Western Securities Co., a subsidiary of Universal Mortg. Corp. v. Derwinski

• Decision Date: 25 July 1991
• Docket Number: No. 90-3052,90-3052
• Citation: 937 F.2d 1276
• Parties: WESTERN SECURITIES COMPANY, A SUBSIDIARY OF UNIVERSAL MORTGAGE CORPORATION, Plaintiff-Appellant, v. Edward J. DERWINSKI, Secretary of Veterans Affairs, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1276

937 F.2d 1276

WESTERN SECURITIES COMPANY, A SUBSIDIARY OF UNIVERSAL MORTGAGE CORPORATION, Plaintiff-Appellant, v. Edward J. DERWINSKI, Secretary of Veterans Affairs Defendant-Appellee.

No. 90-3052.

United States Court of Appeals Seventh Circuit.

Argued May 13, 1991.

Decided July 25, 1991.

Dean B. Richards, Thomas L. Jacobs, George A. Coulter, Gray & End, Milwaukee, Wis., for plaintiff-appellant.

James L. Santelle, Asst. U.S. Atty., Office of the U.S. Atty., Milwaukee, Wis., for defendant-appellee.

Before POSNER, FLAUM, and EASTERBROOK, Circuit Judges.

POSNER, Circuit Judge.

Western Securities Company made a $73,000 home mortgage loan to a veteran in 1980. The Veterans' Administration (now the Department of Veterans Affairs) guaranteed a portion of the loan. The veteran later sold the property to Becky Shaw, who resold it to a couple who defaulted on the mortgage. Western notified the Veterans' Administration of intention to foreclose on the mortgage. The Administration responded by notifying Western that Western was not to forgo seeking deficiency judgments against any persons who were liable on the mortgage note. Western's letter was dated October 2 and the Veterans' Administration's response October 23, but we do not know when either letter was actually mailed or received.

It was not until February of the following year that Western instructed its attorney to foreclose on the mortgage and to seek any other relief that might be obtainable. Included in the packet of documents that it transmitted to the attorney was the Veterans' Administration's letter of October 23. The attorney decided, however, that Shaw had not assumed the mortgage when she bought the property and therefore was not liable on the note, and so rather than seek a deficiency judgment against her he released her from liability.

The foreclosure sale resulted in a loss to Western, which then turned to the Veterans' Administration to make good on its guaranty. The Administration refused, citing a regulation it has promulgated which provides that "the release of the personal liability of any obligor on a guaranteed or insured obligation resultant from the act or omission of any holder [of the guaranty] without the prior approval of the [Veterans'] Administrator shall release the obligation of the Administrator as guarantor or insurer." 38 C.F.R. Sec. 36.4324(f). Western sued the Administrator in state court under 38 U.S.C. Sec. 1820(a)(1) for $25,002, the amount of money Western allegedly had lost as a result of the refusal to honor the loan guaranty. The suit claimed that Shaw was not an obligor on the loan and that, in any event, the defense based on the regulation was barred by the Administration's failure to have notified Western, within fifteen days of being informed that Western intended to foreclose, of the Administration's desire that Western preserve personal liability on the mortgage note. For the regulation from which we quoted makes an exception to the release of the Administrator if, "after receiving [the required] notice, the Administrator shall have failed to notify the holder within 15 days to proceed in such manner as to effectively preserve the personal liability of the parties liable." The Veterans' Administration concedes that it missed the deadline by six days. The concession is a bit curious, since the record contains no evidence either of when Western's notice was received, which would have started the Veterans' Administration's clock running, or of when the Veterans' Administration's response was mailed, which by analogy to notification requirements in other commercial settings would have stopped the clock. See UCC Sec. 1-201(26) and Official Comment 26. It is not the only curiosity in the case.

The Administrator removed the case to federal court under 28 U.S.C. Sec. 1442(a)(1) (removal by federal officer), producing a host of questions that the parties did not address in their original briefs but that in response to our request have addressed in supplementary briefs. The first question is whether the suit really was removable under section 1442(a)(1). Suits against federal agencies are not, International Primate Protection League v. Administrators of Tulane Educational Fund, --- U.S. ----, 111 S.Ct. 1700, 114 L.Ed.2d 134 (1991), and while the suit in this case is nominally against the Administrator, it is against him in his official capacity and such suits are considered to be against the government itself. Loeffler v. Frank, 486 U.S. 549, 562 n. 8, 108 S.Ct. 1965, 1973 n. 8, 100 L.Ed.2d 549 (1988); General Railway Signal Co. v. Corcoran, 921 F.2d 700, 704-05 (7th Cir.1991); Duckworth v. Franzen, 780 F.2d 645, 649 (7th Cir.1985). Western did not object to the removal of the suit, however, and, ordinarily, objections to removal are waived unless made within thirty days. 28 U.S.C. Sec. 1447(c); Johnson v. Burken, 930 F.2d 1202, 1206 (7th Cir.1991). But that is provided the court to which the case was removed had subject-matter jurisdiction. For the thirty-day rule is applicable only to "defect[s] in removal procedure," 28 U.S.C. Sec. 1447(c); State v. Ivory, 906 F.2d 999, 1000 n. 1 (4th Cir.1990), and the absence of subject-matter jurisdiction, if it becomes apparent at any time before appellate remedies have been exhausted, requires that the case be dismissed, whether or not there has been an objection. American Fire & Casualty Co. v. Finn, 341 U.S. 6, 16-18, 71 S.Ct. 534, 541-42, 95 L.Ed. 702 (1951); Wiggens v. North American Equitable Life Assurance Co., 644 F.2d 1014, 1018 (4th Cir.1981). The second point is fundamental, not the first. If a case is removed to a court that has original jurisdiction over the type of case, and no objection to removal is lodged, it is as if the plaintiff had sued in federal district court in the first place.

So we must consider whether the federal district court had original jurisdiction. At first glance the answer is a resounding "no." Western has a contract claim against the United States for more than $10,000, and the jurisdiction of federal district courts over such claims is limited to claims that do not exceed that amount, the larger claims being within the jurisdiction not of the district courts but of the Claims Court, in Washington. Tucker Act, codified at 28 U.S.C. Secs. 1346(a)(2), 1491(a)(1); Lomas & Nettleton Co. v. Pierce, 636 F.2d 971 (5th Cir.1981); Garrett v. United States, 15 Cl.Ct. 204, 206 (1988). Section 1491(a)(1) confers jurisdiction on the Claims Court; section 1346(a)(2), enacted separately and sometimes referred to as the "little Tucker Act," confers concurrent jurisdiction on the district courts, provided the claim does not exceed $10,000. Preseault v. ICC, 494 U.S. 1, 110 S.Ct. 914, 920, 108 L.Ed.2d 1 (1990); see generally United States v. Testan, 424 U.S. 392, 397-98, 96 S.Ct. 948, 952-53, 47 L.Ed.2d 114 (1976).

It is true that 38 U.S.C. Sec. 1820(a)(1) empowers the Veterans' Administrator to sue or be sued in any court, state or federal, of competent jurisdiction. It was under the authority of that statute that Western filed this suit--in state court, remember--initially. But that statute, in contrast to 15 U.S.C. Sec. 634(b)(1), construed in General Railway Signal Co. v. Corcoran, supra, 921 F.2d at 705-06, is better read as a waiver of sovereign immunity than as a grant of jurisdiction. C.H. Sanders Co. v. BHAP Housing Development Fund Co., 903 F.2d 114, 118 (2d Cir.1990). It is true that the statutes which allocate federal jurisdiction over contract claims against the government between the district courts and the Claims Court do not constitute an exclusive or exhaustive grant of jurisdiction over such claims. Id. at 119-20. They make clear that the district court was not a court of competent jurisdiction for the adjudication of the claim in this case, but they do not thereby render the state court in which Western filed its suit a court of incompetent jurisdiction. All that this means, however, in conjunction with 38 U.S.C. Sec. 1820(a)(1), which waived the government's sovereign immunity to suit in either federal or state court, is that this suit was properly filed in state court. Crowel v. Administrator of Veterans' Affairs, 699 F.2d 347, 350-51 (7th Cir.1983). It emphatically does not mean that it could have been filed in federal district court instead, for federal jurisdiction is statutory and section 1820(a)(1) is not a grant of jurisdiction. And while it is true that the propriety of removal under section 1442(a)(1) would be unaffected by the district court's lack of original jurisdiction, Poss v. Lieberman, 299 F.2d 358 (2d Cir.1962); Lindy v. Lynn, 395 F.Supp. 769, 771 (E.D.Pa.1974), aff'd without opinion, 515 F.2d 507 (3d Cir.1975), because the aim of that statute is to guarantee a federal defendant a federal forum whether or not the plaintiff could have selected that forum in the first place, removal by an unauthorized party--a federal agency, as distinct from a federal officer sued in his individual capacity--does not appear to be a mere defect in the procedure for removal. It is tempting to suppose that we might transfer the case to the Claims Court under 28 U.S.C. Sec. 1631 (transfer between federal courts to cure want of jurisdiction), but this route may be foreclosed by the provision of section 1447(c) that a case which has been improperly removed "shall be remanded" to the court from which it was improperly removed, which in this case is the state court.

We need not pursue these questions. Jurisdiction is saved by the fact that Western's suit, being a suit against the Veterans' Administration to enforce the loan guaranty, arises under federal law and is therefore within the original jurisdiction of the federal district court by virtue of 28 U.S.C. Sec. 1331 (the general federal-question jurisdictional statute), making objection to removal waivable. Suits to enforce contracts with federal agencies are governed...