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Bank of New York Mellon v. Laugand

United States District Court, M.D. Louisiana

October 18, 2017

THE BANK OF NEW YORK MELLON
v.
ROGER JOSEPH LAUGAND, ET AL.

          RULING AND ORDER

          BRIAN A. JACKSON, CHIEF JUDGE

         Before this Court is the United States Magistrate Judge's Report and Recommendation (Doc. 21) pursuant to 28 U.S.C. § 636(b)(1). The Report and Recommendation addresses the Motion to Remand (Doc. 6) filed by Plaintiff, which was opposed. (Doc. 10). This case involves a Petition for Mortgage Foreclosure by Executory Process with Appraisal filed by Plaintiff in state court. (Doc. 1-2). Plaintiff alleges that Defendants defaulted on a promissory note secured by certain real property in East Baton Rouge Parish, and requests the principal amount of $296, 975.14, along with other damages. (Doc. 21 at pp. 2-3). Plaintiff, a citizen of New York, has exercised its option to accelerate payment on the amounts owed by way of executory process against Defendants, citizens of Louisiana, in Louisiana state court. (Doc. 21 at pp. 2, 8). However, Defendants seek removal to federal court on the basis of federal question jurisdiction pursuant to 42 U.S.C § 1983 and the Fifth and Fourteenth Amendments under 28 U.S.C. § 1331, diversity jurisdiction under 28 U.S.C. § 1332, and Rule 5.1 of the Federal Rules of Civil Procedure.[1] (Id. at p. 3).

         The Magistrate Judge recommended that Plaintiffs Motion to Remand be granted. (Id. at pp. 2, 14). Although Plaintiffs Motion to Remand was untimely, given that Plaintiffs motion was filed thirty-four days after the Notice of Removal, [2] the untimeliness of the motion only waived procedural defects. (Id. at p. 4-5). Therefore, the Magistrate Judge was left to analyze whether the Court had subject matter jurisdiction.[3] (Doc. 21 at p. 6).

         In addressing this Court's federal question jurisdiction pursuant to § 1331, the Magistrate Judge concluded that Defendants' arguments under § 1983 and the Fifth and Fourteenth Amendments are defenses to the foreclosure proceeding. (Id. at p. 7). Defendants' argument is not that Plaintiff stated a federal question in its state court petition warranting removal to federal court, but rather that Defendants raise federal defenses and counterclaims to Plaintiffs petition. (Id.). According to the "well-pleaded complaint rule, " federal jurisdiction is conferred only when a federal question appears on the face of the plaintiffs complaint, not in a defendant's pleadings. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987); see also PCI Transp., Inc. v. Fort Worth & Western R. Co., 418 F.3d 535, 543 (5th Cir. 2005) ('Potential defenses . . . do not provide a basis for removal").

         In addressing this Court's diversity jurisdiction pursuant to § 1332, the Magistrate Judge concluded that although diversity jurisdiction exists between Defendants and Plaintiff, given that there is a controversy between citizens of different states (Louisiana and New York) and the requisite amount in controversy is met (Plaintiff seeks $296, 975.14 along with other damages), the foreclosure proceeding should nonetheless be remanded to state court. (Doc. 21 pp. 8-9). A conflict arises between the right to use executory process under Louisiana law[4] with the federal judiciary's obligation to exercise the original jurisdiction provided to it.[5] (Doc. 21 at p. 9). The Magistrate Judge concluded that, "where a plaintiff has a 'right to use' executory process, and executory process is not available to a litigant in federal court, and that litigant has neither consented nor converted the case to an ordinary proceeding, a federal court does not have original jurisdiction." (Id. at p. 10). It follows that:

A federal court cannot issue a writ of seizure and sale in an executory proceeding because the lack of a requirement of citation and judgment before seizure and sale of property does not comply with Rules 4(b) and 12(a) of the Federal Rules of Civil Procedure, which require that a summons and complaint be served on the defendant to answer within 20 days. See FDIC v. Saxena, 1994 WL 202364 (E.D.La.1994) (unpublished). Seizure of the property became available in federal court when the action was converted to an ordinary proceeding, which comports with the federal rules. See id.

First Bank & Tr. v. Swope, 2008 WL 4059860, at *2 (E.D. La. Aug. 25, 2008); see also Midsouth Bank, N.A. v. McZeal, 2011 WL 2173655, at *l-2 (W.D. La. June 1, 2011) ("not only is an executory proceeding predicated on state law, see, e.g., La. Rev. Stat. Ann. § 9:5555, it cannot be prosecuted under federal law."); Leggette v. Wash, Mut. Bank. FA, 2005 WL 2679699, at *3-5 (N.D. Tex. Oct. 19, 2005) ("[e]xercising federal jurisdiction over home foreclosure disputes typically governed by private contract and state law portends a significant transfer of judicial responsibilities from state to federal courts."). "Litigating state-law foreclosure lawsuits ... in a federal forum thus!threaten[s] to affect . . . the normal currents of litigation, ' in which foreclosure proceedings are generally litigated in state courts." Leggette, 2005 WL 2679699, at *4 (citing Grable & Sons Metal Prod., Inc. v. Dante Eng'g & Mfg., 545 U.S. 308, 319 (2005); (Doc. 21 at pp. 12-13). This Court is therefore satisfied that the Magistrate Judge articulated the correct legal standard.

         The Report and Recommendation notified the parties that, pursuant to 28 U.S.C. § 636(b)(1), they had fourteen (14) days from the date they received the Report and Recommendation to file written objections to the proposed findings of fact, conclusions of law, and recommendations therein. (Id. at p. 1). Defendants timely filed an opposition (Doc. 22). Plaintiff did not respond.

         Defendants object to the Report and Recommendation and argue that the challenges they have raised regarding the constitutionality of Louisiana's executory process are "not [defenses] as the court posits, but more precisely an attack on a corrupt judicial proceeding inherently flawed. [Defendants] attack the right to foreclose under the theory, as unconstitutional versus raising a defense to the proceeding." (Doc. 22 at p. 5). However, such contentions are unsupported by law or legal authority. Furthermore, Defendants object to the Magistrate Judge's finding that foreclosure proceedings should not be litigated in federal courts because such proceedings do not comport with federal law. (Doc. 22 at p. 6; Doc. 21 at pp. 9-10). Defendants support their objection by arguing thatfi[w]hile such [executory] proceedings sounding in foreclosure may ... in the federal context be 'subject to dismissal/ they in no way are mandated to be dismissed from the federal system . . . ." (Doc 22 at pp. 6-7). Defendants attempt to distinguish the Magistrate Judge's citation to F.D.I.C v. Saxena by noting that although an executory proceeding under Louisiana law does not comport with the requirements of the Federal Rules of Civil Procedure, nothing in the text of F.D.I.C v. Saxena states that foreclosure cases cannot be litigated in a federal court. This Court agrees with this contention. Indeed, there is no absolute bar to litigating foreclosure proceedings in federal court; however, to be litigated in federal court a foreclosure proceeding must be converted from executory process to ordinary process by the plaintiff or upon his consent. Therefore, the Court is satisfied that the Magistrate Judge applied the correct legal standard.

         Having carefully considered the underlying Complaint, the instant motions, and related filings, the Court approves the Magistrate Judge's Report and Recommendation, and hereby adopts its findings of fact, conclusions of law, and recommendation.

         Accordingly, IT IS ORDERED that the Magistrate Judge's Report and Recommendation (Doc. 21) is ADOPTED as the Court's opinion herein.

         IT IS FURTHER ORDERED that Plaintiffs Motion to Remand (Doc. 6) is GRANTED.

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