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Bryant v. CIT Group/Consumer Finance

United States District Court, S.D. Texas, Houston Division

April 12, 2017

Stanley J. Bryant, Plaintiff,
v.
The CIT Group/Consumer Finance, et al., Defendants.

MEMORANDUM OPINION AND ORDER

          Gray H. Miller United States District Judge.

         Pending before the court is a motion to remand filed by plaintiff Stanley J. Bryant. Dkt. 16. After considering the motion, response, reply, supplemental authority, and the applicable law, the court is of the opinion that the motion to remand should be DENIED.

         I. Background

         This case relates to the foreclosure sale of property located at 2234 Dawn Shadow Way, Fresno, Texas 77545 (the “Property”). Dkt. 20 (first amended complaint). Bryant filed suit against the defendants[1] in the 434th Judicial District Court in Fort Bend County, Texas, on May 17, 2016. Dkt. 1-5 (original petition). He asserts that he executed a mortgage note on the Property secured by a deed of trust (the “Loan”) with the CIT Group/Consumer Finance, Inc. (“CIT”) on December 20, 2005. Dkt. 20. However, he fell into default in 2011 after experiencing medical problems. Id. He alleges that he received several notices of sale and that the Property sold on April 5, 2016. Id. The purchaser was defendant Bank of New York Mellon as Trustee for the CWABS, Inc. Asset-Backed Certificates, Series 2006-BC4 (the “Bank of NY”). Id. Bryant contends that the Bank of NY threatened to sue Bryant for eviction if he did not vacate the Property. Id.

         According to Bryant's state-court petition and amended complaint, the only recorded assignment of the Loan is a fraud and forgery and even if it were not there is no complete and unbroken chain of assignments from CIT to the Bank of NY. Dkts. 1-5, 20. Bryant argues that Chester Levings, an Assistant Secretary of the Mortgage Electronic Registration Systems, Inc. (“MERS”), “purportedly signed” an assignment of the Loan to the Bank of NY on August 23, 2011, but the assignment does not state that MERS was acting as nominee for any other entity. Dkt. 20. Bryant asserts that this and other documents related to the chain of assignments are void ab initio because they are forgeries. Id. He also asserts that if the Loan was securitized into the 2006-BC4 Trust as the Bank of NY claims, it was not properly and validly transferred according to the Trust's Pooling and Servicing Agreement (“PSA”) and the law of the state in which the Trust was created (New York). Id. He contends the note was not legally or validly assigned and/or transferred as required by Texas and New York law for standing to foreclose as a real party in interest. Id. His claims include (1) violation of § 12.002 of the Texas Civil Practices and Remedies Code against K.N.A. Bank of America, N.A. (“BOA”), MERS, and the Bank of NY; (2) negligence per se against BOA, MERS, and the Bank of NY; (3) gross negligence and gross negligence per se against BOA, MERS, and Bank of NY; (4) money had and received against the Bank of NY, BOA, and Ditech Financial LLC (“Ditech”); (5) unjust enrichment against the Bank of NY, BOA, and Ditech; (6) declaratory judgment of lack of standing to foreclose against the Bank of NY and Ditech; (7) declaratory judgment against all defendants; (8) quiet title against all defendants; (9) declaratory relief under the statute of limitations against all defendants; (10) fraud against the CWABS, Inc. Asset-Backed Certificates, Series 2006-BC4 Trust (the “CWABS Trust”), Bank of NY, and Ditech; and (11) violation of the Texas Debt Collection Act against Bank of NY, BOA, and Ditech. Id.

         Ditech and the Bank of NY removed the case to this court on June 27, 2016, alleging diversity jurisdiction. Dkt. 1. They noted that defendants BOA and MERS consented to the removal, and they asserted that no consent was required from the CWABS Trust or CIT because they are nominal parties that had been fraudulently joined. Id. They additionally noted that the consent of the CWABS Trust, CIT, and CWABS, Inc., was not required because these parties have not been served and no citations have been issued to them. Id.

         Bryant filed a motion to remand on September 23, 2016. Dkt. 16. He alleges that the notice of removal fails to state the citizenship of all the defendants and should thus be remanded. Id. Specifically, he asserts that the CWABS Trust must prove that the citizenship of each of its members and beneficiaries is diverse from Bryant's citizenship under the U.S. Supreme Court's March 2016 Americold decision. Id. (citing Americold Realty Tr. v. Conagra Foods, Inc., 136 S.Ct. 1012, 1016 (2016)). Bryant argues that, in accordance with Americold and this court's decision in Juarez v. DHI Mortgage Co., LTD, NO. H-15-3534, 2016 WL 3906296 (S.D. Tex. Jul. 19, 2016) (Miller, J.), the defendants must demonstrate that the CWABS Trust is a traditional donative trust and not an unincorporated artificial business entity in order for the court to look only at the citizenship of the trustee when considering the citizenship of the trust. Id.

         Ditech and the Bank of NY contend that the trustee's (Bank of NY) citizenship, not the citizenship of the CWABS Trust, is what counts for diversity purposes. Dkt. 21. Ditech and the Bank of NY further contend that even if the court were to consider the citizenship of the CWABS Trust, it would find that the CWABS Trust is a traditional trust and the citizenship of its members is irrelevant for diversity purposes. Id. Ditech and the Bank of NY also assert that the CWABS Trust is a nominal party improperly joined. Id. Ditech and the Bank of NY argue that the controlling issue here is whether the real and substantial party to this controversy is the Bank of NY or the CWABS Trust; Ditech and the Bank of NY argue it is the Bank of NY. Id.

         In reply, Bryant asserts that “[i]t cannot be clearer that Plaintiff intended to sue the trust itself, ” pointing out that he named the trust in his original petition and alleged that the CWABS Trust did not have the right to foreclose on the Property. Dkt. 23. With regard to the argument that the trust is improperly joined, Bryant notes that Fifth Circuit law states that a court may not consider a claim of improper joinder if the defendants fail to allege a non-diverse defendant. Id. (citing McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir. 2005)).

         II. Legal Standard

         A party may remove to federal court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” 28 U.S.C. § 1441 (2012). The party seeking removal bears the burden of establishing federal jurisdiction. Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). This statutory right to removal is strictly construed because “removal jurisdiction raises significant federalism concerns.” Id. (citations omitted). “[A]ny doubt about the propriety of removal must be resolved in favor of remand.” Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281-82 (5th Cir. 2007). Ditech and Bank of NY claim that the court has removal jurisdiction based on diversity of citizenship. Dkt. 1 at 4-5. Subject matter jurisdiction premised on diversity requires (1) complete diversity of citizenship between the parties and (2) an amount in controversy in excess of $75, 000. 28 U.S.C. § 1332 (2012). The only disputed issue is whether the diversity requirement is satisfied.

         Courts have taken a two-step approach to determining the citizenship of a trust for purposes of diversity: (1) identify whether the trust or the trustee is the real and substantial party to the controversy, and (2) if the trust is the real party, then determine whether it is a “traditional trust” where a court looks to the citizenship of the trustee, or whether it is a “business trust” (unincorporated association) where a court looks to the citizenship of the trust's members to determine jurisdiction. Americold Realty Tr. v. Conagra Foods, Inc., 136 S.Ct. 1012, 1016 (2016).

         At the outset, the court must determine who is the real and substantial party to the controversy that is being haled to court-the trust or the trustee. “[A] federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.” Corfield v. Dall. Glen Hills LP, 355 F.3d 853, 857 (5th Cir. 2003). The two main U.S. Supreme Court cases addressing the citizenship of a trust, Americold and Navarro, do not “limit[] an entity's membership to its trustees just because the entity happens to call itself a trust.” Id.; see also, e.g., Wells Fargo Bank, N.A. v. Transcon. Realty Inv'rs, Inc., No. 3:14-CV-3565-BN, 2016 WL 3570648, at *2 (N.D. Tex. July 1, 2016); Juarez v. DHI Mortg., Ltd., No. CV H-15-3534, 2016 WL 3906296, at *2 (S.D. Tex. July 19, 2016) (Miller, J.).

         If the trustee is suing or is being sued in his or her own name, or if the trust is a traditional trust, then the Navarro standard applies. Navarro Savs. Ass'n v. Lee, 446 U.S. 458, 100 S.Ct. 1779 (1980). Trustees that have exclusive authority over the property (i.e. the declaration of the trust “authorizes the trustees to take legal title to trust assets, to invest those assets for the benefit of the shareholders, and to sue and be sued in their capacity as trustees”) may “sue in their own right, without regard to the citizenship of the trust beneficiaries.” Id. at 464-66. In these instances, the court will look to the citizenship of the trustee alone to determine jurisdiction.

         If the trust is an unincorporated artificial business entity like the trust considered in Americold, the “shareholders appear to be in the same position as the shareholders of a joint-stock company or the partners of a limited partnership.” Americold, 136 S.Ct. at 1016. In ...


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