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The Bank of New York Mellon v. Ashley

United States District Court, D. Maryland

March 28, 2018

THE BANK OF NEW YORK MELLON
v.
HOLLY G. ASHLEY, et al.

          MEMORANDUM OPINION

          DEBORAH K. CHASANOW, UNITED STATES DISTRICT JUDGE

         Before proceeding with this action, the precise nature of the claims, and the basis for this court's jurisdiction, must be clarified. Plaintiff's four count complaint does not recite a basis for jurisdiction, in violation of Fed.R.Civ.P. 8 (a)(1). The Civil Cover Sheet reflects that a United States government defendant is the “Basis of Jurisdiction” and, where the form calls for a citation to the civil statute under which suit is filed, the words “quiet title, ” with no code section, are written in. (ECF No. 1-1). The complaint contains claims for (I) declaratory judgment, (II) equitable subrogation, (III) quiet title, and (IV) breach of contract. No. count refers to any statute.

         After years of litigation, and seeming resolution of most, if not all, of the issues generated by the property records and various liens, the case appeared to be ready for final judgment. In trying to prepare that judgment, the court raised the issue of subject matter jurisdiction sua sponte and issued an order directing Plaintiff Bank of New York Mellon (“Plaintiff”) to file a memorandum supporting the court's exercise of jurisdiction. (ECF No. 82). Plaintiff filed a memorandum, Defendant the United States Department of the Treasury and Internal Revenue Services (collectively, the “United States”) responded, and Plaintiff replied. (ECF Nos. 83, 88, 93). The issue has been briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the case will be dismissed.

         I. Background

         This case was brought to determine the priority of liens on the real property known as 2902 Matapeake Drive, Upper Marlboro, Maryland (the “Property”). Pursuant to a deed dated October 5, 1999, the Property was conveyed by recorded deed to Defendant Holly G. Smith, n/k/a Holly G. Ashley. (ECF No. 57-3). Pursuant to a recorded deed dated November 24, 2003, Mrs. Ashley conveyed the Property to herself and Defendant Michael Ashley, her husband, as tenants by the entirety. (ECF No. 57-4).

         On December 22, 2004, Mr. and Mrs. Ashley refinanced their mortgage on the Property using proceeds obtained from a loan granted by WMC Mortgage in the amount of $400, 000 (the “Prior Loan”) in exchange for a deed of trust to the Property (the “Prior DOT”). (See ECF No. 63-2). Both Mr. and Mrs. Ashley were signatories to the Prior Loan, which paid off an existing $337, 500.00 mortgage lien; both Mr. and Mrs. Ashley were identified as grantors on the Prior DOT; and both Mr. and Mrs. Ashley executed the Prior DOT. The Prior DOT was recorded in the land records of Prince George's County on July 7, 2005. (Id.). On July 5, 2005, Mr. Ashley applied for and was granted a refinance loan from WMC Mortgage in the amount of $475, 000 (the “Subject Loan”). (ECF No. 63-4). The Subject Loan was funded and a closing was conducted in the ordinary course of the loan. Disbursement of the proceeds went to pay off the Prior DOT, in the amount of $405, 450.06. (ECF No. 57-6). Mr. Ashley - but not Mrs. Ashley - was identified as a grantor on the corresponding deed of trust (the “Subject DOT”), which Mr. Ashley executed on July 14. (ECF No. 63-3). The Subject DOT was recorded on December 21. (Id. at 1). BONY is the successor in interest to WMC Mortgage and, accordingly, the current holder of the Subject Loan and beneficiary of the Subject DOT.[1] (ECF No. 43 ¶ 21).

         On June 5, 2007, Mr. and Mrs. Ashley together conveyed the Property to the Ashley Family Trust by recorded deed (the “Trust DOT”). (ECF No. 57-10). Under the terms of the Ashley Family Trust, both Mr. Ashley and Mrs. Ashley held an undivided 50% interest in the Property. (ECF No. 57-11, at 8-9). On November 5, 2012, the United States filed Notices of Federal Tax Liens in the amount of $428, 227.50, noticed on October 11, 2012 and assessed on December 12, 2011, as to Mr. and Mrs. Ashley. (ECF No. 54-5). Finally, on December 21, 2012, the Ashley Family Trust conveyed the Property to Mr. Ashley by recorded quitclaim deed. (ECF No. 57-12).

         BONY filed this action requesting that the court determine the priority of liens against the Property on September 12, 2014. (ECF No. 1). The operative amended complaint was filed on October 29, 2015. (ECF No. 43). The six-count amended complaint asserts claims against four groups of interested parties: (1) Mr. and Mrs. Ashley; (2) CitiFinancial, Trustee Nancy J. Liberto, and Trustee Betty Lou Crumrine (concerning a now-discharged CitiFinancial deed of trust dated December 18, 2000 (the “CitiFinancial DOT”)); (3) the United States; and (4) the State of Maryland, Comptroller of Maryland (“Maryland Comptroller”). BONY seeks: declaratory relief determining that it holds a first-priority lien on the Property (Count I); a determination that it holds a first-priority lien by reason of equitable subrogation (Count II); to use quiet title to determine the owner of the Property and hold that the Subject DOT constitutes a valid first-priority lien (Count III); to obtain a decree reforming the Subject DOT to include the signature of Mrs. Ashley (Count IV); to obtain a constructive trust in its favor (Count V); and to obtain an equitable mortgage against the Property as of July 13, 2005 (Count VI). (ECF No. 43).

         The Clerk of Court entered default against Defendants CitiFinancial, Trustee Nancy J. Liberto, and Trustee Betty Lou Crumrine for their failure to plead or otherwise defend as directed in the summonses and as provided by the Federal Rules of Civil Procedure. (ECF Nos. 12; 14; 16). Accordingly, CitiFinancial and its trustees do not contest that the CitiFinancial DOT has been paid and satisfied and that any error in its release does not affect BONY's interest. (See ECF Nos. 43 ¶ 4; 53, at 6). The court also previously granted a joint motion establishing the priority of liens as to the Maryland Comptroller, but ordered that the order of judgment would not be entered until the entire case was resolved. (ECF No. 53).[2]

         Plaintiff previously filed a motion for consent judgment as to Mr. and Mrs. Ashley (ECF No. 28), which the United States opposed (ECF No. 31). The consent motion, inter alia, would have provided that the Subject DOT is equitably subrogated to the position and priority of the Prior DOT and the CitiFinancial DOT, and that Mr. and Mrs. Ashley intended for the Subject DOT to be a first-priority deed of trust against the Property. (ECF No. 28-1, at 2). On March 14, 2016, the court denied the consent motion without prejudice to its renewal because its resolution would have affected the priority of the United States' tax liens. Mr. and Mrs. Ashley answered the amended complaint on June 23. (ECF No. 72). In their answer, they request that the court enter judgment in favor of BONY establishing that the Subject DOT is the first-priority lien on the property. (Id.). The United States answered the amended complaint on December 21, 2015 (ECF No. 47). In a later opinion, the court purported to resolve some of the additional discrete issues. (ECF No. 73). In its motion for entry of final judgment, BONY recites that the Ashleys and the Comptroller of Maryland consent to the requested relief. (ECF No. 79).

         II. Standard of Review

Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree. It 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) (internal citations omitted). Subject matter jurisdiction can be challenged for the reason that “a complaint simply fails to allege facts upon which subject matter jurisdiction can be based. In that event, all the facts alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same procedural protection as he would receive under a Rule 12(b)(6) consideration.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). In such a situation, the complaint should be dismissed if it does not allege sufficient facts to invoke subject matter jurisdiction. Kerns v. United States, 585 F.3d 187, 193 (4th Cir. 2009).

         III. ...


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