Kim v. Kang
| Decision Date | 31 August 1998 |
| Docket Number | Nos. 97-55334,97-55588 and 97-55621,s. 97-55334 |
| Citation | 154 F.3d 996 |
| Parties | 98 Cal. Daily Op. Serv. 6767, 98 Daily Journal D.A.R. 9430 Chong Kook KIM; Kum Ju Kim, Plaintiffs-counter-defendants-cross-defendants-Appellants, v. Yong Do KANG, Defendant-cross-defendant-cross-claimant-Appellee, Jin O. KANG, Defendant-cross-defendant-counter-claimant-Appellee. v. UNIVERSAL ESCROW, INC.; Pia Youn, Cross-claimants-Appellees. v. Kenny K. KANG; Lisa Y. Kang, Cross-defendants-counter-claimants-counter- defendants-Appellees. v. U.S. SMALL BUSINESS ADMINISTRATION; Does 1-25, Cross-defendants-Appellees, and Southbay Business Brokers, Inc.; Jim H. Kim, Cross-defendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Douglas L. Walsh, Los Angeles, California, for plaintiffs-counter-defendants-cross-defendants-appellants Chong Kook Kim and Kum Ju Kim.
Tom S. Chun, Bartz, Knuppel & Chun, Irvine, California, for defendants-cross-defendants-cross-claimants-appellees Yong Do Kang and Jin O. Kang and for cross-defendants-appellees Kenny K. Kang and Lisa Kang.
Raymond M. Sutton, Sherman Oaks, California, for cross-claimant-appellee Pia Youn.
Elise Louise Lampert, Sherman Oaks, California, for cross-claimant-appellee Universal Escrow, Inc. and for cross-defendants Southbay Business Brokers and Jim H. Kim.
Tomson T. Ong, Assistant United States Attorney, Los Angeles, California, for cross-defendant-appellee United States Small Business Administration.
Appeal from the United States District Court for the Central District of California Before: FLETCHER, D.W. NELSON, and SILVERMAN, Circuit Judges.
Appellants Chong Kook Kim and Kum Ju Kim ("the Kims") challenge a final judgment issued by the district court that distributes funds placed in escrow by the Appellees Kenny Kang, Lisa Kang, Yong Do Kang and Jin O. Kang ("the Kangs") in preparation for their purchase of a liquor market from the Kims. Southbay Business Brokers ("the Broker"), which represented the Kangs in their efforts to purchase the market, also appeals the district court's judgment. It challenges the court's decision not to award it attorney's fees incurred in defending against cross-claims filed by the Kangs. The issues raised on this appeal are discrete: (1) whether the district court had subject matter jurisdiction over the action; (2) whether the court erred in revising earlier rulings regarding the distribution of the escrow funds; and (3) whether the court erred in declining to award attorney's fees to the Broker. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.
The Kims owned a liquor store in San Pedro, California, called Harbor Market. Through the Broker, the Kangs offered to purchase the store; and, after some negotiation, the Kims accepted the offer. After taking possession of the store, however, the Kangs came to believe that the Kims had deceived them regarding the store's earnings, and they cancelled the escrow. The Kangs informed the Small Business Administration ("SBA"), which had extended them a loan of $118,000 to finance the purchase, and requested that the SBA withhold final approval of the loan.
The SBA contacted Appellee Universal Escrow ("Universal") seeking return of the funds it had lent. At around the same time, the Kims filed a complaint in state court, claiming title to the funds. To resolve these competing claims, Universal filed a cross-complaint in interpleader in state court, which the SBA subsequently removed to federal district court. The Kangs later filed another cross-complaint for damages in tort, naming the Kims, Universal, and the Broker as defendants.
The case eventually proceeded to trial on three central claims: (1) the Kims' contract and tort claims against the Kangs; (2) the Kangs' tort claims against the Kims and the Broker; and (3) the interpleader claims among the Kims, the Kangs, and the SBA regarding their respective rights to the escrow fund.
At the conclusion of trial, the court stated that it intended to enter judgment in favor of the Kims on the claims between the Kims and the Kangs and in favor of the Broker on the claims brought against it by the Kangs. The court also expressed its intention to enter judgment for the SBA for the amount of its loan to the Kangs and to release the balance of the funds from the escrow account to the Kims.
The court reconsidered these decisions, however, ultimately deciding in favor of the Kangs on their claims against the Kims. The court also provided that, after distribution to the SBA, the balance of the funds would be disbursed to the Kangs.
The Kims timely appeal.
We review de novo a district court's decision that it has subject matter jurisdiction over an action. Ma v. Reno, 114 F.3d 128, 130 (9th Cir.1997). Attorney's fees awards are reviewed for an abuse of discretion. Wing v. Asarco Inc., 114 F.3d 986, 988 (9th Cir.1997).
Upon being notified that the Kangs no longer sought to purchase Harbor Market from the Kims, the SBA sent Universal a letter dated December 1, 1993, requesting the immediate return of "the sum of $118,000 On March 23, 1994, the SBA filed a notice of removal to federal district court. The notice stated, in pertinent part:
... which proceeds were conditionally committed to the transaction only upon final execution of the business sale transaction." On January 7, 1994, however, the Kims filed a complaint naming Universal as a defendant and seeking possession of all the funds placed into escrow by the Kangs, including the $118,000 loan from the SBA. Faced with these conflicting claims, Universal filed a cross-complaint in interpleader in Los Angeles Superior Court on February 10, 1994. The cross-complaint named the Kims, the Kangs, and the "U.S. Small Business Administration" as cross-defendants and requested that the court order the cross-defendants "to interplead and litigate their respective rights to the documents, property, and/or moneys held pursuant to the Escrow Agreement."
This action is one which may be removed to the United States District Court because:
a. This Court may have federal question jurisdiction under 28 U.S.C. § 1331 and 15 U.S.C. § 634(b)(1), and the action is removable under 28 U.S.C. § 1441(a); and
b. This action, when properly brought, is against the Administrator of the Small Business Administration and an action against an officer of the United States or any agency thereof, or person acting under him, for any act under color of such office or on account of any right, title, or authority thereto, and is an action removable under 28 U.S.C. § 1442(a)(1).
The action was removed, apparently without objection, and Universal Escrow amended its cross-complaint to name the Administrator of the SBA as cross-defendant. After a bench trial, the federal district court noted that it had jurisdiction over the action pursuant to 28 U.S.C. §§ 1331 and 1367 and 15 U.S.C. § 634(b)(1).
On appeal, the Kims challenge the district court's subject matter jurisdiction for the first time. They assert that the court lacked general federal question jurisdiction under 28 U.S.C. § 1331 because the action did not "arise under" federal law--i.e., because the cross-complainants did not allege any federal causes of action. The appellees--the Small Business Administration ("SBA"), the Kangs, and Universal Escrow--argue in response that the district court's jurisdiction was properly established under 15 U.S.C. § 634(b)(1). The appellees contend that § 634(b)(1) applies "because the Escrow Company's action is a suit against the Federal appellee to determine a controversy over the Federal appellee's property (the $118,000)."
The plain language of § 634(b)(1) and the case law construing it make clear that the district court's jurisdiction was properly established in this case. The statute specifically states that "jurisdiction is conferred" upon the federal district courts to hear suits by and against the Administrator of the SBA. § 634(b)(1). Accordingly, we have twice held that § 634(b)(1) vests jurisdiction in federal district courts over contract claims against the SBA. See In re Liberty Constr., 9 F.3d 800, 801-02 (9th Cir.1993); Munoz v. Small Business Admin., 644 F.2d 1361, 1364-65 (9th Cir.1981). Although we have not had occasion to construe § 634(b) in an interpleader action, the Seventh Circuit has held that our reasoning in Munoz applies equally well in the interpleader context. See General Ry. Signal Co. v. Corcoran, 921 F.2d 700, 706 (7th Cir.1991). We see no reason to depart from the considered judgment of the Seventh Circuit.
Thus, we conclude that the district court had subject matter jurisdiction over the action under § 634(b)(1) and that removal jurisdiction consequently was properly established under 28 U.S.C. § 1441(a).
After removal to federal court, Universal Escrow brought a motion to withdraw from the action on the condition that it deposit all of the funds in escrow with the Clerk of the Court. The district court ordered the escrow funds deposited with the clerk but initially denied Universal's motion because it had yet In the district court's order granting the motion for summary judgment, the court concluded, inter alia, that "[t]itle to the funds in escrow passed to the sellers when the [Department of Alcoholic Beverage Control] completed the liquor license transfer on November 15, 1993, even if all escrow conditions were not then satisfied." In the court's final judgment, however, the court ordered that the balance of the escrow funds, after...
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