Zelman v. Gregg

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 93-1416

                           VICTOR ZELMAN and BETTY ZELMAN,

                               Plaintiffs, Appellants,

                                          v.

             RICHARD L. GREGG, COMMISSIONER OF THE PUBLIC DEPT., ET AL.,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                              FOR THE DISTRICT OF MAINE

                     [Hon. D. Brock Hornby, U.S. District Judge]
                                            ___________________

                                 ____________________

                                        Before

                                Cyr, Boudin and Stahl,

                                   Circuit Judges.
                                   ______________

                                 ____________________

            Victor Zelman and Betty Zelman on brief pro se.
            _____________     ____________
            Stuart E.  Schiffer, Acting  Assistant  Attorney  General, Jay  P.
            ___________________                                        _______
        McCloskey, United States Attorney, Barbara  C. Biddle and Deborah Ruth
        _________                          __________________     ____________
        Kant on brief for appellees.
        ____

____________________

                                  February 17, 1994
                                 ____________________

BOUDIN, Circuit Judge.  This is a suit by the owners  of
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            federal savings bonds that were allegedly stolen and redeemed

            without the owners' permission.  The district court dismissed

            the suit on the ground that it had been brought in  the wrong

            court.  With certain clarifications, we affirm.

                                          I.

                 In this case Victor and Betty Zelman, a husband and wife

            residing in  Maine, brought  suit pro  se  in district  court
                                              _______

            against the Secretary of the Treasury and the Commissioner of

            the Public Debt.   Their complaint alleged that  six series E

            bonds issued to  one or both of the  Zelmans, currently worth

            (in total) more  than $10,000, had been stolen  from them and

            that  the government was now refusing to issue replacements.1

            Claiming  that the  government had  breached the  contractual

            rights   reflected  in  the  bonds,  the  Zelmans  sought  an

            injunction to require the issuance of replacements.  

                 Prior  to  bringing  suit,  the  Zelmans  had  requested

            replacements from the Bureau of Public Debt which administers

            the  savings bond  program for  the Treasury.   In  reply the

            Bureau told  the Zelmans  the following:   first,  government

            records showed the bonds to  have been redeemed more than ten

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                 1The series E  bonds assertedly stolen from  the Zelmans
            appear  to  have  been registered  bonds  rather  than bearer
            bonds.  See 31 C.F.R.   315.5 ("Savings bonds are issued only
                    ___
            in  registered form. . . .  The registration is conclusive of
            ownership,  except as  provided  in     315.49  [relating  to
            correction of error in registration].").

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years   ago;   second,   government  regulations   create   a

            presumption that redeemed bonds have been properly paid if no

            claims have been  filed within ten  years of redemption;  and

            third,  since the  government now  retains  no other  records

            after ten years has elapsed following redemption, "no details

            regarding .  . .  redemption [of the  Zelmans' bonds]  can be

            furnished."

                 Broadly  speaking   and  with   certain  qualifications,

            government  bonds  are   viewed  as  contracts  between   the

            government and the owners, whose terms are fixed by statutes,

            regulations  and  offering  circulars.   Estate  of  Curry v.
                                                     _________________

            United States,  409 F.2d 671,  675 (6th Cir. 1969);  Wolak v.
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            United States,  366 F.  Supp. 1106,  1111-12 (D.  Conn. 1973)
            _____________

            (collecting and quoting numerous cases).  In response  to the

            Zelmans' suit, which explicitly alleged a breach of contract,

            the U.S.  Attorney asserted  that the  district court  lacked

            subject matter jurisdiction  over the suit.  This  is so, the

            U.S. Attorney argued in a motion to dismiss, because contract

            claims  against the United States for amounts of over $10,000

            may  be  brought only  in  the Claims  Court.   28  U.S.C.   

            1346(a)(1), 1491(a)(1).  

                 The district  court agreed with the  government, stating

            that "since this is an action for breach of contract and more

            than $10,000  is  at  stake, the  Tucker  Act  provides  that

            jurisdiction exists only in the  . . . Claims  Court . . . ."

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Noting that no request for such a transfer had been made, see
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            28 U.S.C.    1631, the district court dismissed  the case for

            want of jurisdiction and without prejudice to a new action in

            a court with jurisdiction.  The Zelmans have sought review in

            this court, arguing that the dismissal was improper  and that

            redress apart from damages should be afforded to them.

                                         II.

                 On appeal, the Zelmans first argue that each bond should

            be treated  as a  separate contract  and that,  individually,

            each such claim  in this case is under $10,000 and within the

            jurisdiction  of the district court.  The government responds

            that  there  is  "some authority"  for  the  proposition that

            separate  claims for under $10,000 should not be aggregated;2

            but  it   says  that   the  district   court  still   "lacked

            jurisdiction" to afford the only remedy sought by the Zelmans

            in  this case, namely, an injunction directing re-issuance of

            the bonds.   Indeed, we  have held that "[f]ederal  courts do

            not  have  the power  to  order specific  performance  by the

            United  States  of   its  alleged  contractual  obligations."

            Coggeshall Development Corp.  v. Diamond, 884 F.2d  1, 3 (1st
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            Cir. 1989).

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                 2See e.g., Baker  v. United  States, 722  F.2d 517,  518
                  ___ ____  _____     ______________
            (9th  Cir. 1983);  United States  v.  Louisville &  Nashville
                               _____________      _______________________
            R.R., 221 F.2d 698, 701-03 (6th Cir. 1955); Sutcliffe Storage
            ____                                        _________________
            & Warehouse Co.  v. United States, 162 F.2d  849, 851-52 (1st
            _______________     _____________
            Cir. 1947);   see also 14 C.  Wright, A. Miller &  E. Cooper,
                          ________
            Federal Practice and Procedure,   3647 at 287 (2d ed. 1985).
            ______________________________

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One  could argue  about  whether "jurisdiction"--a  term

            with many shades of meaning--is  lacking if the complaint has

            asserted  a  colorable claim  (in  this case,  for  breach of

            contract) but named  an unavailable remedy.   But the Zelmans

            did not  argue to the district  court that the claims  may be

            disaggregated  (although  two sentences  in  their memorandum

            hinted at such an argument)  and even now the government does

            not quite  concede the point.   We are reluctant  to overturn

            the district court in a  civil suit based on a disaggregation

            theory not raised in that court.  Indeed, the government does

            not confess error  on this issue and  may dispute or hope  to

            distinguish the disaggregation precedents.

                 Accordingly,  we  are  disposed to  affirm  the district

            court but without  prejudice to the Zelmans' filing  of a new

            suit  in the same district court if they wish to pursue their

            disaggregation theory.  We say "if" because  the Claims Court

            has unquestioned jurisdiction, assuming that the  Zelmans are

            now prepared to accept damages  as their relief.  The Zelmans

            might prefer to refile their suit in the Maine district court

            or they might  conclude that the Claims  Court, although more

            distant, is  a preferable  forum  in order  to avoid  another

            possible round  of jurisdictional  controversy.   The initial

            choice is theirs.

                 But we  have something more  to say about the  course of

            this matter.  The pages of correspondence between the Zelmans

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and  the  Treasury's  Bureau  of  the  Public  Debt  will  be

            familiar, at least as a prototype, to anyone who has ventured

            to assert a money claim against a public  body.  Although the

            Bureau's letters to the Zelmans  (and later to their senator)

            may well  be accurate  in a literal  sense, most  lay readers

            would  likely  believe  that the  Bureau  had  determined the

            Zelmans' claim to be without merit.   The critical sentences,

            repeated in several of the letters, are these:

                      [T]he regulations governing savings bonds
                      provide that bonds for which no claim has
                      been  filed   within  10  years   of  the
                      recorded  date  of   redemption  will  be
                      presumed to have been properly paid.   At
                      that  time, the  payment records  of such
                      bonds  are  destroyed  and  from then  on
                      there  is no  data  available from  which
                      photographs  or  other  details regarding
                      the redemption can be obtained.

                 The  critical phrase,  "presumed  to have  been properly

            paid,"  is   taken  verbatim   from   the  current   Treasury

            regulations, 31 C.F.R.    315.29(b), although the  regulation

            in question is not cited in the letters.  The word "presumed"

            has more  than one  meaning but  it quite  often refers to  a

            rebuttable presumption; that  is, when the predicate  fact is

            proved  (here, that the  bonds were redeemed  by someone over

            ten years ago), then  some other "presumed" fact (here,  that

            the bonds were  redeemed by their real owners)  will be taken

            to be true--unless and until the party disputing the presumed

            fact offers substantial countervailing evidence.  See Fed. R.
                                                              ___

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Evid. 301; 2 J. Strong, McCormick on Evidence   342 (4th  Ed.
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            1992).3 

                 Assuming for purposes of discussion that  the regulation

            refers to  a rebuttable  presumption, then  quite likely  the

            Zelmans have  the burden  of offering  evidence to  establish

            that the  bonds were  stolen from them  and if  redeemed were

            redeemed  without their permission.   They might  have such a

            burden even  without the  presumption.   The  Zelmans may  be

            hindered because  the  Bureau has apparently disposed  of the

            records  of redemption  apart  from  recording  the  fact  of

            redemption.    Still,  a factfinder  might  well  believe the

            Zelmans, especially if they can corroborate the theft of  the

            bonds.   Stolen bonds are  unlikely to have been  redeemed by

            their rightful owner.

                 If the Bureau regards the presumption as rebuttable, one

            might expect  at least one of its letters  to say this to the

            Zelmans  in plain  language and,  further, to tell  them what

            process  (a review  board, a  court)  is available  to get  a

            decision on the factual issue.   If instead the Bureau thinks

____________________

                 3Occasionally the term "presumption" is used to indicate
            that  the  presumed  fact  is  conclusively  or  irrebuttably
            presumed and  the opponent  will not be  allowed to  show the
            contrary.  See e.g., Stanley  v. Illinois, 405 U.S. 645, 656-
                       ___ ____  _______     ________
            57  (1972) (voiding  irrebuttable  statutory presumption);  2
            McCormick at 451.  And,  to make matters even more confusing,
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            the term  is sometimes  used to refer  to a  mere permissible
            inference.  See  County Court of Ulster County  v. Allen, 442
                        ___  _____________________________     _____
            U.S.  140, 157 (1979)  (referring to "an  entirely permissive
            inference  or   presumption,  which   allows--but  does   not
            require"--an inference of one fact from proof of another).

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that  the regulation  creates an  irrebuttable presumption--a

            kind  of mini-statute of  limitations--then it ought  to have

            said so plainly  to the Zelmans.   To leave  the matter in  a

            state of confusion is not an attractive posture for an agency

            that must face this very issue with some frequency.

                 The  government is  a huge  body  employing millions  of

            people,  and  needs  to use  regulations,  routines  and form

            letters.  It is also right  that its servants should be chary

            about claims against the Treasury, claims that are often ill-

            founded and sometimes dishonest.  But  it is not too much  to

            ask that the Bureau of the Public Debt give a plain statement

            of  its  position--and   even  useful  directions--to   those

            citizens  who have lent the government money, seek repayment,

            and have very little idea  how to navigate through the forest

            of rules and procedures.

                                         III.

                 The Zelmans'  filings, both in the district court and in

            this  court, argue variously that case law supports equitable

            relief; that it  is a violation of the due  process clause to

            apply regulation    315.29(b) as a statute  of limitations to

            bonds  sold before the  regulation was promulgated;  and that

            the  records concerning the  redemption should not  have been

            destroyed since without  them the Zelmans cannot  prove their

            case.    These arguments  do  not  alter  our view  that  the

            district court should be affirmed.

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The  Zelmans' argument for equitable relief rests on the

            ground that the  government had an obligation,  under the law

            as  it  existed when  the  bonds were  purchased,  to replace
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            stolen  bonds that  have  been  improperly  redeemed.    This

            argument is  difficult to appraise  because the  text of  the

            provisions relied  upon by the  Zelmans is not quoted  by the

            Zelmans,  and the  statutes  and  regulations  to  which  the

            Zelmans cite do not clearly set forth the obligation that the

            Zelmans impute.4   Whether such an  obligation might be  made

            out, however, is an issue we need not determine.

                 On  the  Zelmans'   own  version  of  the   matter,  the

            obligation  on which  they rely  existed  under statutory  or

            regulatory language that  has since been repealed.   Although

            their position is not clearly explained, they may  be arguing

            that the  procedures and  remedies that  applied in 1968  and

            1969 were incorporated into the bond contracts by implication

            or by the offering circular (which is not, however, quoted or

            cited).   See generally Wolak, 366  F. Supp. at  1113-14.  If
                      _____________ _____

            this is their argument, then  the Zelmans are back to arguing

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                 4Former  31 U.S.C.   738a(a) provided that the Secretary
            of  the  Treasury,  when  it   is  "clearly  proved  to   the
            satisfaction of the Secretary" that non-bearer  securities of
            the United  States have been lost or stolen, "shall" re-issue
            a security "which  has not matured or  become redeemable" and
            shall  make  payment  on  one  that "has  matured  or  become
            redeemable."  This section was supplanted in 1971 by one that
            said that  the Secretary  had authority to  grant relief  for
            loss  or theft  of government  securities, 85  Stat.  74; the
            current  comparable version  is  31  U.S.C.     3125(a)  (The
            Secretary . . . may provide relief . . .)".

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that  the government  has  breached  its  contract  and  that

            equitable relief should be afforded for this breach.

                 The  difficulty is  that it is  settled in  this circuit

            that equitable relief  cannot be obtained on  contract claims

            against the government, Coggeshall, 884 F.2d at 3,  with very
                                    __________

            narrow  statutory exceptions that are  not here relevant.  28

            U.S.C.     1491(a)(2), (3).   This rule  may not  be followed

            everywhere  and it  can  be especially  hard  to apply  where

            contract claims are  mingled with other claims  not dependent

            on  contract.  See, e.g., Transohio Savings Bank v. Director,
                           ___  ____  ______________________    _________

            Office of Thrift Supervision, 967  F.2d 598 (D.C. Cir. 1992).
            ____________________________

            However, the rule remains the law of this circuit and may not

            normally be reconsidered except by the court en banc.5
                                                         _______

                 The  Zelmans'  next  argument is  that  it  violates due

            process  for the  government  to  impose, through  regulation

            315.29, a ten-year  statute of limitations (measured  from an

            illegal  redemption)  on  requests  by  rightful  owners  for

            replacement  or  payment  of their  stolen  bonds.   No  such

            regulation  existed, say the  Zelmans, when their  bonds were

            purchased; and (they  say) their bonds have  been extended by

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                 5As already  noted, the Zelmans have not  pointed to any
            law currently in  force that gives them a  statutory right to
            re-issuance  of the  bonds (as  opposed to  damages based  on
            breach of  contract).  Thus  we have no occasion  to consider
            whether or  when--despite the  Tucker  Act--a district  court
            might  be  able  to grant  injunctive  relief,  with monetary
            implications, based on statute rather than contract.  Compare
                                                                  _______
            Esch  v. Yeutter,  876 F.2d  976  (D.C. Cir.  1989); Hahn  v.
            ____     _______                                     ____
            United States, 787 F.2d 581 (3d Cir. 1985).
            _____________

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the Treasury for thirty years past their original maturity so

            the Zelmans had no earlier reason to inquire into their theft

            or illegal redemption.  

                 It will be time enough for the courts to consider such a

            constitutional  attack  on  the regulation  if  and  when the

            government  endorses the  reading  of  the  regulation  as  a

            statute of limitations and if and when the courts accept that

            reading.   As we  have already noted,  the regulation  on its

            face is  susceptible to  a quite  different reading,  namely,

            that  it creates a rebuttable presumption (starting ten years

            after  a redemption) that  the bonds were  lawfully redeemed.

            This  in turn would  leave it open  to the rightful  owner to

            show that the bonds were lost or stolen and were not redeemed

            by the rightful owner.  

                 The Zelmans, appearing pro se, may misunderstand what is
                                        ______

            entailed in a  showing of this kind.   It would not  be their

            automatic obligation to establish the details of the theft or

            identify the party  who wrongfully redeemed  the bonds.   One

            might expect them to shed some  light on where the bonds were

            kept, how they might have been purloined, why it took so long

            to discover  the loss, whether  the loss was reported  to the

            police,  and what  investigations were  made;  but these  are

            matters that  go to plausibility  and corroboration.   If the

            Zelmans tell a plausible story, nothing prevents the trier of

            fact from accepting it.

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As for the  details of the redemption, all  that a trier

            of fact  would likely  demand from  the Zelmans  is testimony

            that they did not redeem  the bonds, did not authorize anyone

            to do so,  and have no  idea who did  redeem the bonds.   The

            fact that  the government has  destroyed the records  is more

            likely  to inconvenience it rather than the Zelmans, assuming

            that they have a plausible story to tell.  Of course,  we are

            proceeding on the arguendo premise that the regulation is not
                              ________

            a  statute  of  limitations;  but  if  it  is  a  statute  of

            limitations,  the  destruction  of  the  records is  probably

            irrelevant anyway.  

                 We  do not  know whether the  Zelmans will  refile their

            contract claim lawsuit in the district court or in the Claims

            Court.  But we trust that, once a  forum with jurisdiction is

            chosen, government counsel will pay some mind to the question

            whether the Zelmans have a valid claim against the government

            or  how to  get this  issue  decided at  minimum expense  and

            without further delay.  Thus far, this case is not much of an

            advertisement for savings bonds.

                 The judgment of  the district court is  affirmed without
                                                         ________

            prejudice to the filing of a  new suit for damages either  in

            the  Claims  Court  or  in the  district  court  (subject  to

            resolution of the disaggregation issue).  No costs.

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