United States District Court, D. Rhode Island
OPINION AND ORDER
WILLIAM E. SMITH, Chief Judge.
filed this action in state court to rescind what they
consider a faulty foreclosure. (Compl., ECF No. 1-1.) After
the case was filed, but not before the state court entered a
default against Ocwen Loan Servicing, LLC, (“Ocwen
Loan”), Defendants removed it to this Court. (Notice of
Removal, ECF No. 1.) Pending now are Plaintiffs' Motion
to Remand (ECF No. 8) and Ocwen Loan's Motion to Vacate
Entry of Default (ECF No. 5). Also pending is the
parties' Joint Motion to Rescind Foreclosure (ECF No.
15). The Court GRANTS Plaintiffs' Motion, remanding the
case to state court and rendering the two later-filed Motions
case started with Plaintiffs filing their complaint in Rhode
Island Superior Court on December 13, 2017. (Defs.' Mem.
of Law in Supp. of Obj. to Pls.' Mot. to Remand 2, ECF
No. 9-1.) The complaint alleges - and it is undisputed for
purposes of Plaintiffs' Motion - that U.S. Bank, N.A.,
(“US Bank”) was the last to hold and Ocwen Loan
the last to service Plaintiffs' mortgage. (Compl. ¶
6.) The (previously) mortgaged property is located at 176-178
Grove Street in Woonsocket, Rhode Island,
(“Property”), and was Plaintiffs' primary
residence before U.S. Bank bought it at a foreclosure sale.
(Id. at ¶¶ 2, 5, 16-17.)
claim that Defendants unlawfully foreclosed on the Property.
(Id. at ¶¶ 18-19.) They ask the Court to
rescind the foreclosure sale and to award an unspecified
amount of compensatory and punitive damages, and
attorneys' fees. (Id. at ¶¶
1[a]-5[a].) Notably, Plaintiffs do not ask that the mortgage
and note be invalidated. (See id.; Pls.' Mem. in Supp. of
Mot. to Remand 2-3, ECF No. 8-1 (“Pls.'
Mem.”).) Nor do they ask that Defendants be prevented
from foreclosing on the mortgage. (See Compl. ¶¶
1[a]- 5[a]; Pls.' Mem. 2-3.) What they ask is that the
status quo ante be restored, so that if Defendants foreclose,
they do so in accordance with the law. (See Compl.
¶¶ 1[a]-5[a]; Pls.' Mem. 2-3.)
parties agree that they are completely diverse. (See Compl.
¶¶ 2-4; Notice of Removal 1-2.) Plaintiffs argue,
however, that Defendants cannot remove this case under 28
U.S.C. § 1441(a) because the amount in controversy does
not exceed $75, 000 as required by 28 U.S.C. § 1332(a).
(Pls.' Mem. 2.) Plaintiffs did not demand a specific
amount in their complaint. (See Compl. ¶¶
1[a]-5[a].) But Defendants averred in their Notice of Removal
that the amount in controversy exceeds $75, 000, as evidenced
by the mortgage's size ($279, 000) and the Property's
current value ($139, 800). (Notice of Removal 2-3.)
jurisdiction of federal courts is limited; “[i]t is to
be presumed that a cause lies outside this limited
jurisdiction, and the burden of establishing the contrary
rests upon the party asserting jurisdiction.”
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994) (citations omitted). In situations like this
one - where removal is based on diversity and the complaint
fails to provide an amount in controversy, but the notice of
removal claims it exceeds $75, 000 - “removal of the
action is proper . . . if the district court finds, by the
preponderance of the evidence, that the amount in controversy
exceeds [$75, 000].” 28 U.S.C. § 1446(c)(2)(B);
see also Dart Cherokee Basin Operating Co. v. Owens,
135 S.Ct. 547, 554 (2014). And when the relief sought is
declaratory or injunctive, “the amount in controversy
is measured by the value of the object of the
litigation.” Hunt v. Wash. State Apple Advert.
Comm'n, 432 U.S. 333, 347 (1977).
object of this litigation is not the Property at 176-178
Grove Street. At least not exactly. Cf. Bobola v. Wells
Fargo Bank, C.A. No. 14-14735-MLW, 2016 WL 4844039, at
*3 (D. Mass. Sept. 13, 2016) (“It is reasonable to
designate the amount in controversy as the value of the
mortgage where the Defendants' mortgage interest would be
extinguished if the Plaintiffs were ultimately successful. In
such a case, it is the property itself that is the object of
the litigation . . . .” (citation, alteration, and
quotation marks omitted)). The complaint does not demand that
Defendants' interest in the Property be extinguished. See
Id. at *4 (finding amount of mortgage-loan
modification for which mortgagor eligible was proper amount
in controversy, where “the relief requested in the
Complaint, if granted, would not extinguish [mortgagee]'s
interest in the Property.” (quotation marks omitted)).
Nor does it ask the Court to prevent Defendants from selling
the Property at a foreclosure sale. Rather, it asks for the
Court to return the parties to the positions they occupied
before the sale - when Defendants, as mortgagee and
note-holder, held legal title to the Property and Plaintiffs,
as mortgagors, equitable title. See Lister v. Bank of
Am., 790 F.3d 20, 25 (1st Cir. 2015) (explaining that
Rhode Island “mortgage law splits the title to a
property in two parts: the legal title, which becomes the
mortgagee's and secures the underlying debt, and the
equitable title, which the mortgagor retains.”
(alteration and quotation marks omitted)); Milton Sav.
Bank v. United States, 187 N.E.2d 379, 381 (Mass. 1963)
(noting that in Massachusetts - a title- theory jurisdiction
like Rhode Island - “the mortgagor has merely an equity
of redemption accompanied by a right to possession[, while
t]he paramount title is in the mortgagee”).
than the mortgage or the Property, then, the object of this
litigation is the latter's equitable title. And the
amount in controversy is the value of this title at the time
Plaintiffs filed their complaint. See Spielman v. Genzyme
Corp., 251 F.3d 1, 5 (1st Cir. 2001) (“Courts
determine whether a party has met the amount-in-controversy
requirement by looking to the circumstances at the time the
complaint is filed.” (quotation marks omitted)). In
other words, the amount in controversy is the difference
between the value of the Property with and without the
mortgage attached to it. See 14AA Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure §
3702.5 (West 4th ed. 2018) (“If suit is brought to
quiet title to land . . . and the cloud affects the entire
title, then the value of the property . . . is the measure of
the amount in controversy. If the entire title is not in
issue, the amount in controversy is the difference in the
value of the land . . . with the cloud and its value with the
cloud removed.”). But see Pah v. JPMorgan Chase
Bank, Civil Action No. 1:12-cv-4071- JEC., 2014 WL
1683332, at *2 (N.D.Ga. Apr. 29, 2014) (finding that where
“plaintiff seeks an order rescinding the foreclosure
sale . . . the appropriate measure of the amount in
controversy is the value of the property at issue”). An
analogous situation obtains when a plaintiff seeks injunctive
relief to invalidate a leasehold to mineral rights. See,
e.g., A.C. McKoy, Inc. v. Schonwald, 341 F.2d
737, 739 (10th Cir. 1965). For example, in A.C.
McKoy, the court determined that the amount in
controversy was not the value of the mineral interest, but
“the diminished value of the mineral interest burden
with the lease or the increased value without the
Supreme Court applied a similar logic in McNutt v. Gen.
Motors Acceptance Corp. of Ind., 298 U.S. 178 (1936).
There, a company sought to enjoin the enforcement of a state
regulation. Id. at 179. The company asserted that
the amount in controversy was equal to the value of its
business, much more than the jurisdictional requirement,
which was then $3, 000. Id. at 180. The Court
rejected the company's assertion, finding that
“[t]he object or right to be protected against
unconstitutional interference is the right to be free of that
regulation.” Id. at 181. “The value of
that right, ” the Court said, “may be measured by
the loss, if any, which would follow the enforcement of the
rules prescribed.” Id. Put otherwise, the
amount in controversy was the difference between the
company's value in a world where it abided the challenged
regulation versus one where it did not. And because the
company - the party seeking federal jurisdiction - had not
provided evidence to inform this calculation, the Court
dismissed. Id. at 190.
Ninth Circuit did the same in a recent foreclosure case.
See Corral v. Select Portfolio Servicing, Inc., 878
F.3d 770, 775-76 (9th Cir. 2017). In Corral,
homeowners sought to temporarily stay a mortgage foreclosure
sale pending review of their loan-modification application.
Id. at 774. The court found that neither the
original amount of the note, nor the current level of
indebtedness, nor the value of the property represented the
amount in controversy. See id. at 776. These
measures - applicable in cases where “plaintiffs seek
to enjoin foreclosure indefinitely as part of an effort to
quiet title to the property or rescind their loan
agreements” - were inapt in a case like
Corral, the court explained, where “even if
Appellants['] [lawsuit] were to succeed . . . they would
not be able to retain possession and ownership of their
Property without paying off their debt.” Id.
All they might have won is a few extra nights in their home
as their application was reviewed, and either denied before
the property was foreclosed upon, or accepted. Id.
Therefore, the evidence the loan servicer presented in its
motion - the current amount of indebtedness - was
insufficient to support removal. Id. Needed, the
court held, was evidence showing the value of the object of
the litigation - the temporary injunction - which might
include “the transactional costs to the lender of
delaying foreclosure or a fair rental value of the property
during the pendency of the injunction.” Id.;
see also Ballew v. Am.'s Servicing Co., No.
4:11-CV-030-A., 2011 WL 880135, at *3 (N.D. Tex. Mar. 14,
2011) (“[P]laintiff seeks to temporarily delay
foreclosure proceedings until the merits of this lawsuit are
decided. The value of such a delay is not the value of the
property, it is the value to plaintiff of postponing
foreclosure until he can determine through this suit whether
defendants are entitled to foreclose.”); Sanders v.
Homecomings Fin., LLC, No. 2:08-CV-369-MEF., 2009 WL
1151868, at *3-4 (M.D. Ala. Apr. 29, 2009) (finding amount in
controversy not equal to mortgage's original value, but
rather “a[t] the very most” to mortgagee's
“equity in the home, ” where mortgagee sought to
enjoin foreclosure sale).
same reasoning requires remand here. Defendants have not
provided evidence of the amount in controversy. The value of
the mortgage and that of the Property are not what Plaintiffs
would win if their lawsuit were to succeed. What they would
win - the object of the litigation - is, essentially,
equitable title to the Property, something as to which
Defendants have not attempted appraisal. Defendants ...