United States District Court, D. Colorado
ORDER OF DISMISSAL
PHILIP
A. BRIMMER, CHIEF UNITED STATES DISTRICT JUDGE
This
matter comes before the Court on Plaintiff's Response to
Order to Show Cause [Docket No. 9]. Plaintiff asserts that
this Court has jurisdiction pursuant to 28 U.S.C. §
1332. Docket No. 1 at 2, ¶ 6; Docket No. 9 at 2.
Plaintiff
filed this lawsuit on May 23, 2019 asserting claims for
wrongful foreclosure, negligent misrepresentation,
intentional interference with contract, civil theft,
conversion, unjust enrichment, and breach of contract based
on the foreclosure of real property in which plaintiff held
an interest. See Docket No. 1 at 7-14. Plaintiff alleged that
the Court has subject matter jurisdiction pursuant to 28
U.S.C. § 1332 because the parties are completely diverse
and plaintiff is seeking to recover the value of its mortgage
loan, which exceeds the jurisdictional amount of $75, 000.
Id. at 2, ¶ 6. On June 12, 2019, the Court
ordered plaintiff to show cause why this case should not be
dismissed due to the Court's lack of subject matter
jurisdiction. Docket No. 8 at 5. The Court found that the
facts alleged in the complaint were insufficient to establish
the citizenship of defendants Janet Commodore and Erin Snow.
Id. at 2. In addition, the Court determined that
plaintiff had failed to establish an amount in controversy
exceeding $75, 000 with respect to its claims against
defendant Snow. Id. at 3. As the Court explained in
its order, the conversion claim sought only $49, 985.86 and
the breach of contract claim merely alleged that defendant
Snow had “failed to satisfy her obligations under the
Deed of Trust and [was] liable for plaintiff's
attorney's fees in attempting to collect the outstanding
balance on the mortgage loan.” Id. at 5.
Critically, plaintiff did not assert that its attorney's
fees alone were sufficient to satisfy the amount in
controversy requirement. Id. And it did not appear
to the Court that plaintiff could hold defendant Snow liable
for contract damages equal to the outstanding balance on the
mortgage loan under the terms of the Deed of Trust.
Id. (citing Docket No. 1-2 at 10, ¶ 13).
Plaintiff
filed its response to the Court's order to show cause on
June 20, 2019. Docket No. 9. In that response, plaintiff
provides additional information showing that defendants
Commodore and Snow are domiciled in Colorado. See
Docket No. 9 at 3-6. In addition, plaintiff argues that the
amount-in-controversy requirement has been met as to
defendant Snow because (1) plaintiff may seek general
contract damages against defendant Snow equaling “the
amount secured by the Deed of Trust, ” which exceeds
$75, 000; and (2) the Court may consider, as part of the
amount-in-controversy requirement, “a reasonable
estimate of the attorney fees [plaintiff] has and will incur
in prosecuting” its breach of contract claim. Docket
No. 9 at 8-9.[1] At no point, however, does plaintiff
address the effect of section 13 of the Deed of Trust, which
provides that
any Borrower who co-signs this Security Instrument but does
not execute the Note (a “co-signer”): (a) is
co-signing this Security Instrument only to mortgage, grant
and convey the co-signer's interest in the Property under
the terms of this Security Instrument; [and] (b) is not
personally obligated to pay the sums secured by this Security
Instrument . . . .
Docket
No. 1-2 at 10, ¶ 13. There is no dispute that defendant
Snow signed the Deed of Trust, but did not execute the
promissory note. See Docket No. 9 at 8. Accordingly,
section 13 appears to foreclose plaintiff's argument that
it can hold defendant Snow liable for general contract
damages equal to either the outstanding balance on the
mortgage loan or the “value of a foreclosure that
[plaintiff] could have instituted.” Docket No. 9 at 8;
see also Flagstar Bank, FSB v. A.M. Hochstadt, 405
Fed.Appx. 374, 377 (11th Cir. 2010) (unpublished) (holding
that similar language in a Deed of Trust relieved the
co-signer of liability for both the mortgage loan and any
items secured by the mortgage, including “escrow items,
taxes, insurance, costs in defending interests in the
property, and fees relating to a default”).
While
plaintiff correctly notes that attorney's fees may be
considered as part of the minimum amount in controversy when
they are provided for “by statute or contract, ”
Stuart v. Cocorilla, Ltd., No. 18-cv-00926-KLM, 2019
WL 529517, at *4 (D. Colo. Feb. 11, 2019); see
Docket No. 9 at 7, plaintiff does not identify any statute
entitling plaintiff to attorney's fees and the two Deed
of Trust provisions that address the issue, sections 9 and
14, appear to fall within the scope of section 13's
limitation on liability.[2]
Section
9 of the Deed of Trust states that, if “[b]orrower
fails to perform the covenants and agreements contained in
this Security Interest” or “there is a legal
proceeding that might significantly affect Lender's
interest in the Property and/or rights under this Security
Instrument, ” then
Lender may do and pay for whatever is reasonable or
appropriate to protect Lender's interest in the Property
and rights under this Security Instrument . . . . includ[ing]
. . . (c) paying reasonable attorneys' fees to protect
its interest in the Property and/or rights under this
Security Instrument. . . . Any amounts disbursed by Lender
under this Section 9 shall become additional debt of Borrower
secured by this Security Instrument.
Docket
No. 1-2 at 8, ¶ 9. Likewise, section 14 provides that
Lender may charge Borrower fees for services performed in
connection with Borrower's default, for the purpose of
protecting Lender's interest in the Property and rights
under this Security Instrument, including, but not limited
to, attorneys' fees . . . .
Id. at 10, ¶ 14. The Deed of Trust
“secures to Lender” not only the mortgage loan,
but also “the performance of Borrower's covenants
and agreements under this Security Instrument and the Note,
” which includes the payment of attorney's fees
under sections 9 and 14. Id. at 3. Accordingly, the
attorney's fees provided for in those sections are added
to the outstanding loan balance to become “sums secured
by” the Deed of Trust, for which defendant Snow cannot
be held liable under section 13. Id. at 10, ¶
13; see also Flagstar Bank, FSB, 405
Fed.Appx. at 376-77 (holding that the “sums secured
by” the mortgages included both the mortgage loan and
the performance of covenants requiring payment of
“escrow items, taxes, insurance, costs in defending
interests in the property, and fees relating to a
default”). This conclusion is supported by the last
sentence of the quoted portion of section 9, which states
that any amounts “disbursed” under the section
“shall become additional debt . . . secured by this
Security Instrument.” Docket No. 1-2 at 8, ¶ 9.
Even
assuming defendant Snow can be held liable for attorney's
fees under the Deed of Trust, “a party seeking
diversity jurisdiction may not aggregate the attorneys'
fees from multiple claims to meet the amount in controversy
requirement.” Stuart, 2019 WL 529517, at *4
(citing Martin v. Franklin Capital Corp., 251 F.3d
1284, 1293 (10th Cir. 2001)). Plaintiff estimates that it has
already incurred $61, 724.03 in attorney's fees and
costs, but makes no attempt to apportion that amount among
the various claims asserted in this case. See Docket
No. 9 at 9.[3] The Court is therefore unable to determine
whether the attorney's fees attributable to the claims
against defendant Snow would satisfy the jurisdictional
amount in controversy.
The
Court is mindful that plaintiff is not required to prove its
case at this stage of the proceedings. See TBM Land
Conservancy, Inc. v. Nextel West Corp., No.
15-cv-00134-PAB-KLM, 2016 WL 10674152, at *2 (D. Colo. Aug.
8, 2016) (“Once the [jurisdictional facts] have been
established, uncertainty about whether the plaintiff can
prove its substantive claim, and whether damages (if the
plaintiff prevails on the merits) will exceed the threshold,
does not justify dismissal.” (quoting McPhail v.
Deere & Co., 529 F.3d 947, 955 (10th Cir. 2008)).
Nevertheless, given the absence of allegations regarding the
amount of contract damages plaintiff is seeking against
defendant Snow, see Docket No. 1 at 14-15; see
also Docket No. 8 at 5, and plaintiff's failure to
respond to that portion of the Court's show cause order
noting the apparent effect of section 13 of the Deed of Trust
on defendant Snow's liability for contract damages,
see Docket No. 8 at 5, the Court finds that
plaintiff has failed to carry its burden of establishing
subject matter jurisdiction as a threshold matter. See
McPhail, 529 F.3d at 955 (“[A] proponent of
federal jurisdiction must, if material factual allegations
are contested, prove those jurisdictional facts by a
preponderance of the evidence.” (internal quotation
marks omitted)); Woodme ...