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Schutze Signature Homes, LLC v. Fairview Investment Fund III, LP

United States District Court, N.D. Texas, Dallas Division

November 5, 2019

SCHUTZE SIGNATURE HOMES, LLC, A TEXAS LIMITED LIABILITY COMPANY, Plaintiff,
v.
FAIRVIEW INVESTMENT FUND III, LP, BECKHAM CAPITAL GROUP, LLC, AS TRUSTEE UNDER THE DEED OF TRUST, AND JASON KRAUS, AS SUBSTITUTE TRUSTEE, Defendants.

          FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          DAVID L. HORAN UNITED STATES MAGISTRATE JUDGE.

         Plaintiff Schutze Signature Homes, LLC has filed a Motion for Temporary Restraining Order [Dkt. No. 8], which Senior United States District Judge Sam R. Cummings has referred to the undersigned United States Magistrate Judge for hearing and entry of Findings, Conclusions, and Recommendation. See Dkt. No. 10 at 1. The referral order also provides that the undersigned “may elect to consider Plaintiff's Motion for Leave to Amend [Dkt. No. 7], as well as Plaintiff's Motion for Remand [Dkt. No. 9], which, if granted, would effectively moot Plaintiff's Motion for Temporary Restraining Order.” Id. at 1 n.1.

         For the reasons explained below, the Court should conclude that Defendants Beckham Capital Group LLC as Trustee under the Deed of Trust and Jason Kraus as Substitute Trustee were improperly joined and that the Court has subject matter jurisdiction over this removed action and the Court should deny Plaintiff's Motion for Temporary Restraining Order [Dkt. No. 8].

         Background

         Plaintiff purchased real property located in Dallas County, Texas, on February 28, 2018. See Dkt. No. 1 at 17-36. To finance the purchase, Plaintiff and Fairview entered a Loan and Security Agreement, which was secured by a Deed of Trust, a Secured Promissory Note, a Collateral Assignment and Security Agreement, and Personal Guarantees by Nolan Schutze and Hope Schutze (the “Loan Documents”). See Id. at 38-171.

         On September 4, 2019, Fairview noticed the property for foreclosure. The foreclosure sale was scheduled for October 1, 2019. See Id. at 184-89.

         On September 30, 2019, Plaintiff filed suit in state court to stop the foreclosure. Plaintiff sued the lender, Fairview; the trustee under the deed of trust, Beckham Capital Group, LLC; and the substitute trustee, Jason Kraus. See Id. at 17- 36; see also Cause No. DC-19-15873 in the 192nd Judicial District Court of Dallas County, Texas. Plaintiff alleged that it is a Texas limited liability company; that Fairview is a foreign limited partnership organized and existing under the laws of Delaware with its home office in Seattle, Washington; that Beckham is a Texas limited liability company; and that Krause is an individual residing in Texas. See Id. at 18.

         Also on September 30, 2019, the state court entered an amended temporary restraining order to prevent Defendants from “[t]aking any action to foreclose on the property.” See Id. at 267-69.

         On October 10, 2019, Defendants Kraus and Beckham filed verified denials in state court, asserting that they were not liable in the capacities in which they had been sued as substitute trustee and trustee, respectively. See Id. at 270-73.

         Then, also on October 10, 2019, Defendants removed the case to this Court on the basis of diversity jurisdiction. See Dkt. No. 1. According to the notice of removal, Plaintiff “is a Texas limited liability company and upon information and belief, its members are Texas residents, ” and Fairview “is a foreign limited partnership organized and existing under the laws of the State of Delaware, whose home office is located at...Seattle, Washington.” See Id. at 4. Defendants contend that diversity exists because the in-state defendants - Beckham and Krause - were improperly joined.

         On October 14, 2019, Fairview again noticed the property for foreclosure. The foreclosure sale was scheduled for November 5, 2019. See Dkt. No. 8-1 at 272-75.

         On November 1, 2019, Plaintiff filed a motion for temporary restraining order to stop the scheduled November 5, 2019, foreclosure sale. See Dkt. No. 8. Plaintiff also filed a motion to remand, see Dkt. No. 9; a motion to amend the original petition, see Dkt. No. 7; and a motion for order to show cause concerning alleged violations of the September 30, 2019 amended temporary restraining order, see Dkt. No. 6.

         On November 4, 2019, Judge Cummings referred the motion for temporary restraining order to the undersigned, see Dkt. No. 10; Fairview filed a response, see Dkt. No. 11; and the undersigned heard oral argument, see Dkt. No. 12.

         After oral argument, the undersigned directed the parties to file supplements to Plaintiff's Motion to Remand and Defendants' Notice of Removal to provide all necessary information regarding the parties' citizenship as required for diversity jurisdiction. See Dkt. No. 13. Plaintiff filed a Supplement to Plaintiff's Motion to Remand that explained:

1. Plaintiff Schutze Signature Homes, LLC is a single member Texas Limited Liability Company. It was formed in Texas, does business in Texas, and has its principal office in Texas. The single member is an individual, Nolan Schutze, who is a resident and citizen of the State of Texas.
2. Defendant Jason Kraus is an individual, who is a resident and citizen of the State of Texas. Mr. Kraus has admitted before this Court, on November 4, 2019, that he is a citizen of the State of Texas.
3. Defendant Beckham Capital Group, LLC is a Texas Limited Liability Company, which was formed in Texas, does business in Texas, and has its principal office in Texas. To the best of Plaintiff's knowledge, it is a single member entity, owned by Mr. Beck Beckham, who is a resident and citizen of the State of Texas.
4. Defendant Fairview Investment Fund III, LP is a Delaware Limited Partnership whose principal place of business is at 119 S. Main Street, Suite 410, Seattle WA 98140. To the best of Plaintiff's knowledge, Defendant Fairview does not have any filings on file with the Texas Secretary of State. Other than the transaction forming the basis of this transaction, Plaintiff does not know if Defendant Fairview regularly conducts business in the State of Texas. Plaintiff does not have any personal knowledge who the partners of Defendant Fairview may be.

Dkt. No. 14 at 1-2.

         Defendants filed a Response to Plaintiff's Motion to Remand, see Dkt. No. 15, and attached an Unsworn Declaration of Carson Rasmussen Regarding Citizenship of Membership ...


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