Rivercliff Properties, Inc. v. Certain Interested Underwriters at Lloyd's London Subscribing to Certificate Number AVAC084293 et al

Filing 26

ORDER denying 13 Motion for Temporary Restraining Order and granting 16 and 19 Motions for Extension of Time. The Lloyd's London and Rivercliff Trust defendants shall have through and including 6/7/2016 to answer or otherwise respond to plaintiff's complaint. Signed by District Judge Terrence W. Boyle on 5/17/2016. (Romine, L.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:16-CV-215-BO

RIVERCLIFF PROPERTIES, INC.

)
)
Plaintiff,
)
)
v.
)
)
CERTAIN INTEREST UNDERWRITERS )
AT LLOYDS LONDON SUBSCRIBING )
TO CERTIFICATE AVAC084293, et al., )
)
Defendants. )

ORDER

This cause comes before the Court on plaintiffs motion for entry of a temporary
restraining order and preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil
Procedure. Defendant RivercliffRoad NC Trust filed a written response to the motion. A
hearing was held on the matter before the undersigned on May 11,2016, at Raleigh, North
Carolina and the court heard argument from all parties present. 1 For the reasons discussed
below, plaintiffs motion is denied.
BACKGROUND
Plaintiff filed this action in Cumberland County Superior Court alleging claims for
breach of insurance contract, breach of duty of good faith and fair dealing, unfair and deceptive
trade practices, and punitive damages. [DE 1-1]. Plaintiff builds, markets, and sells new homes
in the Fayetteville area. The specific homes at issue are located at 2764, 2776, and 2783
Rivercliff Road. Plaintiff executed a promissory note in favor of Rivercliff Road NC Trust
1

Only defendants White and Lail were not present at the hearing. As noted below, however, the
Court finds these to be nominal parties.

(RivercliffTrust) with the 2764 and 2783 homes as collateral. The note was due in full May 1,
2015. Plaintiff contends that RivercliffTrust also holds the note for the 2776 property. Lloyd's
London issued commercial property and commercial general liability insurance on the 2764 and
2783 properties. The property at 2764 is insured for $480,000 and the property at 2783 is
insured for $470,000. On April21, 2015, three homes owned by p1aintiffburned sufficiently
that the City of Fayetteville ordered them demolished- two of the properties that burned were
the subject of this suit, located at 2764 and 2783 RivercliffRoad. The 2776 property did not
burn.
Plaintiff sought entry of a temporary restraining order (TRO) and preliminary injunction
to enjoin defendant RivercliffRoad NC Trust from moving forward with foreclosure proceedings
against, transferring, or selling 2764 Rivercliff Road, 2783 Rivercliff Road, and 2776 Rivercliff
Road. On March 29, 2016, Superior Court Judge Robert Frank Floyd, Jr. entered plaintiffs
TRO, setting it to expire at the close of business on April4, 2016, unless extended by the court
or the parties. Superior Court Judge Gale Adams entered a consent order extending the TRO
until May 2, 2016, or pending further order of the court.
On April29, 2016, the Lloyd's London defendants and RivercliffTrust removed the
action to this Court pursuant to its diversity jurisdiction. 28 U.S.C. §§ 1441; 1332. Plaintiff
thereafter filed the instant motion for temporary restraining order and preliminary injunction, to
which Rivercliff Trust has responded.
DISCUSSION
I.

SUBJECT MATTER JURISDICTION

At the hearing before the undersigned, plaintiff raised for the first time a challenge to this
Court's subject matter jurisdiction over this action. Specifically, plaintiff argued that it and

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defendants Francis White and Rick Lail are citizens ofNorth Carolina and that White and Lail
are necessary parties and their citizenship thus defeats diversity. 2 Plaintiffs complaint states that
White and Lail, the substitute trustees, have been named solely because the action seeks to enjoin
foreclosure proceedings wherein the substitute trustees have been appointed by the beneficiaries
of the subject deeds oftrust. [DE 1-1]. "[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 (1980). The "key inquiry" in determining whether a party is
nominal is "whether the suit can be resolved without affecting the [] nominal defendant in any
reasonably foreseeable way." Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255,
260 (4th Cir. 2013).
Here, defendants White and Lail would not be affected in any foreseeable way by a
resolution of plaintiffs complaint for breach of contract, breach of duty of good faith and fair
dealing, and unfair and deceptive trade practices. While they may be necessary parties to any
foreclosure action, they appear in this pleading solely because of their status as substitute
trustees. The Court holds that in this instance White and Lail are nominal parties to this action
and their citizenship may be ignored for diversity jurisdiction purposes. See also Mansfield v.

Vanderbilt Mortg. and Fin., Inc., 29 F. Supp. 3d 645, 651 (E.D.N.C. 2014) (holding that
substitute trustees against whom no factual allegations are made in the complaint are nominal
parties).

2

Plaintiff further suggests that Burford abstention may be appropriate, but the Court does not
find there to be any difficult questions of state law bearing on policy problems or that this
Court's review of the questions in this case would be disruptive of any state efforts. New
Orleans Pub. Serv., Inc. v. Council of City ofNew Orleans, 491 U.S. 350, 361 (1989).
3

Because the Court may properly disregard the citizenship of the substitute trustees,
complete diversity exists between plaintiff and defendants and the Court has diversity
jurisdiction over this matter.
II.

TEMPORARY RESTRAINING ORDER & PRELIMINARY INJUNCTION

Whether considering a request for temporary restraining order or a motion for
preliminary injunction, a movant must establish each of four elements before such relief may
issue: 1) he is likely to succeed on the merits, 2) he is likely to suffer irreparable harm in the
absence of preliminary relief, 3) the balance of equities tips in his favor, and 4) an injunction is
in the public interest. Winter v. Natural Res. Def Council, Inc., 555 U.S. 7, 20 (2008). A
temporary restraining order is a similar remedy to a preliminary injunction. The difference is
that "a preliminary injunction preserves the status quo pending a final trial on the merits, [while]
a temporary restraining order is intended to preserve the status quo only until a preliminary
injunction hearing can be held." Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411,
422 (4th Cir. 1999). A temporary restraining order is an "emergency procedure and is
appropriate only when the applicant is in need of immediate relief." 11A Charles Wright, Arthur
Miller & Mary Kane, Federal Practice and Procedure § 2951.
Plaintiff has not demonstrated that it is entitled to a temporary restraining order or a
preliminary injunction because it has not established that it is likely to suffer irreparable harm.
Plaintiffs breach of contract and breach of duty of good faith and fair dealing claims rest on
plaintiffs allegation that RivercliffTrust failed to seek amounts owed to it by the Lloyd's
London defendants and instead sought to foreclose on the subject properties. At the hearing
before the undersigned, defendants confirmed that the insurance proceeds for the subject
properties at 2764 and 2783 RivercliffRoad were provided on April28, 2016, to Rivercliff

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Trust. [DE 18]. Thus, no irreparable harm can arise based on plaintiffs claim that Rivercliff
Trust had a duty to seek insurance proceeds prior to enforcing any right to foreclose.
In regard to the 2776 RivercliffRoad property, RivercliffTrust contends that it is not the
holder of the 2776 deed of trust and is therefore not the proper party to restrain or enjoin from
foreclosure proceedings. See [DE 18-2]. Additionally, plaintiffs argument concerning the 2776
property is that Rivercliff Trust is aware that its failure to mitigate damages in regard to the 2764
and 2783 properties was and is causing severe economic/financial distress to plaintiff by ruining
plaintiffs ability to refinance the 2776 property. As noted above, RivercliffTrust is now in
possession of the insurance proceeds on the 2764 and 2783 properties and any mitigation
allegedly required has been accomplished. Moreover, though it reserves the right to seek
equitable relief, plaintiffs complaint seeks monetary damages from Lloyd's London and
Rivercliff Trust. "Where the harm suffered by the moving party may be compensated by an
award of money damages at judgment, courts generally have refused to find that harm
irreparable." Hughes Network Sys., Inc. v. InterDigital Commun. Corp., 17 F.3d 691, 694 (4th
Cir. 1994).
At bottom, plaintiffs complaint and request for injunctive relief concern Rivercliff
Trust's failure to seek insurance proceeds as a first step, and do not contest either the validity of
the Clerk of Superior Court's foreclosure orders or the right of the note holder to foreclose on the
subject properties. Because the insurance proceeds have now been paid to the mortgagee, the
Court finds no basis upon which to issue temporary or preliminary injunctive relief in this matter.
The record now before the Court simply does not demonstrate that this is one of the "limited
circumstances which demands" the grant of such extraordinary interim relief. Steakhouse, Inc. v.
City of Raleigh, 166 F .3d 634, 63 7 (4th Cir. 1999).

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CONCLUSION
The motion for temporary restraining order and preliminary injunction [DE 13] is
DENIED. The consent motions for extension of time to answer the complaint [DE 16 & 19] are
GRANTED. The Lloyd's London and RivercliffTrust defendants shall have through and
including June 7, 2016, to answer or otherwise respond to plaintiff's complaint.

SO ORDERED, thisfl day ofMay, 2016.

T RRENCE W. BOYLE
UNITED STATES DISTRICT J

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