Clifton Park Manor, Section One v. Mason

• Citation: 137 F. Supp. 326
• Decision Date: 19 December 1955
• Docket Number: Civ. A. No. 1735.
• Parties: CLIFTON PARK MANOR, SECTION ONE, Inc., Clifton Park Manor, Section Two, Inc., Clifton Park Manor, Section Three, Inc., Delaware corporations, C. Porter Schutt, Thomas E. Brittingham, Jr., Charles R. Martin and Charles F. Benzel, Plaintiffs, v. Norman P. MASON, Federal Housing Commissioner, and Federal Housing Administration, Defendants.
• Court: U.S. District Court — District of Delaware

137 F. Supp. 326

CLIFTON PARK MANOR, SECTION ONE, Inc., Clifton Park Manor, Section Two, Inc., Clifton Park Manor, Section Three, Inc., Delaware corporations, C. Porter Schutt, Thomas E. Brittingham, Jr., Charles R. Martin and Charles F. Benzel, Plaintiffs, v. Norman P. MASON, Federal Housing Commissioner, and Federal Housing Administration, Defendants.

Civ. A. No. 1735.

United States District Court D. Delaware.

December 19, 1955.

Clair J. Killoran and John Van Brunt (of Killoran & Van Brunt), Wilmington, Del., for plaintiffs.

Leonard G. Hagner, U. S. Atty., Wilmington, Del., and Max L. Kane, Atty., Dept. of Justice, Washington, D. C., for defendants.

LEAHY, Chief Judge.

On July 22, 1955, plaintiffs instituted similar actions both here and in the Delaware Court of Chancery, to enjoin the Federal Housing Administration and its officials from holding a proposed meeting of preferred stockholders for the avowed purpose of assuming control and direction of the corporate plaintiffs. The individual plaintiffs are citizens and residents of the state of Delaware; corporate plaintiffs are Delaware corporations and have their principal place of business in Delaware. The individual defendant was Commissioner of the Federal Housing Administration and in his official capacity is a citizen and resident of the District of Columbia; the Federal Housing Administration is a federal agency operating under an Act of Congress.

On July 27, 1955, this court denied plaintiffs' motion for preliminarily injunctive relief¹ and stayed our CA No. 1734 in order to permit the state action in the Court of Chancery to proceed. On the same day, July 27, 1955, government-defendants removed the Chancery Court action to this district court. On July 28, 1955, plaintiffs served a motion to remand the removal action to the state court.

The motion to remand by plaintiffs poses two questions. First, whether the action was one properly removed by the government to this court; and second, if it was, whether the court should exercise its discretionary power to decline its jurisdiction over this particular controversy.

1. Plaintiffs' original actions in both the federal and state courts were founded on the National Housing Act, of which 12 U.S.C.A. § 1702 provides, in part: "The Administrator shall, in carrying out the provisions of this subchapter and subchapters II, III, and VI, be authorized, in his official capacity, to sue and be sued in any court of competent jurisdiction."² Jurisdiction in the federal court was based on the existence of a federal question and diversity of citizenship. 28 U.S.C. §§ 1331, 1332(a) (1).

Defendants removed to this court under 28 U.S.C. § 1441 and § 1442. Section 1441 provides, in part: "(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending. (b) Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."³ Section 1442 provides, in part: "(a) A civil action * * * commenced in a State court against any of the following persons may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending: (1) Any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office * * *."

2. The question is whether § 1702 of 12 U.S.C.A. constitutes a waiver not only of immunity to suit but of the government's statutory right to removal. In recent years statutory inroads have been made on the doctrine of sovereign immunity; but it has not been extended by the courts more broadly than authorized.⁴ Nor have coincident rights, such as the right to removal, been unnecessarily hampered in the absence of express provisions.⁵ Indeed, in granting concurrent jurisdiction Congress has never been backward in denying the right to removal expressly when it has deemed it advisable. Thus, removal from the state to the federal court of civil actions against a railroad under the Federal Employers' Liability Act, 45 U.S.C.A. § 51 et seq., and against a common carrier under the Interstate Commerce Act, 49 U. S.C.A. § 1 et seq.,⁶ and by seamen under the Jones Act,⁷ has been restricted in positive terms. The attempt to read an implied waiver of the right to removal into the Fair Labor Standards Act has also been unsuccessful. The act provides that an "action to recover such liability may be maintained in any court of competent jurisdiction."⁸ The word "maintained" was deemed by those courts granting remand to prevent the removal of actions brought in state courts because it connoted not merely the commencement of suit but "every requisite step in carrying the suit, once commenced, to effect."⁹ This ratio has been criticized in later decisions because it does violence to the plain meaning of the act.¹⁰ Absent a more explicit language, say these courts in denying remand, a litigant should not be deprived of the right to remove a case otherwise removable.

Waiver of immunity of § 1702 was considered specifically in Federal Housing Administration Region No. 4 v. Burr, 309 U.S. 242, 60 S.Ct. 488, 490, 84 L.Ed. 724. There, the Supreme Court upheld garnishment proceedings against the government on the theory the phrase "to `sue and be sued'" embraced all civil process incident to the commencement or continuance of legal proceedings. Although a rule of liberal construction was employed, the Court merely defined the extent to which an individual could pursue his remedy subject, however, to the usual legal hazards, procedural or otherwise, inherent in all litigation. But the Burr case did not impose a judicial strait-jacket on the sovereign's normally existing procedural rights. Right to removal, in this case exercised by the government, is guaranteed by statute and should be accorded the same respect as garnishment secured by the individual. To deny that right, or even to limit it, on the authority of Burr is to stilt its language and misapply the spirit in which it was rendered. The conclusion is § 1702 does not prevent the proper removal of this cause under either § 1441 or § 1442.¹¹

3. This was the precise holding of Judge Meaney in Sarner v. Mason, D.C. N.J., 128 F.Supp. 165, where he had the question similarly presented in support of a motion to remand. The fact plaintiffs here initially saw fit to supplement their advocacy in the state court with a companion suit in the federal court is not material and has no bearing on the defendants' statutory right of removal. And the most recent decision is James River Apartments, Inc. v. Federal Housing Administration, D.C.Md., 136 F. Supp. 24, where Judge Watkins held governmental waiver of immunity under § 1702 did not bar removal to federal district court of builder's Maryland state court suit for declaratory judgment that the Federal Housing Administrator had no right to inspect certain of builder's books.

4. Earlier plaintiffs' motion for a preliminary injunction was refused for the reasons, among others, that it called "for the application of Delaware law exclusively" and the necessity "to maintain that delicate balance which should exist between the Federal and State Courts." See D.C.Del., 137 F.Supp. 325, 137, 325. Plaintiffs now request this court to remand the case to the state court of Delaware because the controversy involves Delaware law, i. e., construction of a Delaware certificate of incorporation and the right to declare dividends to plaintiffs' stockholders over the protest of the Federal Housing Administration. Plaintiffs rely on a number of Supreme Court decisions as authorizing the exercise of discretionary power in this court to refuse to hear this cause of action on the ground that purely local questions of state law are involved.

The touchstone of plaintiffs' position is Rogers v. Guaranty Trust Co., 288 U. S. 123, 53 S.Ct. 295, 77 L.Ed. 652, in which the Supreme Court (5 to 3) upheld the District Court in dismissing an action without prejudice on the theory that a court, state or federal, sitting in one state will decline to interfere by injunction with the management of the internal affairs of a corporation organized under the laws of another state. At pages 130-131 of 288 U.S. at page 298 of 53 S.Ct.:

"While the District Court had jurisdiction to adjudge the rights of the parties, it does not follow that it was bound to exert that power. * * * It was free in the exercise of a sound discretion to decline to pass upon the merits of the controversy and to relegate plaintiff to an appropriate forum."

In a vigorous dissent Justice Stone,¹² with Justice Brandeis concurring, favored disposition of the case on its merits in the federal court and, in echoing his earlier sentiments speaking for the Court in Risty v. Chicago, R. I. & P. R. Co., 270 U.S. 378, 387, 46 S.Ct. 236, 240, 70 L.Ed. 641 ("It is the duty of the federal courts, in suits brought in or removed to the district courts, to decide for themselves all relevant questions of state law * * *"), refused to recognize any principle which permitted a federal court in its discretion to decline jurisdiction because it was called upon to decide an unsettled question of state law. Nonetheless plaintiffs in the case at bar submit the Rogers holding supports their broader contention a federal court can and should refuse jurisdiction lawfully...