Sharma v. HSI Asset Loan Obligation Tr. 2001-1
| Decision Date | 16 July 2020 |
| Docket Number | No. 2:20-cv-921-JAM-KJN (PS),2:20-cv-921-JAM-KJN (PS) |
| Court | U.S. District Court — Eastern District of California |
| Parties | VINOD SHARMA AND VINJAY L. SHARMA, Plaintiffs, v. HSI ASSET LOAN OBLIGATION TRUST 2001-1, et al., Defendants. |
FINDINGS AND RECOMMENDATIONS
On July 18, 2019, plaintiffs filed a complaint in California Superior Court alleging twelve claims against defendants HSI Asset Loan Obligation Trust 2007-1 ("HSI Trust"), HSI Asset Securitization Corporation ("HSI Corp."), and 100 doe defendants in connection with plaintiffs' residential mortgage. (ECF No. 1-1 at 2, 7.) Deutsche Bank National Trust Company ("DBNTC"), claiming to be the real party defendant in interest in this action as trustee for the HSI Trust, removed to this court and moved to dismiss.1 (ECF Nos. 1, 5.) Plaintiffs opposed dismissal, and moved to remand the case. (ECF No. 17.)
The undersigned recommends: (I) denying plaintiffs' motion to remand; and (II) dismissing plaintiffs' complaint with prejudice based on California res judicata.
In April 2007, plaintiffs borrowed $875,000 from American Brokers Conduit ("ABC") for a refinance loan secured by a deed of trust recorded against the property at 8645 Bradshaw Roadin Elk Grove, California. (See ECF No. 5-3 at "Exhibit A" pp. 2-17.) Plaintiffs initially purchased the property in July 2000. (ECF No. 1-1 at 10.) The deed of trust listed plaintiffs as the borrowers and American Brokers Conduit as the lender. (See ECF No. 5-3 at 2.) In January 2010, a notice of default was recorded, indicating that plaintiffs were approximately $30,000 in arrears. (See ECF No. 5-3 at "Exhibit B" pp. 19-21.) In August 2010, foreclosure proceedings were initiated and the property was sold at a trustee's sale to DBNTC "as trustee for HSI Loan Obligation Trust 2001-7." (See ECF No. 5-3 at "Exhibit C" pp. 23.)
Less than a month after foreclosure, on August 26, 2010, plaintiffs filed an action in Sacramento County Superior Court, naming numerous defendants including HSI Corp. and "Deutche Bank as Trustee for HSI Loan Obligation Trust 2001-1." (See ECF No. 5-3 at 81, noting that the original complaint was initially filed on Aug. 26, 2010.) Plaintiffs amended three times, and the Prior 3AC challenged the foreclosure sale based on claims of "wrongful foreclosure" and violation of California Business Code § 17200. (See ECF No. 5-3 at 26-50.) On January 28, 2013, the California Superior Court sustained defendants' demurrer of plaintiffs' 3AC, dismissing plaintiffs' 3AC with prejudice and closing the case. (See ECF No. 5-3 at 81-82, the January 2013 judgment of dismissal of the Prior 3AC.) Plaintiffs appealed the judgment, but the Third District Court of Appeal dismissed on April 25, 2013, for failure to designate the record. (See ECF No. 5-3 at 84.) The subject property was vacated, and DBNTC sold the property to a third party in December 2013. (See ECF No. 5-3 at 87-88.)
On July 18, 2019, plaintiffs filed the instant complaint in California Superior Court (Sacramento County) against HSI Trust, HSI Corp., and 100 does alleging the following claims: (1) wrongful foreclosure; (2) violation of California Civil Code § 2924; (3) declaratory relief; (4) declaratory relief to void or cancel substitution of trustee and notice of defaults; (5) breach of contract; (6) declaratory relief under California Business and Professions Code § 17200; (7) wrongful foreclosure; (8) violation of the Fair Debt Collection Practices Act; (9) civil conspiracy; (10) mail and wire fraud, 18 U.S.C. §§ 1341, 1344; (11) bank fraud, 18 U.S.C. §§ 1341, 1344; and (12) violation of 18 U.S.C. §§ 1001, 1005. (See ECF No. 1-1 at 7, 23-34.)
DBNTC, who is not a named defendant, removed the action to this court on May 4, 2020, claiming to be the real party in interest as trustee for the HSI Trust, and on behalf of HSI Corp.3 (See ECF No. 1 at 3.) Thereafter, DBNTC moved to dismiss plaintiffs' claims with prejudice. (ECF No. 5.) In response, plaintiffs moved to remand (ECF No. 17) and opposed DBNTC's Motion to Dismiss (ECF No. 16). DBNTC replied to plaintiffs' opposition (ECF No. 20) and opposed remand (ECF No. 21.) The court took the motion to dismiss and motion to remand under submission without oral argument. (ECF Nos. 15, 22.) Additionally, plaintiffs have twice requested entry of default against HSI defendants, each of which were denied by the Clerk of the Court. (See ECF Nos. 10, 14, 18, 19.)
Plaintiffs seek remand, claiming DBNTC's Notice of Removal was untimely and based on hearsay, that no federal question jurisdiction exists, and that the Rooker-Feldman doctrine bars removal. (See generally ECF No. 17.)
DBNTC claims it is the real party in interest, and the case is removable based on federal question jurisdiction because plaintiffs' state-court complaint alleges a violation of the Fair Debt Collection Practices Act ("FDCPA") under 15 U.S.C. § 1692. (ECF No. 1.) Further, DBNTC claims that this court has supplemental jurisdiction over plaintiffs' 11 other claims under 28 U.S.C. § 1367(a). (Id.)
The undersigned finds DBNTC to be the real party in interest in this action, and finds removal to be proper under 28 U.S.C. §§ 1331, 1367(a), and 1446.
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Under the removal statute, a defendant may remove a case to federal court if the plaintiff could have filed the action in federal court initially. 28 U.S.C. § 1441(a); Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1393 (9th Cir. 1988). The party seeking removal bears the burden of establishing federal jurisdiction. Id. A notice of removal is to contain a short and plain statement of the grounds for removal. 28 U.S.C. § 1446(a). Removal is to be noticed "within 30 days of receipt of the initial pleading," or, in cases of diversity jurisdiction, within "one year after commencement of the action." 28 U.S.C. § 1446(b), (c).
However, federal courts are courts of limited jurisdiction, and so the statute is strictly construed against removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Filing a motion to remand is the proper way to challenge removal. Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009). While a district court may remand a case for lack of subject-matter jurisdiction sua sponte at any time, a court may only remand a case based on defect in removal procedure upon the timely filing of a motion to remand. 28 U.S.C. § 1447(c).
District courts have federal question jurisdiction over "all civil actions that arise under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. "A case 'arises under' federal law either where federal law creates the cause of action or 'where the vindication of a right under state law necessarily turn[s] on some construction of federal law.'" Republican Party of Guam v. Gutierrez, 277 F.3d 1086, 1088-89 (9th Cir. 2002) (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 8-9 (1983)). "[T]he presence or absence of federal-question jurisdiction is governed by the 'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1091 (9th Cir. 2009).
Plaintiffs' eighth cause of action explicitly alleges a violation of the Fair Debt Collections Practices Act, a federal law. The complaint alleges that "[a]t the time the [d]efendants claimedthey acquired the subject note and mortgage, [the defendant] claimed it was in arrears and therefore the FDCPA applies to the [d]efendants as debt collectors." (ECF No. 1-1 at 31.) Further, plaintiffs allege that defendants "made demands . . . for payments . . . by means of the US mail[,]" thereby violating the FDCPA on "multiple and separate occasions." (Id.) Under the "well-pleaded complaint rule," plaintiffs' complaint states a cause of action created by federal law under the FDCPA. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987); Provincial Gov't of Marinduque, 582 F.3d 1083 at 1091. Accordingly, a proper basis exists for DBNTC's removal under 28 U.S.C. § 1331. See Green v. All. Title, 2010 U.S. Dist. LEXIS 92203, at *6-8 (E.D. Cal. Sep. 2, 2010) ().
Plaintiffs also request the court sever and remand any remaining state law claims. (See ECF No. 17 at 12-15.) However, a court may exercise supplemental jurisdiction over state law claims under 28 U.S.C. § 1367(c). Here, plaintiffs' federal and state law claims are based on the same facts and allegations, and so the undersigned declines to sever the state claims in the interest of judicial economy and convenience. See Brady v. Brown, 51 F.3d 810, 816 (9th Cir. 1995) ().
Under 28 U.S.C. § 1446(b)(1), a defendant's 30 day window to remove a case to federal court does not begin to run until "formal service" has been effected. Murphy Bros. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 347-48 (1999).
The "mere receipt" of a complaint, unaccompanied by formal service, is insufficient to trigger the removal clock. Id.; see also Quality Loan Serv. Corp. v. 24702 Pallas Way, Mission Viejo, CA 92691, 635 F.3d 1128, 1133 (9th Cir. 2011). Generally, a later-served defendant's right of removal is separate from that of an earlier-served defendant. See 28 U.S.C. § 1446(b)(2); HSBC Bank USA, Nat'l Ass'n v. Mohanna, 2015 U.S....
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