Hearn v. Deutsche Bank National Trust Company et al

Filing 7

ORDER denying 5 Motion to Remand to State Court.The Court DISMISSES Defendants Lisle Patton, Robert Forster, Robert Maris, and Matt Lindsey as improperly joined in the suit. (Ordered by Judge Jane J Boyle on 11/18/2013) (Judge Jane J Boyle)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
KEITH L. HEARN,
Plaintiff,
v.
DEUTSCHE BANK NATIONAL
TRUST COMPANY, as Trustee
for First Franklin Mortgage Loan Trust
2006-FF11, Mortgage Pass-Through
Certificates, Series 2006-FF11, et al.,
Defendants.

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CIVIL ACTION NO. 3:13-CV-2417-B

MEMORANDUM ORDER AND OPINION
Before the Court is Plaintiff Keith Hearn’s Motion to Remand (doc. 5), filed July 24,
2013. For the reasons stated below, the Court finds that Plaintiff’s Motion to Remand should be
and hereby is DENIED.
I.
BACKGROUND
Plaintiff Keith Hearn owns real property located at 9942 Ontario Lane, Dallas, Texas (“the
Property”). Doc. 1-5, Pl.’s Orig. Pet. 2. Hearn’s dispute with Defendants arises out of an attempted
foreclosure on the Property. Doc. 1, Notice of Removal 2.
On June 3, 2013, Hearn initiated a civil action in the 116th Judicial District Court of Dallas
County, Texas, against Defendants Deutsche Bank National Trust Company, America’s Servicing
Company, and Mortgage Electronic Systems, Inc. (collectively, “Defendants”) and Trustee
Defendants Lisle Patton, Robert Forster, Robert Maris, and Matt Lindsey (collectively, “Trustee
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Defendants”) seeking a declaratory judgment that Defendant Deutsche Bank has no interest in the
property. Doc. 1-5, Pl.’s Orig. Pet. Defendants removed to federal court on the basis of diversity.
Doc. 1, Notice of Removal 3.
Hearn filed the instant Motion to Remand on July 24, 2013, maintaining that because
Trustee Defendants are citizens of Texas and were properly joined, diversity jurisdiction is destroyed.
Doc. 5, Pl.’s Mot. Remand 3-4. Further, Hearn insists that the amount in controversy does not
exceed $75,000. Id. at 6. Defendants respond that Trustee Defendants’ citizenship should not be
considered for the purposes of assessing diversity jurisdiction because they were improperly joined,
and that the amount-in-controversy requirement has been met because the value of the Property is
$243,690.00, as established by an appraisal from the Dallas Central Appraisal District. Doc. 6, Defs.’
Resp. 4.
II.
LEGAL STANDARD
Because the jurisdiction of the federal courts is limited, a federal court must presume that a
suit falls outside its jurisdiction. See Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001).
The party invoking federal jurisdiction has the burden of establishing it. Id. In the removal context,
this is the removing party. De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995). The removal
statute must be strictly construed in favor of remand, and all doubts and ambiguities must be resolved
against federal jurisdiction. See Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000).
Defendants may remove an action filed in state court to federal court if the parties are of
diverse citizenship and the amount in controversy exceeds $75,000. 28 U.S.C. §1441(a); 28 U.S.C.
§ 1332. Here, because Trustee Defendants are citizens of Texas, 28 U.S.C. § 1441(b) prevents
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Defendants from removing the case unless Trustee Defendants were improperly joined. Caterpillar,
Inc. v. Lewis, 519 U.S. 61, 68 (1996). Consequently, Defendants must show that Hearn improperly
joined Trustee Defendants in order to establish federal subject matter jurisdiction. See McKee v.
Kansas City S. Ry. Co., 358 F.3d 329, 333-34 (5th Cir. 2004).
There are two ways a defendant may demonstrate improper joinder: (1) by showing actual
fraud in the pleading of jurisdictional facts, or (2) by proving that the plaintiff will be unable to
establish a cause of action against the non-diverse defendant under the applicable law. Travis v. Irby,
326 F.3d 644, 647 (5th Cir. 2003). Under this second method, Defendants must establish that there
is no reasonable basis to predict that a plaintiff will be able to recover against the disputed defendants
under applicable Texas law. See Smallwood v. Illinois Cent., 385 F.3d 568, 573(5th Cir. 2004). In
order to predict whether a plaintiff has a reasonable basis of recovery under state law, a Court may
either (1) conduct a Rule 12(b)(6)-type analysis to determine whether the allegations of the
plaintiff’s complaint state a claim under state law against the in-state defendant, or (2) pierce the
pleadings and conduct a summary inquiry to identify the presence of discrete and undisputed facts
that would preclude plaintiff’s recovery against the in-state defendant. Id. at 573-74. A court must
view all factual allegations in the light most favorable to the plaintiff, and any contested issues of fact
or ambiguities of state law must be resolved in the plaintiff’s favor. Travis, 326 F.3d at 649. Thus,
Defendants assume a heavy burden in establishing improper joinder. Id.
III.
ANALYSIS
A.

Diversity Jurisdiction—Improper Joinder

Here the parties agree that Trustee Defendants are Texas residents, dispensing with any
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argument of fraud in the pleading of jurisdictional facts. Thus the Court’s analysis will center on the
second inquiry, whether Plaintiff had a legally cognizable case against Trustee Defendants in Texas
state court.
Hearn insists that he has a cause of action against Trustee Defendants under section
51.007(f). Doc. 5, Pl.’s Mot. Remand 4. Defendants contend that Trustee Defendants are improperly
joined, and that section 51.007 precludes the assertion of causes of action against Trustee
Defendants solely in their roles as Substitute Trustees. Doc. 1, Not. of Removal 4-5; Doc. 5, Defs.’
Resp 2-3.
Section 51.007(a) of the Texas Property Code provides that a trustee named in a suit may
plead in its answer that it “is not a necessary party by a verified denial stating the basis for the
trustee’s reasonable belief that the trustee was named as a party solely in the capacity as a trustee
under a deed of trust, contract lien, or security interest.” Tex. Prop. Code Ann. § 51.007(a). The
other parties to the suit must then file a verified response within thirty days rebutting the trustee's
verified denial. Id. § 51.007(b). If there is no timely verified response filed, the trustee “shall be
dismissed from the suit without prejudice.” Id.§ 51.007(c).
Here, Trustee Defendants filed their Original Answer with a verified denial on June 19, 2013,
asserting that they were named solely in their capacity as Substitute Trustees and were not necessary
parties. Doc. 1-7, Trustee Defs.’ Answer Ex. B-4. Hearn did not submit a verified response within
thirty days to rebut the verified denial. Ordinarily this failure to submit a verified response would
mean that Trustee Defendants would be dismissed from the action without prejudice. Tex. Prop.
Code § 51.007(c); see also WAMCO XXVII, Ltd. v. Casa Grande Cotton Finance Co., 314 F.Supp.2d
655 (N.D. Tex. 2004)(dismissing defendant without prejudice based on failure to file a verified
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response to verified answer). There is some uncertainty, however, over whether Trustee Defendants’
denial was sufficient to merit dismissal under § 51.007(c). Section 51.007(a) requires a trustee to
plead in its answer that the trustee is not a necessary party by “a verified denial stating the basis for
the trustee’s reasonable belief” that the trustee was named as a party solely in her capacity as a
trustee. In Marsh v. Wells Fargo Bank, N.A., 760 F.Supp.2d 701, 707 (N.D. Tex. 2011), the court
held that this language required a trustee to do more than just swear to the mere fact of belief that
it had been named as a party solely in the capacity as a trustee under a deed. According to the court’s
interpretation, a trustee was required to actually state the reason or justification for the trustee’s
reasonable belief, and thus the trustees’ statement in that case that they “reasonably believe that they
were individually named as parties solely in their capacity as trustees” was insufficient to merit
dismissal under § 51.007(c). Id. at 707-08.
Trustee Defendants here made a very similar denial to the trustees in Marsh, stating that they
have a “reasonable belief that they were named as parties in this litigation solely in their capacity as
a Substitute Trustee under the Deed of Trust made the basis of this lawsuit.” Doc. 1-7, Trustee Defs.’
Answer 1-2. They also added that they believed “that their only connection with this lawsuit is their
appointment as Substitute Trustee under the Terms of the Deed of Trust.” Id. While this denial
differs slightly from the denial in Marsh, it does not clearly state a basis for Trustee Defendants’
reasonable belief, although it does at least suggest that their belief is based on the fact that they have
no other connection to this litigation than as Substitute Trustees.
The Court need not decide this verified denial issue in order to rule on Defendants’ claims
of improper joinder, however, because even if Trustee Defendants are not dismissed under
§ 51.007(c), there is no reasonable basis for predicting that Hearn will be able to recover against
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Trustee Defendants. Smallwood, 385 F.3d at 573. In his Petition, Hearn seeks a declaratory judgment
that “Defendant Deutsche Bank National Trust Company . . . has no interest in Plaintiff [sic]
homestead” and an accounting of all funds “received on behalf of Deutsche Bank” and “paid out by
Deutsche Bank.” Doc. 1-5, Pl.’s Orig. Pet. 4. Thus, Hearn only seeks relief against Defendant
Deutsche Bank, and not against Trustee Defendants individually. At most, the requested relief only
incidentally affects Trustee Defendants in their capacities as Substitute Trustees under the deed of
trust, which is not sufficient to defeat diversity jurisdiction. Marsh, 760 F.Supp.2d at 710 (citing Cook
v. Wells Fargo Bank, N.A., No. 3:10-cv-592-D, 2010 WL 2772445, at *4 (N.D. Tex. July 12, 2010)).
Even looking beyond the limitations of the relief Hearn seeks, the Court still finds that
Trustee Defendants are improperly joined because Hearn’s Petition does not otherwise state a claim
against Trustee Defendants under Texas law. Smallwood, 385 F.3d at 573-74. Hearn alleges in his
Motion to Remand that Trustee Defendants can be held accountable for their “bad acts or
omissions” under 51.007(f) and suggests that Defendants must prove that Trustee Defendants are
not jointly or alternatively liable for the claims against the other Defendants. Doc. 5, Pl.’s Mot.
Remand 5. Hearn’s Petition does not specify what “bad acts or omissions” Trustee Defendants
committed, however. In fact, the Petition makes no allegations against Trustee Defendants and does
not state any theory under which Hearn could recover against Trustee Defendants under state law.
Furthermore, there is nothing in the evidence submitted by either party that indicates even a
possibility that Hearn could maintain a separate cause of action against Trustee Defendants or that
Hearn’s charge of joint or alternative liability is anything more than a theoretical suggestion. The fact
that there must be “no possibility of recovery by the plaintiff against an in-state defendant” in order
for the Court to find fraudulent joinder does not mean that any mere theoretical possibility of
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recovery under state law precludes removal. Badon v. RJR Nabisco Inc., 236 F.3d 282, 286 n.4 (5th
Cir. 2000); Travis, 326 F.3d at 648; Griggs v. State Farm Lloyds, 181 F.3d 694, 701 (5th Cir. 1999)
(“While the burden of demonstrating fraudulent joinder is a heavy one, we have never held that a
particular plaintiff might possibly establish liability by the mere hypothetical possibility that such an
action could exist.”). Rather, there must be a reasonable basis for predicting liability. Travis, 326 F.3d
at 648. Accordingly, the Court finds that there is no possibility of recovery against Trustee
Defendants under the applicable state law. Travis, 326 F.3d at 647. Lisle Patton, Robert Forster,
Robert Maris, and Matt Lindsey have been improperly joined and their citizenship will be disregarded
for purposes of assessing diversity.
B.

Diversity Jurisdiction—Amount in Controversy

To remove, Defendants must also show that the amount in controversy exceeds $75,000. 28
U.S.C. § 1332. The district court must first look to the plaintiff’s original state court petition and
determine whether it is "facially apparent" that the claims exceed the jurisdictional amount. St. Paul
Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998). When the plaintiff's complaint
does not allege a specific amount, the removing defendant must prove by a preponderance of the
evidence that the amount in controversy exceeds the jurisdictional requirement. Allen v. R & H Oil
& Gas Co., 63 F.3d 1326, 1335 (5th Cir.1995). If it is not facially apparent that the claims exceed
$75,000, the removing party may provide “summary judgment-type” evidence to demonstrate that
the claims exceed the amount in controversy. Id. If a defendant meets its burden of establishing the
jurisdictional amount, then the plaintiff must show that as a matter of law it is certain that her claims
actually amount to less than $75,000 by either filing a binding stipulation or affidavit with her
petition. De Aguilar, 47 F.3d at 1412.
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Hearn’s Petition does not allege a specific amount in controversy. Doc. 1-5, Pl.’s Orig. Pet.
Ex. B-2. As such, it falls to the Defendants to prove by a preponderance of the evidence that the
amount in controversy exceeds $75,000. Defendants offer a Dallas Central Appraisal District’s
appraisal as summary judgment-type evidence. Doc. 1-12, Appraisal Ex. C. Hearn disputes whether
Defendants may rely upon this appraisal as evidence of the amount in controversy. Doc. 5, Pl.’s Mot.
Remand 7. He also argues that the amount in controversy is not the value of his home. Id.
The appraisal printout from the Dallas Central Appraisal District is competent evidence that
this Court may rely upon in determining the amount in controversy. The Court notes that it is not
uncommon for the court to receive evidence of property value similar to the evidence that
Defendants submit here. See, e.g., Stewart v. Bank of Am., N.A., No. 3:12-cv-2630-M-BK, 2012 WL
5903801, at *2 (N.D. Tex. Oct. 31, 2012) (finding Dallas Central Appraisal District valuation to
be persuasive); Hayward v. Chase Home Fin., LLC, No. 3:10-cv-2463-G, 2011 WL 2881298, at *4
(N.D. Tex. July 18, 2011) (relying on a property appraisal from the Dallas Central Appraisal District
as proof of the amount in controversy); McDonald v. Deutsche Bank National Trust Co., No. 3:11-cv2691-B, 2011 WL 6396628, at *2 (N.D. Tex. Dec. 20, 2011) (accepting appraisal from Dallas
Central Appraisal District as proof of property value). Although Hearn objects to the appraisal
printout as hearsay, it is actually a public record under Rule 803(8) because it represents the findings
of a governmental process to collect information about real property. Kew v. Bank of America, N.A.,
No. H-11-2824, 2012 WL 1414978, at *3 n.4 (S.D. Tex. Apr. 23, 2012); Govea v. JPMorgan Chase
Bank, N.A., No. H-10-3482, 2010 WL 5140064, at *4 (S.D. Tex. Dec. 10, 2010). Furthermore,
because the same document is readily accessible through the Internet, there is no lack of
trustworthiness. Finally, even if the appraisal was not admissible, the Court could likely take judicial
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notice of the fair-market value under Rule 201 because the value can be easily ascertained through
the Dallas Central Appraisal District’s website. Fed. R. Evid. 201(b)(2) (“The court may judicially
notice a fact that is not subject to reasonable dispute because it . . . can be accurately and readily
determined from sources whose accuracy cannot reasonably be questioned.”); Kew, 2012 WL
1414978, at *3 n.4. Thus, the appraisal printout is admissible as evidence of the amount in
controversy in this case.
Hearn also contends that the amount-in-controversy requirement is not met because the true
nature of this action is to prevent Defendants from taking possession of the Property and therefore
does not call into question the rights to the Property. Doc. 5, Mot. Remand 7-8. Thus, under Hearn’s
view of the case, the Property’s value is not the same as the amount in controversy, although he does
not indicate what the alternative measure of the amount in controversy should be. Id. Hearn relies
on Ballew v. America’s Servicing Co., No. 4:11-cv-030-A, 2011 WL 880135 (N.D. Tex. Mar. 14,
2011) and argues that he does not dispute the validity of a security interest, but instead only contests
the authority of Deutsche Bank to foreclose on the property. Id. Defendants respond that the relief
Hearn seeks directly implicates the value of the Property, and that the Property’s appraised value is
the amount in controversy. Doc. 6, Defs.’ Resp. 4.
Where the plaintiff seeks a declaratory judgment or injunctive relief, the amount in
controversy is “measured by the value of the object of the litigation.” Leininger v. Leininger, 705 F.2d
272, 729 (5th Cir. 1983). In other words, the amount in controversy is “the value of the right to be
protected or the extent of the injury to be prevented.” Hartford Ins. Group v. Lou-Con Inc., 293 F.3d
908, 910 (5th Cir. 2002). This value is measured from the plaintiff’s perspective. Adams v. Nationwide
Mut. Ins. Co., No. 3:02-CV-1607, 2003 WL 21251734, at *3 (N.D. Tex. Mar. 28, 2003) (quoting
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Alfonso v. Hillsborough County Aviation Auth., 308 F.2d 724, 727 (5th Cir. 1962); Garcia v. Koch Oil
Co. of Tex., Inc., 351 F.3d 636, 639 (5th Cir. 2003). When “a right to property is called into question
in its entirety, the value of the property controls the amount in controversy.” Waller v. Prof’l Ins.
Corp., 296 F.2d 545, 547-48 (5th Cir. 1961). Hearn argues that requesting a declaratory judgment
that Deutsche Bank has no interest in the Property does not call Defendants’ right to the Property
into question in its entirety. The actual purpose of Hearn’s suit, however, is succinctly stated in his
own Motion to Remand: “to prevent defendants from taking possession of the property pursuant to
their foreclosure proceedings, [and] to allow the Plaintiff to continue to possess the property.” Doc.
5, Pl.’s Mot. Remand 6. Hearn seeks to cut off any right that Deutsche Bank might have to the
Property and to shield his own rights to the Property from impending foreclosure. Thus, the “object
of the litigation” is the property, and not, as Hearn alleges, his rights to be foreclosed upon by
someone with proper authority or to secure a declaration as to Deutsche Bank’s rights to the
Property. See Dillard Family Trust v. Chase Home Finance, LLC, No. 3:11-cv-1740-L, 2011 WL
6747416, at *4 (N.D. Tex. Dec. 23, 2011) (finding that the amount in controversy equaled the value
of the property when plaintiff sought a declaration to quiet title to property); Mason v. Bank of
America, N.A., No. 4:12-cv-0291, 2013 WL 589556, at *2 (E.D. Tex. Feb. 14, 2013) (Slip Copy)
(finding that the value of the property was the amount in controversy when plaintiff sought a
declaration that the Note and Deed of Trust on his property were unenforceable and an injunction
to prevent foreclosure); Martinez v. BAC Home Loans Servicing, LP, 777 F.Supp.2d 1039, 1047-51
(W.D. Tex. 2010) (“If the primary purpose of a lawsuit is to enjoin a bank from selling or transferring
property, then the property is the object of the litigation.”). Moreover, because Hearn seeks a
declaration that Deutsche Bank has no interest in the property, he has called into question the
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validity of Deutsche Bank’s right to the Property in its entirety, and thus the value of the property
is the appropriate measure of the amount in controversy. Waller, 296 F.2d at 547.
Hearn’s reliance on Ballew is misplaced. In Ballew, the plaintiffs sought a declaration that
would have required the defendants to produce the original promissory notes so that the plaintiffs
could discern who possessed authority to foreclose on their property. 2011 WL 880135, at *3. The
plaintiffs in Ballew also sought an injunction that would have forestalled the foreclosure proceedings
until the merits of the case were decided. Id. While Hearn argues that he only asks for a declaration
as to Deutsche Bank’s authority to foreclose, the actual relief he requests in his petition is a
declaration that Deutsche Bank “has no interest in” the Property. Doc. 1-5, Orig. Pet. 4. Hearn may
argue that, like the plaintiffs in Ballew, he is not disputing the validity of any note or security interest,
but his requested relief asks the Court to extinguish any possible interest or claim that Deutsche
Bank has in the Property and does not just Hearn an opportunity to determine who may foreclose
on the Property as in Ballew.
For the reasons stated above, the proper measure of the amount in controversy in this case
is the value of the Property. The appraisal printout submitted by Defendants shows the value of the
Property to be $243,690.00. Hearn does not provide counter-evidence to this point. Because the
printout is uncontroverted, competent evidence, the Court finds by a preponderance of the evidence
that the amount in controversy requirement is met in this case.
C.

Written Consent

Additionally, Hearn argues Defendants did not obtain written consent from all properly
served defendants before removing the case. This is not the case. Defendants received written
consent from Trustee Defendants prior to filing for removal. Doc. 1-13, Trustee Defs.’ Consent Ex.
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D. Thus, the Court finds no issue as to written consent.
IV.
CONCLUSION
For the reasons stated above, the Court concludes that Trustee Defendants were improperly
joined, and that Defendants sufficiently proved that the amount in controversy exceeds $75,000.
The Court therefore DISMISSES Defendants Lisle Patton, Robert Forster, Robert Maris, and Matt
Lindsey as improperly joined. Because it is undisputed that Hearn and Defendants Deutsche Bank,
America’s Servicing Company, and Mortgage Electronics Systems, Inc., are diverse citizens, the
Court has subject matter jurisdiction. Accordingly, the Court DENIES Plaintiff’s Motion to Remand.

SO ORDERED.
SIGNED November 18, 2013.

_________________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE

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