Court Opinion

ID: 868279
Source: CourtListenerOpinion
Date Created: 2013-05-21 00:00:23.685641+00
Date Added: 2024-06-11T09:11:02.008175
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 12-1125

HERBERT A. MCFADDEN; ROSETTA E. MCFADDEN,

                Plaintiffs - Appellants,

           v.

FEDERAL NATIONAL MORTGAGE ASSOCIATION; FLAGSTAR BANK, FSB;
SAMUEL I. WHITE, P.C.,

                Defendants - Appellees.

Appeal from the United States District Court for the Western
District of Virginia, at Roanoke.     James C. Turk, Senior
District Judge. (7:11-cv-00335-JCT)

Argued:   January 30, 2013                  Decided:   May 20, 2013

Before WILKINSON, KEENAN, and WYNN, Circuit Judges.

Affirmed by unpublished opinion.      Judge Keenan      wrote the
majority opinion, in which Judge Wilkinson joined.      Judge Wynn
wrote a dissenting opinion.

ARGUED: Thomas Dean Domonoske, Harrisonburg, Virginia, for
Appellants.    Joseph Samuel Dowdy, NELSON MULLINS RILEY &
SCARBOROUGH, LLP, Raleigh, North Carolina; Ronald James Guillot,
Jr., SAMUEL I. WHITE, PC, Virginia Beach, Virginia, for
Appellees.   ON BRIEF: George E. Kostel, NELSON MULLINS RILEY &
SCARBOROUGH, LLP, Washington, D.C., for Appellees Federal
National Mortgage Association and Flagstar Bank, FSB.
Unpublished opinions are not binding precedent in this circuit.

                                2
BARBARA MILANO KEENAN, Circuit Judge:

       Herbert A. McFadden and Rosetta E. McFadden (the McFaddens)

filed a complaint in a Virginia state court against Flagstar

Bank, F.S.B. (Flagstar), Federal National Mortgage Association

(Fannie       Mae),      and     Samuel       I.     White,       P.C.     (White,      P.C.)

(collectively,           the     defendants),          asserting          various      claims

relating to the foreclosure and sale of the McFaddens’ home.

After the defendants removed the action to the federal district

court, the McFaddens filed a motion to remand the case to the

state court on the ground that the district court lacked subject

matter jurisdiction.              The district court summarily denied the

motion     to     remand.        After    a   hearing,        the    court        granted   the

defendants’ motions to dismiss.                     Among other things, the court

held that the McFaddens failed to state a claim under Federal

Rule of Civil Procedure 12(b)(6).                    The McFaddens filed a timely

appeal to this Court.

       Upon our review, we hold that the district court did not

err   in    denying      the    McFaddens’         motion    to     remand,       because   the

court      had    diversity      jurisdiction         over    the     McFaddens’       claims

pursuant to 28 U.S.C. § 1332.                 We further hold that the district

court did not err in dismissing under Rule 12(b)(6) their claim

to    quiet      title   and     their    equitable         claim    to    set      aside   the

foreclosure        sale,       because    those      claims       lacked      a    sufficient

factual and legal basis.

                                               3
                                                   I.

       The     McFaddens       alleged          in       their   complaint      the   following

facts, which we accept as true for purposes of this appeal. 1                                  In

July       2007,   the   McFaddens            obtained       a   loan    from     Flagstar   for

$116,500, which was secured by a deed of trust on the McFaddens’

home in Pulaski County, Virginia (the property).                                  The terms of

the loan were set forth in a note, in which the McFaddens agreed

to make monthly payments of about $900 for 20 years.

       The     terms     of    the       note      established        that    Flagstar      could

freely transfer the note to a third party without notice to the

McFaddens.         The deed of trust similarly provided for the free

transfer of the note and stated that the agreements in the deed

of   trust     “shall        bind    .    .    .     and    benefit     the   successors      and

assigns” of the lender.                  The deed of trust named Flagstar as the

lender, and named Mortgage Electronic Registration Systems, Inc.

(MERS) as the beneficiary and “nominee for Lender and Lender’s

successors and assigns.”

           At some point before August 2009, Flagstar transferred the

note to Fannie Mae, but retained the obligation to receive the

loan payments and continued to function as the “servicer” on the

loan.        After     the    McFaddens         began       having      trouble    making    loan

       1
       We employ this standard because the case was decided on a
motion to dismiss under Rule 12(b)(6).     Flood v. New Hanover
Cnty., 125 F.3d 249, 251 (4th Cir. 1997).

                                                     4
payments,    Flagstar       sent    them    a        letter    describing       the    Home

Affordable     Modification         Program          (HAMP),     a    federal     program

designed to help certain homeowners who are financially unable

to meet their current mortgage obligations.                          See U.S. Dep’t of

the   Treasury,     Home    Affordable      Modification          Program    Guidelines

(Mar. 4, 2009) 2; see also Loan Modification Group, Inc. v. Reed,

694 F.3d 145, 147 (1st Cir. 2012) (describing HAMP).                        The letter

stated that if the McFaddens qualified under HAMP and complied

with the terms of a “trial period plan,” their loan would be

modified, permitting them to avoid foreclosure.

      In    response       to    this   letter,         the     McFaddens       submitted

documentation       to     Flagstar     seeking         to     qualify    for    a     loan

modification,       and    the     application         process       continued    over    a

period of many months.             According to Flagstar, the process was

delayed due to the McFaddens’ failure to submit all the required

documents.        The McFaddens alleged, however, that Flagstar lost

certain documents that they had submitted, and required them to

provide various duplicate items on several occasions.                                 Before

receiving     a     final        decision       on     their      loan     modification

application,       the    McFaddens     were         notified    that    because       they

      2
       Available at http://www.treasury.gov/press-center/press-
releases/documents/modification_program_guidelines.pdf.

                                            5
defaulted on the loan, their property would be sold at auction

on March 10, 2011 (the foreclosure sale).

     The notice of foreclosure was signed by White, P.C., which

was listed as substitute trustee.               Attached to that notice was a

document executed by Flagstar, stating that it was “the present

holder or the authorized agent of the holder of the note secured

by the deed of trust,” and that, as such entity, Flagstar had

appointed White, P.C. as substitute trustee.

     Upon     receiving    the    notice       of    foreclosure,       the    McFaddens

contacted     Flagstar,     and    a    Flagstar        representative         allegedly

informed    them   orally       that    “their        loan     modification         was    in

process, and that no foreclosure would occur.”                            However, the

foreclosure     sale      proceeded       in    accordance         with       the     terms

contained in the notice.           Flagstar was the highest bidder at the

sale, and purchased the property for $123,009.

     Flagstar assigned its rights in the property to Fannie Mae,

after which White, P.C. executed and delivered a deed of trust

transferring the property to Fannie Mae (the foreclosure deed).

About   one    week     after     the    foreclosure         sale,      the    McFaddens

received      written     notice        from        Flagstar     that     their           loan

modification application had been denied.

     Fannie Mae filed an unlawful detainer action in Virginia

state court against the McFaddens, seeking to evict them and to

take possession of the property.                     In response, the McFaddens

                                          6
filed the present action in Virginia state court against the

defendants asserting six claims, including the quiet title claim

and a claim for equitable relief to set aside the foreclosure

sale.     The McFaddens also asserted violations of the Virginia

Consumer    Protection     Act   (VCPA)      against      White,   P.C. 3        The

defendants removed the case to the federal district court, on

the basis that the court had federal question jurisdiction under

28 U.S.C. § 1331.        According to the defendants, the McFaddens’

claims were governed by the Home Owners Loan Act (HOLA), 12

U.S.C. §§ 1461-1470.

     The McFaddens filed a motion to remand, contending that the

district court lacked subject matter jurisdiction because the

claims presented only questions of state law.                In opposition to

the motion to remand, Flagstar and Fannie Mae argued that in

addition to federal question jurisdiction, the district court

had diversity jurisdiction over the action in accordance with 28

U.S.C. § 1332.       Flagstar and Fannie Mae contended that even

though both the McFaddens and one defendant, White, P.C., were

citizens    of   Virginia,   there     was    complete      diversity       of   the

parties    because   the   McFaddens       lacked   any    possible     cause     of

action against White, P.C. and, therefore, under the doctrine of

     3
       The McFaddens also asserted claims of negligence against
Flagstar and fraudulent conduct against Flagstar and Fannie Mae.

                                       7
fraudulent        joinder,      White,      P.C.’s       citizenship       should     not    be

considered.

       The district court summarily denied the McFaddens’ motion

to    remand,      and    did   not    state       on    which    basis    the      court    was

exercising jurisdiction.                   The court proceeded to consider the

defendants’ motions to dismiss the case.                          After a hearing, the

district court granted the motions to dismiss, concluding that

HOLA preempted the McFaddens’ claims and, alternatively, that

the    McFaddens’        complaint     failed       to    state    a   claim     under      Rule

12(b)(6).         The McFaddens timely filed the present appeal.

                                              II.

                                              A.

       The    McFaddens         contend      that       the    district     court      lacked

subject matter jurisdiction over their state law claims.                                      We

review       de    novo    questions         of     subject       matter    jurisdiction,

including         questions      related       to       the    propriety       of    removal.

Moffitt v. Residential Funding Co., LLC, 604 F.3d 156, 159 (4th

Cir.     2010).          Because      of    concerns          involving    principles        of

federalism,        this    Court      strictly      construes      a   district       court’s

jurisdiction when considering an issue of removal.                               Mulcahey v.

Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir.

1994).

                                               8
       Under 28 U.S.C. § 1441, “any civil action brought in a

State court of which the district courts of the United States

have original jurisdiction, may be removed by the defendant” to

the    appropriate       district      court.         28    U.S.C.     § 1441(a).              The

defendants       argue    that     the       district       court    had     both     federal

question       jurisdiction        and       diversity          jurisdiction      over         the

McFaddens’ claims.

       We      first     consider        whether          the     district     court           had

jurisdiction over the removed action on the basis of diversity

of citizenship of the parties.                     To invoke the district court’s

diversity jurisdiction, the parties must be completely diverse,

meaning that none of the plaintiffs shares citizenship with any

of the defendants, and the amount in controversy must exceed the

jurisdictional threshold.                28 U.S.C. § 1332; Mayes v. Rapoport,

198    F.3d    457,    461      (4th   Cir.    1999);       Owens-Illinois,         Inc.        v.

Meade, 186 F.3d 435, 440 (4th Cir. 1999).                          In the present case,

the     parties    do     not     dispute          that    the     required       amount       in

controversy is satisfied.                Instead, they focus their arguments

on    the    question     whether      the    parties       are     completely      diverse,

given    the    fact     that    the     McFaddens        and    White,    P.C.     are    both

citizens of Virginia.

       The     McFaddens        assert     that      because        White,     P.C.       is    a

defendant in their quiet title, equitable, and VCPA claims, the

parties to the lawsuit do not meet the requirement of complete

                                               9
diversity.        In response, the defendants contend that White, P.C.

was a fraudulently joined party, because the McFaddens lacked

any possible cause of action against White, P.C.                             Therefore, the

defendants submit that the citizenship of White, P.C. was not a

barrier to diversity jurisdiction in this case.                              See Hartley v.

CSX Transp. Inc., 187 F.3d 422, 424 (4th Cir. 1999) (explaining

that when a party is fraudulently joined, courts disregard that

party’s citizenship for jurisdictional purposes).                             We agree with

the    defendants’           argument    that       the     parties      were      completely

diverse.

       The doctrine of fraudulent joinder permits a federal court

to “disregard, for jurisdictional purposes,” the citizenship of

non-diverse defendants.               Mayes, 198 F.3d at 461.                   A defendant

alleging fraudulent joinder must show either that: (1) “there is

no possibility that the plaintiff would be able to establish a

cause of action” against the non-diverse party, or (2) there has

been     “outright           fraud      in     the        plaintiff’s         pleading      of

jurisdictional          facts.”         Hartley,      187    F.3d       at   424   (internal

quotations, emphasis, and citation omitted).

       In   the    present       case,       the    defendants         maintain     that   the

citizenship        of        White,     P.C.        should        be    disregarded        for

jurisdictional          purposes        because       the        McFaddens      lacked     any

possible cause of action against White, P.C., the non-diverse

party.      Thus,       as    applied    here,       use    of    the    term   “fraudulent

                                               10
joinder” effectively is a misnomer, because application of the

doctrine    under      the    present     facts           “does   not   reflect       on    the

integrity” of the plaintiff,              AIDS Counseling & Testing Ctrs. v.

Grp. W Television, Inc., 903 F.2d 1000, 1003 (4th Cir. 1990),

but merely addresses the adequacy of the plaintiffs’ pleadings.

     As     a   preliminary         matter,          we    consider      the       McFaddens’

contention      that    we     should     refrain          from     considering       whether

White, P.C. was a fraudulently joined party, and instead should

permit the district court to consider that question in the first

instance.       We     decline     this    request          because,     as    a    court    of

limited jurisdiction, we have an obligation to determine our own

jurisdiction, as well as the jurisdiction of the district court.

Stephens v. Cnty. of Albemarle, 524 F.3d 485, 490 (4th Cir.

2008) (citing Bender v. Williamsport Area Sch. Dist., 475 U.S.

534, 541 (1986)).            Thus, we will consider directly the issue of

subject    matter      jurisdiction       in      this      case.       See    Leimbach      v.

Allen,    976   F.2d     912,      916   (4th     Cir.       1992);     see    also    In   re

Kirkland, 600 F.3d 310, 314-15 (4th Cir. 2010) (“Subject matter

jurisdiction cannot be forfeited or waived” and can be raised

sua sponte by the court) (citation omitted).

     Additionally,           we    observe        that      the     argument        regarding

fraudulent      joinder      was    raised      in    the     district       court    in    the

pleading filed by Flagstar and Fannie Mae opposing remand to the

state    court.        The    district    court’s           failure     to    address      that

                                             11
argument does not preclude this Court from considering it.                      Cf.

Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 222 (4th Cir.

2002) (explaining that this Court can affirm a judgment on any

basis    supported   by   the    record).         Moreover,   on    the   present

record,   further    development      of    the   facts   would    not    aid   our

analysis.      Therefore,       we   proceed      to   consider    the    question

whether the fraudulent joinder doctrine is applicable, thereby

permitting the district court to exercise diversity jurisdiction

over the case. 4      In conducting this analysis, we resolve all

issues of law and fact in the plaintiff’s favor.                   Hartley, 187

F.3d at 424.

     As noted above, in the McFaddens’ complaint, they asserted

claims against White, P.C. in three different counts, namely,

the quiet title claim, the claim for equitable relief to set

     4
       The dissenting opinion cites In re Blackwater Security
Consulting, LLC, 460 F.3d 576 (4th Cir. 2006) to support the
position that we should not consider the defendants’ diversity
jurisdiction and fraudulent joinder arguments.      Post at 26.
However, the decision in Blackwater is inapposite. In contrast
to the present case, the district court in Blackwater remanded
the removed action to state court for want of jurisdiction. 460
F.3d at 582. On appeal, we held that 28 U.S.C. § 1447(d) barred
our review of the remand order. Id. at 595. In a footnote, we
explained our refusal to consider the appellant’s argument that
the court had jurisdiction because appellant was a federal
officer, stating that the argument had not been raised in the
district court. Id. at 590 n.8. Here, the issues of fraudulent
joinder and diversity jurisdiction were raised in the district
court, and the district court exercised its jurisdiction over
the   removed   action   without  articulating   a    basis for
jurisdiction.

                                       12
aside the foreclosure sale, and the VCPA claim. 5                We address each

of these claims in turn.

      An action to quiet title is “based on the premise that a

person    with    good     title   to   certain   real    or   personal   property

should not be subjected to various future claims against that

title.”     Maine v. Adams, 672 S.E.2d 862, 866 (Va. 2009).                     In

such an action, a plaintiff seeks to compel an “adverse claimant

to prove a competing ownership claim or forever be barred from

asserting it.”       Id.

      In their quiet title claim, the McFaddens asserted that the

foreclosure sale was unlawful, because the deed of trust and the

appointment of White, P.C. as substitute trustee were invalid.

By seeking to void the foreclosure sale, the McFaddens impliedly

alleged that neither the purchaser of the property at auction,

Flagstar, nor its assignee, Fannie Mae, held good title to the

property.        Accordingly, in this claim, the McFaddens contended

that they remained the true owners of the property.

      The McFaddens have not alleged, nor could they, that White,

P.C. had any basis for asserting a competing ownership claim to

the   property.          Under     Virginia    law,   a   trustee   executing   a

      5
       Our determination whether there is                  any possibility that
the McFaddens would be able to establish a                right to relief under
these state law claims against White,                     P.C. is informed by
Virginia law. See generally Erie R.R. Co.                 v. Tompkins, 304 U.S.
64 (1938).

                                          13
foreclosure takes possession of the property in order to sell

it.    Va. Code § 55-59(7).           As trustee, White, P.C. was divested

of any interest in the property after the foreclosure sale when

White,      P.C.       delivered    the     foreclosure         deed    conveying         the

property      to   Fannie    Mae.      See    Sovran        Bank,   N.A.     v.    Creative

Indus., Inc., 425 S.E.2d 504, 505 n.2 (Va. 1993) (a “trustee

under a deed of trust retains legal title to the property until

the deed is delivered”).              Thus, the McFaddens’ sole basis for

asserting their quiet title claim against White, P.C. rested on

their assertion that, under the deed of trust, White, P.C. could

not have taken legal possession of the property and transferred

it to the auction purchaser Flagstar, or to its assignee, Fannie

Mae.

       We    conclude       that    there     was      no     possibility         that    the

McFaddens could have prevailed on this claim against White, P.C.

The provision of the deed of trust permitting the appointment of

a substitute trustee conformed with the requirements of Virginia

Code Section 55-59(9).             Under that statute, the party secured by

the deed of trust or the holder of more than fifty percent of

the    obligations        secured    thereby       has      authority   to    appoint       a

substitute trustee.          Id.

       Flagstar was not prohibited from appointing a substitute

trustee simply because Flagstar had assigned the loan to Fannie

Mae.        Such   a    transfer,    which        is   permitted    under     the        plain

                                             14
language of the deed of trust and the note, did not impede

Flagstar’s ability to serve as the new lender’s agent.                                See

Horvath v. Bank of N.Y., N.A., 641 F.3d 617, 622 (4th Cir. 2011)

(explaining    that      entity       other     than   lender      had    authority    to

foreclose under Virginia law despite transfer of loan, based on

entity’s    status       as    note    holder).          Therefore,       White,    P.C.

properly    was    appointed       under       the     deed   of     trust,   and     had

authority     to   act    as    substitute       trustee      and    to   perform     the

attendant duties authorized by Virginia law.                       See Va. Code § 55-

59(7), (9).

      We next conclude that the McFaddens lacked any possibility

of prevailing on their claim for equitable relief to set aside

the foreclosure sale, which they alleged as an alternative to

the   quiet    title      claim.         In     the     allegations       specifically

supporting this claim for equitable relief, the only defendant

referenced was Flagstar.              The McFaddens asserted that Flagstar

made numerous misrepresentations regarding the loan modification

program and application process, including that the pending loan

modification       application         would     prevent      foreclosure      of     the

property.     These allegations, which did not mention White, P.C.

or its role in the foreclosure sale, plainly did not state a

claim against White, P.C., nor can we discern any possible cause

of action against White, P.C. related to this claim.

                                           15
       Finally, we hold that the McFaddens lacked any possibility

of prevailing on their VCPA claim against White, P.C., which was

the sole defendant named in this claim.                   In the VCPA claim, the

McFaddens      alleged    that    under     Virginia     Code    Section      59.1-198,

White, P.C. was a “supplier,” and that the loan and related

foreclosure sale were “part” of a “consumer transaction.” 6

       The McFaddens asserted two bases for their allegation that

White, P.C. violated the VCPA.               First, they asserted that White,

P.C.       misrepresented     that     it   had   been    properly         appointed      as

substitute trustee, because Flagstar was not authorized to make

that       appointment   after    it    assigned    the    note       to    Fannie    Mae.

Second, the McFaddens alleged that White, P.C. misrepresented

that it would serve as a fiduciary to the McFaddens, and that

White,      P.C.   breached     its    fiduciary   duties.        We       address    each

asserted VCPA violation in turn.

       First,      the   VCPA    is    inapplicable       to    any    “aspect       of   a

consumer transaction” that is “authorized” under Virginia law.

Va. Code § 59.1-199(A).              As we already have stated in our above

discussion of the McFaddens’ quiet title claim, the appointment

       6
       The purpose of the VCPA is to “promote fair and ethical
standards of dealings between suppliers and the consuming
public.” Va. Code § 59.1-197. We assume without deciding, for
purposes of this appeal, that White, P.C. could qualify as a
“supplier” engaged in a “consumer transaction” by conducting the
foreclosure sale.

                                            16
of substitute trustees and the process for such appointments is

set forth in Virginia Code Section 55-59(9), which authorizes

the party secured by the deed of trust or the holder of more

than fifty percent of the obligations secured thereby to appoint

a substitute trustee.         Id.      As we further explained above, the

appointment of White, P.C. as substitute trustee under the deed

of    trust   met    the   requirements      of    Virginia      law.       See     id.

Therefore, because the appointment of White, P.C. as substitute

trustee was valid under Virginia law, the VCPA did not provide a

basis in law for this component of the McFaddens’ VCPA claim.

       We next consider the second component of the McFaddens’

VCPA    claim,   namely,     that   White,   P.C.       misrepresented       that   it

would act as a fiduciary toward the McFaddens, and that White,

P.C. breached its fiduciary duties.                     However, under Virginia

law, the duties of a trustee appointed under a deed of trust are

limited and defined by the instrument under which the trustee

acts.     Warner v. Clementson, 492 S.E.2d 655, 657 (Va. 1997).

The McFaddens have not alleged that White, P.C. owed them such

unspecified      fiduciary    duties    under     the    terms   of   the    deed   of

trust, and the VCPA does not provide an independent basis for

maintaining a claim based on this vague, unsupported allegation

regarding White, P.C.         Thus, we hold that the McFaddens lacked

any    possibility    of   establishing      their       claim   under      the   VCPA

against White, P.C., because they have presented neither a legal

                                        17
nor a factual foundation that would give rise to any such right

of recovery.

     Because          we        conclude     that        the    McFaddens        lacked        any

possibility of prevailing on their three claims against White,

P.C., we hold that, under the fraudulent joinder doctrine, the

citizenship       of       White,        P.C.     should       not    be    considered        for

jurisdictional         purposes.                 See     Mayes,      198     F.3d      at     461.

Therefore,       we    hold       that     the    district      court      did   not    err    in

denying    the    McFaddens’         motion        to    remand      the   action   to       state

court, because the remaining parties were completely diverse. 7

See 28 U.S.C. § 1332(a).

                                                  B.

     The     McFaddens            also     appeal       the    district      court’s         order

dismissing       two       of    their     state        law    claims      discussed        above,

namely, their quiet title claim and their claim for equitable

relief to set aside the foreclosure sale. 8                          The McFaddens contend

that the district court erred in concluding that these claims

were preempted by HOLA, and, alternatively, in concluding that

these claims failed to state a claim under Rule 12(b)(6).                                       We

     7
        Based on this conclusion, we need not consider                                        the
defendants’ additional argument that the district court                                       had
federal question jurisdiction over the action.
     8
       The McFaddens do not challenge the dismissal of their
remaining claims asserted in the complaint.

                                                  18
focus our analysis on the court’s dismissal of the claims under

Rule 12(b)(6).

     We    review    de     novo    the   district        court’s        dismissal       of   a

complaint for failure to state a claim.                       Walters v. McMahen, 684

F.3d 435, 439 (4th Cir. 2012).                 To survive a motion to dismiss

under Rule 12(b)(6), a plaintiff must state a plausible claim

for relief and allege sufficient facts to establish the elements

of the claim.       Id. (citations omitted).

     As set forth above, in the McFaddens’ quiet title claim,

they challenged the validity of the deed of trust and of the

appointment of White, P.C. as substitute trustee.                                They first

alleged that the deed of trust improperly named MERS as the

beneficiary, when the true beneficiary of the deed of trust was

the lender.     This contention is without merit, however, because

the plain language of the deed of trust sets forth that MERS, as

beneficiary,    is    “acting       solely     as    a    nominee        for     Lender   and

Lender’s    successors       and    assigns.”            As    we    explained      in    our

decision in Horvath, naming MERS as the beneficiary was valid

and served merely to establish a consistent beneficiary that

enhanced    “the     ease    with    which     the       deed       of   trust    could       be

transferred.”       641 F.3d at 620.

     The   McFaddens        additionally       alleged         in    their     quiet   title

claim that the deed of trust, and the appointment of White, P.C.

as substitute trustee, were invalid.                      As we explained above,

                                          19
however, those claims are groundless because the deed of trust

providing for the appointment of a substitute trustee, and the

appointment of White, P.C. in that capacity, conformed with the

requirements of Virginia law.         See Va. Code § 55-59(9).

      Because of their inability to demonstrate that the deed of

trust and the document appointing White, P.C. as the substitute

trustee were invalid instruments, the McFaddens have failed to

state a valid claim of ownership in the property.                      See Adams,

672 S.E.2d at 866.        Therefore, we conclude that the district

court   properly    dismissed    their     quiet    title    claim     under   Rule

12(b)(6).

      In the McFaddens’ claim for equitable relief to set aside

the   foreclosure    sale,     they   alleged      that     Flagstar    made     the

following   misrepresentations:       (1)   that     Flagstar    would    provide

them with a loan modification if they met certain criteria; (2)

that the McFaddens’ loan application materials were incomplete;

and   (3)   that   the   McFaddens    should       disregard    the     notice    of

foreclosure due to their pending loan modification request.                      In

essence,    the    McFaddens    asserted     that     they     relied    on    oral

promises by Flagstar that it would modify the terms of the loan

and that the foreclosure and sale of the property, of which the

McFaddens were notified in writing, would not take place.

      While any such promises certainly would have been improper,

such alleged oral promises cannot serve as a basis to set aside

                                      20
a    foreclosure      sale     of    real   property.        Under      the   statute      of

frauds,    as       provided    under       Virginia       law,   oral    promises        and

contracts affecting real property are not enforceable.                           Va. Code

§ 11-2.

       Moreover, the McFaddens do not dispute the fact that they

defaulted     on     their     loan.        The    terms    of    the    deed    of     trust

remained in effect and authorized the foreclosure and sale of

the property.         Therefore, we conclude that the McFaddens failed

to    state     a    claim     for     equitable     relief       to    set     aside     the

foreclosure sale, and that the district court did not err in

dismissing this claim under Rule 12(b)(6). 9

                                            III.

       In sum, based on our conclusion that the district court had

diversity jurisdiction over the removed action, and that the

court correctly determined that the quiet title claim and the

claim for equitable relief to set aside the foreclosure sale

were subject to dismissal under Rule 12(b)(6), we affirm the

district court’s judgment.

                                                                                  AFFIRMED

       9
        Based on this conclusion, we need not consider the
district court’s alternative basis for dismissal of these
claims, relating to preemption under HOLA.

                                             21
WYNN, Circuit Judge, dissenting:

     Plaintiffs       Herbert    and    Rosetta    McFadden        filed    state-law

claims     in   a   state     court.      Only     one    of      the   three     named

defendants, Flagstar Bank, FSB, took action to remove the case

from state court to federal court.                And it did so on only one

ground: purported federal question jurisdiction.

     On     appeal,    Defendant       Samuel     I.     White,     P.C.    (“White”)

argued, for the first time ever, that even in the absence of

federal question jurisdiction, it was fraudulently joined as a

defendant and thus diversity jurisdiction also exists.                           Neither

Flagstar Bank nor Federal National Mortgage Association (“Fannie

Mae”) advanced this argument in their jointly-filed brief.

     Nevertheless,       on    appeal,    this    Court     ignores        the    stated

ground    for   removal—federal        question    jurisdiction—and          “hold[s]

that the district court did not err in denying the McFaddens’

motion to remand, because the court had diversity jurisdiction

over the McFaddens’ claims . . . .”                    In short, the majority

bases federal jurisdiction on a ground that Defendants failed to

properly    preserve.         With   this,    I   cannot    agree.          Because   I

believe that the McFaddens’ state-law claims should be sent back

to state court, I respectfully dissent.

                                         22
                                             I.

       Herbert       and    Rosetta    McFadden      went    to   state    court,     with

state-law claims against Fannie Mae, Flagstar Bank, and White.

The McFaddens alleged that they applied for a loan modification

for their home mortgage, but that Flagstar Bank repeatedly lost

their      modification         materials,        stymying    the       process.      The

McFaddens alleged that they received a foreclosure notice but

that Flagstar Bank affirmatively told them “not to worry,” that

their      loan      modification      was    “in      process,”        and   that    “no

foreclosure would occur” while that process was ongoing.                              J.A.

10.     Instead, however, the McFaddens’ home was foreclosed upon,

allegedly improperly by White, with Flagstar Bank itself the

high bidder at the foreclosure sale.                    The McFaddens, in turn,

brought claims to quiet title, to set aside foreclosure, and for

fraud,      breach         of   contract,     negligence,         and     violation    of

Virginia’s Consumer Protection Act in the Circuit Court for the

County of Pulaski.

       The sole party to file a notice of removal was Flagstar

Bank. 1     Its lone reason: federal question jurisdiction.                    Flagstar

Bank       claimed     that      the    McFaddens’       state-law         claims     were

       1
       Neither Fannie Mae nor White joined the notice of removal
or filed its own removal papers.      Flagstar Bank’s notice of
removal simply alleges, “upon information and belief, [that]
both . . . consent to the removal of this action.”

                                             23
completely preempted or, alternatively, presented a substantial

federal question such that they were removable to federal court.

Nowhere in its notice of removal did Flagstar Bank even suggest

that the McFaddens’ complaint was removable on diversity grounds

due    to    alleged     fraudulent     joinder.        The     only    place   Flagstar

Bank, then along with Fannie Mae, suggested that the McFaddens

had fraudulently joined White was in the final two paragraphs of

the 15-page         brief     in   opposition    to    the     McFaddens’     motion    to

remand the matter to state court.                 Perhaps realizing that their

belated       and      cursory     treatment      of     this     issue       below     was

insufficient to preserve it, Flagstar Bank and Fannie Mae made

not a single mention of this purported basis for removal in

their       appellee    brief.       Indeed,     as    this    panel    noted   at     oral

argument, Flagstar Bank’s and Fannie Mae’s appellee brief failed

to meaningfully argue anything beyond complete preemption as a

basis for federal jurisdiction.

       Meanwhile,         White,     the    allegedly          fraudulently        joined

defendant, never so much as hinted at this argument until the

case    reached        this   Court.       Indeed,      at    oral     argument,      White

plainly       admitted      that   it   should    have        raised    the   fraudulent

joinder issue earlier yet inexplicably failed to do so.

                                            24
                                            II.

       It is axiomatic that federal courts are courts of limited

jurisdiction.          Kokkonen v. Guardian Life Ins. Co. of Am., 511

U.S. 375, 377 (1994).             Accordingly, “[w]e presume that a cause

lies outside this limited jurisdiction, . . . and the burden of

establishing       the     contrary       rests     upon      the     party     asserting

jurisdiction.”         Barbour v. Int’l Union, 640 F.3d 599, 605 (4th

Cir. 2011) (en banc) (quotation marks omitted).

       “Removal        statutes,     in     particular,         must       be     strictly

construed,      inasmuch     as     the   removal        of   cases    from      state   to

federal court raises significant federalism concerns.”                           Id.     See

also    Lontz     v.     Tharp,    413    F.3d     435,       440   (4th      Cir.     2005)

(Wilkinson, J.) (“not[ing] our obligation ‘to construe removal

jurisdiction      strictly        because    of    the     ‘significant         federalism

concerns’ implicated’ by it”).                   In turn, any doubts about the

propriety    of    removal    should        be    resolved     against     the       federal

forum and in favor of remanding to state court.                        Dixon v. Coburg

Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004) (en banc).

Against this backdrop, the statute governing removal explicitly

requires that defendants file and serve a notice containing “a

short and plain statement of the grounds for removal” within

thirty days of a complaint’s service.                         28 U.S.C. § 1446(a).

While a defendant may amend freely during the 30-day period in

which notice of removal must be filed and may be allowed to

                                            25
correct defective allegations thereafter, a defendant may “not

[]    add    a    new   basis     for       removal    jurisdiction.”         16       Moore’s

Federal Practice § 107.30[2][b] (3d ed. 2012).                         Put differently,

“defendants may not add completely new grounds for removal or

furnish       missing     allegations,         even     if   the   court     rejects        the

first-proffered basis of removal, and the court will not, on its

own motion, retain jurisdiction on the basis of a ground that is

present but that defendants have not relied upon.”                           14C Wright &

Miller      Federal      Practice       &    Procedure,      Jurisdiction         &    Related

Matters § 3733 (4th ed. 2012).

       Accordingly, in In re Blackwater Security Consulting, LLC,

this Court refused to deem a notice of removal amended to add a

basis for federal jurisdiction not pled below.                              460 F.3d 576,

590    n.8       (4th   Cir.    2006).         District      courts    throughout           this

Circuit have similarly forbidden defendants from “attempt[ing]

to    amend       [their]       Notice[s]       of    Removal”     via      memoranda        in

opposition to motions to remand, holding that “[a] defendant may

not use a memorandum to attempt to amend his notice of removal

to add a basis for removal[,]” and making plain that new bases

not   timely       asserted      in   the     removal    notice    will      be   rejected.

UMLIC Consolidated, Inc. v. Spectrum Fin. Servs. Corp., 665 F.

Supp.    2d      528,   533    (W.D.N.C.       2009)    (ordering      remand         to   state

court,      holding      that    diversity       jurisdiction         was   lacking,        and

rejecting defendant’s attempt to amend its removal notice after

                                               26
expiration of the 30-day removal period with arguments in remand

opposition brief that a named party was not a real party in

interest and that its citizenship should be disregarded).                     See

also, e.g., Phillips v. BJ’s Wholesale Club, Inc., 591 F. Supp.

2d 822 (E.D. Va. 2008) (remanding to state court for lack of

diversity jurisdiction, holding that diversity jurisdiction did

not exist where removal notice alleged nothing about fraudulent

joinder, and failure to timely raise the issue, asserted for the

first time in response to a motion to remand, was not a mere

technical defect that warranted leave to amend removal notice

beyond the 30-day time limit); Tincher v. Ins. Co. of Penn., 268

F. Supp. 2d 666 (E.D. Va. 2003) (remanding and denying motion to

amend   removal    notice   to   allege      fraudulent     joinder   where   no

allegation    of   fraudulent     joinder       was   made    in   notice     and

defendant    did   not   raise   the        issue   until    its   response    to

plaintiff’s motion to remand); Castle v. Laurel Creek Co., Inc.,

848 F. Supp. 62, 64 (S.D. W.Va. 1994) (remanding to state court

and denying belated attempt to add fraudulent joinder allegation

to notice of removal); Barnhill v. Ins. Co. of N. Am., 130

F.R.D. 46, 51 (D.S.C. 1990) (Hamilton, J.) (remanding to state

court and noting that “the overwhelming majority of courts allow

amendment after expiration of the statutory period for removal

only for the purpose of setting forth more specifically each

ground for removal which had been imperfectly set forth in the

                                       27
original petition” but “deny leave to amend to supply missing

allegations or to supply new allegations”).

     As    then-District           Court     Judge         Hamilton    underscored      in

Barnhill, “a number of compelling policy considerations . . .

require    this      court     to    apply       a    very     restrictive       view   of

amendment-at least after the statutory period for removal . . .

has expired.”        130 F.R.D. at 50.               Those considerations include:

“preventing       federal           court        infringement          upon       rightful

independence      and      sovereignty        of      state    courts[;]”        “reducing

uncertainty     as    to     the    court’s      jurisdiction         in   the   marginal

cases, which a more liberal construction of the removal statute

would promote[;]” “allowing amendment of the notice of removal .

. . after the thirty day time limit for removal specified . . .

would    ‘substantially        eviscerate’           the   specific    time      provision

enacted    by   Congress[;]”         and    “conceding        that    the     traditional

justification for diversity jurisdiction-state court hostility

toward    nonresident        defendants-has           been    significantly       reduced

since the time diversity jurisdiction was created[.]”                              Id. at

50-51.

     Turning to the case at hand, it is clear that not one of

the three named defendants raised fraudulent joinder as a basis

for federal jurisdiction in the requisite removal papers.                               Nor

did any of the three named defendants at any time move to amend

the notice of removal to add any such allegations.                                Instead,

                                            28
White, the only defendant to argue diversity in its brief to

this Court, plainly admitted that in doing so, it was, for the

first       time   ever,     raising      fraudulent          joinder    and       diversity

jurisdiction.            Flagstar Bank and Fannie Mae raised fraudulent

joinder      and   diversity       jurisdiction         below    only    as    a    fleeting

alternative        argument    in     their       opposition      to    the    McFaddens’

motion to remand.           And before this Court, they argued fraudulent

joinder and diversity jurisdiction not once in their brief, and

only half-heartedly in oral argument, when prompted to do so by

this panel.

       As noted during oral argument, where substantial effort has

been    expended,         courts    may   view      removal       defects      through       a

different lens.           Indeed, the Supreme Court instructed us to do

so in Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996), holding

that    a    district     court’s    failure       to    remand   a     case   improperly

removed      on    diversity       grounds    was       not   fatal     to    the    ensuing

adjudication        if    federal    jurisdictional           requirements          were   met

when trial occurred and judgment was entered.                         Notably, however,

the Supreme Court emphasized that “[o]nce a diversity case has

been tried in federal court, with rules of decision supplied by

state law . . ., considerations of finality, efficiency, and

economy become overwhelming.”                Id. at 75 (emphasis added).

                                             29
     In Aqualon Co. v. Mac Equipment, Inc., this Court extended

the Caterpillar rationale to dispositive motions such as summary

judgment, stating:

     Where a matter has proceeded to judgment on the merits
     and principles of federal jurisdiction and fairness to
     parties remain uncompromised, to disturb the judgment
     on the basis of a defect in the initial removal would
     be a waste of judicial resources. Although the
     interest in judicial economy is most pressing where an
     action has proceeded to trial, we feel that the same
     considerations are applicable to summary judgment.

149 F.3d 262, 264-65 (4th Cir. 1998).

     No such compelling judicial economy or efficiency arguments

exist here.     This case was pending before the district court for

less than a half year prior to its dismissal, Defendants had not

even answered Plaintiffs’ complaint, and no discovery had been

undertaken, nor anything else of substance accomplished beyond

summarily denying remand in an order devoid of any analysis and

granting Defendants’ motions to dismiss.         On this record, there

are very serious federalism implications of wresting this state-

law complaint from state court, overlooking the clear pleadings

failures   of   well-represented   defendants,    and   ruling   for   the

first time on appeal on the unpreserved fraudulent joinder and

diversity issues.

                                   30
       Nor have Defendants presented any other convincing basis

for maintaining this case in federal court. 2                    Flagstar Bank and

Fannie Mae concededly put their eggs in the complete preemption

basket.      Complete preemption is an exception to the well-pleaded

complaint rule dictating that the basis for a federal district

court’s     removal     jurisdiction     must    appear     on    the     face    of   a

plaintiff’s      complaint.      The    Supreme    Court      has   read      complete

preemption       into   statutory      schemes    in    only      three       contexts:

Section 301 of the Labor and Management Relations Act (29 U.S.C.

§ 185); Section 502 of the Employee Retirement Income Security

Act of 1974 (29 U.S.C. § 1132); and Sections 85 and 86 of the

National Bank Act (12 U.S.C. §§ 85, 86).                  Beneficial Nat’l Bank

v. Anderson, 539 U.S. 1, 6-11 (2003).               I cannot imagine that it

would find a fourth in the circumstances of this case.

       While     neither   the   Supreme        Court   nor      this     Court    has

addressed whether HOLA completely preempts state law such that

it     coverts    exclusively       state-law      claims        into     a    federal

complaint, a number of district courts have held that it does

not.       For example, in McKenzie v. Ocwen Federal Bank, 306 F.

       2
       The federal question basis set forth in the notice of
removal presents a thorny issue. By reaching beyond Defendants’
preserved basis for removal to get to diversity jurisdiction,
this Court avoids the first-impression issue of whether HOLA
completely preempts state law such that it coverts exclusively
state-law claims into a federal complaint.

                                         31
Supp. 2d 543 (D. Md. 2004), the district court held that HOLA

did    not    completely      preempt    the    borrowers’      state-law    claims

against the defendant national bank for charging inspection fees

prohibited by state law, and thus did not justify removal of the

case to federal court.          The court noted that the HOLA provisions

on which the defendant’s complete preemption argument was based

do    not    provide    an   exclusive    cause   of     action.    Id.     at   546.

Further, the court ruled that no substantial federal question

existed and that that issue boiled down to a preemption defense—

which could not serve as a basis for removal.                   Id. at 547.       The

court therefore remanded.

       It seems self-evident that HOLA does not completely preempt

all state-law claims, including claims grounded in fraud, such

as    the    McFaddens’.        This     is    because    the   HOLA     preemption

regulation includes a savings clause expressly exempting certain

state-law      claims    from   HOLA’s    preemptive      scope.    12    C.F.R.   §

560.2(c).      This Court’s recent opinion in McCauley v. Home Loan

Investment Bank, FSB, underscores the limited nature of HOLA

preemption:

            OTS “does not intend to preempt state laws that
       establish the basic norms that undergird commercial
       transactions,” and “[a]ccordingly, in § 560.2(c), the
       OTS has identified certain categories of state law
       that are not preempted.”   OTS Op. Letter, Preemption
       of State Laws Applicable to Credit Card Transactions,
       1996 WL 767462, at *5 (Dec. 24, 1996).    Tort law is
       one of these categories.    See 12 C.F.R. § 560.2(c);
       see also Lending & Investment, 61 Fed. Reg. at 50966

                                         32
     (“OTS wants to make clear that it does not intend to
     preempt basic state laws such as state uniform
     commercial   codes   and  state   laws   governing   real
     property,     contracts,    torts,     and     crimes.”).
     Determining that the tort of fraud falls within the
     scope of § 560.2 would preclude fundamental state
     regulation    of    deceptive   practices     in    which
     unscrupulous savings and loan associations might
     engage.   Such an interpretation would contravene the
     intent of OTS, whose “assertion of plenary regulatory
     authority does not deprive persons harmed by the
     wrongful acts of savings and loan associations of
     their basic state common-law-type remedies.”       Ocwen,
     491 F.3d at 643.

__ F.3d __, 2013 WL 1189292, at *5 (4th Cir. 2013).

     At    the   very    least,   because    “we   must   construe     removal

strictly [and] reasonable doubts must be resolved against the

complete    preemption    basis   for     it,”   Lontz,   413   F.3d   at   441

(Wilkinson, J.), Defendants should not be allowed to force the

McFaddens to litigate their state claims in federal court on the

basis of purported complete preemption.

     Finally, at the end of their removal discussion in their

brief, Defendants touched on the substantial federal question

doctrine.    “Under the substantial federal question doctrine, a

defendant seeking to remove a case in which state law creates

the plaintiff’s cause of action must establish two elements: (1)

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

question of federal law, and (2) that the question of federal

law is substantial.       If the defendant fails to establish either

of these elements, the claim does not arise under federal law

                                     33
pursuant        to     the   substantial       federal       question       doctrine,       and

removal cannot be justified under this doctrine.”                                Pinney v.

Nokia, Inc., 402 F.3d 430, 442 (4th Cir. 2005) (quotation marks

and citation omitted).                See also Grable & Sons Metal Prods.,

Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005) (instructing

courts     to    analyze       whether       the     federal       issue    is   necessary,

disputed,        and     substantial,        and     whether      the     federal     court’s

accepting jurisdiction would disrupt the balance between state

and federal judicial responsibilities).

      Here,      Flagstar      Bank    and     Fannie       Mae    have    failed    to    meet

their burden.           Flagstar Bank and Fannie Mae assert, for example,

that “the McFaddens’ fraud and other state claims require an

analysis        of     whether      Flagstar        complied”       with     federal       law.

Appellees’ Br. at 25.               Yet this Court’s recent McCauley opinion

belies that assertion.               Similarly, Flagstar Bank and Fannie Mae

sweepingly        claim      that    “[b]ecause        the       McFaddens    allege       that

Flagstar        fraudulently        handled         their    loan    modification,          the

alleged     misrepresentation            was       made     in    connection        with    the

servicing of a loan.                Loan servicing falls within the express

preemption provision of § 560.2(b)(10), thus the district court

possessed subject matter jurisdiction . . . .”                              Appellees’ Br.

at   27.        It     clearly      cannot     be    that    any     act     occurring      “in

connection with” a loan is preempted by HOLA.                              And we recently

                                               34
made plain in McCauley that any assertion to the contrary flies

in the face of the law of this Circuit.

     In        sum,       Defendants’        generalized      assertions       and

(mis)characterizations           of    the    McFaddens’     claims    fail     to

demonstrate that those state-law claims necessarily depend on

questions of federal law so disputed and so substantial that

they warrant wresting the state-law complaint from the state

court in which it was filed.              Further, because Defendants fail

to meet their burden as to complete preemption and substantial

question       jurisdiction,     and     because   they     failed    to    allege

diversity      jurisdiction      based   on    fraudulent   joinder    in    their

notice    of    removal    and   the   circumstances   here    do    not   warrant

looking the other way, they should not have been allowed to

remove this case to federal court.                 Accordingly, the district

court and this Court should have remanded this matter back to

state court—a more than adequate forum in which Defendants would

be free to assert their preemption and other defenses.                         For

these reasons, I respectfully dissent.

                                         35