Nelson v. United States Secretary Of Housing And Urban Development
Filing
33
ORDER granting Defendant's 17 Motion to Dismiss Amended Complaint. This case is dismissed without prejudice. The clerk is directed to close the file. Signed by Judge Roy B. Dalton, Jr. on 11/4/2011. (RMN)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
MICHAEL K. NELSON,
Plaintiff,
vs.
Case No. 3:10-cv-1118-J-37MCR
UNITED STATES SECRETARY OF
HOUSING AND URBAN DEVELOPMENT,
Defendant.
ORDER
This case is before the Court on the following:
1.
Defendant’s Motion to Dismiss Amended Complaint and Memorandum in
Support Thereof (Doc. No. 17), filed on May 13, 2011;
2.
Plaintiff’s Response to Defendant’s Motion to Dismiss Amended Complaint
and Memorandum in Support Thereof (Doc. No. 18), filed on May 27, 2011;
and
3.
Defendant’s Reply to Plaintiff’s Response to Defendant’s Motion to Dismiss
(Doc. No. 22), filed on June 27, 2011.
BACKGROUND
Plaintiff brought this lawsuit to set aside a foreclosure sale of a property that he
allegedly owned. (Doc. No. 14, ¶¶ 2-8.) Unfortunately for all involved, foreclosure cases
have become a significant burden on Florida’s state courts, which have hundreds of
thousands of cases pending before them. See Roger Bull, Trimmed-Down Version of
Florida’s Foreclosure Court to Remain in Service, Fla. Times-Union (Jacksonville), May 24,
2011, available at 2011 WLNR 10336977 (noting the “more than 300,000 pending
foreclosure cases” in Florida at the time of publication). Far fewer foreclosure cases end
up in federal court.
The Single Family Mortgage Foreclosure Act
This case is before the Court because the United Stated Department of Housing
and Urban Devolvement (“HUD”) held a mortgage on Plaintiff’s property. (Doc. No. 17, Ex.
D.) Pursuant to the Single Family Mortgage Foreclosure Act of 1994, 12 U.S.C. § 3751,
et seq., HUD may use a non-judicial process to foreclose on such mortgages. Congress
enacted the Single Family Mortgage Foreclosure Act so that HUD would have a uniform
foreclosure remedy separate and apart from those remedies provided by State law. Id. §
3751. The foreclosure remedy envisioned by Congress is entirely non-judicial; it is concise
and efficient; and the discretion to use it is exercised solely by the Secretary of HUD.1 Id.
§§ 3751(a)(5), 3753.
If the borrower breaches a covenant or condition in the mortgage agreement, HUD
may direct a designated “foreclosure commissioner” to file and serve a “Notice of Default
and Foreclosure Sale” and commence a non-judicial foreclosure sale. 12 U.S.C. §§
3755(a), 3756, 3757. Service is loosely defined under the Act. The notice is “deemed duly
given upon mailing, whether or not received by the addressee and whether or not a return
receipt is received or the notice is returned.” Id. § 3758(2)(C).
So long as the commissioner complies with a few statutory requirements, the
1
Indeed, the Single Family Mortgage Foreclosure Act contemplates the use of its
non-judicial foreclosure procedure in the very circumstances which confront Florida’s court
system today. Congress enacted this law to provide HUD with a way to bypass state
foreclosure remedies if backlogs began clogging state court dockets. See 12 U.S.C. §
3751(a)(5) (“Congress finds that . . . providing the Secretary with a nonjudicial foreclosure
procedure will reduce unnecessary litigation by removing any foreclosures from the courts
if they contribute to overcrowded calendars.”).
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foreclosure commissioner may proceed with the foreclosure sale at the place and time
designated in the notice. See id. § 3758(a) (prescribing the location, manner and time for
foreclosure sales). The foreclosure commissioner has wide discretion to proceed with,
cancel, or adjourn the foreclosure sale. Id. § 3760. Once a foreclosure sale is complete,
the foreclosure commissioner distributes the proceeds of the sale, id. § 3762, transfers title
to the property to the purchaser, id. § 3763, and records the foreclosure and sale in the
official property records of the county in which the property is located, id. § 3764.
The final, recorded documents contain statements which, by statute, are prima facie
evidence of “(1) the date, time, and place of the foreclosure sale; (2) that the mortgage was
held by the Secretary . . .; (3) the particulars of the foreclosure commissioner's service of
the notice of default and foreclosure sale in accordance with [the Act]; (4) the date and
place of filing the notice of default and foreclosure sale; (5) that the foreclosure was
conducted in accordance with the provisions of [the Act] and with the terms of the notice
of default and foreclosure sale; and (6) the sale amount.” Id. The sale is also conclusive.
The Act bars all claims upon or with respect to the property sold for (1) any person to
whom the notice was mailed, (2) any person claiming any interest in the property
subordinate to that of the mortgage if that person had actual knowledge of the foreclosure
sale, (3) any person claiming any non-recorded interest in the property which arose before
the filing date of the notice, and (4) any person claiming an interest in the property
pursuant to a statutory lien or an encumbrance which arose after the filing of the foreclosed
mortgage. Id. § 3765.
The Secretary’s Foreclosure in this Case
The mortgage foreclosed by HUD in this case was originally executed by Richard
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Meeks in favor of Allied Mortgage Capital Corp. (Doc. No. 14, Ex. D.) It was recorded on
March 15, 1999. (Id.) The mortgage was immediately assigned to Wendover Funding
Corp., which assignment was also recorded on March 15, 1999. (Id. Ex. E.) About six
years later, on July 12, 2005, Wendover recorded an assignment of its interest in the
mortgage to HUD in the Duval County property records. (Id. Ex. F.) The foreclosure
commissioner mailed to Plaintiff, as well as Mr. Meeks and another individual, Notices of
Default and Foreclosure Sale for the property. (Id. Ex. G.) The Notices were mailed on
April 5, 2010, and recorded on April 12, 2010. (Id.) The commissioner held a foreclosure
sale on May 19, 2010. (Id.) HUD purchased the property at the sale. (Id.)
Plaintiff’s Allegations of Ownership
Plaintiff claims to own the foreclosed property. (Id. ¶ 3.) He alleges he received title
to the property from Mr. Meeks in 2007. (Id. ¶ 4.c.) The deed evidencing this transfer was
recorded on February 23, 2007. (Id. ¶ 4.c, Ex. C.) According to Plaintiff, HUD did not have
an interest in the property at the time it foreclosed because its mortgage was paid in full.
(Id. ¶ 6.a.) A satisfaction of mortgage is attached to Plaintiff’s Amended Complaint, but
that document is not, as Plaintiff contends, related to the mortgage foreclosed on by HUD.
(See id. Ex. H.) Rather, the Satisfaction of Mortgage relates to a second mortgage on the
same property, involving the same parties, and recorded the same day as the first (now
foreclosed) mortgage. (See id.)
The Procedural History of this Action
Plaintiff brought a quiet title action against the Secretary of HUD on September 3,
2010, in the Circuit Court of the Fourth Judicial Circuit in and for Duval County, Florida.
(Doc. No. 4, Ex. A.) HUD removed the action to this Court on September 7, 2011,
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pursuant to Title 28 U.S.C. § 1442(a). (Doc. No. 1.) With leave of Court, Plaintiff filed an
Amended Complaint on March 29, 2011. (Doc. No. 14.)
HUD now moves to dismiss Plaintiff’s Amended Complaint. (Doc. No. 17.)
APPLICABLE STANDARDS
Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” Federal Rule
of Civil Procedure 12(b)(6) authorizes dismissal of a complaint if it fails to state a claim
upon which relief can be granted. Thus, a Rule 12(b)(6) motion tests the legal sufficiency
of a complaint.
In considering a motion to dismiss brought under Rule 12(b)(6), the facts alleged in
the complaint must be accepted as true and must be construed in the light most favorable
to the plaintiff. Castro v. Sec’y of Homeland Sec., 472 F.3d 1334, 1336 (11th Cir. 2006)
(quoting Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003)). Dismissal is warranted if,
assuming the truth of the factual allegations of the plaintiff’s complaint, there is a
dispositive legal issue which precludes relief. Neitzke v. Williams, 490 U.S. 319, 326
(1989).
DISCUSSION
As one commentator notes, federal non-judicial foreclosure laws like the Single
Family Mortgage Foreclosure Act “combine the harshest features of foreclosure processes
currently in existence under state laws” and “provide the least protection to defaulting
borrowers in comparison with the laws in each of the fifty states.” Debra Pogrund Stark,
Foreclosing on the American Dream: An Evaluation of State and Federal Foreclosure
Laws, 51 Okla. L. Rev. 229, 241 (1998). The list of “no’s” associated with federal non5
judicial foreclosure processes is breathtaking. “The laws provide no requirement for a
commercially reasonable sale, no post-sale redemption rights, no protection against
deficiency judgments, no judicial process to ensure that the lender is indeed entitled to the
remedy of foreclosure for the amount claimed, and a conclusive presumption that the sale
is valid, and only eighteen days to reinstate the loan and twenty-one days to redeem the
loan after the notice of default and sale is sent.” Id.
Besides lacking basic protections for borrowers, the Single Family Mortgage
Foreclosure Act provides no means by which an innocent property owner – one who may
find himself swept up in the process perhaps by mistake – can challenge a foreclosure
sale. That owner must turn to other statutes to try to make out a claim. When the United
States holds title to the property, the statute that provides a remedy is the Quiet Title Act
(“QTA”).
HUD contends that this case should be dismissed because it was not properly
brought pursuant to the QTA, which is the exclusive means by which a person may bring
a claim challenging the United States’ title to real property. Plaintiff contends that he
brought this suit against the Secretary, not the United States. Plaintiff also contends that
his claims are distinguishable from those in Block v. North Dakota ex rel. Bd. of Unv. &
Sch. Lands, 461 U.S. 273 (1983), which the Court determined to fall within the QTA.
The United States is the Proper Party
After careful consideration of the submissions of the parties, the Court concludes
that Plaintiff’s claims are foreclosed by the Supreme Court’s holdings in Block. In that
case, which involved both a claim for declaratory judgment and a claim under the QTA, the
Supreme Court squarely addressed and rejected the officer’s-suit theory advanced by
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Plaintiff in this case.2 Id. at 284-85. The Court also held that the QTA was the exclusive
means by which a property owner may challenge the United States’ interest in real
property. Id. at 286.
The United States’ Sovereign Immunity
The QTA is the exclusive means to bring these types of claims because the United
States, as a sovereign, cannot be sued at all without its consent. Id. at 287; see also
Hercules, Inc. v. United States, 516 U.S. 417, 422 (1996). Congress provides such
consent by passing statues that waive the United States’ sovereign immunity. “Only upon
passage of the QTA did the United States waive its immunity with respect to suits involving
title to land.” Block, 461 U.S. at 280. When Congress “attaches conditions to legislation
waiving the sovereign immunity of the United States, those conditions must be strictly
observed, and exceptions thereto are not to be lightly implied.” Id. at 287.
One condition imposed by the QTA is that claims challenging the United States’ title
2
Plaintiff attempts to distinguish his two claims by arguing his declaratory judgment
claim “seeks a determination as to whether the mortgage held by the Defendant was
foreclosed in compliance with applicable law.” (See Doc. No. 18, p. 2.) This argument is
not persuasive. Both of Plaintiff’s claims, which are stated improperly in a shotgun-style
pleading, are based upon the same alleged facts and seek the same remedy. (Doc. No.
14.) These claims are to quiet title in the property.
Plaintiff’s arguments regarding the Secretary as the proper party are also not
persuasive. As discussed by the Supreme Court in Block, an action against a federal
officer with regard to real property can be maintained against the officer in his individual
capacity only if (1) the officer acted outside his statutory powers, or (2) if the officer acted
within his authorized powers, the exercise of such powers was constitutionally void. Block,
461 U.S. at 281. Plaintiff’s claims in this case fit in neither category. He does not claim
that the Secretary acted outside his power, nor does Plaintiff contend the Single Family
Mortgage Foreclosure Act is constitutionally void as applied in this case. As such, the
United States is the defendant against whom Plaintiff should have brought his claims. See,
e.g., Boron Oil Co. v. Downie, 873 F.2d 67, 69 (4th Cir. 1989) (“It is well established that
an action seeking specific relief against a federal official, acting within the scope of his
delegated authority, is an action against the United States, subject to governmental
privilege of immunity.”).
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to real property must be brought in federal court. Federal district courts “have exclusive
original jurisdiction of civil actions under [28 U.S.C. §] 2409a to quiet title to an estate or
interest in real property in which an interest is claimed by the United States.” 28 U.S.C. §
1346(f) (emphasis added); see also Cummings v. United States, 648 F.2d 289, 291 (5th
Cir. 1981).3 Under Title 28 U.S.C. § 1346(f), the state court had no jurisdiction to hear
Plaintiff’s claim. See Cummings, 648 F.2d at 292. As discussed below, the state court’s
lack of jurisdiction proves significant to this Court’s analysis of its own jurisdiction.
Jurisdiction
When an action is removed to federal court, the district court’s jurisdiction has been
described as being derived from the state court. United States v. Williams, 170 F.3d 431,
433 (4th Cir. 1999). This is referred to as the doctrine of derivative jurisdiction. The
doctrine was most famously articulated by Justice Brandeis in Lambert Run Coal Co. v.
Baltimore & Ohio R.R. Co., 258 U.S. 377 (1922). The posture of that case is similar to that
of this case. See id. at 382. The United States waived its sovereign immunity under a
certain statute but required all suits against it to be brought in federal court. Id. The
plaintiff brought its claims in state court, and the defendant removed the case to federal
court. Id. The Supreme Court held that the case should have been dismissed for want of
jurisdiction and without prejudice. Id. at 383. Justice Brandeis reasoned:
[a]s the state court was without jurisdiction over either the subject-matter or
the United States, the District Court could not acquire jurisdiction over them
by the removal. The jurisdiction of the federal court on removal is, in a
limited sense, a derivative jurisdiction. If the state court lacks jurisdiction of
the subject-matter or of the parties, the federal court acquires none, although
3
See Bonner v. Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc) (adopting
all decisions of the former Fifth Circuit announced prior to October 1, 1981, as binding
precedent in the Eleventh Circuit).
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it might in a like suit originally brought there have had jurisdiction.
Id. at 382.
The question of whether to apply the doctrine in this case requires close
consideration. The doctrine of derivative jurisdiction was, and still deserves to be, the
subject of much criticism. It has been described as “an archaic concept that impedes
justice,” Welsh v. Cunard Lines, Ltd., 595 F. Supp. 844, 846 (D. Ariz. 1984), and a “kind
of legal tour de force that most laymen cannot understand,” Washington v. Am. League
of Prof'l Baseball Clubs, 460 F.2d 654, 658-59 (9th Cir. 1972). It is also inefficient and
does not align with the spirit of the Federal Rules of Civil Procedure, which strive “to secure
the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R.
Civ. P. 1.
In 1986, in response to such criticism, Congress amended the general removal
statute by adding a provision which seemed (for a time) to abolish the doctrine of derivative
jurisdiction.
See 28 U.S.C. § 1441(e) (1986).
Some courts interpreted the 1986
amendment to mean that derivative jurisdiction no longer applied to all removals under any
part of the United States Code. See e.g., North Dakota v. Fredericks, 940 F.2d 333, 33638 (8th Cir. 1991) (“[T]he policy of Congress underlying new § 1441(e) supports the
complete abandonment of the derivative-jurisdiction theory, even though the words of the
statute clearly do not reach this far.”); Hollis v. Fla. State Univ., 259 F.3d 1295, 1298 (11th
Cir. 2001) (holding 1986 addition of Section 1441(e) by Congress “abrogated the theory
of derivative jurisdiction”). Others courts continued to apply the doctrine in cases removed
to federal court under sections other than Section 1441, such as the section invoked by
HUD in this case. See, e.g., Palmer v. City Nat’l Bank of W. Va., 498 F.3d 236, 245 (4th
9
Cir. 2007) (collecting opinions of the U.S. Court of Appeals for the Fourth Circuit which
apply the doctrine in cases removed under Title 28 U.S.C. § 1442).
Congress amended subsection (e) of the general removal statute once again in
2002. First, it re-designated subsection (e) as subsection (f). Second, Congress added
the phrase “under this section” to the language which the Hollis and Fredricks courts
construed as abolishing the doctrine of derivative jurisdiction.
After the 2002 amendment, most courts considering the issue have concluded that
Congress “chose to make clear that the elimination of derivative jurisdiction was limited to
cases removed under Section 1441.” Barnaby v. Quintos, 410 F. Supp. 2d 142, 145
(S.D.N.Y. 2005); see also Rodas v. Seidlin, 656 F.3d 610, 618-19 (7th Cir. 2011)
(reasoning the doctrine of derivative jurisdiction “provides a background rule against which
all of the removal statutes operate; it applies unless abrogated.”); Palmer, 498 F.3d at 246
(“Whatever the intent of the 2002 amendment, its result was that § 1441(f) is more clear
than former § 1441(e) in abrogating derivative jurisdiction only with respect to removals
effectuated under § 1441.”); Elko County Grand Jury v. Siminoe, 109 F.3d 554, 555 (9th
Cir. 1997); Housing Assistance Corp. of Nassau Cnty. v. Fernandina Beach RRH, Ltd., No.
3:08-cv-782-J-32JRK, slip op. at 10-13 (M.D. Fla. Oct. 9, 2008) (Klindt, Mag. J.)
(concluding that “Congress intended for the doctrine of derivative jurisdiction to be
abolished only in the context of removals under Section 1441"). A small number of other
courts acknowledge the 2002 amendment but refuse to apply the doctrine. See Glorvigen
v. Cirrus Design Corp., No. 06-2661, 2006 WL 3043222, at *2-3 (D. Minn. Oct. 24, 2006)
(refusing to apply the derivative jurisdiction doctrine in a case removed pursuant to 28
U.S.C. § 1442(d)).
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The Eleventh Circuit has not directly addressed the vitality of the doctrine of
derivative jurisdiction to cases removed under provisions other than Section 1441. The
Court’s opinion in Hollis is not on point because that case was removed under the general
removal statute, not Section 1442, and its focus was on venue, which is not a jurisdictional
defect. See 259 F.3d at 1296-98. It is difficult to square, however, the broad statements
made by the Eleventh Circuit in Hollis with the 2002 amendment limiting Section 1441(f)
to cases “removed under this section.” See, e.g., 259 F.3d at 1299 (reasoning that the
doctrine of derivative jurisdiction “has been superseded by statute and no longer has any
force”). Although the reasoning used by the Eleventh Circuit was accepted by many courts
at the time, the weight of authority has shifted away from that position. See supra at 10.
For these reasons, the Court concludes Hollis can be distinguished from this case.
Turning to the removal statutes, this Court finds that the plain language of Section
1441(f) limits the abolition of derivative jurisdiction to cases removed under that section.
Because the Eleventh Circuit has yet to interpret Section 1442 “as being anything other
than derivative in nature subsequent to the 2002 amendment to Section 1441, the Court
ends its inquiry with the plain language of the statute and concludes that Congress
intended for the doctrine of derivative jurisdiction to be abolished only in the context of
removals under Section 1441.” Housing Assistance Corp. of Nassau Cnty., No. 3:08-cv782-J-32JRK, slip op. at 12-13 (citing CBS, Inc. v. Primetime 24 Joint Venture, 245 F.3d
1217, 1222 (11th Cir. 2001)).
Thus, because this Court’s removal jurisdiction is derived from that of the state
court, and that court had no jurisdiction to hear Plaintiff’s claims, Plaintiff’s Amended
Complaint is due to be dismissed for want of jurisdiction.
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CONCLUSION
In view of the above, Defendant’s Motion to Dismiss Amended Complaint (Doc. No.
17) is GRANTED. This case is dismissed without prejudice. The clerk is directed to close
the file.
DONE AND ORDERED in Chambers in Jacksonville, Florida, on November 4, 2011.
Copies:
counsel of record
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