THE BANK OF NEW YORK MELLON v. LEE et al

Filing 40

OPINION. Signed by Judge Anne E. Thompson on 3/23/2016. (km)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
THE BANK OF NEW YORK MELLON
FKA THE BANK OF NEW YORK, AS
TRUSTEE FOR THE
CERTIFICATEHOLDERS OF CWMBS,
INC., CHL MORTGAGE PASSTHROUGH TRUST 2005-31,
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2005-31,

Civ. No. 14-4432
OPINION

Plaintiff,
v.
SANG JIK LEE, et al.,
Defendants.
THOMPSON, U.S.D.J.
This matter is before the Court upon Plaintiff The Bank of New York Mellon’s
(“Plaintiff”) second motion to remand the case to the Superior Court of New Jersey, Chancery
Division, Monmouth County. (ECF No. 34). Plaintiff has also requested fees and expenses
pursuant to 28 U.S.C. § 1447(c). (Id.). Defendant Sang Jik Lee (“Defendant”) opposes. (ECF
No. 36). The Court has decided this motion based on the parties’ written submissions and having
heard oral argument. For the reasons stated herein, Plaintiff’s motion to remand will be granted,
but its request for fees and expenses will be denied.

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BACKGROUND
This case involves a foreclosure action by Plaintiff The Bank of New York Mellon
against Defendant Sang Jik Lee. Given the extensive proceedings in this matter, the Court will
recount here only those facts necessary to the present motion.
Plaintiff’s allegations are as follows: on November 18, 2005, Defendant took out a home
loan and executed a note in favor of Countrywide Home Loans, Inc., in the amount of
$519,000.00. The note was secured by a mortgage on Defendant’s home located at 3579 Shafto
Road, Tinton Falls, New Jersey. Subsequently, in 2011, the note and mortgage were transferred
to Plaintiff.
Defendant defaulted on the loan on April 1, 2011. Since then, Defendant has not made
any payments on the mortgage, and has also neglected to make certain real estate tax payments
he was obligated to make. Plaintiff paid the real estate tax payments due by Defendant and has
not been reimbursed by Defendant. As a result of Defendant’s failure to pay the mortgage and
tax payments, Plaintiff commenced a foreclosure action in state court on June 5, 2014. The
action was against Defendant Sang Jik Lee and other creditors of Defendant who may be able to
assert a claim on the property. These other creditors include the State of New Jersey, Mortgage
Electronic Registration Systems, Inc., New Century Financial Services, and Equable Ascent
Financial LLC.
Defendant removed the case to federal court on July 14, 2014, on the basis of diversity
jurisdiction. The parties filed motions, set a schedule, and began discovery, which was set to end
on January 30, 2016. But on January 22, 2016, Plaintiff filed a motion to remand the case to
state court, despite having litigated the case in federal court for eighteen months. (ECF No. 26).
The Court denied the motion on February 9, 2016. (ECF No. 35). However, Plaintiff had raised

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an argument for the first time in its reply brief. The Court deemed this argument untimely for
purposes of the first motion to remand but allowed Plaintiff to raise this argument in a second
motion to remand, if it so desired. (Id.). Plaintiff promptly filed a second motion to remand on
February 11, 2016. (ECF No. 34). This motion is presently before the court.
DISCUSSION
A. Legal Standard
A defendant may remove a civil action filed in state court to the federal court where the
action might originally have been brought. 28 U.S.C. §§ 1441(a), (b). The federal court to
which the action is removed must have original subject matter jurisdiction. 28 U.S.C. § 1441(b).
Federal district courts have subject matter jurisdiction over civil actions that involve a federal
question or diversity of citizenship. 28 U.S.C. §§ 1331, 1332. Federal-question jurisdiction
exists when the action arises “under the Constitution, laws, or treaties of the United States.” 28
U.S.C. § 1331. Diversity jurisdiction exists when the action arises between citizens of different
states, and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. For there to be
complete diversity of citizenship between the parties, each plaintiff must be a citizen of a
different state from each defendant. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373
(1978).
If at any time before final judgment it appears that the district court lacks subject matter
jurisdiction, the case must be remanded to state court. 28 U.S.C. § 1447(c). The party that
removed the case bears the burden of establishing federal jurisdiction. Frederico v. Home
Depot, 507 F.3d 188, 193 (3d Cir. 2007).

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B. Analysis
Defendant removed this case to federal court on the basis of diversity jurisdiction.
Plaintiff makes two arguments as to why the case lacks diversity, and thus, must be remanded to
state court. First, Plaintiff argues that one of the parties is a state, which destroys diversity
jurisdiction because states have no citizenship. Second, Plaintiff argues that the parties are not
diverse because both Plaintiff and one of the defendants (Mortgage Electronic Registration
Systems, Inc.) are citizens of Delaware.1
It is well-settled that a state is not a citizen for purposes of establishing diversity of
citizenship jurisdiction in federal court. See, e.g., Postal Tel. Cable Co. v. Alabama, 155 U.S.
482, 487 (1894) (“A state is not a citizen. And under the judiciary acts of the United States it is
well settled that a suit between a state and a citizen or a corporation of another state is not
between citizens of different states.”); Moor v. Alameda Cty., 411 U.S. 693, 717 (1973) (“There
is no question that a State is not a ‘citizen’ for purposes of the diversity jurisdiction.”); Brown v.
Francis, 75 F.3d 860, 865 (3d Cir. 1996). When a state is a party to a case that was removed on
the basis of diversity jurisdiction, the state’s presence generally destroys diversity, and the case
must be remanded. See Postal Tel. Cable Co., 155 U.S. 482; Brown, 75 F.3d 860.
As Plaintiff notes, one of the defendants in this case is the State of New Jersey. As a
state, New Jersey has no citizenship, and so the presence of this party would ordinarily destroy
the Court’s diversity jurisdiction. However, Defendant argues that the Court need not consider
New Jersey’s citizenship because the state is only a nominal party to the litigation. When
considering citizenship for purposes of diversity jurisdiction, “a federal court must disregard

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In its motion, Plaintiff also argued that Defendant had not adequately established Plaintiff’s
citizenship, but this issue was resolved by further briefing and oral argument.
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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 (1980). Nominal parties are
generally those “without a real interest in the litigation.” Bumberger v. Ins. Co. of N. Am., 952
F.2d 764, 767 (3d Cir. 1991); see also Johnson v. SmithKline Beecham Corp., 724 F.3d 337, 359
(3d Cir. 2013).
The State of New Jersey was made a party to this case based on a judgment it has against
Defendant. Defendant acknowledges that the State of New Jersey has a judgment against him,
but argues that New Jersey is a nominal party to this case because the debt to New Jersey has
nothing to do with Plaintiff’s foreclosure action. Plaintiff counters that because New Jersey
docketed the judgment in the Superior Court, New Jersey has a lien against Defendant’s
property, which must be adjudicated to establish clear title over the property. Under
longstanding New Jersey statutes, a judgment against a party that is docketed in the Superior
Court automatically establishes a lien against that party’s real property. New Brunswick Sav.
Bank v. Markouski, 587 A.2d 1265, 1269-70 (N.J. 1991) (referencing N.J. Stat. Ann. §§ 2A:16-1,
17-17); see also New Century Fin. Servs., Inc. v. Staples, 879 A.2d 1190, 1193-95 (N.J. Super.
Ct. App. Div. 2005). Here, Plaintiff established that New Jersey has a judgment against
Defendant that was docketed in the Superior Court. (See Compl. ¶ 12, ECF No. 1-1). Upon
being docketed in the Superior Court, New Jersey’s judgment automatically established a lien
against Defendant’s property.
“[W]hen land is conveyed at a private sale, valid liens that are not satisfied remain valid
and subject to execution by the lien holder.” Four Felds, Inc. v. N. Grove House, LLC, No. A0041-07T2, 2008 WL 4298581, at *2 (N.J. Super. Ct. App. Div. Sept. 23, 2008). Because New
Jersey has a lien against Defendant’s property, New Jersey has an interest in the outcome of the

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foreclosure action, and Plaintiff cannot obtain clear title to the property without addressing the
lien. Therefore, New Jersey is not a nominal party to the foreclosure action. New Jersey’s
citizenship must be considered for purposes of diversity jurisdiction. As a state, New Jersey has
no citizenship, and consequently, its presence as a party destroys diversity jurisdiction. The case
must therefore be remanded.
Given this finding, the Court need not address Plaintiff’s second argument regarding the
citizenship of Mortgage Electronic Registration Systems, Inc. However, the Court will address
Plaintiff’s request for fees and expenses. An order remanding a case “may require payment of
just costs and any actual expenses, including attorneys’ fees, incurred as a result of the removal.”
28 U.S.C. § 1447(c). The Court has discretion to award attorneys’ fees in connection with a
remand order where the removing party lacked an “objectively reasonable basis” for seeking
removal. See Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Given the presence
of the State of New Jersey as a defendant creditor and the longstanding statutes establishing that
docketed judgments automatically establish liens on real property, Defendant should have known
that New Jersey was a real party in interest that would destroy diversity jurisdiction.
Consequently, Defendant lacked an objectively reasonable basis for removing the case to federal
court. However, due to Plaintiff’s delay in bringing this matter to the Court’s attention, the
Court will not award fees and expenses.
CONCLUSION
For the reasons stated herein, Plaintiff’s motion to remand will be granted, but its request
for fees and expenses will be denied. A corresponding order follows.

/s/ Anne E. Thompson
Anne E. Thompson, U.S.D.J.
Dated: March 23, 2016
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