Robinson v. Michigan Consol. Gas Co. Inc.

• Decision Date: 11 December 1990
• Docket Number: Nos. 89-2097,89-2098,s. 89-2097
• Parties: 24 Collier Bankr.Cas.2d 49, 17 Fed.R.Serv.3d 1145, 20 Bankr.Ct.Dec. 1971, Bankr. L. Rep. P 73,720 Dorothy ROBINSON, Celeste Cherry, Mable Davis, Warren Gaither, and Ida Jones, Plaintiffs-Appellants, v. MICHIGAN CONSOLIDATED GAS CO. INC., and David W. Allard, Jr., Jointly and Severally, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 579

918 F.2d 579

24 Collier Bankr.Cas.2d 49, 17 Fed.R.Serv.3d 1145,

20 Bankr.Ct.Dec. 1971, Bankr. L. Rep. P 73,720

Dorothy ROBINSON, Celeste Cherry, Mable Davis, Warren Gaither, and Ida Jones, Plaintiffs-Appellants, v. MICHIGAN CONSOLIDATED GAS CO. INC., and David W. Allard Jr., Jointly and Severally, Defendants-Appellees.

Nos. 89-2097, 89-2098.

United States Court of Appeals Sixth Circuit.

Argued July 23, 1990.

Decided Nov. 1, 1990.

Rehearing Denied Dec. 11, 1990.

Douglas Spicer, argued, Ypsilanti, Mich., for plaintiffs-appellants.

James E. Wynne, argued, Butzel, Long, Gust, Klein & Van Zile, Detroit, Mich., for defendant-appellee Michigan Consol. Gas Co. Inc.

Michael J. Hughes, argued, Charles J. Taunt, Charles J. Taunt & Associates, Birmingham, Mich., for defendant-appellee David W. Allard, Jr.

Before KEITH and GUY, Circuit Judges, and BROWN, Senior Circuit Judge.

RALPH B. GUY, Jr., Circuit Judge.

The plaintiffs, tenants of an apartment building administered by the defendant bankruptcy Trustee, David Allard, appeal summary judgment on their state law claims against the Trustee and the Michigan Consolidated Gas Company (MichCon). Plaintiffs contend that the district court had no jurisdiction to issue its decision, that the court erred in finding their state law claims preempted by federal law, and that the court abused its discretion in ignoring their motion to amend their complaint against the Trustee.

We find that the court properly exercised jurisdiction over this case, but erred in granting summary judgment to MichCon and erred in failing to consider the plaintiffs' motion to amend their complaint against Allard. Accordingly, we remand.

I. Background

Since at least December of 1985, plaintiffs have been tenants in an 18-unit apartment building located at 445 Fisher Freeway in Detroit. ¹ From the early 1970s until December of 1985, 445 Fisher Freeway was managed by Edith Woodberry and James Fuller operating through the Woodward East Management and Rental Company (Woodward).

On December 4, 1985, defendant MichCon, together with other creditors, filed a Chapter 7 involuntary bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Michigan against Woodward and five other affiliated corporations. In re Woodward East Project, Inc., No. 85-04269-G (Bankr.E.D. Mich. Dec. 4, 1985). Sometime prior to this filing, MichCon had ceased providing gas service to the central boiler at 445 Fisher Freeway due to Woodward's failure to pay gas bills. On December 9, 1985, acting to "preserve the property of the estate, to prevent loss to the estate, and in the best interests of the creditors," the bankruptcy court entered an order appointing defendant Allard interim Trustee over the Woodward estate. The court ordered that Allard was

charged with the duties of a trustee as specified in 11 U.S.C. Sec. 704 and that the trustee may operate the business of the Debtors, if such operation is in the best interests of the estate and consistent with the orderly liquidation of the estate, pursuant to 11 U.S.C. Sec. 721....

On February 4, 1986, the bankruptcy court entered an order clarifying Allard's authority to manage 445 Fisher Freeway. The order stated that the Trustee was to have "the right and authority to fully and completely manage the premises commonly known as 445 Fisher Freeway." The court then ordered that "all tenants now or hereafter occupying the premises are directed to pay their full monthly rental to the Trustee and to no other person." The remainder of the order reads as follows:

IT IS FURTHER ORDERED that the Trustee shall contract with Michigan Consolidated Gas Company ... to provide heating gas service to the premises forthwith.

IT IS FURTHER ORDERED that the Trustee shall receive the rents and from the proceeds thereof pay MichCon for the heating gas service at its authorized rates. The Trustee is also empowered from the proceeds of the rent to pay any reasonable and necessary expenses connected with the management, maintenance, repair or upkeep of the premises. The Trustee shall hold any remaining funds pending further order of this Court.

IT IS FURTHER ORDERED that upon restoration of heating gas service MichCon will be entitled to terminate such service five (5) days after filing with the Court and serving upon the interested parties an affidavit showing that either (1) there has been a tampering or interference with the gas service to the building, or (2) proper payment has not been made by the Trustee for any heating gas service rendered.

Also on February 4, the bankruptcy court issued an injunction prohibiting Edith Woodberry and James Fuller from communicating with their tenants concerning the payment of rents or the management of the building. Allard then sent letters to the tenants warning of an impending rent increase because heating gas service would henceforth be included in their monthly rent.

On October 9, 1986, a MichCon employee, James Wennerholt, signed an affidavit stating that Allard was delinquent in payment of gas bills for 445 Fisher Freeway as of September 30, 1986, in the amount $6,585.35, and that MichCon would exercise its right to shut off further gas service no sooner than five days after the filing of the affidavit. The affidavit was served on two of Woodward's creditors and on Edith Woodberry. None of the plaintiffs in this action were served.

On October 29, MichCon discontinued gas service to 445 Fisher Freeway. Plaintiff Gaither filed an affidavit stating that MichCon had never notified him of the proposed discontinuance or of the procedure that the occupants could follow to provide for the continuation of service.

Plaintiffs filed the complaint in this case in Wayne County Circuit Court on November 21, 1986, naming Allard and MichCon as defendants and seeking relief for violations of various Michigan statutes and of section 56 of the Detroit Code governing termination of utility service. In particular, they complained that MichCon had discontinued gas for space heat to 445 Fisher Freeway without providing the notices required by Detroit Code Secs. 56-4-1 through 56-4-35, resulting in loss of the opportunity to retain heating and hot water by paying rent into an escrow account. Plaintiffs also alleged that Allard had "caused the discontinuance of gas to the premises by his omission to pay for the gas" in violation of the Detroit Code and Michigan State law. As relief, plaintiffs requested that the court "enjoin[ ] Defendant ALLARD from leaving the premises in a state in which there is no space heat or hot water" and "from again omitting to pay the gas bill." They also requested an injunction requiring MichCon to restore gas service for space heat and hot water and preventing it from cutting off such service except in compliance with the Detroit Code. Finally, plaintiffs requested damages in an unspecified amount against both defendants. The Wayne County Circuit Court refused to act on the complaint while the bankruptcy court retained jurisdiction. On December 4, 1986, the bankruptcy court ordered Allard to abandon Woodward's contract to manage 445 Fisher Freeway.

On December 15, the defendants in the Wayne County action filed a timely petition for removal with the United States District Court for the Eastern District of Michigan, basing jurisdiction on 28 U.S.C. Secs. 1441, 1442(a)(3), and 1452. The defendants filed their answers in federal court and then moved for summary judgment. Plaintiffs moved to remand the case to state court due to lack of jurisdiction and, alternatively, urged the court to abstain, citing 28 U.S.C. Sec. 1334(c)(2). The plaintiffs also moved to amend their complaint to assert other state and municipal law claims against Allard.

The court granted Allard's motion for summary judgment on May 26, 1988. Plaintiffs then filed a timely motion for reconsideration. On August 23, 1989, the court granted MichCon's motion for summary judgment, denied plaintiffs' motion for reconsideration of the judgment against Allard, and deemed all remaining issues, including those raised in the motion to remand and the motion to amend the complaint, "moot" in light of the entry of the final judgments. The plaintiffs now appeal both orders of summary judgment as well as the court's refusal to consider their motions on the ground of mootness.

As it stands before us, this appeal presents three general issues: (1) whether the case was improperly removed from the Wayne County Circuit Court and ought therefore to be remanded to that court; (2) whether summary judgment was appropriate on the state law claims contained in the original complaint; and (3) whether the district court improperly failed to allow the plaintiffs to amend their complaint against Allard. We address each issue in turn.

II. The District Court's Jurisdiction

As noted above, the district court did not respond to the plaintiffs' motion to remand until after having granted judgment in favor of both defendants, at which time it explained that "[b]ecause this Court has granted summary judgment to both Defendants in this action, the remaining motions are MOOT." This decision was erroneous. The federal courts are courts of limited jurisdiction, and have a continuing obligation to examine their subject matter jurisdiction throughout the pendency of every matter before them. See Insurance Corporation of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492 (1982); Federal Trade Comm'n v. Owens-Corning Fiberglas Corp., 853 F.2d 458, 464 (6th Cir.1988), cert. denied, 489 U.S. 1015, 109 S.Ct. 1128, 103 L.Ed.2d 190 (1989). Accordingly, we undertake our own consideration of the district court's jurisdiction on appeal. In re Rini, 782 F.2d 603, 608-09 (6th Cir.1986).

The defendants assert that the court had jurisdiction over this case on the basis of three removal statutes: (1) 28 U.S.C. Sec. 1452, providing for...