Seitz v. Fed. Nat'l Mortg. Ass'n

• Decision Date: 14 November 2012
• Docket Number: Civil Action No. 3:12cv633.
• Citation: 909 F.Supp.2d 490
• Court: U.S. District Court — Eastern District of Virginia
• Parties: George H. SEITZ, Plaintiff, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al., Defendants.

909 F.Supp.2d 490

George H. SEITZ, Plaintiff,

v.FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al., Defendants.

Civil Action No. 3:12cv633.

United States District Court,

E.D. Virginia,

Richmond Division.

Nov. 14, 2012.

Henry W. McLaughlin, III, Drew David Sarrett, The Law Office of Henry McLaughlin, P.C., Richmond, VA, for Plaintiff.

George Everitt Kostel, Nelson, Mullins, Riley & Scarborough, LLP, Washington, DC, Ronald James Guillot, Jr., Lisa Hudson Kim, Samuel I. White, PC, Virginia Beach, VA, for Defendants.

MEMORANDUM OPINION

ROBERT E. PAYNE, Senior District Judge.

This matter is before the Court on Plaintiff George H. Seitz's (“Seitz”) MOTION TO REMAND (Docket No. 19). For the reasons set forth below, the motion will be granted.

FACTUAL AND PROCEDURAL BACKGROUND

This action concerns a piece of real property located in the County of Hanover, Commonwealth of Virginia, known as 16297 Washington Highway, Doswell, Virginia 23047. On June 9, 2008,¹ Seitz entered into a mortgage loan with Defendant Flagstar Bank, FSB (“Flagstar”) which was duly recorded. What happened next is the crux of the underlying dispute between the parties, but, for present purposes, it suffices to say that, in April 2010, Flagstar appointed Defendant Samuel I. White, P.C. (“White”) as trustee and began the foreclosure process. On May 3, 2011, White conducted a foreclosure sale in which Flagstar submitted the highest bid. On July 25, 2011, Flagstar executed a trustee's deed which purported to convey the property to Defendant Federal National Mortgage Association (“Fannie Mae”), which was recorded.

On September 30, 2011, Fannie Mae filed an unlawful detainer action against Seitz in the Hanover County General District Court, No. GV11–2904. The General District Court entered a judgment against Seitz and in favor of Fannie Mae. On November 4, 2011, Seitz timely appealed the case to the Circuit Court of Hanover County, No. CL11–1804.

On June 7, 2012, while the unlawful detainer action was pending before the Circuit Court of Hanover County, Seitz filed an action in that court against Fannie Mae and Flagstar Bank. That suit was filed as a suit to quiet title and, in it, Seitz alleged that the defendants had failed to comply with several of the pre-foreclosure requirements set forth in the Deed of Trust. The Complaint prayed the court to award Seitz compensatory damages in the amount of $50,000 and for an Order “quieting Seitz' [sic] title to ownership of the home.” Compl. ¶ 44 in CL12–1110.

On May 25, 2012, the Circuit Court denied Fannie Mae's motion for summary judgment and its motion in limine, and, after Seitz withdrew his demand for a jury trial, the case was set for a bench trial on June 14, 2012. Pl. Mem. in Supp. (Docket No. 20) Ex. B. Seitz moved to consolidate for trial the unlawful detainer action and the quiet title action and the Circuit Court of Hanover County granted that motion on June 12, 2012. Pl. Mem. in Supp. Ex. A. On August 30, 2012, the defendants filed their Notice of Removal, removing the “quiet title” action to this Court (Docket No. 1). On September 26, 2012, Seitz filed his Motion to Remand (Docket No. 19).

LEGAL STANDARD

At issue in this action is the so-called “prior exclusive jurisdiction doctrine.” Applying the doctrine here resolves the motion to remand.

It is well-settled that, generally speaking, “the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction.” McClellan v. Carland, 217 U.S. 268, 282, 30 S.Ct. 501, 54 L.Ed. 762 (1910). However, it is similarly well-settled that, “when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res.” Marshall v. Marshall, 547 U.S. 293, 311, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006). The Supreme Court of the United States has explained:

Where the action is in rem the effect is to draw to the federal court the possession or control, actual or potential, of the res, and the exercise by the state court of jurisdiction over the same res necessarily impairs, and may defeat, the jurisdiction of the federal court already attached. The converse of the rule is equally true, that where the jurisdiction of the state court has first attached, the federal court is precluded from exercising its jurisdiction over the same res to defeat or impair the state court's jurisdiction.

Kline v. Burke Const. Co., 260 U.S. 226, 229, 43 S.Ct. 79, 67 L.Ed. 226 (1922); see alsoCity of Orangeburg v. So. Ry. Co., 134 F.2d 890, 892 (4th Cir.1943) (“[T]he court, state or federal, which first acquires jurisdiction of the subject matter of a suit in rem holds it to the exclusion of any other court until its duty is fully performed.”). The purpose of this rule is to prevent two courts from issuing contradictory and incompatible rulings regarding the same res.

As the Supreme Court explained long ago:

It is a doctrine of law too long established to require a citation of authorities, that, where a court has jurisdiction, it has a right to decide every question which occurs in the cause, and whether its decision be correct or otherwise, its judgment, till reversed, is regarded as binding in every other court; and that, where the jurisdiction of a court, and the right of a plaintiff to prosecute his suit in it, have once attached, that right cannot be arrested or taken away by proceedings in another court. These rules have their foundation, not merely in comity, but on necessity. For if one may enjoin, the other may retort by injunction, and thus the parties be without remedy; being liable to a process for contempt in one, if they date [sic] to proceed in the other. Neither can one take property from the custody of the other by replevin or any other process, for this would produce a conflict extremely embarrassing to the administration of justice.

Peck v. Jenness, 48 U.S. 612, 624–25, 7 How. 612, 12 L.Ed. 841 (1849). Accordingly, “where the judgment sought is strictly in personam ... both a state court and a federal court having concurrent jurisdiction may proceed with the litigation.” Penn Gen. Casualty Co. v. Pennsylvania, 294 U.S. 189, 195, 55 S.Ct. 386, 79 L.Ed. 850 (1935).

However, “if the two suits are in rem or quasi in rem, requiring that the court or its officer have possession or control of the property which is the subject of the suit in order to proceed with the cause and to grant the relief sought, the jurisdiction of one court must of necessity yield to that of the other.” Id. This rule has been described as a principle of jurisdiction, see e.g. Palmer v. Texas, 212 U.S. 118, 125, 29 S.Ct. 230, 53 L.Ed. 435 (1909) (describing the rule as removing jurisdiction from the federal court “as if the property had been entirely removed to the territory of another sovereignty”). It also has been said to be a rule of comity, see e.g. Metro. Finance Corp. v. Wood, 175 F.2d 209, 210 (9th Cir.1949) (describing the rule as “one of necessitous comity”). Whatever the basis, it is clear that the rule is viewed as “a principle of right and of law, and therefore of necessity. It leaves nothing to discretion or mere convenience.” Covell v. Heyman, 111 U.S. 176, 182, 4 S.Ct. 355, 28 L.Ed. 390 (1884). Therefore, if the state court has exercised its jurisdiction, in an in rem or quasi in rem action, over the res at issue here, any attempt by this Court to exercise jurisdiction over that same res is “futile and void.” Id.

The parties agree that, because this action was removed to this Court under the provisions of 28 U.S.C. § 1332(a)(3), the Court must apply Virginia law to determine the nature of the two actions. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The Supreme Court of Virginia has drawn the distinction between in rem and in personam actions in this manner:

Actions in personam and actions in rem differ in that the former are directed against specific persons and seek personal judgments, while the latter are directed against the thing or property or status of a person and seek judgments with respect thereto as against the world.

O'Hara v. Pittston Co., 186 Va. 325, 42 S.E.2d 269, 275 (1947). “An action is in personam when its object is to obtain a personal judgment against the defendant, upon which a general execution may be awarded directing the collection of the judgment out of any property of the defendant anywhere to be found. It is in rem when it seeks to affect particular portions of his property only.” Id. Further, “in a quasi in rem proceeding the direct object is to reach and dispose of property, or some interest therein, owned by the defendant.” Id. The primary distinction between an action quasi in rem and actions in rem is that:

A judgment quasi in rem, like a judgment in rem, affects interests in a thing; but unlike a judgment in rem it affects the interests of only particular persons in the thing and not the interests of all persons in the thing. It differs from a personal judgment in that it does not impose a personal liability or obligation upon anyone.

Restatement (Second) of Conflict of Laws, ch. 3, intro. note (1971).

These principles guide the analysis and resolution of the motion to remand.

DISCUSSION

There is no dispute among the parties over the requirements of the “prior exclusive jurisdiction” doctrine. In order for the doctrine to apply, and for the Court to be without jurisdiction, all of the following must be true: (1) the state action must be an action in rem or quasi in rem; (2) the federal action must be in rem or quasi in rem, under the law of the forum state; and (3) the state action must have commenced prior to the federal action and proceeded to a degree sufficient to cause the state court to have asserted jurisdiction over the res. There is no real dispute that, in this case, the state court action commenced first such that, if the other two conditions are satisfied, the doctrine would apply...