Federal National Mortgage Association v. Morse

Filing 18

MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE. GRANTING 7 Motion to Remand to State Court filed by Federal National Mortgage Association, DENYING 11 Motion for Leave to File filed by Gregory C Morse, 10 Re port and Recommendations,GRANTING 13 Motion for Leave to File Excess Pages filed by Gregory C Morse. Plaintiffs case is REMANDED to the Justice Court of Precinct 3 of Collin County, Texas. All relief not previously granted is DENIED. The Clerk is directed to CLOSE this civil action. Signed by Judge Amos L. Mazzant, III on 11/22/16. (cm, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

FEDERAL NATIONAL MORTGAGE
ASSOCIATION, A CORPORATION
ORGANIZED AND EXISTING UNDER
THE LAWS OF THE UNITED STATE OF
AMERICA,

v.
GREGORY C MORSE.

§
§
§ Civil Action No. 4:16-CV-396
§ (Judge Mazzant/Judge Nowak)
§
§
§
§
§

MEMORANDUM ADOPTING REPORT AND
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Came on for consideration the report of the United States Magistrate Judge in this action,
this matter having been heretofore referred to the Magistrate Judge pursuant to 28 U.S.C. § 636.
On September 29, 2016, the report of the Magistrate Judge (Dkt. #10) was entered containing
proposed findings of fact and recommendations that Plaintiff Federal National Mortgage
Association’s (“Plaintiff”) Motion to Remand (Dkt. #7) be granted. Having received the report
of the Magistrate Judge (Dkt. #10), having considered Defendant Gregory C. Morse’s
(“Defendant”) timely filed objections (Dkt. #12), Defendant’s Motion for Leave to File an
Amended Notice of Removal (Dkt. #11), Defendant’s Motion for Leave to Exceed Page
Limitation in Objection to Magistrate Judge’s Report and Recommendation (Dkt. #13),
Plaintiff’s Objection to Defendant’s Motion for Leave to File an Amended Notice of Removal
(Dkt. #15), Defendant’s Reply to Plaintiff’s Objection to Defendant’s Motion for Leave to File
an Amended Notice of Removal (Dkt. #16), and having conducted a de novo review, the Court is
of the opinion that the findings and conclusions of the Magistrate Judge are correct, and the

Court hereby adopts the Magistrate Judge’s report (Dkt. #10) as the findings and conclusions of
the Court.
BACKGROUND
This suit concerns the foreclosure of a property in which Defendant Gregory C. Morse
resides, located at 223 High Point Dr., Murphy, Texas 75094 (the “Property”). On May 3, 2016,
the Property was sold in a non-judicial foreclosure sale.

Following foreclosure, Plaintiff

submitted a written demand to Defendant, requesting that he vacate the Property. Defendant did
not vacate the Property. On June 10, 2016, Defendant filed a Sworn Complaint for Forcible
Detainer in the Justice Court of Precinct 3 of Collin County, Texas. No other claims are
asserted.
On June 15, 2016, Defendant filed a Notice of Removal alleging jurisdiction based on
diversity. Defendant now also asserts the existence of federal question jurisdiction on the basis
that this action involves “several Federal questions to be answered due to violations of Titles 11,
15, and 18 of the United States Code.” Defendant argues remand is warranted because Plaintiff
has failed to show the requisite amount in controversy, and in any event, forcible detainer actions
are governed by the Texas Property Code and are questions of state rather than federal law.
The Magistrate Judge, after a full hearing and review of all relevant pleadings, entered a
report and recommendation on September 29, 2016, recommending Plaintiff’s Motion to
Remand be granted (Dkt. #10).

Specifically, the Magistrate Judge made the following

conclusions: (1) Defendant’s Notice of Removal did not establish the requisite amount in
controversy; and (2) Defendant’s purported counterclaims could not be considered in
determining the existence of removal jurisdiction.

Subsequent to the report and

recommendation, on October 11, 2016, Defendant filed objections (Dkt. #12), as well as a

2

Motion for Leave to Exceed Page Limitation in Objection to Magistrate Judge’s Report and
Recommendation (Dkt. #13), and a Motion for Leave to File an Amended Notice of Removal
(Dkt. #11). On October 24, 2016, Plaintiff filed its Objection to Defendant’s Motion for Leave
to File an Amended Notice of Removal (Dkt. #15). On October 28, 2016, Defendant filed his
Reply to Plaintiff’s Objection to Defendant’s Motion for Leave to File an Amended Notice of
Removal (Dkt. #16).
MOTIONS FOR LEAVE
Before turning to Plaintiff’s objections, the Court first addresses Defendant’s Motion for
Leave to File an Amended Notice of Removal (Dkt. #11) and Motion for Leave to Exceed Page
Limitation in Objection to Magistrate Judge’s Report and Recommendation (Dkt. #13)
(collectively, the “Motions for Leave”).
Here, Defendant seeks leave to file an amended notice of removal; however, Defendant
has not provided the Court with the proposed amendment to his notice of removal. 1 Moreover,
even if the Court were to ignore this failure, the Motion itself merely contains the conclusory
statement “I am ready to proceed in amending my defective ‘Notice of Removal’ asserting the
federal questions which invoke the jurisdiction of this Court to entertain my corrected motion”
(Dkt. #11 at 2).

To the extent Defendant seeks to assert new bases for federal question

jurisdiction through this statement, 2 28 U.S.C. § 1653 does not permit amendment to add new
bases for federal question jurisdiction and/or to furnish missing allegations to support a new
basis of jurisdiction.

1

Pursuant to Local Rule CV-7(k), Motions for Leave to File must be accompanied by the document sought to be
filed. The motion and document must be filed separately. Id.
2
At Hearing, Defendant argued federal question jurisdiction existed, in addition to diversity jurisdiction (Dkt. #10 at
6 n.1). The Magistrate Judge, without addressing whether Defendant’s assertion was timely under section 1653,
concluded no federal question subject matter jurisdiction existed (Dkt. #10 at 6 n.1).
3

The instant Motion was filed four months after Defendant’s notice of removal—and thus,
must comply with 28 U.S.C. § 1653. Fantroy v. Dall. Area Rapid Transit, No. 3:13-CV-0345-K,
2013 WL 2284879, at *7 (N.D. Tex. May 23, 2013). Here, Defendant’s stated reason for
amending is to assert “the federal questions” (Dkt. #11 at 2) (discussed supra); Defendant does
not state he seeks to correct a technical error regarding the purported diversity jurisdiction.
Again, under section 1653, the Court cannot consider new bases for federal question jurisdiction.
See Fantroy, 2013 WL 2284879, at *7 (“Section 1653 permits amendments to cure technical
defects in the jurisdictional allegations; it does not permit an amendment which adds an entirely
different jurisdictional basis for the removal.”); Iwag v. Geisel Compania Maritima, S.A., 882 F.
Supp. 597, 601 (S.D. Tex. 1995) (holding Supplementary Notice of Removal did not fall within
the scope of amendments allowed under section 1653 when the original notice of removal
asserting federal question jurisdiction referenced the plaintiff’s 18 U.S.C. §§ 1961-68 claims and
not the plaintiff’s 46 U.S.C. §10313 claim, which defendant attempted to raise as separate
grounds for federal question jurisdiction in its Supplementary Notice of Removal). And the
Court can only consider amendment of defective jurisdictional allegations where there has been
no undue delay. Getty Oil Corp., v. Ins. Co. of N. Am., 841 F.2d 1254, 1258 n.5 (5th Cir. 1988).
Defendant’s Motion for Leave to File an Amended Notice of Removal was filed in the present
case four months after removal, and only after the Magistrate Judge’s recommendation at
Hearing to grant the Motion to Remand, which is indicative of undue delay. For the foregoing
reasons, Defendant’s Motion for Leave to File an Amended Notice of Removal (Dkt. #11) must
be DENIED. Notwithstanding denial of Defendant’s Motion for Leave to File an Amended
Notice of Removal, the Court has considered all bases for jurisdiction raised by Defendant in his
objections (discussed more fully infra).

4

With respect to Defendant’s second motion for leave, Defendant seeks leave to exceed
the page limitation for objections to a magistrate judge’s recommendation, pursuant to Local
Rule CV-72(c). Defendant has filed the subject objections (Dkt. #13); and to date Plaintiff has
not opposed such request. The Court therefore assumes Plaintiff is unopposed and in light of
Defendant’s pro se status, the Court will allow the additional pages and consider same.
Accordingly, Defendant’s Motion for Leave to Exceed Page Limitation in Objection to
Magistrate Judge’s Report and Recommendation (Dkt. #13) is GRANTED, and the Court will
consider the entirety of Defendant’s Objection to Report and Recommendation of United States
Magistrate Judge (Dkt. #12).
ANALYSIS
Under the law, a party who files timely written objections to a magistrate judge’s report
and recommendation is entitled to a de novo determination of those findings or recommendations
to which the party specifically objects. 28 U.S.C. § 636(b)(1)(c); Fed. R. Civ. P. 72(b)(2)-(3).
Defendant has timely and specifically objected that (1) the amount-in-controversy requirement is
met because the amount-in-controversy is equal to the purchase price of his homestead; and/or
(2) Plaintiff “artfully pleaded” its forcible detainer action “in order to avoid injecting federal
questions in the complaint.” Defendant articulated each of these arguments in his previous
papers and also at Hearing before the Magistrate Judge.
I.

Removal Jurisdiction
To reiterate, “Federal courts are courts of limited jurisdiction.” Gunn v. Minton, 133 S.

Ct. 1059, 1064 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
(1994)); accord Halmekangas v. State Farm Fire & Cas. Co., 603 F.3d 290, 292 (5th Cir. 2010);
Johnson v. United States, 460 F.3d 616, 621 n.6 (5th Cir. 2006); McKee v. Kan. City S. Ry. Co.,

5

358 F.3d 329, 337 (5th Cir. 2004). The Court “must presume that a suit lies outside this limited
jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the
federal forum.” Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001), cert. denied, 534
U.S. 993 (2001) (citing Kokkonen, 511 U.S. at 377); see also Hertz Corp. v. Friend, 559 U.S. 77,
96 (2010); Boone v. Citigroup, Inc., 416 F.3d 382, 388 (5th Cir. 2005). In an action that has
been removed to federal court, a district court is required to remand the case to state court if, at
any time before final judgment, it determines that it lacks subject matter jurisdiction. 28 U.S.C.
§ 1447(c); Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 571 (2004); In re 1994
Exxon Chem. Fire, 558 F.3d 378, 392 (5th Cir. 2009); McDonal v. Abbott Labs., 408 F.3d 177,
182 (5th Cir. 2005). Federal courts have subject matter jurisdiction and are authorized to
entertain causes of action only where a question of federal law is involved or where there is
diversity of citizenship between the parties and the amount in controversy exceeds $75,000.00,
exclusive of interest and costs. See 28 U.S.C. §§ 1331-1332; Arbaugh v. Y & H Corp., 546 U.S.
500, 513 (2006); Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005); Exxon Mobil Corp. v.
Allapattah Servs., Inc., 545 U.S. 546, 552 (2005); Halmekangas, 603 F.3d at 294; McDonal, 408
F.3d at 181.
II.

Diversity Jurisdiction
Defendant objects to the Magistrate Judge’s finding that diversity jurisdiction does not

exist because “the damages in an eviction lawsuit would be the purchase price of [his]
homestead” (Dkt. #12 at 28), which amount is sufficient to satisfy the amount-in-controversy
requirement. Such assertion is contrary to established precedent. The object of Plaintiff’s
underlying complaint—for forcible detainer—is possession of the Property, not title. As such,
the right to actual possession is the issue to be adjudicated under the complaint. It is well

6

established in this District that the value of the right of actual possession is the value of
occupying the Property, not the value of the Property itself. Nahlawi v. Burton-Dabney, No.
4:14CV609, 2015 WL 139764, at *2 (E.D. Tex. Jan. 9, 2015) (“The value of the right to be
possessed is the value of occupying the property, not the value of the property itself.”); Bank of
N.Y. Mellon v. Ingram, No. 1:12-CV-483, 2013 WL 2637995, at *4 (E.D. Tex. June 11, 2013)
(“Given the limited nature of Texas forcible detainer actions, federal district courts within this
state have consistently held that the amount in controversy in such actions ‘is not the value of the
[p]roperty itself but rather the value of the right to occupy or possess the property.’”) (quoting
Bank of Am., N.A. v. Ingram, 1:12–CV–55, 2012 WL 2524280, at *3 (E.D. Tex. May 14, 2012)).
Defendant does not allege the value of occupying the Property. Rather, Defendant’s Notice of
Removal alleges only the stated sales price of the Property (Dkt. #1 at 6). This is not the correct
measure and without presentation of evidence showing the value of the right to occupy the
Property, Defendant’s Notice of Removal (and other filings) fails to establish the amount in
controversy. Defendant offers no evidence as to the value of the right to occupy or possess the
Property. Accordingly, Defendant’s first objection is overruled. Diversity jurisdiction does not
exist.
III.

Federal Question Jurisdiction
Defendant’s remaining objections argue Plaintiff’s forcible detainer action is an “artfully-

pleaded complaint” pleaded as a forcible detainer action simply to avoid the Court’s
jurisdiction (Dkt. #12 at 27-29).

More specifically, Defendant argues Plaintiff “engaged in

racketeering [18 USC §1961], disregarding bankruptcy law, [18 USC §156], monetary
transactions in property derived from unlawful activity, [19 USC §1957], and conspiracy,

7

[18 USC §2 and 18 USC §1349]” (Dkt. #12 at 20) and attempts to assert counterclaims to
raise each of these issues and to support jurisdiction.
A federal question arises if a substantial, disputed question of federal law is presented on
the face of the plaintiff’s “well-pleaded complaint.” See Aetna Health Inc. v. Davila, 542 U.S.
200, 207 (2004); Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987); Metro. Life Ins. Co. v.
Taylor, 481 U.S. 58, 63 (1987); Gutierrez v. Flores, 543 F.3d 248, 251-52 (5th Cir. 2008);
McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411, 416 (5th Cir. 2008), cert. denied, 553 U.S.
1080 (2008); Hoskins v. Bekins Van Lines, 343 F.3d 769, 772 (5th Cir. 2003). Generally, under
the “well pleaded complaint” rule a case does not arise under federal law and, thus, is not
removable if the complaint does not affirmatively allege a federal claim and instead asserts only
state law causes of action. See Kramer v. Smith Barney, 80 F.3d 1080, 1082 (5th Cir. 1996)
(citing Franchise Tax Bd., 463 U.S. at 10). “Allied as an ‘independent corollary’ to the wellpleaded complaint rule is the further principle that ‘a plaintiff may not defeat removal by
omitting to plead necessary federal questions.’” Rivet v. Regions Bank of La., 522 U.S. 470, 475
(1998); Bellfort Enters. Inc. v. PetroTex Fuels Inc., 339 F. App’x 416, 418 (5th Cir. 2009) (“The
argument is that, even if a federal cause of action did not appear on the face of [Plaintiff’s]
complaint, [federal law] preempts the state law causes of action brought by [Plaintiff], and
federal question jurisdiction therefore exists.”)
The face of Plaintiff’s Complaint does not allege any claims created by federal law, nor
does Plaintiff’s right to relief appear to depend on the resolution of any substantial, disputed
question of federal law. See Caterpillar Inc., 482 U.S. at 392; MSOF Corp. v. Exxon Corp., 295
F.3d 485, 490 (5th Cir.), cert. denied, 537 U.S. 1046 (2002). Rather, Plaintiff’s complaint
asserts a traditional state law claim for forcible detainer. U.S. Bank, N.A. v. Allain, No. 1:14-CV-

8

670, 2015 WL 679233, at *2-3 (E.D. Tex. Feb. 17, 2015); see Bank of N.Y. Mellon Trust Co.,
N.A. v. De La Fuente, No. 3:14–CV–3627, 2014 WL 6901794, at *4 (N.D. Tex. Dec. 8, 2014)
(remanding forcible detainer action under similar facts); Fed. Nat’l Mortg. Ass’n v. Elliott, No.
3:10–CV–1321–L, 2010 WL 4627833, at *3 (N.D. Tex. Nov. 16, 2010) (remanding forcible
detainer action because the plaintiff’s complaint did not raise a federal issue and the state law
claim for forcible detainer had not been completely preempted by federal law). Forcible detainer
actions do not meet the “well-pleaded complaint” standard. Fed. Nat’l Mortg. Ass’n, 2010 WL
4627833, at *3; see U.S. Bank, N.A., 2015 WL 679233, at *2-3. Plaintiff’s Complaint alleges a
single cause of action—one for forcible detainer (eviction) with the purpose of obtaining
physical possession of the Property under state law. Plaintiff’s Complaint raises no federal claim
or issue and provides no basis for federal question jurisdiction. Fed. Nat’l Mortg. Ass’n, 2010
WL 4627833, at *3; see U.S. Bank, N.A., 2015 WL 679233, at *2-3; see also Fannie Mae v. Lee,
No. 3:10–CV–1047–L, 2010 WL 3025533, at *3 (N.D. Tex. July 30, 2010).
In addition, the federal defenses and/or counterclaims Defendant attempts to allege
cannot be considered in determining the existence of removal jurisdiction. Stump v. Potts, 322 F.
App’x 379, 380 (5th Cir. 2009) (“The complaint filed in the state court was a simple suit to evict
arising under state law. The complaint provided no basis for federal question jurisdiction. The
fact that [defendant] brought up possible federal question claims in her answer and counterclaim
cannot be considered in determining the existence of removal jurisdiction.”); see Tex. ex rel. Bd.
of Regents of Univ. of Tex. Sys. v. Walker, 142 F.3d 813 n.2 (5th Cir. 1998) (“The well-pleaded
complaint rule bases removal jurisdiction on the existence of a claim lying within federal
jurisdiction on the face of a plaintiff’s well-pleaded complaint. There has never been a
suggestion that a defendant could, by asserting an artful counterclaim, render a case removable in

9

violation of the well-pleaded complaint rule.”); U.S. Bank, N.A., 2015 WL 679233, at *2-3. 3
Though Defendant attempts to argue that Plaintiff “engaged in racketeering [18 USC §1961],
disregarding bankruptcy law, [18 USC §156], monetary transactions in property derived from
unlawful activity, [19 USC §1957], and conspiracy, [18 USC §2 and 18 USC §1349]” (Dkt. #12
at 20), such counterclaims cannot support federal question jurisdiction. See Tex. ex rel. Bd. of
Regents of Univ. of Tex. Sys., 142 F.3d at 813. Defendant cannot circumvent jurisdiction of the
state courts by asserting “federal questions” in an answer or counterclaim. Stump, 322 F. App’x
at 380. Here, Plaintiff’s Complaint is a forcible detainer action—which has been expressly held
by the Court to be a state law claim that provides no basis for federal question jurisdiction. Fed.
Nat’l Mortg. Ass’n, 2010 WL 4627833, at *3; see U.S. Bank, N.A., 2015 WL 679233, at *2-3.
Accordingly, because Plaintiff’s Complaint does not raise a federal issue, nor is Plaintiff’s right
to relief dependent upon a resolution of federal law, the Court lacks federal question jurisdiction.
Defendant’s remaining objections are overruled.
CONCLUSION
Having received the report of the United States Magistrate Judge (Dkt. #10), having
considered each of Defendant’s timely filed objections (Dkt. #12), Defendant’s Motion for Leave
to File an Amended Notice of Removal (Dkt. #11), Defendant’s Motion for Leave to Exceed
Page Limitation in Objection to Magistrate Judge’s Report and Recommendation (Dkt. #13),
Plaintiff’s Response (Dkt. #15), Defendant’s Reply (Dkt. #16), and having conducted a de novo
review, this Court finds as follows:
3

To the extent Defendant asserts again that his counterclaims could satisfy the amount-in-controversy requirement
for diversity juridiction, district courts in the Fifth Circuit have generally held that a defendant’s counterclaim
against a plaintiff should not be considered in determining the existence of removal jurisdiction. Samargandi v. Am.
Exp., No. 4:09-CV-1577, 2011 WL 221868, at *6 (S.D. Tex. Jan. 20, 2011) (“[T]he ‘near unanimous rule’ of district
courts in this circuit and others is to determine the amount in controversy ‘solely by referring to only the plaintiff’s
original complaint’ and not by including the defendant’s counterclaim.”); see also Thrash v. New Eng. Mut. Life Ins.
Co., 534 F. Supp. 2d 691, 695-97 (S.D. Miss. 2008).
10

It is, therefore, ORDERED Defendant’s Motion for Leave to File an Amended Notice of
Removal (Dkt. #11) is DENIED and Defendant’s Motion for Leave to Exceed Page Limitation
in Objection to Magistrate Judge’s Report and Recommendation (Dkt. #13) is GRANTED.
It is further ORDERED that Plaintiff Federal National Mortgage Association’s Motion
to Remand (Dkt. #7) is GRANTED, and Plaintiff’s case is REMANDED to the Justice Court of

.

Precinct 3 of Collin County, Texas.
All relief not previously granted is DENIED. The Clerk is directed to CLOSE this civil
action
IT IS SO ORDERED.
SIGNED this 22nd day of November, 2016.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

11