United States District Court, S.D. Texas, Galveston Division
MEMORANDUM OPINION AND ORDER
C. Hanks Jr. United States District Judge.
the Court is Pechua Inc.'s (“Pechua”) Motion
to Remand. Dkt. 12. Pechua argues that the Defendants did not
provide sufficient evidence of the parties' complete
diversity of citizenship in their Notice of Removal. Dkt. 1.
Pointing to recent United States Supreme Court precedent,
Pechua argues that in these circumstances, the citizenship of
the trust-and not the trustee-controls for the purpose of
determining diversity. Based upon the motion and the
parties' subsequent filings, and for the reasons that
follow, the Court will GRANT Pechua's motion to remand.
is a Nevada corporation with a lien on subject property
located in Brazoria County, Texas. The Deed of Trust
specifies that federal law and Texas state law govern. Pechua
filed Plaintiff's Original Petition and Application for
Ex Parte Temporary Restraining Order and Temporary Injunction
in the 239th Judicial District Court of Brazoria
County, Texas. Dkt. 1-2. Pechua named the following entities
as defendants: 1) America's Wholesale Lender
(“AWL”); 2) Structured Asset Securities
Corporation Mortgage Loan Trust, Mortgage Pass-Through
Certificates Series 2006-BC5 (“Trust”); 3)
Specialized Loan Servicing, LLC (“SLS”); 4) Bank
of America, N.A. (“BANA”); and 5) Mortgage
Registration Systems, Inc. (“MERS”). Pechua
sought declaratory relief regarding the statute of
limitations and the Defendants' lack of standing to
foreclose. Pechua also sought quiet title and brought claims
in trespass, negligence per se, gross negligence, and for
violations of the Texas Civil Practice and Remedies Code.
Removal Defendants' timely filed Notice of Removal states
that U.S. Bank, N.A., (“U.S. Bank”) as Trustee
for the Structured Asset Securities Corporation Mortgage Loan
Trust Mortgage Pass-Through Certificates Series 2006-BC5 was
incorrectly sued as the trust itself. It further alleges that
U.S. Bank is the correct party to be sued. The Notice of
Removal argued that this Court has subject matter
jurisdiction due to complete diversity of citizenship between
the parties. The Notice based this conclusion on the
citizenship of U.S. Bank and the other named defendants-not
on the citizenship of the members of the trust. It is
undisputed that a sufficient amount in controversy exists to
confer federal subject matter jurisdiction. The diversity of
citizenship among the non-trust entities is likewise
undisputed. Determining the appropriate citizenship of the
trust is therefore the sole issue before the Court.
Standard of Review
a defendant may remove to federal court any state court civil
action over which the federal court would have
“original jurisdiction.” 28 U.S.C. §
1441(a); see Gasch v. Hartford Acc. & Indem.
Co., 491 F.3d 278, 281 (5th Cir.2007). Federal courts
have “original jurisdiction” over civil actions
where the parties are diverse and the matter in controversy
exceeds the sum or value of $75, 000, exclusive of interests
and costs. 28 U.S.C. § 1332(a). However, such diversity
jurisdiction requires complete diversity-that is,
the citizenship of each plaintiff must be diverse from the
citizenship of each defendant. See, e.g., Caterpillar
Inc. v. Lewis, 519 U.S. 61, XX (1996). “[D]oubts
regarding whether removal jurisdiction is proper should be
resolved against federal jurisdiction.” Acuna v.
Brown & Root Inc., 200 F.3d 335, 339 (5th Cir.2000).
The removing party therefore bears the burden of showing by a
preponderance of the evidence that removal is proper.
Manguno v. Prudential Prop. & Cas. Ins. Co., 276
F.3d 720, 723 (5th Cir.2002).
entities are not ‘citizens' under the law; they
instead retain the citizenship of their individual members.
However, courts have carved out exceptions for corporations
and national banks, which are treated as citizens for
diversity purposes. Navarro Sav. Ass'n v. Lee,
446 U.S. 458, 461 (1980). A corporation is a citizen of both
the state where it is incorporated and of the state where its
principal place of business is located. 28 U.S.C. §
1332(c)(1). A national bank “is a citizen of the State
in which its main office, as set forth in its articles of
association, is located.” Wachovia Bank, N.A. v.
Schmidt, 546 U.S. 303, 307 (2006).
motion before the Court requires it to determine the
citizenship of a trust for which the trustee is a national
bank. Under Texas law, the term “trust” refers to
“the fiduciary relationship governing the trustee with
respect to the trust property.” Huie v.
Deshazo, 922 S.W.2d 920, 926 (Tex. 1996). Texas requires
plaintiffs to make the trustee a party to the action in order
to obtain relief against the trust. Ray Maloolv Trust v.
Juhl, l86 S.W .3d 568, 570 (Tex. 2006). Texas law
acknowledges several entities that are termed
“trusts” but that are not subject to the law
surrounding traditional trusts. See, e.g., Tex.
Prop. Code Ann. § 111.003(3). These “business
trusts” are instead viewed as unincorporated
associations. May v. New Century Mortgage Corp.,
CIVIL ACTION NO. 4:16-cv-1272 (S.D. Tex. Sept. 16, 2016).
have long grappled with determining the citizenship of
trusts. The United States Supreme Court recently acknowledged
that this confusion “is understandable and widely
shared.” Americold Realty Trust v. Conagra Foods,
Inc., 136 S.Ct. 1012, 1016 (2016). In Navarro
Savings Association v. Lee, the Supreme Court reaffirmed
the common law principle that trustees who are real parties
to the controversy may “sue in their own right, without
regard to the citizenship of the trust beneficiaries.”
446 U.S. 458, 465-66 (1980). A trustee is a real party to the
controversy when its control over the trust's assets is
“real and substantial.” Id. At 465.
Navarro provides several factors for determining
whether a trustee is a real party: whether the trustee has
legal title; whether the trustee manages the assets; whether
the trustee controls the litigation. Id.
four decades later, the Court revisited citizenship
determinations regarding trusts. In Americold Realty
Trust v. Conagra Foods, Inc., the Court found that a
real estate investment trust created by Maryland statute took
the citizenship of its members. 136 S.Ct. 1012, 1014 (2016).
In so finding, the Court reaffirmed the principle that- aside
from the “limited exception” carved out for
corporations-entities took the citizenship of their members.
Id. At 1015-16. The Court also rejected the
Plaintiff's argument that Navarro stands for the
proposition that “anything called a ‘trust'
possesses the citizenship of the trustees alone, not its
shareholder beneficiaries as well.” Id. at
1016. The Court distinguished between ‘traditional
trusts'-less a legal entity than a fiduciary
relationship-and so-called ‘business trusts'-that
is, entities that are called ‘trusts' but
“have little in common with this traditional
template.” Id. According to the Court, neither
the “oft-repeated rule” (that an unincorporated
entity possesses the citizenship of its members) “nor
Navarro limits an entity's membership to its
trustees just because the entity happens to call itself a
trust.” Id. Increasingly, courts within the
United States Fifth Circuit have read Americold as a
mandate to analyze whether a corporate or national bank
trustee is a real and substantial party before basing
diversity jurisdiction upon the trustee's