United States District Court, C.D. California
Jesus Arceo, et al.
v.
Wells Fargo Bank, N.A., et al.
Present: Honorable GEORGE H. WU, UNITED STATES DISTRICT JUDGE
ORDER REMANDING ACTION TO STATE COURT; VACATING
MOTION HEARING
Honorable GEORGE H. WU, UNITED STATES DISTRICT JUDGE
On May
18, 2016, Wells Fargo Bank, N.A. ("Wells") removed
this matter to this Court, asserting the existence of
complete diversity. Wells admits that its co-defendant,
Quality Loan Service Corporation ("Quality") -
which consented to Wells's removal - is non-diverse from
plaintiffs Jesus Arceo and Yamileth Cordova
("Plaintiffs"), but argues that Quality's
citizenship may be ignored because 1) it is a
"nominal" defendant, 2) it filed a Declaration of
Non-Monetary Status ("DNMS") pursuant to California
Civil Code § 2924l on May 13, 2016, and/or 3)
it has been fraudulently joined as a defendant. This Court is
always obliged to consider its own subject matter
jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994); Allstate Ins. Co. v.
Hughes, 358 F.3d. 1089, 1093 (9th Cir. 2003). For the
reasons discussed herein, the Court concludes that Wells has
not sustained its burden of properly demonstrating the
existence of subject matter jurisdiction.
First,
this Court has consistently taken the approach that the
filing of a DNMS is insufficient to render a state-court
defendant meaningless to the citizenship analysis necessary
to demonstrate complete diversity for federal jurisdiction
purposes. See, e.g., Luna v. Residential Credit
Solutions, Inc., CV 16-843-GW (KSx), Docket Nos. 17, 27;
Sanchez v. Wells Fargo Bank, N.A., CV
11-6255-GW-JEM, Docket Nos. 13, 17; Alonso v. Bank of
N.Y. Mellon, CV 09-6279 GW-JEM, Docket No. 15. Wells has
not cited the Court to (and the Court has not found in its
own research) any controlling Ninth Circuit authority
demonstrating that the Court's approach is incorrect.
Moreover, this determination has found even more support
amongst district courts where, as here, the 15-day period for
objections to the DNMS procedure did not expire before
removal occurred. See, e.g., Moore v. Wells
Fargo Bank, Nat'l Ass'n, Civ. No. 2:16-566 WBS
CKD, 2016 WL 3091087, *3-4 (E.D. Cal. June 2, 2016);
Jenkins v. Bank of Am., N.A., No. CV 14-04545 MMM
(JCx), 2015 WL 331114, *7-8 (C.D. Cal. Jan. 26, 2015);
Wise v. Suntrust Mortg., Inc., No. 11-CV-01360-LHK,
2011 WL 1466153, *4 (N.D. Cal. Apr. 18, 2011); see
also Cal. Civ. Code § 2924l(d)
("In the event that no objection is served within the
15-day objection period, the trustee shall not be required to
participate any further in the action or proceeding, shall
not be subject to any monetary awards as and for damages,
attorneys' fees or costs, shall be required to respond to
any discovery requests as a nonparty, and shall be bound by
any court order relating to the subject deed of trust that is
the subject of the action or proceeding."). For these
reasons, Wells's attempt to rely upon Quality's DNMS
filing is insufficient to preclude the Court's
consideration of Quality's citizenship.
Second,
Wells's argument that Quality is a "nominal"
defendant - to the extent that this argument is separate from
the DNMS-oriented approach - does not faithfully address the
allegations against Quality in the Complaint. Quality is
named on three of the causes of action - violation of
California Civil Code § 2934a(a)(1)(D), [1] unfair business
practices in violation of California Business and Professions
Code § 17200, and for cancellation of written
instruments, Cal. Civ. Code § 3412. Wells's
"nominal defendant" argument is based, in part, on
the idea that a trustee only has duties imposed by statute or
specified in the deed of trust. See Notice of
Removal at 5:8-6:27 (quoting California Court of Appeal and
federal district court decisions for the prospect that
"[t]he scope and nature of the trustee's duties are
exclusively defined by the deed of trust and the
governing statutes" and the observation that
"California courts have refused to impose duties on the
trustee other than those imposed by statute or
specified in the deed of trust") (emphasis added).
California Civil Code § 2934a(a)(2) is a
statutory duty that Quality allegedly violated; it
is not an attempt to impose common law duties on Quality. As
such, Wells's argument for Quality's nominal
party-status here in fact works against itself. See also
Moore, 2016 WL 3091087, *5 ("A trustee is not
considered a nominal party if the plaintiff pleads
substantive allegations against and seeks to recover money
damages from the trustee."); compare Gogert v.
Reg'l Tr. Servs., Inc., No. C11-1578JLR, 2012 WL
289205, *4 (W.D. Wash. Jan. 31, 2012) (finding trustee to be
nominal party where plaintiff had made no "allegations
of wrongdoing [n]or filed claims for money damages"
against the party).[2]
Finally,
Wells's fraudulent joinder argument is based upon the
assertion that Plaintiffs have "offered absolutely no
facts - and can never offer any facts - that might suggest
[they] can state a viable claim for relief against"
Quality. Notice of Removal at 8:10-13. But, as the Court has
just referenced, Plaintiffs have alleged that Quality
violated California Civil Code § 2934a(a)(2).
See Complaint ¶¶ 25, 27-28. Wells has not
demonstrated that any of the cases it cites in its Notice of
Removal dealt with an alleged violation of that statute. Nor
has Wells explained how, given Plaintiffs' allegation, it
can possibly meet the high bar necessary for it to
demonstrate fraudulent joinder under the Ninth Circuit's
test for that doctrine. See 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.") (emphasis added);
see also Hunter v. Philip Morris USA, 582 F.3d 1039,
1046 (9th Cir. 2009) ("[I]f there is a possibility that
a state court would find that the complaint states a cause of
action against any of the resident defendants, the federal
court must find that the joinder was proper and remand the
case to the state court."); Hamilton Materials, Inc.
v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007)
("Fraudulent joinder must be proven by clear and
convincing evidence."); id. (noting that
"there is a general presumption against fraudulent
joinder").
Wells
also argues that fraudulent joinder applies because - it
asserts - Quality's actions are privileged because of a
privilege "bar[ring] any tort claim arising out of the
statutorily required mailing, publication, and
delivery of notices in non-judicial foreclosure, and the
performance of statutory non-judicial procedures absent a
showing of malice." Notice of Removal at 9:3-6 (emphasis
added) (citing California Civil Code § 2924(d)); see
also Cal. Civ. Code § 2924(d) ("All of the
following shall constitute privileged communications pursuant
to [California Civil Code §] 47: (1) The mailing,
publication, and delivery of notices as required by this
section....") (emphasis added). But, again,
Plaintiffs have not pled a tort claim against Quality, and
Wells has not established that the substitution-of-trustee
mailing required by section 2934a(a)(2) qualifies as one of
the acts covered by the privilege it has identified (such
that Plaintiffs' failure in this regard would be
"obvious" according to "settled rules of the
state"). Indeed, according to Plaintiffs'
allegations, the substitution of trustee at issue here was
recorded over a week before a Notice of Default and
Election to Sell Under a Deed of Trust was recorded.
See Complaint ¶¶ 14-15. Moreover, section
2924(d), by its terms, only applies to the mailing,
publication and delivery of notices required by section 2924
- here, the mailing, publication and delivery is required by
section 2934a, not section 2924. Beyond even that
consideration, "[f]ederal courts have questioned whether
[California Civil Code § 2924(d)] protects a foreclosing
trustee which allegedly was not authorized to pursue
foreclosure proceedings in the first instance, "
Gomez v. Wells Fargo Bank, N.A., No. C 15-2996 SBA,
2015 WL 4592060, *2 (N.D. Cal. July 28, 2015), and here
subsection 2934a(a)(2) makes clear that a substitution is
"not effective" where that subsection's
requirements have not been met.
When a
court remands a matter for lack of subject matter
jurisdiction, it may due so sua sponte, without
waiting for the parties' input on the question. See
Scholastic Entm't, Inc. v. Fox Entm't Grp.,
Inc., 336 F.3d 982, 985 (9th Cir. 2003) ("While a
party is entitled to notice and an opportunity to respond
when a court contemplates dismissing a claim on the merits,
it is not so when the dismissal is for lack of subject matter
jurisdiction.") (omitting internal citation). Here,
Wells actually had that opportunity - its Notice of Removal
reads more like a legal brief on this point than a true
Notice of Removal. See Notice of Removal at
4:11-9:21. Wells has not directed the Court to any Ninth
Circuit precedent demonstrating that it is undeniably correct
with respect to any of its arguments for ignoring
Quality's citizenship here. Especially where
"[r]emoval and subject matter jurisdiction statutes are
‘strictly construed, ' and a ‘defendant
seeking removal has the burden to establish that removal is
proper and any doubt is resolved against removability,
'" Haw. ex rel. Louie v. HSBC Bank Nev.,
N.A., 761 F.3d 1027, 1034 (9th Cir. 2014) (quoting
Luther v. Countrywide Home Loans Servicing LP, 533
F.3d 1031, 1034 (9th Cir. 2008)), Wells has therefore come up
short in establishing complete diversity.
The
Court remands this action to Los Angeles County Superior
Court and vacates Wells's motion to dismiss, currently
set for hearing on Monday, June 27, 2016.
---------
Notes:
[1]This subsection does not exist.
However, it is clear from the context of Plaintiffs'
allegations that Plaintiffs are in fact referring to
California Civil Code § 2934a(a)(2)(D). That subsection
indicates that "[a] substitution executed pursuant to
[Civil Code § 2934a(a)(1)(B)] is not effective unless
all the parties signing the substitution sign, under penalty
of perjury, a separate written document stating the
following:... (D) Notice of the substitution was sent by
certified mail, postage prepaid, with return receipt
requested to each holder of an interest in the obligation
secured by the deed of trust who has not joined in the
execution of the substitution or the separate document."
Cal. Civil Code § 2934a(a)(2)(D).
[2]Plaintiffs seek monetary relief from
Quality. See Complaint ¶¶ 70, 73;
id. ...