Zelman v. Gregg

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

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

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.

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

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

Cir. 1989).

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.

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,

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

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

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

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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