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Onewest Bank, N.A. v. Melina

United States Court of Appeals, Second Circuit

June 29, 2016

ONEWEST BANK, N.A., Plaintiff-Counter-Defendant-Appellee,
v.
ROBERT W. MELINA, Defendant-Counter-Claimant-Appellant, AMERICAN EXPRESS CENTURION BANK, AMERICAN EXPRESS BANK, FSB, CITIBANK, N.A., WILLIAM R. SANTO, MAGALY BERMUDEZ, LOUIS BERMUDEZ, and CARMEN MEDINA, Defendants.

          Argued: June 13, 2016 [*]

         Defendant-Appellant Robert W. Melina ("Melina") appeals from an August 31, 2015 memorandum and order of the United States District Court for the Eastern District of New York (Gleeson, J.) granting a motion for summary judgment by Plaintiff-Appellee OneWest Bank, N.A. ("OneWest"), which had filed a foreclosure action, and denying Melina's cross-motion to dismiss for lack of subject matter jurisdiction. Melina seeks review of the District Court's holdings that (1) a national bank is a citizen only of the state in which its main office is located; and (2) OneWest had standing to foreclose Melina's mortgage. We hold that a national bank is a citizen only of the state in which its main office is located-not also the state of its principal place of business-and that OneWest had standing to foreclose Melina's mortgage under both holder and assignment principles. We thus AFFIRM the judgment of the District Court.

          MICHAEL BRUK, Law Office of Michael Bruk, New York, NY, for Defendant-Appellant.

          ALLISON J. SCHOENTHAL, Hogan Lovells U.S. LLP, Washington, D.C. (Nicole E. Schiavo, Hogan Lovells U.S. LLP, New York, NY; Chava Brandriss, Sean Marotta, Hogan Lovells U.S. LLP, Washington, D.C., on the brief), for Plaintiff-Appellee.

          Before: Newman, Wesley, and Droney, Circuit Judges.

          PER CURIAM

         Today we join our sister circuits in holding that, for purposes of subject matter jurisdiction, a national bank is a citizen only of the state in which its main office is located.

         The facts underlying this case are straightforward. On February 26, 2007, Defendant-Appellant Robert W. Melina ("Melina") obtained and memorialized in a note (the "Note") a loan from Wall Street Mortgage Bankers Ltd. for $591, 000 in principal. As security for this loan, Melina executed a mortgage on his property at 1245 77th Street in Brooklyn, New York. Wall Street Mortgage Bankers indorsed the Note to the order of IndyMac Bank, F.S.B. ("IndyMac"), and IndyMac later indorsed the Note in blank.

         In July 2008, the Office of Thrift Supervision closed IndyMac and appointed the Federal Deposit Insurance Corporation ("FDIC") as its receiver. That same day, the Office of Thrift Supervision created a new entity, IndyMac Federal Bank, F.S.B. ("IndyMac Federal"), transferred IndyMac's assets to IndyMac Federal, and appointed FDIC as IndyMac Federal's conservator. FDIC later also became IndyMac Federal's receiver.

         On March 19, 2009, FDIC as IndyMac Federal's receiver entered into a Loan Sale Agreement ("LSA") to sell substantially all of IndyMac Federal's assets to Plaintiff-Appellee OneWest Bank, N.A. ("OneWest"). Section 2.05 of the LSA, titled "Closing, " contemplates that transfer of the subject notes "shall" take place at some future time. See App. 76. Section 3.04(b) of the LSA requires that all notes subject to transfer pursuant to the LSA bear a specific form of endorsement.

         Around the same time that OneWest acquired Melina's loan, OneWest contracted with Deutsche Bank National Trust Company for Deutsche Bank to serve as document custodian for Melina's original Note and mortgage. In that capacity, Deutsche Bank had physical possession of Melina's original Note and mortgage from 2009 until April 2011, at which point Deutsche Bank sent them to OneWest. OneWest returned Melina's Note and mortgage to Deutsche Bank in May 2011, and Deutsche Bank sent them back to OneWest in June 2014. OneWest then transmitted Melina's original Note and mortgage to its foreclosure counsel at Gross Polowy, LLC, on June 19, 2014.

         On August 1, 2009, Melina defaulted on his loan by failing to make the payment due that day. He did not cure the default after receiving notice from OneWest.

         On July 21, 2014, CIT Group Inc. entered into a definitive Agreement and Plan of Merger between CIT Group and IMB HoldCo LLC, the parent company of OneWest. CIT Group is a Delaware corporation with its principal place of business located at 11 West 42nd Street, New York, New York. Article V, Section 5.2 of the Agreement and Plan of Merger requires that, during the period between the date of the agreement and the actual closing, OneWest seek CIT Group's written permission prior to undertaking almost two dozen significant corporate decisions. These decisions include opening, closing, or relocating a branch.

         On September 10, 2014, OneWest commenced a foreclosure action against Melina in the United States District Court for the Eastern District of New York, invoking the court's diversity jurisdiction. On that day, Melina's original Note and Mortgage were in the physical possession of OneWest's counsel at Gross Polowy. On October 13, 2014, OneWest filed an amended complaint containing substantively the same allegations as the original complaint. On February 3, 2015, Melina filed an answer, and on April 2, 2015, he filed an amended answer. OneWest thereafter moved for summary judgment, and Melina cross-moved to dismiss for lack of subject matter jurisdiction.

         On June 18, 2015, the District Court heard oral arguments on the motions. In a memorandum and order dated August 31, 2015, the District Court denied Melina's cross-motion to dismiss and granted OneWest's motion for summary judgment. The District Court held that a national bank such as OneWest is a citizen only of the state in which its main office is located-not also of the state of its principal place of business-and that OneWest's main office is indisputably in California. The District Court concluded further that, even if the principal place of business of a national bank mattered for jurisdictional purposes, OneWest's was California.

         The District Court also disagreed with Melina's standing arguments on the basis of its finding that OneWest was the legal "holder" of Melina's Note and entitled to enforce it under the New York Uniform Commercial Code. This finding was based on the affidavits of OneWest's corporate representative and counsel, which established that OneWest was in physical possession of Melina's original Note at the time it commenced its lawsuit. Additionally, the District Court found that OneWest had proven it was entitled to enforce Melina's loan as the loan's assignee.

         Melina timely appealed the District Court's memorandum and order and sought review of the District Court's holdings on ...


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