Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-01200/USCOURTS-casd-3_17-cv-01200-0/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 15:1692 Fair Debt Collection Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CARL H. SUTHERLIN,

Plaintiff,

v.

DAVID SAVARESE, JASON 

SINGLETON, DENNIS SINGLETON, 

FARWEST REALTY, INC., and DOES 

1-10, inclusive,

Defendants.

Case No.: 3:17-cv-1200-CAB-(BGS)

ORDER ON MOTION TO DISMISS 

COUNTERCLAIM

[Doc. No. 17.]

This matter is before the Court on the motion to dismiss filed by Cross-Defendant

Jacob Carl Sutherlin. (“J. Sutherlin”). [Doc. No. 17.] The motion has been fully briefed 

and is suitable for submission on the papers and without oral argument in accordance with 

Civil Local Rule 7.1(d)(1). For the reasons set forth below, the motion is denied

I. Background

On June 13, 2017, Plaintiff Carl H. Sutherlin filed suit against David Savarese 

(“Savarese”), Dennis Singleton (“D. Singleton”), Jason Singleton (“J. Singleton”) and 

Farwest Realty, Inc. (“Farwest”) for battery, assault, invasion of privacy (intrusion upon 

seclusion), trespass, elder abuse, fraud, and violations of California Civil Codes §§ 

1788.10, 1788.17, and 15 U.S.C. § 1692 et seq. [Doc. No. 1.] The complaint was amended 

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on December 27, 2017 and on February 13, 2018, the Court granted the motion to substitute 

J. Sutherlin in for his father, the deceased Plaintiff, Carl H. Sutherlin. [Doc. Nos. 9, 16.]

On January 24, 2018, Defendants filed their Answer to the FAC. [Doc. No. 14.] 

Along with his answer, Defendant Savarese asserted a Counterclaim for Judicial 

Foreclosure against J. Sutherlin. [Doc. No. 14, at 11-15.1]

On February 14, 2018, J. Sutherlin filed a motion to dismiss, asserting that this Court 

lacks subject matter jurisdiction to hear the claim. [Doc. No. 17.] On March 9, 2018, 

Savarese filed his response in opposition [Doc. No. 22] and J. Sutherlin filed a reply. [Doc. 

No. 23.]

A. Allegations of the First Amended Complaint

On December 27, 2017, C. Sutherlin filed an Amended Complaint (“FAC”) that 

except for the California Civil Code violations asserted the same claims against 

Defendants. [Doc. No 9.] The FAC alleges that C. Sutherlin fell behind on the payments 

due on a second mortgage on his home located 4510 Pebble Beach Drive, Oceanside, 

California which resulted in a foreclosure sale of the property being scheduled for January 

7, 2017. [Id. at ¶ 17.] Defendants D. Singleton, J. Singleton and Farwest, acting as agents 

for Sacarese “represented that they would loan money to Plaintiff to pay the second 

mortgage in full and that he could repaid [sic] the same in six months once his home was 

marketed for sale and sold.” [Id. at ¶ 19.] 

C. Sutherlin complains that on January 5, 2017, he signed a Residential Listing 

Agreement with J. Singleton, on behalf of Farwest, believing he would shortly be provided 

with a loan agreement setting a 3.0 percent interest rate and reflecting his understanding 

that the property would be put up for sale six months in the future. [Id. at ¶¶ 23, 27.] On 

January 6, 2017, feeling pressured to get his affairs in order, cognizant of the scheduled 

foreclosure of this home on the next day, and unaware that Savarese was loaning the 

 

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money, Plaintiff hastily signed a loan agreement. [Id. at ¶¶ 21, 22, 28.] C. Sutherlin alleges 

that “D. Singleton forced him to sign a Straight Note and Deed of Trust” without being 

given the opportunity to read the documents or have them reviewed by his attorney. [Doc. 

Id. at ¶ 29.] The Deed of Trust was never notarized or recorded. [Id. at ¶ 30; see also 

Doc. No. 9-3.] The Straight Note informs that loan amount was for $36,000 with a total 

interest payment of $4,000.00, to be paid on or before July 6, 2017. [Doc. No. 9-2.]

A few days later, C. Sutherlin received a copy of the Note and Deed of Trust and 

realized that the interest rate did not reflect his understanding and had been set at 6 percent. 

[Doc. No. 9 at ¶ 36.] Further, C. Sutherlin discovered that the Residential Listing 

Agreement allowed Defendants to being marketing efforts to sell the house in four months, 

not the six months Plaintiff has agreed to. [Id. at ¶ 37.] Finding the documents not 

reflective of the agreed upon terms, C. Sutherlin refused to notarize the Deed of Trust. [Id. 

at ¶ 38.]

Additionally, it is alleged that Defendants proceeded to harass C. Sutherlin with 

phone calls, emails, texts, and visits to his home demanding he sign the Deed of Trust in 

the presence of a notary. [Id. at ¶¶ 40-43.] On April 29, 2017, Defendants J Singleton and 

D. Singleton tried to forcibly enter the Property, broke C. Sutherlin’s foot by jamming it in 

the front door, broke the front door of the house, and hurled insults at him. [Id. at ¶¶ 44-

54.] The Singleton’s refused to leave the Property, and in fear of further injury, C. Sutherlin 

called the police. [Id. at ¶ 53.] In order to stop Defendants’ constant abuse, C. Sutherlin 

sought bankruptcy protection [Doc. No. ¶ 61.] 

Because of Defendants’ harassing and abusive conduct, C. Sutherlin filed suit 

against them. The FAC alleges claims for battery, assault, invasion of privacy, trespass, 

fraud, intentional infliction of emotion distress, elder abuse pursuant to California Welfare 

& Institution Code § 15610, et seq, and violations of California Civil Codes §§ 1788.10, 

1788.17, and Federal Truth in Lending Act (“TILA”) Violations, 15 U.S.C. § 1692 et seq.

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B. Defendant Savarese’s Counterclaim Allegations

On January 24, 2018, Defendants filed their Answer to the FAC. [Doc. No. 14.] 

Along with his answer, Defendant Savarese asserted a Counterclaim for Judicial 

Foreclosure against J. Sutherlin. [Doc. No. 14, at 11-15.

2

] While Savarese concedes that 

at the January 5, 2017 meeting between D. Singleton and C. Sutherlin, the Deed of Trust 

was not signed before a notary, he asserts that because of the limited time available to 

complete the transaction the parties agreed that any other necessary documents would be 

executed at a later date. [Doc. No. 14 at ¶ 11.] In addition, Savarese alleges that J. Sutherlin 

was present at the January 5, 2017 meeting when his father initially executed the documents 

and that “Jacob knew that Carl signed a deed of trust granting Savarese a security interest 

in the Property.” [Id.] Savarese contends that on the basis of this understanding, D. 

Singleton delivered a $36,000 cashier’s check to C. Sutherlin’s lender which was then used 

to pay off the defaulted loan and save it from foreclosure. [Id. at ¶ 12.] However, absent 

the required notary acknowledgement the Deed of Trust could not be recorded. [Id. at ¶ 

13.] 

Savarese alleges that after providing C. Sutherlin with the money to pay off the

defaulted loan, C. Sutherlin refused to re-execute the Deed of Trust in front of a notary and 

refused to authorize the listing of his Property for sale so that the loan between Savarese 

and C. Sutherlin could be repaid. [Id. at ¶ 13.] On July 6, 2017, the Note became due, but 

C. Sutherlin refused to make any payments. [Id. at ¶ 14.]

Additionally, Savarese asserts that the declaration C. Sutherlin included in his 

petition for bankruptcy made false representations. Specifically, Savarese points to C. 

Sutherlin’s attestation that “he was the only person who had an interest in the Property, and 

that he had not gifted any property exceeding $600 in value, nor transferred any property 

to any person other than in the ordinary course of business, to anyone within 2 years before 

 

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filing for bankruptcy” as being false. [Id. at 13, ¶ 15.] Savarese alleges that in reality, and 

unbeknownst to them, C. Sutherlin granted his son, J. Sutherlin, a fifty percent interest in 

the property, effectuated via a Grant Deed whereby J. Sutherlin became a joint tenant in 

the property with a right of survivorship. [Id. at 13, ¶ 16.] The Grant Deed was not

immediately recorded. [See Doc. No. 14-3.]

Further, it is alleged that on October 3, 2017, the bankruptcy Trustee filed his Report 

of No Distribution, representing that he neither received any property nor paid any money 

on account of C. Sutherlin’s estate. [Doc. No. 14 at 13, ¶ 17.] Therefore, Savarese contends 

that the Trustee did not administer the Property in the bankruptcy proceeding. [Id. at 13, ¶ 

17.] On October 24, 2017, C. Sutherlin received an order of discharge from the bankruptcy 

court. On November 27, 2017, the Grant Deed was recorded. [See Doc. No. 14-3.] When 

C. Sutherlin passed away on November 28, 2017, J. Sutherlin became the sole record title 

owner. [Id. at 14, ¶ 14.]

On January 24, 2018, Savarese filed a Counterclaim for judicial foreclosure against 

J. Sutherlin claiming that he is the owner and holder of the Note and the beneficiary of the 

Deed of Trust. Under the terms of the Note and Deed of Trust should a default occur the 

Trustee has, after giving the appropriate notice of default and sale, the power to sell the 

Property for the benefit of Savarese. [Doc. No. 13 at 14-15; Doc. No. 9-1; Doc. No. 9-2] 

Notwithstanding the bankruptcy discharge, Savarese asserts that he entitled to foreclose on 

the Property because C. Sutherlin defaulted on the Note. [Doc. No. 14 at 14.-15.] 

Additionally, Savarese contends that he is entitled to attorneys’ fees as provided for in the 

Note and Deed of Trust. 

In his motion to dismiss, J. Sutherlin, argues that this Court lacks subject matter 

jurisdiction to hear the Counterclaim because (1) the counterclaim does not raise a federal 

question; (2) is not compulsory under Federal Rule of Civil Procedure 13(a) and (b); and 

(3) is not so related to the FAC that supplemental jurisdiction should be exercised. [Doc. 

No. 17.] 

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II. Discussion

In his motion, J. Sutherlin, argues for dismissal of the Counterclaim under Federal 

Rules of Civil Procedure 12(b)(1) and 12(b)(6). Federal Rule of Civil Procedure 12(b)(1) 

allows a party to move to dismiss based on the court’s lack of subject matter jurisdiction 

whereas Rule 12(b)(6) provides that a party may bring a motion to dismiss based on the 

failure to state a claim upon which relief may be granted. Because the question of 

constitutional standing is a “threshold matter central to [the Court’s] subject matter 

jurisdiction” the Court will begin by considering the Rule 12(b)(1) arguments first. 

Fulfillment Servs. Inc. v. United Parcel Servs., Inc., 528 F.3d 614, 618 (9th Cir. 2008). 

A. Compulsory Counterclaim

J. Sutherlin asserts that “there is no factual connection whatsoever with Sutherlin’s 

complaint for personal injuries and Savarese’s counterclaim for foreclosure.” [Doc. No. 

17-1 at 5.] As a result of the lack of factual connect, he argues that the Court should not 

exercise supplemental jurisdiction over this claim. [Id. at 8-11.] In opposition Savarese 

contends that the Court has jurisdiction over the judicial foreclosure claim because it is a 

compulsory counterclaim. [Doc. No. 22 at 4-7.] Further, Savarese argues that if the Court 

finds the judicial foreclosure claim to not be compulsory, the Court should still exercise 

jurisdiction over the claim because there is a common nucleus of operative facts. [Id. at 7-

10.]

Section 1367(a) of United States Code grants district courts supplemental 

jurisdiction over all claims “that are so related to claims in the action within such original 

jurisdiction that they form part of the same case or controversy under Article III of the 

United States Constitution.” 28 U.S.C. § 1367(a). Rule 13 of the Federal Rules of Civil 

Procedure governs the pleading requirements of compulsory and permissive counterclaims. 

See Fed. R. Civ. P. 13(a). If a counterclaim is compulsory it is “inherently part of the ‘same 

case or controversy’ and will always invoke supplemental jurisdiction.” Grupo Salinas 

Inc. v. JR Salinas Wheels & Tires, Inc., 2017 WL 2972339, at * 2. (C.D. Cal. Jan. 39, 207) 

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(citing Campos v. W. Dental Servs., Inc., 404 F. Supp. 2d 1164, 1167 (N.D. Cal. 2005);

Cal. Prac. Guide Fed. Civ. Pro. Before Trial Ch. 2B–6.). Compulsory counterclaims known 

at the time of service must be stated in a pleading. Fed. R. Civ. P. 13(a)(1). 

A counterclaim is compulsory “if it arises out of the transaction or occurrence that 

is the subject matter of the opposing party’s claim; and does not require adding another 

party over whom the court cannot acquire jurisdiction.” Fed. R. Civ. P. 13(a)(1)(a)-(b)3; 

Mattel, Inc. v. MGA Entm’t, Inc., 705 F.3d. 1108, 1110 (9th Cir. 2013). To aid the courts 

in determining if a counterclaim arises out of the same transaction or occurrence and, is 

therefore compulsory, the Ninth Circuit, has developed “the logical relationship test.” In 

re Pegasus Gold Corp., 394 F.3d 1189, 1195-96 (9th Cir. 2005); Pochiro v. Prudential Ins. 

Co. of Am., 827 F.2d 1246, 1249 (9th Cir. 1987). Under the test, a court is required to 

“analyze whether the essential facts of the various claims are so logically connected that 

considerations of judicial economy and fairness dictate that all the issues be resolved in 

one lawsuit.” Pochiro, 827 F.2d at 1249. A logical relationship exists if the “same 

operative facts serve as the basis of both claims or the aggregate core of facts upon which 

the claim rests activates additional legal rights otherwise dormant in the defendant. In re 

Pegasus, 393 F.3d at 1196 (citation omitted). Courts are required to read the “transaction 

or occurrence” component liberally. Pochiro, 827 F.2d at 1252.

The Court agrees with Savarese that there is sufficient overlap between the claims

for the counterclaim to be considered compulsory. All of the claims being asserted stem 

from the conduct of the parties during and after the execution of the documentation 

securing the $36,000 to prevent the foreclosure on the Property. Logically, evidence 

concerning the loan and the parties’ discussions, understanding and actions taken are 

relevant to both suits and provide context to the alleged fraud, TILA and foreclosure 

claims. While the TILA claim involves the enforcement of federal policies to protect 

 

3

In contrast, permissive counterclaims are claims “against an opposing party not arising out of the same 

transaction or occurrence that is the subject matter of the opposing party’s claim.” Fed. R. Civ. P. 13(b).

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consumers, both the fraud and foreclosure claims involve the same underlying contract, 

therefore, severing the foreclosure claim would require litigating substantially similar 

operative facts in state court as will be litigated here. Additionally, if J. Sutherlin prevails 

on either the TILA or fraud claim and rescinds the contract underlying the loan then 

Savarese’s right to foreclose on the house will undoubtedly be affected. Furthermore, 

J.Sutherlin is requesting that Defendants be restrained “any further contact with Plaintiff 

and collecting on the purported debt.” [Doc. No. 9 at 26.] If the Court were to award such 

relief it would be implicitly ruling on the foreclosure issue. Thus, granting the motion to 

dismiss the Counterclaim would result in a waste of judicial resources and increase in 

litigation fees, and could potentially expose the parties to inconsistent judgments. 

Moreover, J. Sutherlin’s reliance on cases finding that collection of the underlying 

debt are not compulsory claims in litigation brought under the TILA is misplaced and 

overlooks the jurisdictional posture litigation. Here, the initial complaint invoked the 

Court’s jurisdiction by raising a federal question - whether Defendants loan on the Property 

was subject to the right to cancel provisions of TILA. But, the TILA claim was the only 

federal claim asserted, the other seven causes of action were all state law claims, including 

Defendants allegedly fraudulent conduct related to the $36,000 loan. The actions 

complained of occurred over a period of months that began when C. Sutherlin signed the 

Residential Listing Agreement, Straight Note and Deed of Trust in January 2017. The 

same is true for the FAC. The tort claims are no more related to the TILA claim than the 

foreclosure claim, yet J. Sutherlin assumes the Court will exercise supplemental 

jurisdiction over them while vehemently opposing the filing of the Counterclaim. 

Allowing J. Sutherlin to pursue his multiple state law claims in federal court while denying 

Savarese the same opportunity is hardly fair or efficient. See, generally, Mitchell v. CB 

Richard Ellis Long Term Disability Plan, 611 F.3d 1192, 1201 (9th Cir. 2010) (“The 

purpose of Rule 13(a) is to prevent multiplicity of litigation and to promptly bring about 

resolution of disputes before the court.”). 

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In sum, the Court finds Savarese’s Counterclaim compulsory and therefore exercises

ancillary jurisdiction over it while the federal claim remains at issue. See Baker v. Gold 

Seal Liquors, 417 U.S. 467, 469 n.1 (1974) (because compulsory counterclaim are barred 

if not brought, federal courts “have ancillary jurisdiction over [the compulsory 

counterclaim] even though ordinarily it would be a matter for state court.”).

B. Failure to State a Claim

J. Sutherlin asserts that the Counterclaim makes only conclusory allegations and that 

there are “no statute cites that would even allow the Counter-complainant to judicially 

foreclose.” [Doc. No. 17-1 at 12.] The Court does not agree.

A Rule 12(b)(6) motion challenges the sufficiency of a complaint as failing to allege 

“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 570 (2007). For purposes of ruling on a Rule 12(b)(6) motion, the 

court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings 

in the light most favorable to the non-moving party.” Manzarek v. St. Paul Fire & Marine 

Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But, a “pleading that offers ‘labels and 

conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’” 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). 

Savarese has alleged and described the loan transaction including the obligation and 

security, his status as a payee and claim of interest on the Property, C. Sutherlin’s default 

on the obligation and the transfer of security to J. Sutherlin without Savarese’s knowledge. 

This is sufficient to state a prima facie case for foreclosure. See Cal. Civ. Prac. Real 

Property Litigation § 4:116. Further, a number of the facts pled in the Counterclaim 

overlap with those pled in the FAC4, providing J. Sutherlin with sufficient allegations and 

fair notice of the Counterclaim so that he is able to effectively defend against it. See, e.g., 

Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or 

 

4 Compare Doc. No. 14 at 11-15, ¶¶ 7-15 with Doc. No. 9, ¶¶ 17-40.

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counterclaim may not simply recite the elements of a cause of action, but must contain 

sufficient allegations of underlying facts to give fair notice and to enable the opposing party 

to defend itself effectively.”). Thus, Savarese has adequately pled his judicial foreclosure 

claim. Accordingly, the motion to dismiss the Counterclaim pursuant to Federal Rule of 

Civil Procedure 12(b)(6) is DENIED.

I. Conclusion

For the reasons set forth above, Counter-Defendant’s motion to dismiss pursuant to 

Federal Rules of Civil Procedure 12(b)(1) and/or 12(b)(6) is DENIED.

5

 J. Sutherlin has 

up and including April 30, 2018 to file his answer.

It is SO ORDERED.

Dated: April 9, 2018

 

5 Having found Savarese’s counterclaim to be compulsory, the Court need not determine if it would have 

exercised supplemental jurisdiction over the claim had it been deemed a permissive counterclaim. See 

Campos, 404 F. Supp. 2d at 1168 (permissive counterclaims may qualify for supplemental jurisdiction 

under § 1967 if the counterclaim forms part of the same case or controversy).

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