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Ray v. Nationstar Mortgage LLC

United States District Court, S.D. California

June 6, 2014

JOSIE L. RAY, et al., Plaintiffs,
v.
NATIONSTAR MORTGAGE LLC d/b/a CHAMPION MORTGAGE, et al., Defendants.

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND (DOC. NO. 11)

CYNTHIA BASHANT, District Judge.

On March 25, 2014, Plaintiff Josie L. Ray, as Executor of the Estate of Melvin Ray, her deceased spouse, and in her individual capacity, commenced this action in the San Diego Superior Court against Defendants Nationstar Mortgage d/b/a Champion Mortgage, Bank of America, N.A., and 1st Source Funding, Inc., arising out of alleged wrongful conduct related to a Home Equity Conversion Mortgage ("HECM" or "reverse mortgage"). Nationstar later removed this action to this Court. Mrs. Ray now moves to remand to state court. Nationstar and Bank of America oppose.

The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). For the following reasons, the Court GRANTS Mrs. Ray's motion to remand.

I. BACKGROUND

Mrs. Ray, who is 77 years old, is the surviving spouse of the decedent, Mr. Ray, who passed away on March 6, 2013. (Compl. ¶ 1.) Mrs. Ray is also the executor of Mr. Ray's estate. ( Id. ¶ 2.) The estate includes real property located in San Diego, California, which "is now, and has been the residence of [Mrs. Ray] since approximately 1975." ( Id. ¶¶ 3-4.) Title to the residence was in the names of Mr. and Mrs. Ray, as husband and wife, for over 30 years, "before the decedent obtained a Home Equity Conversion Mortgage Reverse Mortgage' in February of 2008, " when Mr. Ray was 81 years old and Mrs. Ray was 71 years old. ( Id. ¶ 4.) "The residence is now encumbered by a Reverse Mortgage which is in the decedent's name alone." ( Id. )

On or about December 30, 2013, "[t]he holder of the Reverse Mortgage commenced foreclosure proceedings on the Reverse Mortgage... with the recording of a Notice of Default[.]" (Compl. ¶ 4.)

Mrs. Ray contends that "there was no compelling necessity for a Reverse Mortgage on the residence at all, " especially given that "[t]here was no existing mortgage debt on the property." (Compl. ¶ 5.) However, in December 2007, Mrs. Ray alleges that she and her spouse "participated in Reverse Mortgage counseling, " in which neither Mr. nor Mrs. Ray "understood, were fully informed, or informed at all, of the consequences to a surviving spouse who was not on title, and was not a borrower on a Reverse Mortgage." ( Id. ) Though title for the residence was originally held in both Mr. and Mrs. Ray's names, the Reverse Mortgage was in Mr. Ray's name alone, allegedly made "without full knowledge and/or consent" of Mrs. Ray. ( Id. ¶ 22.) Mrs. Ray did not discover details of the Reverse Mortgage until after Mrs. Ray's death on March 6, 2013. ( Id. ¶ 64.)

According to Mrs. Ray, the Reverse Mortgage was structured as a "lump sum" payout rather than as a payout in monthly installments, or as a line of credit to be available in the future. (Compl. ¶ 6.) Mrs. Ray contends that "Defendants... had a strong economic incentive to have [her] removed from title to the residence, and to structure the Reverse Mortgage transaction with the decedent only, as the decedent was 10 years older than [Mrs. Ray], and the lump-sum' payout would be larger based upon his age, thus yielding larger commissions and fees to the Defendants." ( Id. ) She further contends that "Defendants... had a strong economic incentive to structure the Reverse Mortgage as a lump sum' payout, because it maximized their fees and commissions at both the loan origination stage, and at the back end' when the Reverse Mortgage was sold." ( Id. ¶ 7.)

Mrs. Ray describes the structure of the Reverse Mortgage as an arrangement where "the unused but available line of credit would have gained compounded interest at the rate of approximately 5% or more annually, " thereby depriving Mr. and Mrs. Ray of potential income and investment opportunities. (Compl. ¶ 8.) To Mrs. Ray, the proper structure of the Reverse Mortgage would have been a line of credit instead of a lump-sum payment with both Mr. and Mrs. Ray on the title of the residence and on the Reverse Mortgage. ( Id. )

On March 25, 2014, Mrs. Ray commenced this action in the San Diego Superior Court, asserting six causes of action for: (1) reformation of contract; (2) declaratory relief; (3) injunctive relief; (4) elder financial abuse; (5) fraud, concealment, intentional misrepresentation; and (6) negligence, negligent misrepresentation. On April 22, 2014, Nationstar removed this action to this Court. In the notice of removal, Nationstar asserts that it is a Delaware corporation headquartered in Lewisville, Texas, and Bank of America is national banking association that is a citizen of North Carolina. (Notice of Removal 3:10-4:8.) Furthermore, in response to Mrs. Ray's allegation that 1st Source Funding is a California corporation, Nationstar states that 1st Source Funding "as of July 20, 2005 was a dissolved California corporation, " while also contending that 1st Source Funding is "a sham defendant' included with the intention to preclude removal." ( Id. at 4:9-21.) Nationstar recognizes that 1st Source Funding "may have been the broker that originated the loan." ( Id. ) Mrs. Ray now moves to remand this action. Nationstar opposes, and Bank of America joins in opposition (Doc. No. 21).

II. LEGAL STANDARD

"Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). "They possess only that power authorized by Constitution or statute, which is not to be expanded by judicial decree." Id. (internal citations omitted). "It is to be presumed that a cause lies outside this limited jurisdiction and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. (internal citations omitted); see also Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006).

Consistent with the limited jurisdiction of federal courts, the removal statute is strictly construed against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992); see also Sygenta Crop Prot. v. Henson, 537 U.S. 28, 32 (2002); O'Halloran v. Univ. of Wash., 856 F.2d 1375, 1380 (9th Cir. 1988). "The strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Gaus, 980 F.2d at 566; see also Nishimoto v. Federman-Bachrach & Assoc., 903 F.2d 709, 712 n.3 (9th Cir. 1990); O'Halloran, 856 F.2d at 1380. "The propriety of removal... depends on whether the case originally could have been filed in federal court." Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 163 (1997). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." ...


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