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Guisihan v. Community Residential Mortgage

March 24, 2010



In response to the court's February 25, 2010 Order to Show Cause (Docket No. 18), defendants America's Servicing Company and HSBC Bank USA, N.A., as trustees for MortgageIT Securities Corp. Mortgage Loan Trust, Series 2007-1, Mortgage Pass-Through Certificates ("HSBC"), and MortgageIT, Inc. ("MortgageIT") filed briefs in support of the court's continued exercise of jurisdiction over plaintiff's Complaint. (Docket Nos. 20, 21.) Plaintiff did not respond to the court's Order to Show Cause. The court now must decide whether this case should be remanded to state court.

I. Factual and Procedural Background

On February 23, 2007, plaintiff alleges that she entered into a loan with MortgageIT for plaintiff's property at 1891 Leaning Oak Drive, Fairfield, California. (Compl. ¶¶ 1-3.) This loan was secured by two Deeds of Trust on the property. (Id. ¶¶ 2, 21-22.) The first Deed of Trust listed MortgageIT as Lender, Old Republic Title Company ("Old Republic") as trustee, and Mortgage Electronic Registration Systems, Inc. ("MERS") as Beneficiary. (Id. ¶¶ 3, 21.)

Plaintiff was allegedly channeled into this loan in late 2006 and early 2007, when she established a relationship with Community Residential Mortgage ("Community"), a mortgage brokerage company. (Id. ¶¶ 15-16.) Community allegedly directed plaintiff to apply for the loan on her own rather than jointly with her husband, as his credit issues would disqualify them for a loan. (Id. ¶ 18.) On the loan application and allegedly at Community's direction, plaintiff listed her husband's business as her own and overstated her monthly income. (Id. ¶ 18.) MortgageIT approved the loan application without verifying plaintiff's ability to pay. (Id. ¶ 19.) The loan allegedly contained a higher interest rate and extra and excess fees than what plaintiff agreed to with Community. (Id. ¶ 24.)

Plaintiff eventually defaulted on the loan, and on March 10, 2009, a Notice of Default and Election To Sell Under Deed of Trust was recorded in Solano County by NDEX West. (Id ¶ 31; Compl. Ex. E.) A Substitution of Trustee was recorded on April 24, 2009, which substituted NDEX West for Old Republic. (Id. ¶ 32.) On July 7, 2009, NDEX West recorded a Notice of Trustee's Sale. (Id. ¶ 33.)

Plaintiff filed this action in state court on November 25, 2009. (Notice of Removal (Docket No 1).) On January 14, 2010, defendant MortgateIT removed the action to this court, invoking the court's federal question jurisdiction, 28 U.S.C. § 1331, based upon federal statutes referenced in plaintiff's claim for violation of California unfair competition law ("UCL"), Cal. Bus. & Prof. Code § 17200. (Id.) Plaintiff's fourth cause of action for violation of the California UCL alleges, among other things, violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. §§ 1691-1691f, and the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f.

MortgageIT and HSBC Bank then moved to dismiss plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. (Docket Nos. 9, 11.) Those motions are currently pending.

II. Discussion

"Under 28 U.S.C. § 1441, a defendant may remove an action filed in state court to federal court if the federal court would have original subject matter jurisdiction over the action."

Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1243 (9th Cir. 2009). Federal courts have original subject matter jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.

"If at any time prior to judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c); see also Fed. R. Civ. P. 12(h)(3). A district court has "a duty to establish subject matter jurisdiction over the removed action sua sponte, whether the parties raised the issue or not." United Investors Life Ins. Co. v. Waddell & Reed, Inc., 360 F.3d 960, 967 (9th Cir. 2004). "Thus, the court can, in fact must, dismiss a case when it determines that it lacks subject matter jurisdiction, whether or not a party has a filed a motion." Page v. City of Southfield, 45 F.3d 128, 133 (6th Cir. 1995).

A case "arises under" federal law when federal law either creates the cause of action or a state law claim "necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibility." Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005); see Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27-28 (1983). When a plaintiff only pleads state causes 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." Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 1383 (9th Cir. 1988) (citing Franchise Tax, 463 U.S. at 13).

A. Substantial Federal Question

Plaintiff's Complaint does not plead any federal causes of action, but it does make references to federal statutes in its fourth cause of action for violations of the California UCL. (See Compl. ¶¶ 65, 67-68.) It is a "long-settled understanding that the mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction." Lippitt v. Raymond James Fin. Servs., 340 F.3d 1033, 1040 (9th Cir. 2003) (quoting Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 808 (1986)). A substantial federal question does not exist simply because a complaint makes a mere reference to a federal statute. Id. at 1040-41; see also Rains v. Criterion Sys. Inc., 80 F.3d 339, 344 (9th Cir. 1996) (references to Title VII are insufficient to establish federal jurisdiction in a wrongful termination action). Instead, the ...

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