525 F. App'x 223
4th Cir.2013Background
- McFaddens sued Flagstar Bank, F.S.B., Fannie Mae, and White, P.C. in Virginia state court over foreclosure of their Pulaski County home.
- Flagstar initially held the note and deed of trust; MERS appeared as beneficiary.
- Flagstar later transferred the note to Fannie Mae but remained servicer; foreclosure proceeded after default.
- McFaddens sought loan modification under HAMP; process allegedly delayed and documents allegedly lost.
- Notice of foreclosure was issued by White, P.C. as substitute trustee; Flagstar bid and purchased the property at foreclosure.
- Fannie Mae filed state-court unlawful detainer; McFaddens removed to federal court alleging federal-question and diversity arguments; district court denied remand and granted dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal was proper under diversity jurisdiction despite McFaddens and White, P.C. being Virginia citizens | McFaddens against diversity due to nondiverse White, P.C. | Fraudulent joinder of White, P.C. defeats lack of complete diversity | Diversity jurisdiction valid; White, P.C. fraudulently joined; remand denied |
| Whether quiet title claim against White, P.C. can survive Rule 12(b)(6) | Quiet title invalid due to improper appointment and transfer | Appointment and transfer valid under Virginia law; no competing title | Quiet title claim dismissed under Rule 12(b)(6) |
| Whether equitable relief to set aside foreclosure and VCPA claim against White, P.C. survive Rule 12(b)(6) | Equitable relief and VCPA violations due to misrepresentations by White, P.C. | No basis against White, P.C.; VA statute of frauds bars oral promises; VCPA inapplicable to asserted role | Equitable relief claim dismissed; VCPA claim dismissed |
Key Cases Cited
- Hartley v. CSX Transp. Inc., 187 F.3d 422 (4th Cir.1999) (fraudulent joinder standard; disregard nondiverse party's citizenship for jurisdiction)
- Mayes v. Rapoport, 198 F.3d 457 (4th Cir.1999) (complete diversity requirement; fraudulent joinder)
- Horvath v. Bank of N.Y., N.A., 641 F.3d 617 (4th Cir.2011) (foreclosure authority despite loan transfer; substitute trustee validity)
- In re Blackwater Security Consulting, LLC, 460 F.3d 576 (4th Cir.2006) (removal grounds not preserved; strict adherence to removal procedures)
- Caterpillar Inc. v. Lewis, 521 U.S. 61 (1996) (context for treating removal defects; economy when resolved on merits)
- McCauley v. Home Loan Investment Bank, FSB, 710 F.3d 551 (4th Cir.2013) (OTS preemption limits; preemption not wholesale removal basis)
- Lontz v. Tharp, 413 F.3d 435 (4th Cir.2005) (strictly construe removal; doubts resolved against removal)