Owen v. Saxon Asset Securities 2006-1 Mortgage Asset Backed Notes et al

Filing 32

MEMORANDUM OPINION AND ORDER granting 7 MOTION Robert T. Owen, Jr. to Remand and denying request for an award of fees and costs; the court will, by companion order entered contemporaneously herewith, remand this action to the Circuit Court of Kanawha County. Signed by Judge John T. Copenhaver, Jr. on 4/5/2018. (cc: counsel of record; any unrepresented parties; Clerk of Court, Circuit Court of Kanawha County) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
ROBERT T. OWEN, JR.,
Plaintiff,
v.

Civil Action No. 2:17-cv-04396

SAXON ASSET SECURITIES TRUST
2006-1 MORTGAGE ASSET BACKED
NOTES, SERIES 2006-1, through
Deutsche Bank Trust Co.
Americas, indentured trustee;
OCWEN LOAN SERVICING LLC; and
PILL & PILL, PLLC,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending is plaintiff Robert T. Owen, Jr.’s motion to
remand and to award fees and costs, filed December 18, 2017.

I. Background

The plaintiff, Robert T. Owen, Jr., resides at 827
Hughes Drive, St. Albans, Kanawha County, West Virginia.
(Compl. ¶ 4.)

On October 20, 2005, Owen refinanced the mortgage

on his home, signing a note and deed of trust with America’s
Moneyline, Inc. (“America’s Moneyline”), a nonparty to this
action.

(Id. ¶¶ 6, 8.)

At the origination of Owen’s

refinancing, America’s Moneyline withheld the fact that it was
not licensed as a lender in West Virginia.

(Id. ¶¶ 11, 32, 36.)

Owen remained unaware of that fact until October 2017.
37.)

(Id. ¶

Additionally, America’s Moneyline did not allow Owen “to

negotiate or give any input” on the terms of the refinancing.
(Id. ¶¶ 45-46.)
On December 30, 2005, America’s Moneyline assigned
Owen’s note and deed of trust to Saxon Funding Management, Inc.
(“Saxon Funding”), also a nonparty to this action.
40.)

(Id. ¶¶ 12,

Saxon Funding was not licensed as a lender or a servicer

in West Virginia according to the state’s “official licensing
records.”

(Id. ¶¶ 13, 41.)
On August 3, 2017, Saxon Funding assigned Owen’s note

and deed of trust to defendant Saxon Asset Securities Trust
2006-1 Mortgage Asset Backed Notes, Series 2006-1 (the “Trust”).
(Id. ¶ 14.)

The Trust is a Delaware statutory trust and does

not hold a license to “acqui[re], transfer, own[], or enforce[]
. . . any primary or subordinate mortgage loan secured by real
estate in West Virginia.”

(Id. ¶¶ 15, 18-19.)

The Trust’s

indentured trustee, Deutsche Bank Trust Company Americas, “has
no ownership or servicing role as to [Owen’s] mortgage.”

(Id. ¶

17.)
Defendant Ocwen Loan Servicing LLC (“Ocwen
Servicing”), a Florida corporation with its principal place of
business in Florida, is the Trust’s servicing agent for Owen’s
2

note and deed of trust.

(Id. ¶¶ 20-21.)

As of April 20, 2017,

Ocwen Servicing has been prohibited by the state of West
Virginia “from new acquisitions of servicing rights for any West
Virginia mortgage; from new acquisition of any existing West
Virginia mortgage; and from originating any new mortgages in
West Virginia.”

(Id. ¶¶ 25-26.)

Defendant Pill & Pill PLLC (“Pill”) is a West Virginia
law firm.

(Id. ¶ 27.)

On August 22, 2017, Ocwen appointed Pill

as the substitute trustee under Owen’s deed of trust.
28.)

(Id. ¶

After Owen’s evident default on his mortgage, Pill

“scheduled [Owen’s] home for foreclosure sale on the steps of
the Kanawha County Courthouse on October 31, 2017.”

(Id. ¶ 29.)

Owen instituted this action on October 19, 2017, in
the Circuit Court of Kanawha County.

Pursuant to the West

Virginia Residential Mortgage Lender, Broker and Servicer Act
(“Residential Mortgage Act”), W. Va. Code § 31-17-1 et seq.,
Owen seeks to quiet title through a declaratory judgment that
his note and deed of trust are “void and unenforceable as a
matter of law” and further asks the court to permanently enjoin
the defendants from claiming an interest in his home.
57-63.)

(Id. ¶¶

He also brings an action against the defendants for

3

slander of title and an action against Ocwen Servicing and the
Trust for unjust enrichment.

(Id. ¶¶ 64-66, 67-68.) 1

As to Pill in particular, Owen states as follows:
[Pill is] named as defendant[] solely for the purpose
of obtaining temporary and final injunctive relief to
prevent the sale of plaintiff’s home. No monetary
claims are asserted against defendant [Pill].
(Id. ¶ 30.)

In addition to that “sole[]” purpose, however, Owen

also includes Pill under his quiet title and slander of title
claims, and Owen alleges as well that Pill’s substitution as
trustee under the deed of trust was invalid.
52.)

(See id. ¶¶ 51-

For these claims, he seeks equitable relief and damages.

(See id. WHEREFORE Clauses.)
The Trust and Ocwen Servicing (together, “Defendants”)
removed the action to this court on November 22, 2017, invoking
the court’s diversity jurisdiction.

Owen suggests that this

action should be remanded because Pill failed to consent to
removal.

(Mem. Supp. 7.)

Defendants claim that Pill, a West

Virginia citizen for jurisdictional purposes, does not defeat

1

Owen stated a provisional claim under the West Virginia
Consumer Credit and Protection Act (“WVCCPA”). (See id. ¶¶ 6971.) Owen acknowledges that the defendants have forty-five days
to cure the alleged WVCCPA violations pursuant to chapter 46A,
article 5, section 108 of the West Virginia Code. (Id. ¶ 70.)
Because Owen has not amended his pleading to reflect a failure
to cure by the defendants, (id. ¶ 71), the court assumes that
the violations have been cured.
4

complete diversity of citizenship because Pill was fraudulently
joined or, alternatively, is a nominal party to the action by
reason of which it was unnecessary for Pill to consent to
removal.

(Notice of Removal ¶¶ 6, 16-21; Mem. Opp’n 6 n.3.)
On December 18, 2017, Owen moved to remand the case to

state court and to recover attorney’s fees and costs. 2

Since the

filing of the motion to remand, Richard Pill, one of Pill’s
members, has submitted a declaration wherein he declares that
“[Pill], as substitute trustee, will not initiate foreclosure
on” Owen’s home while this action is pending.

(Richard Pill

Decl. ¶¶ 3, 7.)

II. Governing Standard

“Under the general removal statute, ‘any civil action
brought in a State court of which the district courts of the
United States have original jurisdiction[] may be removed by the
defendant or the defendants’ to the appropriate district court.”
Jackson v. Home Depot U.S.A., Inc., 880 F.3d 165, 167 (4th Cir.

2

The Trust and Ocwen moved to dismiss the complaint and/or
compel arbitration on January 2, 2018, on the grounds that there
exists between the parties a valid and binding arbitration
agreement. (See ECF #9.) The court must first ascertain
whether it possesses subject matter jurisdiction over the case,
and this memorandum opinion and order is limited to that effect.
5

2018) (alteration in original) (quoting 28 U.S.C. § 1441(a)).
As our court of appeals has explained regarding diversity
jurisdiction,
[u]nder 28 U.S.C. § 1332, a federal district court has
original jurisdiction over all civil actions where the
amount in controversy exceeds $75,000, exclusive of
interest and costs, and is between citizens of
different states. 28 U.S.C. § 1332(a)(1). With the
exception of certain class actions, Section 1332
requires complete diversity among parties, meaning
that the citizenship of every plaintiff must be
different from the citizenship of every defendant.
Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 (1996).
Cent. W. Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3d
101, 103 (4th Cir. 2011) (footnote omitted).

III. Discussion

A. Fraudulent Joinder and Nominal Party

The United States Court of Appeals for the Fourth
Circuit recently summarized fraudulent joinder 3 doctrine as it
applies here:
Under [fraudulent joinder] doctrine, naming nondiverse defendants does not defeat diversity
3

It bears mentioning that “‘[f]raudulent joinder’ is a term of
art, [and] it does not reflect on the integrity of plaintiff or
counsel[; rather, it] is merely the rubric applied when a court
finds either that no cause of action is stated against [a]
nondiverse defendant, or in fact no cause of action exists.”
AIDS Counseling & Testing Ctrs. v. Group W Television, Inc., 903
F.2d 1000, 1003 (4th Cir. 1990) (quoting Lewis v. Time Inc., 83
F.R.D. 455, 460 (E.D. Cal. 1979)).
6

jurisdiction. Rather, the fraudulent joinder doctrine
“effectively permits a district court to disregard,
for jurisdictional purposes, the citizenship of
certain nondiverse defendants, assume jurisdiction
over a case, dismiss the nondiverse defendants, and
thereby retain jurisdiction.” Mayes v. Rapoport, 198
F.3d 457, 561 (4th Cir. 1999).
“The party alleging fraudulent joinder bears a heavy
burden - it must show that the plaintiff cannot
establish a claim even after resolving all issues of
law and fact in the plaintiff’s favor.” Hartley v.
CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999).
The removing party must show either “‘outright fraud
in the plaintiff’s pleading of jurisdictional facts’
or that ‘there is no possibility that the plaintiff
would be able to establish a cause of action against
the in-state defendant in state court.’” Id. (quoting
Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th
Cir. 1993)).
[Under] the latter, “no possibility” formulation, . .
. a plaintiff’s claim against a non-diverse defendant
“need not ultimately succeed to defeat removal; only a
possibility of a right to relief need be asserted.”
Marshall, 6 F.3d at 233. This standard heavily favors
the [plaintiff], who must show only a “glimmer of
hope” of succeeding against the non-diverse
defendants. Mayes, 198 F.3d at 466. Moreover, when
considering whether the [plaintiff] ha[s] satisfied
this standard, we must resolve all legal and factual
issues in [the plaintiff’s] favor. Id. at 465.
“[T]his standard is even more favorable to the
plaintiff than the standard for ruling on a motion to
dismiss under Fed. R. Civ. P. 12(b)(6).” Id. (quoting
Hartley, 187 F.3d at 424).
Johnson v. Am. Towers, LLC, 781 F.3d 693, 704 (4th Cir. 2015)
(last alteration in original and first full cite added).
Additionally, when determining whether a joinder is fraudulent,
“the court is not bound by the allegations of the pleadings, but
may instead ‘consider the entire record, and determine the basis

7

of joinder by any means available.’”

AIDS Counseling, 903 F.2d

at 1004 (quoting Dodd v. Fawcett Pubs., Inc., 329 F.2d 82, 85
(10th Cir. 1964)).
The Fourth Circuit stated its nominal party standard
in Hartford Fire Insurance Co. v. Harleysville Mutual Insurance
Co., 736 F.3d 255 (4th Cir. 2013).

“Determining nominal party

status is a practical inquiry, focused on the particular facts
and circumstances of a case . . . .”

Id. at 260.

The inquiry

is “straightforward”: “whether the non-removing party has an
interest in the outcome of the case.”

Id. at 261.

Owen asserts three claims against Pill: injunctive
relief to prevent the sale of his home, slander of title, and
quiet title.

(Compl. ¶¶ 30, 57-66.)

The court need only

address slander of title, coupled with the request here for
injunctive relief, to conclude that Pill is neither fraudulently
joined nor a nominal party.
The Supreme Court of Appeals of West Virginia
describes an action for slander of title as the “1. publication
of 2. a false statement 3. derogatory to plaintiff’s title 4.
with malice 5. causing special damages 6. as a result of
diminished value in the eyes of third parties.”

Syl. Pt. 3, TXO

Prod. Corp. v. All. Res. Corp., 187 W. Va. 457 (1992).

In TXO

Production Corp., the Supreme Court of Appeals affirmed a jury’s
8

finding that a defendant was liable for slander of title because
the defendant “record[ed] a quitclaim deed which it knew to be
frivolous.”

Id. at 466.

In other words, the Supreme Court of

Appeals decided that “wrongfully recording an unfounded claim to
the property of another is actionable as slander of title.”

Id.

at 467.
Resolving all factual and legal issues in favor of
Owen reveals that Owen’s slander of title claim against Pill has
at least a “glimmer of hope” of success.

Pill published notice

of the trustee’s sale of Owen’s home pursuant to W. Va. Code §
38-1-4.

(Pl.’s Ex. 2.)

The notice allegedly asserts an

unfounded interest in Owen’s home under an invalid deed of
trust, which, it appears, would doubtlessly diminish the value
of the home in the eyes of third parties.
The two elements of primary prominence here are malice
and special damages.

Under the strikingly lax fraudulent

joinder standard, the court finds that Owen has shown a
possibility that he could establish each.

As for malice,

Federal Rule of Civil Procedure 9(b) provides that malice may be
alleged generally.

Moreover, the court in TXO Production Corp.

held that “[t]he action of [the defendant] in filing his
[frivolous] quitclaim deed was such as to warrant the necessary
showing of malice.”

187 W. Va. at 467 (second alteration in
9

original) (quoting Jumping Rainbow Ranch v. Conklin, 167 Mont.
367, 373 (Mont. 1975)).

In the present action, Owen alleges

that the “defendants know or should know” that the deed of trust
and subsequent notice to sell are invalid.

(Compl. ¶ 65.)

Turning to special damages, Owen claims that the defendants’
actions have caused him to incur “expenses and out-of-pocket
costs . . . in opposing [the defendants’] actions.”

(Id. ¶ 55);

e.g., Syl Pt. 6, TXO Prod. Corp., 187 W. Va. 457 (“Attorneys’
fees incurred in removing spurious clouds from a title qualify
as special damages in an action for slander of title.”).

Thus,

the court is satisfied that Owen has carried his light burden
under the fraudulent joinder standard as to the elements of
malice and special damages. 4

4

Owen also alleges that Pill’s substitution as trustee is a
nullity under the terms of the deed of trust. (Id. ¶¶ 45-56.)
Owen points out that, according to the terms of the deed of
trust, only the “Lender” is permitted to appoint a substitute
trustee, and that the definition of “Lender” is restricted to
America’s Moneyline rather than extended to, for example, the
successors and assigns of America’s Moneyline. (Id. ¶¶ 47-51
(citing Pl.’s Ex. 1, Deed of Trust Definition (C) and ¶ 27).)
Because America’s Moneyline itself did not appoint Pill, Owen
argues that the appointment is invalid. (Mem. Supp. 8.) The
court notes that, contrary to Owen’s suggestion, the deed of
trust states that “[t]he covenants and agreements of this
Security Instrument shall bind . . . and benefit the successors
and assigns of Lender.” (Pl.’s Ex. 1 ¶ 13.) Thus, even
resolving all legal and factual issues in Owen’s favor, Owen’s
claim that Pill’s substitution was invalid lacks even a “glimmer
of hope” of success.
10

In their response brief, Defendants contend that
“[t]he determination of whether a substitute trustee is a
fraudulently joined or a real party in interest turns on the
actions taken by the trustee and the relief Plaintiff seeks
against the trustee.”

(Resp. Opp’n 4.)

Defendants note that

Pill’s role was “limited to providing the notice of the
trustee’s sale” while the truly actionable conduct is, according
to Defendants, limited to the origination of Owen’s refinancing.
(Id.)
The cases cited by Defendants in support of their
position are, however, distinguishable.

For example, Defendants

cite Monton v. America’s Servicing Co., where the Eastern
District of Virginia concluded that a substitute trustee had
been fraudulently joined because the pleadings “lack[ed] . . .
facts that would support a cause of action against the
Substitute Trustee.”

No. 2:11cv678, 2012 U.S. Dist. LEXIS

117259, at *15 (E.D. Va. Aug. 20, 2012) (emphasis omitted).

In

Monton, the “Plaintiffs never set forth a single act (or
omission) taken by the Substitute Trustee.”

Id. at *16.

Owen,

on the other hand, has established that he has a “glimmer of
hope” of prevailing on his slander of title claim against Pill,
as earlier discussed.

Indeed, the court in Monton concluded

after review of relevant case law that “the status of a

11

substitute trustee hinges on the nature of the actions allegedly
taken by the trustee, if any, and the type of relief sought
against the trustee, if any.”

Id. at *14.

Here, Owen has pled

facts showing the possibility of a right to relief against Pill
for damages under a theory of slander of title.
Owen’s claim for slander of title also precludes Pill
from being a nominal party.

A slander of title claim

contemplates the recovery of special damages.
TXO Prod. Corp., 187 W. Va. 457.

See Syl. Pt. 3,

Accordingly, Pill “has an

interest in the outcome of case” because Owen asserts a claim
against Pill for monetary relief; and, in addition, seeks
injunctive relief against Pill to stop the foreclosure sale that
Pill had advertised, prior to suit, for October 31, 2017,
prompting the filing of this action on October 19, 2017.
Again, the cases cited by Defendants do not compel a
different result.

For example, in Mansfield v. Vanderbilt

Mortgage & Finance, Inc., the Eastern District of North Carolina
determined that the substitute trustee-defendants were nominal
parties to the plaintiff’s claim “to enjoin them from taking any
action adverse to plaintiff's interest in the property.”
Supp. 3d 645, 651 (E.D.N.C. 2014).

29 F.

The court so held because

substitute trustees “hold title to the land described in the
deed of trust for the sole benefit of the real parties in
12

interest to this action, they being [the plaintiff] and [the
defendant-lender].”

Id. (internal quotation marks omitted).

“Tellingly,” however, the court noted that “plaintiff's
complaint includes no factual allegations against the defendant
trustees.”

Id.

In the present action, Owen alleges facts to

support his claim against Pill for slander of title and
injunctive relief.

Namely, Owen alleges that Pill published a

notice of sale when it knew or should have known that the
underlying deed of trust was invalid, (see Compl. ¶¶ 64-65), and
he seeks monetary special damages and injunctive relief as a
result, (see id. ¶ 55).

Pill is consequently not a nominal

party here.
Accordingly, Pill is a proper party to this action and
was not fraudulently joined.

Pill’s West Virginia citizenship

defeats complete diversity, and this action must be remanded to
the Circuit Court of Kanawha County.

B. Fees and Costs

28 U.S.C. § 1447(c) provides that “[a]n order
remanding [a] case may require payment of just costs and any
actual expenses, including attorney fees, incurred as a result
of the removal.”

“Absent unusual circumstances, courts may

award attorney's fees under § 1447(c) only where the removing
13

party lacked an objectively reasonable basis for seeking
removal.

Conversely, when an objectively reasonable basis

exists, fees should be denied.”

Martin v. Franklin Capital

Corp., 546 U.S. 132, 141 (2005).
Owen asserts that Defendants lacked an objectively
reasonably basis for removal.

(See Mem. Supp. 16.)

Inasmuch as

a trustee under a deed of trust such as that in issue here is
often regarded as a nominal party for diversity purposes, it was
not objectively unreasonable for the defendants to seek removal.
Indeed, Owen did not cite any authority conclusively
establishing that a substitute trustee is neither fraudulently
joined nor a nominal party under the circumstances presented
here.

Accordingly, Owen’s request for fees and costs is denied.

IV. Conclusion

Based upon the foregoing, it is ORDERED that Owen’s
motion to remand be, and hereby is, granted.

It is further

ORDERED that Owen’s request for an award of fees and costs be,
and hereby is, denied.

The court will, by companion order

entered contemporaneously herewith, remand this action to the
Circuit Court of Kanawha County.

14

Meeting.
02/22/2016

See L.R. Civ. P. 16.1.

Scheduling conference at 4:30 p.m. at the Robert C.
Byrd United States Courthouse in Charleston, before
the undersigned, unless canceled. Lead counsel
directed to appear.
The Clerk is directed to forward copies of this

02/29/2016
Entry of scheduling all counsel of record, to any
memorandum opinion and order to order.
03/08/2016
Last day to serve F.R. Civ. P 26(a)(1) disclosures.
unrepresented parties, and to the clerk of court for the Circuit
The Clerk is requested to transmit this Order and
Court of Kanawha County.
Notice to all counsel of record and to any unrepresented
parties.

ENTER: April 5, 2018
DATED: January 5, 2016
John T. Copenhaver, Jr.
United States District Judge

15