State of N.D. v. Fredericks, 90-5262
| Decision Date | 31 July 1991 |
| Docket Number | No. 90-5262,90-5262 |
| Citation | 940 F.2d 333 |
| Parties | The STATE OF NORTH DAKOTA, doing business as the Bank of North Dakota, Appellee, v. John FREDERICKS, Jr., a/k/a John B. Fredericks, Jr., and Judy Fredericks, husband and wife; Candace T. Fredericks, a/k/a Candace Fredericks; United States of America, acting through the Farmers Home Administration, United States Department of Agriculture; Southwest Grain Cooperative; Lorene Siedel; and Woody's Feed and Grain Co., Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Irvin B. Nodland, Bismarck, N.D., for appellants.
Lawrence R. Klemin, Bismarck, N.D., for appellee. Nicholas J. Spaeth and Lawrence R. Klemin, Bismarck, N.D., on the brief.
Before LAY, Chief Judge, McMILLIAN and ARNOLD, Circuit Judges.
From this foreclosure action comes a nice question of the removal jurisdiction of the federal courts. The District Court 1 upheld its own jurisdiction and foreclosed the mortgage. John Fredericks, Jr., and his family, the borrowers, appeal. No question is raised as to the merits. Appellants contend only that the District Court lacked jurisdiction. We affirm.
The Frederickses borrowed money, giving as security mortgages on the approximately 3,000 acres they farm. The lenders are, among others, the Bank of North Dakota, a state agency, and the Farmers Home Administration, an agency of the United States. The borrowers are Native Americans. Their land is located in Dunn County, North Dakota, within the Fort Berthold Indian reservation.
The case now before us began as a suit to foreclose the mortgage brought in a North Dakota state court by the Bank of North Dakota as first mortgagee. In order to understand the situation fully, however, it is necessary to recite briefly the circumstances of two previous lawsuits. The first case arising out of the borrower's default was brought by the Frederickses themselves. The bank was about to proceed to foreclose by advertisement, see N.D.C.C. Sec. 35-22-01. The borrowers sued the bank in a North Dakota state court, seeking to compel them to foreclose by suit, instead of by the nonjudicial process of advertisement. The state court agreed, and an injunction (apparently still in effect) was granted.
The bank then filed suit to foreclose the mortgage in the court below. The Frederickses claimed that the District Court had no jurisdiction, and Chief Judge Conmy agreed. No federal statute, he held, creates a federal right of action to foreclose mortgages on Indian trust lands, and 28 U.S.C. Sec. 2410, which waives the sovereign immunity of the United States in actions involving title to Indian lands, is not an independent basis of federal jurisdiction. Accordingly, the District Court had no original jurisdiction over the bank's suit to foreclose, and the complaint was dismissed. North Dakota v. Fredericks, A1-87-204 (D.N.D. March 21, 1988) (unpublished order). The District Court relied chiefly for this result on our opinion in Northwest South Dakota Production Credit Association v. Smith, 784 F.2d 323 (8th Cir.1986).
The bank, thus stymied in its attempt to invoke the original jurisdiction of the federal district courts, returned to the state courts. It first moved to have the injunction against foreclosure by advertisement dissolved. The Frederickses successfully resisted this motion. Then the bank filed the present suit, seeking to foreclose the mortgage by normal judicial procedure. Among the defendants named were the Frederickses themselves and the Farmers Home Administration. This time, the borrowers answered that the state court (like the federal District Court) lacked jurisdiction. The only court with jurisdiction, they argued, would be the Fort Berthold Tribal Court. The state court (perhaps recalling that the borrowers themselves had initially invoked its powers) rejected this jurisdictional defense. The borrowers then filed a cross-claim against FmHA, claiming that its breach of a contract to lend them more money was the cause of their default on the first mortgage held by the Bank of North Dakota.
The United States, having been, in effect, sued twice, once as an originally named defendant and once as a defendant on the cross-claim, filed a petition to remove the case to the District Court. The District Court upheld the removal under 28 U.S.C. Sec. 1444. The borrowers then dismissed their cross-claim against FmHA. They also asserted that the District Court lacked jurisdiction even on removal. At this point, the bank agreed, relying on the fact that FmHA was no longer a defendant on the cross-claim. The District Court disagreed with both parties, noting the continued presence of an agency of the United States, in its capacity as a junior lienholder, as an originally named defendant. The Court then foreclosed the mortgage. North Dakota v. Fredericks, Civil No. A1-89-017 (D.N.D. Feb. 12, 1991, March 29, 1990, April 25, 1990) (unpublished orders). The farm has now been sold at a sheriff's sale, but the period of redemption under state law has not yet run, so the case is not moot.
If the District Court had jurisdiction, it is because of 28 U.S.C. Sec. 1444, one of the removal statutes. This section, styled "Foreclosure action against United States," reads as follows:
Any action brought under section 2410 of this title against the United States in any State court may be removed by the United States to the district court of the United States for the district and division in which the action is pending.
The statute thus referred to, 28 U.S.C. Sec. 2410, reads in pertinent part as follows:
Under the conditions prescribed in this section and in section 1444 of this title for the protection of the United States, the United States may be named a party in any civil action or suit in any district court, or in any state court having jurisdiction of the subject matter....
On their face, these two statutes, when read together, appear clearly to confer removal jurisdiction on the District Court. This is an action brought against the United States in a state court to foreclose a mortgage, and the United States seeks to remove the action to a federal district court "for [its] protection." The borrowers attack the apparent meaning of the statutes on two related but distinct bases.
First. Though claiming otherwise, the Frederickses, in effect, invoke an old doctrine referred to as "derivative jurisdiction." Because of the Indian nature of the subject matter, they say, the state court itself lacked jurisdiction over the suit brought by the bank. (Never mind the apparent unfairness of this argument when one recalls that it was the borrowers themselves that initially, and successfully, called upon the state courts for aid.) A federal court on removal, the argument continues, can have no jurisdiction if the state court where the suit began had none.
Certainly there was at one time a well established doctrine to this effect, and a number of cases so held. "The jurisdiction of the federal court on removal is, in a limited sense, a derivative jurisdiction." Lambert Run Coal Co. v. Baltimore & Ohio R.R., 258 U.S. 377, 382, 42 S.Ct. 349, 351, 66 L.Ed. 671 (1922). "[T]he plaintiff should have a care that the state court has the necessary jurisdiction to furnish the stock on which to graft" the federal proceedings. Fidelity Trust Co. v. Gill Car Co., 25 Fed. 737, 740 (C.C.S.D.Ohio 1885). The doctrine of derivative jurisdiction was even invoked to accord federal officers what amounted to absolute protection from suit in either state or federal court for acts arising out of their official duties. Where there was no basis for federal jurisdiction as an original matter, and where a federal officer availed himself of removal under 28 U.S.C. Sec. 1442(a)(1) because of the official nature of his challenged acts, the suit would be dismissed and the plaintiff left without his remedy. See, e.g., Pennsylvania Turnpike Comm'n v. McGinnes, 179 F.Supp. 578 (E.D.Pa.1959), aff'd per curiam, 278 F.2d 330 (3d Cir.), cert. denied, 364 U.S. 820, 81 S.Ct. 57, 5 L.Ed.2d 51 (1960), discussed in Arnold, The Power of State Courts to Enjoin Federal Officers, 73 Yale L.J. 1385, 1393 (1964) ().
The argument runs into a major difficulty. The doctrine of derivative jurisdiction, never based on anything explicit in the removal statutes, but rather a judicial gloss upon them, has now been overruled by Congress. The Judicial Improvements Act of 1985, 100 Stat. 633, has removed this "caselaw gloss" from the law of removal. H.R.Rep. No. 99-423, 99th Cong., 1st Sess. 13 (1985), U.S.Code Cong. & Admin.News 1986, p. 1545. One need not look far for a reason. Consider the following example: suppose someone sued you in a state court claiming infringement of a patent. Realizing that such matters are inherently federal, you file a petition for removal. The federal court, however, refuses to entertain the case. Federal district courts have original and exclusive jurisdiction of patent-infringement cases. The state court therefore had no jurisdiction at all, and the federal court on removal, as a sort of off-shoot of the state court, can have none, either. The result is that a federal court refuses to entertain a case over which only it has jurisdiction. Presumably, the plaintiff then refiles in the federal court, or you, as defendant, file...
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