Adams et al v. Bank of America, N.A.

Filing 21

ORDER DENYING 9 Motion to Remand to State Court; MOOTING 11 Motion to Dismiss. Signed by Judge Sam Sparks. (dm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

STEVEN L. ADAMS
ELLEN L. ADAMS,
Plaintiffs,

CAUSE NO.:
A-17-CA-00646-SS

-vs-

BANK OF AMERICA, N.A., SUCCESSOR
BY MERGER TO BAC HOME LOANS
SERVICING, LP FKA COUNTRYWIDE
HOME LOANS SERVICING, LP, FOR
THE BENEFIT OF WMALT 2007-OA1
TRUST,
Defendant.

ORDER
BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause,
and specifically, Plaintiffs Steven and Ellen Adams's Motion to Remand [#9] and Defendant

Bank of America, N.A. (BANA)'s Response [#16] in opposition, as well as BANA's Motion to
Dismiss [#11], the Adamses' Response [#16] in opposition, and BANA's Reply [#20] in support.
Having reviewed the documents, the relevant law, and the case file as a whole, the Court now
enters the following opinion and orders.

Background
In July 2006, Steven and Ellen Adams purchased a subdivision lot in Cedar Park, Texas.
Adams

v.

Bank of Am., NA., No. A-12-CA-366-SS, 2013 WL 12094271, at *1_2 (W.D. Tex.

June 7, 2013),

aff'd,

570 Fed. App'x 375 (5th Cir. 2014) (per curiam). The Adamses paid for the

property by taking out a loan from Countrywide Bank (the Loan). Id. The Loan was secured by a

1

VA

lien against the property (the Deed of Trust). Id. The Loan is owned by the WMALT 2007-OA1
Trust (the Trust); the Deed of Trust has been owned by BANA since 2011 "for the benefit of the

[T]rust." Id.' BANA has serviced both the Loan and the Deed of Trust since 2006. Id. The

trustee of the Trust, however, is U.S.

Banknot BANA. Id.

The Adamses defaulted on the Loan in May 2009, and BANA served notice of a
foreclosure sale in November 2011. Id. When the foreclosure sale took place in December 2011,
BANA purchased the property "for the benefit of the [T]rust." Id. The Adamses brought suit in
state court in April 2012 challenging BANA's authority to foreclose on the property. Id. BANA

removed that prior lawsuit to this Court, and this Court dismissed the Adamses' claims with
prejudice on July 7, 2013. Id. The Fifth Circuit affirmed. Adams, 570 Fed. App'x 375.
Subsequently, in November 2016, BANA initiated a forcible detainer suit in state court
asserting a right to immediate possession of the property. Am. Compl. [#8] at 3. Travis County

Justice Court ruled in favor of the Adamses, but BANA appealed and prevailed in Travis County

Court at Law. Id. The Adamses have appealed the decision of the Travis County Court at Law.
Id.

Despite the pendency of their appeal in the forcible detainer suit, the Adamses brought
this second action in state court seeking a declaratory judgment that BANA is not the legal
owner of the property. Notice Removal [#1-2] Ex.

1

(Petition). BANA removed the action to this

Court on July 30, 2017. Following amendment of their complaint, the Adamses' sole claim for

relief arises under the Declaratory Judgment Act, 28 U.S.C.

§

2201.

See

Am. Compl. [#8] at 4-5.

'The parties appear to dispute whether BANA subsequently assigned the Deed of Trust in 2014. Compare
Am. Compl. [#8] at 3 ("On March 4, 2014, any interest [BANAl had in the Deed of Trust was assigned to another
person."), with Mot. Dismiss [#111 at 2 ("BANA is the latest assignee of record.").
2

BANA now asks this Court to dismiss the Adamses' suit on the basis of res judicata. Mot.
J. Pleadings [#1 1]

2

The Adamses request this Court remand to state court or, in the alternative,

deny BANA's motion for judgment on the pleadings. Mot. Remand [#9]; Resp. Mot. Dismiss.
[#16]. These pending motions are now ripe for review.

Analysis
First, the Court addresses the Adamses' contention the Court lacks diversity jurisdiction

over this action. See Mot. Remand [#9]. Second, the Court considers whether it should exercise
its discretion to stay or dismiss the Adamses' claim for declaratory relief under 28 U.S.C.
§

2201. Because the Court in its discretion concludes the Adamses' claim for declaratory relief

should be dismissed, the Court does not reach BANA's motion to dismiss. See Mot. Dismiss
[#16].
I.

Motion to Remand
A. Legal Standard

"[T]he burden of establishing federal jurisdiction is placed upon the party seeking
removal." Willy

v.

Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). Moreover, because

removal jurisdiction raises significant federalism concerns, courts must strictly construe removal
jurisdiction. Id. Any doubts or ambiguities regarding the propriety of removal are construed
against removal and in favor of remand to the state court. Manguno

v.

Prudential Prop. & Cas.

Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). BANA has invoked federal court diversity

jurisdiction under 28 U.S.C.

§

1332(a).

District courts have diversity jurisdiction over civil actions between citizens of different
States when the amount in controversy exceeds $75,000.00. 28 U.S.C.

2

§

1332(a). Section 1332

While BANA characterizes its filing as a motion to dismiss, the motion was actually brought under Rule
12(c), rendering it a motion for judgment on the pleadings. See FED. R. CIV. P. 12(c).
3

requires "complete

diversity"that is, the citizenship of every plaintiff must be different from

that of every defendant. Caterpillar Inc.

v.

Lewis, 519 U.S. 61, 68 (1996). "Citizens upon whose

diversity a plaintiff grounds jurisdiction must be real and substantial parties to the controversy."

Navarro Say. Ass 'n

v.

Lee, 446 U.S. 458, 460-461 (1980). Thus, the Court must "disregard

nominal or formal parties and rest jurisdiction only upon the citizenship of the real parties to the
controversy." Id.; see also Americold Realty Trust

v.

Conagra Foods, Inc., 136 S. Ct. 1012

(2016).
B. Application

Steven and Ellen Adams are citizens of Texas. BANA is a citizen of North Carolina. See
Tu Nguyen v. Bank

of Am., NA., 516 Fed. App'x 332, 334

n.1 (5th Cir. 2013) (per curiam)

(observing national banking association is citizen of the state in which it has its main office).

Nevertheless, the Adamses insist BANA has failed to establish diversity of citizenship exists.
This requires some unpacking.
The Adamses have named BANA as the sole defendant in this action and seek a

declaratory judgment that BANA has no authority to enforce or service the lien on the Adamses'
property. Am. Compl. [#8] at 1, 4-5. In spite of this, the Adamses now assert BANA is a non-

stakeholder in this controversy. Mot. Remand [#9] at 4-5. The real party in interest, the Adamses
suggest, is actually the Trust. Id. And because BANA has not established the citizenship of the
Trust in this case, the Adamses argue this Court must remand for failure to establish diversity of
citizenship. Id. at 7.
As an initial matter, if the Court were to find BANA to be a non-stakeholder in this
action, it is not at all clear whether the citizenship of the Trust would control. When a plaintiff
sues the trustee of a statutory trust, the citizenship of the trustee is the only relevant consideration

in determining whether diversity exists. See Americold, 136 S. Ct. at 1016 ("[W]hen a trustee
files a lawsuit or is sued in her own name, her citizenship is all that matters for diversity

purposes."). Conversely, when a plaintiff sues the statutory trust itself, the citizenship of the trust
is detennined by looking to the citizenship of each of the trust's members. Id. (citing Navarro,

446 U.S. at 462-66; see also Bynane v. Bank of New York Mellon, 866 F.3d 351, 357-59 (5th
Cir. 2017). It is uncertain which rule would apply where, as here, the plaintiff has sued neither

the trust nor the trustee, but instead, the servicer.
In any event, the Court finds it unnecessary to apply either rule here, because the

Adamses have made it abundantly clear that they are not trying to sue either the Trust or the
trustee. See Mot. Remand [#9] at
the Court presume it is the

5

("There is no reason to assume [BANAl is a trustee nor may

trustee.").3

Instead, the Adamses deliberately brought suit against

BANA, seeking a declaratory judgment that

the 2012 foreclosure

BANAdespite having purchased the property at

salelacks authority to enforce or service the lien. See

Mot. Remand [#9]

at 4-5; Resp. Mot. Remand [#15] at 5. In these circumstances, the Court declines to look to the

citizenship of parties the Adamses knowingly declined to sue. Cf Bynane, 866 F.3d at 358
("[W]e do not interpret Americold as standing for the proposition that a district court must
disregard whether the trust or trustee is sued and look instead at how the substance of the

Assuming, arguendo, that one of these rules did apply, the Court finds Navarro to be the better fit. The
Adamses argue the Court should look past the citizenship of BANA because BANA is merely acting for the benefit
of the Trust. Yet whether a party acts for the benefit of the trust cannot be a decisive factor, because if that were the
case, the citizenship of the trusteewho presumably also acts for the benefit of the trustwould never control. Cf
Americold, 136 S. Ct. at 1016 (stating citizenship of trustee controls where trustee is sued in its own name). The
more probative inquiry is for whom BANA is acting as agent. In this case, BANA appears to be acting as agent for
the trustee, U.S. Bank. Insofar as U.S. Bank appears to exert real and substantial control over the trust assets, see
Resp. Mot. Remand [#15] at 7-11 (citing controlling pooling and servicing agreement), the Court believes the
Navarro rule would apply where the plaintiff has mistakenly sued an agent of the trustee rather than the trustee or
the trust itself. See Justice v. Wells Fargo Bank Nat. Ass'n, 674 Fed. App'x 330, 332 (5th Cir. 2017) (per curiam)
("Where a trustee has been sued or files suit in her own name, the only preliminary question a court must answer is
whether the party is an active trustee[] whose control over the assets held in [its] name[] is real and substantial."
(internal citation and quotation marks omitted) (alterations in original)). Thus, because U.S. Bank is a citizen of
Ohio, complete diversity of the parties would still exist if the Navarro rule applied.

complaint characterizes the real party to the controversy."). Because the Adamses are citizens of
Texas and BANA is a citizen of North Carolina, the Court finds BANA has met its burden of
showing complete diversity between the parties. This Court therefore has jurisdiction under

§

1332.

II.

Request for Declaratory Relief
A.

Legal Standard

District courts have substantial discretion to stay or dismiss declaratory judgment actions

under 28 U.S.C.

§

2201. See Wilson

v.

Seven Falls Co., 515 U.S. 277, 286-88 (1995). If a district

court determines a declaratory judgment will serve no useful purpose, it is not incumbent upon

the court to proceed to the merits before staying or dismissing the action. Id. (emphasizing
Declaratory Judgment Act is "an enabling Act" which confers discretion on the district court

"rather than an absolute right upon the litigant" (internal quotation marks and citations omitted)).
When a related proceeding is already pending in state court, the proper inquiry for the district
court is "whether the questions in controversy between the parties to the federal suit, and which
are not foreclosed under the applicable substantive law, can better be settled in the proceeding

pending in the state court." Brilihart v. Excess Ins. Co. ofAm., 316 U.S. 491, 495 (1942).
The Fifth Circuit has crafted a list of seven nonexciusive factors to guide district courts'

exercise of discretion in deciding whether to accept or decline jurisdiction over a declaratory

judgment suit. See Sherwin-Williams Co.
(citing St. Paul Ins. Co.

v.

v.

Holmes Cly., 343 F.3d 383, 390 (5th Cir. 2003)

Trejo, 39 F.3d 585 (5th Cir. 1994)). These factors are: 1) whether

there is a pending state action in which all of the matters in controversy may be fully litigated; 2)

whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant; 3) whether the

plaintiff engaged in forum shopping in bringing the suit; 4) whether possible inequities in

allowing the declaratory plaintiff to gain precedence in time or to change forums exist; 5)
whether the federal court is a convenient forum for the parties and witnesses; 6) whether

retaining the lawsuit in federal court would serve the purposes of judicial economy; and 7)
whether the federal court is being call on to construe a state judicial decree involving the same
parties and entered by the court before whom the parallel state suit between the parties is
pending. Trejo, 39 F.3d at 590-91.
B.

Application

This Court has substantial discretion to stay or dismiss declaratory judgment actions

brought under 28 U.S.C.

§

2201. See Wilson, 515 U.S. at 268-69 ("[T]he propriety of declaratory

relief in a particular case will depend upon a circumspect sense of its fitness informed by the
teachings and experience concerning the functions and extent of federal judicial power."

(internal quotation marks and citation omitted)). In this case, the Adamses seek a declaratory

judgment that BANA lacks authority under Texas law to bring a forcible detainer action in state
court. The Court finds this question is more properly addressed through the forcible detainer

action itself, which is already pending in state court and which is now on appeal for the second
time. Am. Compl. [#8] at 3; see also Brillhart, 316 U.S. at 495 (suggesting court should consider

whether questions in controversy "can better be settled in the proceeding pending in the state
court"). The Trejo factors weigh in favor of this conclusion.

First, there is a pending state action in which all of the matters in controversy may be
fully litigated. See Trejo, 39 F.3d at 590-91. The Adamses' request for declaratory relief relates

exclusively to BANA's authority to bring a forcible detainer action in state court. Am. Compl.
[#8] at 5-6. Presumably, this issue could be litigated in the forcible detainer action itself. The

first factor weighs in favor of declining to exercise jurisdiction.

7

The second factor asks whether the plaintiffs filed the declaratory judgment suit in

anticipation of a lawsuit filed by the defendant. See Trejo, 39 F.3d at 590-91. Here, the Adamses
have not filed a declaratory judgment suit "in anticipation" of a suit by BANAthey filed suit

after BANA had already brought a forcible detainer action in state court. Am. Compi. [#8] at 3.
The Adamses declaratory judgment action asks this Court to improperly decide legal questions

currently on appeal in state court. See id.; Sherwin-Williams, 343 F.3d at 397 (suggesting it is
improper for plaintiff to file a declaratory judgment action "for the sole purpose of controlling
the state law that would apply" in the state court suit). The second factor weighs in favor of
declining to exercise jurisdiction.
The third factor asks whether the plaintiff engaged in forum shopping in bringing the

declaratory judgment suit. See Trejo, 39 F.3d at 590-91. Here, the Adamses did not engage in
forum shopping. To the contrary, BANA was the party responsible for removing the case to this
Court, and the Adamses have actively sought remand. See Notice Removal [#1]; Mot. Remand
[#9]. The Court finds the third factor weighs in favor of the exercise of jurisdiction.

Fourth, the Court finds possible inequities might arise in allowing the declaratory

plaintiff to gain precedence in time or to change forums. See Trejo, 39 F.3d at 590-91. Any
declaratory relief issued by this Court might contradict a ruling in the pending forcible detainer
action. Cf Ironshore Specialty Ins. Co.

v.

Tractor Supply Co., 624 Fed. App'x 159, 168 (5th Cir.

2015) (per curiam). Therefore the fourth factor weighs in favor of declining to exercise

discretion.
Turning to the fifth factor, there is no indication this Court would be an inconvenient
forum for either party. See Trejo, 39 F.3 d at 590-91. In fact, both parties are already litigating

[bI

the forcible detainer action in state court in Austin.

See

Am. Compi. [#8] at 3. The fifth factor

therefore weighs in favor of exercising jurisdiction.
The sixth factor asks whether retaining the lawsuit in federal court would serve the
purposes of judicial economy.

See Trejo, 39

F.3d at 590-91. Here, the exercise of jurisdiction by

this Court would not be in the interest of judicial economy. The Adamses seek declaratory relief
and ask this Court to construe a Texas real property statute which is already at issue in a pending

state court appeal. Thus far, neither party has briefed the Court on the state law issues underlying

BANA's forcible detainer action. In light of the pending appeal in state court and the nascent
character of this federal proceeding, the Court finds the sixth factor weighs against exercising

jurisdiction.
The seventh and final factor asks "whether the federal court is being called upon to

construe a state judicial decree involving the same parties and entered by the court before whom
the parallel state suit between the parties is pending." See

Trejo,

39 F.3d at 590-91. This factor

weighs against dismissal because there is no need to construe a state judicial decree to resolve

the issues in this case.

Weighing these factors together, the Court finds that it would be improper to issue
declaratory relief in light of the pending forcible detainer action in state court. The Court

therefore DISMISSES the Adamses' claim for declaratory relief under

§

2201.

Conclusion
Though this Court may properly exercise diversity jurisdiction over the Adamses' claim,
the Court declines to proceed to the merits of the Adamses' declaratoryjudgment action because

the matters in controversy are more properly addressed through the forcible detainer action
currently pending in state court. The Adamses' claim for declaratory relief is therefore

dismissed, and because the Adamses have asserted no other claims in their complaint, the

Adamses' complaint is also dismissed.
Accordingly,
IT IS ORDERED that Plaintiffs' Motion to Remand [#9] IS DENIED; and
IT IS FURTHER ORDERED that Plaintiffs' First Amended Complaint [#8] is

DISMISSED WITHOUT PREJUDICE; and
IT IS FINALLY ORDERED that Defendant's Motion to Dismiss [#11] is

DISMISSED AS MOOT.

SIGNED this the

day of November 2017.

SPAr

SAM
UNITED STATES DISTRICT JUDGE

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