Filed: Apr. 02, 2012
Latest Update: Apr. 02, 2012
Summary: OPINION AND ORDER MYRON H. THOMPSON, District Judge. Plaintiff Nancy O. Robertson ("Robertson"), acting in her official capacity as probate judge of Barbour County, Alabama, and on behalf of all probate judges in the State, brought suit in state court against defendants MERSCORP, Inc. ("MERSCORP"), and Mortgage Electronic Registration Systems, Inc. ("MERS"), claiming that the defendants failed to record certain assignments of interests in mortgages. Pursuant to 28 U.S.C. 1332, 1441, and 14
Summary: OPINION AND ORDER MYRON H. THOMPSON, District Judge. Plaintiff Nancy O. Robertson ("Robertson"), acting in her official capacity as probate judge of Barbour County, Alabama, and on behalf of all probate judges in the State, brought suit in state court against defendants MERSCORP, Inc. ("MERSCORP"), and Mortgage Electronic Registration Systems, Inc. ("MERS"), claiming that the defendants failed to record certain assignments of interests in mortgages. Pursuant to 28 U.S.C. 1332, 1441, and 144..
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OPINION AND ORDER
MYRON H. THOMPSON, District Judge.
Plaintiff Nancy O. Robertson ("Robertson"), acting in her official capacity as probate judge of Barbour County, Alabama, and on behalf of all probate judges in the State, brought suit in state court against defendants MERSCORP, Inc. ("MERSCORP"), and Mortgage Electronic Registration Systems, Inc. ("MERS"), claiming that the defendants failed to record certain assignments of interests in mortgages. Pursuant to 28 U.S.C. §§ 1332, 1441, and 1446, the defendants removed this case to federal court on a diversity-of-citizenship ground. Robertson moves to remand to state court because the defendants have failed to satisfy their burden of demonstrating that the $75,000 amount-in-controversy requirement for diversity jurisdiction has been met in this case. For the reasons that follow, Robertson's remand motion will be granted.
I. STANDARD FOR REMAND
Where, as here, a defendant seeks to remove a case on a diversity-jurisdiction ground and the damages have not been specified by the plaintiff, the removing defendant "must prove by a preponderance of the evidence that the amount in controversy exceeds the $75,000 jurisdictional requirement." Leonard v. Enterprise Rent A Car, 279 F.3d 967, 972 (11th Cir. 2002). "A removing defendant bears the burden of proving proper federal jurisdiction." Id. The court may not "speculate in an attempt to make up for the notice's failings." Lowery v. Alabama Power Co., 483 F.3d 1184, 1215 (11th Cir. 2007).
II. BACKGROUND
The defendants operate the MERS system, which is a digital marketplace for mortgages and mortgage-backed securities. As the Ninth Circuit Court of Appeals succinctly explained:
"MERS is a private electronic database, operated by MERSCORP, Inc., that tracks the transfer of the `beneficial interest' in home loans, as well as any changes in loan servicers. After a borrower takes out a home loan, the original lender may sell all or a portion of its beneficial interest in the loan and change loan servicers. The owner of the beneficial interest is entitled to repayment of the loan. For simplicity, we will refer to the owner of the beneficial interest as the `lender.' The servicer of the loan collects payments from the borrower, sends payments to the lender, and handles administrative aspects of the loan. Many of the companies that participate in the mortgage industry—by originating loans, buying or investing in the beneficial interest in loans, or servicing loans—are members of MERS and pay a fee to use the tracking system.
"When a borrower takes out a home loan, the borrower executes two documents in favor of the lender: (1) a promissory note to repay the loan, and (2) a deed of trust, or mortgage, that transfers legal title in the property as collateral to secure the loan in the event of default. State laws require the lender to record the deed in the county in which the property is located. Any subsequent sale or assignment of the deed must be recorded in the county records, as well.
"This recording process became cumbersome to the mortgage industry, particularly as the trading of loans increased. It has become common for original lenders to bundle the beneficial interest in individual loans and sell them to investors as mortgage-backed securities, which may themselves be traded. MERS was designed to avoid the need to record multiple transfers of the deed by serving as the nominal record holder of the deed on behalf of the original lender and any subsequent lender.
"At the origination of the loan, MERS is designated in the deed of trust as a nominee for the lender and the lender's `successors and assigns,' and as the deed's `beneficiary' which holds legal title to the security interest conveyed. If the lender sells or assigns the beneficial interest in the loan to another MERS member, the change is recorded only in the MERS database, not in county records, because MERS continues to hold the deed on the new lender's behalf. If the beneficial interest in the loan is sold to a non-MERS member, the transfer of the deed from MERS to the new lender is recorded in county records and the loan is no longer tracked in the MERS system."
Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1038-39 (9th Cir. 2011) (internal citations omitted).
In her role as probate judge of Barbour County, Robertson is responsible for compiling and maintaining an accurate index of grantors and grantees of interests in real estate. Robertson also collects fees for the assignment and recording of mortgages.
Robertson alleges that the MERS system illegally circumvents Alabama's recording statutes for interests in real estate. Robertson seeks an accurate accounting and index of all transfers in real estate involving the MERS system for the past ten years, an injunction ordering the defendants to comply with Alabama's recording statutes, and reimbursement for any fees that should have been paid.
III. DISCUSSION
The defendants posit two theories of potential liability that they believe push the amount-in-controversy above the $75,000 threshold. They are uncertain which theory Robertson intends to pursue in this litigation, but base these theories on a reading of the complaint. As the defendants have the burden of establishing this court's jurisdiction, the court focuses on these two theories to ascertain whether removal jurisdiction is proper.
First, the defendants put forward a Note Transfer Theory: any sale or transfer of notes constitutes an assignment of mortgages that must be recorded under Alabama law. According to the defendants, approximately 3,475 mortgages naming MERS as mortgagee of record were recorded in Barbour County for the past ten years, the relevant time period in Robertson's complaint. The defendants argue that these mortgages were transferred at least 2,693 times. The Barbour County Probate Court charges a $16.50 fee to record the first page of an assignment and $2.50 for each additional page. Assuming that each assignment is one page, the defendants would owe $44,434.50 in recording fees for the past ten years.
Acknowledging that this figure falls short of the jurisdictional threshold, the defendants extrapolate the cost of recording fees ten years into the future. They presume that the number of note transfers would be the same, thereby reaching an amount-in-controversy of $88,869.
This methodology, however, ignores that the past ten years witnessed an unprecedented housing boom followed by the worst recession since the 1930s. It is simply unrealistic to assume that the number of note transfers in the next ten years would mirror the past decade. The defendants have put forward no evidence to back up their assumption about a constant rate of note transfers over the next ten years. This court cannot speculate as to future-note-transfer rates. Lowery, 483 F.3d at 1215 ("The absence of factual allegations pertinent to the existence of jurisdiction is dispositive and, in such absence, the existence of jurisdiction should not be divined by looking to the stars."). Because the Note Transfer Theory cannot surmount the amount-in-controversy requirement without resort to hypothetical future costs, the defendants have failed to meet their burden.
The defendants' alternative theory of liability is the False Mortgage Theory: the listing of MERS as the mortgagee of record is a false designation and concealment. Under this theory, MERS would have to re-record approximately 3,475 mortgages in Barbour County to update the mortgagee of record. According to the defendants, a standard mortgage is 15 pages long and the Barbour County Probate Court charges $16.50 for the first page and $2.50 for each additional page. The total cost to re-record these mortgages would be approximately $178,962.50.
While this figure is above the amount-in-controversy threshold, Robertson expressly disavows any reliance on the False Mortgage Theory. Rather, Robertson claims that the "mortgage, as recorded, does not conceal the real parties in interest." Robertson's Reply Brief (Doc. No. 18) at 9. Robertson's complaint concerns actions taken after the mortgage is recorded, "when the security interest is bought and sold under cover of the Defendants' operation." Id. Robertson seeks an accounting of the interests in real estate, not an invalidation and re-recording of mortgages. Given Robertson's representations to this court, the defendants would not be liable for $178,962.50 under the False Mortgage Theory.
Finally, in their notice of removal, the defendants comment that the costs incurred by them to provide an accurate index would be substantial. They provide no monetary estimate of these costs, however. But even if the defendants were to calculate this figure, "the costs borne by the defendant in complying with the injunction are irrelevant" because "the value of an injunction for amount in controversy purposes must be measured by what the plaintiff stands to gain." Morrison v. Allstate Indemnity Co., 228 F.3d 1255, 1268 n.9 (11th Cir. 2000).
To the extent that there is any uncertainty as to the theory of liability in this litigation, "uncertainties are resolved in favor of remand." Burns v. Windsor Insurance Co., 31 F.3d 1092, 1095 (11th Cir. 1994). The defendants, therefore, have failed to satisfy their burden of establishing the amount in controversy.
* * *
Accordingly, it is the ORDER, JUDGMENT, and DECREE of the court that plaintiff Nancy O. Robertson's motion to remand (Doc. No. 12) is granted and that, pursuant to 28 U.S.C. § 1447(c), this case is remanded to the Circuit Court of Barbour County, Alabama for want of jurisdiction.
It is further ORDERED that all other pending motions are left for resolution by the state court after remand.
The clerk of the court is DIRECTED to take appropriate steps to effect the remand.
This case is closed.
CIVIL APPEALS JURISDICTION CHECKLIST
1. Appealable Orders: Courts of Appeals have jurisdiction conferred and strictly limited by statute:
(a) Appeals from final orders pursuant to 28 U.S.C. § 1291: Only final orders and judgments of district courts, or final orders of bankruptcy courts which have been appealed to and fully resolved by a district court under 28 U.S.C.§ 158, generally are appealable. A final decision is one that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Pitney Bowes, Inc. v. Mestre, 701 F.2d 1 365, 1 368 ( 11th Cir. 1 983). A magistrate judge's report and recommendation is not final and appealable until judgment thereon is entered by a district court judge. 28 U.S.C. § 636(c).
(b) In cases involving multiple parties or multiple claims, a judgment as to fewer than all parties or all claims is not a final, appealable decision unless the district court has certified the judgment for immediate review under Fed.R.Civ.P. 54(b). Williams v. Bishop, 732 F.2d 885, 885-86 (11th Cir. 1984). A judg ment which resolves all issues except matters, such as attorneys' fees and costs, that are collateral to the merits, is immediately appealable. Budinich v. Becton Dickinson & Co., 486 U.S.196, 201, 108 S.Ct. 1717, 1721-22, 100 L.Ed.2d 178 (1988); LaChance v. Duffy's Draft House, Inc., 146 F.3d 832, 837 (11th Cir. 1998).
(c) Appeals pursuant to 28 U.S.C. § 1292(a): Appeals are permitted from orders "granting, continuing, modifying, refusing or dissolving injunctions or refusing to dissolve or modify injunctions . . ." and from "[i]nterlocutory decrees . . . determining the rights and liabilities of parties to admiralty cases in which appeals from final decrees are allowed." Interlocutory appeals from orders denying temporary restraining orders are not permitted.
(d) Appeals pursuant to 28 U.S.C. § 1292(b) and Fed.R.App.P. 5: The certification specified in 28 U.S.C. § 1292(b) must be obtained before a petition for permission to appeal is filed in the Court of Appeals. The district court's denial of a motion for certification is not itself appealable.
(e) Appeals pursuant to judicially created exceptions to the finality rule: Limited exceptions are discussed in cases including, but not limited to: Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949); Atlantic Fed. Sav. & Loan Ass'n v. Blythe Eastman Paine Webber, Inc., 890 F.2d 371, 376 (11th Cir. 1989); Gillespie v. United States Steel Corp., 379 U.S. 148, 157, 85 S.Ct. 308, 312, 13 L.Ed.2d 199 (1964).
2. Time for Filing: The timely filing of a notice of appeal is mandatory and jurisdictional. Rinaldo v. Corbett, 256 F.3d 1276, 1278 (11th Cir. 2001). In civil cases, Fed.R.App.P. 4(a) and (c) set the following time limits:
(a) Fed.R.App.P. 4(a)(1): A notice of appeal in compliance with the requirements set forth in Fed.R.App.P. 3 must be filed in the district court within 30 days after the entry of the order or judgment appealed from. However, if the United States or an officer or agency thereof is a party, the notice of appeal must be filed in the district court within 60 days after such entry. THE NOTICE MUST BE RECEIVED AND FILED IN THE DISTRICT COURT NO LATER THAN THE LAST DAY OF THE APPEAL PERIOD — no additional days are provided for mailing. Special filing provisions for inmates are discussed below.
(b) Fed.R.App.P. 4(a)(3): "If one party timely files a notice of appeal, any other party may file a notice of appeal within 14 days after the date when the first notice was filed, or within the time otherwise prescribed by this Rule 4(a), whichever period ends later."
(c) Fed.R.App.P. 4(a)(4): If any party makes a timely motion in the district court under the Federal Rules of Civil Procedure of a type specified in this rule, the time for appeal for all parties runs from the date of entry of the order disposing of the last such timely filed motion.
(d) Fed.R.App.P. 4(a)(5) and 4(a)(6): Under certain limited circumstances, the district court may extend the time to file a notice of appeal. Under Rule 4(a)(5), the time may be extended if a motion for an extension is filed within 30 days after expiration of the time otherwise provided to file a notice of appeal, upon a showing of excusable neglect or good cause. Under Rule 4(a)(6), the time may be extended if the district court finds upon motion that a party did not timely receive notice of the entry of the judgment or order, and that no party would be prejudiced by an extension.
(e) Fed.R.App.P. 4(c): If an inmate confined to an institution files a notice of appeal in either a civil case or a criminal case, the notice of appeal is timely if it is deposited in the institution's internal mail system on or before the last day for filing. Timely filing may be shown by a declaration in compliance with 28 U.S.C. § 1746 or a notarized statement, either of which must set forth the date of deposit and state that first-class postage has been prepaid.
3. Format of the notice of appeal: Form 1, Appendix of Forms to the Federal Rules of Appellate Procedure, is a suitable format. See also Fed.R.App.P. 3(c). A pro se notice of appeal must be signed by the appellant.
4. Effect of a notice of appeal: A district court loses jurisdiction (authority) to act after the filing of a timely notice of appeal, except for actions in aid of appellate jurisdiction or to rule on a timely motion of the type specified in Fed.R.App.P. 4(a)(4).
