Corral v. Select Portfolio Servicing, Inc.

• Decision Date: 27 December 2017
• Docket Number: No. 15-16574,15-16574
• Citation: 878 F.3d 770
• Parties: Esperanza CORRAL; Diana Balgas, Plaintiffs-Appellants, v. SELECT PORTFOLIO SERVICING, INC.; U.S. Bank, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

878 F.3d 770

Esperanza CORRAL; Diana Balgas, Plaintiffs-Appellants,

v.SELECT PORTFOLIO SERVICING, INC.; U.S. Bank, Defendants-Appellees.

No. 15-16574

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 19, 2017 San Francisco, California

Filed December 27, 2017

Anthony George Graham (argued), Graham & Martin LLP, Santa Ana, California, for Plaintiffs-Appellants.

Thomas A. Woods (argued) and Bao M. Vu, Stoel Rives LLP, Sacramento, California, for Defendants-Appellees.

Before: Kim McLane Wardlaw and Andrew J. Kleinfeld, Circuit Judges, and Cathy Ann Bencivengo, District Judge.^*

Dissent by Judge Kleinfeld

BENCIVENGO, District Judge:

This case requires us to decide how to measure the amount in controversy for the purpose of determining diversity subject matter jurisdiction when a complaint seeks only a temporary stay of foreclosure pending review of a loan modification application pursuant to the California Homeowners Bill of Rights ("HBOR"). We hold that the value of the property or amount of indebtedness are not the amounts in controversy in such a circumstance.

BACKGROUND

On March 15, 2013, Appellants Esperanza Corral and Diana Balgas (together, "Corral") received a notice of default on their mortgage on the residential property where Ms. Balgas lives (the "Property"). They then applied for a loan modification with the loan servicer, Appellee Select Portfolio Servicing, Inc. ("SPS").¹ In April 2014, while the loan modification application was pending, Corral received a Notice of Trustee Sale of the Property. Thereafter, Corral filed a lawsuit in the California Superior Court for Alameda County (the "First Action") and successfully moved for a temporary restraining order ("TRO") of the trustee sale. In December 2014, the parties reached a settlement, pursuant to which SPS agreed to wait thirty days following the dismissal of the First Action to receive Corral’s submission of a completed application for a loan modification. The settlement agreement also provided that if SPS did not receive a completed application within thirty days, SPS reserved the right to pursue non-judicial foreclosure of the Property.

On or around February 25, 2015, SPS scheduled a trustee sale for the Property for March 5, 2015. On March 3, 2015, Corral filed this lawsuit in California Superior Court for Alameda County, asserting claims for violation of HBOR and for violation of California’s unfair competition law, California Business & Professions Code § 17200 et seq. The Superior Court issued a TRO enjoining the trustee sale, but it later denied Corral’s motion for a preliminary injunction of the foreclosure sale.

On April 3, 2015, SPS removed this lawsuit to the United States District Court for the Northern District of California. The notice of removal stated that the district court had diversity jurisdiction under 28 U.S.C. § 1332 because the parties are diverse and more than $75,000 is in controversy. As for diversity, the notice stated that Corral and Balgas are citizens of California and SPS is a Utah corporation with its principal place of business in Utah. As for the amount in controversy, the notice stated that the amount in controversy requirement is satisfied because the Deed of Trust on the Property secured a $680,000.00 promissory note and the unpaid balance and other charges on the promissory note at the time of the notice was $806,512.74.

The district court denied Corral’s motion to remand. In its opinion, the district court relied exclusively on cases where the plaintiffs sought an indefinite injunction against foreclosure, to quiet title to the property in question, or to rescind their loans, and concluded that Corral’s gains from the temporary injunction "would surely exceed $75,000" in light of the value of the Property and amount of indebtedness.

Corral also filed an amended complaint in the district court that added claims for breach of contract and breach of the implied covenant of good faith and fair dealing arising out of the settlement of the First Action. The amended complaint specified that the amount in controversy does not exceed $75,000. On July 9, 2015, the district court granted SPS’s motion to dismiss the amended complaint for failure to state a claim. Corral now timely appeals.

STANDARD OF REVIEW

Although Corral’s brief does not specifically identify the district court’s denial of the motion to remand as an issue presented for review, it argues that the motion to remand should have been granted. Our review of a denial of a motion to remand is de novo. Hunter v. Philip Morris USA , 582 F.3d 1039, 1042 (9th Cir. 2009) ; see also Reeb v. Thomas , 636 F.3d 1224, 1225 (9th Cir. 2011) ("The existence of subject matter jurisdiction is a question of law reviewed de novo."). Moreover, "[t]he requirement that jurisdiction be established as a threshold matter is inflexible and without exception; for jurisdiction is power to declare the law, and without jurisdiction the court cannot proceed at all in any cause." Ruhrgas AG v. Marathon Oil Co. , 526 U.S. 574, 577, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) (citing Steel Co. v. Citizens for Better Env't , 523 U.S. 83, 93–95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) ) (internal brackets, ellipses, citations and quotation marks omitted). Thus, it is irrelevant that the Corral did not expressly identify subject matter jurisdiction as an issue on appeal because the court has an "independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party." Arbaugh v. Y&H Corp. , 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006).

DISCUSSION

"Federal courts are courts of limited jurisdiction.... 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." Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (internal citations omitted). This burden is particularly stringent for removing defendants because "[t]he removal statute is strictly construed, and any doubt about the right of removal requires resolution in favor of remand." Moore-Thomas v. Alaska Airlines, Inc. , 553 F.3d 1241, 1244 (9th Cir. 2009) ; see also Gaus v. Miles, Inc. , 980 F.2d 564, 566 (9th Cir. 1992) (noting the "strong presumption" against removal jurisdiction).

"The basic statutory grants of federal-court subject-matter jurisdiction are contained in 28 U.S.C. §§ 1331 and 1332. Section 1331 provides for ‘federal-question’ jurisdiction, § 1332 for ‘diversity of citizenship’ jurisdiction." Arbaugh , 546 U.S. at 513, 126 S.Ct. 1235 (internal brackets omitted). SPS removed this case to federal court on the basis of diversity jurisdiction. "For a federal court to exercise diversity jurisdiction under § 1332(a), the amount in controversy must exceed $75,000, and the parties must be citizens of different states." Rainero v. Archon Corp. , 844 F.3d 832, 839 (9th Cir. 2016) ; see also 28 U.S.C. § 1332(a).

Corral did not dispute the existence of diversity of citizenship in the motion to remand before the district court, but the citizenship of each party is not entirely clear from the record. There is no dispute that Corral and Balgas are citizens of California, and that SPS is a Utah corporation with its principal place of business in Utah. However, the notice of removal did not specify the citizenship of U.S. Bank, N.A., which was identified as a party in the original complaint and as an appellee here. Nevertheless, we have previously ruled that U.S. Bank, N.A., "is a citizen of Ohio because its main office is located in that state." Lowdermilk v. U.S. Bank Nat'l Ass'n , 479 F.3d 994, 997 (9th Cir. 2007) (citing Wachovia Bank, N.A. v. Schmidt , 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006) ). Assuming U.S. Bank’s main office was located in Ohio when Corral filed this lawsuit, there is complete diversity of the parties.

Assuming diversity exists, the only issue is whether the amount in controversy exceeds $75,000. The original complaint, which was the operative complaint at the time of removal, did not seek a specific dollar amount in damages. Rather, it prayed for "an order enjoining the sale of the Subject property while Plaintiff’s loan modification application is under review," compensatory damages, and costs. Elsewhere, the complaint stated that "Defendants may be liable for the greater of treble damages or $50,000 if the material violation was intentional, reckless or resulted in willful misconduct. Plaintiff may also be awarded her reasonable attorney’s fees and costs."

"Where it is not facially evident from the complaint that more than $75,000 is in controversy, the removing party must prove, by a preponderance of the evidence, that the amount in controversy meets the jurisdictional threshold." Matheson v. Progressive Specialty Ins. Co. , 319 F.3d 1089, 1090 (9th Cir. 2003) ; see also Singer v. State Farm Mut. Auto. Ins. Co. , 116 F.3d 373, 376 (9th Cir. 1997) ("Where the complaint does not demand a dollar amount, the removing defendant bears the burden of proving by a preponderance of evidence that the amount in controversy exceeds [the jurisdictional threshold]."). "Conclusory allegations as to the amount in controversy are insufficient." Matheson , 319 F.3d at 1090–91.

SPS, the removing party, asserted in its notice of removal that the amount in controversy for jurisdictional purposes was either $680,000.00, based on the value of the promissory note secured by the Deed of Trust on the Property, or $806,512.74, based on the unpaid balance and other charges on the promissory note. There is no dispute as to whether either of these dollar amounts is accurate. The only question is whether they are proper measures of the amount in controversy in a complaint seeking only a temporary injunction against foreclosure while a loan modification application is pending.

"In actions seeking declaratory or...