Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-00035/USCOURTS-azd-2_12-cv-00035-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Contract Dispute

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Fannie Mae, a corporation organized and

existing under the laws of the United

States,

Plaintiff, 

vs.

H&B II, LLC, an Arizona limited liability

company; Comanche 18, LLC, a

California limited liability company; and

John Does I-X,

Defendants. 

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No. CV 12-0035-PHX-JAT

ORDER

Pending before the Court is Plaintiff’s Motion to Remand (Doc. 18). The Court now

rules on this Motion.

I. BACKGROUND

On December 9, 2011, Plaintiff filed this action in Maricopa County Superior Court

(the “Superior Court”). (Doc. 1, Exhibit 2). In its Complaint, Plaintiff alleges that its

predecessor-in-interest, Deutsche Bank Berkshire Mortgage, Inc. (“Deutsche Bank”), made

a loan to Defendants in the principal amount of $10,163,700. (Id.). The Note was secured

by a Deed of Trust on the property located at 9350 North 67th Avenue, Glendale, Arizona

85302 (the “Property”). (Id.). Deutche Bank assigned all of its interest in the Note and Deed

of Trust to Fannie Mae. (Id.). Defendants gave Fannie Mae a first priority lien and security

interest in all personal property located on or connected with the Property, with such interest

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perfected in a UCC Financing Statement. (Id.). The Deed of Trust and Assignment of

Collateral includes an assignment of leases and rents provision, wherein Defendants assigned

all leases rents, issues or income from the Property to Plaintiff. (Id.). 

Plaintiff further alleges that, in November 2011, Defendants defaulted on their

obligations under the Note and other loan documents by failing to pay all outstanding

amounts of principal, interest, and other amounts due and owing under the Loan Documents.

(Id.). In its Complaint, Plaintiff seeks the Appointment of Receiver as provided for by

Arizona Revised Statutes sections 33-702(B)(1) and 12-1241. (Id.). Although not alleged

in the Complaint, the Parties represented to the Court, during a hearing on January 10, 2012

that, pursuant to the Arizona statutes governing non-judicial foreclosures, Plaintiffs have

noticed a Trustee’s Sale of the Property for March 19, 2012.

On December 14, 2011, the Superior Court set a hearing regarding the appointment

of a receiver to take place on January 6, 2012 at 8:45 a.m. (Doc. 1, Exhibit 3). The Superior

Court also entered a temporary restraining order restraining Defendants from “removing

secreting, expending, disbursing, transferring, assigning, selling, conveying, devising,

pledging, mortgaging, creating a security interest in, or otherwise disposing of the whole or

part of the Property, other than in the ordinary course of business, pending the hearing set

forth above.” (Id.). 

 On January 5, 2012, Defendants removed this action to the District Court of Arizona.

(Doc. 1). On January 6, 2012, this Court notified Defendants of deficiencies in their Notice

of Removal and ordered them to file an amended notice of removal. (Doc. 6). This Court

specifically pointed out that Defendants (1) failed to plead the citizenship of the members of

limited liability companies, (2) failed to identify how Fannie Mae, as a corporation chartered

by the federal government, could be considered a citizen of the District of Columbia for

diversity purposes, and (3) failed to establish that the amount in controversy exceeds

$75,000. (Id). The Court also set a hearing to discuss either the application for appointment

of receiver or remanding this case. (Doc. 7). The Court ordered that the temporary

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restraining order issued by the Superior Court remain in full force pending the Court’s

decision regarding remanding the case or an appointment of a receiver. (Id.). 

On January 9, 2012, Defendants filed an Amended Notice of Removal, attempting to

address the problems discussed in the Court’s Order. During the hearing on January 10,

2012, the Court informed Defendants that it still had concerns regarding the citizenship of

a federally chartered corporation and the amount in controversy. Defendants informed the

Court that they were unprepared to address these concerns at the hearing and the Court gave

Defendants until 5:00 p.m. on January 11, 2012 to supplement their Notice of Removal. 

In their supplemental Notice of Removal, Defendants directed the Court to 12 U.S.C.

§ 1717, which states that Fannie Mae “shall be deemed for the purposes of jurisdiction and

venue in civil actions, to be a District of Columbia corporation.” (Doc. 17). Defendants also

argued that the amount in controversy was met because, when a receiver is sought, the

amount in controversy is the full value of the company’s assets. (Id.). Plaintiff then filed a

Motion to Remand, agreeing with Fannie Mae’s citizenship, but arguing that Defendants

have failed to meet the amount in controversy requirement. (Doc. 18). Accordingly, the

Court must now determine whether Fannie Mae has adequately alleged the amount in

controversy.

II. LEGAL STANDARD

A defendant may remove a civil action filed in state court to federal district court if

the district court could have exercised original jurisdiction over the matter. 28 U.S.C.A. §

1441(a). On a motion to remand, the scope of the removal statute must be strictly construed.

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992). “The ‘strong presumption’ against

removal jurisdiction means that the defendant always has the burden of establishing that

removal is proper.” Id. Doubts as to removability must be resolved in favor of remanding

the case to state court. Id.

District courts have original jurisdiction over all civil actions “where the matter in

controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is

between . . . citizens of different States.” 28 U.S.C.A. § 1332(a). The party asserting

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diversity jurisdiction bears the burden of proving diversity of citizenship. Lew v. Moss, 797

F.2d 747, 749 (9th Cir. 1986).

A federal court must ensure that it has proper jurisdiction over the appointment of a

receiver because “[w]hen the federal court is without jurisdiction of the action, the

receivership necessarily is improper; the appointment of the receiver is a nullity and the

receiver has no power to act.” 9 CHARLES ALAN WRIGHT ET. AL., FEDERAL PRACTICE AND

PROCEDURE § 2985 (4th ed. 2009) (citing Fahey v. Calverley, 208 F.2d 197 (9th Cir. 1953),

cert. denied, 347 U.S. 955 (1954)). 

III. ANALYSIS

Plaintiff argues that Defendants have failed to establish that the amount in controversy

exceeds $75,000 in an action solely for the appointment of a receiver. In response,

Defendants argue that the amount in controversy should be measured by the value of the

Property. Alternatively, Defendants argue that the amount in controversy should be

measured by the amount of rents that, if appointed, the Receiver would collect, depriving

Defendants of the ability to themselves collect those rents. 

Defendants argue and cite cases establishing that, when parties seek equitable relief,

the amount in controversy should be measured by the value of the interest to be protected by

the equitable relief requested. Defendants argue that, in this case, the value of the interest

to be protected by equitable relief is the value of the Property that the Receiver would

manage until the rights of the parties are determined. In each case relating to receivership

that Defendants cite in support of this proposition, the Court had jurisdiction over matters

that would ultimately determine the rights of the parties to the suit. In other words, in all of

the cases regarding receivership cited by Defendants, there existed an underlying cause of

action independent of the request for the appointment of a receiver. Here, no such

underlying cause of action exists. 

In this case, Plaintiff seeks to proceed with a non-judicial foreclosure of the Property

and Arizona Revised Statutes section 12-1241 provides for the appointment of a receiver in

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1

 “The superior court or a judge thereof may appoint a receiver to protect and preserve

property or the rights of parties therein, even if the action includes no other claim for relief.”

ARIZ. REV. STAT. ANN. § 12-1241. 

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the absence of an underlying cause of action.1 Consequently, in the absence of an underlying

cause of action, this Court would not ultimately determine the rights of the parties to the

Property. Accordingly, the value of the Property cannot serve as a basis for determining the

amount in controversy. 

In this action, Plaintiff seeks the appointment of an equity receiver. In appointing an

equity receiver, the Court does not determine the parties rights to the Property. Rather,

An equity receiver is a person specially appointed by the court

to take control, custody, or management of property that is

involved in or is likely to become involved in, litigation for the

purpose of preserving the property, receiving rents, issues, or

profits, and undertaking any other appropriate action with regard

to the property pending its final disposition by the suit . . . . The

receiver is considered to be an officer of the court, and therefore

not an agent of the parties, whose appointment is incident to

other proceedings in which some form of primary relief is

sought.

9 CHARLES ALAN WRIGHT ET. AL., FEDERAL PRACTICE AND PROCEDURE § 2981 (4th ed.

2009) (internal quotation omitted). “The money in his hands is in custodia legis for whoever

can make out title to it. Id. at n.8 (internal citation omitted). 

Accordingly, any effects resulting from the Court’s appointment of a receiver (beyond

the cost of actually appointing such a receiver) are collateral to the ultimate disposition of

the parties’ rights in the Property. “It is well settled that the amount in controversy

requirement cannot be met by taking into account any collateral effect which may follow

adjudication, whether by way of estoppel of the parties or otherwise.” Rapoport v. Rapoport,

416 F.2d 41, 43 (9th Cir. 1969) (holding that the court lacked subject matter jurisdiction to

consider an action to set aside a divorce decree because the action only affected the parties’

interests in certain real property collaterally and not directly, and, thus, the value of the

property could not be considered as part of the amount in controversy.); see also Pusey &

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Jones Co. v. Hanssen, 261 U.S. 491 (1923) (“a receivership is not final relief. The

appointment determines no substantive right, nor it is a step in the determination of such a

right. It is a means of preserving property which may ultimately be applied toward the

satisfaction of substantive rights.”). 

Accordingly, Defendants have failed to establish that this Court has subject matter

jurisdiction, and, thus, this case must be remanded.

IV. CONCLUSION

Based on the foregoing,

IT IS ORDERED that 

1. Plaintiff’s Motion to Remand (Doc. 18) is granted. 

2. The Clerk of the Court shall remand this action to Maricopa County Superior

Court. 

IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss (Doc. 14) is

denied as moot.

DATED this 17th day of January, 2012.

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