Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_10-cv-00111/USCOURTS-caed-2_10-cv-00111-1/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 28:1441 Petition for Removal- Torts to Land

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

JANICE GUISIHAN,

Plaintiff,

 v.

COMMUNITY RESIDENTIAL

MORTGAGE, INC.; MORTGAGEIT,

INC.; WELLS FARGO BANK, N.A.;

AMERICA’S SERVICING COMPANY;

NDEX WEST LLC.; HSBC BANK USA,

N.A., AS TRUSTEES FOR

MORTGAGEIT SECURITIES CORP.

MORTGAGE LOAN TRUST, SERIES

2007-1, MORTGAGE PASS-THROUGH

CERTIFICATES and DOES 1

through 50, inclusive,

Defendants. /

 

NO. CIV. 2:10-111 WBS GGH

MEMORANDUM AND ORDER RE:

REMAND

----oo0oo----

In response to the court’s February 25, 2010 Order to

Show Cause (Docket No. 18), defendants America’s Servicing

Company and HSBC Bank USA, N.A., as trustees for MortgageIT

Securities Corp. Mortgage Loan Trust, Series 2007-1, Mortgage

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Pass-Through Certificates (“HSBC”), and MortgageIT, Inc.

(“MortgageIT”) filed briefs in support of the court’s continued

exercise of jurisdiction over plaintiff’s Complaint. (Docket

Nos. 20, 21.) Plaintiff did not respond to the court’s Order to

Show Cause. The court now must decide whether this case should

be remanded to state court. 

I. Factual and Procedural Background

On February 23, 2007, plaintiff alleges that she

entered into a loan with MortgageIT for plaintiff’s property at

1891 Leaning Oak Drive, Fairfield, California. (Compl. ¶¶ 1-3.) 

This loan was secured by two Deeds of Trust on the property. 

(Id. ¶¶ 2, 21-22.) The first Deed of Trust listed MortgageIT as

Lender, Old Republic Title Company (“Old Republic”) as trustee,

and Mortgage Electronic Registration Systems, Inc. (“MERS”) as

Beneficiary. (Id. ¶¶ 3, 21.) 

Plaintiff was allegedly channeled into this loan in

late 2006 and early 2007, when she established a relationship

with Community Residential Mortgage (“Community”), a mortgage

brokerage company. (Id. ¶¶ 15-16.) Community allegedly directed

plaintiff to apply for the loan on her own rather than jointly

with her husband, as his credit issues would disqualify them for

a loan. (Id. ¶ 18.) On the loan application and allegedly at

Community’s direction, plaintiff listed her husband’s business as

her own and overstated her monthly income. (Id. ¶ 18.) 

MortgageIT approved the loan application without verifying

plaintiff’s ability to pay. (Id. ¶ 19.) The loan allegedly

contained a higher interest rate and extra and excess fees than

what plaintiff agreed to with Community. (Id. ¶ 24.) 

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Plaintiff eventually defaulted on the loan, and on

March 10, 2009, a Notice of Default and Election To Sell Under

Deed of Trust was recorded in Solano County by NDEX West. (Id ¶

31; Compl. Ex. E.) A Substitution of Trustee was recorded on

April 24, 2009, which substituted NDEX West for Old Republic. 

(Id. ¶ 32.) On July 7, 2009, NDEX West recorded a Notice of

Trustee’s Sale. (Id. ¶ 33.) 

Plaintiff filed this action in state court on November

25, 2009. (Notice of Removal (Docket No 1).) On January 14,

2010, defendant MortgateIT removed the action to this court,

invoking the court’s federal question jurisdiction, 28 U.S.C. §

1331, based upon federal statutes referenced in plaintiff’s claim

for violation of California unfair competition law (“UCL”), Cal.

Bus. & Prof. Code § 17200. (Id.) Plaintiff’s fourth cause of

action for violation of the California UCL alleges, among other

things, violations of the Real Estate Settlement Procedures Act

(“RESPA”), 12 U.S.C. §§ 2601-2617, the Equal Credit Opportunity

Act (“ECOA”), 15 U.S.C. §§ 1691-1691f, and the Truth in Lending

Act (“TILA”), 15 U.S.C. §§ 1601-1667f. 

MortgageIT and HSBC Bank then moved to dismiss

plaintiff’s Complaint pursuant to Federal Rule of Civil Procedure

12(b)(6) for failure to state a claim upon which relief can be

granted. (Docket Nos. 9, 11.) Those motions are currently

pending.

II. Discussion

“Under 28 U.S.C. § 1441, a defendant may remove an

action filed in state court to federal court if the federal court

would have original subject matter jurisdiction over the action.” 

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Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1243 (9th

Cir. 2009). Federal courts have original subject matter

jurisdiction over “all civil actions arising under the

Constitution, laws, or treaties of the United States.” 28 U.S.C.

§ 1331. 

“If at any time prior to judgment it appears that the

district court lacks subject matter jurisdiction, the case shall

be remanded.” 28 U.S.C. § 1447(c); see also Fed. R. Civ. P.

12(h)(3). A district court has “a duty to establish subject

matter jurisdiction over the removed action sua sponte, whether

the parties raised the issue or not.” United Investors Life Ins.

Co. v. Waddell & Reed, Inc., 360 F.3d 960, 967 (9th Cir. 2004).

“Thus, the court can, in fact must, dismiss a case when it

determines that it lacks subject matter jurisdiction, whether or

not a party has a filed a motion.” Page v. City of Southfield,

45 F.3d 128, 133 (6th Cir. 1995). 

A case “arises under” federal law when federal law

either creates the cause of action or a state law claim

“necessarily raise[s] a stated federal issue, actually disputed

and substantial, which a federal forum may entertain without

disturbing any congressionally approved balance of federal and

state judicial responsibility.” Grable & Sons Metal Prods., Inc.

v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005); see Franchise

Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal.,

463 U.S. 1, 27-28 (1983). When a plaintiff only pleads state

causes of action, “original federal jurisdiction is unavailable

unless it appears that some substantial, disputed question of

federal law is a necessary element of one of the well-pleaded

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state claims, or that one or the other claim is ‘really’ one of

federal law.” Morongo Band of Mission Indians v. Cal. State Bd.

of Equalization, 858 F.2d 1376, 1383 (9th Cir. 1988) (citing

Franchise Tax, 463 U.S. at 13). 

A. Substantial Federal Question

Plaintiff’s Complaint does not plead any federal causes

of action, but it does make references to federal statutes in its

fourth cause of action for violations of the California UCL. 

(See Compl. ¶¶ 65, 67-68.) It is a “long-settled understanding

that the mere presence of a federal issue in a state cause of

action does not automatically confer federal-question

jurisdiction.” Lippitt v. Raymond James Fin. Servs., 340 F.3d

1033, 1040 (9th Cir. 2003) (quoting Merrell Dow Pharm., Inc. v.

Thompson, 478 U.S. 804, 808 (1986)). A substantial federal

question does not exist simply because a complaint makes a mere

reference to a federal statute. Id. at 1040-41; see also Rains

v. Criterion Sys. Inc., 80 F.3d 339, 344 (9th Cir. 1996)

(references to Title VII are insufficient to establish federal

jurisdiction in a wrongful termination action). Instead, the

federal question must be “a necessary element of the well-pleaded

state claim” or the plaintiff’s right to relief must rely on the

resolution of a substantial, disputed question of federal law. 

Lippitt, 340 F.3d at 1042. 

Defendant MortgageIT cites Moore v. Chase Bank, No. 08-

350, 2008 WL 314664 (N.D. Cal. Feb. 4., 2008) for the proposition

that plaintiff’s Complaint implicates federal jurisdiction on its

face due to plaintiff’s reliance on federal statutes in her UCL

claim. In Moore, the plaintiff’s complaint stated only state

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causes of action, yet multiple causes of action–-including causes

of action for fraud and under the UCL--“contain[ed] predicate

federal statutory violations” of, inter alia, TILA and RESPA. 

Id. at *2. Yet the Ninth Circuit has made clear that “[t]he

invocation of federal law as a basis for establishing an element

of a state law cause of action does not confer federal question

jurisdiction when the plaintiff also invokes a state

constitutional provision or a state statute that can and does

serve the same purpose.” Rains, 80 F.3d at 345; see Montoya v.

MortgageIT, Inc., No. 09-5889, 2010 WL 546891, at *2 (N.D. Cal.

Feb. 10, 2010) (distinguishing Moore, discussing Rains, and

granting plaintiff’s motion to remand). 

The court finds the circumstances in this case to be

virtually identical to those in Montoya, and similarly finds

Rains instructive. In her fourth cause of action, plaintiff

alleges that MortgageIT and Community committed “unfair

competition” through their previously alleged actions, and also

alleges unfair competition through violations of California

Financial Code section 50700(c) and California Business &

Professions Code section 10163. (Compl. ¶¶ 61-70.) As Judge

Illston explained in Montoya, “Here, as in Rains, it is state,

not federal, law that creates the cause of action. The

complaint’s references to federal law do not convert the UCL

claim into a federal cause of action.” Montoya, No. 09-5889,

2010 WL 546891, at *3. Plaintiff’s complaint clearly alleges

both unfair practices and violations of federal law as the basis

for her UCL claim. Her allegations of TILA, RESPA, and EOCA

violations are not necessary elements of a well-pleaded UCL

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claim, nor are they necessary to prevail on her UCL claim. Since

plaintiff can prove all her claims independently under state law,

an application of federal law is not a substantial or “necessary

element” of the claims. See Fardella v. Downey Sav. & Loan

Ass’n, No. 00-4394, 2001 WL 492442, at *3 (N.D. Cal. May 9,

2001).

B. Artful Pleading

“Under the artful pleading doctrine, a plaintiff may

not defeat removal by omitting to plead necessary federal

questions in a complaint. The artful pleading doctrine allows

courts to delve beyond the face of the state court complaint and

find federal question jurisdiction by recharacterizing a

plaintiff’s state-law claim as a federal claim.” Lippit, 340

F.3d at 1041. The artful pleading doctrine applies to “(1)

complete preemption cases, and (2) substantial federal question

cases. Subsumed within this second category are those cases

where the claim is necessarily federal in character or where the

right to relief depends on the resolution of a substantial,

disputed federal question.” Id. (citations omitted). Because

the well-pleaded complaint rule makes the plaintiff the master of

its complaint, a plaintiff may avoid federal jurisdiction by

exclusively relying on state law. See Merrell Dow, 478 U.S. at

806 n.2, 809 n.6 (describing well-pleaded complaint and master of

complaint rules). 

HSBC also alleges that plaintiff’s ninth claim for

relief to set aside the trustee’s sale in effect alleges and

relies on a RESPA violation, thus raising a substantial federal

question. Plaintiff’s ninth cause of action asserts the

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trustee’s sale should be set aside because: “The Trust Deed was

invalid because the amount stated on the Trustee Deed included

the unconscionable and illegal Yield Spread Premium.” (Compl. ¶

91.) According to the plaintiff, the purchaser at the Trustee’s

sale was not a bonafide purchaser for value because it was aware

the deed of trust was invalid. (Id. ¶ 92.) The Complaint fails

to state how or under what statute the yield spread premium is

allegedly “illegal,” and HSBC correctly argues that yield spread

premium disputes are often raised as RESPA violations. While

plaintiff’s Complaint is not elegantly pled, this claim for

relief need not rely on proving a RESPA violation. Rather,

California’s UCL could also provide the statutory basis under

which plaintiff could argue the yield spread premium was illegal. 

See, e.g., Wilmer v. Sunset Life Ins., 78 Cal. App. 4th 952, 964

(2000) (explaining that California’s UCL outlaws “unfair”

business practices that offend an established public policy, or

are immoral, unethical, oppressive, injurious to customers, or

unscrupulous). 

HSBC makes similar arguments with respect to

plaintiff’s twelfth claim for relief for cancellation of a void

instrument, arguing that the demand for rescission might rely on

a TILA violation. For the same reasons explained above, the

court finds this argument unconvincing. 

The court therefore finds plaintiff’s references to

federal law insufficient to establish federal subject matter

jurisdiction and will remand the case to state court.

///

///

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IT IS THEREFORE ORDERED that defendants’ pending

motions to dismiss and motion to strike be, and the same hereby

are, DENIED as moot, and this action be, and the same hereby is,

REMANDED to Superior Court of the State of California in and for

the County of Solano.

DATED: March 24, 2010

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