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SPRINGFIELD OIL SERVS. v. MERMELSTEIN

January 12, 1996

SPRINGFIELD OIL SERVICES, INC., Plaintiff,
v.
MARVIN MERMELSTEIN, Defendant.



The opinion of the court was delivered by: ALESIA

 Before the Court is plaintiff Springfield Oil Services, Inc.'s ("Springfield Oil") motion for summary judgment pursuant to Federal Rule of Civil Procedure 56(b) on its complaint against defendant Marvin Mermelstein ("Mermelstein"). Magistrate Judge Edward A. Bobrick submitted a Report and Recommendation ("Report") finding that Springfield Oil did not present sufficient facts to enable the magistrate judge to recommend granting summary judgment in Springfield Oil's favor. As set forth fully below, the court grants Springfield Oil's motion for summary judgment on the issue of liability, but finds that an evidentiary hearing must be conducted on the issue of damages and attorney's fees.

 I. BACKGROUND

 The facts are those set out in the Report and the parties' 12(m) and 12(n) statements. (Report at 2; Pl.'s Local Rule 12(m) Statement of Uncontested Facts; Def.'s Local Rule 12(n) Statement.) In short, Springfield Oil is seeking to recover from Mermelstein over $ 200,000 that Mermelstein promised to pay through six subscription notes in return for interests in two oil and gas limited partnerships: Arizona Associates ("Arizona"), an Oklahoma limited partnership, and Sanford Associates ("Sanford"), a Texas limited partnership. The three Arizona subscription notes became due December 31, 1990, 1991, and 1992, respectively; the three Sanford subscription notes became due December 31, 1991, 1992, and 1993, respectively.

 Arizona and Sanford assigned all six notes to Springfield Oil in December 1989. Springfield Oil had performed drilling services for Arizona and Sanford pursuant to "turnkey contracts," and the assignments served to satisfy Arizona's and Sanford's debts to Springfield Oil. Mermelstein failed to pay the notes to Springfield Oil as they became due. Springfield Oil sued to recover the principal and interest due on the notes, as well as attorney's fees.

 According to his Local Rule 12(n) statement, Mermelstein admits that he executed the subscription notes described above. (Def.'s Local Rule 12(n) Statement, Resp. to Pl.'s Local Rule 12(m) Statement PP 6, 14.) However, he claims that no diversity of citizenship between the parties exists; (id. P 34); that the assignments of the notes to Springfield Oil were invalid for a variety of reasons; (id. PP 1-5, 7-17, 25, 31); and that the attorney's fees provision in the subscription notes is invalid. (Def.'s Local Rule 12(n) Statement P 14.)

 Magistrate Judge Bobrick found that this court properly has diversity jurisdiction over this case because Springfield Oil is a New York corporation with its primary place of business in New York, and thus is a New York resident, while Mermelstein is an Illinois resident.

 Magistrate Judge Bobrick then found that several questions of fact still remained regarding whether Arizona and Sanford were limited partnerships, since Springfield Oil had not produced a limited partnership agreement signed by all of the parties, and to whom Arizona and Sanford intended to endorse the subscription notes -- Springfield Oil, a New York corporation, or Springfield Oil, a Texas corporation.

 Because these questions remained, the magistrate judge found that Springfield's submissions were not dispositive of the issues in the case, and that it would be inappropriate for the court to act as Springfield's advocate and develop its case further. As Magistrate Judge Bobrick noted,

 
[the] seminal elements of [Springfield Oil's] case .... might be easily proved, but we cannot merely assume they are true without more from Springfield. It may well be that, in the end, this turns out to be a 'straightforward collection case,' but the present deficiencies in the record suggest it is not. Unless and until those deficiencies are cured, we cannot find this case appropriate for summary judgment.

 (Report at 8.) Accordingly, the magistrate judge recommended denying Springfield Oil's motion for summary judgment.

 II. DISCUSSION

 A. Standard of Review

 This court reviews de novo the findings of a magistrate judge. FED. R. CIV. P. 72(b); Delgado v. Bowen, 782 F.2d 79, 82 (7th Cir. 1986). A motion for summary judgment must be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). The burden is on the moving party to show that no genuine issues of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S. Ct. 2505, 2514, 91 L. Ed. 2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986).

 Once the moving party presents a prima facie showing that he is entitled to judgment as a matter of law, the party opposing the motion may not rest upon the mere allegations or denials in its pleadings but must set forth specific facts showing that a genuine issue for trial exists. Anderson, 477 U.S. at 256-57, 106 S. Ct. at 2514: Celotex, 477 U.S. at 324, 106 S. Ct. at 2553; Schroeder v. Lufthansa German Airlines, 875 F.2d 613, 620 (7th Cir. 1989). All reasonable factual inferences must be viewed in favor of the non-moving party. Holland v. Jefferson Natl. Life Ins. Co., 883 F.2d 1307, 1312 (7th Cir. 1989).

 B. Liability of Mermelstein on the subscription notes

 Springfield Oil considers this a simple case: Mermelstein executed the subscription notes, making him liable to Arizona and Sanford on the notes; Arizona and Sanford assigned the notes to Springfield Oil; the notes have become due; and therefore Mermelstein is liable to Springfield Oil on the notes. Though Mermelstein admits executing the subscription notes, he argues vehemently that he is not liable to Springfield Oil on the notes.

 1. Diversity of citizenship

 Mermelstein contends that this court does not have diversity jurisdiction over this case because both the original and amended complaints allege that Springfield Oil Services, Inc., is a Texas corporation, when in fact it is a New York corporation. Thus, according to Mermelstein, the entity that sued him is nonexistent. Springfield Oil counters that, at most, the complaint contains a mistaken allegation of jurisdiction, which can be amended freely pursuant to 28 U.S.C. § 1653.

 The court agrees with Springfield Oil. Section 1653 is meant to address incorrect statements about jurisdiction that actually exists. See Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830-31, 104 L. Ed. 2d 893, 109 S. Ct. 2218 (1989). In the present case, diversity jurisdiction actually exists, since Springfield Oil is a New York resident, Mermelstein is an Illinois resident, and the case involves substantially more than the jurisdictional amount. See 28 U.S.C. § 1332. The complaint simply incorrectly states the state of incorporation of Springfield Oil. This is precisely the type of mistake for which section 1653 is intended to provide relief.

 Accordingly, Springfield Oil is given leave to amend its amended complaint pursuant to 28 U.S.C. § 1653 to state correctly the allegation of jurisdiction. The court finds that diversity of citizenship between the parties in this case exists and that this ...


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