Improperly Joined Party Allows for More Federal Protection for Foreclosure Mill Locke Lord

Ankus, L.L.C. v. PHH Mortgage Corp.

(4:22-cv-00355)

District Court, S.D. Texas

FEB 2, 2022 | REPUBLISHED BY LIT: FEB 3, 2022

I.

STATE COURT ACTION

1. On January 13, 2022, Plaintiff Ankus, L.L.C (“Plaintiff”), filed its Amended Petition and Application for Temporary Restraining Order and Temporary Injunction (the “Petition”) in the 125th Judicial District Court of Harris County, Texas, in an action styled Ankus, L.L.C. v. PHH Mortgage Corp., Cause No. 2020-DCL-566 (the “State Court Action”).

2. In the State Court Action, Plaintiff seeks damages and injunctive and other relief concerning the real property located at 9510 Gentry Shadows Lane, Houston, Texas 77396 (the “Property”).

Plaintiff seeks a declaratory judgment to declare that it is the owner of the Property and remove any interest of Defendants PHH and USAA Federal Savings Bank (“USAA”) as a cloud on Plaintiff’s title.

3. Defendant PHH was served with a citation and a copy of Plaintiff’s Original Petition on January 3, 2022.

Therefore, this Notice of Removal is timely filed under 28 U.S.C. §§ 1446(b).

4. PHH removes the State Court Action to this Court on the basis of diversity jurisdiction.

II. PROCEDURAL REQUIREMENTS

5. This action is properly removed to this Court, as the lawsuit is pending within the district and division. See 28 U.S.C. § 1441; 28 U.S.C. § 124(b)(4).

6. The United States District Court for the Southern District of Texas, has original jurisdiction over this action based on diversity jurisdiction because Defendant is now, and was at the time this action commenced, diverse in citizenship from Plaintiff, and the amount in controversy exceeds the minimum jurisdictional amount. See 28 U.S.C. § 1332(a).

7. Pursuant to 28 U.S.C. § 1446(a) and Southern District of Texas Local Rule LR81, this Notice of Removal is accompanied by copies of the following materials:

Exhibit A Index of Matters Being Filed

Exhibit B Civil Cover Sheet

Exhibit C List of all counsel of record

Exhibit D Copy of the State Court Civil Docket Sheet

Exhibit E Plaintiff’s Original Petition and Application for Temporary Restraining Order

Exhibit F Clerk’s Certificate of Cash Deposit in Lieu of Injunction Bond

Exhibit G Order Granting TRO, Setting Bond, Setting Hearing

Exhibit H Return of Citation to PHH Mortgage

Exhibit I Plaintiff’s First Amended Petition and Application for Temporary Restraining Order

Exhibit J Return of Service of Citation to Registered Agent

Exhibit K Defendant’s Original Answer

Exhibit L Publically available filings

8. Simultaneously with the filing of this Notice of Removal, PHH is filing a copy of the Notice of Removal in the 125th Judicial District Court of Harris County, Texas, pursuant to 28 U.S.C. § 1446(d).

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— LawsInTexas (@lawsintexasusa) February 10, 2022

III. DIVERSITY JURISDICTION

9. Where there is complete diversity among the parties and the amount in controversy exceeds $75,000, exclusive of interest and costs, an action may be removed to federal court. See 28 U.S.C. §§ 1332(a), 1441(a). Complete diversity exists in this case because the properly joined defendant is not a citizen of the same state as Plaintiff. Additionally, this action involves an amount in controversy that exceeds $75,000, exclusive of interest and costs.

A. THERE IS COMPLETE DIVERSITY AMONG THE PARTIES

10. Plaintiff Ankus, L.L.C. is a limited liability company.

See Petition at 1. Because Plaintiff is a limited liability company, its citizenship, for diversity jurisdiction purposes, is determined by the citizenship of its members.

Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008) (collecting cases).

Based on publicly filed records, David R. Klein (“Klein”), a resident of Texas, is Plaintiff’s sole member.

See Ex. K.

Thus, Plaintiff’s citizenship for diversity jurisdiction is determined by Klein’s citizenship.

11. Defendant PHH is a corporation and is considered to be a citizen both of its state of incorporation and of its principal place of business.

See Lincoln Prop. Co. v. Roche, 546 U.S. 81, 88-89 (2005); see also 28 U.S.C. § 1332(c)(1).

PHH is a New Jersey corporation with its principal place of business in New Jersey. Therefore, PHH is a citizen of New Jersey for diversity purposes.

See id.

12. USAA has also been named as a defendant in this case; however, its citizenship should be disregarded because it was improperly joined. The Fifth Circuit has established that improper joinder exists if there is:

(1) actual fraud in the pleading of jurisdictional facts; or (2) no possibility that the plaintiff would be able to establish a cause of action in state court against the defendant whose citizenship prevents removal.1

Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004); see also Cantor v. Wachovia Mortgage, FSB, 641 F. Supp. 2d 602, 606 (N.D. Tex. 2009); Shields v. Bridgestone/Firestone, Inc., 232 F. Supp. 2d 715, 719 (E.D. Tex. 2002).

A “mere theoretical possibility of recovery under local law” is insufficient and will not preclude a finding of improper joinder.

Smallwood, 385 F.3d at 573 n.9; see also Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 328 (5th Cir. 2002).

13. The Petition fails to assert any claims against USAA or allege any facts or conduct which would give rise to a cause of action against USAA.

(See generally, the Petition).

Nowhere in the Petition does Plaintiff make any allegations against or seek recovery from USAA. In fact, the only specific reference Plaintiff makes to USAA is that USAA is the originating lender, which assigned the deed to PHH.

(Id. at 2).

Plaintiff makes no allegation, moreover, that USAA retains an interest in the subject property, given that purported to have assigned any such interest to PHH.

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— LawsInTexas (@lawsintexasusa) February 10, 2022

See Petition at 2.

The proper defendant in a suit to remove a cloud, however, is not the originating lender, but rather the party who is allegedly clouding the title on the property at issue.

See, e.g., Tarrant Bank v. Miller, 833 S.W.2d 666, 667 (Tex. App.—Eastland 1992, pet. denied)

(“In order to maintain a suit to quiet title, there must be an assertion by the defendant of a claim to some interest adverse to plaintiff’s title; and the claim must be one that, if enforced, would interfere with the plaintiff’s enjoyment of the property”)

(quoting Mauro v. Lavlies, 386 S.W.2d 825 (Tex. Civ. App.—Beaumont 1964, no writ) (emphasis added)); Texan Dev. Co. v. Hodges, 237 S.W.2d 436, 439 (Tex. Civ. App.—Amarillo 1951, no writ)

(“The object of the suit is . . . for the purpose of quieting the plaintiff’s title, and presupposes its validity, but that he is disquieted and his title disturbed by the alleged unconscientious claims and pretensions of the defendants. His purpose is to have those claims judicially declared to be unfounded.”) (emphasis added).

14. Plaintiff does not allege any specific facts or conduct which would give rise to a claim or cause of action against USAA.

Plaintiff does not even raise the “theoretical possibility” that any such claim could be maintained against USAA.2

Accordingly, Plaintiff has not raised a reasonable possibility that any claim—whether a suit to quiet title or otherwise—could be maintained against USAA, and USAA has been improperly joined.

15. Moreover, even if Plaintiff could establish a cause of action against USAA, USAA’s citizenship should be disregarded because it is, at most, a nominal party.

Removal is proper if there is diversity of citizenship among the parties in interest properly joined.

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— LawsInTexas (@lawsintexasusa) February 11, 2022

Sun River Energy, Inc. v. Mirador Consulting Inc., No. 3:11-CV-1132-K, 2011 WL 3703229, at *2 (N.D. Tex. Aug. 19, 2011).

“’Parties in interest’ do not include formal or unnecessary parties, thus a plaintiff’s joinder of such parties . . . cannot prevent the removal of an action to federal court.”

Id.

“Whether a party is ‘nominal’ for removal purposes depends on ‘whether, in the absence of the [defendant], the Court can enter a final judgment consistent with equity and good conscience which would not be in any way unfair or inequitable to the plaintiff.’”

Acosta v. Master Maint. & Constr., Inc., 452 F.3d 373, 379 (5th Cir. 2006) (quoting Tri-Cities Newspapers, Inc. v. Tri-Cities P.P. &
A. Local 349, 427 F.2d 325, 327 (5th Cir. 1970) (alterations in original)).

Here, USAA’s presence as a party is not necessary in order to quiet title to the Property.

The Court will be able to enter a fair and equitable final judgment regarding the title to the Property in the absence of USAA.

See Acosta, 452 F.3d at 379.

Accordingly, USAA is a nominal party.

16. Because Plaintiff and PHH are citizens of different states, and because USAA’s citizenship should be disregarded for the reasons set forth herein, there is complete diversity in this case.

B. AMOUNT IN CONTROVERSY

17. The amount-in-controversy element is also satisfied. Where a defendant can show, by a preponderance of the evidence, that the amount in controversy is greater than the jurisdictional amount, removal is proper.

See White v. FCI U.S.A., Inc., 319 F.3d 672, 675 (5th Cir. 2003); see also St. Paul Reins. Co. v. Greenberg, 134 F.3d 1250, 1253 n.13 (5th Cir. 1998)

(“The test is whether it is more likely than not that the amount of the claim will exceed [the jurisdictional minimum].”).

The defendant can meet its burden if it is apparent from the face of the petition that the claims are likely to exceed $75,000 or, alternatively, if the defendant introduces other evidence to show that the amount in controversy more likely than not exceeds $75,000.

E.g., Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); Greenberg, 134 F.3d at 1253.

“The amount in controversy is determined from the perspective of the plaintiff, and the proper measure is the benefit to the plaintiff, not the cost to the defendant.”

Berry v. Chase Home Fin., LLC, No. C-09-116, 2009 WL 2868224, at *2 (S.D. Tex. Aug. 27, 2009).

To determine the amount in controversy, a court may consider actual damages, exemplary damages, and attorney fees.

White, 319 F.3d at 675–76.

18. “In actions seeking declaratory or injunctive relief, it is well established that the amount in controversy is measured by the value of the object of the litigation.”

Farkas v. GMAC Mortgage, LLC, 737 F.3d 338, 341(5th Cir. 2013) (quoting Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 347 (1977)); Martinez v. BAC Home Loans Servicing, 777 F. Supp. 2d. 1039, 1044 (W.D. Tex. 2010).

Specifically, the Farkas Court held that:

“[i]n actions enjoining a lender from transferring property and preserving an individual’s ownership interest, it is the property itself that is the object of the litigation; the value of that property represents the amount in controversy.” Id.

(citing Garfinkle v. Wells Fargo Bank, 483 F.2d 1074, 1076 (9th Cir. 1973)).

Thus, “[when . . . a right to property is called into question in its entirety, the value of the property controls the amount in controversy.’“

Nationstar Mortgage LLC v. Knox, No. 08-60887, 351 Fed. App’x 844, 848 (5th Cir. 2009) (quoting Waller v. Prof’l Ins. Corp., 296 F.2d 545, 547-48 (5th Cir. 1961)); see also Alsobrook v. GMAC Mortg., L.L.C., 541 Fed. App’x. 340, 342 n.2, (5th Cir. 2013); Copeland v. U.S. Bank Nat’l Ass’n, No. 11-51206, 485 Fed. App’x 8, 9 (5th Cir. 2012)

(relying on the value of the property to satisfy the amount in controversy in exercising diversity jurisdiction over appeal of foreclosure-related claims).

19. Because Plaintiff seeks injunctive relief, the amount in controversy is determined by the value of the Property.

See Knox, 351 Fed. App’x at 848; Turner v. JP Morgan Chase Bank, N.A., No. 3:12-CV-2701-M (BF), 2013 WL 2896883, at *3 (N.D. Tex. June 13, 2013).

Plaintiff alleges that the fair market value of the Property is $200,000.

See Petition at 4.

Thus, the value of the Property satisfies the amount in controversy requirement.

20. Because there is complete diversity among the parties and because the amount in controversy requirement is satisfied, this Court has jurisdiction pursuant to 28 U.S.C. §§ 1332, 1441, and 1446.

Therefore, removal is proper.

IV. CONCLUSION

WHEREFORE, PHH removes this action from the 125th Judicial District Court of Harris County, Texas, to the United States District Court for the Southern District of Texas, so that this Court may assume jurisdiction over the cause as provided by law.

Respectfully submitted,

/s/Camille Griffith

Robert T. Mowrey
State Bar No. 14607500
rmowrey@lockelord.com

Arthur E. Anthony
State Bar No. 24001661
aanthony@lockelord.com

Camille Griffith
State Bar No. 24034761
camille.griffith@lockelord.com

2200 Ross Avenue, Suite 2800
Dallas, Texas 75201-6776
(214) 740-8000
(214) 740-8800 (facsimile)

COUNSEL FOR DEFENDANT