Nadler v. American Motors Sales Corp.

• Decision Date: 01 July 1985
• Docket Number: No. 84-2242,84-2242
• Parties: Adeline NADLER, Robert B. Nadler and Carole M. Nadler, Plaintiffs-Appellants, v. AMERICAN MOTORS SALES CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 409

764 F.2d 409

Adeline NADLER, Robert B. Nadler and Carole M. Nadler Plaintiffs-Appellants, v. AMERICAN MOTORS SALES CORPORATION, Defendant-Appellee.

No. 84-2242.

United States Court of Appeals Fifth Circuit.

July 1, 1985.

Oramus, Gideon & Trauger, James V. Doramus, Nashville, Tenn., for plaintiffs-appellants.

James C. Slaughter, Houston, Tex., for defendant-appellee.

Appeals from the United States District Court for the Southern District of Texas.

Before GEE, POLITZ and WILLIAMS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

This appeal requires us to harmonize two covenants in a long-term lease agreement covering commercial property. The first covenant obligates the lessee to keep the premises "in good order and condition" during the lease term, and the other demands surrender of the property at termination "in the same condition as when received except for reasonable use and natural wear." We must determine whether either covenant binds the lessee to repair or replace equipment that barely functions when the lease expires. Because the answer depends on facts that remain in dispute, we hold only that the provisions may so obligate the lessee. We thus reverse the summary judgment against the lessors and remand the case for further proceedings.

I.

The parties' relationship started in 1962 and presumably will end with this litigation. On August 3, 1962, appellee American Motors Sales Corporation (AMSC) leased a new building in Houston, Texas, for a twenty-year period ending September 30, 1982. Five days later, appellant Adeline Nadler bought the building, and the previous owner assigned its lease with AMSC to her. AMSC occupied the building until November 27, 1972, when it sublet the property to Hussman Refrigeration, a firm whose business included repair and installation of heating and cooling equipment. On July 14, 1979, Adeline Nadler sold or gave a ten percent interest in the building to her son, appellant Robert B. Nadler, and his wife, appellant Carole M. Nadler. Hussman used the building until the lease and sublease expired, but it promptly entered into a new agreement under which it began to lease directly from the Nadlers.

At the heart of this case lie the heating, ventilation, and air conditioning (HVAC) system that served the building and the two covenants that govern AMSC's obligations with respect to it. When the builders installed the new system in 1962, it embodied the state of the heating, cooling, and ventilating art. It included four large heat pumps, which both heated and cooled, and a number of small units that supplied cool air to offices in the rear portion of the building. The Nadlers replaced the system in 1982, after the lease with AMSC ended.

The deterioration that the system suffered over the lease term generated the parties' dispute regarding liability for its repair or replacement. The record does not indicate the maintenance and performance record of the system during the first ten years of the lease, but it does suggest that by 1972 significant problems had developed. Hussman took possession of the building in that year, and the system thereafter required repair an average of once a month. Hussman did the work itself, and it fixed or replaced several condensers and other parts. It also installed electric strip heaters in the HVAC system when the heat pumps no longer performed their heating function. Starting in 1981, moreover, the Nadlers serially commissioned four contractors to evaluate the system. Each contractor reported that the system worked poorly and needed replacement. An AMSC employee, however, contradicted their assessments, testifying on deposition that, as of May 1981, the system "was operating satisfactorily" and "was maintaining temperatures adequately".

A single paragraph of the lease agreement specifies the circumstances in which AMSC had to repair or replace the HVAC system. It provides as follows:

REPAIRS (9) Lessee covenants throughout the term of this Lease, at Lessee's sole cost and expense, to take good care of the demised premises, including the building and improvements now or at any time erected thereon, the equipment, fixtures, motors and machinery thereof, and the parking areas, fences and vaults, if any, and to keep the same in good order and condition, and shall promptly, at Lessee's own cost and expense, make all necessary repairs, interior and exterior, structural and non-structural, ordinary as well as extraordinary, foreseen as well as unforeseen. The term "repairs" shall include replacements or renewals when necessary, and such repairs shall be equal in quality and class to the original work. At the termination of this Lease, Lessee shall surrender the premises in the same condition as when received except for reasonable use and natural wear.

After repeatedly but unsuccessfully demanding that AMSC restore the system to good order or replace it, the Nadlers brought this suit on February 1, 1983, alleging that AMSC had breached paragraph 9 of the lease agreement. The complaint asserted that the district court had diversity of citizenship jurisdiction of the case under 28 U.S.C. Sec. 1332 (1982). The Nadlers claimed that AMSC had breached the lease agreement both by failing to keep the HVAC system in good order during the lease term and by surrendering the system at the end of the term in poor condition. They sought damages in the amount they had paid Hussman to replace the system. They also demanded recovery of court costs, prejudgment interest, and attorney fees.

Both sides moved for summary judgment in early 1984. The Nadlers supported their motion with the affidavit of Robert B. Nadler and copies of the contractors' evaluations of the HVAC system. AMSC responded with the same reports; it also submitted excerpts from two depositions. ¹ The district court resolved the cross motions in favor of AMSC, holding simply that "[p]aragraph 9 of the lease in question, particularly under the undisputed facts, cannot be construed in such a fashion as to require [AMSC] to purchase a new HVAC system for [the Nadlers]." The Nadlers appeal.

II.

Before addressing the merits of this appeal, we must deal with a problem that has grown distressingly familiar to this Court: The failure properly to allege the basis for diversity of citizenship jurisdiction. Because the error recurs frequently and wastefully diverts this Court from its primary mission, we take the opportunity to outline the simple rules that govern pleading diversity jurisdiction.

Each party asserting a claim for relief bears the burden of setting out in his pleading "a short and plain statement of the grounds upon which the court's jurisdiction depends". Fed.R.Civ.P. 8(a)(1); see Strain v. Harrelson Rubber Co., 742 F.2d 888, 889 (5th Cir.1984) (per curiam); Illinois Central Railroad v. Pargas, Inc., 706 F.2d 633, 636 & n. 2 (5th Cir.1983) (requiring affirmative and distinct allegation of jurisdictional grounds); Kerney v. Fort Griffin Fandangle Ass'n, 624 F.2d 717, 719 (5th Cir.1980) (holding that pleader must set out basis for jurisdiction "distinctly and affirmatively"). The statute that confers diversity of citizenship jurisdiction on the federal courts plainly indicates the facts that a pleader must allege to satisfy Rule 8(a)(1). See 28 U.S.C. Sec. 1332 (1982). Section 1332 provides for jurisdiction over civil actions between, inter alia, "citizens of different States". Id. Sec. 1332(a)(1) (emphasis supplied). An allegation that the parties are "residents" of particular states does not satisfy the requirements of Rule 8(a)(1); section 1332(a)(1) demands diverse citizenship, not diverse residency. See, e.g., Bingham v. Cabbot, 3 U.S. (Dall.) 382, 1 L.Ed. 646 (1798); Neeley v. Bankers Trust Co. of Texas, 757 F.2d 621, 634 n. 18 (5th Cir.1985); Strain, 742 F.2d at 889; Kerney, 624 F.2d at 719; Delome v. Union Barge Line, 444 F.2d 225, 233 (5th Cir.), cert. denied, 404 U.S. 995, 92 S.Ct. 534, 30 L.Ed.2d 547 (1971).

Section 1332 also sets out the allegations necessary to invoke diversity jurisdiction in a case involving a corporate party. Under section 1332(c), "a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business". Thus, "allegations regarding the citizenship of a corporation must set out the principal place of business as well as the state of its incorporation...." Neeley, 757 F.2d at 634 n. 18; see Illinois Central, 706 F.2d at 637; Joiner v. Diamond M Drilling Co., 677 F.2d 1035, 1039 (5th Cir.1982). These rules are straightforward, and the law demands strict adherence to them.

The original complaint in this case defectively alleged grounds for diversity jurisdiction. The pleading asserted merely that Adeline Nadler "is a resident of the State of Illinois", that Robert B. Nadler and Carole M. Nadler "are residents of the State of Tennessee", and that AMSC "is a Delaware corporation doing business within the State of Texas". Only the allegation regarding AMSC's state of incorporation tracked the requirements of section 1332. The complaint did not allege the citizenship of the Nadlers or the state of AMSC's principal place of business. It thus failed properly to invoke the jurisdiction of the federal courts.

We nonetheless have discretion to permit the Nadlers to cure the defect by amending their complaint in this Court. See 28 U.S.C. Sec. 1653 (1982) ("Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.") Although we construe section 1653 liberally, e.g., Carlton v. BAWW, Inc., 751 F.2d 781, 789 (5th Cir.1985), it authorizes correction only of formal mistakes. Because "we do not sit to receive new evidence", Strain, 742 F.2d at 889 n. 2, moreover, the normal course consists in remanding the case rather than in allowing amendment here, see id. at 889 & n. 2 (remanding "for determination of whether jurisdictional grounds...