Federal Deposit Ins. Corp. v. Elefant

• Decision Date: 16 May 1986
• Docket Number: Nos. 85-2991,85-3102,s. 85-2991
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver of United of America Bank, Plaintiff-Appellee, v. Rabbi Mordecai ELEFANT, et al., Defendants. ITRI Torah Research Institute and Erwin Weiner, Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 661

790 F.2d 661

4 Fed.R.Serv.3d 1268

FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver of United of America Bank, Plaintiff-Appellee, v. Rabbi Mordecai ELEFANT, et al., Defendants ITRI Torah Research Institute and Erwin Weiner, Appellants.

Nos. 85-2991, 85-3102.

United States Court of Appeals Seventh Circuit.

Submitted April 21, 1986.

Decided May 16, 1986.

Andrew B. Kagan, Chicago, Ill., Richard Parker, Richard Parker & Assoc., Houston, Tex., for appellants.

Paul J. Richter, DeHaan & Richter, Chicago, Ill., for plaintiff-appellee.

Before FLAUM, EASTERBROOK and RIPPLE, Circuit Judges.

EASTERBROOK, Circuit Judge.

A simple action to collect a debt has produced a host of problems, all jurisdictional. We must decide whether this court has jurisdiction; having done this, we must decide whether the district court ever did, or could, have jurisdiction.

I

In 1983 the ITRI Torah Research Institute borrowed $114,770 from the United of America Bank. ITRI gave the Bank a note and a mortgage on a 38-foot sports fishing boat. The Dean of ITRI, Rabbi Mordecai Elefant, later executed a note for $75,000 in the Bank's favor. This, too, was secured by the boat, and it was supported by two guarantees: one by ITRI and one by Erwin Weiner. The Bank ordered ITRI to surrender possession of the boat to Rodi Boat Co., which was to hold the boat for the duration. ITRI and Rabbi Elefant defaulted on their notes. The Bank meanwhile ran into trouble, and the Federal Deposit Insurance Corp., which guaranteed some of the Bank's deposits, became its receiver. The FDIC filed an action in an Illinois court to recover on the ITRI note, the Elefant note, and the two guarantees. For good measure the FDIC named Rodi as a defendant, although it did not seek any particular relief against Rodi.

ITRI removed the case to the district court under 28 U.S.C. Sec. 1441(a), asserting diversity of citizenship. No one contested the removal. There were nonetheless two glaring problems. Only ITRI sought removal, although as a rule all defendants must join the petition. See Chicago, Rock Island & Pacific Ry. v. Martin, 178 U.S. 245, 248, 20 S.Ct. 854, 855, 44 L.Ed. 1055 (1900); P.P. Farmers' Elevator Co. v. Farmers Elevator Mutual Insurance Co., 395 F.2d 546 (7th Cir.1968). See also Thomas v. Shelton, 740 F.2d 478, 483-84 (7th Cir.1984). ITRI might have removed the FDIC's severable claims against it alone. Bernstein v. Lind-Waldock & Co., 738 F.2d 179, 183 (7th Cir.1984). It purported, however, to remove the whole suit. Second, the FDIC's complaint demonstrates that there is a lack of diversity. ITRI's petition to remove treated the FDIC as taking the Bank's Illinois citizenship. Because the complaint alleges that ITRI is a New York corporation with its principal place of business in New York and that Elefant, Weiner, and Rodi (a sole proprietorship) are residents of Illinois, there is not complete diversity (on this view of the FDIC's citizenship). Nonetheless, everyone acted as if the whole action had been moved to district court, and the district judge never noticed the jurisdictional problems (of which there are more to come).

Rodi, although not the subject of any claim for relief, filed a "counterclaim" for the value of its services storing and repairing the boat; this, too, sought no particular relief, because Rodi had possession of the boat and a mechanics' lien. Rodi suggested, however, that the court might order the boat sold. The FDIC had some trouble serving Elefant with process, for he is now in Israel. Elefant was served in November 1985.

By then the district court had granted summary judgment against ITRI and Weiner. The court found no material dispute about the existence of the notes and guarantees and the lack of payment. ITRI and Weiner had argued that the notes failed for want of consideration because, they said, the Bank had taken possession of the boat and allowed it to deteriorate. The district court held that the Bank had never had possession and that, in any event, a diminution of the value of the boat would not undercut the obligation to pay. The court entered judgment under Fed.R.Civ.P. 54(b) on the ITRI note and the ITRI and Weiner guarantees of the Elefant note. It deferred consideration of the claim against Rabbi Elefant and the "claims" by and against Rodi.

ITRI and Weiner appeal, and their principal argument is that the district court lacked jurisdiction because 12 U.S.C. Sec. 1819 Fourth prevents the use of diversity jurisdiction when the FDIC is a receiver of a bank. The FDIC agrees that Sec. 1819 Fourth prevented the removal and asks us to remand to the district court, so that it may decide whether Rodi's counterclaim supplies the missing jurisdiction. It also asks for $16,000 in attorneys' fees, on the ground that whoever removes a case without jurisdiction should pay the ensuing costs.

II

Before we may decide whether the district court had jurisdiction, we must decide whether we do. The judgment does not wrap up the litigation. Rule 54(b) permits the entry of a partial final judgment concerning all claims with respect to a party, or all parties with respect to a claim. The district court did not dispose of all claims against one party; everyone remains before the district court as a result of Rodi's counterclaim to determine the value of its lien. This will affect the value of the boat, and hence the net amount ITRI and Weiner must pay. So the question is whether the Elefant note and Rodi counterclaim, the two matters still pending, are "claims" separate from the ITRI note and the two guarantees.

We start with the principle that as a rule each contract is a "claim" for purposes of Rule 54(b). Walker v. Maccabees Mutual Life Insurance Co., 753 F.2d 599, 601 (7th Cir.1985). Each of the notes, and each guarantee, is a separate contract under Illinois law. Bank of Homewood v. Sjo, 113 Ill.App.3d 179, 68 Ill.Dec. 817, 446 N.E.2d 1214 (1st Dist.1983); Ishak v. Elgin National Bank, 48 Ill.App.3d 614, 6 Ill.Dec. 620, 363 N.E.2d 159 (2d Dist.1977); National Acceptance Co. v. Exchange National Bank, 101 Ill.App.2d 396, 243 N.E.2d 264 (1st Dist.1968). Part (e) of the sixth paragraph of each guarantee allows the Bank to proceed against the guarantor without regard to efforts to collect from the maker of the note or realize on the security. Because appellate jurisdiction should be defined in as mechanical a fashion as possible, both to enable parties to know when they must appeal and to prevent jurisdictional disputes from overwhelming the disputes on the merits, we stop at the starting place.

Often the entry of a separate judgment under Rule 54(b) presents difficult problems because of the additional rule that a dispute is not a "claim" under the Rule--even if it would be a separate claim for purposes of claim or issue preclusion--if it has a legal or factual overlap with matters remaining in the district court. "Claim" under Rule 54(b) is defined with a view to avoiding double appellate review of the same issues. See Cold Metal Process Co. v. United Engineering & Foundry Co., 351 U.S. 445, 76 S.Ct. 904, 100 L.Ed. 1311 (1956); National Metalcrafters v. McNeil, 784 F.2d 817, 821 (7th Cir.1986); A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chemical Group, 725 F.2d 1140 (7th Cir.1984). If A sues B on two grounds, factually or legally related, the entry of a Rule 54(b) judgment on one will not permit a separate appeal. But this concern is tempered when the different requests for relief also have separate parties. When A sues B and C on separate contracts, and the district court enters judgment in A's favor against B, the fact that C has a "similar" dispute pending will not prevent A's execution of judgment against B, or B's appeal. Walker v. Maccabees. This is our case.

True, the claims by and against Rodi embroil everyone; no party is done in the district court. Yet Rodi's claims are distinct from those on appeal. They do not depend on or affect the validity of the notes or guarantees; they are joined to the others in this case loosely, if they are properly joined at all. See Tenneco Inc. v. Saxony Bar & Tube, Inc., 776 F.2d 1375 (7th Cir.1985). If the boat had sunk and been salvaged, it would be saddled with a salvor's lien, and this would influence the amount that could be realized on the security. It would have nothing to do with the notes, and it should not prevent adjudication of the makers' and guarantors' liability. So it is with Rodi's lien. The size of Rodi's bill is so distinct from any of the issues concerning the validity of the notes and guarantees that it is a different "claim" within the meaning of Rule 54(b).

That is enough to give us jurisdiction of these appeals. ITRI and Weiner say that the entry of partial final judgment under Rule 54(b) was improvident, but the district judge has substantial discretion here. Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 100 S.Ct. 1460, 64 L.Ed.2d 1 (1980). One appropriate use of Rule 54(b) is the entry of judgment on the principal claims of the suit while reserving disposition of counterclaims that may require a longer time to resolve. The FDIC need not cool its heels waiting for Rabbi Elefant to return to the United States, or for the resolution of the amount of Rodi's lien. True, these may affect the net sums ITRI and Weiner must pay, because they will be credited with the net value of the security. When the basic liability is clear, however, a district court may require the obligor to pay up at once. Any other approach gives litigants an incentive to tarry while they are in possession of money that is (mostly) someone else's.

Both the Supreme Court in Curtiss-Wright, 446 U.S. at 10, 100 S.Ct. at 1466, and this court in Exchange National Bank v. Daniels, 763 F.2d 286, 291 (7th Cir.), reheard in part, 768 F.2d 140 (1985), have expressed concern about the use of Rule 54(b) to carve a case into little pieces, multiplying the...