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Lee v. Quality Loan Service Corp.

United States District Court, N.D. California

July 22, 2016

Chet Lee, Plaintiff,
v.
Quality Loan Service Corporation, et al., Defendants.

          ORDER GRANTING MOTION TO DISMISS RE: DKT. NO. 12

          YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE

         Plaintiff Chet Lee brings this action against defendants Quality Loan Service Corporation, Caliber Home Loans, Inc., LSF9 Master Participation Trust, J.P. Morgan Chase Bank, N.A., U.S. Bank, N.A., [1] as Trustee for LSF9 Master Participation Trust, Washington Mutual Bank, and forty-five unnamed defendants for violations related to a foreclosure. (Dkt. No. 1-1, “Compl.”) Specifically, plaintiff alleges that the defendants failed to contact plaintiff to “explore options for avoiding foreclosure” as required by certain laws prior to initiating foreclosure procedures. (Id.)

         Now before the Court is defendant J.P. Morgan Chase Bank, N.A.’s (“Chase”) motion to dismiss the complaint for failure to state a claim. (Dkt. No. 12, “Mtn.”) Plaintiff has filed a response (Dkt. No. 20, “Opp’n”) and defendant has replied (Dkt. No. 22, “Reply”).

         Having carefully considered the pleadings and papers submitted, the Court Dismisses Without Prejudice plaintiff’s claims against Chase.[2]

         I. BACKGROUND

         On or about July 20, 2000, plaintiff entered into a loan agreement with Washington Mutual for $350, 000.00. (Compl. ¶ 22.) As security for the loan, plaintiff executed a deed of trust, mortgaging his property located at 107 Merion, Moraga, California 94556 (the “Property”) to Washington Mutual. (Id. at ¶¶ 19, 22.) At some point, Washington Mutual ceased to exist and defendant Chase acquired all of its assets, allegedly including Washington Mutual’s security interest in the Property. (Dkt. No. 1.)

         On or about April 14, 2014, Chase substituted the original trustee on the deed of trust with an entity named ALAW, a substitution which plaintiff alleges was executed unlawfully. (Compl. ¶ 23.) Around April 15, 2015, plaintiff alleges that Chase “issued a purported assignment of deed of trust, transferring and assigning all beneficial interests under the Note and deed of trust of [p]laintiff’s real property to LSF9 Master Participation Trust.” (Id. at ¶ 24.) Then, according to plaintiff, around August 6, 2015, defendants LSF9 Master Participation Trust and Caliber Home Loans transferred the interests under the deed of trust to U.S. Bank, N.A., as trustee for LSF9 Master Participation Trust. (Id. at ¶ 26.) U.S. Bank, N.A., in turn, substituted Quality Loan Service Corporation (“Quality”) as the trustee under the deed of trust. (Id. at ¶ 29.)

         Subsequently, on or about September 23, 2015, Quality recorded a notice of default and election to sell the Property. (Id. at ¶ 31.) Plaintiff alleges that the notice was “false in that it fail[ed] to properly credit [p]laintiff for the payments [p]laintiff made towards the mortgage and therefore overstates the amount of [p]laintiff’s default if any.” (Id.) Additionally, plaintiff alleges that the notice had no force or effect because “neither the loan servicer nor the lender contacted [p]laintiff in person or by telephone to discuss options of avoiding foreclosure as required by the California Homeowner Bill of Rights.” (Id.) On or about January 11, 2016, Quality recorded the notice of trustee’s sale, and plaintiff alleges that this, too, was unlawful because it overstated the amount of plaintiff’s default and no party contacted plaintiff to discuss options for avoiding foreclosure. (Id. at ¶ 32.)

         II. SUBJECT MATTER JURISDICTION

         The Court first addresses plaintiff’s contention that it should not rule on the motion to dismiss because the Court lacks subject matter jurisdiction in this case. Plaintiff originally filed this action in state court alleging violations of California statutory and common laws on March 4, 2016. (Dkt. No. 1-1.) Defendants Caliber Home Loans, Inc., LSF9 Master Participation Trust, and U.S. Bank, N.A., with the consent of all other defendants, filed a Notice of Removal on May 3, 2016 on the basis of the Court’s diversity jurisdiction. (Dkt. No. 1.) Plaintiff now argues that complete diversity does not exist, and, therefore, the Court lacks subject matter jurisdiction. Chase argues on reply that the Court need not address this argument because plaintiff has not filed a proper motion to remand.

         The Court has an independent obligation to address issues directly related to its subject matter jurisdiction over an action. Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1116 (9th Cir. 2004). A case removed to federal court must be remanded back to state court “if at any time before final judgment it appears that the district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c). Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (federal courts “possess only that power authorized by Constitution and statute”). “Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992); accord Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003). A defendant may remove a civil action from state court if the action could have originally been filed in federal court. 28 U.S.C. § 1441. Federal subject matter jurisdiction under 28 U.S.C. § 1332(a)(1) requires complete diversity of citizenship and an amount in controversy in excess of $75, 000. For the purposes of determining whether complete diversity of citizenship exists, courts 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 conveying the title if adjudged to the complainant.” Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 873 (9th Cir. 2000) (citations omitted); see also Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980) (“A federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.”).

         Here, plaintiff is correct that, at least from the face of the complaint, there is a lack of complete diversity. Both plaintiff and defendant Quality are California citizens. However, as defendants explained in the Notice of Removal-and which plaintiff does not dispute-Quality was sued only “in its capacity as a trustee on the subject deed of trust, in that it filed and served a Declaration of Non-Monetary status in the State Court Action on April 11, 2016, and plaintiff has not filed an objection to that declaration.” (Dkt. No. 1); see Docket Sheet, Lee v. Quality Loan Service Corporation, et al., No. C16-00435 (Cal. Sup. Ct.). Courts have routinely found that parties who have served a declaration of non-monetary status to which no objection is filed are properly deemed as nominal parties for the purposes of determining diversity jurisdiction. See, e.g., Jenkins v. Bank of Am., N.A., No. 14-CV-04545, 2015 WL 331114, at *6 (C.D. Cal. Jan. 26, 2015) (finding that defendant Quality was a nominal defendant because it had filed a declaration of non-monetary status without objection) (citing cases); Cabriales v. Aurora Loan Servs., No. 10-CV-00161, 2010 WL 761081, at *2 (N.D. Cal. Mar. 2, 2010) (same); see also Cal. Civ. Code § 2924l (stating that a trustee’s filing of nonmonetary status without objection obviates any requirement that the trustee “participate any further in the action or proceeding, ” and the trustee “shall not be subject to any monetary awards as and for damages, attorneys’ fees or costs”). Accordingly, because Quality filed such a declaration in the state court action without objection, the Court finds that Quality is only a nominal party and is to be disregarded for the purposes of establishing diversity jurisdiction. Thus, the Court finds that complete diversity exists and, therefore, the Court properly can exercise subject-matter jurisdiction over the parties in this action.[3]

         III. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

         A. ...


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