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
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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).
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
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
4 No. 15‐2415
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.
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
6 No. 15‐2415
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.
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 whether to 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.