JOHN E. MILLER, Chief Judge.
On June 27, 1961, plaintiff filed his complaint, in which he alleged that he is a citizen of Kansas and the defendant is a corporation organized under Arkansas law, with its principal place of business in Hot Springs, and that the amount in controversy exceeded $10,000, exclusive of interest and costs.
Plaintiff further alleged:
"2. On April 6, 1961, plaintiff was in defendant's place of business at Hot Springs and indicated an interest in purchasing a diamond ring. Such ring was represented as being a pure white stone and defendant's employee agreed that it would be auctioned on Saturday night, April 8, at which time plaintiff could bid. Plaintiff appeared for the auction and prior to beginning the auction L. Morse, acting on behalf of defendant, announced that the stone was a 4.20 carat white diamond; that it was a choice stone; and that it was the property of an estate in Reading, Pa.; that sale was expressly conditioned on the stone being worth the price paid; that the successful bidder was privileged to submit it to any competent jewelry appraiser and if the stone was not appraised at the value fixed by the price paid it could be returned and full refund would be given.
"3. Plaintiff, relying on such representations, and on the condition of repurchase if appraisal showed less value than the price, purchased the ring for $6554.
"4. The representations were false, defendant's employees were aware of such falsity, and were part of a plan to deceive and defraud plaintiff, in the following particulars: (a) the stone was not white, but dark yellow. It was not choice, but was poor brilliancy. It was not in good condition, but was scratched. (b) The stone was of materially less value than represented. (c) The condition of the sale; i. e., that appraisal by a competent jeweler would confirm value, with right of return, was breached by defendant. (d) The sale was in violation of Ark. Stat.Ann. Sec. 71-418 in that no statement setting out the color of the diamond was furnished plaintiff. Instead, defendant delivered to plaintiff a document styled `Diamond Guarantee Bond', reproduction of which is attached, which is not a bond but a document designed to mislead purchasers, merely setting forth an incomplete and false description of the article, failing to include the color of the stone or the weight of the two smaller stones.
"5. Plaintiff alleges that the entire transaction, as herein described, is part of a plan to deceive and defraud and that defendant perpetrated such fraud on plaintiff by use of knowingly false statements and conditions made for the purpose of being relied on by plaintiff and relied on by him to his damage.
"6. Upon discovering breach of the condition and the nature of the fraud, plaintiff attached the ring to a draft on defendant, notified defendant of his intention to rescind, and the draft was presented to defendant but not accepted. Plaintiff has repeatedly offered to return the ring for a refund of the price, but defendant has refused. Emphasis added.
"Wherefore, plaintiff prays that the transaction be rescinded; that he recover the sum of $6554 as damages, upon return of the ring, and the sum of $5000 as punitive damages, for costs and all proper relief."
Simultaneously with the filing of the complaint, the plaintiff's attorney, Mr. Griffin Smith, submitted to the court a memorandum, in which he stated:
"Since jurisdiction is dependent on a right to punitive damages, plaintiff anticipates the authority for recovery of such element should be demonstrated at the time the complaint is being filed. Arkansas authority is represented by Cummings v. Lord's Art Galleries, 302 S.W.2d 792, 227 Ark. 972. The transactions were, for practical purposes, identical, and punitive damages were sought and awarded in the sum of $2000. While the judgment was reversed on other grounds, the right to exemplary damages was apparently not questioned. This type activity is classed as `gross fraud' and falls within the rule allowing recovery of punitive damages as a result. Am.Jur., Vol. 15, p. 715, n. 20.
"The remaining aspects of the action are contained in Pasternack v. Esskay Art Galleries, Inc. D.C. 90 F.Supp. 849, which issued from this court and will not be reiterated."
On July 6, 1961, defendant answered, denying specifically that the plaintiff was a citizen of Kansas and that the amount in controversy exceeded $10,000, and further denied each and every material allegation contained in the complaint. On the same date defendant filed a motion to strike an alleged appraisal of the ring in question, having been attached as "Exhibit A" to the complaint, contending that such allegation was a violation of the hearsay evidence rule. The court sustained the motion.
In a letter to the attorneys, dated July 10, 1961, advising them of the action on the defendant's motion, the court raised the question of jurisdiction, and in the last two paragraphs of the letter stated:
"The plaintiff further alleges that the entire transaction `is part of a plan to deceive and defraud and that defendant perpetrated such fraud on plaintiff by use of knowingly false statements and conditions made for the purpose of being relied on by plaintiff and relied on by him to his damage,' and therefore he is seeking to recover the sum of $5,000.00 as punitive damages, which sum, together with the sum of $6,554.00, affords the jurisdictional amount.
"When the complaint was filed, Mr. Smith the attorney for plaintiff, forwarded to me a memorandum in support of the jurisdiction, but at this time I have not had an opportunity to consider the jurisdictional question. However, I shall do so as soon as the business of the court permits, and in the meantime I suggest that if either of you desires to file any additional brief on the jurisdictional question, that you send same to me as soon as you may reasonably do so."
On July 20, 1961, the attorney for the defendant responded by letter, acknowledging receipt of the court's letter of July 10, and stated:
"This is to advise you that I will raise no question or object to the jurisdiction of the court with respect to the amount of damages. I have researched this question on a minor degree and am satisfied that the claimed punitive damages can be tacked onto the actual damages in order to arrive at the jurisdictional amount."
On the following day, July 21, the court replied to the letter of the defendant's attorney and stated:
"I am in doubt as to whether the court does have jurisdiction and it is my duty to determine the question, which I shall do in due time, and if I conclude that the court does not have jurisdiction I shall enter an order dismissing the case for lack of jurisdiction.
"The complaint is nothing more than a suit for damages because of an alleged breach of contract of sale, and I am of the tentative opinion that punitive damages cannot be added to the amount sought to be recovered for a breach of contract.
"I am sending a copy of this letter to Mr. Smith in order that he may know that I am compelled to give consideration to the question of jurisdiction so that if either of you desires to file a brief on the question I shall be glad to have it."
On July 24, Mr. Smith, the attorney for the plaintiff, acknowledged receipt of the court's letter of July 21, and stated:
"I note that the court has characterized the action as one for breach of contract. While sales transactions are annoyingly overlapping as to character we submit that the allegation of the complaint makes the action sound in tort. It is alleged that there was `a plan to deceive and defraud.'
"For jurisdictional purposes, of course, the face of the complaint affords the test not the ultimate result. Inclusion of exemplary damages in order to reach the necessary amount is recognized and approved, if in fact exemplary damages are legally recoverable. Bell v. Preferred Life Assur. Soc. of Montgomery, Ala., 64 S.Ct. 5, 320 U.S. 238, 88 L.Ed. 15.
"Aside from the Arkansas authority already cited, recoverability of exemplary damages in actions for deceit is thoroughly explored in the Eighth Circuit case of Greene v. Keithley, 86 F(2) 238, which states: `Exemplary damages in tort actions based on deceit are allowed in many jurisdictions and reputable text-writers approve and state that such is favored by the weight of authority."
It is generally accepted that it is the duty of the court to inquire into its own jurisdiction, and upon its own motion the court should dismiss the suit whenever its lack of jurisdiction appears. 2 Cyc. of Fed. Practice, 3d Ed., Sec. 2.461.
In Reynolds v. Reynolds, D.C.W.D.Ark. 1940, 65 F.Supp. 916, on page 919, this court said:
"* * * There is no principle more firmly established than that parties may never create jurisdiction in a federal court by waiver or consent. Miller v. First Service Corporation, 8 Cir., 84 F.2d 680, 683, 109 A.L.R. 1179. At any and all stages of the proceedings it is the duty of the federal courts to determine the existence of the elements which are essential prerequisites to invoking their limited jurisdiction. 28 U.S.C.A. § 80; McNutt et al. v. General Motors Acceptance Corporation, 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135; Miller v. First Service Corporation, supra."
In Scroggin Farms Corporation v. McFadden, 8 Cir., 1948, 165 F.2d 10, at page 15, the court stated:
"* * * But on * * * appeal appellant has suggested that the jurisdiction of the federal court should be determined. It has not argued against the jurisdiction in its brief, stating merely that `the question is not free from doubt', but it is recognized that the jurisdiction of a federal court in any case must
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