the court on defendants’ motion to dismiss. The court, having considered the motion and been apprised of the applicable authorities concludes that the motion is not well taken and should be denied.

Plaintiff instituted this action on January 18, 1985, in the District Court of the State of New Mexico, County of Chaves. The case was removed to federal court on February 15, 1985. Removal is based on the Court’s jurisdiction under 28 U.S.C. §§ 1331 and 1337 and 29 U.S.C. § 185(a).

Plaintiff was an employee of Furr’s, Inc. and a member of the United Food and Commercial Workers’ Union, Local No. 462 (UFCW), which was the exclusive collective bargaining agent for plaintiff and other production and maintenance employees, of Clardy’s Dairy. Plaintiff alleges that he was covered under Furr’s group health insurance plan until January 1, 1984. The health insurance plan is provided for in the Collective Bargaining Agreement between Furr’s and UFCW, effective March 10, 1981. Plaintiff contends that defendants terminated his health insurance coverage without notice on or about January 1,1984. Plaintiff’s cause of action is based on an alleged breach of a state statutory duty which requires health insurers to notify each employee of its conversion privileges upon termination. N.M.Stat.Ann. § 59-18-5.1(E) (1984 Cum.Supp.).

The defendants’ position is that plaintiff’s cause of action is either (1) an action governed by substantive federal labor law and therefore subject to dismissal for plaintiff’s failure to exhaust or otherwise utilize the grievance procedures provided for in the collective bargaining agreement, or (2) a claim based on state law which is preempted by federal labor law as recognized in Textile Workers Union of America v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957). Defendants contend that Allis-Chalmers Corp. v. Lueck, — U.S. —, 105 S.Ct. 1904, 85 L.Ed.2d 206 (Sup.Ct.1985), is dispositive of this action.

Section 301 of the Labor Management Relations Act of 1947, 61 Stat. 156, codified at, 29 U.S.C. § 185(a) states in pertinent part:

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce ... may be brought in any district court of the United States having jurisdiction of the parties.

Teamsters v. Lucas Flour Co., 369 U.S. 95, 82 S.Ct. 571, 7 L.Ed.2d 593 (1962) was the first case to analyze the pre-emptive effect of § 301. The Court there held that “in enacting § 301 Congress intended doctrines of federal labor law uniformly to prevail over inconsistent local rules.” Id., at 104, 82 S.Ct. at 577. The Supreme Court had previously held that § 301 constituted a mandate to the federal courts to fashion a body of federal common law to be used in addressing disputes arising out of labor contracts. Textile Workers v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957).

In Lucas Flour the Court articulated the reason for the pre-emption doctrine in this instance:

[T]he subject matter of § 301(a) ‘is peculiarly one that calls for uniform law.’ ... The possibility that individual contract terms might have different meanings under state and federal law would inevitably exert a disruptive influence upon both the negotiation and administration of collective agreements. Because neither party could be certain of the rights which it had obtained or conceded, the process of negotiating an agreement would be made immeasurably more difficult by the necessity of trying to formulate contract provisions in such a way as to contain the same meaning under two or more systems of law which might someday be invoked in enforcing the contract. Once the collective bargain was made, the possibility of conflicting substantive interpretation under competing legal systems would tend to stimulate and prolong disputes as to its interpretation ... [and] might substantially impede the parties’ willingness to agree to contract terms proving for final arbi-tral or judicial resolution of disputes.

Id., at 103-104, 82 S.Ct. at 576-577. Lucas Flour involved a suit initiated in state court that alleged a violation of a labor contract. The Supreme Court held that the suit must be brought under § 301 and resolved under federal law.

Allis-Chalmers v. Lueck, — U.S. —, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985), takes Lucas Flour one step further to hold that § 301 pre-empts state tort law when resolution of the state-law claim “is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract.” Id., at —, 105 S.Ct. at 1916. Allis-Chalmers involved a state-law cause of action for bad-faith handling of a claim under a disability plan included in a collective-bargaining agreement. The Court reasoned that to determine if the insurer had breached its duty of good faith, the extent of that duty needed to be defined. The individual contract of insurance was what defined the insurer’s duty under state law. Since the insured’s right derives from the contract and is defined by the contract of insurance, any attempt to assess liability would involve contract interpretation.

[U]nder Wisconsin law it appears that the parties to an insurance contract are free to bargain about what “reasonable” performance of their contract obligation entails. That being so, this tort claim is firmly rooted in the expectations of the parties that must be evaluated by federal contract law.

Id., at —, 105 S.Ct. at 1914.

Contract interpretation is a matter of federal law regardless of whether it arises in a contract action or some other action. Otherwise, the terms of the labor agreement “would be subject to varying interpretations and the congressional goal of a unified federal body of labor-contract law would be subverted.” Id., at —, 105 S.Ct. at 1916. Thus the state tort cause of action was pre-empted by federal labor law.

The case at bar is distinguishable from Allis-Chalmers. In the present case, plaintiff alleges that his employer/insurer breached a state statutory duty. N.M.Stat. Ann. § 59-18-5.1(E) (1984 Cum.Supp.) requires a health insurer to notify each employee under a group insurance plan of its conversion privileges upon termination of employment. This duty is not only independent of any contractual duty that may be owed to plaintiff but resolution of the claim is not substantially dependent upon an analysis of the terms of the labor agreement or the contract of insurance. Only the existence of a contract for insurance is necessary to define the scope and extent of the insurer’s duty.

The Allis-Chalmers court emphasized that its holding was a narrow one. “In extending the pre-emptive effect of § 301 beyond suits for breach of contract, it would be inconsistent with congressional intent under that section to pre-empt state rules that proscribe conduct, or establish right and obligations, independent of a labor contract.” Id., at -, 105 S.Ct. at 1912. The question of pre-emption comes down to whether a state tort action for breach of duty to notify the insured of his conversion privilege “confers non-negotiable state law rights on ... employees independent of any right established by contract, or, instead, whether evaluation of the tort claim is inextricably intertwined with consideration of the terms of the labor contract.” Id., at —, 105 S.Ct. at 1912. This case appears to fall within the former category.

This case is distinguishable from Allis-Chalmers in one other respect. An important consideration in Allis-Chalmers was the fact that an action for breach of an implied contractual duty to act in good faith states a cause of action in contract, which is clearly encompassed under § 301, and in tort. Unless the tort claim is governed by the same pre-emptive rules as contract claims, litigants would be allowed an end run around the arbitration procedures established to resolve contract disputes between employers and employees.

Since nearly any alleged breach of contract can be restated as a tort claim for breach of a good-faith obligation under a contract, the arbitrator’s role in every case would be bypassed easily if § 301 is not understood to pre-empt such claims_ A rule that permitted an individual to sidestep available grievance procedures would cause arbitration to lose most of its effectiveness, as well as eviscerate a central tenet of federal labor-contract law under § 301 that it is the arbitrator, not the court, who has the responsibility to interpret the labor contract in the first instance. Id., at — —, 105 S.Ct. at 1916.

In the present case, there is no corresponding parallel contract and tort duties, such that allowing plaintiff to bring this action as a state-law cause of action would frustrate federal labor law policies in its procedures or its interpretation of collective bargaining agreements.

In conclusion, plaintiff’s state-law claim is not pre-empted by § 301 and should not be dismissed as either pre-empted by federal law or for plaintiff’s failure to follow the grievance procedure under the collective bargaining agreement. Nor is plaintiff’s complaint barred by the statute of limitations. Since this is a state-law cause of action, New Mexico’s statute of limitations applies not the ninety day federal statute of limitations to vacate arbitration awards or the federal six-month limitations period set out in § 10(b) of the National Labor Relations Act, 29 U.S.C. § 160(b).

One final matter needs to be resolved which was not directly addressed by the parties. This action was removed to federal court under 28 U.S.C. § 1441. Jurisdiction is stated to exist under 28 U.S.C. §§ 1331 and 1337 and 29 U.S.C. § 185(a). Given the court’s findings that plaintiff’s action is based on state law and is not pre-empted by federal labor law, it appears that this court does not have jurisdiction to hear this lawsuit. Thus, the case will be remanded to the state court for further proceedings. 28 U.S.C. § 1447(c).

Now, Therefore,

IT IS BY THE COURT ORDERED that defendants’ motion to dismiss is denied.

IT IS FURTHER ORDERED that the case is remanded to the District Court of the State of New Mexico, County of Chaves.


author: BIGGERS, District Judge.

text:
    STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. Larry EUBANKS, Sr., Lorene Eubanks, Sherry Gene Eubanks Crimm, and Judy Lynn Eubanks, Defendants.
    No. WC84-81-NB-D.
    United States District Court, N.D. Mississippi, W.D.
    July 19, 1985.
    Wylene Dunbar, Oxford, Miss., for plaintiff.
    William Liston, Winona, Miss., for defendants.
   MEMORANDUM OPINION

BIGGERS, District Judge.

This diversity action is before the court on the parties’ cross-motions for summary judgment. The issue before the court is the proper interpretation of the coverage afforded by the uninsured motorist provisions of three State Farm automobile insurance policies under applicable Mississippi law. Both parties agree that this issue should be decided by the court as a question of law and that there exists no genuine dispute as to any material issues of fact. Accordingly, both parties agree that this is an appropriate case for summary judgment under Rule 56, Fed.R.Civ.P.

On May 6, 1983, Larry Eubanks, Jr. was killed in an automobile accident caused by the negligence of the operator of an uninsured motor vehicle. The deceased was survived by his parents and two sisters. These four individuals are the sole heirs and statutory beneficiaries of the deceased under the Mississippi Wrongful Death Act, Miss.Code Ann. § 11-7-13 (1972). Each of these individuals was named as a defendant herein and each of the four defendants has filed a separate counterclaim against State Farm seeking payment of his or her damages from the uninsured motorist benefits payable under the State Farm policies. Each defendant seeks summary judgment as to his or her separate counterclaim. The plaintiff, State Farm Mutual Automobile Insurance Company (hereinafter State Farm), also seeks a partial summary judgment to limit the maximum liability of State Farm under the subject insurance policies to $45,000.00, exclusive of any set-offs. The defendants, on the other hand, take the position that each of the four is entitled under the policies to recover his or her separate damages up to the aggregated per person limits of uninsured motorist coverage ($45,000.00), assuming his or her damages reach those limits, subject to the policy’s overall maximum per accident limit of $90,000.00. The defendants also take the position that State Farm is not entitled to reduce its uninsured motorist coverage by offsetting against that coverage the amount of $10,000.00 which was paid to the defendants on behalf of the driver of the motor vehicle by that driver’s liability carrier.

At the time of the accident and death of the decedent, the Eubanks family was covered by three separate policies of automobile liability insurance purchased from State Farm. These three policies provided uninsured motorist coverage with the following limits of liability:

Policy No Each Person Each Accident

145 6952-C21-24C $25,000.00 $50,000.00

148 5656-E13-24 $10,000.00 $20,000.00

151 3921-F02-24A $10,000.00 $20,000.00

The terms of the three State Farm policies are identical. In accordance with the requirements of Miss.Code Ann. § 83 — 11— 101 (1972), the State Farm policies contain an uninsured motorist endorsement obliging State Farm:

... to pay all sums which the insured (emphasis added) or his legal representative shall be entitled to recover as damages from the owner of an uninsured motor vehicle ... up to the stated policy limits.

The dispute between State Farm and the four Eubanks beneficiaries concerns the extent of the uninsured motorist coverage afforded under the terms of the policies, a matter of contract interpretation.

State Farm contends that the maximum coverage afforded under its policies is $45,-000.00 (subject to a claimed right of setoff of $10,000.00 as described above).

The Eubanks beneficiaries contend, however, that the maximum coverage afforded under the State Farm policies is $90,000.00. Each of the Eubanks survivors is, by policy definition, an “insured” under each of the three State Farm policies. Since the policies oblige State Farm to “pay damages for bodily injury and property damage an insured is legally entitled to collect from the owner or driver of an uninsured motorist vehicle” up to the stated policy limits of $45,000.00 per person and $90,000.00 per accident, each of the Eubanks beneficiaries takes the position that each is entitled to recover his or her provable damages up to the aggregated per person limits of $45,-000.00, subject to an overall per accident limitation of $90,000.00.

State Farm’s position to the court is that since only one injury occurred — the fatal injury to Larry Eubanks, Jr. — the Eubanks survivors as a group are limited to a single aggregation of the per person limits of coverage, and therefore the maximum fund available under the policies to satisfy the claims of the Eubanks beneficiaries is $45,-000.00. It is State Farm’s position that the per person limits of uninsured motorist coverage afforded under its policies refer not to each insured, but rather to the injured party only.

After consideration of the pleadings and briefs submitted by the parties, the court is of the opinion that the liability provisions of the subject policies under which the defendants are claiming are subject to the “Each Person” limitation for the group of beneficiaries and that such limitation is not increased simply because there is more than one insured. Accordingly, State Farm’s maximum liability to all defendants jointly under the terms of its policies is the aggregate of the “Each Person” limits of the three subject policies, which amount is $45,000.00. This is the interpretation of the policy which best complies with ordinary usage and meaning. Continental Casualty Co. v. Hester, 360 So.2d 695 (Miss.1978). To hold differently would result in the amount of liability under a policy depending in large part on the number of statutory beneficiaries an insured might have. An insured with a large family would have more coverage than an insured with an identical policy but a small family. The plaintiffs motion for partial summary judgment will be granted.

After consideration of the motion of the defendants herein that State Farm should not be allowed to reduce its uninsured motorist coverage by offsetting against that coverage the sums paid to the defendants herein by another company on behalf of the under-insured driver, it is the opinion of the court that the clear language of the policies provides for such reduction in liability (page 9 of the policy) and is controlling in this case. Accordingly, it is the opinion of the court that the defendants’ motion for summary judgment should be denied.

An order will be entered accordingly.

      . As will be discussed more fully, the tort feasor in this case carried liability insurance in an amount less than the coverage afforded under any interpretation of the three State Farm policies. Accordingly, by statutory definition, the tort feasor's automobile was an "uninsured motor vehicle.” Miss.Code Ann. § 83-11-103 (1972).