Martinez v. Wells Fargo Bank
Decision Date | 21 May 2013 |
Docket Number | No. C-12-6006 EMC,C-12-6006 EMC |
Parties | RAUL MARTINEZ, et al., Plaintiffs, v. WELLS FARGO BANK, Defendant. |
Court | U.S. District Court — Northern District of California |
At issue is whether, for purposes of diversity jurisdiction, a national bank is a citizen solely of the state in which its main office is located, as identified in its articles of association (the ) , or is also a citizen of the state in which its principal place of business is located. Plaintiffs Raul Martinez and Martha L. Miranda initially brought this action in state court against the successor in interest to the lender for their property at 327 Foerster Street, San Francisco, California (the "Property"), Defendant Wells Fargo Bank, N.A. ("Wells Fargo"), based on Defendant's conduct surrounding issuance and servicing of the note for the Property. See Compl., Docket No. 1 Ex. A. Plaintiffs assert state law claims for (1) violation of California Business & Professions Code section 17200 (the "UCL" claim) based on unfair conduct and fraudulent conduct; (2) fraud; (3) negligent misrepresentation; and (4) breach of the implied covenant of good faith and fair dealing. See Compl. After Defendant removed the case to this Court on the basis of diversity jurisdiction, it brought the instant motion to dismiss. See Mot. to Dismiss, Docket No. 4. Plaintiff brought the instant motion to remand. See Mot. to Remand, Docket No. 14. As the Court finds Defendant to be a citizen ofCalifornia, diversity jurisdiction is lacking, and thus the Court GRANTS Plaintiff's motion for remand. Defendant's motion to dismiss is DENIED as moot.
This case stems from an adjustable rate mortgage note for $532,800 (the "Note") obtained by Plaintiffs in March 2005. See Compl. ¶¶ 17, 19, Ex. 2.1 Plaintiffs are Spanish speakers with limited ability to read, speak, and understand English. Id. ¶ 44. Plaintiffs obtained the loan through loan broker Infinity Financial Consultants Inc. ("Infinity") and John Balladeres (collectively, "the Brokers"), neither of which are defendants in the current action. See id. ¶¶ 3, 52-54. Defendant Wells Fargo is a national bank with the main office identified in its articles of association in South Dakota, but its principal place of business in California. See Remand RJN, Docket No. 19, Ex. 5 art. II, ¶ 1;2 Mot. to Remand 4 (arguing Wells Fargo's principal place of business is in California); Def.'s Opp'n to Mot. to Remand ("Def.'s Opp'n"), Docket No. 18 ( ).
Plaintiffs' claims are based on two general sets of allegations. First, the bulk of the complaint is devoted to Plaintiffs' allegations that Wells Fargo and the Brokers took part in various deceptive practices that induced Plaintiffs to sign the Note, such as failing to disclose that the loan was designed to cause negative amortization to occur, failing to disclose that the initial interest rate was only temporary, and failing to disclose that unpaid interest would be added to the principal of the loan. See Compl. ¶¶ 66 (UCL claim), 88 (fraud claim), 102-05 (negligent misrepresentation claim), 119 (breach of covenant claim). The Brokers and Wells Fargo represented "that their minimum monthly payments would pay off the balance of the loan during their negotiations with Plaintiffs . . . ." Id. ¶¶ 30, 46. No one explained any of the loan documents to Plaintiffs in Spanishand none of the documents were presented to Plaintiffs in advance. Id. ¶ 33. As a result of these representations and omissions, Plaintiffs executed the Note. Id. ¶ 31. Plaintiffs did not realize that the representations made at the time they executed the Note were false until November 2011, when they sought advice in an attempt to modify their loan with a fixed interest rate. Id. ¶ 43.
Second, although not discussed in the facts section of the complaint, Plaintiffs' UCL and breach of covenant causes of action include allegations that Wells Fargo has "assessed improper or excessive late fees"; "improperly characterized Plaintiffs' account as being in default or delinquent status to generate unwarranted fees"; "misapplied, or failed to apply Plaintiffs' payments"; tried to collect and/or collected various improper fees, costs and charges." Compl. ¶¶ 68, 121.
In arguing whether there is diversity jurisdiction, the parties contest the citizenship of Wells Fargo. At the hearing on this matter on January 31, 2013, the Court ordered the parties to submit supplemental briefing detailing the legislative history behind adoption of the principal place of business standard in 1958, which the parties filed on April 1, 2013. See Docket Nos. 20-23.
28 U.S.C. § 1348 (emphasis added). However, the statute does not define where national banks are "located" for purposes of jurisdiction, nor is such a definition obvious.
Courts have struggled to interpret the last phrase in § 1348. Compare World Trade Center Properties, L.L.C. v. Hartford Fire Ins. Co., 345 F.3d 154 (2d Cir. 2003) (, )abrogated by Wachovia Bank v. Schmidt, 546 U.S. 303, 309 (2006), with Firstar Bank, N.A. v. Faul, 253 F.3d 982, 993 (7th Cir. 2001) ( ), and with Wells Fargo Bank, N.A. v. WMR e-Pin, LLC, 653 F.3d 702, 709 (8th Cir. 2011) ( ).
In Wachovia Bank v. Schmidt, 546 U.S. 303, 307 (2006), the Supreme Court rejected an interpretation of § 1348 that national banks are citizens of every state in which they have a branch and instead determined "that a national bank, for § 1348 purposes, is a citizen of the State in which its main office, as set forth in its articles of association, is located." However, the Court did not reach the question of whether a national bank may also be a citizen of the state in which its principal place of business is located, specifically leaving that question unresolved. See id. at 317 n.9. Schmidt left open the door to either of two interpretations, that a national bank is a citizen of: (1) only its state of association (the state in which its main office is listed in its articles of association); or (2) both its state of association and the state in which its principal place of business is located. See WMR e-Pin, 653 F.3d at 707 ( ). The Court turns to the reasoning in Schmidt, the various lower court cases that have considered this issue, and legislative history and legislative policy underlying § 1348 and related statutes to determine which of these two interpretations is correct.
In Schmidt, the lower court had found that a national bank is a citizen of every state in which it has established a branch. See 546 U.S. at 307. The Supreme Court rejected that interpretation and instead found that national banks are citizens of their states of association. In so holding, Schmidt first looked to the legislative history behind § 1348. As set forth in Schmidt, Congress authorized national banks in 1863, providing that suits in which a national bank was a party could automatically be brought in all federal courts. See id. at 309-10 (citing Act of Feb. 25, 1863, § 59, 12 Stat. 681). In contrast, state banks and other state-incorporated entities could only access federal courts on the basis of diversity of citizenship or federal question jurisdiction. See id. at 310.
National banks' automatic qualification for federal jurisdiction ended in 1882, when Congress passed a bill providing for jurisdictional parity with state-chartered banks, such that jurisdiction would be "the same as, and not other than, the jurisdiction for suits by or against" state banks from the state where national banks were doing business. See id. (quoting Act of July 12, 1882, § 4, 22 Stat. 163). Congress thus established parity between national and local banks for purposes of jurisdiction.
In 1887, Congress again revised the law governing national banks, inserting, for the first time, the current language defining where a national bank was "located" for diversity purposes:
[A]ll national banking associations established under the laws of the United States shall, for the purposes of all actions by or against them, real, personal or mixed, and all suits in equity, be deemed citizens of the...
To continue reading
Request your trial