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Pablo Palominos, et al v. Citibank

April 30, 2012


The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge



On January 30, 2012, Plaintiffs Pablo Palominos and Marie Ines Palominos (collectively "Plaintiffs") filed this action against Defendant Citibank N.A. ("Defendant"). For the reasons set forth below, Plaintiffs' complaint is DISMISSED without prejudice and Plaintiffs are granted thirty (30) days leave to amend.


Plaintiffs allege that they resided at real property located in Modesto, California. (Doc. 1, ¶ 3.) Plaintiffs bring their suit against Defendant "for its unlawful unfair collection practices arising out of the financing of [their] real property." (Doc. 1, ¶ 2.) Although Plaintiffs' allegations are unclear and fail to provide any factual specificity, it appears that Plaintiffs entered into a mortgage in which either Defendant or some other unspecified entity was the lender, and the mortgage was later foreclosed upon. (Doc. 1, ¶¶ 20, 21, 24, 26, 27, 74-76.) Plaintiffs further assert that Defendant refused to enter into a loan modification prior to the foreclosure and engaged in "outrageous" conduct in an attempt to collect the debt. (Doc. 1, ¶¶ 26, 28, 29, 53-63, 130-135.) Plaintiffs also appear to contend that Defendant engaged in fraudulent conduct during both the loan application and loan modification process. (Doc. 1, ¶¶ 40-49, 69-72.)*fn1

Plaintiffs allege the following causes of action: (1) violation of California Civil Code § 2923.6; (2) promissory estoppel; (3) fraud; (4) set aside a trustee's sale; (5) void or cancel trustee's deed upon sale; (6) wrongful foreclosure; (7) breach of contract; (8) breach of the covenant of good faith and fair dealing; (9) violation of the California Business and Professions Code § 17200; (10) quiet title; (11) slander of title; (12) declaratory relief; (13) violation of California Civil Code § 1788.17; and (14) violation of California Civil Code § 1572.


A. Applicable Standards

1. Screening Standard

In cases where the plaintiffs are proceeding in forma pauperis, the Court is required to screen each case and shall dismiss the case at any time if the Court determines that the allegation of poverty is untrue, or the action or appeal is frivolous or malicious, fails to state a claim upon which relief may be granted, or seeks monetary relief against a defendant who is immune from such relief. 28 U.S.C. § 1915(e)(2). If the Court determines that the complaint fails to state a claim, leave to amend may be granted to the extent that the deficiencies of the complaint can be cured by amendment. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc).

2. Legal Standard

In determining whether a complaint fails to state a claim, the Court uses the same pleading standard used under Federal Rule of Civil Procedure 8(a). Under Rule 8(a), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "[A] complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 557). "[A] complaint [that] pleads facts that are 'merely consistent with' a defendant's liability . . . 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557). Further, although a court must accept as true all factual allegations contained in a complaint, a court need not accept a plaintiff's legal conclusions as true. Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (quoting Twombly, 550 U.S. at 555).

A court may also dismiss a complaint for failure to comply with Federal Rule 9(b). See Vess v. Ciba-Geigy Corp, USA, 317 F.3d 1097, 1107 (9th Cir. 2003). Rule 9 provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). Such circumstances include the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). Claims subject to Rule 9(b) pleading requirements must also satisfy the ordinary pleading requirements of Rule 8.

B. Plaintiffs Fail to Establish Subject Matter Jurisdiction

Federal courts have no power to consider claims for which they lack subject-matter jurisdiction. Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). Courts have an independent duty to consider their own subject matter jurisdiction and may, sua sponte, dismiss an action over which it lacks jurisdiction. Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action."); see also Cal. Diversified Promotions, Inc. v. Musick, 505 F.2d 278, 280 (9th Cir. 1974) ("It has long been held that a judge can dismiss sua sponte for lack of jurisdiction.").

Here, Plaintiffs allege that "[j]urisdiction of this Court arises under California Code of Civil Procedure § 410.10 et seq. The California Superior Court has jurisdiction over this action pursuant to California original jurisdiction in all in this case [sic], which presents California state law claims regarding California real estate transactions conducted by California based entities." (Doc. 1, ¶ 15.) Plaintiffs, however, have not filed their action in the California Superior Court, but have instead filed this case in the United States District Court, Eastern District of California. In other words, Plaintiffs filed this action in federal court, not state court, although they provide a jurisdictional analysis as to why the case should be in state court.

Plaintiffs thus fail to properly allege or establish that this Court has subject-matter jurisdiction over this case. Further, a review of the allegations in this complaint do not permit the Court to independently determine that subject-matter jurisdiction is proper in federal court.

1. Federal Question Jurisdiction

Pursuant to 28 U.S.C. § 1331, federal district courts have original jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." "A case 'arises under' federal law either where federal law creates the cause of action or 'where the vindication of a right under state law necessarily turn[s] on some construction of federal law.'" Republican Party of Guam v. Gutierrez, 277 F.3d 1086, 1088-89 (9th Cir. 2002) (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 8-9 (1983)). "The presence or absence of federal-question jurisdiction is governed by the well-pleaded complaint rule." Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Under the well-pleaded complaint rule, "federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Id.

Plaintiffs do not allege any claims under federal law. Plaintiffs' claims all arise under the California Civil Code, the California Business & Professions Code, or are common law claims that arise under state law. As such, these claims do not present a federal question that supports federal subject-matter jurisdiction.

2. Diversity Jurisdiction

Pursuant to 28 U.S.C. § 1332, federal district courts have original jurisdiction over actions in diversity cases "where the matter in controversy exceeds the sum or value of $75,000" and where the matter is between "citizens of different States." Plaintiffs allege that they resided in Modesto, California at all relevant times and thus establish that they are citizens of California. (Doc. 1, ¶ 3.) Plaintiffs further allege that "Defendant[] Citibank N.A. is a private company organized under the laws of the State of California with its headquarters and principal place of business at 399 Park Avenue, New York, NY 10001 . . . . Citibank N.A. has transacted and continues to transact business throughout the State of California . . . [and] had submitted itself to and is within the personam jurisdiction of this Court." (Doc. 1, ¶ 4.)

Based on the above allegations, it appears that Plaintiffs are seeking to establish the California Superior Court's jurisdiction over Defendant, which is not relevant to determining subject-matter jurisdiction in federal court. However, Plaintiffs may be able to establish this Court's jurisdiction based on diversity, as Plaintiffs allege that they are citizens of California and that Defendant is a private company headquartered in New York; as such, the matter is apparently between "citizens of different States." 28 U.S.C. § 1332(a)(1).

In order for this Court to have subject-matter jurisdiction of this action based on diversity, Plaintiffs also need to establish that the "matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs." 28 U.S.C. § 1332(a). Plaintiffs pray for judgment against Defendant in the amount of $10,000 for general damages, $10,000 for breach of fiduciary duty, and $1,000,000 in punitive damages. (Doc. 1, p. 28.)

Plaintiffs' prayer for $10,000 in damages for Defendant's breach of fiduciary duty appears to be unfounded. "As a general rule, a financial institution owes no duty of care to a borrower where the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a lender of money." Nool v. HomeQ Servicing, 653 F. Supp. 2d 1047, 1056 (E.D. Cal. 2009) (citing Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089, 1096 (1991)). As such, there does not appear to be a fiduciary relationship between Plaintiffs and Defendant. Thus, Plaintiffs' prayer for relief, as currently pled, is limited to the prayer for $10,000 in general damages and the prayer for punitive damages.

Plaintiffs' complaint cannot meet the requisite $75,000 minimum controversy amount without considering Plaintiffs' punitive damages claim. Punitive damages may be considered in determining the amount in controversy if they are recoverable as a matter of state law. See Gibson v. Chrysler Corp., 261 F.3d 927, 945 (9th Cir.2001). "However, the mere possibility of an award of . . . punitive damages is not sufficient to prove that the amount in controversy has been met . . . . [Plaintiffs] must present evidence indicating the amount of punitive damages . . . will, more likely than not, exceed the amount needed to increase the amount in controversy to $75,000." Bussa v. Chase Home Finance, LLC, No. 3:10--cv--0782--LRH--VPC, 2011 WL 1808032, at *2 (D.Nev. May 12, 2011).

It is not clear upon what allegations Plaintiffs are basing their prayer for punitive damages. The Court notes that Plaintiffs allege a cause of action for fraud, which allows for exemplary damages under California law. See Cal. Civ. Code ยง 3294. However, as discussed below, Plaintiffs' fraud claim is not properly pled. Further, Plaintiffs do not link their prayer for punitive damages to their fraud allegations. As such, Plaintiffs fail to establish a basis for ...

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