Onewest Bank, N.A. v. Melina

• Decision Date: 29 June 2016
• Docket Number: Docket No. 15-3063,August Term, 2015
• Citation: 827 F.3d 214
• Parties: OneWest Bank, N.A., Plaintiff–Counter–Defendant–Appellee, v. Robert W. Melina, Defendant–Counter–Claimant–Appellant, American Express Centurion Bank, American Express Bank, FSB, Citibank, N.A., William R. Santo, Magaly Bermudez, Louis Bermudez, and Carmen Medina, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

827 F.3d 214

OneWest Bank, N.A., Plaintiff–Counter–Defendant–Appellee

v. Robert W. Melina, Defendant–Counter–Claimant–AppellantAmerican Express Centurion Bank, American Express Bank, FSB, Citibank, N.A., William R. Santo, Magaly Bermudez, Louis Bermudez, and Carmen Medina, Defendants.^*

Docket No. 15-3063

August Term, 2015

United States Court of Appeals, Second Circuit.

Argued: June 13, 2016

Decided: June 29, 2016

Michael Bruk, Law Office of Michael Bruk, New York, NY, for Defendant–Appellant.

Allison J. Schoenthal, Hogan Lovells US LLP, Washington, D.C. (Nicole E. Schiavo, Hogan Lovells US LLP, New York, NY; Chava Brandriss, Sean Marotta, Hogan Lovells US LLP, Washington, D.C., on the brief), for Plaintiff–Appellee.

Before: Newman, Wesley, and Droney, Circuit Judges.

Per Curiam:

Today we join our sister circuits in holding that, for purposes of subject matter jurisdiction, a national bank is a citizen only of the state in which its main office is located.

The facts underlying this case are straightforward. On February 26, 2007, Defendant-Appellant Robert W. Melina (“Melina”) obtained and memorialized in a note (the “Note”) a loan from Wall Street Mortgage Bankers Ltd. for $591,000 in principal. As security for this loan, Melina executed a mortgage on his property at 1245 77th Street in Brooklyn, New York. Wall Street Mortgage Bankers indorsed the Note to the order of IndyMac Bank, F.S.B. (“IndyMac”), and IndyMac later indorsed the Note in blank.

In July 2008, the Office of Thrift Supervision closed IndyMac and appointed the Federal Deposit Insurance Corporation (“FDIC”) as its receiver. That same day, the Office of Thrift Supervision created a new entity, IndyMac Federal Bank, F.S.B. (“IndyMac Federal”), transferred IndyMac's assets to IndyMac Federal, and appointed FDIC as IndyMac Federal's conservator. FDIC later also became IndyMac Federal's receiver.

On March 19, 2009, FDIC as IndyMac Federal's receiver entered into a Loan Sale Agreement (“LSA”) to sell substantially all of IndyMac Federal's assets to Plaintiff–Appellee OneWest Bank, N.A. (“OneWest”). Section 2.05 of the LSA, titled “Closing,” contemplates that transfer of the subject notes “shall” take place at some future time. See App. 76. Section 3.04(b) of the LSA requires that all notes subject to transfer pursuant to the LSA bear a specific form of endorsement.

Around the same time that OneWest acquired Melina's loan, OneWest contracted with Deutsche Bank National Trust Company for Deutsche Bank to serve as document custodian for Melina's original Note and mortgage. In that capacity, Deutsche Bank had physical possession of Melina's original Note and mortgage from 2009 until April 2011, at which point Deutsche Bank sent them to OneWest. OneWest returned Melina's Note and mortgage to Deutsche Bank in May 2011, and Deutsche Bank sent them back to OneWest in June 2014. OneWest then transmitted Melina's original Note and mortgage to its foreclosure counsel at Gross Polowy, LLC, on June 19, 2014.

On August 1, 2009, Melina defaulted on his loan by failing to make the payment due that day. He did not cure the default after receiving notice from OneWest.

On July 21, 2014, CIT Group Inc. entered into a definitive Agreement and Plan of Merger between CIT Group and IMB HoldCo LLC, the parent company of OneWest. CIT Group is a Delaware corporation with its principal place of business located at 11 West 42nd Street, New York, New York. Article V, Section 5.2 of the Agreement and Plan of Merger requires that, during the period between the date of the agreement and the actual closing, OneWest seek CIT Group's written permission prior to undertaking almost two dozen significant corporate decisions. These decisions include opening, closing, or relocating a branch.

On September 10, 2014, OneWest commenced a foreclosure action against Melina in the United States District Court for the Eastern District of New York, invoking the court's diversity jurisdiction. On that day, Melina's original Note and Mortgage were in the physical possession of OneWest's counsel at Gross Polowy. On October 13, 2014, OneWest filed an amended complaint containing substantively the same allegations as the original complaint. On February 3, 2015, Melina filed an answer, and on April 2, 2015, he filed an amended answer. OneWest thereafter moved for summary judgment, and Melina cross-moved to dismiss for lack of subject matter jurisdiction.

On June 18, 2015, the District Court heard oral arguments on the motions. In a memorandum and order dated August 31, 2015, the District Court denied Melina's cross-motion to dismiss and granted OneWest's motion for summary judgment. The District Court held that a national bank such as OneWest is a citizen only of the state in which its main office is located—not also of the state of its principal place of business—and that OneWest's main office is indisputably in California. The District Court concluded further that, even if the principal place of business of a national bank mattered for jurisdictional purposes, OneWest's was California.

The District Court also disagreed with Melina's standing arguments on the basis of its finding that OneWest was the legal “holder” of Melina's Note and entitled to enforce it under the New York Uniform Commercial Code. This finding was based on the affidavits of OneWest's corporate representative and counsel, which established that OneWest was in physical possession of Melina's original Note at the time it commenced its lawsuit. Additionally, the District Court found that OneWest had proven it was entitled to enforce Melina's loan as the loan's assignee.

Melina timely appealed the District Court's memorandum and order and sought review of the District Court's holdings on subject matter jurisdiction and standing.

DISCUSSION¹

Diversity jurisdiction under 28 U.S.C. § 1332

is proper “only if diversity of citizenship among the parties is complete, i.e. , only if there is no plaintiff and no defendant who are citizens of the same State.” Wis. Dep't of Corr. v. Schacht , 524 U.S. 381, 388, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998)

. Diversity is measured as of the time the action is brought, and thus a post-filing change of citizenship does not destroy diversity jurisdiction. See

Wolde–Meskel v. Vocational Instruction Project Cmty. Servs., Inc ., 166 F.3d 59, 62 (2d Cir. 1999).

A corporation's principal place of business under § 1332

is “the place where a corporation's officers direct, control, and coordinate the corporation's activities.” Hertz Corp. v. Friend , 559 U.S. 77, 92–93, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010). In practice, this “should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e. , the ‘nerve center.’–” Id. at 93, 130 S.Ct. 1181.

28 U.S.C. § 1348

provides that national banks shall “be deemed citizens of the States in which they are respectively located.” The Supreme Court has held unequivocally that a national bank is “located,” for diversity jurisdiction purposes, in the state designated in its articles of association as the locus of its main office—not in every state in which it has branch offices. See

Wachovia Bank v. Schmidt , 546 U.S. 303, 307, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006).²

In Wachovia Bank

, the Supreme Court left open the question of whether a national bank is also a citizen of the state of its principal place of business. See

id. at 315 n. 8, 126 S.Ct. 941. The Court did observe, however, that although 28 U.S.C. § 1332 provides that a corporation “shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business,” 28 U.S.C. § 1332(c)(1), “[t]he counterpart provision for national banking associations, § 1348, ... does not refer to ‘principal place of business,’ ” Wachovia Bank , 546 U.S. at 317 n. 9, 126 S.Ct. 941. The Court then dismissed this difference as one “of scant practical significance” because “in almost every case ... the location of a national bank's main office and of its principal place of business coincide.” Id.

Several federal courts of appeals to have considered this issue in the wake of Wachovia Bank

have held that a national bank is a citizen only of the state listed in its articles of association as its main office. See, e.g.,

Rouse v. Wachovia Mortg., FSB , 747 F.3d 707, 708 (9th Cir. 2014) (“Looking to the Supreme Court's treatment of the issue and to the history and sequence of the enactment and amendment of the statute, we conclude that, under § 1348, a national bank is ‘located’ only in the state designated as its main office.”); Wells Fargo Bank, N.A. v. WMR e

–

PIN, LLC , 653 F.3d 702, 706–10 (8th Cir. 2011) (analyzing Wachovia Bank and § 1348's statutory history to “reject [the] claim that Wells Fargo is a citizen of both South Dakota and California”).³ Even the Fifth and Seventh Circuits, which had held prior to Wachovia Bank

that a national bank's principal place of business is an independent basis for its citizenship, have now agreed that a national bank's citizenship is to be determined with reference to its main office. See, e.g.,

Tu Nguyen v. Bank of Am., N.A. , 516 Fed.Appx. 332, 334 n. 1 (5th Cir. 2013) (“A national bank may be considered a citizen of ‘the State designated in its articles of association as its main office.’ ” (quoting Wachovia Bank , 546 U.S. at 318, 126 S.Ct. 941 )); Hicklin Eng'g, L.C. v. Bartell , 439 F.3d 346, 348 (7th Cir. 2006) (“Wachovia Bank held that national banks are citizens only of the states in which their main offices are located, and that decision saves this case from a jurisdictional dismissal.”).

We agree with our sister circuits that a national bank is a citizen only of the state listed in its articles of association as its main office. Though Wachovia Bank

did not conclusively resolve whether a national bank is...