Boyce v. CitiMortgage, Inc.
Filing
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ORDER GRANTING 7 Motion to Remand to State Court; GRANTING 27 Motion to Remand to State Court; DENYING 33 Motion to Amend Complaint. Signed by Judge Xavier Rodriguez. (rg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
ANGELICA REYES BOYCE,
Plaintiff,
v.
CITIMORTGAGE, INC.
Defendant.
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Civil Action No. SA-13-CV-832-XR
ORDER
Before the Court are Plaintiff’s motions to remand (docket nos. 7 & 27), to which
Defendant has responded (docket nos. 17 & 29) and Plaintiff has replied (docket nos. 20 & 32).
The Court also considers Plaintiff’s first, second, and third amended complaints (docket nos. 9,
16 & 22), and Plaintiff’s motion to amend complaint (docket no. 33), which only requests leave
for Plaintiff to file her third amended complaint. Additionally, the Court considers Defendant’s
motion to strike Plaintiff’s third amended complaint (docket no. 29), Plaintiff’s response to
Defendant’s motion (docket no. 32), and Defendant’s reply (docket no. 36).1 Finally the Court
considers Lawrence Boyce’s motion to intervene (docket no. 34), and Defendant’s response
thereto (docket no. 35).
Factual and Procedural Background
On August 30, 2013, Plaintiff Angelica Reyes Boyce, acting pro se, filed suit in the 224th
Judicial District Court of Bexar County, Texas. According to her state-court petition, Ms. Boyce
owns a homestead, located at 9710 Dawn Trail, San Antonio, Texas 78258 (the “Property”). Ms.
1
Plaintiff’s first, second, and third amended complaints have all been docketed even though the Court has never
granted leave to file any of these complaints. However, the fact that they were docketed does not mean that they
were filed in compliance with the Federal Rules of Civil Procedure.
Boyce alleges that the Property is encumbered by a mortgage, which Defendant CitiMortgage,
Inc. (“CitiMortgage”) either holds or services for the true mortgage holder. Pet., Docket No. 1-1
¶ 6. According to Ms. Boyce, CitiMortgage allegedly noticed the Property for a foreclosure sale
on August 6, 2013.2 Id.
CitiMortgage’s notice came despite Ms. Boyce having allegedly
received a pending offer for a short sale of the Property, which Ms. Boyce allegedly submitted to
CitiMortgage for approval. Id. Ms. Boyce sought a complete accounting of her mortgage loan, a
reasonable opportunity to satisfy or reinstate the mortgage, and injunctive relief, enjoining
CitiMortgage from conducting a foreclosure sale.
On September 3, 2013, the state court granted Ms. Boyce a temporary restraining order,
enjoining CitiMortgage from selling her home and setting a temporary injunction hearing for
September 16, 2013. Docket No. 1-1. On September 12, 2013, CitiMortgage removed the
action to this Court based on diversity jurisdiction. Docket No. 1. On October 7, 2013, Andrew
E. Toscano filed a notice of appearance, and moved, on behalf of Plaintiff, to remand the action
back to state court. Docket Nos. 4 & 7. On that date, Ms. Boyce also filed a first amended
complaint. Docket No. 9.
Ms. Boyce’s first amended complaint clarifies that the Property was sold at a foreclosure
sale on August 6, 2013. Id. ¶ 12. Ms. Boyce complains that the sale was improper because it was
conducted while a short sale was pending and because Plaintiff was not provided with notice of
the foreclosure sale. Id. ¶ 11–12. Ms. Boyce sought to add as a defendant Deborah Martin, who
was the substitute trustee who conducted the foreclosure sale. Id ¶ 3. Ms. Martin is allegedly a
citizen of the state of Texas. Id.
Ms. Boyce alleges causes of action against Ms. Martin and
2
It is unclear from Ms. Boyce’s state-court petition whether CitiMortgage actually conducted a foreclosure sale on
August 6, 2013; however the parties now do not dispute that a foreclosure sale was conducted on that date. See
Third Am. Compl. ¶ 18, Docket No. 22; Trustee’s Deed, Docket No. 7, Ex. B.
2
CitiMortgage for negligence, intentional infliction of emotional distress, and violations of the
Texas Deceptive Trade Practices Act.
She also alleges causes of action solely against
CitiMortgage for breach of contract and fraud. Finally, she seeks a declaratory judgment setting
aside the foreclosure sale. Since the addition of Ms. Martin purportedly defeated complete
diversity, Ms. Boyce moved to remand. Docket No. 7.
On October 11, 2013, four days after filing her first amended complaint, Ms. Boyce filed
a second amended complaint. Docket No. 16. By her second amended complaint, Ms. Boyce
sought to add her ex-husband, Lawrence Boyce, to the lawsuit. Mr. Boyce allegedly is a party to
the mortgage, having signed the promissory note and deed of trust. Id. ¶ 10. The second
amended complaint repeats the allegations against CitiMortgage and Ms. Martin regarding an
allegedly unlawful foreclosure sale of the Property while a short sale of the Property was
pending. The second amended complaint also clarifies that CitiMortgage only sent Ms. Boyce a
notice of the scheduled foreclosure sale, and not also Mr. Boyce. Id. ¶ 12, 23. The Boyces repeat
their claims for negligence, intentional infliction of emotional distress, violations of the Texas
Deceptive Trade Practices Act, breach of contract, and fraud. They also request a declaratory
judgment setting aside the foreclosure sale.
Three weeks later, on November 1, 2013, the Boyces filed a third amended complaint.
Docket No. 22. By their third amended complaint, the Boyces sought to add CitiMortgage’s
foreclosure counsel, Buckley Mandole, P.C. (“Buckley”), as a defendant. Buckley is allegedly a
Texas corporation. Id. ¶ 5. The third amended complaint repeats the allegations regarding
foreclosure while a short sale was allegedly pending. The complaint also clarifies that by a letter
dated March 22, 2013, CitiMortgage notified both Mr. and Ms. Boyce of their alleged default
3
and right to cure. Id. ¶ 24. The complaint further states that, unlike the March 22, 2013 letter,
which was addressed to both Mr. and Ms. Boyce, a letter dated July 11, 2013 sent by Buckley
notified only Ms. Boyce of the mortgage acceleration and of the scheduled August 6, 2013
foreclosure sale. Id. The Boyces allege claims against all three defendants for violations of the
foreclosure sale requirements of the Texas Property Code, negligence, intentional infliction of
emotional distress, violations of the Texas Deceptive Trade Practices Act, and violations of the
Texas Debt Collection Act. The Boyces also alleged breach of contract and fraud solely against
CitiMortgage. Finally, the Boyces request declaratory judgment to rescind the foreclosure sale.
On November 11, 2013, Mr. Boyce filed a motion to remand, alleging that complete
diversity was destroyed by the addition of Ms. Martin and Buckley to the lawsuit. Docket No.
27. CitiMortgage responded with a motion to strike the Boyces’ third amended complaint,
alleging that the amendment was filed untimely and did not state viable claims against the nondiverse defendants. Docket No. 29. The Boyces responded that Mr. Boyce filed the third
amended complaint as a matter of right. Docket No. 32 ¶ 17. The Boyces also filed a motion for
leave to amend their complaint. Docket No. 33. Finally, Mr. Boyce filed a motion to intervene.
Docket No. 34. CitiMortgage responded that it was not opposed to Mr. Boyce’s intervention.
Docket No. 35.
Discussion
Despite the complicated procedural history of this case, the relevant inquiry can be
simplified to two questions: (1) whether the initial removal was proper; and (2) whether the
Court will allow joinder of a non-diverse party to this lawsuit, thereby defeating the Court’s
jurisdiction. The Court finds that removal was proper, that Ms. Martin should be joined as a
4
party to this lawsuit, and that because of her joinder, this Court lacks jurisdiction to hear this
case. The Court makes these determinations by considering and allowing Ms. Boyce’s first
amended complaint. Since the Court must grant remand after allowing Ms. Martin’s joinder, the
Court will not consider whether to also allow the second and third amended complaints,
Buckley’s joinder, or Mr. Boyce’s intervention.
A. Whether Removal Was Proper
A party may remove an action from state court to federal court if the action is one over
which the federal court possesses subject matter jurisdiction. See 28 U.S.C. § 1441(a). Removal
is proper in any case in which the federal court would have had original jurisdiction. Id. To
determine whether jurisdiction is present for removal, the Court considers the claims in the state
court petition as they existed at the time of removal. Cavallini v. State Farm Mut. Auto Ins. Co.,
44 F.3d 256, 264 (5th Cir. 1995). The removing party bears the burden of showing that federal
jurisdiction exists and that removal was proper. De Aguilar v. Boeing Co., 47 F.3d 1404, 1408
(5th Cir. 1995). Any ambiguities are to be construed against removal, as the removal statute
should be strictly construed in favor of remand. Acuna v. Brown & Root, Inc., 200 F.3d 335, 339
(5th Cir. 2000).
Under 28 U.S.C. § 1332, a federal court has jurisdiction over controversies involving
disputes between citizens of different states where the amount in controversy exceeds $75,000.
Here, CitiMortgage originally removed this case based on diversity jurisdiction. Docket No. 1.
Ms. Boyce’s state-court petition asserts that she is a resident of the State of Texas. Pet., Docket
No. 1-1 ¶ 1. CitiMortgage’s notice of removal asserts that it is incorporated under the laws of
New York, with its principal place of business in Missouri. Notice of Removal, Docket No. 1 ¶
5
11; see 28 U.S.C. § 1332(c)(1) (stating that a corporation is deemed a citizen of its state of
incorporation and principal place of business). CitiMortgage also asserts that the amount in
controversy exceeds $75,000. Notice of Removal, Docket No. 1 ¶ 12 (noting that the Bexar
County, Texas Tax Appraisal District appraised the Property for $154,490); see Farkas v. GMAC
Mortg., L.L.C., 737 F.3d 338, 341 (5th Cir. 2013) (stating that when a plaintiff sues for
injunctive and declaratory relief to enjoin a foreclosure sale, the amount in controversy for
diversity jurisdiction analysis is determined by the value of the mortgaged property). The
Boyces do not dispute these jurisdictional facts. Accordingly, since the state-court petition only
lists Ms. Boyce and CitiMortgage as parties, since it is undisputed that these parties are diverse,
and since it is undisputed that the amount in controversy exceeds $75,000, the Court finds that
this case was properly removed to this Court, and the Court has jurisdiction to decide this case.
See 28 U.S.C. § 1332.
B. Whether the Court Will Allow Joinder of a Non-Diverse Defendant
Nevertheless, a court’s subject matter jurisdiction may be defeated by the addition of a
non-diverse defendant. See Doleac ex rel. Doleac v. Michalson, 264 F.3d 470, 477 (5th Cir.
2001) (explaining that generally jurisdiction is determined at the time a suit is removed and postremoval developments to lower the amount in controversy or change the citizenship of a party
will not divest jurisdiction;
however, the addition of a non-diverse defendant will defeat
jurisdiction). Since joinder of a non-diverse defendant has such a drastic consequence on
jurisdiction, a court has discretion to permit or deny joinder. See 28 U.S.C. § 1447(e) (“If after
removal the plaintiff seeks to join additional defendants whose joinder would destroy subject
matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the
6
State court.”).
The Fifth Circuit has instructed district courts to exercise discretion when
considering a proposed amendment adding a non-diverse defendant. See Hensgens v. Deere &
Co., 833 F.2d 1179, 1182 (5th Cir. 1987). The district court should scrutinize the proposed
amendment more closely than when considering an ordinary amendment under Federal Rule of
Civil Procedure 15(a)(2), which requires a court to “freely give leave to amend when justice so
requires.” Id.; FED. R. CIV. P. 15(a)(2). When an amendment will defeat jurisdiction, the court
must balance the defendant’s right in “maintaining the federal forum with the competing interest
of not having parallel lawsuits.” Hensgens, 833 F.2d at 1182. Among the factors a court should
consider are: (1) the extent to which the purpose of the amendment is to defeat federal
jurisdiction; (2) whether the plaintiff has been dilatory in asking for the amendment; (3) whether
the plaintiff will be significantly injured if amendment is not allowed; and (4) any other factor
bearing on the equities. Id. If the court permits amendment, then it must remand to state court.
Id.; see also Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 679 (5th Cir. 2013) (noting
that Hensgens is the “correct legal standard” to apply in determining whether joinder of nondiverse parties should be permitted after removal).
Confusing matters, however, is Federal Rule of Civil Procedure 15(a)(1)(B), which
permits amendment “as a matter of course” within 21 days after a party is served with a motion
under Rule 12(b). FED. R. CIV. P. 15(a)(1)(B). Here, Ms. Boyce was served with CitiMortgage’s
Rule 12(b)(6) motion to dismiss on October 3, 2013. Docket No. 3. Four days later, Ms. Boyce
filed her first amended complaint, adding Ms. Martin as a non-diverse defendant. Docket No. 9.
If Rule 15(a)(1)(B) acted in isolation, Ms. Boyce would be allowed to file her first amended
complaint without leave of this Court; however, Ms. Boyce’s right to amend conflicts with this
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Court’s right to consider and deny amendments which add non-diverse defendants and defeat
jurisdiction. See 28 U.S.C. § 1447(e); Hensgens, 833 F.2d at 1182.
The Fifth Circuit has not ruled on how to reconcile Rule 15(a)(1)(B) with 28 U.S.C. §
1447(e); however, it has determined that a court cannot conduct an improper joinder analysis
after a defendant is added in federal court. See Cobb v. Delta Exports, 186 F.3d 675, 677 (5th
Cir. 1999).3 In Cobb, the Fifth Circuit explained that the doctrine of improper joinder “does not
apply to joinders that occur after an action is removed.” Id. The doctrine permits “courts to
ignore (for jurisdictional purposes) only those non-diverse parties on the record in state court at
the time of removal.” Id. (emphasis in the original). Thus, a court prohibited by Cobb from
conducting an improper joinder analysis after removal, and prohibited by Rule 15(a)(1)(B) from
using its discretion to allow or deny the addition of a non-diverse party, would have to remand if
a plaintiff amended to add a non-diverse party within the Rule 15(a)(1)(B) window. See 28
U.S.C. § 1447(e); Cobb, 186 F.3d at 677 (explaining that once a non-diverse defendant is added,
a court’s diversity jurisdiction is destroyed, and the court must remand). This result, however,
would significantly impair a diverse defendant’s ability to litigate in a federal forum since a court
could not prohibit remand even if the non-diverse defendant was added solely to defeat
jurisdiction. See Hensgens, 833 F.2d at 1182 (stating that a diverse defendant has an interest in
retaining a federal forum). Therefore, to prohibit this unfair result and to maintain the Court’s
statutory discretion over party additions which would defeat jurisdiction, the court holds that 28
U.S.C. § 1447(e) allows the Court discretion to permit or deny joinder, even when a party may
otherwise amend as a matter of course. The Court’s decision accords with those of its sister
3
Although there is no substantive difference between the terms “improper joinder” and “fraudulent joinder,” the
Fifth Circuit has held that “improper joinder” is preferred. Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 571 n.1
(5th Cir. 2004) (en banc).
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courts. See Drew v. Rebuild Am., Inc., 1:13-CV-384-LG-JMR, 2013 WL 6179184 (S.D. Miss.
Nov. 25, 2013) (“Where the addition of a party will destroy the court’s jurisdiction and prejudice
the other party, the general rule prevails that leave of court is necessary.”) (citing 6 C. Wright, A.
Miller & M. Kane, Federal Practice & Procedure: Civil, § 1477, at 562 (2d ed.1990));
Adey/Vandling, Ltd. v. Am. First Ins. Co., A-11-CV-1007-LY, 2012 WL 534838 (W.D. Tex.
Feb. 17, 2012) (“[F]ederal courts have concluded that when the amendment would deprive the
court of subject matter jurisdiction, a party may not rely on Rule 15(a) to amend a pleading
without leave of court and such an amendment must be analyzed pursuant to § 1447(e).”);
Mackey v. J.P. Morgan Chase Bank, N.A., 786 F. Supp. 2d 1338, 1340 (E.D. Mich. 2011)
(“[C]ourts generally have insisted that a plaintiff must satisfy the standards of § 1447(e) in order
to join a non-diverse defendant following removal, rather than achieving this result through the
liberal amendment provisions of Rule 15(a).”); Ascension Enterprises, Inc. v. Allied Signal, Inc.,
969 F. Supp. 359, 360 (M.D. La. 1997) (noting that “§ 1447(e) trumps Rule 15(a)”); Whitworth
v. TNT Bestway Transp., 914 F. Supp. 1434, 1435 (E.D. Tex 1996) (“When an amendment will
destroy diversity, leave of court is required even though the existing defendant . . . ha[s] not yet
filed responsive pleadings.”).
Unfortunately, at the time the first amendment was offered, Ms. Boyce did not seek leave
to file the amended complaint, nor did CitiMortgage move to strike the complaint from the
docket. Instead, the parties assumed Ms. Martin was joined as a matter of course and incorrectly
argued over whether she was improperly joined. See Mot. to Remand, Docket No. 7 at 5
(“Plaintiff’s joinder of Deborah Martin, a nondiverse Defendant, is not fraudulent joinder.”);
CitiMortgage’s Resp., Docket No. 17 at 3 (“[Ms. Martin] was improperly joined, and her
9
citizenship should be disregarded for purposes of diversity.”). Nevertheless, the Court will now
conduct a Hensgens analysis to determine whether to allow the first amended complaint and the
addition of Ms. Martin as a non-diverse defendant. Ms. Boyce and CitiMortgage have presented
numerous motions, responses, and replies concerning whether Ms. Martin is a proper party. See
e.g. Mot. to Remand, Docket No. 7; Resp. to Mot. to Remand, Docket No. 17; Second Mot. to
Remand, Docket No. 27; Mot. to Strike Third Am. Compl., Docket No. 29; Resp. to Mot. to
Strike, Docket No. 32.
Moreover, Ms. Boyce and CitiMortgage explicitly considered the
Hensgens factors when arguing for and against leave to file the third amended complaint. See
Mot. to Strike, Docket No. 29 at 4; Resp. to Mot. to Strike, Docket No. 32 at 4. Therefore,
through these briefings, the Court is presented with all the relevant facts and arguments needed
to determine whether to allow the first amended complaint and the addition of Ms. Martin as a
non-diverse defendant.
1. The Extent to which the Purpose of the Amendment Is to Defeat Federal
Jurisdiction
The first Hensgens factor a court must consider before allowing an amendment which
adds a non-diverse defendant is the extent to which the purpose of the amendment is to defeat
federal jurisdiction. Hensgens, 833 F.2d at 1182. Bearing on this factor is whether the proposed
amendment asserts a valid cause of action against the non-diverse defendant. Tillman v. CSX
Transp., Inc., 929 F.2d 1023, 1029 (5th Cir. 1991) (approving a trial court’s discretion to add a
non-diverse defendant after the court found that the principal purpose of the amendment was not
to defeat jurisdiction since the amendment stated a valid claim against the non-diverse
defendant); Mallery v. Becker, 13-CV-2790, 2014 WL 60327, at *4 (W.D. La. Jan. 7, 2014)
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(allowing an amendment where a plaintiff asserted valid claims against a non-diverse defendant).
Courts have also considered whether the plaintiff knew or should have known the identity of the
non-diverse defendant when the state court petition was filed. See e.g. Rouf v. Cricket
Communications, Inc., CIV.A. H-13-2778, 2013 WL 6079255, at *2 (S.D. Tex. Nov. 19, 2013)
(denying amendment after finding that plaintiffs knew about the proposed non-diverse
defendants when suit was filed). Additionally, if a plaintiff moves to amend shortly after
removal, some courts have viewed that as evidence of a primary purpose to defeat jurisdiction.
See e.g. Gallegos v. Safeco Ins. Co. of Indiana, CIV.A. H-09-2777, 2009 WL 4730570, at *4
(S.D. Tex. Dec. 7, 2009) (finding that a plaintiff’s filing of a motion for leave to amend and a
motion for remand less than a month after removal evidenced the amendment’s principal purpose
of defeating jurisdiction). Other courts have found that if a plaintiff had not filed a motion for
remand before moving to amend, the court could reasonably conclude that the primary reason to
amend was not to defeat jurisdiction. See Tujague v. Atmos Energy Corp., CIV.A. 05-2733, 2008
WL 489556, at *4 (E.D. La. Feb. 20, 2008) (finding that plaintiff moved to amend to assert a
valid claim about which he was unaware at the time suit was filed).
Here, Ms. Boyce asserts that she sought to amend “to include all parties and claims for
which [she is] entitled.” Resp. to Mot. to Strike, Docket No. 32 at 4 (discussing the third
amended complaint). The record supports this statement. On August 30, 2013, Ms. Boyce filed
her suit pro se, alleging that CitiMortgage sold the Property while a short sale was pending. Pet.,
Docket No. 1-1 ¶ 6. On September 12, 2013, CitiMortgage removed the case to this Court.
Docket No. 1. Within a month after removal, CitiMortgage moved to dismiss. Docket No. 3.
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Four days later, on October 7, 2013, Ms. Boyce, through counsel, filed her first amended
complaint and filed a motion to remand. Docket Nos. 7 & 9.
The first amended complaint dramatically expands the facts and basis for recovery. Ms.
Boyce’s state-court petition simply asserted that CitiMortgage scheduled the Property for a
foreclosure sale while a short sale was pending. Pet., Docket No. 1-1 ¶ 6. Ms. Boyce’s first
amended complaint, however, asserts additional claims against CitiMortgage, and importantly a
claim against Ms. Martin for negligently selling the Property while Ms. Boyce was making short
sale arrangements and without providing notice of the foreclosure sale. First Am. Compl.,
Docket No. 9 ¶ 20. Additionally, the second amended complaint clarifies that Ms. Boyce
complains that the notice of foreclosure sale was sent to Ms. Boyce only, and not also to Mr.
Boyce. Second Am. Compl., Docket No. 16 ¶ 4. The Court will now focus on these additional
facts, which it finds assert a viable negligence claim against Ms. Martin.4
a. Negligence Claim Against a Foreclosure Trustee
“Negligence actions in Texas require a legal duty owed by one person to another, a
breach of that duty, and damages proximately caused by the breach.” Nabors Drilling, U.S.A.,
Inc. v. Escoto, 288 S.W.3d 401, 404 (Tex. 2009). “The existence of a duty is a question of law.”
Id. In Texas, a trustee under a deed of trust has a duty to “act with absolute impartiality and
fairness” to both the mortgagor and mortgagee. Hammonds v. Holmes, 559 S.W.2d 345, 347
(Tex. 1977); see Myrad Properties, Inc. v. LaSalle Bank Nat. Ass’n, 300 S.W.3d 746, 751 (Tex.
2009) (affirming that the trustee’s duty runs to both the mortgagor and mortgagee). “The trustee
in making the sale, and during the time the property is under the hammer, is expected to protect
4
The Court will not consider Ms. Boyce’s other claims against Ms. Martin for intentional infliction of emotional
distress and violations of the Texas Deceptive Trade Practices Act. Since Ms. Boyce asserts, at a minimum, one
viable claim against Ms. Martin, and because of the other factors discussed below, the Court finds that the primary
purpose of Ms. Boyce’s amendment is not to defeat jurisdiction.
12
the interests of the grantor, to see that no fraud is practiced detrimental to his interests, and that
no improper bid is accepted, and that the property is not knocked off without giving fair
opportunity for it to bring its reasonable value.” Fuller v. O’Neal, 6 S.W. 181, 181 (Tex. 1887);
see Houston First Am. Sav. v. Musick, 650 S.W.2d 764, 768 (Tex. 1983) (“Compliance with the
notice condition contained in the deed of trust and as prescribed by law is a prerequisite to the
right of the trustee to make the sale.”)
Construing Ms. Boyce’s claim broadly, she alleges that Ms. Martin breached her duty of
absolute impartiality and fairness.5 She asserts that CitiMortgage did not serve both Mr. and Ms.
Boyce the required notice of the foreclosure sale. See TEX. PROP. CODE. § 51.002(b) (requiring
notice of sale be served on each debtor who, according to the records of the mortgage servicer, is
obligated to pay the debt); First Am. Compl., Docket No. 9 ¶ 12; Second Am. Compl., Docket
No. 16 ¶ 23; Id. ¶ 10 (stating that Mr. Boyce remained on the loan documents after the Boyces
divorced). Ms. Boyce asserts that Ms. Martin should have refused to conduct the foreclosure
sale since she did not provide both Mr. and Ms. Boyce notice of sale or obtain proof that both
Mr. and Ms. Boyce had been served with notice as required by statute.6
Ms. Boyce has provided the Court with a copy of the trustee’s deed and affidavit of
completed foreclosure sale. Mot. to Remand, Docket No. 7, Ex. B. These documents have been
filed in the Official Public Records of Bexar County, Texas. Ms. Martin has provided the Court
with a copy of the deed of trust. Mot. to Dismiss, Docket No. 31-1. This document too has been
filed with Bexar County.
Ms. Boyce, Ms. Martin, and CitiMortgage do not dispute the
5
Ms. Boyce states that “[Ms. Martin] owed her a duty to provide notice of the foreclosure sale.” First Am. Compl.,
Docket No. 9 ¶ 20. While Ms. Boyce does not use the term “duty of absolute impartiality and fairness,” the Court
reads Ms. Boyce’s first amended complaint broadly as asserting a breach of this duty.
6
Again, the Court construes Ms. Boyce’s allegations broadly. In her first amended complaint Ms. Boyce asserts
that Ms. Martin acted negligently; Ms. Boyce does not reference the statutory notice requirements. By her third
amended complaint, however, she references both the Texas Property Code and state-court decisions interpreting the
Property Code. Third Am. Compl., Docket No. 22 ¶ 37.
13
authenticity of these documents.
Therefore, the Court will consider these documents in
determining whether Ms. Boyce states a viable claim for Ms. Martin’s breach of her duty of
absolute impartiality and fairness as a foreclosure trustee. See Funk v. Stryker Corp., 631 F.3d
777, 783 (5th Cir. 2011) (stating that a court may take judicial notice of matters of public
record); cf. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (holding that
when deciding a motion to dismiss a court may consider documents incorporated into the
complaint by reference).
Considering the allegations and the evidence in the record, the Court finds that Ms.
Boyce does not state a viable claim against Ms. Martin for negligence when she asserts that Ms.
Martin should not have conducted the foreclosure sale when she did not give notice of the sale to
Mr. or Ms. Boyce. Ms. Boyce’s deed of trust states that the lender or the trustee must give notice
of the foreclosure sale. Deed of Trust, Docket No. 31-1 ¶ 22. Thus, the deed of trust does not
impart on Ms. Martin the exclusive duty of serving notice; CitiMortgage could have served
notice.
Nevertheless, the Texas Property Code requires that mortgage borrowers be given notice
before a sale. TEX. PROP. CODE. § 51.002(b). Ms. Martin could be liable for breaching her duty
of absolute impartiality and fairness to Ms. Boyce if she conducted the foreclosure sale without
ensuring that both Mr. and Ms. Boyce were notified of the sale. See Sanchez v. Bank of America,
N.A., SA-13-CV-87-HLH, at 2–3 (W.D. Tex. Mar. 19, 2013) (allowing a claim for negligence
against a trustee where the borrowers alleged that they were not served with notice of the
foreclosure sale); Magers v. Bank of Am., N.A., EP-12-CV-00368-DCG, 2013 WL 705545, *6
(W.D. Tex. Feb. 26, 2013) (allowing a claim for wrongful foreclosure against a trustee where a
14
debtor alleged that she was not served with notice of a foreclosure sale); Johnson v. Ocwen Loan
Servicing, LLC, CIV.A. C-09-47, 2009 WL 2215103, at * 3 (S.D. Tex. July 22, 2009) (allowing
a claim for breach of duty against a trustee when the borrower alleged that he had not been
served with notice of the foreclosure sale).
Here, nothing in the record contradicts Ms. Boyce’s assertion that Ms. Martin did not
ensure that both Mr. and Ms. Boyce were served with notice of the sale before Ms. Martin
conducted the sale. The Texas Property Code provides, “A trustee shall not be liable for any
good faith error resulting from reliance on any information in law or fact provided by the
mortgagor or mortgagee or their respective attorney, agent, or representative or other third
party.” See TEX. PROP. CODE. § 51.007(f). Thus, even if Mr. Boyce were never served, Ms.
Martin could avoid liability by having relied on CitiMortgage’s representations that Mr. Boyce
was served; however, nothing in the allegations, arguments, or exhibits attached to the various
motions state or show that Mr. Martin relied on information provided by CitiMortgage when
representing that Mr. Boyce had been served with notice of the sale. The closest thing to such
evidence in the record is an “affidavit of completed foreclosure sale,” signed the day after the
sale by an attorney for CitiMortgage, stating, “On behalf of the Current Mortgagee, and
Mortgage Servicer, and Substitute Trustee(s), Buckley served a Notice of Acceleration and
Notice of Trustee’s Sale on every debtor obligated on the debt, in strict compliance with the
Texas Property Code, by certified mail at least twenty-one (21) days prior to the date therein
specified for sale at the last known address of each such debtor according to the records of the
Mortgage Servicer.” Affidavit of Completed Foreclosure, Docket No. 7, Ex. B. This affidavit,
however, does not state that CitiMortgage informed Ms. Martin of proper service of the
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foreclosure sale notices before she conducted the sale. Likewise, the trustee’s deed, signed by
Ms. Martin, states, “Notice of Acceleration and of Trustee’s Sale was mailed to all debtors
obligated on the debt, filed with the County Clerk and posted at the Courthouse door (and in two
other public places if required) of Bexar County, Texas at least twenty-one days prior to the date
of the sale indicated above.” Trustee’s Deed, Docket No. 7, Ex. B. The trustee’s deed also lists
both Mr. and Ms. Boyce as debtors. Id. However, neither CitiMortgage nor Ms. Martin explain,
in briefing or otherwise, how Ms. Martin obtained knowledge that both Mr. and Ms. Boyce were
actually served.
CitiMortgage attempts to avoid the issue of Ms. Martin’s actions and knowledge before
the sale by arguing that Ms. Martin acted only in her capacity as substitute trustee and that she
should not be liable for any errors that CitiMortgage may have committed in the foreclosure
process. Mot. to Strike, Docket No. 29 at 8. While often this is a valid argument, here, Ms.
Martin is sued precisely because she had a duty as foreclosure trustee and was allegedly
negligent in fulfilling that duty. See Sanchez, SA-13-CV-87-HLH, at 2–3 (“[T]he status of a
substitute trustee [as a properly or improperly joined defendant] hinges on the nature of the
actions allegedly taken by the trustee”); cf. Eisenberg v. Deutsche Bank Trust Co. Americas, SA11-CV-384-XR, 2011 WL 2636135 (W.D. Tex. July 5, 2011) (finding that a trustee was only a
nominal party and her inclusion did not defeat jurisdiction, where the trustee was named solely to
prevent foreclosure, no foreclosure sale had occurred, and the plaintiffs did not allege any defects
in notice or bad faith by the trustee).
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Since the record does not contradict or otherwise undermine Ms. Boyce’s allegations, and
since Ms. Boyce alleges negligence in Ms. Martin’s conduct as foreclosure trustee, Ms. Boyce
asserts a viable claim against Ms. Martin.
b. Other Factors Showing the Purpose of the Amendment
Finding that Ms. Boyce states a valid claim against Ms. Martin in her first amended
complaint, the court now considers other facts which tend to show whether Ms. Boyce amended
primarily to defeat jurisdiction. First, the Court is unsure whether Ms. Boyce knew or should
have known that Ms. Martin could be liable for negligence when Ms. Boyce filed her state-court
petition. While Ms. Boyce should have known that her home was sold on August 6, 2013 by Ms.
Martin as substitute trustee, she may not have known that Mr. Boyce did not receive notice since
she was divorced from him at the time filing. Next, the record is clear that Ms. Boyce filed her
amendment soon after removal; however, this does not necessarily mean that Ms. Boyce
amended primarily to defeat jurisdiction. Ms. Boyce likely would have amended regardless
when she obtained counsel, which she did soon after removal. Finally, Ms. Boyce had not
moved to remand before filing her first amended complaint; she moved to remand after
attempting to add a non-diverse defendant, sued on a viable claim. Thus, considering the
viability of Ms. Boyce’s claim against Ms. Martin and the inconclusive other factors, the Court
concludes that Ms. Boyce does not seek to add Ms. Martin as a non-diverse defendant primarily
to defeat diversity jurisdiction.
2. Whether the Plaintiff Has Been Dilatory in Asking for the Amendment
Next, the Court considers the second Hensgens factor of whether Ms. Boyce has been
dilatory in asking for her amendment. Generally a plaintiff is not dilatory in seeking to amend a
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complaint “when no trial or pre-trial dates [have been] scheduled and no significant activity
beyond the pleading stage has occurred.” Herzog v. Johns Manville Products Corp., No. Civ. A.
02–1110, 2002 U.S. Dist. LEXIS 22187, 2002 WL 31556352, at *2 (E.D. La. Nov. 15, 2002);
Smith v. Robin Am., Inc., CIV.A. H-08-3565, 2009 WL 2485589 (S.D. Tex. Aug. 7, 2009).
Here, no scheduling order had been entered when Ms. Boyce sought to amend to add Ms. Martin,
and Ms. Boyce sought to add Ms. Martin soon after she obtained counsel. Nevertheless, where a
plaintiff’s true motive in seeking to add a defendant is to defeat jurisdiction, speed is not terribly
relevant. See Adey/Vandling, Ltd. v. Am. First Ins. Co., A-11-CV-1007-LY, 2012 WL 534838, at
*4 (W.D. Tex. Feb. 17, 2012). Here, however, as has been discussed, Ms. Boyce’s motive was
not primarily to defeat jurisdiction. Thus, Ms. Boyce’s speed in attempting to add Ms. Martin as
a non-diverse defendant weighs in favor of allowing her addition.
3. Whether the Plaintiff Will Be Significantly Injured if Amendment Is Not Allowed
The third Hensgens factor looks to whether a plaintiff will be significantly injured if
amendment is not allowed. When considering this factor, courts look to “whether a plaintiff can
be afforded complete relief in the absence of the amendment.” Loewe v. Singh, Civ. A. No. H10-1811, 2010 WL 3359525, at *2 (S.D. Tex. Aug. 23, 2010). Courts also look to “whether the
plaintiff will be forced to litigate their action against the non-diverse defendants in a different
court system, on a different timetable, subject to different procedural rules and conflicting
results, and under the weight of additional financial burden.” Adey/Vandling, 2012 WL 534838,
at *4. Ms. Boyce could likely obtain full relief from CitiMortgage alone since CitiMortgage
purchased the Property at the foreclosure sale and Ms. Boyce seeks rescission of the sale. See
Trustee’s Deed, Docket No. 7, Ex. B. She also seeks money damages on claims for which both
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CitiMortgage and Ms. Martin are defendants. Therefore, the Court finds that the third factor
does not weigh in favor of adding Ms. Martin as a non-diverse defendant. Nevertheless, the
Court will grant Ms. Boyce leave to amend her complaint to add Ms. Martin as a non-diverse
defendant since the four factors considered together weigh in favor of amendment.
4. Any Other Factor Bearing on the Equities
Finally, the Court considers any other factors bearing on the equities. Here, the Court
notes that Ms. Boyce filed her petition pro se in state court. When the petition was removed to
federal court and faced dismissal, Ms. Boyce hired a lawyer, who diligently amended the
complaint. When considering a motion to dismiss, the Fifth Circuit has instructed lower courts
to hold a pro se plaintiff’s complaint to a “less stringent standard” and to grant leave to amend in
most instances. Frazier v. Wells Fargo Bank, N.A., — F. App’x —, 2013 WL 5513987, at *1
(5th Cir. Oct. 7, 2013); Bazrowx v. Scott, 136 F.3d 1053, 1054 (5th Cir. 1998).
VI. Conclusion
Having considered the relevant factors, the Court finds that together they weigh in favor
of granting Plaintiff Angelica Reyes Boyce leave to add Deborah Martin, as a non-diverse
defendant. Accordingly it is ORDERED that Plaintiff is granted leave to file her first amended
complaint (docket no. 9). Where a court permits the amendment of a plaintiff’s pleadings to add
a non-diverse defendant, thereby destroying diversity, the court must then remand the action to
state court. 28 U.S.C. § 1447(e); Hensgens, 833 F.2d at 1182. Accordingly, the Clerk is directed
to REMAND this case to state court and to close the case.
It is so ORDERED.
SIGNED this 22nd day of January, 2014.
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XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE
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