Firstbank Puerto Rico v. Gittens

• Decision Date: 03 November 2006
• Docket Number: Civil No. 2005–53.
• Citation: 48 V.I. 564
• Parties: FIRSTBANK PUERTO RICO, Plaintiff, v. Samuel GITTENS and Joy C.A. Gittens a/k/a Joy Gittens, Defendants/Third-party Plaintiffs, v. The Chase Manhattan Bank, JPMorgan Chase Bank, successor by Merger to the Chase Manhattan Bank, and Chase Manhattan Bank Mortgage Corporation, Third-party Defendants.
• Court: U.S. District Court — Virgin Islands

48 V.I. 564

FIRSTBANK PUERTO RICO, Plaintiff,

v.Samuel GITTENS and Joy C.A. Gittens a/k/a Joy Gittens, Defendants/Third-party Plaintiffs,

v.The Chase Manhattan Bank, JPMorgan Chase Bank, successor by Merger to the Chase Manhattan Bank, and Chase Manhattan Bank Mortgage Corporation, Third-party Defendants.

Civil No. 2005–53.

District Court of the Virgin Islands, Division of St. Croix.

Nov. 3, 2006.

OPINION TEXT STARTS HERE

Bruce Bennett, Esq., for the plaintiff.

Mark Milligan, Esq., for the defendants/third-party plaintiffs.

Carol Rich, Esq., for the third-party defendants.

MEMORANDUM OPINION

GOMEZ, Chief Judge.

Before the Court is FirstBank of Puerto Rico's (“FirstBank”) motion for the enforcement of a judgment of the Superior Court of the Virgin Islands.¹

I. Facts

This matter was initiated by FirstBank against defendants Samuel and Joy Gittens (the “Gittens”) in the Superior Court on May 24, 2004. The Gittens allegedly executed a note (hereinafter the “Note”) pursuant to which they promised to repay the principal amount of $158,100 to Chase Manhattan Bank, JP Morgan Chase Bank (successor to the Chase Manhattan Bank Mortgage Corporation), and Chase Manhattan Bank Mortgage Corporation (collectively the “Chase Defendants”).² The Note was secured with a mortgage, executed and delivered by the Gittens to the Chase Defendants.

FirstBank is now the holder of the Note. FirstBank alleged in its complaint that the Gittens failed to make the payments and are in default on the Note. FirstBank requested the following in a judgment: (a) judgment against the Gittens for all unpaid payments plus interest, (b) recognition of FirstBank's mortgage as a first priority mortgage, (c) a personal judgment against the Gittens, (d) possession of the property to FirstBank, (e) appointment of a receiver, (f) award of reasonable costs and fees to FirstBank, and (g) any other just and proper relief. The Gittens filed a counterclaim against FirstBank for breach of fiduciary duty and damages under the Restatement of Contracts and the Restatement of Torts.

On June 17, 2004, the Gittens filed a third-party complaint against the Chase Defendants. The Gittens filed an amended third-party complaint against the Chase Defendants on February 16, 2005. In the amended third-party complaint, the Gittens assert claims under the Real Estate Settlement Procedures Act (“RESPA”), 26 U.S.C. § 2601, et seq., the Restatement (Second) Contracts, and the Restatement of Torts.

Specifically, the amended third-party complaint alleges that the Gittens deposited a Veteran Administration Guarantee Fee of $3,162 into an escrow account of the Chase Defendants “for the express[ ] purpose of procuring a Veteran Administration Loan Guaranty.” The Chase Defendants then allegedly paid the money to the Department of Veteran Administration (“VA”). Yet, in a November 19, 2001, letter, the VA notified the Chase Defendants that the VA loan guarantee application had been cancelled. The letter stated that the closing of the mortgage loan between the Chase Defendants and the Gittens was done “in violation of the requirements as stated in the VA Lender's Manual ¶ 3” and the loan amount exceeded the maximum allowed by $3,812. The amended third-party complaint alleges this led to the VA's failure to issue a Certificate of Guaranty. The information in the November 19, 2001, letter was not communicated to the Gittens. The Gittens did not become aware that the Chase Defendants had failed to secure the VA loan guaranty until the commencement of the foreclosure by FirstBank. In the amended third-party complaint, the Gittens allege the Chase Defendants breached their fiduciary duty by failing to procure the VA Loan Guaranty. Additionally, the amended third-party complaint states causes of action for detrimental reliance, negligence, accounting, and damages.

FirstBank moved for summary judgment on the primary claims and on the Gittens' counterclaim. The Gittens filed a cross-motion for summary judgment.

On March 3, 2005, the Superior Court granted summary judgment in favor of FirstBank on the primary claims for debt and foreclosure. FirstBank was awarded judgment against the Gittens in the principal amount of $166,598.97, as of October 1, 2004, plus per diem interest of $33.19 from October 1, 2004, until the date of entry of judgment. Additionally, FirstBank received any and all amounts it may expend to protect the subject property plus attorneys fees and costs. The judgment also ordered that the property be sold in a public sale by the Territorial Marshal.

Regarding the Gittens' counterclaim, the March 3, 2005, judgment denied FirstBank's motion for summary judgment and denied the Gittens' cross-motion for summary judgment.

On April 19, 2005, the Chase Defendants removed this case from the Superior Court to this Court. The notice of removal indicates it was removed pursuant to title 28, section 1441(b) of the United States Code.

FirstBank filed a Praecipe for Issuance of Writ of Execution in this Court on July 12, 2005. On August 24, 2005, FirstBank filed a motion asking this Court “to recognize the March 3, 2005, Superior Court judgment and to issue an order directing the U.S. Marshal to execute the judgment by attaching the real property subject thereto and disposing of it in accordance with the terms of the March 3, 2005 judgment.”

On September 12, 2005, the Gittens filed a motion to modify the foreclosure judgment entered by the Superior Court. The Gittens want the order modified to allow for a stay of the execution of the March 3, 2005, judgment until all substantive issues are resolved.

II. Discussion

Because FirstBank and Gittens are not diverse, and FirstBank's claim against Gittens contains no federal question, FirstBank could not have sued originally in federal court. As such, to the extent removal was defective, this Court may be deprived of jurisdiction. Korea Exchange Bank v. Trackwise Sales Corp., 66 F.3d 46, 50 (3d Cir.1995) (“We conclude therefore that an irregularity in removal of a case to federal court is to be considered ‘jurisdictional’ only if the case could not initially have been filed in federal court.”). Accordingly, this Court must determine whether it has jurisdiction. Meritcare Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214, 217 (3d Cir.1999) (“A federal court has the obligation to address a question of subject matter jurisdiction sua sponte.”). Title 28, section 1441(a) of the United States Code provides the general circumstances under which a case may be removed from state to federal court:

Except as otherwise expressly provided by Act of Congress, 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 district court of the United States for the district and division embracing the place where such action is pending.

28 U.S.C. § 1441(a). Title 28, section 1441(c) of the United States Code permits the defendant to remove the entire case when a federal claim is included in an otherwise nonremovable cause of action:

Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.

28 U.S.C. § 1441(c).

While the amended third-party complaint alleges a claim involving a federal question against the Chase Defendants, the Circuits are split on whether section 1441(c) permits removal by a third-party defendant. Compare Lewis v. Windsor Door Co., 926 F.2d 729, 733 (8th Cir.1991) (“We do not ... believe § 1441(c) was intended to effect removal of a suit, not otherwise within federal jurisdiction, because of the introduction of a third-party claim.” (internal quotations omitted)) and First Nat'l Bank of Pulaski v. Curry, 301 F.3d 456, 465 (6th Cir.2002) (holding that removal under section 1441(c) may only be done by the original defendant) with Carl Heck Eng'rs, Inc. v. Lafourche Parish Police Jury, 622 F.2d 133, 136 (5th Cir.1980) (“If the third party complaint states a separate and independent claim which if sued upon alone could have been properly brought in federal court, there should be no bar to removal.”); see also Roxbury Condominium Ass'n, Inc. v. Anthony S. Cupo Agency, 316 F.3d 224, 228 (3d Cir.2003) (giving examples of courts that disagree on whether third-party defendants may properly remove a case); Thomas v. Shelton, 740 F.2d 478, 487–88 (7th Cir.1984) (“Although satisfied that in the broad run of third-party cases, including this one, the third-party defendant cannot remove the case under section 1441(c), we hesitate to adopt a universal and absolute rule to that effect....”); Ford Motor Credit Co. v. Aaron–Lincoln Mercury, Inc., 563 F.Supp. 1108, 1111 (N.D.Ill.1983) (listing cases that demonstrate the split); 32A Am.Jur.2d Fed. Cts. § 1644 (“The cases are ‘hopelessly divided’ on whether and under what circumstances a third-party defendant may remove to a federal court.”); Deborah Pearce Reggio, Removal and Remand: A Guide to Navigating Between the State and Federal Courts, 23 Miss. C.L. Rev. 97, 130 (2004) (examining who may remove a case from state to federal court and noting the split); Heather R. Barber, Developments in the Law: Federal Jurisdiction and Forum Selection: Removal and Remand, 37 Loy. L.A. L. RevV. 1555, 1568 n. 96 (2004) (listing cases that demonstrate the split); Michael Massengale, Riotous Uncertainty: A Quarrel with the “Commentators' Rule” Against Section 1441(c) Removal for Counterclaim, Cross-claim, and Third–Party Defendants, 75 Tex. L.Rev. 659, 667–76 (1997) (surveying the split case law).

The majority of the Courts of Appeals that have ruled on this issue have held that third-party defendants may not remove a...