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Robinson v. Clear Recon Corp.

United States District Court, C.D. California

July 9, 2015

CYNTHIA ROBINSON, Plaintiff,
v.
CLEAR RECON CORP, U.S. BANK TRUST, N.A. as Trustee for LSF8 Master Participation Trust, HOUSEHOLD FINANCE CORPORATION OF CALIFORNIA, and DOES 1-50 INCLUSIVE, Defendants.

ORDER SUA SPONTE REMANDING ACTION

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

On November 25, 2014, Plaintiff Cynthia Robinson filed a pro se Complaint in state court against Defendants Clear Recon Corp ("Clear Recon"), U.S. Bank Trust ("US Bank"), and Household Finance Corporation ("Household"), to prevent foreclosure on her property. On January 12, 2015, Defendants removed the action to federal court under diversity jurisdiction. Subsequently, U.S. Bank moved to dismiss the First Amended Complaint ("FAC"), which was opposed by Plaintiff. During review of the Motion, the Court reexamined jurisdiction and now questions whether federal jurisdiction exists. For the reasons discussed below, the Court, REMANDS this action for lack of diversity jurisdiction.

II. FACTUAL BACKGROUND

On May 3, 2007, Plaintiff obtained a mortgage loan in the principal amount of $273, 765.78 from Household, secured by a Deed of Trust ("DOT") encumbering the property located at 506 South Grevillea, Unit #1, Inglewood, CA 90301, and recorded on May 8, 2007. (First Am. Compl. ("FAC") ¶ 21, ECF No. 13.) The DOT securing the loan identified Stewart Title Guaranty as trustee and Household as beneficiary. (Def.'s Req. for Judicial Notice ("RJN") Ex. A, ECF No. 14-2.) U.S. Bank alleges that Plaintiff defaulted on the loan, and foreclosure proceedings commenced. ( See Mot. to Dismiss ("MTD"), ECF No. 14 (stating that "Installment of Principal and Interest plus impounds and/or advances... became due on 3/8/2011 plus late charges.").)

Clear Recon substituted Stewart Title as trustee (FAC ¶ 24; RJN Ex. B), and recorded a Notice of Default ("NOD") on December 18, 2013, showing the loan in arrears by $66, 585.46. (FAC ¶ 26; RJN Ex. C.) Household later assigned its beneficial interest to U.S. Bank. (FAC ¶ 27, Ex. 1 at 48.) On August 18, 2014, Clear Recon recorded the Notice of Trustee's Sale, and thereafter rescheduled the sale for December 2014. (FAC ¶ 30.) From the parties' submissions, it appears no foreclosure sale has taken place.

In Plaintiff's state court complaint, she asserted ten causes of action against all Defendants with the exception of one.[1] On January 12, 2015, U.S. Bank removed the case to federal court (ECF No. 1), then moved to dismiss on January 15, 2015 (ECF No. 7). That motion was granted with leave to amend (ECF No. 12). The First Amended Complaint ("FAC") was submitted on April 22, 2015 (ECF No. 13), and again U.S. Bank moved to dismiss on May 11, 2015 (ECF No. 14). Plaintiff untimely filed her opposition to which U.S. Bank replied.[2] (ECF Nos. 16, 18.) With that Motion pending, upon further review the Court remands based upon lack of subject-matter jurisdiction.

III. LEGAL STANDARD

Federal courts have limited jurisdiction, having subject-matter jurisdiction only over matters authorized by the Constitution and Congress. U.S. Const. art. III, § 2, cl. 1. There are two ways a party can bring a case within the jurisdiction of federal courts: (1) diversity of citizenship under 28 U.S.C. § 1332, and (2) federal question under 28 U.S.C. 1331. Federal courts have diversity jurisdiction over civil actions where the amount in controversy exceeds $75, 000, exclusive of interest and costs, and the case is between citizens of different states. 28 U.S.C. § 1332. "[A]ny 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 or the defendants, to [a] district court...." 28 U.S.C. § 1441(a). A removing defendant bears the burden of establishing that removal is proper. E.g., 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.") (internal quotation marks omitted). Moreover, if there is any doubt regarding the existence of subject matter jurisdiction, the court must resolve those doubts in favor of remanding the action to state court. E.g., Gaus, 980 F.2d at 566 ("Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.").

Further, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). In fact, "[i]f a district court lacks subject matter jurisdiction over a removed action, it has the duty to remand it, for removal is permissible only where original jurisdiction exists at the time of removal or at the time of the entry of final judgment....'" Sparta Surgical Corp. v. Nat'l. Ass'n of Sec. Dealers, Inc., 195 F.3d 1209, 1211 (9th Cir. 1996) (quoting Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 43 (1998)). Under 28 U.S.C. § 1441(a), an action must "be fit for federal adjudication when the removal petition is filed." Lexecon, 523 U.S. at 43. "If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fed.R.Civ.P. 12(h)(3); see also Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002) ("Federal Rule of Civil Procedure 12(h)(3) provides that a court may raise the question of subject matter jurisdiction, sua sponte, at any time.") (footnote omitted).

IV. DISCUSSION

The present case poses no federal question therefore subject-matter jurisdiction is predicated on diversity of citizenship. The Court has original jurisdiction over controversies between citizens of different states when the matter in dispute exceeds the sum value of $75, 000. 28 U.S.C. § 1332. There is no dispute over the amount in controversy, thus the Court looks to the diversity of the parties. Complete diversity is required to maintain jurisdiction. Exxon Mobil Corp. v. Allapattah Serv., Inc., 545 U.S. 546, 553 (2005) ("[T]he presence in the action of a single plaintiff from the same State as a single defendant deprives the district court of original diversity jurisdiction over the entire action.").

The only Defendant whose citizenship is not diverse to Plaintiff is Clear Recon.[3] Plaintiff is a citizen of California. (ECF No. 1, Notice of Removal ("NOR") ¶ 5; FAC ¶ 15.) Clear Recon is a corporation existing under the laws of the State of California. (FAC ¶ 16.) Accordingly, Clear Recon and Plaintiff are not diverse because they are citizens of the same state. However, U.S. Bank states that Clear Recon is a nominal party and is not required to appear in the action or join in the removal. (NOR ¶ 5.)

In general, all parties named in the pleadings are considered in the diversity analysis. See Osborne v. Bank of the United States, 22 U.S. 738, 857 (1824); Morongo Band of Mission Indians v. California State Bd. Of Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988) (diversity is determined by citizenship of parties as of filing of the original complaint). But the Ninth Circuit instructs courts to "ignore the citizenship of nominal or formal parties who have no interest in the action, and are merely joined to perform the ministerial act of ...


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