Nevada Eighty-Eight, Inc. v. Title Ins. Co.
| Decision Date | 21 December 1990 |
| Docket Number | No. CV-S-90-251-PMP (LRL).,CV-S-90-251-PMP (LRL). |
| Citation | 753 F. Supp. 1516 |
| Parties | NEVADA EIGHTY-EIGHT, INC., Plaintiff, v. TITLE INSURANCE COMPANY OF MINNESOTA, Defendant. TITLE INSURANCE COMPANY OF MINNESOTA, Counterclaimant, v. NEVADA EIGHTY-EIGHT, INC., Counterdefendant. TITLE INSURANCE COMPANY OF MINNESOTA, Third Party Plaintiff, v. G.C. SWARTS MANAGEMENT AND DEVELOPMENT, INC., Frank A. Ellis, Jr., Andrew J. Welch, M.D., Third Party Defendants. |
| Court | U.S. District Court — District of Nevada |
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Rex A. Jemison, Robert T. Eglet, Beckley, Singleton, De Lanoy Jemison & List, Las Vegas, Nev., for plaintiff.
John Sacco, Las Vegas, Nev., for defendant Title Ins. Co.
Kirk B. Lenhard, Jones, Jones, Close & Brown, Las Vegas, Nev., for third party defendant Swarts Management.
James C. Mahan, Mahan & Ellis, Las Vegas, Nev., for third party defendant Frank Ellis.
Plaintiff/Counterdefendant NEVADA EIGHTY-EIGHT, INC. ("Nevada 88") is a Nevada corporation with its principal place of business in Clark County, Nevada. Defendant/Counterplaintiff TITLE INSURANCE COMPANY OF MINNESOTA, INC. ("Title Insurance"), is incorporated under the laws of Minnesota and has its principal place of business outside of Nevada.1 Third-Party Defendant FRANK A. ELLIS, JR., is a citizen of the State of Nevada. Third-Party Defendant G.C. SWARTS MANAGEMENT AND DEVELOPMENT, INC. ("SMD") is a Nevada corporation with its principal place of business in Clark County, Nevada.
In 1988, Ellis owned a one-third undivided interest in 117 acres of property located in Henderson, Nevada. He agreed to act as Nevada 88's agent and negotiate the sale of the remaining two-thirds ownership from his associates to Nevada 88. The parties planned to build a casino, hotel, and mall of automobile dealerships on the land. After acquiring the property, Ellis placed title for the remaining two-thirds interest in Minnesota Title Holding Company ("Minnesota Holding"). Ellis retained equitable title while Minnesota Holding held legal title to the entire property. On May 3, 1988, escrow was opened with Title Insurance. On the same day, Ellis appointed Nevada 88 as his nominee who was to be treated as an original principal to the escrow account.
After some delay, escrow was scheduled to close January 4, 1989.
On August 7, 1988, Nevada 88 amended the escrow instructions to Title Insurance as follows:
Exhibit C to Plaintiff Nevada 88's Complaint (# 1).
Subsequent to receiving this amendment from Nevada 88, Title Insurance received a letter on January 3, 1989, from SMD instructing Title Insurance not to allow escrow to close but rather to cancel the escrow account:
Please accept this letter as an authorization and direction to terminate the above-referenced escrow account and return all deeds, assignments and other instruments of transfer to the seller. The reasons for this termination (with which you need not be concerned) consist of numerous and various breaches, defaults, and express repudiations of obligations on the part of the remaining purchaser Nevada Eighty Eight, Inc., of assumed obligations under that certain letter of intent dated April 25, 1988, between the undersigned and the seller, and otherwise on account of the failure of Nevada Eighty Eight, Inc. to honor obligations it has to G.C. Swarts Management and Development, Inc.
Exhibit 4 to Title Insurance's Third Party Complaint (# 12).
Escrow did not close on January 4, 1989, as scheduled.
SMD brought suit in the Eighth Judicial District Court in Clark County, Nevada (Case No. A 271351) against Nevada 88. Nevada 88 then counterclaimed against SMD. Nevada 88 then brought a third-party action against George Swarts (of SMD) individually, Frank Ellis, Jr., Minnesota Holding, and other persons not before this Court. Ellis filed an additional third-party complaint against Nevada 88 and other persons not before this Court.
Title Insurance moved to intervene and was denied permission to do so. Additionally, when Nevada 88 moved to amend its Third-Party Complaint to include Title Insurance, that motion was successfully opposed by Minnesota Holding.
On April 13, 1990, Nevada 88 brought this suit against Title Insurance. On July 30, 1990, Title Insurance filed its Answer and Counterclaim (# 11). On August 6, 1990, Title Insurance filed a Third-Party Complaint (# 12) against SMD, Ellis, and a person no longer party to this suit.
There are currently five Motions pending before this Court:
Defendant's and Third-Party Defendants' Motions to Dismiss (# 22, # 24 and # 34)
SMD, Ellis, and Title Insurance have moved this Court to dismiss Nevada 88's Complaint (# 1) for lack of subject matter jurisdiction. In doing so, they assert virtually identical arguments. First, they claim that the Court lacks subject matter jurisdiction to hear this action as there are necessary and indispensable absent parties whose joinder would destroy diversity. Second, they claim that the Court should look beyond SMD's and Ellis's status as Third-party Defendants and treat them as aligned in interest with Defendant Title Insurance. If such a realignment were to take place, diversity would again be destroyed. Under either of these theories, the Court would have no subject matter jurisdiction and would have to dismiss the entire suit.
SMD, Ellis, and Title Insurance urge the Court to dismiss Nevada 88's Complaint (# 1) for failure to join SMD and Ellis as defendants to the main action. Currently, the status of SMD and Ellis is strictly that of Third-Party Defendants. If they had been joined originally as defendants, complete diversity among the parties would not have existed. However, under normal circumstances the presence of non-diverse third-party defendants does not destroy diversity. Fed.R.Civ.P. 24. See also Lesher by Lesher v. Andreozzi, 647 F.Supp. 920, 922 (M.D.Pa.1986). Third-party claims do not require independent jurisdictional bases. Field v. Volkswagenwerk AG, 626 F.2d 293, 299 (3d Cir.1980). They fall within a court's ancillary jurisdiction and are proper when they share a "common nucleus of operative fact" with a case already before the court. Freeman v. Howe, 65 U.S. (24 How.) 450, 16 L.Ed. 749 (1860). A plaintiff in a diversity suit may not assert claims against nondiverse third-party defendants. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 376-77, 98 S.Ct. 2396, 2403-04, 57 L.Ed.2d 274 (1978).
Of course, a plaintiff desiring a federal forum may omit nondiverse parties from his or her claim and sue them separately in a state court proceeding. E. Chemerinsky, Federal Jurisdiction § 5.3 (1989). Further, defendants need not bring third-party actions whenever possible. If there is a simultaneous litigation of the same transaction or occurrence in state and federal court, whichever court decides first will preclude the other's decision. Id.
Federal Rule of Civil Procedure 19 provides the only exception to the standard that plaintiffs and defendants/third-party plaintiffs may choose their adversaries. Rule 19(a) provides that if certain factors are present, absent parties are considered "necessary" and should be joined if possible:
(a) A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter...
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