Watson v. Cartee
817 F.3d 299
| 6th Cir. | 2016Background
- Diana and Alan Cartees refinanced their Nashville home in 2002 by executing a deed of trust in favor of Citizens Bank; the deed was later rerecorded with a corrected acknowledgment without the Cartees’ knowledge.
- In 2004 the Cartees granted a second deed of trust to Regions (AmSouth); later several other liens (tax, judgment, mechanic’s) were recorded.
- After default, Citizens foreclosed in December 2013; purchaser Ingram paid $1,513,000, extinguishing Citizens’s debt and creating a surplus of $281,632.74.
- Substitute trustee Watson interpleaded the surplus proceeds into federal court; Regions moved for summary judgment claiming priority to the surplus and obtained the funds.
- The Cartees filed a third‑party complaint against Ingram challenging the foreclosure based on an alleged defect in the Citizens deed acknowledgment and arguing (at oral argument) the sale was commercially unreasonable.
- The district court granted summary judgment to Regions and Ingram, denied the Cartees’ motions, and refused to certify a state‑law question; the Cartees appeal.
Issues
| Issue | Cartees’ Argument | Regions / Ingram’s Argument | Held |
|---|---|---|---|
| Whether the district court had jurisdiction over the interpleader and supplemental jurisdiction over the third‑party complaint | Cartees argued (late) that the court lacked jurisdiction over their third‑party claim | Watson/Regions/Ingram argued statutory interpleader and §1367 supplemental jurisdiction supported federal jurisdiction | Court held district court had original jurisdiction under §1335 and properly exercised supplemental jurisdiction under §1367 |
| Whether Cartees may challenge priority of Regions’ deed (asserting Regions’ rights) | Cartees argued Regions’ deed had priority because of a defective acknowledgment in Citizens’ deed, so foreclosure was invalid | Regions never asserted priority; Regions sought only the surplus proceeds | Held Cartees lack prudential standing to assert Regions’ rights; claim fails |
| Whether invalid priority would void the foreclosure and Ingram’s title | Cartees argued invalid priority would prevent Citizens from foreclosing | Ingram/Regions argued a junior lienholder can foreclose and a purchaser takes subject to senior liens; Regions accepted surplus in lieu of pressing any lien | Held foreclosure and Ingram’s title stand; even if Regions were senior, the sale proceeds satisfied creditors and Ingram’s title would be subject to any senior lien (but Regions waived pressing it) |
| Whether district court abused discretion by not certifying state‑law question under Tenn. Code Ann. §66‑24‑101(e) | Cartees wanted certification on whether the 2005 statute applies to deeds recorded before its effective date | Regions/Ingram argued the question was not dispositive and Regions did not press priority | Held issue is moot because Regions did not assert priority and Cartees cannot assert Regions’ rights; district court’s failure to certify need not be reviewed |
Key Cases Cited
- Ammex, Inc. v. Cox, 351 F.3d 697 (6th Cir. 2003) (de novo review of subject‑matter jurisdiction)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (standard for summary judgment and genuine dispute of material fact)
- State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523 (U.S. 1967) (statutory interpleader requires only minimal diversity)
- Harper v. AutoAlliance Int’l, Inc., 392 F.3d 195 (6th Cir. 2004) (claims form part of same case or controversy when they derive from a common nucleus of operative facts)
- Warth v. Seldin, 422 U.S. 490 (U.S. 1975) (prudential standing bars asserting third‑party rights)
- JPMorgan Chase Bank, N.A. v. First Am. Title Ins. Co., 750 F.3d 573 (6th Cir. 2014) (applying prudential standing principles to bar defense based on third‑party rights)