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Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 

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In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 15‐2415

U.S. BANK NATIONAL ASSOCIATION,

Plaintiff‐Appellee,

v.

CHERYLE A. COLLINS‐FULLER T. and

HEYWOOD FULLER T.,

Defendants‐Appellants.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 12 C 5057 — Marvin E. Aspen, Judge.

____________________

SUBMITTED JUNE 15, 2016* — DECIDED JULY 26, 2016

____________________

Before WOOD, Chief Judge, and POSNER and FLAUM, Circuit

Judges.

WOOD, Chief Judge. In June 2012, U.S. Bank National

Association, which has its main office in Ohio, filed this

                                                 

* After examining the briefs and the record, we have concluded that

oral argument is unnecessary. The appeal is thus submitted on the briefs

and the record. See Fed. R. App. P. 34(a)(2)(C).

Case: 15-2415 Document: 26 Filed: 07/26/2016 Pages: 7
2 No. 15‐2415

diversity suit asking for a foreclosure judgment on the

mortgage of a residential property owned by defendants

Heywood Fuller T. and Cheryle Collins‐Fuller T., both

citizens of Illinois (to whom we refer as the Fullers, since we

are not sure what “T” stands for). See 28 U.S.C. § 1332(a)(1).

U.S. Bank also named as a defendant KeyBank National

Association, which held a junior mortgage on the property.

After KeyBank was discovered also to be a citizen of Ohio, the

district court granted U.S. Bank’s motion voluntarily to

dismiss the case without prejudice because diversity was

lacking. See FED. R. CIV. P. 41(a)(2). The court also dismissed

certain claims that the Fullers had asserted against Litton

Loan Servicing, LLP, a nonparty, in their answer, because it

had not been served with the third‐party complaint. The

Fullers challenge the dismissal of both U.S. Bank’s complaint

and the claims they brought against Litton Loan. Because they

cannot overcome the fundamental defects the district court

identified, however, we affirm.

I

In 2005 the Fullers signed a promissory note for $232,000

with Fremont Investment & Loan in order to purchase a home

in Naperville, Illinois. Around the same time, they executed a

mortgage on the property, naming Mortgage Electronic

Registration Systems, Inc. (MERS) as the mortgagee. By 2011,

they had stopped making payments on their loan, and so

MERS assigned the primary mortgage to U.S. Bank. MERS

remained Fremont’s nominee for a junior mortgage Fremont

held in the amount of $58,000.  

In June 2012, U.S. Bank sued the Fullers in the district

court for the Northern District of Illinois for a judgment

ordering foreclosure of the mortgage, sale of the house, and

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No. 15‐2415 3

related relief under Illinois law. U.S. Bank also named as a

defendant KeyBank National Association, which the couple

had designated as the mortgagee when they executed a junior

mortgage on the property in 2005 securing a loan for $34,533.

The complaint asserted that the district court’s subject‐matter

jurisdiction was based on diversity. See 28 U.S.C. § 1332(a)(1).  

The Fullers answered the complaint in June 2013 and

asserted, among other things, self‐styled “counterclaims”

(actually a third‐party complaint) against their loan servicer,

nonparty Litton Loan Servicing, LLP. Litton Loan, the Fullers

charged, had violated the Federal Home Ownership Equity

Protection Act (“HOEPA”), Pub. L. No. 103‐325, 108 Stat. 2160

(1994), by fraudulently claiming that they were not making

their mortgage payments, causing them to default on the

mortgage. The Fullers never served Litton Loan with the

third‐party complaint, however, and so it never entered an

appearance or otherwise participated in the suit.

After further proceedings, U.S. Bank moved to dismiss the

suit voluntarily because it had discovered that KeyBank was

a citizen of Ohio. Since U.S. Bank is also a citizen of Ohio,

KeyBank’s presence as a defendant destroyed the complete

diversity that is necessary for jurisdiction under section

1332(a)(1).  

In March 2015, the district court granted U.S. Bank’s

motion and dismissed the complaint without prejudice to

refiling in state court. The Fullers argued that KeyBank was

not a required party, as Federal Rule of Civil Procedure 19(a)

uses the term, and should be dismissed (thus preserving

diversity jurisdiction). Because of KeyBank’s status as a junior

lienholder, the court regarded it as a party that had to be

joined if feasible. See id. Because KeyBank would destroy

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complete diversity, however, the court concluded that joinder

was not possible. The court decided that the suit could not

proceed in equity and good conscience without KeyBank as a

party. See FED. R. CIV. P. 19(b). The court declined to treat the

Fullers’ claims against Litton Loan as “counterclaims”

because counterclaims may be brought only against an

existing party, see FED.R. CIV. P. 13(a), (b), and the Fullers had

raised their claims against only Litton Loan, a nonparty. To

the extent that the Fullers intended to bring third‐party claims

against Litton Loan under Federal Rule of Civil Procedure

14(a), the court invited them to explain why their failure to

serve Litton Loan with their complaint within the requisite

120 days from the filing of the complaint was supported by

good cause. See FED. R. CIV. P. 4(m).

The Fullers responded that health problems, coupled with

bad advice from their former counsel, constituted good cause

for their failure timely to serve their complaint. The district

court was not persuaded and terminated the action. The

district court also rejected the Fullers’ attempt to refile the

third‐party complaint and serve it on Litton Loan.

The Fullers moved for reconsideration of the court’s

judgment dismissing their third‐party complaint. They took

the position that the district court, in dismissing their

complaint, had failed to consider the likelihood that the

statute of limitations had run on their claims against Litton

Loan. The district court denied the motion, explaining that

regardless of whether it was construed under Federal Rule of

Civil Procedure 59 or 60, the Fullers had not pointed to any

change in the law or new facts that would warrant

reconsideration, nor had they offered any other compelling

reason to alter the judgment.

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No. 15‐2415 5

II

A

On appeal the Fullers mount a two‐part challenge to the

district court’s decision to grant U.S. Bank’s motion for

voluntary dismissal based on lack of subject‐matter

jurisdiction. First, they argue that these proceedings involved

violations of federal regulations and statutes—the HOEPA

regulations, 12 C.F.R. §§ 1024, 1026, and the Dodd‐Frank Act

of 2010, Pub. L. No. 111–203, 124 Stat. 1376–2223—over which

the district court had federal‐question jurisdiction. But as the

district court recognized, these federal theories cannot

provide a basis for federal‐question jurisdiction because they

were raised by the defendants and do not appear on the face

of the plaintiff’s well‐pleaded complaint. See Rivet v. Regions

Bank of La., 522 U.S. 470, 475 (1998); City of Chicago v. Comcast

Cable Holdings, LLC, 384 F.3d 901, 904 (7th Cir. 2004).

U.S. Bank premised its claims only on Illinois state law.

Second, the Fullers challenge the district court’s refusal to

dismiss KeyBank from the litigation. As the court explained,

however, KeyBank was a required party to U.S. Bank’s

lawsuit: without KeyBank’s presence, the court could not

“accord complete relief” to U.S. Bank. FED. R. CIV. P.

19(a)(1)(A); see Extra Equipamentos E Exportaҫão Ltda. v. Case

Corp., 361 F.3d 359, 361 (7th Cir. 2004); N.D. ex rel. parents

acting as guardians ad litem v. Haw. Dep’t of Educ., 600 F.3d 1104,

1109 (9th Cir. 2010); Hooper v. Wolfe, 396 F.3d 744, 747–48 (6th

Cir. 2005). Under Illinois law it is possible for a senior

lienholder (here, U.S. Bank) to foreclose on its secured

property without joining a junior lienholder (KeyBank). See

735 ILCS 5/15‐1501(a); React Fin. v. Long, 852 N.E.2d 277, 281–

82 (Ill. Ct. App. 2006). Nevertheless, a junior lienholder’s

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interest in the property is not extinguished unless it is made a

party to the foreclosure action. See 735 ILCS 5/15‐1501(a);

ABN AMRO Mortg. Grp., Inc. v. McGahan, 931 N.E.2d 1190,

1197 (Ill. 2010); React Fin., 852 N.E.2d at 281. Because

KeyBank’s presence was required before the litigation could

completely extinguish all liens on the property, yet joining it

was not feasible (because its presence destroyed diversity),

the district court reasonably concluded that “in equity and

good conscience” it should dismiss the suit. FED. R. CIV. P.

19(b); see Extra Equipamentos E Exportaҫão Ltda., 361 F.3d

at 361; N. Arapaho Tribe v. Harnsberger, 697 F.3d 1272,

1282 (10th Cir. 2012). Dismissal eliminated the prejudicial

impact and inefficiency of forcing U.S. Bank to litigate its

dispute over the same property in both federal and state court

in order to obtain an adequate judgment. See FED. R. CIV. P.

19(b)(1), (3).

B

The defendants next assert that the district court wrongly

dismissed their third‐party complaint against Litton Loan for

failure to serve it in a timely fashion. The court had an

obligation to exercise its discretion to extend the deadline for

service, they contend, because Litton Loan knew about the

third‐party complaint. In fact, the Fullers say that Litton Loan

should have been aware of their claims against it because one

year before this suit began it had been acquired by Ocwen

Financial, the loan servicer for their U.S. Bank mortgage.

The Fullers came close to waiving this argument by not

raising it specifically before the district court. See Larson v.

United Healthcare Ins. Co., 723 F.3d 905, 918 (7th Cir. 2013). In

any event, we cannot say that the court acted impermissibly

by declining to provide an extension of time, see Coleman v.

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No. 15‐2415 7

Milwaukee Bd. of Sch. Dirs., 290 F.3d 932, 933–34 (7th Cir. 2002).

Whether Litton Loan had actual notice of the claims against it

through its parent company is only one factor the district

court may consider when deciding whetherto extend the time

for service. See Cardenas v. City of Chicago, 646 F.3d 1001, 1006–

07 (7th Cir. 2011). The court was free to determine, as it did,

that the Fullers’ failure over two years to pursue their claims

against Litton Loan diligently—or really to pursue them at

all—ruled out the necessary extension.

AFFIRMED.

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