The Bank of New York Mellon vs Townhouse South Association, Inc. et al

Filing 19

ORDERED that the Motion to Dismiss (ECF No. 7 ) is DENIED. Signed by Judge Robert C. Jones on 6/29/2016. (Copies have been distributed pursuant to the NEF - DRM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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THE BANK OF NEW YORK MELLON, AS
TRUSTEE FOR THE BENEFIT OF THE
CERTIFICATE HOLDERS OF CWABS, INC.,
ASSET BACKED CERTIFICATES, SERIES
2004-2,

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Plaintiff,

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3:16-cv-00208-RCJ-VPC
ORDER

vs.

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TOWNHOUSE SOUTH ASSOCIATION, INC. et

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al.

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Defendants.

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This case arises from the foreclosure of a residential property pursuant to a homeowners

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association lien. Pending before the Court is a Motion to Dismiss (ECF No. 7). For the reasons

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given herein, the motion is denied.

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I.

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FACTS AND PROCEDURAL HISTORY
On November 6, 2003, Roongtum Chongolnee purchased a home located at 580

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Smithridge Park, Reno, Nevada 89502 (“the Property”). (Compl. ¶¶ 7, 13, ECF No. 1).

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Chongolnee financed ownership of the property through a loan in the amount of $104,310.00,

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which was secured by a deed of trust. (Id. ¶ 13). At some point, the deed of trust was assigned to

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Plaintiff The Bank of New York Mellon (“BNY Mellon”). (Id. ¶ 14). On February 4, 2013,

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Defendant E. Alan Tiras, P.C. (“Tiras”) recorded a Notice of Delinquent Assessment Lien on

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behalf of Defendant Townhouse South Association, Inc. (“the HOA”). (Id. ¶ 15). The Notice

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stated that the amount due was $1,648.75. (Id.).

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On March 22, 2013, Tiras recorded a Notice of Default and Election to Sell on behalf of

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the HOA, with an amount of $2,559.17 due. (Id. ¶ 16). On July 1, 2013, Tiras recorded a Notice

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of Trustee’s Sale on behalf of the HOA, with an amount of $4,876.59 due. (Id. ¶ 17). The sale

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was scheduled for August 8, 2013. (Id.).

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On July 22, 2013, BNY Mellon requested a ledger identifying the super-priority amount
owed to the HOA, but the HOA refused to identify the amount and instead provided the total

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amount owed. (Id. ¶ 24). BNY Mellon calculated the super-priority amount to be $1,980.00 and

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tendered that amount to Tiras on Augst 6, 2013. (Id. ¶ 26). The HOA allegedly refused the

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tender. (Id.). The HOA foreclosed on the Property on August 8, 2013, and a foreclosure deed

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was recorded on August 15, 2013 in favor of Defendant Thunder Properties, Inc. (“Thunder”).

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(Id. ¶ 27). The sale price at foreclosure was $5,421.59. (Id.).

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Plaintiff alleges four causes of action: (1) quiet title/declaratory judgment against all

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Defendants; (2) violation of Nev. Rev. Stat. § 116.1113 (obligation of good faith) against the

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HOA and Tiras; (3) wrongful foreclosure against the HOA and Tiras; and (4) preliminary

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injunction against Thunder. BNY Mellon asserts that the Court has subject-matter jurisdiction

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over the case under 28 U.S.C. § 1332. Defendants Tiras and Thunder move the Court to dismiss

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the Complaint for lack of subject-matter jurisdiction pursuant to Federal Rule of Civil Procedure

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12(b)(1).

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II.

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LEGAL STANDARDS
Federal courts are courts of limited jurisdiction, possessing only those powers granted by

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the Constitution and statute. See United States v. Marks, 530 F.3d 799, 810 (9th Cir. 2008)

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(citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). The party

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asserting federal jurisdiction bears the burden of overcoming the presumption against it.

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Kokkonen, 511 U.S. at 377. Federal Rule of Civil Procedure 12(b)(1) provides an affirmative

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defense for lack of subject matter jurisdiction. Additionally, a court may raise the question of

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subject matter jurisdiction sua sponte at any time during an action. United States v. Moreno–

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Morillo, 334 F.3d 819, 830 (9th Cir. 2003). Regardless of who raises the issue, “when a federal

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court concludes that it lacks subject-matter jurisdiction, the court must dismiss the complaint in

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its entirety.” Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006).

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“The district courts shall have original jurisdiction of all civil actions where the matter in

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controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between

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. . . citizens of different States.” 28 U.S.C. § 1332(a), (a)(1). Under the diversity statute, all

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Plaintiffs must be diverse from all Defendants. See Strawbridge v. Curtiss, 7 U.S. 267, 267

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(1806). “[A] corporation shall be deemed to be a citizen of every State . . . by which it has been

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incorporated and of the State . . . where it has its principal place of business.” 28 U.S.C. § 1332

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(c)(1).

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III.

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ANALYSIS
Defendants move the Court to dismiss the Complaint because diversity of citizenship is

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not clear on the face of the Complaint. They argue that Plaintiff is “likely” a real estate

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investment trust and, therefore, under Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct.

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1012 (2016) diversity jurisdiction depends on the citizenship of the members or beneficiaries of

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the trust rather than on BNY Mellon’s citizenship. Defendants assert that dismissal is required

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because BNY Mellon has not shown that its members are completely diverse from all

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Defendants.

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In Americold, the Supreme Court held that for unincorporated entities “diversity

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jurisdiction in a suit by or against the entity depends on the citizenship of all its members.” Id. at

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1015 (internal quotations and alterations omitted). It held that Americold “possesses its

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members’ citizenship” because it is not a corporation but a real estate investment trust under

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Maryland law. Id. In respect to trustees, however, the Court reaffirmed the holding in Navarro

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Savings Association v. Lee that “when a trustee files a lawsuit in her name, her jurisdictional

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citizenship is the State to which she belongs—as is true of any natural person.” Id. at 1016

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(citing Navarro Sav. Ass’n. v. Lee, 446 U.S. 458, 465 (1980). The Court stated that the Navarro

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rule “coexists” with the rule established in Americold. Id.

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BNY Mellon argues that Navarro applies because BNY Mellon is a trustee filing a

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lawsuit in its name. Defendants argue that Americold applies because BNY Mellon is “likely” a

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real estate investment trust or other unincorporated entity. (Mot., 7). Defendants present no

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arguments or evidence to cause the Court to question that BNY Mellon is anything other than a

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trustee of a traditional trust. For instance, unlike in Americold, Defendants do not show that BNY

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Mellon is a real estate investment trust under Nevada law or the law of any other state.

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Defendants also argue that Navarro does not apply to BNY Mellon because the trust, not

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BNY Mellon, is the real party in interest to the suit. Under Navarro, “a federal court must

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disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties

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to the controversy.” 446 U.S. at 461. The Court held that “a trustee is a real party to the

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controversy for purposes of diversity jurisdiction when he possesses certain customary powers to

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hold, manage, and dispose of assets for the benefit of others.” Id. at 464. However, in Americold

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the Court did not qualify the application of Navarro based on the powers or attributes that a

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trustee possesses; rather, it reaffirmed the simple rule that that “when a trustee files a lawsuit or

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is sued in her own name, her citizenship is all that matters for diversity.” 136 S. Ct. at 1016.

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Furthermore, even if the Court did need to analyze BNY Mellon’s role as trustee, BNY Mellon is

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more than likely not merely a nominal plaintiff because it has an impact on and a stake in the

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controversy. See Lincoln Prop. Co. v. Roche, 546 U.S. 81, 92, (2005) (stating that nominal

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parties are those that have “no control of, impact on, or stake in the controversy”). BNY Mellon

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alleges that it has legal title to the trust assets and, if successful, it will be entitled to a significant

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amount of relief.
BNY Mellon is a trustee filing a lawsuit in its own name; thus, “[its] citizenship is all that

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matters for diversity.” Navarro, 136 S. Ct. at 1016. Other district courts have concluded that for

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national banks that are trustees of trusts involving asset-backed securities the citizenship of the

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bank is what matters. See Wells Fargo Bank NA v. Breakwater Equity Partners LLC, No. CV-13-

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01475-PHX-DGC, 2014 WL 1515135, at *2 (D. Ariz. Apr. 17, 2014); Wilmington Trust, Nat.

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Ass’n v. Rob, No. 1-15-CV-552 RP, 2015 WL 7076637, at *3 (W.D. Tex. Nov. 12, 2015); Rivas

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v. U.S. Bank Nat. Ass’n, No. CIV.A. H-14-3246, 2015 WL 3613653, at *1 (S.D. Tex. June 9,

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2015).

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BNY Mellon asserts that it is a New York corporation with its principal office in New

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York, (see Compl. ¶ 1, ECF No. 1); thus, for purposes of diversity jurisdiction it is a citizen of

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New York, see 28 U.S.C. § 1348. Defendants do not contest BNY Mellon’s allegation that they

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are citizens of Nevada. As a result, the parties are diverse and the Court has jurisdiction over the

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case. The motion to dismiss is denied.

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CONCLUSION

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IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 7) is DENIED.

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IT IS SO ORDERED.

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Dated this 29 day of June, 2016.
Dated this 6ththday of June 2016.

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_____________________________________
ROBERT C. JONES
United States District Judge

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