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SROUR v. BARNES

February 25, 1987

Farid Srour, Plaintiff,
v.
F. Gordon Barnes, Defendant



The opinion of the court was delivered by: GASCH

Honorable Oliver Gasch, Senior District Judge

 MEMORANDUM

 I. BACKGROUND

 On March 9, 1986, plaintiff, Farid Srour, agreed to sell and defendant, F. Gordon Barnes, agreed to buy a parcel of real property located in the District of Columbia. The price agreed upon by the parties for the lot and for the single family dwelling which plaintiff Srour was to build upon it was $ 395,000. The parties memorialized their understanding by signing a standard form contract for the sale of land. They altered the otherwise routine nature of the transaction by making the purchaser's duty to buy contingent upon the seller's duty to accept the purchaser's existing home in trade. In standard form, the contract also required the purchaser to pay the seller a deposit of $ 10,000. Barnes accordingly tendered Srour a check drawn in this amount. However, on or about March 22, 1986, the check was returned to Srour marked "insufficient funds." The plaintiff alleges that this action was intentional. The defendant claims the event was a mistake which occurred as a consequence of his financial manager's movement of certain funds without his knowledge. For reasons disputed by the parties, no deposit has ever been paid to the plaintiff and no settlement ever took place.

 The issue before the Court is a narrow one. Because the defendant never purchased the bargained for the real estate, the plaintiff claims that the defendant breached the sales agreement. Under the terms of the contract, plaintiff elects the liquidated remedy of forfeiture of Barnes' yet unpaid $ 10,000 deposit. This is the substance of Count I of the plaintiff's complaint. Count II requests the Court to award punitive damages in the amount of $ 100,000. The plaintiff claims that punitive damages are appropriate in this contract action because the defendant's alleged breach of contract constitutes a willful tort.

 A. Jurisdiction

 The plaintiff's complaint grounds jurisdiction on the diversity statute, which states, in relevant part,

 
(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $ 10,000, exclusive of interest and costs, and is between -- (1) citizens of different States . . . .

 28 U.S.C. ยง 1332 (emphasis supplied). Thus, to satisfy diversity jurisdiction, the plaintiff must demonstrate geographic diversity of the parties and must plead damages satisfying the amount in controversy requirement. Geographic diversity is uncontested. However, the defendant contests the plaintiff's allegation that more than $ 10,000 is at stake in this lawsuit. On its face, the plaintiff's complaint appears to satisfy the amount in controversy mandated by section 1332. Plaintiff's Count I seeks liquidated damages in the amount of exactly $ 10,000. Count II seeks punitive damages in the amount of $ 100,000. In addition, the plaintiff requests interest due, the costs of bringing this lawsuit, and attorney fees.

 The defendant contends that assuming, arguendo, the $ 10,000 in liquidated damages is recoverable, this amount, in and of itself, does not confer jurisdiction on the Court. Section 1332 requires the amount in controversy to "exceed[s] the sum or value of $ 10,000. . . ." Id. Moreover, by its own terms the amount in controversy must be "exclusive of interest and costs." Id. Thus, standing alone, the plaintiff's liquidated damages claim and his requests for interest and costs do not exceed $ 10,000 and therefore do not satisfy the amount in controversy requirement of section 1332. The question the Court must decide is whether either the plaintiff's claim for punitive damages or his claim for attorney fees is sufficient to boost the amount in controversy over the $ 10,000 hurdle mandated by section 1332.

 It is axiomatic that federal courts are courts of limited jurisdiction. They may hear only those cases entrusted to them by a grant of power contained in either the Constitution or by Congress. City of Kenosha v. Bruno, 412 U.S. 507, 511, 37 L. Ed. 2d 109, 93 S. Ct. 2222 (1973). It would therefore be an error of constitutional dimension for the court to entertain a claim not properly within its jurisdiction.

 The formula for determining whether the amount in controversy is sufficient has been repeatedly stated by the Supreme Court. The test is stated as follows:

 
The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim ...

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