New Alaska Development Corp. v. Guetschow

• Decision Date: 09 March 1989
• Docket Number: 87-3801 and 87-4047,Nos. 87-3786,87-3787,s. 87-3786
• Citation: 869 F.2d 1298
• Parties: NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff-Appellant, v. Bernd C. GUETSCHOW, Defendant-Appellee. NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff, and J. Glen Cassity, Stockholder Individually, Plaintiff-Appellant, v. Bernd C. GUETSCHOW, Defendant-Appellee. NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff-Appellant, v. Ralph E. MOODY, personally; and State of Alaska, Defendants-Appellees. NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff, and J. Glen Cassity, Stockholder Individually, Plaintiff-Appellant, v. Ralph E. MOODY, personally; and State of Alaska, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1298

869 F.2d 1298

NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff-Appellant, v. Bernd C. GUETSCHOW, Defendant-Appellee.

NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff, and J. Glen Cassity, Stockholder Individually, Plaintiff-Appellant, v. Bernd C. GUETSCHOW, Defendant-Appellee.

NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff-Appellant, v. Ralph E. MOODY, personally; and State of Alaska,

Defendants-Appellees.

NEW ALASKA DEVELOPMENT CORPORATION, a New York Corporation, Plaintiff, and J. Glen Cassity, Stockholder Individually, Plaintiff-Appellant, v. Ralph E. MOODY, personally; and State of Alaska,

Defendants-Appellees.

Nos. 87-3786, 87-3787, 87-3801 and 87-4047.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 8, 1988.

Decided March 9, 1989.

J. Glen Cassity, Lynnwood, Wash., for plaintiffs-appellants.

Bernd C. Guetschow, Anchorage, Alaska, pro se.

Michael H. Woodell and Jean E. Kizer, Bradbury, Bliss & Riordan, Anchorage, Alaska, for Ralph E. Moody and State of Alaska.

Appeal from the United States District Court for the District of Alaska.

Before BEEZER, HALL and WIGGINS, Circuit Judges.

CYNTHIA HOLCOMB HALL, Circuit Judge:

In November 1982, appellant J. Glen Cassity's wife filed for divorce in Alaska Superior Court. On March 23, 1983, in the course of the divorce proceeding, the presiding judge, Ralph E. Moody, appointed Bernd C. Guetschow the receiver to take over Cassity's business affairs, including the management and control of New Alaska Development Corporation ("New Alaska"), a closely held New York corporation of which Cassity was the sole officer and director and the principal shareholder. This lawsuit springs from Judge Moody's appointment of Guetschow as New Alaska's receiver.

I

In late 1985, Cassity and New Alaska (collectively, "appellants") initiated this litigation by commencing two suits in the District Court for the District of Alaska. One suit raised numerous claims against Guetschow based primarily on his allegedly wrongful conduct of New Alaska's affairs in the course of his receivership. The other suit sought recovery from the State of Alaska and Judge Moody based on allegations that Judge Moody made erroneous decisions in the divorce proceedings. Both complaints asserted diversity and federal question jurisdiction, seeking recovery on numerous state law and federal civil rights grounds.

A

In their suit against Guetschow, appellants allege that he improperly exercised control over New Alaska's assets, "although [he was] completely devoid of jurisdiction to do so and in contravention of the due process and equal protection clauses...." Appellants' second suit against Judge Moody and the State of Alaska essentially sought to hold them liable as principals for Guetschow's alleged improprieties. Consequently, we will focus on appellants' allegations against Guetschow because these charges undergird both lawsuits.

Appellants allege that as receiver Guetschow obtained $329,000 of New Alaska's funds which he commingled with his own funds and, "through taking fees and through misappropriation," reduced to less than $50,000. Appellants also allege that Guetschow's negligence and malpractice contributed to the depletion of New Alaska's assets, and that Guetschow improperly charged $90,000 in fees for his services.

Appellants allege that in his receivership capacity, Guetschow obtained gems owned by New Alaska, which he has failed to return. The record contains an affidavit filed by Guetschow's secretary which states that the gems were stolen from Guetschow's office on July 1, 1986. This robbery came one week after Guetschow was notified of a court order that he return the gems. Appellants allege the gems to be of an unknown value. The record contains conflicting evidence on the value of the gems, ranging from $2,000 to $150,000.

The complaint further alleges that Guetschow slandered Cassity by referring to him as "my ward." Appellants also allege that Guetschow's management of New Alaska caused Cassity to suffer mental distress. Finally, appellants demand a full accounting of New Alaska's assets.

B

The issues in this case are clouded by a somewhat complicated procedural background. The state court entered a final divorce decree on February 17, 1984, which confirmed the court's December 20, 1983, order dividing the marital estate. ¹ On February 28, 1984, both Cassity and New Alaska filed voluntary petitions for bankruptcy under Chapter 11. Guetschow retained control over New Alaska's assets during the pendency of the bankruptcy proceedings, evidently with the bankruptcy court's approval.

The bankruptcy court entered a final distribution of New Alaska's estate on October 28, 1985. This order directed Guetschow to distribute $6,000 to an attorney representing New Alaska in connection with its claims against Guetschow. Appellants' brief argues that Guetschow failed to comply with this order, but the complaint does not address Guetschow's retention of this $6,000. ² Instead, the complaint alleges that Guetschow violated his fiduciary duties by claiming $3,500 in additional fees, an amount expressly approved by the bankruptcy court.

C

The appellees moved to dismiss in each lawsuit. The district court dismissed appellants' complaint against Moody because it found Moody to be entitled to absolute judicial immunity. ³ The district court dismissed the State of Alaska on eleventh amendment grounds, a ruling that is not appealed. Separately, the district court entered summary judgment in Guetschow's favor on a variety of grounds, including Guetschow's absolute immunity from suit as a court-appointed receiver. In addition, the district court sanctioned Cassity, relying on Federal Rule of Civil Procedure 11 in both cases and also relying on 28 U.S.C. Sec. 1927 in the case involving Guetschow. Appellants appeal the decisions of the district court in favor of Guetschow and Moody, as well as the sanctions imposed against Cassity.

II

We review the summary judgment in favor of Guetschow and the Rule 12(b)(6) dismissal in favor of Moody de novo. See Cadillac Fairview/California, Inc. v. Dow Chemical Co., 840 F.2d 691, 693 (9th Cir.1988) (motion to dismiss for failure to state a claim); Ferguson v. Greater Pocatello Chamber of Commerce, Inc., 848 F.2d 976, 979 (9th Cir.1988) (summary judgment).

III

Appellants alleged in their actions against Judge Moody and Guetschow that the district court had both diversity and federal question jurisdiction. In Guetschow's case, the district court expressly found that diversity jurisdiction was lacking due to appellants' failure to allege New Alaska's principal place of business. The complaint alleged that New Alaska's "principal office" was in Washington, but the only business activity alleged in the complaint was New Alaska's ownership of various real estate developments in Anchorage, Alaska. Thus, the court concluded that appellants had failed to establish diversity jurisdiction, as Guetschow was also an Alaskan citizen.

Appellants fault the district court for treating Guetschow's motion to dismiss as a motion for summary judgment. Appellants fail to appreciate, however, that the complaint itself was defective in only alleging New Alaska's principal office and not establishing that its principal place of business was not in Alaska. ⁴ See Bautista v. Pan American World Airlines, Inc., 828 F.2d 546, 552 (9th Cir.1987); see also Getty Oil Corp., Div. of Texaco, Inc. v. Insurance Co. of North America, 841 F.2d 1254, 1259 (5th Cir.1988); Acwoo Int'l Steel Corp. v. Toko Kaiun Kaish, Ltd., 840 F.2d 1284, 1290 n. 6 (6th Cir.1988); Jason's Foods, Inc. v. Peter Eckrich & Sons, Inc., 768 F.2d 189, 190 (7th Cir.1985).

For purposes of diversity jurisdiction, "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." 28 U.S.C. Sec. 1332(c). Not only is appellants' complaint against Guetschow technically defective in failing to establish that New Alaska's principal place of business is not Alaska, but the allegations themselves indicate that New Alaska's sole place of business activity is Alaska, rendering that New Alaska's principal place of business. See Bialac v. Harsh Building Co., 463 F.2d 1185, 1186 (9th Cir.) (per curiam), cert. denied, 409 U.S. 1060, 93 S.Ct. 558, 34 L.Ed.2d 512 (1972). Consequently, the district court correctly found that appellants' claims against Guetschow were not subject to diversity jurisdiction.

While appellants' complaint against Judge Moody was similarly defective in failing to allege New Alaska's principal place of business, ⁵ we nonetheless conclude that the district court had subject matter jurisdiction to entertain appellants' two lawsuits. As the parties to this case are not diverse, the sole basis of subject matter jurisdiction in the district court was the alleged violations of 42 U.S.C. Sec. 1983. We do not find these allegations to be so wholly insubstantial as to have deprived the district court of jurisdiction. See Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946); Matek v. Murat, 862 F.2d 720, 728 n. 12 (9th Cir.1988); Ferguson, 848 F.2d at 980.

IV

The district court held that absolute judicial immunity shielded both Moody and Guetschow from liability. Our affirmance on the basis of absolute immunity would be dispositive, so we begin by considering the scope of judicial immunity.

A

A defendant judge is immune from suit when:

at the time he took the challenged action he had jurisdiction over the subject matter before him.... [T]he scope of the judge's jurisdiction must be construed broadly where the issue is the immunity of the judge. A judge will not be deprived of immunity because the action he took was in error, was done maliciously, or was in excess of his authority; rather, he will be subject to liability...