Michael BYNANE, Plaintiff - Appellant v. The BANK OF NEW YORK MELLON, as Trustee for CWMBS, Incorporated Asset-Backed Certificates Series 2006-24; Bank of America, N.A.; Mortgage Electronic Registration Systems, Incorporated, Defendants - Appellees
No. 16-20598
United States Court of Appeals, Fifth Circuit.
August 3, 2017
351
CONCLUSION
For the foregoing reasons, the district court‘s judgment is AFFIRMED.
Connie Flores Jones, Winston & Strawn, L.L.P., Suite 2500, 1111 Louisiana Street, Houston, TX 77002, Phoebe Norton Coddington, Winston & Strawn, L.L.P., Suite 2900, 100 N. Tryon, Charlotte, NC 28202, for Defendants - Appellees.
Before KING, PRADO, and SOUTHWICK, Circuit Judges.
KING, Circuit Judge:
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.
I. FACTUAL AND PROCEDURAL BACKGROUND
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
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
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., — U.S. —, 136 S.Ct. 1012, 194 L.Ed.2d 71 (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
II. DIVERSITY JURISDICTION
We first address the threshold issue of whether there is subject matter jurisdiction over this case on the basis of diversity jurisdiction. Under
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, 100 S.Ct. 1779, 64 L.Ed.2d 425 (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 crux of the issue raised by Bynane‘s argument is whether Navarro controls (i.e., we should look at only the trustee‘s citizenship) or whether Americold controls (i.e., we should look at the citizenships of all of the trust‘s shareholders). In Justice v. Wells Fargo Bank National Association, 674 Fed.Appx. 330 (5th Cir. 2016) (per curiam), an unpublished opinion,3 we addressed a similar question involving a trustee of a mortgage securitization trust and held that, for the purpose of determining diversity jurisdiction, the citizenship of the trustee is what matters. See id. at 332. Put another way, Justice held that the Navarro rule still controls when the trustee sues or is sued in its own name. See id. We agree. As we recognized in Justice, Americold “reiterated [the Supreme Court‘s] prior holding in Navarro ..., ‘that when a trustee files a lawsuit in her name, her jurisdictional citizenship is the State to which she belongs—as is true of any natural person.‘” Id. (quoting Americold, 136 S.Ct. at 1016). Indeed, Americold emphasized that Navarro‘s rule “co-exists” with Americold‘s discussion that, “when an artificial entity is sued in its name, it takes the citizenship of each of its members.” See Americold, 136 S.Ct. at 1016. Thus, Navarro‘s rule is still good law: “Where a trustee has been sued or files suit in her own name, the only preliminary question a court must answer is whether the party is an ‘active trustee[] whose control over the assets held in [its] name[] is real and substantial.‘” Justice, 674 Fed.Appx. at 332 (alterations in original) (quoting Carden, 494 U.S. at 191).
Here, similar to the trustee in Justice, BONYM was sued in its capacity as a trustee. Thus, Navarro controls, and the only remaining question is whether BONYM possesses the sort of “real and substantial” control over the trust‘s assets discussed in Navarro. And just as in Justice, the trustee here, BONYM, has “real and substantial” control. For example, under the Pooling and Service Agreement (PSA) for the trust, “all right, title, and interest in and to the Initial Mortgage Loans” were transferred to BONYM as trustee. Moreover, under the PSA, the certificateholders have only limited rights to vote or otherwise control the operation of the trust. Thus, we consider in determining diversity jurisdiction only the citizenship of BONYM, which Bynane does not dispute is a citizen of New York for diversity jurisdiction purposes. See Wachovia Bank v. Schmidt, 546 U.S. 303, 307, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006) (“[A] national bank ... is a citizen of the State
We reject Bynane‘s argument that, contrary to the straightforward application of Navarro and Americold described above, we should instead adopt the two part test used in an unpublished district court opinion:
(1) identify whether the trust or the trustee is the real and substantial party to the controversy, and (2) if the trust is the real party, then determine whether it is a “traditional trust” where a court looks to the citizenship of the trustee, or whether it is a “business trust” (unincorporated association) where a court looks to the citizenship of the trust‘s members to determine jurisdiction.
Guillen v. Countrywide Home Loans, Inc., No. H-15-849, 2016 WL 7103908, at *4 (S.D. Tex. Dec. 6, 2016). Under Guillen‘s test, even if the trustee is the named defendant because the trust is not an entity that can be sued in its own capacity under state law, a district court must examine the substance of the complaint to see if the allegations show that the trust is the real party to the controversy, and if it is, the district court must then wade into the thicket of determining whether the trust is a business trust or a traditional trust. We disagree with this test for several reasons. First, as noted above, we do not interpret Americold as standing for the proposition that a district court must disregard whether the trust or trustee is sued and look instead at how the substance of the complaint characterizes the real party to the controversy.4 Rather, if the trustee sues or is sued in the trustee‘s own name, then Navarro‘s rule controls. Second, nominally determining whether the trust is a “business” or “traditional” trust is not the appropriate test. Putting aside the fact that a business trust and a traditional trust lack clear definitions and the line between them is blurry at best, the characterization of the trust as a business or traditional trust is not dispositive. As we stated in Justice, “‘[t]he fact [t]hat the trust [otherwise] may depart from conventional forms in other respects has no bearing upon‘” our determination of whether the trustee‘s control over the trust‘s assets is real and substantial. Justice, 674 Fed.Appx. at 332 (second and third alterations in original) (quoting Navarro, 446 U.S. at 465). Indeed, Navarro involved what the Supreme Court referred to as a “business trust“—yet, the Supreme Court held that the trustees’ citizenships were the relevant inquiry in determining diversity jurisdiction.5 See Navarro, 446 U.S. at 459. In sum, Navarro provides the appropriate framework here: BONYM‘s citizenship, not the trust‘s shareholders’ citizenships, is relevant for determining diversity jurisdiction because BONYM was sued in its own name as trustee and it has sufficiently real and substantial control
over the trust‘s assets. See Americold, 136 S.Ct. at 1016 (“And when a trustee files a lawsuit or is sued in her own name, her citizenship is all that matters for diversity purposes.“).
Bynane‘s second argument relating to diversity jurisdiction is that the district court should have considered that Julian is purportedly a citizen of Texas. Bynane argues that, prior to removal, Guzman transferred his interest in the property to Julian. According to Bynane, a recent Texas Court of Appeals decision confirms the transfer to Julian.6 Bynane concludes that the district court should have effectively looked through Guzman and considered Julian‘s purported Texas citizenship as a real party to the controversy, and thus, complete diversity did not exist at the time of removal because Julian and Bynane are both Texas citizens.
Bynane‘s argument, however, is flawed. “The ‘real party to the controversy’ test does not require a federal court to consider the citizenship of non-parties who have an interest in the litigation or might be affected by the judgment.” Corfield v. Dall. Glen Hills LP, 355 F.3d 853, 865 n.10 (5th Cir. 2003). Instead, “[t]he ‘real party to the controversy’ test requires consideration of the citizenship of non-parties when a party already before the court is found to be a non-stake holder/agent suing only on behalf of another.” Id. But here, it is simply not accurate to characterize Guzman as only litigating this case on behalf of another: Bynane named Guzman as a defendant in the suit with causes of action based, in part, on Guzman‘s purchase of the property at foreclosure, and Guzman was not named as a litigant only on behalf of another. Even assuming that Julian had an interest in the property at the time of removal, the law does not dictate that the district court should have looked through Guzman to determine whether Julian‘s citizenship would destroy complete diversity. And Bynane does not cite to any caselaw mandating such a result. Perhaps there could have been an issue of whether Julian should have been joined to the litigation, but that was not an argument raised by Bynane. Cf. Keybank Nat‘l Ass‘n v. Perkins Rowe Assocs., L.L.C., 539 Fed.Appx. 414, 417 (5th Cir. 2013) (per curiam) (“Whether the other non-party banks in this case are necessary parties whose joinder would defeat diversity is a much different question. Although the district court determined that the other banks were not necessary parties under Rule 19, Perkins Rowe has not briefed that issue, and we do not consider it.” (citations omitted)). Accordingly, the district court did not err by failing to consider that Julian is purportedly a citizen of Texas.7
In sum, the district court did not err in determining that diversity jurisdiction exists in this case: Bynane is a citizen of Texas, BANA is a citizen of North Carolina, MERS is a citizen of Delaware and Virginia, BONYM is a citizen of New York, and Guzman is a citizen of Indiana.
III. FORGERY ALLEGATION
We next turn to Bynane‘s argument that the assignment from MERS to
Under Texas law, “an obligor cannot defend against an assignee‘s efforts to enforce the obligation on a ground that merely renders the assignment voidable at the election of the assignor.” Reinagel v. Deutsche Bank Nat‘l Tr. Co., 735 F.3d 220, 225 (5th Cir. 2013). However, “the obligor may defend ‘on any ground which renders the assignment void.‘” Id. (quoting Tri-Cities Constr., Inc. v. Am. Nat‘l Ins., 523 S.W.2d 426, 430 (Tex. App. -Houston [1st Dist.] 1975, no writ)). As noted above, Bynane advances two arguments for why the assignment was void: (1) Johnson signed the assignment but lacked authority to do so on behalf of MERS, or alternatively, (2) Johnson did not actually sign the assignment, and instead, Johnson‘s signature was forged by some unknown individual.
Bynane‘s first argument—i.e., Johnson signed the assignment but lacked authority to do so—fails. Under Texas law, “a contract executed on behalf of a corporation by a person fraudulently purporting to be a corporate officer is, like any other unauthorized contract, not void, but merely voidable at the election of the defrauded principal.” Id. at 226. Here, even accepting as true Bynane‘s allegation that Johnson was not authorized to execute the assignment, this allegation merely renders the assignment voidable at MERS‘s behest. Thus, given that this allegation merely renders the assignment voidable, Bynane may not defend against BONYM‘s enforcement of his obligation on the ground that Johnson executed the assignment without authorization. See id.
Bynane‘s second argument—ie., Johnson‘s signature on the assignment was forged—also fails. As an initial matter, the assignment would be void if it was forged, and “[a] document is forged if it is signed by one who purports to act as another.” See Vazquez v. Deutsche Bank Nat‘l Tr. Co., N.A., 441 S.W.3d 783, 787-88 (Tex. App.-Houston [1st Dist.] 2014, no pet.). However, Bynane‘s conclusory allegation that Johnson‘s signature was forged fails to meet the heightened pleading standard of
In sum, Bynane fails to adequately allege a ground that would make the assignment void. Accordingly, the district court did not err in dismissing Bynane‘s claims for lack of standing to foreclose, quiet title, and breach of contract given that each of those claims was based on the assignment being void.
IV. PROMISSORY ESTOPPEL
Next, we address Bynane‘s argument that the district court erred in dismissing his promissory estoppel claim. Bynane alleged that BANA promised over the phone and in writing that it would consider a loan modification application from him and that “no non-judicial or judicial foreclosure would occur until the loan modification process was completed and [he] was given an answer that his application was either granted or denied.” Bynane further alleged that BANA promised “to sign a written modification document already in existence at the time of the promise if the modification was approved.” The district court, however, found that these allegations were insufficient because Bynane had failed to allege that the purported “written modification document already in existence” satisfied the statute of frauds by containing the material terms of the loan modification. Similar to Bynane‘s forgery allegation, we review the district court‘s dismissal of this claim de novo. See Sullivan, 600 F.3d at 546.
Pursuant to Texas‘s statute of frauds, “[a] loan agreement for more than $50,000 is not enforceable unless it is in writing.” Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 256 (5th Cir. 2013) (citing
Bynane argues in the alternative that the district court erred in failing to allow him leave to replead his promissory estoppel claim. “We review the district court‘s denial of a motion for leave to amend for abuse of discretion.” Moore v. Manns, 732 F.3d 454, 456 (5th Cir. 2013) (per curiam). “In determining whether to grant leave to amend, ‘the court may consider factors such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, [and] futility of the amendment.‘” Leal v. McHugh, 731 F.3d 405, 417 (5th Cir. 2013) (alteration in original) (internal quotation marks omitted) (quoting Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 678 (5th Cir. 2013)).
Here, the district court did not abuse its discretion in denying Bynane leave to replead his promissory estoppel claim. As the district court reasoned, Bynane had raised a promissory estoppel claim in Bynane I, and in light of being able to see Appellees’ motion to dismiss in that case prior to voluntarily dismissing his complaint, Bynane already had the opportunity to rework his current promissory estoppel claim. Moreover, the district court reasoned that Bynane‘s voluntary dismissal of Bynane I and refiling of this case created an undue delay and suggested a dilatory motive.10 Finally, the district court noted
that Appellees and Guzman would suffer undue prejudice from further delay in the resolution of this case, especially considering that Guzman had yet to take possession of the property. In light of the district court‘s reasoning and the circumstances of this case, the district court did not abuse its discretion in denying Bynane leave to replead his promissory estoppel claim.
Finally, we turn to Bynane‘s argument that the district court erred in denying him leave to amend his complaint to assert claims under
The district court denied Bynane‘s request for leave to amend on the ground that his amendments would be futile. Specifically, the district court concluded that Bynane cannot state a claim under
Bynane has waived any challenge to the district court‘s futility ruling by failing to adequately brief the issue. In his opening brief, Bynane‘s argument amounts to recounting how the change in law—i.e., the statute of limitations ruling in Wood—should allow him to now bring “any good faith claims ... under
under these circumstances based solely on the district court‘s consideration of his prior voluntary dismissal in determining whether to grant leave to replead this claim.
VI. CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
KING
UNITED STATES CIRCUIT JUDGE
UNITED STATES of America, Plaintiff-Appellee, v. Rodney SOUTHERS, Defendant-Appellant.
No. 15-6395
United States Court of Appeals, Sixth Circuit.
Decided and Filed May 08, 2017 *
* This decision was originally filed as an unpublished opinion on May 8, 2017. The court has now designated the opinion for full-text publication.