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Bynane v. The Bank of New York Mellon

United States Court of Appeals, Fifth Circuit

August 3, 2017

MICHAEL BYNANE, Plaintiff - Appellant

         Appeal from the United States District Court for the Southern District of Texas

          Before KING, PRADO, and SOUTHWICK, Circuit Judges.


         Plaintiff-Appellant Michael Bynane appeals the dismissal of his claims, which related to his mortgage and the foreclosure on his home. As an initial matter, Bynane argues that the district court lacked subject matter jurisdiction because there was not complete diversity, which requires us to address the recurring issue of whether diversity jurisdiction hinges on a trustee's citizenship or a trust's shareholders' citizenships. Bynane also contends that certain claims were improperly dismissed and that he should have been allowed leave to amend his complaint. For the following reasons, we AFFIRM.


         In November 2006, Plaintiff-Appellant Michael Bynane executed a $135, 000 note in favor of Countrywide Home Loans, Inc. (Countrywide) for the purpose of purchasing a property located in Houston, Texas. To secure the note, Bynane and his wife executed a security instrument (the Deed of Trust) in favor of Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Countrywide and Countrywide's successors and assigns. In January 2012, MERS assigned its interest under the Deed of Trust to Defendant-Appellee The Bank of New York Mellon (BONYM), as trustee for the certificateholders of the CWABS Inc., Asset-Backed Certificates, Series 2006-24.

         After Bynane defaulted on the loan, BONYM accelerated the debt, obtained a June 2014 order to proceed with a foreclosure, and sold the property to David Guzman for $281, 000 at a substitute trustee's sale in March 2015. In April 2015, Bynane filed a lawsuit in Texas state court against MERS, BONYM, Bank of America, N.A. (BANA, and together with MERS and BONYM, Appellees), and Guzman, which was removed to federal district court (Bynane I). Further litigation ensued, including Bynane filing a first amended complaint and Appellees filing a motion to dismiss. Bynane also moved to remand the case to state court, arguing that complete diversity was lacking because Guzman was a citizen of Texas (of which Bynane was also a citizen), not Indiana (which was claimed in the notice of removal). The district court denied the motion to remand. Following the district court's denial of his motion to reconsider on August 6, 2015, Bynane voluntarily dismissed his complaint without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i).

         A few days later, Bynane filed this lawsuit in Texas state court, naming, once again, Appellees and Guzman as the defendants. Bynane's complaint applied for a temporary restraining order and injunction and included six causes of action: (1) lack of standing to foreclose; (2) quiet title; (3) breach of contract; (4) promissory estoppel; (5) fraud; and (6) violation of the Texas Debt Collection Act. Appellees removed the case to federal district court on the basis of diversity jurisdiction.[1] On October 12, 2015, Appellees moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.[2] On October 13, 2015, Bynane moved to remand the case, alleging, once again, that Guzman was a citizen of Texas, not Indiana. Appellees and Guzman filed separate oppositions to the motion to remand, and Guzman supported his opposition with his own affidavit stating, inter alia, that "Indiana is my home where I always intend to return and stay." On December 1, 2015, the district court concluded that Guzman was a citizen of Indiana and, thus, denied Bynane's motion to remand.

         On December 15, 2015, the district court granted both Appellees' and Guzman's motions to dismiss, thus leaving only Guzman's counterclaim against Bynane pending. The district court also denied Bynane leave to replead his claims. On March 7, 2016, the district court reinstated the case and ordered the parties to address whether diversity jurisdiction existed in light of the Supreme Court's decision that same day in Americold Realty Trust v. Conagra Foods, Inc., 136 S.Ct. 1012 (2016). On May 10, 2016, after receiving the requested briefing from the parties, the district court concluded that there was diversity jurisdiction. Specifically, the district court found that, for the purpose of determining diversity jurisdiction, the citizenship of BONYM as the trustee is what matters, not the citizenships of the trust's shareholders. Thus, because BONYM is a citizen of New York, the district court concluded that there was diversity jurisdiction.

         On May 25, 2016, the district court entered a Federal Rule of Civil Procedure 54(b) final judgment, dismissing all of Bynane's claims against Appellees as ordered by its December 15, 2015, opinion granting Appellees' motion to dismiss. On June 22, 2016, Bynane filed a combined motion to alter or amend judgment and for leave to file an amended complaint (Combined Motion). In the Combined Motion, Bynane argued that (1) the district court should allow him to amend his complaint to add allegations under section 50(a)(6) of the Texas Constitution in light of the Texas Supreme Court's recent decision in Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542 (Tex. 2016); (2) the district court erred in concluding that his allegation that the mortgage assignment was void as a forgery was insufficient; and (3) the district court erred in denying his request to amend his promissory estoppel claim. On July 15, 2016, Bynane filed a proposed amended complaint for his allegations relating to violations of section 50(a)(6). The district court denied the Combined Motion. Bynane timely appeals.


         We first address the threshold issue of whether there is subject matter jurisdiction over this case on the basis of diversity jurisdiction. Under 28 U.S.C. § 1332(a), diversity jurisdiction exists when there is complete diversity of citizenship among the parties and the amount in controversy exceeds $75, 000. See, e.g., Vantage Drilling Co. v. Hsin-Chi Su, 741 F.3d 535, 537 (5th Cir. 2014) (per curiam). "[C]omplete diversity requires that all persons on one side of the controversy be citizens of different states than all persons on the other side." Settlement Funding, L.L.C. v. Rapid Settlements, Ltd., 851 F.3d 530, 536 (5th Cir. 2017) (alteration in original) (quoting McLaughlin v. Miss. Power Co., 376 F.3d 344, 353 (5th Cir. 2004) (per curiam)). Our review of a district court's determination that diversity jurisdiction exists is de novo. See Arena v. Graybar Elec. Co., 669 F.3d 214, 218-19 (5th Cir. 2012). The party seeking the federal forum has the burden of establishing diversity jurisdiction. See id. at 219. Accordingly, in this case, Appellees have the burden of establishing diversity jurisdiction given that they invoked federal jurisdiction by removing Bynane's state court case. See Howery v. Allstate Ins., 243 F.3d 912, 916 (5th Cir. 2001).

         The district court found that there was complete diversity: Bynane is a citizen of Texas; BANA, a national banking association with its main office located in North Carolina, is a citizen of North Carolina; MERS, a Delaware corporation with its principal place of business in Virginia, is a citizen of Delaware and Virginia; BONYM, a national banking association with its main office located in New York, is a citizen of New York; and Guzman is a citizen of Indiana. On appeal, Bynane challenges the district court's citizenship findings with respect to BONYM and Guzman. First, Bynane contends that the district court erred in considering only the citizenship of BONYM as the trustee, and instead, the district court should have considered the citizenship of each of the shareholders of the trust. Second, Bynane argues that an individual named Preston Julian purchased the property from Guzman prior to removal. According to Bynane, Julian is thus the real party in interest, and because Julian appears to be a citizen of Texas, complete diversity was lacking at the time of removal. We address each argument in turn.

         A. BONYM

         Bynane's first argument raises the issue of whether the district court erred in not considering the citizenships of the trust's shareholders. In determining diversity jurisdiction, "a federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy." Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461 (1980). In Navarro, the Supreme Court addressed whether the trustees or the trust's beneficial shareholders are the real parties to a controversy when the trustees are named as the parties in the lawsuit. Id. at 462. The Supreme Court held that, in such a situation, "a trustee is a real party to the controversy for purposes of diversity jurisdiction when he possesses certain customary powers to hold, manage, and dispose of assets for the benefit of others." Id. at 464. And in that case, the trustees were the real parties to the controversy because their "control over the assets held in their names [wa]s real and substantial." Id. at 465. Here, Navarro has a straightforward application: BONYM, the trustee, was named as the defendant in this lawsuit, and thus, BONYM is the real party to the controversy (and therefore its citizenship is what matters in determining diversity jurisdiction) if its control over the trust's assets is real and substantial. See id.

         Bynane, however, argues that we should instead look to the Supreme Court's recent decision in Americold. In that case, the Supreme Court considered whose citizenship-the trustee's or the trust's shareholders'- matters in determining diversity jurisdiction for a real estate investment trust organized under Maryland law. Americold, 136 S.Ct. at 1015-17. Treating the trust as a non-corporate artificial entity and applying the "oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of all [its] members, " the Supreme Court held that the real estate investment trust's shareholders' citizenships must be considered. See id. (alteration in original) (internal quotation marks omitted) (quoting Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990)). Notably, the Supreme Court "decline[d] to apply the same rule to an unincorporated entity sued in its organizational name that applies to a human trustee sued in her personal name." See id. at 1017. In other words, because the real estate investment trust was sued in its own name (rather than the suit being filed against the trustee), the Supreme ...

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