Scott Sexton v. Ndex West, Llc

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SCOTT D. SEXTON ; SONIA L. No. 11-17432
SEXTON ,
Plaintiffs-Appellants, D.C. No.
3:11-cv-00440-
v. LRH-VPC
NDEX WEST , LLC; ONE WEST
BANK, FSB; STEWART TITLE OPINION
GUARANTY COMPANY ,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Nevada
Larry R. Hicks, District Judge, Presiding
Submitted March 12, 2013*
San Francisco, California
Filed April 12, 2013
Before: J. Clifford Wallace, M. Margaret McKeown,
and Sandra S. Ikuta, Circuit Judges.
Opinion by Judge Ikuta
*
The panel unanimously concludes that this case is suitable for decision
without oral argument. Fed. R. App. P. 34(a)(2).
2 SEXTON V . NDEX WEST , LLC
SUMMARY**
Jurisdiction
The panel affirmed the district court’s summary judgment
entered in favor of parties associated with the loan and deed
of trust in an action, alleging wrongful foreclosure and related
claims, that was removed from state court based on diversity
jurisdiction.
The panel rejected appellants’ claims that the district
court should have remanded the action sua sponte to state
court under two different prudential rules. The panel held
that the doctrine of prior exclusive jurisdiction is inapplicable
because the state court did not retain jurisdiction over the
appellants’ property. The panel also held that the Colorado
River abstention doctrine is inapplicable because appellants
have not shown that any state proceeding relating to their
house is pending concurrently with federal proceedings.
COUNSEL
Terry J. Thomas, Reno, Nevada, for Plaintiffs-Appellants.
Michael R. Brooks, Brooks Bauer LLP, Las Vegas, Nevada,
for Defendants-Appellees NDEX West, LLC and OneWest
Bank, FSB.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
SEXTON V . NDEX WEST , LLC 3
Douglas D. Gerrard, Gerrard Cox Larsen, Henderson,
Nevada, for Defendant-Appellee Stewart Title Guaranty
Company.
OPINION
IKUTA, Circuit Judge:
Scott and Sonia Sexton appeal from the district court’s
summary judgment in favor of NDEX West, LLC, OneWest
Bank, FSB, and Stewart Title Guaranty Company in an action
alleging wrongful foreclosure and related claims that the
defendants had removed to federal court. The Sextons argue
that under the “prior exclusive jurisdiction” doctrine, see
Chapman v. Deutsche Bank Nat’l Trust Co., 651 F.3d 1039,
1043 (9th Cir. 2011), or under the Colorado River abstention
doctrine, see Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800, 818 (1976), the district court
should have remanded sua sponte. Because neither doctrine
applies here, we affirm.
I
Scott and Sonia Sexton bought a home in Reno, Nevada,
in April 2007, and financed the purchase with a loan of
$752,000 from IndyMac Bank, secured by a deed of trust on
the home. The original deed of trust identified IndyMac
Bank as the lender, Stewart Title as the trustee, and Mortgage
Electronic Registration Systems (MERS) as the beneficiary,
serving solely as nominee for IndyMac. In August 2010,
after the Sextons had fallen behind in their loan payments, an
agent for the trustee sent the Sextons a notice of breach and
election to sell the house under the deed of trust, pursuant to
4 SEXTON V . NDEX WEST , LLC
Nevada’s statutory provisions governing non-judicial
foreclosure proceedings. See Nev. Rev. Stat. § 107.080.
After mediation to avoid foreclosure failed, the Sextons
filed a complaint in Nevada state court against various parties
associated with the loan and deed of trust.1 In their
complaint, the Sextons alleged wrongful foreclosure, debt
collection violations, unfair lending practices, unfair and
deceptive trade practices, violation of the covenant of good
faith and fair dealing, fraud in the inducement, slander of
title, and abuse of process. They sought to quiet title and
requested other forms of equitable relief under Nevada law.
Along with their lawsuit, they filed a notice of lis pendens to
halt the foreclosure process.
The defendants removed the action to federal court on
diversity grounds under 28 U.S.C. § 1441.2 The Sextons did
not contest that the requirements for diversity jurisdiction
were satisfied. The defendants moved to dismiss the Sextons’
action for failure to state a claim, and NDEX West and
OneWest also moved to expunge the Sextons’ lis pendens so
that they could proceed with foreclosure. The district court
1
Specifically, the Sextons sued IndyMac (the original lender), OneW est
(the agent of the new beneficiary, Deutsche Bank), Stewart Title (the
original trustee), NDEX W est (the new trustee) among other parties.
2
28 U .S.C. §§ 1441(a) and (b) provide that a civil action brought in a
state court may be removed by the defendant to federal court on the basis
of diversity of citizenship.
SEXTON V . NDEX WEST , LLC 5
granted NDEX West, OneWest Bank, and Stewart Title’s
motions to dismiss, which the Sextons timely appealed.3
We have jurisdiction under 28 U.S.C. § 1291. We review
determinations regarding federal subject-matter jurisdiction
de novo, and factual findings underlying those determinations
for clear error. See Robinson v. United States, 586 F.3d 683,
685 (9th Cir. 2009).
II
On appeal, the Sextons argue that the district court should
have remanded the action sua sponte to state court under two
different prudential rules directing federal courts to abstain
from adjudicating actions involving property that is the
subject of concurrent state proceedings: (1) the prior
exclusive jurisdiction doctrine, and (2) the Colorado River
abstention doctrine. We consider each in turn.
A
Under the Supreme Court’s long-standing prior exclusive
jurisdiction doctrine, if a state or federal court “‘has taken
possession of property, or by its procedure has obtained
jurisdiction over the same,’” then the property under that
court’s jurisdiction “‘is withdrawn from the jurisdiction of the
courts of the other authority as effectually as if the property
had been entirely removed to the territory of another
sovereign.’” State Engineer v. S. Fork Band of Te-Moak
3
In May 2012, the district court granted N DEX W est and OneW est
Bank’s motion to expunge the Sextons’ lis pendens, and in August 2012,
dismissed the Sextons’ action with respect to IndyMac and the other
defendants named in the complaint for failure to effect proper service.
6 SEXTON V . NDEX WEST , LLC
Tribe of W. Shoshone Indians, 339 F.3d 804, 809 (9th Cir.
2003) (emphasis omitted) (quoting Palmer v. Texas, 212 U.S.
118, 125 (1909)). That is, when “one court is exercising in
rem jurisdiction over a res, a second court will not assume in
rem jurisdiction over the same res.” Chapman, 651 F.3d at
1043 (internal quotation marks omitted).4 As we have
explained, “[t]he purpose of the rule is the maintenance of
comity between courts; such harmony is especially
compromised by state and federal judicial systems attempting
to assert concurrent control over the res upon which
jurisdiction of each depends.” United States v. One 1985
Cadillac Seville, 866 F.2d 1142, 1145 (9th Cir. 1989) (citing
Penn Gen. Cas. Co. v. Pennsylvania ex rel. Schnader,
294 U.S. 189, 195 (1935)).5
4
Cases discussing the prior exclusive jurisdiction doctrine tend to lapse
into Latin. W e therefore clarify that when property is the main subject of
a lawsuit, a court’s exercise of jurisdiction over the property in that
lawsuit may be termed “in rem” jurisdiction, and the property at issue may
be termed the “res.” See Black’s Law Dictionary 864, 1420 (9th ed. 2009)
(in Latin, “in rem” means “against a thing,” and “res” means “thing”).
5
Although we have described the prior exclusive jurisdiction rule as
both a “rule of comity” and as a rule of subject-matter jurisdiction, see
Chapman, 651 F.3d at 1044, the doctrine is judge-made, not statutory.
One 1985 Cadillac Seville, 866 F.2d at 1145 (citing Penn Gen., 294 U.S.
at 195). Because the Supreme Court has recently “clarified that court-
promulgated rules are not jurisdictional” and “‘[o]nly Congress may
determine a lower federal court’s subject-matter jurisdiction,’” Vaught v.
Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 626 n.2 (9th Cir.
2008) (quoting Bowles v. Russell, 551 U.S. 205, 217 (2007)), the doctrine
of prior exclusive jurisdiction is now best understood as a prudential
(although mandatory) common law rule of judicial abstention. See One
1985 Cadillac Seville, 866 F.2d at 1145; accord Penn Gen., 294 U.S. at
195; In re Simon, 153 F.3d 991, 996 (9th Cir. 1998); Metro. Fin. Corp. of
Cal. v. Wood, 175 F.2d 209, 210 (9th Cir. 1949).
SEXTON V . NDEX WEST , LLC 7
Relying on this doctrine, the Sextons claim that because
they filed a complaint in state court challenging the
defendants’ efforts to continue with foreclosure proceedings,
the state court obtained in rem jurisdiction over their home
(the res in this case), and the district court was “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 (1922). Accordingly, the Sextons
argue, the district court had to remand the action even though
the defendants met the requirements for removal. The scope
of the Sextons’ proposed rule is sweeping: in effect, it would
prevent federal courts from exercising diversity jurisdiction
over any in rem case removed to a district court.
The Sextons’ argument, however, is squarely foreclosed
by our case law. The doctrine of prior exclusive jurisdiction
applies to a federal court’s jurisdiction over property only if
a state court has previously exercised jurisdiction over that
same property and retains that jurisdiction in a separate,
concurrent proceeding. See, e.g., Chapman, 651 F.3d at
1042; One 1985 Cadillac Seville, 866 F.2d at 1144–45.6
Where, as here, the defendant appropriately removes the case
to federal court, the state court’s jurisdiction over the
property terminates, and the federal court’s jurisdiction
begins. See 28 U.S.C. § 1446(d) (“after the filing of [a]
notice of removal . . . the State court shall proceed no further
unless and until the case is remanded.”); Resolution Trust
Corp. v. Bayside Developers, 43 F.3d 1230, 1238 (9th Cir.
1994). Because the state court did not retain jurisdiction over
6
Of course, the same rule would apply to a state court if a federal court
were the first to assert jurisdiction over the property. See United States v.
Alpine Land & Reservoir Co., 174 F.3d 1007, 1012–14 (9th Cir. 1999).
8 SEXTON V . NDEX WEST , LLC
the Sextons’ property, the doctrine of prior exclusive
jurisdiction is inapplicable.
To avoid this conclusion, the Sextons contend that State
Engineer held that the prior exclusive jurisdiction rule applies
to litigation in federal court even where the state court is not
concurrently considering an action involving the same
property. We disagree, because State Engineer did in fact
involve concurrent state and federal actions. In State
Engineer, the State of Nevada brought a contempt proceeding
against an Indian tribe to enforce a water-rights decree in
Nevada’s Sixth Judicial District Court, which had exercised
jurisdiction over that decree for seventy years. See 339 F.3d
at 807–08. After the federal government was joined as a
defendant, it removed the action to federal court under
28 U.S.C. § 1442. See id. at 808. The district court
remanded the case to state court, and the defendants appealed.
We affirmed the district court’s remand under the prior
exclusive jurisdiction doctrine, explaining that the state court
had continuing jurisdiction over the water-rights decree that
was the basis of the contempt action at issue, and the action
before the district court arose from enforcement of the same
water-rights decree. See id. at 811. We noted that absent a
remand, the district court “hearing the second suit” would
disturb the state court’s jurisdiction over the property (i.e., the
river and tributaries to which the decree applied). See id.
Accordingly, State Engineer does not support the Sextons’
argument.
B
Although the prior exclusive jurisdiction doctrine is not
applicable here, the Sextons nevertheless argue that the
Colorado River abstention doctrine prevents the district court
SEXTON V . NDEX WEST , LLC 9
from asserting jurisdiction over the complaint. See 424 U.S.
at 818. We also reject this argument. In Colorado River, the
Supreme Court reviewed its precedent and derived a list of
factors that weighed in favor of dismissing a federal suit “due
to the presence of a concurrent state proceeding.” Id.
Specifically, federal courts should consider: “(1) whether
either the state or federal court has exercised jurisdiction over
a res; (2) the inconvenience of the federal forum; (3) the
desirability of avoiding piecemeal litigation; and (4) the order
in which the forums obtained jurisdiction.” 40235
Washington St. Corp. v. Lusardi, 976 F.2d 587, 588 (9th Cir.
1992) (citing Colorado River, 424 U.S. at 818). Relevant
here, the Supreme Court derived the first factor from cases
applying the prior exclusive jurisdiction doctrine. See
Colorado River, 424 U.S. at 818 (collecting cases).
Consistent with those principles, we have held that where
there are “pending state court proceedings” involving a single
property, the first Colorado River factor bars us from
exercising jurisdiction over that property because “the forum
first assuming custody of the property at issue has exclusive
jurisdiction to proceed.” Lusardi, 976 F.2d at 588–89; see
also id. at 589 (holding that when the first Colorado River
factor is applicable, it is “dispositive,” and consideration of
the other three factors is unnecessary). Conversely, as with
prior exclusive jurisdiction, Colorado River abstention does
not apply absent “pending state court proceedings” involving
the same property. Cf. id.; see also Kirkbride v. Cont’l Cas.
Co., 933 F.2d 729, 734 (9th Cir. 1991).
Because the Sextons have not shown that any state
proceeding relating to their house is pending concurrently
with federal proceedings, the Colorado River abstention
doctrine is not implicated any more than the prior exclusive
10 SEXTON V . NDEX WEST , LLC
jurisdiction doctrine. Accordingly, we reject the Sextons’
Colorado River abstention claim as well.
AFFIRMED.