Knuckles v. Rbmg, Inc.

• Decision Date: 27 March 2007
• Docket Number: Civil Action No.: 2:03-2414.
• Court: U.S. District Court — Southern District of West Virginia
• Parties: Mack C. KNUCKLES and Pamela K. Knuckles, Plaintiffs v. RBMG, INC., a corporation, Global Mortgage Group, Inc., a corporation, Mortgage Portfolio Services, Inc., a corporation, William Whitehair, and Federal National Mortgage Association, Defendants.

Page 559

481 F.Supp.2d 559

Mack C. KNUCKLES and Pamela K. Knuckles, Plaintiffs v. RBMG, INC., a corporation, Global Mortgage Group, Inc., a corporation, Mortgage Portfolio Services, Inc., a corporation, William Whitehair, and Federal National Mortgage Association, Defendants.

Civil Action No.: 2:03-2414.

United States District Court, S.D. West Virginia, at Charleston.

March 27, 2007.

Bren J. Pomponio, Daniel F. Hedges, Heather E.W. Walsh, Mountain State Justice, Inc., Charleston, WV, for Plaintiff.

Mark G. Schroeder, Briggs & Morgan, St. Paul, MN, O. Gay Elmore, Jr., Elmore & Elmore, William W. Booker, Kay Casto & Chaney, Nicholas P. Mooney, II, R. Terrance Rodgers, Allen, Guthrie, McHugh & Thomas, Charleston, WV, Donald B. Verrilli, Jr., Ian Gershengorn, J. Alex Ward, Scott B. Wilkens, Jenner & Block, Gary C. Tepper, Kristine J. Dunne, Arent Fox Kintner Plotkin & Kahn, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER

COPENHAVEN, District Judge.

Pending before the court is plaintiffs' motion, filed January 8, 2004, seeking to remand the above-captioned civil action to the Circuit Court of Kanawha County, West Virginia.

I.

According to the allegations of their complaint, the plaintiffs were solicited by a real estate agent, Joe Lannen, in June or July 2000 concerning the potential purchase by them of residential real estate located in Mercer County, West Virginia. Compl. at ¶ 8. The real estate was represented to have a value of $75,000 and the plaintiffs were directed by Lannen to defendant Global Mortgage Group, Inc. ("Global Mortgage"), for financing. Id at ¶¶ 8-9.

Defendant William Whitehair, a licensed real estate appraiser, was sent by Global Mortgage to conduct an appraisal of the real estate. Id. at ¶ 10(a). His appraisal valued it at $75,000. Id. at ¶ 10(b). The plaintiffs apparently decided to purchase the real estate and Global Mortgage arranged two loans through defendant Mortgage Portfolio Services, Inc., evidenced by notes dated August 8, 2000, in the amounts of $60,000 and $11,250 respectively and secured by deeds of trust on the real estate.¹ Id. at ¶¶ 11-12. The transaction was consummated and the larger loan was subsequently purchased by the defendant Federal National Mortgage Association ("Fannie Mae"). See fn. 1.

A subsequent appraisal conducted by an "honest appraiser," presumably hired by the plaintiffs or their counsel, in February 2002 valued the real estate at $44,500. Compl. at ¶ 13(a); Pls.' Mot. to Rem. at 2. Plaintiffs defaulted on the larger loan and foreclosure proceedings were initiated through a notice of sale by substitute trustee Richard A. Pill, at which sale, held on August 28, 2003, the real estate was purchased by RBMG, Inc., for the sum of $76,425.74. Pls.' Mot. Remand at Ex. B.

On September 26, 2003, Fannie Mae initiated an eviction action against the plaintiffs in the magistrate court of Mercer County, West Virginia. Id. at Ex. A. Rather than seek to remove the magistrate court matter to the Circuit Court of Mercer County and file a counterclaim as was their right under W. Va.Code § 50-4-8, plaintiffs commenced this action, on November 3, 2003, against all of the defendants listed in the style of this case, and the State of West Virginia ex rel. West Virginia Real Estate Licensing and Certification Board ("Appraisal Board"), in the Circuit Court of Kanawha County, West Virginia.² Plaintiffs also filed a Notice of Lis Pendens with the County Clerk of Mercer County. Id. at Ex. C.

With respect to Fannie Mae, plaintiffs allege that it was the "underwriter" and "true lender" in the transaction. Compl. at ¶ 4(b). Plaintiffs accuse the defendants of violations of the West Virginia Consumer Credit and Protection Act, W. Va.Code § 46A-1-101, et seq., breaches of fiduciary duty, conspiracy and fraud. Plaintiffs, in addition to compensatory damages, punitive damages and statutory penalties, seek injunctive relief purporting to modify or cancel the obligation as well as enjoining the defendants from continuing certain lending practices in the State of West Virginia.

On November 17, 2003, Fannie Mae was served with a copy of the complaint and summons. Not. of Removal at ¶ 3. On December 4, 2003, Fannie Mae removed on the grounds that its federal charter, found at 12 U.S.C. § 1723a(a), confers original jurisdiction upon this court to hear the action. Fannie Mae also contends that it is entitled to remove this action under the federal officer removal statute, 28 U.S.C. § 1442(a)(1). Id. at ¶ 4. In addition to the notice of removal, written consents to the removal executed by the remaining defendants who had been served, including the Appraisal Board, were filed. Id. at ¶ 14.

On January 8, 2004, the plaintiffs filed a motion to remand. Plaintiffs contend, among other things, that Fannie Mae's charter does not confer federal jurisdiction and that Fannie Mae is not acting as a federal instrumentality so as to confer jurisdiction under the federal officer removal statute. In Fannie Mae's response it further elaborates on its position that both its charter and the federal officer removal statute permit the court to exercise jurisdiction over this action.

II.

Removal statutes must be construed in light of the federalism concerns that animate the policy of strictly confining federal jurisdiction within the congressionally-set limits. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). "The policy of the statute calls for its strict construction." Healy v. Ratta, 292 U.S. 263, 270, 54 S.Ct. 700, 78 L.Ed. 1248 (1934). A case must be remanded if federal jurisdiction is doubtful. Mulcahey v. Columbia Organic Chew. Co., 29 F.3d 148, 151 (4th Cir. 1994); see also Able v. Upjohn Co., 829 F.2d 1330, 1332 (4th Cir.1987), cert. denied, 485 U.S. 963, 108 S.Ct. 1229, 99 L.Ed.2d 429 (1988) (stating that "congressional desire to restrict removal has been understood to require that doubts about the propriety of removal be resolved in favor of retained state court jurisdiction").

III.

1. Fannie Mae's Charter

Fannie Mae contends that federal jurisdiction is proper pursuant to its charter and American National Red Cross v. S.G., 505 U.S. 247, 112 S.Ct. 2465, 120 L.Ed.2d 201 (1992).

In Red Cross, the United States Supreme Court addressed the issue of whether the charter of the American National Red Cross conferred both the capacity to sue in federal courts and also jurisdiction upon the federal courts. The relevant portion of the Red Cross charter, which was amended in 1947, provides that "The American National Red Cross ... shall have ... the power to sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States." Id. at 251, 112 S.Ct. 2465 (citations omitted).

Examining its previous decisions concerning the jurisdictional scope of a federal charter, the Court stated that:

These cases support the rule that a congressional charter's `sue and be sued' provision may be read to confer federal court jurisdiction if, but only if, it specifically mentions the federal courts.

Id. at 255, 112 S.Ct. 2465 (citations omitted). The Court ultimately held that the language contained in the Red Cross charter conferred original federal jurisdiction inasmuch as it "expressly authoriz[ed] the organization to sue and be sued in federal courts." Id. at 257, 112 S.Ct. 2465. In so holding, the Court gave weight to the fact that five years prior to the amendment of the Red Cross charter in 1947, the Court found language that was substantively identical to that in the amended Red Cross charter sufficient to confer federal jurisdiction, suggesting that Congress relied upon this holding when drafting the amendment of the Red Cross charter. Id. (referring to D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942)).

Fannie Mae insists that because its charter, like the Red Cross charter, mentions the federal courts this alone "is sufficient to demonstrate Congress' intent to confer original jurisdiction." This is a misreading of Red Cross. As the Supreme Court made clear, a charter which mentions the federal courts "may" be read to confer federal court jurisdiction. Accordingly, Red Cross does not compel the conclusion that Fannie Mae's charter confers federal court jurisdiction; rather, it simply acknowledges that Fannie Mae's charter could possibly be read to confer federal jurisdiction insofar as the charter mentions federal courts. The court is thus required to interpret the other language in Fannie Mae's charter to determine whether it can be read to confer federal jurisdiction.

The court first observes that the "sue and be sued" provision found in Fannie Mae's charter is not identical to the "sue and be sued" provision found in the Red Cross charter. The differences between the two are not merely semantic, but have jurisdictional effect. More specifically, the Red Cross charter provides that the Red Cross could "sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States;" however, Fannie Mae's charter permits it "to sue or be sued, and to complain or defend, in any court of competent jurisdiction, State or Federal." (citations omitted) (emphasis supplied). Under the canons of statutory construction each word in a statute should be given effect and linguistic superfluity avoided. Scheidler v. Nat'l Org. for Women, Inc., 547 U.S. 9, 126 S.Ct. 1264, 164 L.Ed.2d 10 (2006). Accordingly, the phrase "any court of competent jurisdiction, State or Federal," found in Fannie Mae's charter, but not in the charter of the Red Cross, must be given effect. For the phrase "any court of competent jurisdiction" to have any meaning it should be read as differentiating between state and federal courts that possess "competent" jurisdiction, i.e., an independent basis for jurisdiction, from those that do not. To conclude, as Fannie Mae suggests, that its...