United States District Court, Northern District of Illinois, E. D
July 31, 1972
MILDRED J. BAKER, INDIVIDUALLY AND AS REPRESENTATIVE AND ON BEHALF OF ALL PERSONS, FIRMS, CORPORATIONS AND TRUSTEES WHO BORROWED MONEY FROM NORTHLAND MORTGAGE COMPANY, A MINNESOTA CORPORATION, EVIDENCED BY THEIR NOTES SECURED BY MORTGAGES ON REAL ESTATE, WHICH LOANS WERE INSURED BY AGENCIES OF THE UNITED STATES OF AMERICA, A CLASS, PLAINTIFF,
NORTHLAND MORTGAGE COMPANY, A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF MINNESOTA, DEFENDANT.
The opinion of the court was delivered by: McLAREN, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff has brought this class action on behalf of all
persons who borrowed money from defendant to finance the
purchase of homes. Defendant moves to dismiss for lack of
subject matter jurisdiction. The motion is granted.
The gravamen of the amended complaint is that defendant is
using the class' monthly advance payments for ground rents,
insurance premiums, taxes and assessments for its own benefit
(earning interest and commingling them with the general funds)
— thereby violating that portion of the mortgage contracts
which states that such payments shall be held in trust to pay
said ground rents, premiums, taxes and assessments. The amended
complaint substituted 28 U.S.C. § 1337 for 28 U.S.C. § 1332(a)
as the basis for jurisdiction and alleged that the defendant's
breach of fiduciary duty violated 24 C.F.R. § 203.4(c)(2).
Section 1337 provides jurisdiction for claims arising under
an act of Congress regulating commerce. Plaintiff argues that
her claim arises under the National Housing Act, 12 U.S.C. § 1701
et seq. and the regulations of the Federal Housing
Administration, 24 C.F.R. § 203 et seq., and its Mortgagees'
However, plaintiff has not demonstrated that this is
anything more than an action for breach of the mortgage
contract; indeed, the Court understands that a companion
action has been instituted in state court upon that ground.
The statute and regulations relied upon deal only with
relations between the mortgagee and the government, and give
mortgagors no claim to a duty owed nor a remedy. See United
States v. Neustadt, 366 U.S. 696, 709, 81 S.Ct. 1294, 6
L.Ed.2d 614 (1961). Since the federal laws involved are not an
essential element of plaintiff's cause of action and do not
afford her a remedy, there can be no jurisdiction under
Section 1337. Gully v. First National Bank of Meridian,
299 U.S. 109, 112, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Russo v.
Kirby, 453 F.2d 548, 551 (2d Cir. 1971); Schuman v. Little Bay
Const. Corp., 110 F. Supp. 903, 904 (S.D.N.Y. 1953).
The case will be dismissed and judgment will be entered for
It is so ordered.
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