United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 98-1962

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Cynthia McNeill, Formerly known as *

Cynthia J. Franke, *

*

Appellant, *

*

v. *

*

William E. Franke, doing business as *

Gannon Partnership 19, L.P.; Gannon *

Partnership 19, L.P.; Kevin W. Kelly; *

Pentad Properties, Inc., formerly known *

as Kemmons Wilson Properties, Inc., *

formerly known as St. Louis Associates * Appeal from the United States

Limited Partnership, formerly known as * District Court for the Eastern

St. Louis Associates, Ltd., Inc.; St. * District of Missouri.

Louis Associates Limited Partnership, *

formerly known as St. Louis * 

Associates, Ltd.; Phillip J. Paster; *

Department of Housing and Urban *

Development, Henry Cisneros, *

Secretary; West Pointe Limited *

Partnership; Northwest Village Limited *

Partnership; Grandview Hills Limited *

Partnership; Park Ridge Apartments *

Limited Partnership; Lamplite Limited *

Partnership, *

*

Appellees. *

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 Submitted: February 8, 1999

Filed: March 8, 1999

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Before FAGG, WOLLMAN, and LOKEN, Circuit Judges.

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FAGG, Circuit Judge.

This case stems from a Missouri divorce judgment awarding Cynthia McNeill

a 20% interest in a private promissory note secured by a mortgage lien against five

residential apartment complexes. McNeill recorded her interest, and her former

husband, William E. Franke, retained the remaining 80%. Contrary to the divorce

judgment’s terms, Franke later unilaterally refinanced the note with a loan made

under the National Housing Act and co-insured by the Federal Housing

Administration, a branch of the United States Department of Housing and Urban

Development (HUD). When Franke’s partnerships defaulted on the loans, HUD was

assigned mortgage liens against the property. Seeking to foreclose her mortgage

interest and to determine the relative priority between her lien and HUD’s liens,

McNeill filed this lawsuit in federal district court. The district court dismissed the

federal case as barred by collateral estoppel and res judicata based on a Missouri

contempt judgment against Franke. McNeill appealed, and we reversed. SeeMcNeill

v. Franke, 84 F.3d 1010 (8th Cir. 1996). On remand, HUD moved to dismiss the case

for lack of subject matter jurisdiction. After HUD sold its mortgages to Prairie

Properties, L.L.C., McNeill sought to add Prairie Properties as a defendant. The

district court granted HUD’s motion to dismiss and denied as moot McNeill’s motion

to add Prairie Properties. McNeill again appeals, and this time we affirm.

In her first amended complaint, McNeill alleged the district court had

“jurisdiction of and over the subject matter and the parties . . . [under] 28 U.S.C. §

2410 in that this is an action to foreclose a lien against real property on which the
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United States of America claims a lien.” Section 2410 provides that “the United

States may be named a party in any civil action or suit in any district court, or in any

State court having jurisdiction of the subject matter--(1) to quiet title to, (2) to

foreclose a mortgage or other lien upon, . . . real or personal property on which the

United States has or claims a mortgage or other lien.” The statute does not grant

jurisdiction, however, but merely waives sovereign immunity. See North Dakota v.

Fredericks, 940 F.2d 333, 334-35 (8th Cir. 1991). Thus, McNeill’s jurisdictional

allegation is incorrect. Despite this defect, McNeill asserts dismissal was improper

because she pleaded facts in her complaint showing a basis for federal question

jurisdiction under 28 U.S.C. § 1331. McNeill has filed a motion to amend her

complaint to allege jurisdiction on this ground. See 28 U.S.C. § 1653 (1994);

Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830-31 (1989). 

According to § 1331, federal district courts have original jurisdiction over

cases “arising under the . . . laws . . . of the United States,” including the federal

common law, see Illinois v. City of Milwaukee, 406 U.S. 91, 100 (1972). Relying

on United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979), McNeill contends her

lawsuit arises under federal common law. In Kimbell Foods, the Supreme Court

considered whether contractual liens arising from federal loan programs took

precedence over private liens arising under local law, in the absence of federal

statutes setting priorities. See 440 U.S. at 718. Noting it had consistently held

federal law governs questions involving the rights of the United States arising under

nationwide federal lending programs, the Court held the priority of liens stemming

from federal lending programs must be decided with reference to federal law. See id.

at 726. Although the source of law is federal, the Court concluded a national rule is

unnecessary to protect federal interests underlying the loan programs. See id. at 729.

The Court thus selected state law to be incorporated as the federal rule of decision for

establishing the relative priority of competing federal and private liens. See id. at

740. 
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Contrary to McNeill’s assertion, Kimbell Foods does not control the decision

in this appeal. Kimbell Foods dealt with choice of law, not federal question

jurisdiction. Federal question jurisdiction exists only when the plaintiff’s “wellpleaded complaint establishes either that federal law creates the cause of action or

that the plaintiff’s right to relief necessarily depends on resolution of a substantial

question of federal law.” Franchise Tax Bd. v. Construction Laborers Vacation Trust,

463 U.S. 1, 27-28 (1983); see Berger Levee Dist. v. United States, 128 F.3d 679, 681

(8th Cir. 1997). “[T]he vast majority of cases brought under the general federalquestion jurisdiction . . . are those in which federal law creates the cause of action.”

Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804, 808 (1986). When

state law creates the cause of action, “original federal jurisdiction is unavailable

unless it appears that some substantial, disputed question of federal law is a necessary

element of one of the well-pleaded state claims, or that one or the other claim is

‘really’ one of federal law.” Franchise Tax, 463 U.S. at 13; see Merrell Dow, 478

U.S. at 808-09. Nevertheless, “the mere presence of a federal issue in a state cause

of action does not automatically confer federal-question jurisdiction.” Merrell Dow,

478 U.S. at 813. 

In the case before us, federal common law does not create McNeill’s causes of

action. McNeill’s first amended complaint sets forth three counts. The quiet title

count seeks a declaration that McNeill’s lien against the property is valid and

perfected and has first priority over the defendants’ liens. The second count asserts

St. Louis Associates breached the promissory note by failing to pay as the note

required. The third count reasserts McNeill’s superior interest in the property and

seeks judicial foreclosure. McNeill’s complaint does not specify any statutory

entitlement for the relief it seeks, but it appears the complaint states claims under

Missouri statutes. See Mo. Rev. Stat. § 527.150 (1994) (quiet title); id. § 443.190

(judicial foreclosure). McNeill’s breach of contract claim against a private entity also

arises under state law. See Federal Nat’l Mortgage Ass’n v. Howlett, 521 S.W.2d
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428, 437 (Mo. 1975). Indeed, McNeill does not even assert her claims are federal

ones. 

 Without a federal cause of action, McNeill’s case cannot arise under federal

law unless her right to relief under state law requires resolution of a substantial

question of federal law in dispute between the parties. See Franchise Tax, 463 U.S.

at 13. No disputed question of federal law is a necessary element of McNeill’s state

claims. See id. To prevail on her claims involving HUD, McNeill must show that,

under state law, she has an interest in the mortgage lien and her lien is perfected.

Then, the court must decide the priority of the liens held by McNeill and HUD.

Although Kimbell Foods dictates that the priority issue is governed by federal

common law, there is no federal rule of priority so state law controls. See Chicago

Title Ins. Co. v. Sherred Village Assocs., 708 F.2d 804, 806 (1st Cir. 1983). Thus,

even if the priority issue is reached, McNeill’s success still depends on state law.

When, as here, the rights involved are rooted in state law, the presence of a collateral

federal issue does not transform the action into a federal case. See Merrell Dow, 478

U.S. at 813; Robbins v. Reagan, 780 F.2d 37, 43 (D.C. Cir. 1985) (per curiam). 

In conclusion, state law controls the outcome of this garden-variety quiet title,

breach of contract, and judicial foreclosure action. McNeill will win or lose on the

playing field of state law. Her case does not belong in the federal arena. We thus

affirm the district court’s dismissal for lack of federal subject matter jurisdiction. We

grant HUD’s motion to strike those parts of McNeill’s appendix that were not before

the district court. See Fed. R. App. P. 10(a); Barry v. Barry, 78 F.3d 375, 379 (8th

Cir. 1996). We deny as moot McNeill’s motion to amend her complaint. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.