Gandy v. Peoples Bank and Trust Co.
| Decision Date | 29 May 1998 |
| Docket Number | No. CIV. A. 3:97-CV-843WS.,CIV. A. 3:97-CV-843WS. |
| Citation | 224 BR 340 |
| Parties | Wanda GANDY, Plaintiff, v. THE PEOPLES BANK AND TRUST COMPANY; Ross and Yerger, P.A.; Ross and Yerger, Inc.; and Ross and Yerger Financial Systems, Defendants. |
| Court | U.S. District Court — Southern District of Mississippi |
William E. Catledge, Catledge Law Firm, Tupelo, MS, for plaintiff.
Stephen M. Corban, Mitchell, Voge, Beasley & Corban, Tupelo, MS, Keith R. Raulston, Watkins, Ludlam, Winter, & Stennis, P.A., Jackson, MS, for defendants.
Keith R. Raulston, Watkins, Ludlam, Winter, & Stennis, Jackson, MS, for third-party plaintiffs.
Before this court is the motion of the plaintiff to remand this lawsuit to the Circuit Court, First Judicial District of Hinds County, Mississippi. The plaintiff, Wanda Gandy, instituted this cause by filing her complaint in the Circuit Court of the First Judicial District of Hinds County, Mississippi, on October 20, 1997. The defendants subsequently filed their removal papers on November 19, 1997, and removed the action to this court pursuant to Title 28 U.S.C. § 1446(b).1 The plaintiff has now timely filed a motion to remand this cause to state court. Defendants, The Peoples Bank and Trust Company, Ross and Yerger, P.A., Ross and Yerger, Inc., and Ross and Yerger Financial Systems, oppose the motion.
This case arises from a bank's placement of Collateral Protection Insurance ("CPI") on collateral left uninsured by bank borrowers. The plaintiff borrower accuses her lender, the Peoples Bank and Trust Company ("Peoples Bank"), along with co-defendants Ross & Yerger, P.A., Ross & Yerger, Inc., and Ross & Yerger Financial Systems, Inc. ("Ross & Yerger"), of unlawfully imposing unauthorized and excessive insurance premiums (plus interest thereon) on her loan. The plaintiff complains that the nature and cost of the CPI program were concealed or inadequately disclosed and challenges Peoples Bank's truthfulness and completeness of disclosures made related to the loan transaction at issue.
Defendants conclude that plaintiff's claims are federal, on the theory that resolution of plaintiff's claims will necessarily turn on this court's construction of the Truth in Lending Act ("TILA"), Title 15 U.S.C. § 1601, et seq. If defendants are correct, this district court has federal question jurisdiction of the plaintiff's claims pursuant to Title 28 U.S.C. § 1441-(b).2 Alternatively, if plaintiff's argument that she has pleaded but claims arising under Mississippi law is valid, then this court must remand this action to the state court for lack of subject matter jurisdiction. This court sees merit in defendants' argument that this court has subject matter jurisdiction under the TILA. Further, since plaintiff has filed for protection under the bankruptcy statutes, this court is satisfied that it has subject matter jurisdiction under Title 28 U.S.C. § 13343 and § 1452(a).4 Thus, persuaded by defendants' arguments, this court declines to remand the lawsuit and, accordingly, denies plaintiff's motion to remand.
District courts are granted federal question jurisdiction of all civil claims "arising under the Constitution, laws, or treaties of the United States." Title 28 U.S.C. § 1331. An action is removable under Title 28 U.S.C. § 1441(b) if the district court would have had original federal question jurisdiction of the matter when filed. In other words, removal is appropriate if the action could have been filed originally in federal court. See Aaron v. National Union Fire Ins. Co. of Pittsburg, 876 F.2d 1157, 1160 (5th Cir.1989), reh'g denied, 886 F.2d 1314 (5th Cir.1989) (); Merkel v. Federal Express Corp., 886 F.Supp. 561, 564 (N.D.Miss.1995) ().
This court is required to remand to state court any action over which it does not have subject matter jurisdiction. Buchner v. F.D.I.C., 981 F.2d 816, 819 (5th Cir.1993); Title 28 U.S.C. § 1447. Any party, even the court sua sponte, may raise an objection challenging the court's subject matter jurisdiction at any time in the course of the proceedings. Federal Deposit Insurance Corp. v. Loyd, 955 F.2d 316, 323 (5th Cir. 1992) (citing Ziegler v. Champion Mortgage Co., 913 F.2d 228, 230 (5th Cir.1990)) ("a court must consider the existence of subject matter jurisdiction on its own motion").
The defendants here have the burden of establishing that their removal of this lawsuit to federal court was proper. Jernigan v. Ashland Oil Co., 989 F.2d 812, 815 (5th Cir.1993); LeJeune v. Shell Oil Co., 950 F.2d 267, 271 (5th Cir.1992); B. Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981). Further, since the removal statutes are strictly construed, all doubts will be resolved against a finding of proper removal. Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir.1992); Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir.1979). In the case at bar, the defendants contend that this court has jurisdiction over the present action based either upon federal question jurisdiction, or because plaintiff has filed for protection under the bankruptcy statutes. Therefore, the defendants carry the burden of establishing federal jurisdiction in this action.
On or about March 29, 1990, the plaintiff executed a Retail Installment Contract and an Agreement to Furnish Insurance in connection with her purchase of an automobile which was to be financed by The Peoples Bank. (See Complaint, ¶ 4). During the term of this loan, the plaintiff allowed her insurance coverage to lapse on more than one occasion. After discovering such lapse, The Peoples Bank, consistent with its rights, placed insurance on the collateral under a CPI policy procured from Central National Insurance and/or Prudential Property and Casualty Insurance Company for various periods of time corresponding to the period of time when the plaintiff had allowed her insurance coverage to lapse. Supposedly, this was done to protect The Peoples Bank's interest in the collateral, and not to provide the plaintiff with an alternative source of standard automobile insurance.
On or about May 19, 1994, the plaintiff signed a subsequent promissory note renewing the indebtedness due The Peoples Bank from the forced placed insurance premiums which had become due from the prior automobile loan. (See Answer, ¶ 21). The amount of this note was $5,938.97. The plaintiff made payments under this note and reduced the principal amount to $4,057.35, at which time she stopped paying. Thereafter, on May 1, 1995, the plaintiff filed for bankruptcy protection under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Mississippi, Eastern Division, case number 95-11177. The Peoples Bank was listed as an unsecured creditor for the balance of the insurance premium due in relation to the plaintiff's automobile. The United States Bankruptcy Court entered an order granting plaintiff a discharge of her indebtedness to The Peoples Bank on August 14, 1995. (See Bankruptcy File attached to Defendants' Response to Plaintiff's Motion to Remand, Exhibit "A").
The plaintiff, in her complaint, essentially complains that the defendants, The Peoples Bank and Ross & Yerger, breached their duty of good faith and fair dealing and other fiduciary duties. (Complaint, ¶¶ 4-16). The plaintiff alleges that the defendants intentionally obtained insurance coverage at a rate higher than would have otherwise been available to the plaintiff individually. The plaintiff also alleges that the defendants profited by charging such exorbitant premiums and then financing said premiums, thereby earning interest, and that The Peoples Bank and Ross & Yerger "engaged in a course of conduct which conduct constitutes a pattern, practice, design a scheme (sic) to defraud the Plaintiff." (Complaint, ¶ 12).
As earlier stated, a case is removable if it is "founded on a claim arising under the Constitution, its laws, or treaties of the United States." Title 28 U.S.C. § 1331. Federal law need not create the cause of action, for the Supreme Court has often noted that a case can "arise under" federal law "where the vindication of a right under state law necessarily turn(s) on some construction of federal law." Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986); Franchise Tax Board v. Laborers Vacation Trust, 463 U.S. 1, 8-9, 28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); see also Kidd v. Southwest Airlines Co., 891 F.2d 540, 542 (5th Cir.1990). "Even though the claim is created by state law, a case may `arise under' a law of the United States if the complaint discloses a need for determining the meaning or application of such a law." T.B. Harms Co. v. Eliscu, 339 F.2d 823, 827 (2d Cir.1964), cert. denied, 381 U.S. 915, 85 S.Ct. 1534, 14 L.Ed.2d 435 (1965).
The TILA is encompassed in Title I of the Consumer Credit Protection Act, as amended, Title 15 U.S.C. § 1601, et seq. The regulations promulgated pursuant to the TILA, commonly known as Regulation Z, are set forth in Title 12 of the Code of Federal Regulations, 12 C.F.R. § 226.1, et seq. The TILA and the underlying regulations impose mandatory disclosure requirements on institutions extending credit to consumers and control what charges flowing from a credit transaction may be charged to a borrower. Under the TILA, federal and state courts have concurrent jurisdiction. See Title 15 U.S.C. § 1640(e). Section 1640(e) of the Act provides that:
Any action under this section may be brought in any U.S. District Court, or in any other Court of competent jurisdiction . . . (emphasis added).
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