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FEDERAL LAND BANK OF ST. LOUIS v. KEISER

February 14, 1986

THE FEDERAL LAND BANK OF ST. LOUIS, A CORPORATION, PLAINTIFF,
v.
ALLEN N. KEISER; CAROL A. KEISER; THE UNITED STATES OF AMERICA, ACTING THROUGH THE FARMERS HOME ADMINISTRATION, UNITED STATES DEPARTMENT OF AGRICULTURE; THE FIRST NATIONAL BANK OF LITCHFIELD, A NATIONAL BANKING ASSOCIATION, TRACE PETROLEUM AND UNKNOWN OWNERS, DEFENDANTS.



The opinion of the court was delivered by: Mills, District Judge:

OPINION AND ORDER

Defendants' arguments for federal jurisdiction are specious.

The case is remanded to state court.

The matter presently before the Court is a motion by the Federal Land Bank for remand to the Circuit Court for the Fourth Judicial Circuit of Illinois at Hillsboro.

The bank brought a mortgage foreclosure suit under Ill.Rev.Stat., Ch. 110, ¶ 15-101 et seq., in the state circuit court, and the Defendants have removed that case here, claiming that there is original federal question jurisdiction under 28 U.S.C. § 1331, which may be removed to the district court under 28 U.S.C. § 1441 (b). No other grounds are alleged to exist for original jurisdiction here, such as diversity.

I

The nonfederal defendant is trying to "boot strap" his way here by the use of the Plaintiff's federal status. The defendant has no standing to do this. The federal Plaintiff could have chosen the federal forum, which was provided for its protection from local prejudice. They have not chosen to avail themselves of this and since they are bringing the action they may choose the forum by "determining the theory of the action, and so long as fraud is not involved, [they] may defeat removal to the federal courts by avoiding allegations which provide a basis for the assertion of federal jurisdiction." Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 (7th Cir. 1976).

In general, to remove a case from state court to a United States district court the defendant must establish at least two requisites: that "the action was properly commenced in the state court, and that it could have been originally commenced in federal court." Nuclear Engineering Co. v. Scott, 660 F.2d 241, 248 (7th Cir. 1981). "Removal is proper where the real nature of the claim asserted in the complaint is federal, whether or not so characterized by the Plaintiff." Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 (7th Cir. 1976). Furthermore, "A federal law, statute, or question, a right or immunity created by the Constitution or . . . law of the United States must be an element, and an essential one, of the Plaintiff's cause of action . . . i.e. . . . , the federal nature of the claim must be a basic issue in the case." Id. These cases are cited with approval in People of the State of Illinois v. Kerr-McGee Chemical Corp., 677 F.2d 571, 575 (7th Cir. 1982), where the court went on to say, "a federal question must appear on the face of the complaint . . . [and] a defendant's assertion of an issue of federal law in the pleadings or in the petition for removal does not create a federal question. Phillips Petroleum Co. v. Texaco, Inc., 415 U.S. 125, 127-28 [94 S.Ct. 1002, 1003-04, 39 L.Ed.2d 209] (1974)."

Also, "the removal statute should be construed narrowly and against removal, see Shamrock Oil and Gas Corp. v. Sheets, 313 U.S. 100, 108 [61 S.Ct. 868, 872, 85 L.Ed. 1214] (1941)," Kerr-McGee Chemical Corp., 677 F.2d at 576.

II

More specifically—and most pertinent to the case at hand—is the case of The Federal Land Bank of Columbia v. Cotton, 410 F. Supp. 169 (N.D.Ga. 1975). This case was initiated by the Federal Land Bank against defendant Cotton in the Georgia state court to foreclose upon a mortgage because the defendant Cotton had defaulted on a promissory note. The defendant had attempted to remove the case to the United States District Court, using the same arguments that are found in the case before the court, but to no avail.

Cotton argued that the case arose under the laws of the United States because the plaintiff is a federally chartered corporation formed under the Federal Farm Loan Act, 12 U.S.C. § 2011 et seq. [sic]. The court noted that due to 28 U.S.C. § 1349,*fn1 "corporations organized under federal law as [a] party," "federally-chartered corporations cannot sue or be sued in federal court merely because they are federally chartered, unless the United States government owns 51% of the capital stock." (Emphasis the court's.) Cotton at 170. The only way this case could be removed is for the Plaintiff to allege a "violation of the regulatory guidelines governing such organizations." Id. The court noted in Cotton (and the same is true here) that "plaintiff is merely seeking to enforce a contract right pursuant to the laws of the State." Id.

The Defendant before us, and the one in Cotton, argue that the federal land banks were agencies of the federal government and so removal would be proper under 28 U.S.C. § 1345. That section of the Code states: "Except as otherwise provided by Act of Congress, the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of Congress." However, the term Agency is defined at 28 U.S.C. § 451 and states in part: "The term `agency' includes . . . any corporation in which the United States has a proprietory interest, unless the context shows that such term was intended to be used in a more limited sense." The court in Cotton read this section in tandem with § 1349, supra, and found that a federally chartered corporation could not be an "agency" "unless the government has a substantial proprietory interest in the corporation or exercised considerable control over operation and policy of the corporation." Cotton at 171.

For the purposes of comparison, the defendant in Cotton and the Defendant here wish to compare the Federal Savings and Loan Insurance Corporation (FSLIC) with the federal land banks because FSLICs have been found to be "agencies" of the federal government and so there is original federal jurisdiction in all cases involving them. The court in Cotton found that federal land banks were "obviously meant to be a private, rather than governmental, corporation which" is merely subject to various federal regulations. 12 U.S.C. ยง ...


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