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Alabastro v. Wells Fargo Bank, N.A.

United States District Court, N.D. California, San Jose Division

January 9, 2015

WELLS FARGO BANK, N.A., et al., Defendants.


EDWARD J. DAVILA, District Judge.


On or about July 20, 2007, Plaintiff Anthony Alabastro ("Plaintiff") executed a Deed of Trust secured by a an adjustable rate Note for $360, 000.00 in favor of World Savings Bank, FSB[1] in order to purchase certain real property located in Milpitas, California. See Compl., Docket Item No. 1, at ¶¶ 7, 12, Ex. A. On August 6, 2010, an agent for Cal-Western Reconveyance Corporation ("Cal-Western") recorded a Notice of Default against the Milpitas property on behalf of Wells Fargo, noting that Plaintiff owed $29, 932.40 as of that date. Id. at ¶ 21, Ex. D. A series of additional documents were then recorded against the Milpitas property until, on September 10, 2013, a trustee's sale was scheduled for October 3, 2013. Id. at ¶¶ 22, 23, 25, 28-33. According to Plaintiff, the trustee's sale has been postponed further and was last scheduled for July 1, 2014. Id. at ¶ 33.

In this action originally filed Santa Clara County Superior Court on June 26, 2014, Plaintiff alleges that Wells Fargo, Cal-Western and the Bank of New York Mellon (collectively, "Defendants") initiated wrongful foreclosure proceedings against the Milpitas property. He asserts five causes of action under California law: (1) wrongful foreclosure, (2) quiet title, (3) violation of Business and Professions Code § 17200, (4) unjust enrichment, and (5) accounting. Wells Fargo removed the case to this court on July 31, 2014, claiming diversity jurisdiction under 28 U.S.C. § 1332.

Presently before the court are two motions, a Motion to Remand filed by Plaintiff and a Motion to Dismiss filed by Wells Fargo. See Docket Item Nos. 7, 14. The court previously found these matters suitable for disposition without oral argument pursuant to Civil Local Rule 7-1(b). After careful review of the parties' arguments, the court will grant the Motion to Remand and deny the Motion to Dismiss without prejudice.


Removal jurisdiction is a creation of statute. See Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979) ("The removal jurisdiction of the federal courts is derived entirely from the statutory authorization of Congress."). In general, only those state court actions that could have been originally filed in federal court may be removed. 28 U.S.C. § 1441(a) ("Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant."); see also Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) ("Only state-court actions that originally could have been filed in federal court may be removed to federal court by defendant."). Accordingly, the removal statute provides two basic ways in which a state court action may be removed to federal court: (1) the case presents a federal question, or (2) the case is between citizens of different states and the amount in controversy exceeds $75, 000. 28 U.S.C. §§ 1441(a), (b).

On a motion to remand, it is the removing defendant's burden to establish federal jurisdiction, and the court must strictly construe removal statutes against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) ("The strong presumption' against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper."). "Where doubt regarding the right to removal exists, a case should be remanded to state court." Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003).


Plaintiff argues for remand because both he and Cal-Western are citizens of California. These facts are evident from the face of the Complaint and are undisputed by Wells Fargo in the Notice of Removal. Since California parties appear on both sides of the action, this case was not presumptively removable. See Kuntz v. Lamar Corp., 385 F.3d 1177, 1181 (9th Cir. 2004) ("For a case to qualify for federal jurisdiction under 28 U.S.C. § 1332(a), there must be complete diversity of citizenship between the parties opposed in interest."); see also Miller v. Grgurich, 763 F.2d 372, 373 (9th Cir. 1985) ("When an action is removed on the basis of diversity, the requisite diversity must exist at the time the action was removed to federal court... and should generally be determined from the face of the complaint.").

Recognizing the apparent absence of federal jurisdiction, Wells Fargo contends the removal was nonetheless proper because Cal-Western was fraudulently joined. Under the "fraudulent joinder" doctrine, a defendant may remove a civil action that alleges claims against a non-diverse defendant when the plaintiff has no basis for suing that defendant. McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987). "If the plaintiff fails to state a cause of action against a resident defendant, and the failure is obvious according to the settled rules of the state, the joinder of the resident defendant is fraudulent." Id .; Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). In such a case, the "fraudulently-joined" defendant is disregarded for jurisdictional purposes. Id.

Proving that a party was joined solely to defeat diversity jurisdiction is not easy, however. A fraudulent joinder "must be proven by clear and convincing evidence." Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). "[A]ll disputed questions of fact and all ambiguities in the controlling state law are [to be] resolved in plaintiff's favor." Calero v. Unisys Corp., 271 F.Supp.2d 1172, 1176 (N.D. Cal. 2003). If after doing so, "there is a non-fanciful possibility that plaintiff can state a claim under [state] law against the non-diverse defendants the court must remand." Macey v. Allstate Prop. & Cas. Ins. Co., 220 F.Supp.2d 1116, 1118 (N.D. Cal. 2002).

Furthermore, "a defendant seeking removal based on an alleged fraudulent joinder must do more than show that the complaint at the time of removal fails to state a claim against the non-diverse defendant." Nasrawi v. Buck Consultants, LLC, 776 F.Supp.2d 1166, 1170 (E.D. Cal. 2011). "Remand must be granted unless the defendant shows that the plaintiff would not be afforded leave to amend his complaint to cure [the] purported deficiency.'" Id . (quoting Burris v. AT&T Wireless, Inc., No. C 06-02904 JSW, 2006 U.S. Dist. LEXIS 52437, at *4, 2006 WL 2038040 (N.D. Cal. Jul. 19, 2006)).

Here, Wells Fargo argues that Cal-Western is a "sham" defendant because all of the actions it allegedly undertook as a with respect to the Milpitas property were privileged. This is generally true to the extent its conduct as a trustee arises from California's non-judicial foreclosure statutes. See Cal. Code Civ. Proc. 2924(b) ("[T]he trustee shall incur no liability for any good faith error resulting from reliance on information provided in good faith by the beneficiary regarding the nature and the amount of the default under the secured obligation, deed of trust, or mortgage."); see also Kachlon v. Markowitz, 168 Cal.App.4th 316, 333 (2008) ("[S]ection 2924 deems the statutorily required mailing, publication, and delivery of notices in nonjudicial ...

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