Growth Rlty. Companies v. Burnac Mtg. Investors

• Decision Date: 21 August 1979
• Docket Number: No. 79-1187.,79-1187.
• Citation: 474 F. Supp. 991
• Parties: GROWTH REALTY COMPANIES, Plaintiff, v. BURNAC MORTGAGE INVESTORS, LTD., Defendant.
• Court: U.S. District Court — District of Puerto Rico

474 F. Supp. 991

GROWTH REALTY COMPANIES, Plaintiff, v. BURNAC MORTGAGE INVESTORS, LTD., Defendant.

No. 79-1187.

United States District Court, D. Puerto Rico.

August 21, 1979.

Eric A. Tulla, Hato Rey, P. R., for plaintiff.

Luis M. Angelet Frau, San Juan, P. R., for defendant.

OPINION AND ORDER

TOLEDO, Chief Judge.

We are presently concerned with plaintiff's Motion to Remand which calls for the recitation of the following pertinent facts.

On or about December 2, 1977, Gary Walls, as nominee of the trustees of LMI Investors, a non incorporated trust created by a Declaration of Trust filed in Los Angeles, California in March 1972, filed a complaint against the named defendant in the Superior Court of Puerto Rico, San Juan Division. The complaint requesting declaratory relief and specific contractual compliance, was assigned Civil Number 77-8257 by the local court. Defendant then filed the first petition for removal to this Court. It invoked Title 28, United States Code, Section 1441 and the jurisdictional diversity statute, Title 28, United States Code, Section 1332. This removal petition was opposed by the plaintiff who indicated that complete diversity between the parties was lacking and, therefore, jurisdiction was not present.¹ Defendant acknowledged the lack of complete diversity and acceded to the remand. This Court entered the Order of Remand accordingly on March 29, 1978.

While the case was pending before the state court, the plaintiff sought permission to amend its complaint from the local court. This was granted on May 8, 1979. The amended complaint, in its pertinent part reads:

"1. Growth Realty Companies is a corporation organized under the laws of the State of California from February 9, 1979. Previously, Growth Realty, then known as Growth Realty Investors, was a business trust created by way of a declaration of trust under the laws of the State of California. By operation of law, all rights and properties of Growth Realty Investors, were transferred to Growth Realty; in the same manner, Growth Realty became liable for all Growth Realty Investor's obligations and debts.

2. Burnac Mortgage Investors, Ltd., (hereinafter called Burnac), is a limited company organized under the laws of the Province of Alberta, Canada, and is doing business in Puerto Rico."

In its answer to the amended complaint the defendant filed the following affirmative defenses:

"1. The defendant is a limited company (corporation) duly organized and existing under and by virtue of the laws of the Province of Alberta, Dominion of Canada with its principal place of business at Toronto, Canada.

2. The plaintiff is a corporation duly organized and existing under and by virtue of the laws of the State of California, with its principal place of business at Los Angeles, California."²

Upon notification of the amended complaint on April 30, 1979, defendant then filed a second request for Removal before this Court pursuant to Title 28, United States Code, Section 1446(b) alleging jurisdiction pursuant to Title 28, United States Code, Section 1332, the diversity statute.

In this case plaintiff opposed the second petition for removal on grounds that there is no requisite diversity of citizenship under Title 28, United States Code, Section 1332. Plaintiff also states that even assuming the existence of diversity jurisdiction, the second petition for removal is untimely. In its Memorandum of Law, plaintiff amplifies his argument which, as we understand it, states: diversity is missing because the diversity of the parties is determined at the commencement of the action and a subsequent change of citizenship does not permit the defendant to remove the case. Plaintiff's allegation of untimeliness assumes the presence of diversity jurisdiction indicating that the defendant had notice of plaintiff's incorporation by the filing of a "companion case" involving the same parties and property. This "companion case", according to the plaintiff, constitutes an "other paper" within the meaning of Section 1446(b). Hence, the "other paper" or "companion case" constitutes sufficient notice causing the clock to start running so that defendant's second filing of removal is untimely.

Before proceeding with the discussion of the peculiar facts of this case, we would like to make one general observation concerning removability of cases from state to federal courts. This Court is mindful of the fact that ". . . a federal court is a court of limited jurisdiction and can only entertain those actions which fall squarely within its jurisdiction as that jurisdiction is stated by the Act or Acts of Congress in conformity with the Judiciary Articles of the Constitution. This Court has the responsibility to accept jurisdiction in all proper cases. It has an equal obligation to protect the jurisdiction of the State court, both by reason of comity to that court and fairness to the litigants who have chosen it as a forum. Where there is doubt as to the federal jurisdiction, the doubt should be construed in favor of remanding the case to the State court where there is no doubt as to its jurisdiction." Saylor v. General Motors Corp., 416 F.Supp. 1173 at 1176 (E.D.Ky., 1976) quoting Walsh v. American Airlines, Inc., 264 F.Supp. 514, 515 (E.D.Ky., 1967). See also Putterman v. Daveler, 169 F.Supp. 125, 130 (D.C.Del., 1958); Winters Government Securities Corporation v. Cedar Point, 446 F.Supp. 1123, 1128 (S.D.Fla., 1958).

Title 28, United States Code, Section 1446(b) provides:

"(b) The petition for removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has been filed in court and is not required to be served on the defendant, whichever period is shorter.

If the case stated by the initial pleading is not removable, a petition for removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may be first ascertained that the case is one which is or has become removable." (Emphasis supplied).

The second paragraph in the quoted Section 1446 was the result of a Congressional enactment in 1949 and of a subsequent amendment in 1965.³

"The enactment of 1446(b) has been said to codify or be declaratory of the existing Rule as laid down by the decision of Putterman v. Daveler, 169 F.Supp. 125, 129 (D.Del., 1958); accord, 1 Barron & Holtzoff, Federal Practice and Procedure, Section 107 at 514 (1960); 2 U.S. Code Congressional & Administrative News, pp. 1248, 1268 (1960) quoted in 1A Moore's Federal Practice, Section 0.168, 3.-5 at 1232, n. 6 (2d ed., 1965), quoting H.Rep.No.352 to accompanying H.R.370, 81st Cong., 1st Session (1949). Clearly, before the enactment on 1446(b) in 1949, more than one petition to remove may be clearly allowed in certain cases." O'Bryan v. Chandler, 496 F.2d 403, 408-409 (10th Cir., 1974), cert. denied, 419 U.S. 986, 95 S.Ct. 245, 42 L.Ed.2d 194; rehearing denied, 95 S.Ct. 838, 420 U.S. 913, 42 L.Ed.2d 845.

This decision also states the circumstances under which a defendant may successfully petition for the removal of a case on a second or subsequent occasion. As stated therein, "Generally, the second paragraph of 1446(b) is designed to allow a defendant to remove a state action when it was not originally removable as stated in the plaintiff's initial complaint in the state court, but has become removable due to the filing in the state court of an amended pleading, motion, order or other paper where it may be ascertained that the case is one which is or has become removable." . . . It is equally clear, however, that not every amendment to a plaintiff's original complaint in a state court allows the granting of a second or subsequent petition to remove . . . According to the statute itself, there must be both an amended pleading or paper and a ground for ascertaining removability exists for the first time . . . "To come within the perimeters of Section 1446(b), the amendment of the state court complaint must be one that makes the case removable at the time of the amendment, when the original state court petition did not state a removable action." O'Bryan, supra, at 409. (Emphasis added). This same case enunciates factors to be applied in determining whether to grant or deny a second petition for removal in consonance with sec. 1446(b). These are: (1) ". . . plaintiff must voluntarily amend his state court complaint after an order to remand has been entered (cit. omitted)"; and (2) ". . . the voluntary action of the plaintiff in amending his state complaint must set forth a ground for removal that appears for the first time." O'Bryan, supra, at 407-410. (Emphasis supplied). See also First National Bank, etc. v. Johnson and Johnson, 455 F.Supp. 361 (E.D.Ark., 1978); Martropico Compañia Naviera, S.A. v. (Pertamina), 428 F.Supp. 1035 (S.D.N.Y., 1977); McMahon Chevrolet, Inc. v. Davis, 392 F.Supp. 322-324 (S.D. Tex., 1975); White v. Hughes, 409 F.Supp. 1005 (W.D.Tenn., 1975). The mentioned case specifically contemplates the occurrence of the following event as grounds for granting a second or subsequent petition for removal under the provision of 1446(b), "the cases, therefore, hold that a different ground for the removal must be alleged in the second petition that was not alleged in the first petition. For example, if plaintiff adds or dismisses a party to his state action after the remand and creates diversity of citizenship, a defendant may remove the action for a second time." O'Bryan, supra, at p. 410. "Stated oppositely, different grounds more precisely means a different set of facts that state a new ground for removal, Key v. West Kentucky Coal Co., ...