JPMorgan Chase Bank, N.A. v. Sharon Peters Real Estate, Inc.
ORDER GRANTING 6 Motion to Dismiss and this case is DISMISSED WITHOUT PREJUDICE. Signed by Judge Xavier Rodriguez. (rg)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
JPMORGAN CHASE BANK, N.A.,
SHARON PETERS REAL ESTATE,
Civil Action No. 5:12-cv-1172-XR
On this day the Court considered Defendant‟s 12(b)(7) motion to dismiss for failure to
join a party under Rule 19. (Doc. No. 6.). For the following reasons, the motion is granted.
In December 2005, Janice A. Love and Thomas A. Love obtained a mortgage for their
property (“Property”) from JPMorgan Chase Bank, N.A. (“J.P. Morgan” or “Plaintiff”). It is
undisputed that Mr. Love defaulted on the payment obligations of the mortgage after Mrs.
Love‟s death. A foreclosure sale of the Property was scheduled for September 4, 2012.
On August 31, 2012, the Friday before the scheduled foreclosure sale, Mr. Love sent J.P.
Morgan the funds necessary to cure his payment default and cancel the foreclosure sale.
However, J.P. Morgan was unable to timely process the funds or notify the substitute trustee, and
the foreclosure sale went forward. Sharon Peters Real Estate, Inc. (“SPRE” or “Defendant”)
purchased the Property at the foreclosure sale. According to the Complaint, J.P. Morgan notified
SPRE that the foreclosure sale was invalid and returned the purchase funds, but SPRE refused to
execute the documents to rescind the foreclosure sale and proceeded with a forcible entry and
detainer action to evict Mr. Love from the Property.
J.P. Morgan filed its original complaint in this Court on December 13, 2012, seeking
among other things, declaratory judgment that the foreclosure sale was invalid, J.P. Morgan
holds a lien on the Property, and Mr. Love “retains any interest in the Property he held prior to
the . . . foreclosure sale.” SPRE filed the instant motion to dismiss for failure to join a party
under Rule. J.P. Morgan filed a response to the motion and SPRE filed a reply.
Sharon Peters Real Estate asserts that J.P. Morgan failed to join Mr. Love as a party, and
that Mr. Love is indispensable. Determining whether to dismiss a case for failure to join an
indispensable party requires a two-step inquiry. Hood ex rel Miss. v. Memphis, Tenn., 570 F.3d
625, 628 (5th Cir. 2009). First, the court must determine whether the party should be added
under the requirements of Rule 19(a). Id. Rule 19(a) requires joinder of a person subject to
process whose joinder will not deprive the court of subject-matter jurisdiction if:
(A) in that person's absence, the court cannot accord complete relief among
existing parties; or (B) that person claims an interest relating to the subject of the
action and is so situated that disposing of the action in the person's absence may:
(i) as a practical matter impair or impede the person's ability to protect the
interest; or (ii) leave an existing party subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations because of the interest.
FED. R. CIV. P. 19(a)(1). If a person who qualifies under Rule 19(a) cannot be made a party
because joinder would destroy subject-matter jurisdiction, the court must determine whether “in
equity and good conscience, the action should proceed among the existing parties or should be
dismissed.” FED. R. CIV. P. 19(b). In this determination, the court should consider:
(1) the extent to which a judgment rendered in the person's absence might
prejudice that person or the existing parties; (2) the extent to which any prejudice
could be lessened or avoided by: (A) protective provisions in the judgment; (B)
shaping the relief; or (C) other measures; (3) whether a judgment rendered in the
person's absence would be adequate; and (4) whether the plaintiff would have an
adequate remedy if the action were dismissed for nonjoinder.
Id. The 1966 amendments to Rule 19 encourage “practical, fact-based” analysis. PulitzerPolster v. Pulitzer, 784 F.2d 1305, 1309 (5th Cir. 1986). The Federal Rules seek to “bring all
persons that may have an interest in the subject of an action together in one forum so that the
lawsuit may be fairly and completely disposed of.” Pulitzer-Polster, 784 F.2d at 1308.
Mr. Love is a required party under Rule 19(a).
Mr. Love claims an interest relating to the subject of this property
An absent person must be joined if “that person claims an interest relating to the subject
of the action.” FED. R. CIV. P. 19(a)(1)(B). An indispensible party is one whose rights are
affected by the judgment resolving the controversy. Hilton v. Atlantic Ref. Co., 327 F.2d 217,
218 (5th Cir. 1964). A court cannot directly adjudicate upon the absent person‟s rights unless the
person is “actually or constructively before it.” Calcote v. Texas Pac. Coal & Oil Co., 157 F.2d
216, 220 (5th Cir. 1946). The burden is on the moving party to characterize the interests of the
absent party. HS Res., Inc. v. Wingate, 327 F.3d 432, 439 n.11 (5th Cir. 2003) (citing 5A
WRIGHT & MILLER FEDERAL PRACTICE AND PROCEDURE § 1359, at 426).
The Fifth Circuit has determined that non-participating mineral lessees and royalty
owners have an interest in property disputes in the context of indispensible party inquiries. See,
e.g., Doty v. St. Mary Parish Land Co., 598 F.2d 885, 886 (5th Cir. 1979) (determining that
royalty owners and a mineral lessee were indispensible parties in a suit to try title to land);
Schutten v. Shell Oil Co., 421 F.2d 869, 870, 874 (5th Cir. 1970) (determining that a lessor who
also claimed title to land was an indispensible party in an action to evict the lessee). When
adjudication of the controversy does not affect a non-participating mineral lessors‟ rights, joinder
is not required. HS Res., 327 F.3d at 439 (determining in “litigation over one lessor‟s
contribution to a pooled unit, the presence of other lessors is not required”).
SPRE argues that Mr. Love‟s interest in the action is evident from the complaint, which
seeks a declaration that Mr. Love is the titleholder to the Property. J.P. Morgan claims that once
the foreclosure sale is invalidated, Mr. Love‟s regaining title to the property is incidental. In its
complaint, Plaintiff seeks judgment that “title to the Property is unaffected by . . . the foreclosure
sale,” the foreclosure sale is invalid, and a declaratory judgment that Mr. Love “retains any
interest in the Property he held prior to the . . . foreclosure sale.” Actual title to the land must be
adjudicated in a quiet title action and in order to provide the declaratory relief sought. Any
effective decree resolving the controversy of the foreclosure sale‟s validity directly affects Mr.
Love‟s title to the Property. Like the royalty owners and lessees in Doty and Schutten whose
rights were affected by suits to determine the validity of leases, Mr. Love‟s rights are affected by
this suit to determine title to land. Mr. Love has an interest in the subject matter of this dispute,
affecting his right to actual title.
Whether Mr. Love’s absence may impair or impede his ability to
protect his interest or leave an existing party subject to risk of
multiple, inconsistent obligations because of the interest.
A person is a required party if that person claims an interest in the subject matter of the
action and continuing the action in his or her absence might “as a practical matter, impair or
impede the person‟s ability to protect the interest.” FED. R. CIV. P. 19(a)(1)(B)(i). If a judgment
would injuriously affect a party or impair the party from enforcing rights, that party is necessary.
HS Res., 327 F.3d at 439. A judgment validating the foreclosure sale would injuriously affect
Mr. Love. Such a judgment would make Mr. Love‟s current rights to title in the property
uncertain. It could impair Mr. Love‟s ability to protect his property rights if he decided to bring
a subsequent action in state court. Mr. Love does not have the opportunity to protect his rights in
this action despite the practical impairment he might suffer if J.P. Morgan is unsuccessful.
Alternatively, the court may also consider the risk of leaving an “existing party subject to
substantial risk of incurring double, multiple, or otherwise inconsistent obligations” because of
the absent party‟s interest. FED. R. CIV. P. 19(a)(1)(B)(ii). Mr. Love may bring an action in state
court to quiet title to the Property which, if successful, would impose an additional obligation on
SPRE related to the subject matter of this suit. Furthermore, the state court and this Court could
come to opposite conclusions regarding the validity of the foreclosure sale and SPRE‟s title,
leaving SPRE subject to inconsistent obligations. See Cornhill Ins. PLC v. Valsamis, Inc., 106
F.3d 80, 84 (5th Cir. 1996) (determining that the threat of inconsistent obligations makes a party
This Court cannot accord complete relief among existing parties in
Mr. Love’s absence.
An absent person must be joined if “in that person‟s absence, the court cannot accord
complete relief among existing parties.” FED. R. CIV. P. 19(A)(1)(A). A court may be able to
afford complete relief if the plaintiff seeks damages only for itself. Pulitzer-Polster, 784 F.2d at
1309. However, J.P. Morgan also seeks relief for Mr. Love by requesting declaratory judgment
of Mr. Love‟s property rights. This Court cannot determine the validity of the foreclosure sale
without impairing Mr. Love‟s ability to protect his interest in the property. However, this Court
cannot afford complete relief to J.P. Morgan without determining the validity of the foreclosure
Joinder of Mr. Love is not feasible
J.P. Morgan argues that if joined, Mr. Love would be joined as a defendant in rem, but
provides no support for this conclusory assertion. According to the classical distinction, in
personam actions are against a person to determine personal rights and in rem actions are against
property to determine its status. Green Oaks Apts., Ltd. v. Cannan, 696 S.W.2d 415, 418 (Tex.
App.—San Antonio 1985, writ denied). J.P. Morgan brings an action against Sharon Peters Real
Estate, not the Property.
The preliminary issue is not whether Mr. Love would proceed in the lawsuit as a plaintiff
or a defendant, but rather whether Mr. Love, once joined, would be considered a plaintiff or a
defendant for the purpose of diversity. See Eikel v. States Marine Lines, Inc., 473 F.2d 959, 963
(5th Cir. 1973) (determining the person to be joined under Rule 19(a) is a defendant “for
purposes of process and procedure” but a plaintiff for purposes of diversity). The parties‟ “own
determination of who are plaintiffs and who are defendants” does not confer diversity
jurisdiction. Indianapolis v. Chase Nat’l Bank, 314 U.S. 63, 69 (1941) (aligning both parties
seeking validation of a lease as plaintiffs). In order to determine parties‟ statuses for diversity,
the court “must look beyond the pleadings to the matters actually in controversy.” Eikel, 473
F.2d at 963.
The court determines party alignment for diversity jurisdiction according to
“principal purpose of the suit and the primary and controlling matter in dispute.” Indem. Ins. Co.
of N. Am. v. First Nat’l Bank, 351 F.2d 519, 522 (5th Cir. 1965).
This suit seeks to invalidate a foreclosure sale and quiet title to property. Mr. Love‟s
interests relative to this claim are those of a plaintiff. He shares the same ultimate interest as J.P.
Morgan against SPRE: invalidation of the foreclosure sale and retention of any property rights
held prior to the sale. Mr. Love‟s joinder does not alter the primary cause of action seeking to
nullify SPRE‟s interest in the Property. J.P. Morgan provides no support for how Mr. Love
could be a defendant in rem under Rule 19. The Court finds that he is a plaintiff for the purpose
of determining diversity.
Joining Mr. Love as a plaintiff would destroy complete diversity. J.P. Morgan is a citizen
of Ohio and SPRE is a citizen of Texas. It is undisputed that Mr. Love is also a citizen of Texas.
Jurisdiction exists under 28 U.S.C. 1332 only if there is “complete diversity;” no plaintiff can be
from the same state as any defendant. Corfield v. Dall. Glen Hills LP, 355 F.3d 853, 857 (5th
Cir. 2003). Because Mr. Love and Defendant SPRE are both citizens of Texas, Mr. Love‟s
addition as a plaintiff would deprive this Court of diversity jurisdiction and is therefore not
This action cannot proceed without Mr. Love under Rule 19(b).
A judgment rendered in Mr. Love’s absence might prejudice Mr.
Love or the existing parties.
In determining whether “in equity and good conscience,” this Court should proceed in
adjudicating this action without Mr. Love or dismiss it, the Court must consider “the extent to
which a judgment rendered in the person‟s absence might prejudice that person or existing
parties.” FED. R. CIV. P. 19(b)(1). SPRE argues that Mr. Love suffers prejudice because “he is
not prosecuting his own claims” to the property and it is prejudiced because it is defending
against claims that Mr. Love may reassert in a subsequent action.
Plaintiff provides the
conclusory statement that no party will be prejudiced. The Court finds that Mr. Love and
Defendant suffer prejudice in the absence of Mr. Love.
Prejudice requires more than a technical inquiry into whether the absent party would be
bound by res judicata in a subsequent action. Schutten, 421 F.2d at 874. For example in Doty v.
St. Mary Parish Land Co., the Fifth Circuit recognized that an absent lessee would probably not
be bound by an adjudication of title to the property, but considered that a successful suit to try
title to the land would “as a practical matter . . . reduce the economic value of the lease, [and]
inject an element of uncertainty into all of the lessee‟s business transactions concerning the
lease.” Doty, 598 F.2d at 887. Additionally, a successful suit would create “precedent adverse to
the lessee‟s claims” that a state court, though not formally bound, might find persuasive if the
absent lessee brought a subsequent suit. Id.
Similarly, Mr. Love would suffer prejudice if Plaintiff‟s suit is unsuccessful in obtaining
declaratory judgment that Mr. Love is the Property‟s titleholder and the foreclosure sale is
Such a judgment would affect Mr. Love‟s rights to title of the Property without
affording him the opportunity to protect his own interests in court. Even if such a judgment
would not bind Mr. Love in a technical sense, a state court might give informal consideration to
the federal court‟s ruling in a subsequent action. Defendant SPRE also suffers prejudice because
it might have to defend against both Mr. Love and J.P. Morgan‟s claimed interests in separate
actions and could be subject to inconsistent obligations.
The extent to which prejudice could be lessened or avoided and
whether a judgment rendered in the person’s absence would be
In determining whether a case should proceed or be dismissed, the court must also
consider “the extent to which prejudice could be lessened and avoided” and “whether a judgment
rendered in the person‟s absence would be adequate.” FED. R. CIV. P. 19(b)(2)-(3). Adequacy
refers to the “public stake in settling disputes by wholes, whenever possible.”
Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 111 (1968). At this early stage of
litigation, it is possible to adjudicate this property dispute in “whole” by joining all parties who
have an interest in the property into the same lawsuit in state court.
Neither party suggests a method for mitigating prejudice, and none appear to be available
to this court. This litigation centers on a question of title to property and the validity of a
foreclosure sale. A judgment cannot fully adjudicate the question of Plaintiff‟s equitable title
without affecting Mr. Love‟s claim to actual title to the Property. This Court cannot mitigate the
effect on Mr. Love‟s rights without evading the legal determinations required. See Schutten, 421
F.2d at 975 (upholding a 12(b)(7) dismissal for failure to join a non-participating lessor in a
property dispute because “any attempt to fashion a judgment which would lessen [prejudice to
the absent party] would result in a meaningless decree”).
Plaintiff has an adequate remedy in state court if the action is
dismissed for nonjoinder.
In order to determine whether J.P. Morgan has an adequate remedy in the case of
dismissal, the court should consider the availability of state court as an alternative forum for
resolving the dispute. Haas v. Jefferson Nat’l Bank, 442 F.2d 394, 399 n.8 (5th Cir. 1980).
SPRE argues that J.P. Morgan would have an adequate remedy by bringing an action in state
court. J.P. Morgan states it could file in Guadalupe County state court but additional resources
would be required. The Court agrees with SPRE that J.P. Morgan would have an adequate
remedy upon dismissal by re-filing in Guadalupe County state court. The early stage of litigation
minimizes the burden of re-filing. J.P. Morgan presents no argument that it would suffer
prejudice or have an inadequate remedy in state court; the Property is situated in Guadalupe
County and J.P. Morgan‟s equitable title is governed by state law.
The availability of state court alone does not necessitate dismissal. Brown v. Pac. Life
Ins. Co., 462 F.3d 384, 394 (5th Cir. 2006). “Judicial economy and convenience do not in
themselves provide grounds for dismissal.” Boone v. Gen. Motors Acceptance Corp., 682 F.2d
552, 554 (5th Cir. 1982). However, this factor in combination with the other Rule 19(b) factors
lead this Court to believe that “in equity and good conscience” this action cannot proceed
without the joinder of Mr. Love. The “essence” of the Rule 19(b) criteria is to “balance the
rights of all concerned.” Schutten, 421 F.2d at 873. This includes the right of the plaintiff to
“„control‟ his own litigation and choose his own forum.” Id. However, it also includes the right
of the defendant to avoid defending duplicative litigation and risk inconsistent obligations, and
the right of the absent party to protect his own rights in an adjudication of them. Id. It is the
availability of state court in conjunction with SPRE‟s right to avoid duplicative and potentially
inconsistent litigation and Mr. Love‟s right to defend his own property interests that necessitate
dismissal for inability to join Mr. Love.
In light of the foregoing, Defendant‟s motion to dismiss the case for failure to join a required
party is GRANTED. (Doc. No. 6). This case is DISMISSED WITHOUT PREJUDICE. The
Clerk is directed to enter a final judgment and to close this case.
It is so ordered.
SIGNED this 15th day of July, 2013.
UNITED STATES DISTRICT JUDGE
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