Jasso et al v. Federal National Mortgage Association a/k/a Fannie Mae et al
Filing
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OPINION AND ORDER granting 6 Deft Fannie Mae's Motion to Dismiss. mooting 19 Deft Sanchez's Motion to Dismiss. Case terminated on September 12, 2012.(Signed by Judge Melinda Harmon) Parties notified.(htippen, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ELVA JASSO and JESUS AVALOS,
Plaintiffs,
VS.
FEDERAL NATIONAL MORTGAGE a/k/a
FANNIE MAE and N. SANCHEZ,
SUBSTITUTE TRUSTEE,
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CIVIL ACTION NO. 4:11-CV-3253
Defendants.
OPINION AND ORDER
Pending before the Court is Defendant Federal National Mortgage Association a/k/a
Fannie Mae’s (“Fannie Mae”) motion to dismiss Plaintiffs Elva Jasso and Jesus Avalos’ original
petition. Doc. 6. Defendant N. Sanchez also has filed a motion to dismiss (Doc. 19) but, for
reasons the Court will discuss, Sanchez was improperly joined in this case and his motion to
dismiss is moot. Fannie Mae has moved to dismiss under Rule 12(b)(6) on the grounds that
Plaintiffs’ original petition failed to state a claim. Doc. 6 at 1; Doc. 19 at 1.
Having considered Defendants’ motion, the facts of this case, and the applicable law, the
Court finds that Defendant Fannie Mae’s motion to dismiss should be granted.
I. Background
Plaintiffs Elva Jasso and Jesus Avalos, citizens of Texas, have sued Defendant Fannie
Mae, “a government authorized enterprise” with its principal place of business in Washington,
D.C., and Defendant Sanchez, a citizen of Texas, to quiet title and obtain injunctive relief. Doc. 1
at 2-3; Doc. 1-1 at 5-10. As alleged in their original petition, Plaintiffs purchased a home in
Houston, Texas on October 24, 2007. Doc. 1-1 at 6. Plaintiffs secured the purchase with a
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promissory note from Silverstone Mortgage and, upon closing, “received a Notice of
Assignment, Sale or Transfer of Servicing Rights naming Chase Bank . . . as the loan servicer.”
Id. On November 16, 2010 Brian Bly, purportedly acting as a vice president for Chase, signed an
assignment of the note and deed of trust from JPMorgan Chase Bank, N.A. (“Chase”) to
Mortgage Electronic Registration Systems, Inc. (“MERS”) “as nominee for” Fannie Mae. Id. at
7, 13. Plaintiffs allege that Bly is a robo-signer,1 Bly lacked “authority to assign the note on
behalf of Chase,” Bly worked for Nationwide Title Clearing rather than Chase,2 and “Chase did
not hold ownership rights to the note or security interest as it was only the servicer on the
account.” Id. at 7-8. On April 6, 2011, MERS assigned the deed of trust to Fannie Mae. Id. at 7.
Although Plaintiffs did not state as much, it appears that they defaulted on their loan. On June 7,
Sanchez executed a substitute trustee’s deed purporting to transfer the property from Fannie Mae
as mortgagee to Fannie Mae as buyer for $134,584.20. Id. at 7-8; see also id. at 22.
On August 22, Plaintiffs filed suit in the 281st Judicial District of Harris County against
Fannie Mae and Sanchez seeking to quiet title in their home, rescission of the June 7th substitute
trustee’s deed, a temporary restraining order “to prevent [Fannie Mae and Sanchez] from
evicting Plaintiffs from their home, marketing, or selling the home until [the] suit is resolved by
a trial on the merits,” a temporary injunction “against [Fannie Mae and Sanchez] restraining any
party from evicting Plaintiffs or from marketing or selling home pending a full trial on the
merits,” and actual damages. Id. at 5, 7-10. Plaintiffs contend that since the December 3, 2010,
assignment from Chase to MERS “was ineffective,” “[a]ll subsequent transfers are void,” “the
1
“The staff used by US banks to sign off on foreclosures have been dubbed ‘robo signers’ for the speed with which
they rubber-stamped mortgage documents without checking their accuracy.” Julia Kollewe, Q&A: What Are
Mortgage Foreclosure ‘Robo Signers’?, THE GUARDIAN (London), Oct. 14, 2010,
http://www.guardian.co.uk/business/2010/oct/14/what-are-us-foreclosure-robo-signers.
2
Plaintiffs attached a portion of a deposition from a Florida suit in which Bly “admit[s] to signing as Vice President
of numerous banks while employed by Nationwide Title Clearing.” Doc. 1-1at 7; see also id. at 15-16.
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appointment of substitute trustee N. Sanchez [was] ineffective and void,” and thus Fannie Mae’s
June 7th substitute trustee’s deed should be rescinded. Id. at 7-8. The 281st Judicial District of
Harris County granted Plaintiffs’ request for a temporary restraining order on August 22. Id. at
33-34.
On September 1, pursuant to 28 U.S.C. § 1446(a), Fannie Mae removed this case to
federal court on diversity jurisdiction grounds.3 Doc. 1. In its notice of removal, Fannie Mae
contended that “Plaintiffs have no independent claims against Sanchez” and that Sanchez was
improperly joined to defeat diversity jurisdiction. Id. at 3-4. On September 13, Fannie Mae filed
a motion to dismiss Plaintiffs’ original petition on the grounds that it “fail[s] to state a claim
upon which relief can be granted.” Doc. 6 at 1.
II. Legal Standard
A. Federal Diversity Jurisdiction & Improper Joinder
Federal district courts have original jurisdiction over “civil actions where the matter in
controversy exceeds the sum or value of $75,000 . . . and is between . . . citizens of different
States.” 28 U.S.C. § 1332(a); Addo v. Globe Life and Accident Ins. Co., 230 F.3d 759, 761 (5th
Cir. 2000). “Defendants may remove an action on the basis of diversity of citizenship if there is
complete diversity between all named plaintiffs and all named defendants, and no defendant is a
citizen of the forum State.” Lincoln Property Co. v. Roche, 546 U.S. 81, 84 (2005). The
citizenship of a corporation in the United States is determined by the state under whose laws the
entity was organized or where it has its principal place of business. 28 U.S.C. § 1332(c). Where
federal diversity jurisdiction exists, a defendant may remove an action from a State court “to the
3
Fannie Mae’s notice of removal also states that “[r]emoval is based on federal question jurisdiction.” Doc. 1 at 1.
Fannie Mae failed to explain the basis of any potential federal question jurisdiction in its notice of removal, and no
federal question appears on the face of the charge. See id. at 2-7. See also Doc. 1-1 at 5-11. Because there is
complete diversity and because the amount in controversy is greater than $75,000, the Court proceeds under the
authority of 28 U.S.C. § 1332(a).
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district court of the United States for the district and division embracing the place where such
action is pending.” 28 U.S.C. § 1441(a). The removing party bears the burden of establishing
federal jurisdiction. Allen v. R & H Oil and Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1996);
Laughlin v. Prudential Ins. Co., 882 F.2d 187, 190 (5th Cir. 1989). All “doubts regarding
whether removal jurisdiction is proper should be resolved against federal jurisdiction.” Acuna v.
Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000). All factual allegations are evaluated in
the light most favorable to the plaintiff. Guillory v. PPG Indus., Inc., 434 F.3d 303, 308 (5th Cir.
2005).
A removing party can establish federal jurisdiction on the basis of 28 U.S.C. § 1332 by
demonstrating that in-state defendants have been “improperly joined.”4 See Smallwood v. Illinois
Cent. R. Co., 385 F.3d 568, 573 (5th Cir. 2004). To establish improper joinder, a removing party
must show either “‘(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the
plaintiff to establish a cause of action against the non-diverse party in state court.’” Id. (quoting
Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003)). The Fifth Circuit has made it clear that
“the test for fraudulent joinder is whether the defendant has demonstrated that there is no
possibility of recovery by the plaintiff against an in-state defendant, which stated differently
means that there is no reasonable basis for the district court to predict that the plaintiff might be
able to recover against an in-state defendant.” Id.
B. Motion to Dismiss
Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can
be granted.” In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009),
4
The Fifth Circuit prefers the term “improper joinder” to “fraudulent joinder” because it is more consistent with the
statutory language in 28 U.S.C. §§ 1441 and 1332. Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 571 n.1, 57273 (5th Cir. 2004).
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the Supreme Court confirmed that Rule 12(b)(6) must be read in conjunction with Rule 8(a),
which requires “a short and plain statement of the claim showing that the pleader is entitled to
relief.” FED. R. CIV. P. 8(a)(2).
To withstand a Rule 12(b)(6) motion, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see also Elsensohn v. St.
Tammany Parish Sheriff's Office, 530 F.3d 368, 372 (5th Cir. 2008). Under Rule 8(a)(2),
plaintiffs are not required to include “‘detailed factual allegations,’ but more than ‘an unadorned,
the-defendant-unlawfully-harmed-me accusation’ is needed.” Id. (quoting Twombly, 550 U.S. at
555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 129 S.Ct. at 1949. “The plausibility standard is not akin to a ‘probability requirement,’ but
it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting
Twombly, 550 U.S. at 556).
III. Analysis
In their original petition, Plaintiffs assert causes of action to quiet title against Fannie
Mae and Sanchez and seek rescission of the June 7th substitute trustee’s deed and other
injunctive relief. Doc. 1-1 at 7-10. Plaintiffs allege that because the December 3, 2010
assignment from Chase to MERS “was ineffective,” “[a]ll subsequent transfers are void,” “the
appointment of substitute trustee N. Sanchez [was] ineffective and void,” and thus Fannie Mae’s
June 7th substitute trustee’s deed should be rescinded. Id. at 7-8.
A. Federal Diversity Jurisdiction & Fraudulent Joinder
Plaintiffs asserted claims against Sanchez in their original petition. Doc. 1-1. In its notice
of removal, Fannie Mae claimed that Sanchez “has been fraudulently joined” because “Plaintiffs
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have no independent claims against Sanchez,” Sanchez is an agent of Fannie Mae and “only the
citizenship of the principal is considered in assessing diversity of citizenship,” and “Texas law
provides that substitute trustees are not proper parties in an action challenging the propriety of
mortgage foreclosures.” Doc. 1 at 3-4 (citations omitted). Plaintiffs have not filed a motion to
remand nor responded to Fannie Mae’s arguments in any way. In addition, in the joint
discovery/case management plan, which Plaintiffs signed and submitted to the Court, the parties
agreed that “[t]his Court has diversity jurisdiction pursuant to 28 U.S.C. Section 1332” and that
they “agree as to jurisdiction.” Doc. 15 at 1-2. As a result, Plaintiffs have expressed no
opposition and appear to consent to Sanchez’s dismissal. Regardless, Plaintiffs have failed to
allege adequately any cognizable claims against Sanchez. Plaintiffs’ claim is to quiet title and to
assert the superiority of their title over Fannie Mae’s. Doc. 1-1 at 7-8. Sanchez has claimed no
interest in the contested property. Doc. 19 at 2. Plaintiffs therefore would be unable “to establish
a cause of action against [Sanchez] in state court.” Smallwood, 385 F.3d at 573 (quoting Travis,
326 F.3d at 646-47). Sanchez must be dismissed. Because complete diversity exists between the
remaining parties and because the amount in controversy–the value of Plaintiffs’ home–is greater
than $75,000, the Court has subject matter jurisdiction over the case pursuant to 28 U.S.C. §
1332(a).
B. Suit to Quiet Title
In their response to Fannie Mae’s motion to dismiss, Plaintiffs summarized their claim to
quiet title, stating that they:
. . . alleged in their petition that Chase’s assignment of rights were invalid, broke
the chain of title, and thus began a series of events that on its face appeared valid
but ultimately led to multiple void/ineffective transfers. Put simply, Chase could
not assign rights it did not own. All subsequent transfers were ineffective . . . .
Fannie Mae was not the rightful owner of the note or deed of trust at the time of
the foreclosure and therefore Plaintiffs are entitled to quiet title to the subject
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property.
Doc. 12 at 2. At the outset, the Court notes that “[u]nder Texas law, absent circumstances not
relevant here, assignments are contracts that are only enforceable by parties to the contract.”
Hazzard v. Bank of Am. NA, No. C-12-127, 2012 WL 2339313, at *3 (June 19, 2012) (citing
Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002) (per curiam); Univ. of Texas Med. Branch v.
Allan, 777 S.W.2d 450, 453 (Tex. App.—Houston [14th Dist.] 1989, no writ); Pagosa Oil and
Gas, L.L.C. v. Marrs & Smith P’ship, 323 S.W.3d 203, 209-14 (Tex. App.—El Paso 2010, pet.
denied)). Thus, “a nonparty to the mortgage assignment . . . does not have standing to contest it.”
Id. (citing Schieroni v. Deutsche Bank Nat’l Trust Co., No. H-10-663, 2011 WL 3652194 (S.D.
Tex. Aug. 18, 2011); McAllister v. BAC Home Loans Servicing, LP, No. 4:10-CV-504, 2011 WL
2200672, at *5 (E.D. Tex. Apr. 28, 2011)). Since Plaintiffs were not parties to the assignment,
they have no standing to contest the validity thereof.
Even if they had standing, however, Plaintiffs’ suit to quiet title fails. “A suit to quiet title
is an equitable action in which the plaintiff seeks to recover possession of property wrongfully
withheld.” Reardean v. CitiMortgage, Inc., No. A-11-CA-420-SS, 2011 WL 3268307, at *5
(W.D. Tex. July 25, 2011) (citing Poretto v. Patterson, 251 S.W.3d 701, 708 (Tex. App.—
Houston [1st Dist.] 2007, no pet.)). “The suit ‘enables the holder of feeblest equity to remove
from his way to legal title any unlawful hindrance having the appearance of better right.’” Id.
(quoting Thomson v. Locke, 66 Tex. 383, 389, 1 S.W. 112 (1886)). “To quiet title in his favor,
the plaintiff ‘must allege right, title, or ownership in himself or herself with sufficient certainty to
enable the court to see he or she has a right of ownership that will warrant judicial interference.’”
Id. (quoting Wright v. Matthews, 26 S.W.3d 575, 578 (Tex. App.—Beaumont 2000, pet.
denied)). “In other words, the plaintiff must recover on the strength of his or her title, not the
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weakness of his adversary’s.” Id. (citing Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.—
Corpus Christi 2001, no pet.)).
Here, Plaintiffs do no more than attack the validity of Fannie Mae’s deed and fail to
allege specific facts supporting the validity of their own deed “‘with sufficient certainty.’” Id.
(quoting Wright, 26 S.W.3d at 578). Plaintiffs’ complaint fails as a result. Accord id. (“[B]ecause
of the dearth of factual allegations, [Plaintiff] has failed to state a claim to quiet title.”) (citing
Disanti v. Mortg. Elec. Registration Sys., Inc., No. 4:10-CV-103, 2010 WL 3338633, at *3 (E.D.
Tex. Aug. 24, 2010) (“Because Plaintiff has failed to allege that he owns superior title to the
Property, his claim to quiet title should be dismissed.”)).
C. Injunctive Relief
Because Plaintiffs’ substantive claim fails, they are not entitled to injunctive relief. Their
request for a temporary restraining order and temporary injunction therefore is denied.
IV. Conclusion
Based on the foregoing, the Court hereby
ORDERS that Defendant Sanchez was improperly joined in this action and therefore is
dismissed. Further, the Court
ORDERS that Defendant Sanchez’s motion to dismiss Plaintiffs’ original petition (Doc.
19) is moot. Further, the Court
ORDERS that Defendant Fannie Mae’s motion to dismiss Plaintiffs’ original petition
(Doc. 6) is GRANTED.
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SIGNED at Houston, Texas, this 12th day of September, 2012.
___________________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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