U.S. Bank Trust, N.A. v. Dupre
| Decision Date | 20 September 2016 |
| Docket Number | 6:15-CV-0558 (LEK/TWD) |
| Parties | U.S. BANK TRUST, N.A., as trustee for LSF8 Master Participation Trust, Plaintiff, v. SCOTT A. DUPRE, a/k/a Scot Dupre, et al., Defendants. |
| Court | U.S. District Court — Northern District of New York |
This action was brought by U.S. Bank Trust, N.A., in its capacity as trustee of the LSF 8 Master Participation Trust, to foreclose on a mortgage encumbering property owned by Scott and Deborah Dupre. Dkt. No. 1 ("Complaint") ¶¶ 1-4, 12. Rome Savings Bank was also included as a defendant due to its holding of a subordinate lien on the property. Id. ¶ 5.
Currently before the Court is U.S. Bank's Motion for Default Judgment, Dkt. No. 15 ("Motion"), which was filed after the Clerk's entry of default, Dkt. No. 14. Upon review of U.S. Bank's Motion, the Court issued a series of orders—prompting a series of responses—requesting additional filings that would establish the existence of subject matter jurisdiction. Dkt. Nos. 19 ("April Order"), 21 ("First Memorandum"), 22 ("July Order"), 26 ("Second Memorandum"). As explained below, these filings have failed to do so. Accordingly, U.S. Bank's Motion is denied and this action is dismissed for lack of subject matter jurisdiction.
On May 5, 2015, U.S. Bank filed its Complaint, seeking to foreclose a mortgage it held upon the real property of the Dupres after they stopped making payments on their loan. Compl. ¶¶ 1, 10-11, 13-14. Rome Savings Bank was also included as a defendant due to its holding of a subordinate lien on the property. Id. ¶ 5.
U.S. Bank alleges subject matter jurisdiction on the basis of diversity of citizenship. Id. ¶ 8. The Complaint alleges that the Dupres are both citizens of New York. Id. ¶¶ 3-4. The Complaint also states that U.S. Bank "is a National Association with its principal place of business [in] . . . Wilmington, Delaware." Id. ¶ 2. Finally, the Complaint states that Rome Savings Bank "is a corporation or other business entity formed under the laws of the United States of America with its principal place of business in New York." Id. ¶ 5.
On September 18, 2015, the Clerk of the Court entered a certificate of default as to all of the defendants in this action for their failure to respond to the Complaint and summonses. Dkt. No. 14. On October 1, 2015, U.S. Bank moved for a default judgment. Mot.
On April 28, 2016, the Court issued a Decision and Order noting possible issues with U.S. Bank's asserted basis for subject matter jurisdiction. Apr. Order. Specifically, the Court's order noted that the allegation concerning Rome Savings Bank created doubts as to its citizenship, as the Complaint did not specify the type of business entity or state of incorporation for Rome Savings Bank. Id. at 1. The order also questioned U.S. Bank's citizenship, as the Complaint only noted that its principal place of business was in Delaware without further explanation of its citizenship. Id. at 1-2.
The Court allowed U.S. Bank to file a response to the April Order, id. at 2, which it did on May 31, 2016, First Mem. As evidence for U.S. Bank's own citizenship, it attached a list of national banks, apparently from the Office of the Comptroller of the Currency, that notes the city and state of "U.S. Bank Trust National Association" as Wilmington, Delaware. Id. ¶ 12, Ex. A. Regarding Rome Savings Bank's citizenship, U.S. Bank simply reiterated its statement that Rome Savings' principal place of business is in New York, and noted that Rome Savings had listed a Rome, New York, business address on a city court transcript of judgment. Id. ¶ 13, Ex. B.
On July 1, 2016, the Court issued another Decision and Order in response to U.S. Bank's filing. July Order. In the July Order, the Court noted that the list of national banks was insufficient evidence of U.S. Bank's main office location, but allowed yet another response and directed U.S. Bank to submit a copy of its articles of association. Id. at 1-2 (citing Wachovia Bank v. Schmidt, 546 U.S. 303 (2006)). The Court also noted that there was insufficient information in the Complaint or other filings to show that U.S. Bank could maintain a suit brought on behalf of the LSF8 Master Participation Trust using only its own citizenship and without reference to the citizenship of the trust's beneficiaries, and directed U.S. Bank to file a copy of the trust instrument or other comparable evidence. Id. at 2-3. Furthermore, the Court found that the additional information concerning Rome Savings Bank was insufficient to demonstrate its citizenship, as U.S. Bank had "still not identified its state of incorporation, whether it instead is a national banking association chartered by the Office of the Comptroller of the Currency, or if the Bank has been acquired by, or merged with, another bank or corporation." Id. at 3; see also id. at 3 n.1 ().
In its most recent memorandum, filed on August 10, 2016, U.S. Bank responded by reiterating that its principal place of business is in Wilmington, Delaware, and that U.S. Bank was "authorized to act on behalf of the LSF8 Master Participation Trust," and thus that only its citizenship should count for diversity purposes. Second Mem. ¶¶ 10-12. While U.S. Bank did attach the trust instrument as an exhibit, the text of that instrument was almost entirely redacted. Id. Ex. C. Additionally, U.S. Bank failed to include its own articles of association (despite the Court's request that it do so), and did not address Rome Savings Bank's citizenship in any way. Second Mem. Finally, while U.S. Bank claims that the trust instrument shows that the LSF8 Master Participation Trust should be distinguished for diversity purposes from "an unincorporated, 'artificial entity' created under state law and given the trust label," id. ¶ 12, its exhibits show that the LSF8 Master Participation trust was formed as a Delaware statutory trust and that the trust instrument was filed with the Secretary of State under the procedures for creating that type of entity, id. Exs. A, C; see also Del. Code Ann. tit. 12, § 3810 ().
A fundamental predicate to judgment in the federal courts is the existence of subject matter jurisdiction. "Dismissal of a case for lack of subject matter jurisdiction . . . is proper 'when the district court lacks the statutory or constitutional power to adjudicate it.'" Ford v. D.C. 37 Union Local 1549, 579 F.3d 187, 188 (2d Cir. 2009) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). A lack of subject matter jurisdiction may not be waived, and may be raised by motion or sua sponte at any time. E.g., Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 107 (2d Cir. 1997); see also Fed. R. Civ. P. 12(h)(3) (). The party asserting subject matter jurisdiction carries the burden of proving its existence by a preponderance of the evidence. E.g., Makarova, 201 F.3d at 113; Augienello v. FDIC, 310 F. Supp. 2d 582, 587-88 (S.D.N.Y. 2004). This is true even on a motion for default judgment, since the principle that a default deems the well-pleaded allegations of the complaint to be admitted is inapplicable when a court doubts the existence of subject matter jurisdiction. See Transatlantic Marine, 109 F.3d at 108.
As mentioned earlier, U.S. Bank alleges federal jurisdiction on the basis of diversity of citizenship. Compl. ¶ 8. Under the standard diversity jurisdiction statute, 28 U.S.C. § 1332(a), there must be "complete" diversity among the parties, meaning that each defendant must be a citizen of a different state from each plaintiff. E.g., Caterpillar Inc. v. Lewis, 519 U.S. 61, 67-68 (1996); Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74 (1978). While the Court has no reason to doubt the allegations in the Complaint contending that Scott and Deborah Dupre are both citizens of New York, Compl. ¶¶ 3-4, the Court has concerns, expressed in the July Order, about the citizenship of U.S. Bank, whether U.S. Bank's citizenship is sufficient when suing on behalf of the Master Participation Trust, and the citizenship of Rome Savings Bank. As discussed below, these concerns were not addressed by U.S. Bank's most recent filing, and it has failed to meet its burden of establishing the existence of subject matter jurisdiction.
As a national banking association, the citizenship of U.S. Bank is defined by 28 U.S.C. § 1348. That statute provides that "[a]ll national banking associations shall, for the purposesof . . . actions by or against them, be deemed citizens of the States in which they are respectively located." At issue here is the meaning of the word "located."
In Wachovia Bank v. Schmidt, the Supreme Court addressed the meaning of "located" within § 1348, finding that a national banking association is located for diversity purposes "in the State designated in its articles of association as its main office." 546 U.S. at 318. As the Court noted, "[a] national bank, on formation, must designate, in its organization certificate and articles of association, the 'place where its operations of discount and deposit are to be carried on.'" Id. at 307 n.1 (quoting 12 U.S.C. § 22). It is this "main office" that determines the bank's home state under the banking laws and, under Wachovia, determines the bank's citizenship for diversity purposes. Id. at 307 & n.1. A change to the city of this main office may only be accomplished through an amendment of the bank's articles of association. Id. at 307 n.1; 12 C.F.R. § 5.40(c)(2)(i).
While U.S. Bank's filings state that its "principal executive...
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