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SUMMIT BANK v. U.S. DEP'T OF THE TREASURY-BUREAU O

October 29, 1998

SUMMIT BANK, Plaintiff,
v.
U.S. DEPARTMENT OF THE TREASURY-BUREAU OF THE PUBLIC DEBT; COMMISSIONER, U.S. DEPARTMENT OF THE TREASURY-BUREAU OF THE PUBLIC DEBT; ESTATE OF SHIRLEY M. STARLING, DECEASED; JAMES D. STARLING, INDIVIDUALLY AND AS EXECUTOR OF THE ESTATE OF SHIRLEY M. STARLING; LINDA R. MELVIN; JOHN DOES 1-10; AND JANE DOES 1-10 AND ABC COMPANIES 1-10, Defendants.



The opinion of the court was delivered by: WALLS

Walls, District Judge

 Federal defendant, the U.S. Department of the Treasury ("Treasury") moves to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim. The non-federal defendants are the estate of Shirley M. Starling and James Starling (individually and as executor of the estate) and Linda Melvin. Plaintiff Summit Bank ("Summit") has filed a cross motion for summary judgment in its favor. Pursuant to Rule 78 of the Federal Rules of Civil Procedure, the Court considers these motions without oral argument. For reasons that follow, defendant Treasury's motion is granted. Plaintiff's motion for summary judgment is denied. The case is transferred to the United States Court of Claims.

 Factual Background

 Over a period of years, David R. Starling purchased one-hundred and twenty Series EE and E United States savings bonds in various denominations. His wife's name, Shirley M. Starling, was inscribed on twenty-one of the bonds as the payee upon his death and on seventy-five of the bonds as an alternative payee. Compl. PP 18, 19. Mrs. Starling's name was inscribed on ten of the bonds as the original purchaser and alternative payee. Id. P 10. The names of David R. Starling and Rose Lee Starling, his daughter, were on fourteen of the bonds as alternative payees. Id. P 8, 19.

 David R. Starling died on September 29, 1989. Sometime in November 1991, Shirley M. Starling went to live with her daughter, Linda Melvin. At this time, she was in possession of the aforementioned savings bonds. According to Linda Melvin's certification, in May 1992, she was asked by her mother to help cash the bonds. Melvin Certif. P 5. Such assistance was required because Mrs. Starling's left hand had been partially crippled by a stroke. Id.

 On May 12, 1992 fourteen savings bonds registered to "David R. Starling or Rose Lee Starling" in the amount of $ 2,576.24 were paid by United Jersey Bank (the former name of Summit Bank) upon requests for payment signed "Linda R. Melvin, POA." *fn1" Hawes Declaration, PP 4,6. Five years later, on October 9, 1997, $ 3,438.40 was paid to Rose Lee Starling by the Department of the Treasury, Bureau of Public Debt ("Public Debt") to satisfy the obligation of those bonds. Hawes P 6.

 On May 13, 1992, the bank redeemed fifty-eight savings bonds registered in the co-ownership of David R. Starling and Shirley M. Starling. Compl. P 19; Melvin Declaration PP 6, 7; Hawes Declaration PP 4, 7. Linda Melvin had printed the name of Shirley M. Starling on the back of these bonds and signed the payment requests "Linda Melvin, POA." Id. On June 15, 1992, the bank paid twenty-one savings bonds registered "David R. Starling POD Shirley M. Starling," also upon requests for payment signed "Linda R. Melvin POA." Melvin Declaration P 9; Hawes Declaration PP 4, 7. On August 3, 1992, the bank redeemed twenty-seven savings bonds registered "David R. Starling or Shirley M. Starling" upon requests signed "Linda R. Melvin POA." Compl. PP 21, 29; Melvin Declaration P 8; Hawes Declaration PP 4, 7.

 Shirley M. Starling died on December 19, 1996. The executor of her estate, James D. Starling - Shirley's son and Linda Melvin's half-brother - lodged an inquiry into the status of the bonds with Public Debt. Compl. P 31; James Starling Certif. P 3. Public Debt determined that the bond redemptions using the power of attorney and endorsements by Linda Melvin, being a person not named on the bonds, violated the applicable regulations. On October 9, 1997, Public Debt issued a check of $ 24,643.88, the amount of these redemption transactions, payable to James D. Starling as the executor of the estate of Shirley M. Starling. Hawes Declaration P 7.

 Public Debt then wrote to the bank charging that the bank's redemption of the bonds violated Section 321.9(c) of the Department of the Treasury Circular, No. 750, as revised. Compl. Ex. A. The letter requested reimbursement by the bank of the government's payments to Rose Lee Starling and the estate of Shirley M. Starling. Id. The bank replied, contradicting certain factual allegations made in the letter. The bank also requested a review of Public Debt's decision regarding the illegality of the redemptions and more information. Compl. Ex. B. In July 1997, Public Debt finally decided to charge the bank with liability for the redemption transactions, which amount had grown to $ 27,337.98 (interest and administrative costs added).

 The bank refused to reimburse the government and instead has brought this complaint against Public Debt, the Starlings, Linda Melvin, and certain fictitious defendants. Count One of its complaint seeks a determination reversing the findings and conclusions of Public Debt, declaring that the actions taken by the bank to redeem the subject bonds complied with applicable law and regulations, or declaring that the applicable regulations are arbitrary and capricious, declaring that Summit has no liability, permanently enjoining Public Debt from offsetting or otherwise seizing any property of the bank, and permanently enjoining all defendants from prosecuting any further claims or otherwise seeking to recover money with regard to the bonds. Counts Two, Three and Four request permanent injunctions, enjoining the Starlings, certain beneficiaries of the Starling estate and Linda Melvin from bringing any further claims or otherwise seeking to recover money in connection with the bonds. The bank also seeks indemnification from these defendants for any amounts that it may be liable, ultimately, to Public Debt. Count Five requests that the Court immediately and temporarily enjoin Public Debt from seizing any bank property and from making any additional payments or substitutes for the bonds. Count Five also demands that the non-federal defendants be immediately and temporarily restrained from cashing any checks or redeeming any other instruments related to the bonds, and the freezing of assets of other defendants to the extent of any redemption payments.

 Analysis

 1. Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim

 Section 1491 of 28 U.S.C. provides that:

 
(a)(1) The United States Claims Court shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or ...

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