Lewis et al v. Deutsche Bank National Trust Company et al
MEMORANDUM OPINION AND ORDER denying 19 Opposed MOTION to Remand (Signed by Judge George C Hanks, Jr) Parties notified.(dperez, 3)
United States District Court
Southern District of Texas
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
DEUTSCHE BANK NATIONAL TRUST §
COMPANY, et al,
April 13, 2017
David J. Bradley, Clerk
KIMBERLY LEWIS, et al,
CIVIL ACTION NO. 3:16-CV-133
MEMORANDUM OPINION AND ORDER
Plaintiffs, Stephen Lewis and Kimberly Lewis, filed this lawsuit in state court to
challenge a foreclosure upon their home. Plaintiffs filed suit in the 405th Judicial District
Court of Galveston County, Texas, Cause No. 16-CV-398, against the following
Defendants: Fremont Investment & Loan Corp. (“Fremont”); Deutsche Bank National
Trust Company, as Trustee for Fremont Home Loan Trust 2004-4, Asset-Backed
Certificates, Series 2004-4 (“Deutsche Bank”); Ocwen Loan Servicing, LLC (“Ocwen”);
and Mortgage Electronic Registration Systems, Inc. (“MERS”).
Plaintiffs’ Original Petition alleged that, in June 2015, Deutsche Bank had
improperly filed an expedited application to foreclose on their home, and that “[a]fter the
Galveston County District Court signed a Rule 736 Order in favor of Deutsche Bank,
Deutsche Bank noticed a sale of the Property for Tuesday, April 5, 2016.” Dkt. 1-2, pg.
5.1 Plaintiffs brought claims for: (1) declaratory relief that “Deutsche Bank (as Trustee) is
Plaintiff’s Original Petition attached the Rule 736 Application filed in the 405th District Court
of Galveston County, Texas, as well as the “Notice of Sale.”
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not the holder or owner of the primissory [sic] Note and that Deutsche Bank and Ocwen
have or had no power of sale under the Deed of Trust in this case;” (2) declaratory relief
to quiet title on the grounds that “Plaintiffs’ legal ownership of the Property was superior
to Deutsche Bank’s claimed mortgage lien on the Property at the time of sale . . . [and]
Deutsche Bank wrongly claims a secured monetary interest and estate in the Property . . .
[and] [a]ll claims of Deutsche Bank, present and prior, are without and were without any
right whatsoever, and Deutsche Bank has no right, estate, title, lien, power of sale, or any
interest of any kind in or to the Property . . . due to the fact that Deutsche Bank lacks
standing to foreclose as alleged in detail above.” Plaintiffs also alleged that “Deutsche
Bank, in its role as Trustee has acted as Fremont Investment’s assignee in conducting
foreclosure activities against Plaintiff[s].” Finally, Plaintiffs asserted that Deutsche Bank
and Ocwen were “debt collectors” under the Texas Debt Collection Act, and that
Deutsche Bank violated that law when it “threatened to foreclose without being the actual
holder of the debt instrument” and by filing the Rule 736 lawsuit in 2015.
On May 16, 2016, Defendants Deutsche Bank, Ocwen, and MERS removed the
lawsuit to this Court, asserting that this Court had diversity jurisdiction. Plaintiff’s state
court petition had alleged that Stephen and Kimberly Lewis were residents of Texas, and
that the real property at issue was located in League City, Texas. Dkt. 1-2. Defendants’
Notice of Removal contended that Defendant Deutsche Bank was a citizen of California,
as “a national banking association pursuant to federal law” whose main office is located
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in Los Angeles, California. Dkt. 1.2 Defendants contended that Defendant Ocwen was a
citizen of the U.S. Virgin Islands because it was incorporated in the U.S. Virgin Islands,
with its principal place of business in Frederiksted, U.S. Virgin Islands. Dkt. 1.
Defendant MERS was alleged to be a citizen of Delaware and Virginia. Defendant
Fremont was alleged to be a California corporation, with its principal place of business in
California, and therefore a citizen of California.
After the notice of removal was filed, the parties filed several motions for
extensions of time and a joint motion for abatement, pointing to a possible settlement of
the case. This case was abated on July 5, 2016, and then re-opened a few months later in
October 2016. Eventually, in December 2016, Plaintiffs filed a motion to remand the case
back to state court. Dkt. 19.
Plaintiffs’ motion to remand contends that this Court lacks diversity jurisdiction.
Plaintiffs first contend that Defendants’ Notice of Removal is defective because it fails to
allege that the citizenship of the FHLT 2004-4 Trust, of which Deutsche Bank is the
Trustee, is diverse from the citizenship of Plaintiffs. In other words, Plaintiffs contend
that the Notice of Removal failed to allege that the FHLT 2004-4 Trust is not a citizen of
Plaintiffs’ state court petition alleged the following: (1) Deutsche Bank was “a National
Banking Association doing business in the County Of Galveston, State of TEXAS, and is the
purported Trustee to the securitized Trust that claims to own Plaintiffs’ Mortgage Note and the
Deed of Trust securing the subject Property”; (2) Defendant Ocwen was “a corporation doing
business in the County of Galveston, State of TEXAS”; (3) MERS was “a corporation duly
organized and existing under the laws of TEXAS, whose last known address is 1818 Library
Street, Suite 300, Reston, Virginia [and] is doing business in the County of Galveston, State of
TEXAS”; and (4) Fremont was “a California State Chartered Industrial Bank doing business in
the County of Galveston, State of TEXAS.” Dkt. 1-2.
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Texas, and this failure requires remand. Further, Plaintiffs allege that the FHLT 2004-4
Trust is not a citizen of Texas “in light if [sic] the U.S. Supreme Court’s March 2016
Americold decision,” and therefore the Court must remand this case.
Defendants respond that the citizenship of the FHLT 2004-4 Trust is irrelevant
because the Trust itself is not the real party in interest in this litigation. Instead,
Defendants contend that this Court should look only to the citizenship of Deutsche Bank.
After reviewing the motion to remand, the response, the evidence submitted, the
pleadings in this case, and the record of this case as a whole, the Court finds that the
motion to remand should be DENIED.
A party may remove an action from state court to federal court if the federal court
possesses subject matter jurisdiction over the action. 28 U.S.C. § 1441(a). Federal courts
have subject matter jurisdiction over all civil actions where the matter in controversy
exceeds $75,000 and the parties are completely diverse. 28 U.S.C. § 1332. The latter
issue, diversity, is the one in dispute here.
Here, the Court focuses on the Plaintiffs’ pleadings “as they existed at the time of
removal.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir.
2002). But the Court “may be required to survey the entire record ... and base its ruling
on the complaint, or undisputed facts, and on its resolution of disputed facts.” Aquafaith
Shipping, Ltd. v. Jarrillas, 963 F.2d 806, 808 (5th Cir. 1992). Any “ambiguities are
construed against removal,” and “[t]he removing party bears the burden of showing that
federal jurisdiction exists.” Manguno, 276 F.3d at 723.
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Plaintiffs’ motion to remand asserts that this Court should, under Americold Realty
Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012, 1016 (2016),3 immediately engage in an
analysis of the citizenship of the FHLT 2004-4 Trust by looking to the citizenship of “all
of its members/beneficiaries.” After considering the motion to remand and the applicable
authorities, this Court disagrees.
First, the Court begins with the rule that “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). “Whether a party is
[formal or] ‘nominal’ for removal purposes depends on ‘whether, in the absence of the
[party], the Court can enter a final judgment consistent with equity and good conscience,
which would not be in any way unfair or inequitable . . . .’” Acosta v. Master Maint. &
Constr. Inc., 452 F.3d 373, 379 (5th Cir. 2006) (quoting Tri–Cities Newspapers, Inc. v.
Tri–Cities Printing Pressmen & Assistants Local 349, 427 F.2d 325, 327 (5th Cir. 1970));
see also Cousins v. Turn, 9:16-CV-47, 2017 WL 426872, at *5 (E.D. Tex. Jan. 12, 2017),
report and recommendation adopted, 9:16-CV-47, 2017 WL 413204 (E.D. Tex. Jan. 31,
2017) (noting, “Where a party to litigation asserts affirmative claims for relief, even if
As the Fifth Circuit recently observed, “Americold involved a Maryland Real Estate Investment
Trust, nominally a trust but in reality an unincorporated business entity recognized by statute.
For traditional trusts, the Americold court held that ‘when a trustee files a lawsuit or is sued in
her own name, her citizenship is all that matters for diversity purposes.’” Hometown 2006–1
1925 Valley View, L.L.C. v. Prime Income Asset Mgmt., L.L.C., 847 F.3d 302, 306–07 (5th Cir.
2017). The Fifth Circuit explained, “Traditionally, a trust was not considered a distinct legal
entity, but a ‘fiduciary relationship’ between multiple people.” Id. at n.17 (citing Americold, 136
S. Ct. at 1016). Further, “[t]rusts do not have ‘members,’ rather a trust exists where a settlor
transfers title of property to a trustee to hold in trust for the benefit of beneficiaries.” Id. at n.17
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such parties are characterized as nominal defendants, those counterclaims elevate them to
real parties in interest.”).
Grappling with the language of Americold and Navarro, federal courts in Texas
have taken different paths to determine whether a trustee, or the trust itself, is the real
party to the controversy. See, e.g., Shastry v. U.S. Bank Nat’l Ass’n, 3:16-CV-3335-GBN, 2017 WL 1102807, at *2, * 3 (N.D. Tex. Mar. 2, 2017), report and recommendation
adopted, 3:16-CV-3335-G (BN), 2017 WL 1091650 (N.D. Tex. Mar. 23, 2017)
(“Determinations about whether the trust or trustee is the real party to the action are
informed by the duties that the trust has delegated to its trustee. Courts have long held
that a trustee is a real party when the trust has ceded ‘certain customary powers to hold,
manage, and dispose of assets’ to the trustee and the trustee’s actions or interests are the
subject of the suit . . . But a trust is considered a real party to the action where the trust’s
own interests or own actions are the subject of the claims at issue.”); Rodriguez v.
Deutsche Bank Nat’l Trust Co., CV H-16-1597, 2017 WL 371141, at *2 (S.D. Tex. Jan.
26, 2017) (looking to whether “the trustee is suing or is being sued in his or her own
name, or if the trust is a traditional trust,” and whether the trustees have “exclusive
authority over the property (i.e. the declaration of the trust ‘authorizes the trustees to take
legal title to trust assets, to invest those assets for the benefit of the shareholders, and to
sue and be sued in their capacity as trustees . . .’)”; Guillen v. Countrywide Home Loans,
Inc., CV H-15-849, 2016 WL 7103908, at *5 (S.D. Tex. Dec. 6, 2016) (finding trust was
the real party in interest even though plaintiff sued only trustee, not trust itself, noting
“[b]ecause suing a trust in Texas and New York necessitates naming the trustee in the
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pleadings, then courts in these states must look to the substance of the complaint to
determine the real party to the controversy,” looking instead to the Pooling Agreement
and allegations in complaint); Moore v. Ameriquest Mortgage Co., 4:16-CV-00380, 2016
WL 6159377, at *4 (E.D. Tex. Oct. 24, 2016) (looking to Pooling and Servicing
Agreement for trust, finding under New York law that trustee was traditional trustee with
“legal title and with it the power to hold, manage, and dispose of Trust assets,” and that
only trustee’s citizenship was therefore relevant, but also finding that trust was only “a
nominal party and may disregarded for purposes of diversity” because plaintiffs sought
declaratory and monetary relief for claims arising from the improper transfers of
Plaintiffs’ loan and title, and court did not need the trust to be a party in order to grant a
final judgment giving Plaintiffs all relief they sought); Juarez v. DHI Mortgage Company
Ltd., No. H-15-3534, 2016 WL 3906296, at *3 (S.D. Tex. July 19, 2016) (finding trust to
be a real and substantial party where “the complaint treats the 2004-68 Trust as [a]
separate defendant from [the trustee] by alleging the trust itself wrongfully foreclosed on
Juarez’s property,” and remanding because “the burden remains with the removing party
to classify the trust, establish its citizenship, and prove complete diversity . . . [but]
Defendants have not even attempted to classify the 2004-68 Trust or identify any of its
members.”); Halley v. Deutsche Bank Nat’l Trust Co., CV H-15-1174, 2016 WL
3855872, at *1 (S.D. Tex. July 15, 2016) (where both parties contended the court had
subject matter jurisdiction, and where trustee had filed counterclaims, looking only to
citizenship of trustee under Americold and Navarro, concluding, “As a national bank
association, Deutsche Bank is considered a citizen of the state in which its main office is
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located. Because Deutsche Bank has its main office in California, as specified in its
articles of association, . . . Deutsche Bank is a citizen of California for purposes of
diversity jurisdiction.”) (internal citations omitted).
Ultimately, this Court finds that the approaches taken in cases such as Shastry,
Rodriguez, and Moore are the most sound. Accordingly, the Court will look to the
pleadings themselves to ask whether it is the trust’s, or the trustee’s, interests and actions
at issue, as well as whether the trust, the trustee, or both, are named as parties to the
lawsuit. In determining whether the trust or the trustee is the real party to the controversy
at hand, the Court may also consider the duties that the trust has delegated to its trustee,
i.e., whether it is a “traditional trust” in which “trustees have legal title to the trust assets,
have the ability to invest those assets, and have the ability ‘to sue and be sued in their
capacity as trustees.’” Navarro, 446 U.S. at 464–66.
1. Plaintiffs’ Petition
Examining the Plaintiffs’ state court petition, the Court notes the following: (1)
Plaintiffs’ lawsuit named Deutsche Bank, as Trustee, as a defendant, but Plaintiffs did not
name the Trust itself as a defendant; (2) Plaintiffs’ lawsuit arises out of an earlier
proceeding filed by Deutsche Bank, and Plaintiffs now seek to invalidate the relief
received by Deutsche Bank; (3) Plaintiffs have brought a cause of action against
Deutsche Bank, claiming that Deutsche Bank’s actions violated the Texas Debt
Collection Act; (4) Plaintiffs’ petition, which formed the basis of removal for this action
to this Court, specifically alleged that the FHLT 2004-4 Trust is “an express Trust” under
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New York law; and (5) Plaintiffs’ jurisdictional allegations in their petition were directed
at Deutsche Bank as Trustee, not the FHLT 2004-4 Trust itself.
Plaintiffs’ motion to remand first contends that they named Deutsche Bank as a
defendant because, under Texas law, a trust cannot be named as a defendant. However, as
shown by the differing results obtained by the courts cited above, this principle logically
can cut two ways. Compare Guillen v. Countrywide Home Loans, Inc., CV H-15-849,
2016 WL 7103908, at *6 (S.D. Tex. Dec. 6, 2016) (noting Texas and New York law
required naming the trustee in an action, but going beyond “the mere caption of the suit,”
and finding that the trust was the real party to the controversy) with Shastry v. U.S. Bank
Nat’l Ass’n, 3:16-CV-3335-G-BN, 2017 WL 1102807, at *2, * 3 (N.D. Tex. Mar. 2,
2017), report and recommendation adopted, 3:16-CV-3335-G (BN), 2017 WL 1091650
(N.D. Tex. Mar. 23, 2017) (noting that Plaintiffs sued U.S. Bank in its capacity as trustee
because, under Texas law, “[f]or relief to be granted against a trust, the trust—through its
trustee—must be made a party to the action,” and finding U.S. Bank was the real and
Next, Plaintiffs contend that their petition “treats the FHLT 2004-4 Trust as a
separate defendant from the Deutsche Trustee by alleging that the FHLT 2004-4 Trust
itself wrongfully foreclosed on Plaintiffs’ property.” Respectfully, the Court has scoured
the 20-page petition, but it has not been able to locate this sentence.4 However, even if
In fact, many of the statements in Plaintiffs’ Motion to Remand appear to be directed at other
clients or lawsuits. The Court notes that Plaintiffs’ counsel have made similar motions for
remand to other courts, with varying success. See, e.g., Guillen v. Countrywide Home Loans,
Inc., CV H-15-849, 2016 WL 7103908 (S.D. Tex. Dec. 6, 2016); Moore v. Ameriquest Mortgage
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this sentence is among the allegations made in Plaintiffs’ petition, the thrust of Plaintiffs’
petition still remains directed at Deutsche Bank’s allegedly improper foreclosure action,
including claims that Deutsche Bank filed incorrect securitization statements, failed to
ensure the proper chain of assignments to transfer the mortgage loan into the Trust, and
improperly sought foreclosure upon the Plaintiffs’ property. Further, Plaintiffs also
particularly allege that Deutsche Bank itself violated the Texas Debt Collection Act.
2. The Pooling Services Agreement
The Court now examines the duties that the FHLT 2004-4 Trust has delegated to
Deutsche Bank, as Trustee. Specifically, the Court looks to whether Deutsche Bank, as
Trustee, has “legal title to the trust assets,  the ability to invest those assets, and  the
ability ‘to sue and be sued in their capacity as trustees.’” Navarro, 446 U.S. at 464–66.
Plaintiffs’ motion to remand contends that the PSA, when taken as a whole, shows that
Deutsche Bank does not have these duties.5
At its outset, the PSA explains that Deutsche Bank, as Trustee, purchased a set of
mortgage loans from Financial Asset Securities Corp., (“the Depositor”). Section 1(a) of
the PSA then further states:
Co., 4:16-CV-00380, 2016 WL 6159377 (E.D. Tex. Oct. 24, 2016); Juarez v. DHI Mortgage
Company Ltd., No. H-15-3534, 2016 WL 3906296, at *3 (S.D. Tex. July 19, 2016).
Plaintiffs also point to statements they contend that Deutsche Bank has made in a class action
lawsuit filed in the United States District Court for the Southern District of New York, arguing
that Deutsche Bank should be estopped in this case from arguing to the contrary. Given the lack
of any factual connection between these two cases, including differences in procedural posture,
legal issues, and counsel, this Court declines to impose such a rule. See, e.g., Blackrock
Allocation Target Shares v. Deutsche Bank Nat'l Trust Co., No. 14-CV-09367, 2016 WL
269570, at *2 (S.D.N.Y. Jan. 19, 2016).
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The Depositor does hereby sell, transfer, assign,
set over and convey to the Trustee in trust, on
behalf of the Trust, without recourse, all of its
right, title and interest in and to the Subsequent
Mortgage Loans, and including all amounts due on
the Subsequent Mortgage Loans after the related
Subsequent Cut-off Date, and all items with
respect to the Subsequent Mortgage Loans to be
delivered pursuant to Section 2.01 of the Pooling
and Servicing Agreement; provided, however that
the Depositor reserves and retains all right,
title and interest in and to amounts due on the
Subsequent Mortgage Loans on or prior to the
related Subsequent Cut-off Date. The Depositor,
Agreement, has delivered or caused to be delivered
to the Trustee each item set forth in Section 2.01
of the Pooling and Servicing Agreement. The
transfer to the Trustee by the Depositor of the
Mortgage Loan Schedule shall be absolute and is
intended by the Depositor, the Servicer, the
Trustee and the Certificateholders to constitute
and to be treated as a sale by the Depositor to
the Trust Fund.
Section 8.12(a) states that the Trustee may bring “claims” and “actions” under the
PSA, that such proceedings “instituted by the Trustee shall be brought in its own name or
in its capacity as Trustee for the benefit of all Holders of such Certificates, subject to the
provisions of this Agreement.” In contrast, Section 11.03 limits the right of
Certificateholders to bring “any suit, action or proceeding in equity or at law or upon or
under or with respect to this Agreement,” except in certain enumerated instances.
Further, Section 11.03 limits the right of Certificateholders to “vote or in any manner
control the operation and management of the Trust, or the obligations of the parties
hereto . . .”
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Comparing the PSA against the allegations in Plaintiffs’’ petition, the Court finds
that the rights and duties of Deutsche Bank, as Trustee under the PSA, are congruent with
the actions of Deutsche Bank upon which Plaintiffs base their causes of action. See, e.g.,
Shastry v. U.S. Bank Nat’l Ass’n, 3:16-CV-3335-G-BN, 2017 WL 1102807, at *3 (N.D.
Tex. Mar. 2, 2017), report and recommendation adopted, 3:16-CV-3335-G (BN), 2017
WL 1091650 (N.D. Tex. Mar. 23, 2017) (“The claims asserted in Plaintiff's Amended
Petition are based on their contentions that, because of alleged defects in the
securitization process, an alleged failure to comply with the PSA and alleged defects in
the assignment of Plaintiffs' note and deed of trust, U.S. Bank, as trustee for the trust, is
neither the holder of Plaintiffs' note nor the mortgagee with respect to the deed of trust. . .
. As the possessor of the customary powers to hold, manage and dispose of the trust's
assets for the benefit of the certificate holders, it is U.S. Bank's interest that is implicated
by this lawsuit.”). Accordingly, the Court finds that Deutsche Bank, as Trustee, is the real
party here and it is Deutsche Bank’s citizenship that should be considered for purposes of
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Plaintiffs are natural persons domiciled in Texas, and are citizens of Texas for
diversity purposes. There is no dispute that Deutsche Bank is a national banking
association and a citizen of California, and that all other defendants are citizens of states
other than Texas.
Accordingly, Plaintiffs’ Motion to Remand is DENIED.
SIGNED at Galveston, Texas, this 13th day of April, 2017.
George C. Hanks Jr.
United States District Judge
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