Reported / Citable
Background
PennyMac Loan Services sued Angeline Diane Boling, the Estate of David D. Boling, and the United States on behalf of the Small Business Administration, seeking to foreclose on real property in Vidor, Texas. PennyMac alleged that the SBA held a subordinate lien and asserted federal jurisdiction under 28 U.S.C. §§ 1331 and 2410.
After approving a consent judgment between PennyMac and the SBA, the court ordered supplemental briefing on whether it had subject matter jurisdiction. PennyMac maintained that § 2410 supplied jurisdiction because the foreclosure concerned property encumbered by a federal lien.
The Court’s Holding
The court held that § 2410 waives the United States’ sovereign immunity in specified lien proceedings but does not independently confer federal subject matter jurisdiction. The underlying claim sought enforcement of a mortgage lien and foreclosure, and its resolution did not turn on the construction of federal law, so § 1331 did not supply federal-question jurisdiction.
Applying the Fifth Circuit’s published decision in Hussain v. Boston Old Colony Insurance Co., the court concluded that federal jurisdiction in this setting exists when the government removes a state-court action under 28 U.S.C. § 1444. Because PennyMac originally filed this action in federal court, rather than the government removing it from state court, jurisdiction was absent. The court dismissed the case without prejudice, vacated the consent order, and directed the clerk to close the matter and deny pending motions as moot.
Key Takeaways
- Section 2410 waives sovereign immunity for certain actions involving federal liens but does not independently create federal subject matter jurisdiction.
- A state-law mortgage foreclosure does not present a federal question merely because the United States holds a subordinate lien.
- Because the action was filed originally in federal court rather than removed by the government under § 1444, the court dismissed it without prejudice and vacated the previously entered consent order.
Why It Matters
Lenders cannot establish original federal jurisdiction over an otherwise state-law foreclosure simply by naming the United States as a lienholder under § 2410. In the Fifth Circuit, the statute’s waiver of sovereign immunity must be paired with an independent jurisdictional basis, or with government removal of a qualifying state-court proceeding under § 1444.