SGK Properties, L.L.C. v. U.S. Bank National Ass'n
881 F.3d 933
5th Cir.2018Background
- SGK Properties borrowed $1,725,000 from Greenpoint in 2007; SGK executed a promissory note and deed of trust; Katz and Weinreb personally guaranteed the loan.
- Greenpoint purportedly assigned the deed and endorsed the note through Aurora to U.S. Bank (as trustee for a Lehman trust); appellants questioned Aurora’s existence and ceased payments in 2010.
- U.S. Bank (with Ocwen as servicer) initiated non-judicial foreclosure; SGK obtained temporary relief in Texas state court but case was removed to federal court.
- SGK and Katz sued raising title, contract, and statutory claims and challenged U.S. Bank’s citizenship; district court found U.S. Bank’s trustee citizenship established diversity and denied remand.
- District court granted U.S. Bank summary judgment on plaintiffs’ claims (holding U.S. Bank was holder of the note and therefore could foreclose), entered a deficiency judgment against appellants, struck additional claims raised in appellants’ answer, and denied leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal court had diversity jurisdiction / motion to remand | SGK/Katz: U.S. Bank is an unincorporated association; trustee’s beneficiaries/shareholders’ citizenship must be considered | U.S. Bank: sued in trustee capacity; trustee’s citizenship controls under Navarro when trustee has real and substantial control | Court: Affirmed—Navarro applies; U.S. Bank, as trustee and holder, has determinative citizenship and complete diversity existed |
| Whether U.S. Bank was entitled to enforce the note (summary judgment) | SGK/Katz: Appellees failed to prove an unbroken chain of title; questions about Aurora’s existence create genuine issues of material fact | U.S. Bank: Possession of original note with special endorsement and allonge makes it the holder entitled to enforce the note; defects in deed assignments are irrelevant because mortgage follows the note | Court: Affirmed—U.S. Bank is holder of the note; holder status gave standing to foreclose and to obtain deficiency; summary judgment proper |
| Whether U.S. Bank had standing to recover deficiency against Weinreb (guarantor) | Weinreb: U.S. Bank lacked standing to foreclose, so cannot pursue guarantor for deficiency | U.S. Bank: As holder of the note it had authority to foreclose and pursue deficiency against guarantors | Court: Affirmed—U.S. Bank’s holder status authorized deficiency claim against Weinreb |
| Whether the district court properly struck additional claims and denied leave to amend | SGK/Katz: Stricken claims were responsive/new defenses and should be allowed; sought leave to amend | U.S. Bank: Additional claims were effectively an improper untimely amendment and were futile given holder status | Court: Affirmed—claims properly stricken for failing to follow Rule 15; amendment would be futile because claims could not survive given U.S. Bank’s holder status |
Key Cases Cited
- Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980) (trustee’s citizenship may control when trustee has substantial control over trust assets)
- Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct. 1012 (2016) (trust treated as noncorporate entity; citizenship of trust members may control where trust itself is the party)
- Carden v. Arkoma Assocs., 494 U.S. 185 (1990) (diversity depends on citizenship of all members of unincorporated associations)
- Bynane v. Bank of New York Mellon, 866 F.3d 351 (5th Cir. 2017) (applying Navarro in trustee/national bank context and discussing when trustee citizenship controls)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (complaint must plead sufficient factual matter to state plausible claim)