A. Musto Co., Inc. v. Satran

• Decision Date: 27 September 1979
• Docket Number: Civ. A. No. 78-0493-J.
• Citation: 477 F. Supp. 1172
• Parties: In the Matter of A. MUSTO CO., INC. and William Montouri, as he is Chairman of the A. Musto Co., Inc., Creditors Committee v. Neal SATRAN, as he was Trustee in Bankruptcy.
• Court: U.S. District Court — District of Massachusetts

477 F. Supp. 1172

In the Matter of A. MUSTO CO., INC. and William Montouri, as he is Chairman of the A. Musto Co., Inc., Creditors Committee v. Neal SATRAN, as he was Trustee in Bankruptcy.

Civ. A. No. 78-0493-J.

United States District Court, D. Massachusetts.

September 27, 1979.

Emmanuel N. Papanickolas, Peabody, Mass., for plaintiff.

Joseph Steinfield, Hill & Barlow, Boston, Mass., for defendant.

RULING ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

JULIAN, Senior District Judge.

This case is before the Court for a ruling on the defendant's motion for summary judgment. In support of his motion for summary judgment the defendant has submitted his own affidavit. The plaintiffs did not submit any counter-affidavits and there are no depositions, answers to interrogatories, or admissions on file. Thus, under Fed.R.Civ.P. 56, the Court may refer only to the pleadings and to the defendant's affidavit in ruling on the motion. Because the defendant's affidavit is uncontradicted, the allegations contained in that affidavit must be accepted as true for the purposes of this motion. Morton v. Browne, 438 F.2d 1205, 1206 (1st Cir. 1971). The pleadings and the defendant's affidavit disclose the following facts.

On September 15, 1975, the plaintiff, A. Musto Co., Inc. (Musto), filed a voluntary petition under Chapter XI of the United States Bankruptcy Act, docketed as Bankruptcy No. 75-2270-G (the Bankruptcy Case). On May 24, 1976, the Bankruptcy Judge issued an order adjudicating Musto a bankrupt and appointed the defendant, Neal Satran, trustee in bankruptcy. On May 25, 1976, Musto filed a notice of appeal to the District Court from the Bankruptcy Judge's Order of Adjudication. The Bankruptcy Judge's Order of Adjudication was affirmed by the District Court on May 16, 1977.

On August 25, 1976, two applications were filed in the Bankruptcy Case, each seeking the removal of Satran from his position as trustee in bankruptcy. One of the applications was filed by Musto in its own behalf and the other by William Montouri (the other plaintiff in the case at bar) on behalf of Musto's unsecured creditors. The removal applications alleged that Satran's removal was required because he committed various acts in breach of his fiduciary duties as trustee.¹ Evidentiary hearings on the applications for removal were held on November 29, 1976, December 10, 1976, January 24, 1977, and March 18, 1977. Conferences on the removal applications were held on April 4 and 15, 1977. The defendant, counsel for the applicants, and the Bankruptcy Judge were present at those conferences.

On July 26, 1977, acting upon Musto's motion for dismissal of the proceedings, the Bankruptcy Judge entered a two-page order dismissing the proceedings in the Bankruptcy Case. Paragraph 6 of that order reads as follows: "6. All complaints, applications, motions, counterclaims, and all other pleadings filed by the debtor and/or bankrupt in these proceedings upon which a final determination on the merits has not been had, be, and they all are, dismissed with prejudice."²

The general language in the above-quoted Paragraph 6, which dismisses all applications "upon which a determination on the merits has not been had . . .", is the only indication in the record that the Bankruptcy Judge acted on the removal applications. He did not issue any findings of fact concerning the removal applications. Neither Musto nor Montouri appealed to the District Court³ from the order dismissing the proceedings in bankruptcy.

The amended complaint in the case at bar was filed on October 30, 1978. The amended complaint seeks damages from the defendant, Satran, on the theory that Satran, in his capacity as trustee in bankruptcy in the Bankruptcy Case, committed a number of acts in breach of his fiduciary duties.⁴ The defendant's uncontradicted affidavit and Exhibit D attached to that affidavit show that the allegations contained in paragraph 14 of the amended complaint are untrue.⁵

Paragraph 6 of the amended complaint does not allege a breach of duties on the defendant's part.⁶ Evidence concerning each of the other allegations contained in the amended complaint was presented to the Bankruptcy Judge at the removal hearings.⁷

The defendant filed his motion for summary judgment on May 1, 1979. The motion states that the amended complaint is barred by the doctrine of res judicata and that the amended complaint fails to comply with the requirements of Fed.R.Civ.P. 8(a) because it does not contain a statement of the grounds upon which the Court's jurisdiction depends. Because the Court must have jurisdiction over the subject matter of the action before it can rule on the motion for summary judgment, the jurisdictional question will be addressed first.

Jurisdiction

The plaintiffs' amended complaint does not contain the jurisdictional statement required by Fed.R.Civ.P. 8(a). Ordinarily such a defect in the complaint does not require dismissal because of the liberality of the Federal Rules of Civil Procedure toward amendments. 5 Wright & Miller, Federal Practice and Procedure § 1214 at 106. Here, however, the jurisdictional prerequisites do not appear anywhere in the amended complaint. Furthermore, even if the plaintiffs were given another opportunity to amend their complaint, they would be unable to cite an adequate basis for the Court's jurisdiction.

Neither of the "general" provisions for the original⁸ jurisdiction of the district courts (28 U.S.C. § 1331 federal question and 28 U.S.C. § 1332 diversity of citizenship) is relevant here. The amended complaint alleges that Musto is a Massachusetts corporation with offices at 14 Beacon Street in Boston, Massachusetts. It also alleges that the defendant is an attorney, licensed to practice in Massachusetts, with offices at 7 Water Street, Boston, Massachusetts. Thus, the suit is between citizens of the same state and the Court's diversity jurisdiction may not be invoked. The Court's federal question jurisdiction is also inapplicable. The fact that a former trustee in bankruptcy is a party does not give rise to a federal question. Spencer v. Duplan Silk Co., 191 U.S. 526, 531, 24 S.Ct. 174, 48 L.Ed. 287 (1903); Newland v. Edgar, 362 F.2d 911, 913 (9th Cir. 1966).

There are various particular grants of jurisdiction to the district courts scattered throughout the Code (See Historical and Revision Notes to 28 U.S.C.A. § 1332), but the Court is not aware of any which would confer jurisdiction here. During oral argument plaintiffs' counsel stated that he could think of only one basis for the Court's jurisdiction over this action, namely, § 11(a) of the Bankruptcy Act, 11 U.S.C. § 11(a), which grants to federal courts "such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in proceedings under this title . . ." 11 U.S.C. § 11(a) (Emphasis added). However, the plaintiffs' present claims, which are based on the defendant's alleged breach of his fiduciary duties, do not arise under Title XI (the Bankruptcy Act). The bankruptcy proceedings involved here have already been terminated. The present case is not a proceeding under Title XI. Therefore, § 11(a) of Title XI, which grants jurisdiction to federal courts only "in proceedings under this title . . ." is not applicable to this case.

Because of the plaintiffs' failure to meet the requirements of Fed.R.Civ.P. 8(a), and their failure to state grounds that constitute a basis for the Court's jurisdiction, this case must be, and hereby is, dismissed for want of subject matter jurisdiction, pursuant to Fed.R.Civ.P. 12(h)(3).

Res Judicata

In the event that the Court's holding that it has no jurisdiction over the subject matter of this action is reversed or is ineffectual for any other reason, the Court will also rule alternatively on the defendant's motion for summary judgment based on res judicata, such ruling to take effect only if the jurisdictional holding cannot stand.

The doctrine of res judicata was explained as follows in Lawlor v. National Screen Service Corp., 349 U.S. 322, 75 S.Ct. 865, 99 L.Ed. 1122 (1955):

Under the doctrine of res judicata, a judgment "on the merits" in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action. 349 U.S. at 326, 75 S.Ct. at 867.

Final orders of the Bankruptcy Court are res judicata of all matters that were or could have been litigated before the Bankruptcy Court. Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 377, 60 S.Ct. 317, 84 L.Ed. 329 (1940); United States v. Estes, 448 F.Supp. 971, 975 (N.D.Tex.1978).

The parties in the case at bar are identical to the parties in the removal proceedings. However, Paragraph 6 of the order dismissing the bankruptcy proceedings only dismisses applications "filed by the debtor and/or bankrupt." Thus, the final order involved here applies only to Musto, not to Montouri. Res judicata does not apply to bar Montouri's claim because there is no evidence that the Bankruptcy Court ever issued a final order with respect to Montouri's removal application. In the absence of such a final order res judicata does not apply.

Because the final order involved here does apply to Musto, res judicata is applicable to Musto's claims if certain prerequisites are met. First, the parties in the present case must be the same as those involved in the removal proceedings. There is no question about the identicality of the parties here.

Second, the claims made in the amended complaint in this case must be identical to those made in the removal proceedings.⁹ The critical inquiry in determining whether two claims are identical for res judicata purposes is whether the facts underlying the claims are identical. Expert Electric, Inc. v. Levine, 554 F.2d 1227, 1234 (2d Cir.), cert. denied, 434 U.S. 903, 98 S.Ct. 300, 54 L.Ed.2d 190 (1977). Because the factual predicate of the claims asserted determines whether two claims are identical,...