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CONNERS v. FDIC

July 9, 1941

CONNERS et al.
v.
FEDERAL DEPOSIT INS. CORPORATION



The opinion of the court was delivered by: KALODNER

This case involves the question of the removal of causes from State to Federal courts.

The facts are as follows:

 The original proceeding in this matter was instituted by the substituted trustees of the E.P. Wilbur Trust Company Mortgage Certificate Pool (hereinafter designated as Pool) in the Court of Common Pleas of Northampton County, Pennsylvania, to determine the present owners of the undivided interest in the Pool, the amount of interest of each such participant, and the priorities or subordinations, if any, among participants.

 It appears that prior to its closing by the State Secretary of Banking, the E.P. Wilbur Trust Company of Bethlehem, Pennsylvania, maintained the Pool. It had issued and outstanding Series "A" guaranteed certificates (as to principal and interest) in the original face amount of $1,435,600 and Series "B" unguaranteed certificates in the original face amount of $230,300.

 Subsequent to the closing of the Trust Company, various payments were made to the certificate holders by the Secretary of Banking, who had taken possession of the institution, and later by the substituted trustees of the Pool, who had been appointed by the Court of Common Pleas of Northampton County.

 Among the holders of certificates to whom distributions were made was the Federal Deposit Insurace Corporation, the respondent in the instant proceeding (hereinafter designated as the F.D.I.C.), which held Series "A" certificates in the original face amount of $14,900 and Series "B" certificates in the original face amount of $173,80. All the certificates had been acquired by the F.D.I.C. from the Trust Company, the immediate prior holder and guarantor of Series "A", on November 16, 1935, which was the last day upon which the Trust Company was open for unrestricted banking business.

 On June 6, 1940, during the taking of testimony on the original petition, the movants filed a "Petition Supplemental to Objection to Allow Participation". This supplemental petition stated that the F.D.I.C., being subordinated in interest to other certificate holders, was not entitled to the principal income payments theretofore paid to it, and prayed that the court order the F.D.I.C. to pay over to the trustees of the Pool the sum of $77,933.10 theretofore distributed to it.

 Upon the filing of this supplemental petition the F.D.I.C. entered a special appearance in the Northampton County Common Pleas Court and filed a petition for the removal of the action for restitution set forth in the supplemental petition on the ground that it constituted a second cause of action, "separate and distinct" from that asserted by the movants in their original objections at the February 6, 1940, hearing which was concerned with priorities and subordinations in the Pool.

 As a result of the F.D.I.C.'s petition for removal the cause was removed to this court, and the movants thereupon filed the instant proceeding to remand back to the State court.

 The contentions of the parties in the instant proceeding, briefly summarized, are as follows:

 The respondent F.D.I.C. contends that the restitution action embodied in the June 6, 1940 supplemental petition constitutes a "separate and distinct" controversy, removable under the Federal Removal Statute, Section 71, Title 28 U.S.C.A., Section 28 of the Judicial Code.

 The movants contend that the restitution proceeding is part and parcel of the administration of the Pool by the court-appointed substituted trustees and not a "separate and distinct" controversy and therefore not removable.

 The relevant provisions of the Federal Removal Statute, supra, are as follows: "Any suit of a civil nature, at law or in equity, arising under the Constitution or laws of the United States, or treaties made, or which shall be made, under their authority, of which the district courts of the United States are given original jurisdiction, in any State court, may be removed by the defendant or defendants therein to the district court of the United States for the proper district. Any other suit of a civil nature, at law or in equity, of which the district courts of the United States are given jurisdiction, in any State court, may be removed into the district court of the United States for the proper district by the defendant or defendants therein, being nonresidents of that State. And when in any suit mentioned in this section there shall be a controversy which is wholly between citizens of different States, and which can be fully determined as betwen them, then either one or more of the defendants actually interested in such controversy may remove said suit into the district court of the United States for the proper district."

 An examination of the language of the Act leaves much to be desired on the score of clarity. When a suit wholly involves a Federal question, or where there is a complete diversity of citizenship between the plaintiffs on the one side and the defendants on ther other, the problem of removal as provided by the Act is relatively simple. The confusion arises: (a) on the removability of a cause ...


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