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Gregoria G. Castillo, Trustee of the v. Bank of America

October 9, 2012

GREGORIA G. CASTILLO, TRUSTEE OF THE
GREGORIA G. CASTILLO SEPARATE PROPERTY TRUST; GREGORIA G. CASTILLO SEPARATE PROPERTY TRUST, PLAINTIFFS,
v.
BANK OF AMERICA, N.A.; BANK OF NEW YORK MELLON, ALTERNATIVE LOAN TRUST 2006-OA2 MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-OA2, FKA BANK OF
MOOT NEW YORK, AS TRUSTEE FOR THE
CERTIFICATEHOLDERS OF THE CWALT, INC..;
1 THROUGH 100, INCLUSIVE,
DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez United States District Judge

ORDER: (1) DENYING PLAINTIFFS' MOTION TO REMAND [DOC. NO. 6]; (2) GRANTING IN PART DEFENDANTS' MOTION TO DISMISS [DOC. NO. 4]; (3) REMANDING STATE LAW CLAIMS; AND (4) DENYING AS DEFENDANTS' MOTIONS TO DOES STRIKE AND TO EXPUNGE LIS PENDENS [DOC. NO. 4]

Presently before the Court are Defendants Bank of America, N.A. ("BANA") and Bank of New York Mellon's ("BNYM") (together "Defendants") motions to dismiss the complaint of Plaintiffs Gregoria G. Castillo ("Castillo") and Gregoria G. Castillo Separate Property Trust's ("Trust") (together "Plaintiffs"), to strike, and to expunge the lis pendens. [Doc. No. 4.] Also before the Court is Plaintiffs' motion to remand. [Doc. No. 6.] For the following reasons, the Court DENIES Plaintiffs' motion to remand, GRANTS in part Defendants' motion to dismiss, REMANDS Plaintiffs' state law claims, and DENIES AS MOOT Defendants' motions to strike and to expunge the lis pendens.

BACKGROUND

Plaintiffs allege that on or about January 25, 2006, Plaintiff Castillo obtained a loan from Countrywide, through its trade name America's Wholesale Lender ("AWL"), a Doe defunct Defendant, in the amount of $750,000. [Doc. No. 1-1, Compl. ¶ 12; Doc. No. 4-1, P. & A. Supp. Def.'s Mot. to Dismiss ("Def.'s Mot.") at 2.] The loan was secured by a deed of trust to real property located at 2735 Hornblend Street, San Diego, California 92109 ("Hornblend Property"). The deed of trust lists Castillo as the borrower, AWL as the lender, Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary, and CTC Real Estate Services as the trustee. [Doc. No. 1-1, Compl. ¶ 20; Doc. No. 5-1, Request for Judicial Notice ("RJN"), Ex. 1, Deed of Trust.]*fn1 BANA services the loan. [Doc. No. 4-1, Def.'s Mot. at 2.] Plaintiffs allege that during the process of applying for the loan, agents of AWL deceived Castillo by processing the loan using falsely inflated income for Castillo, not verifying her true income, and preventing Castillo from understanding her rights. [Doc. No. 1-1, Compl. ¶ 13.] Plaintiffs allege that BNYM is the successor in interest to AWL, and that it therefore incurs all liability for AWL. [Id. ¶ 39.]

Defendants allege in their motion to dismiss that subsequently, on December 4, 2006, Castillo recorded a quitclaim deed transferring her interest in the Hornblend Property to the Trust. [Doc. No. 4-1, Def.'s Mot. at 2; Doc. No. 5-1, RJN, Ex. 2, Quitclaim Deed.] Defendants further allege in their motion that on February 28, 2007, the Trust recorded another quitclaim deed transferring its interest in the Hornblend Property to Group Enterprise Management, LLC ("Group Enterprise"). [Doc. No. 4-1, Def.'s Mot. at 2; Doc. No. 5-1, RJN, Ex. 3, Quitclaim Deed.] Plaintiffs argue in their reply to Defendants' motion that they are unaware of the transfer to Group Enterprises and that they did not authorize this transfer. [Doc. No. 8, Pl.'s Reply to Def.'s Mot. at 3]. On July 19, 2011, MERS assigned its interest in the deed of trust to BNYM in an assignment of deed of trust. [Doc. No. 5-1, RJN, Ex. 4, Assn. of Deed of Trust.]

Plaintiffs allege in their complaint that it became difficult for them to make the mortgage payments due on the loan, and that they attempted to refinance or modify the terms of the loan. Plaintiff Castillo alleges that Defendants would not discuss refinancing or modifying the terms of the loan with her. [Doc. No. 1-1, Compl. ¶ 21.] Plaintiffs allege that BNYM participates in the federal government's Home Affordable Modification Program ("HAMP"), which obligates it to consider Plaintiffs for a loan modification. [Doc. No. 1-1, Compl. ¶¶ 30-32, 70-72.] In their motion, Defendants clarify that BANA, and not BNYM signed the SPA to participate in HAMP. [Doc. No. 4-1, Def.'s Mot. at 12-13 & n.3; Doc. No. 5-2, Ex. 11, SPA.]

Plaintiffs subsequently defaulted on the loan, and Defendants recorded a notice of default against the Hornblend Property on September 23, 2011. The notice of default showed that Castillo was $134,586.23 in arrears as of September 22, 2011. [Id.; Doc. No. 5-1, RJN, Ex. 5, Notice of Default.] Defendants subsequently filed a notice of trustee's sale on December 27, 2011, setting a sale date of January 18, 2012. [Doc. No. 1-1, Compl. ¶ 21; Doc. No. 5-1, RJN, Ex. 6.]

Defendants allege that on January 17, 2012, Castillo filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Southern District of California. Defendants also allege that the bankruptcy action remains open and that the scheduled sale has not occurred due to an automatic stay. [Doc. No. 4-1, Def.'s Mot. at 3; Doc. No. 5-1, RJN, Ex. 7.]

On June 25, 2012, Plaintiffs filed a complaint in state court against Defendants and recorded a lis pendens against the Hornblend Property. [Doc. No. 1-1, Compl.; Doc. No. 1-2, Notice of Pendency of Action.] On July 25, 2012, Defendants removed the action to this Court on the basis of federal question jurisdiction and supplemental jurisdiction. [Doc. No. 1, Notice of Removal.] In their complaint, Plaintiffs allege ten causes of action for: (1) fraud in origination of loan; (2) wrongful foreclosure in violation of California Civil Code § 2923.5; (3) breach of contract; (4) declaratory relief; (5) breach of implied covenant of good faith and fair dealing; (6) rescission; (7) injunctive relief; (8) unfair and deceptive business act practices; (9) predatory lending and violation of California Business and Professions Code § 17200; and (10) quiet title. [Doc. No. 1-1, Compl.]

DISCUSSION

I. Plaintiffs' Motion to Remand for Lack of Subject Matter Jurisdiction

The Court first addresses Plaintiffs' motion to remand. [Doc. No. 6, Pl.'s Mot. to Remand.] "The Supreme Court has instructed lower courts to resolve jurisdictional issues before reaching the merits of a case." Rivera v. R.R. Retirement Bd., 262 F.3d 1005, 1008 (9th Cir. 2001) (citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998) (rejecting doctrine of "hypothetical jurisdiction")). "Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause." Steel Co., 523 U.S. at 94 (internal quotation marks omitted). Therefore, the Court must first determine if it has subject matter jurisdiction before proceeding to the merits of this case.

An action is removable to federal court only if it might have been brought there originally. See 28 U.S.C. § 1441(a). Federal courts are courts of limited jurisdiction and as such "possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (internal citations omitted). The court must presume that a case lies outside of its limited jurisdiction, and the burden of establishing jurisdiction is on the party asserting it. Id. Lack of subject matter jurisdiction can be raised at any time by any party or sua sponte by the court. Csibi v. Fustos, 670 F.2d 134, 136 n.3 (9th Cir. 1982). "[D]istrict courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The "federal question" must be disclosed on the face of the complaint. Sparta Surgical Corp. v. Nat'l Ass'n of Securities Dealers, Inc., 159 F.3d 1209, 1211 (9th Cir. 1998). Under the longstanding well-pleaded complaint rule, this means that jurisdiction is proper "only when the plaintiff's statement of his own cause of action shows that it is based upon [federal law]." Vaden v. Discover Bank, 556 U.S. 49, 60 (2009) (internal quotation omitted).

In determining whether federal jurisdiction attaches to a state law claim that is predicated on violations of federal law, a court must examine whether the "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 responsibilities." Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005). "It is not enough that the court may have to interpret federal laws or regulations. 'Arising under' jurisdiction ...


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