Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-03277/USCOURTS-caed-2_09-cv-03277-1/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

CONG MINH TRAN AND

PHUONG HUYNH,

NO. CIV. S-09-3277 LKK/DAD

Plaintiffs,

v.

O R D E R

WASHINGTON MUTUAL BANK, 

et al.,

Defendants.

 /

This case concerns plaintiffs’ mortgage and foreclosure

thereon. On December 10, 2009, defendant Quality Loan Service

Corporation (“defendant” or “Quality”) filed a declaration of

nonmonetary status, as defined in Cal. Civ. Code § 2924l. On

January 14, 2010, plaintiffs filed an opposition to defendant’s

declaration. As explained below, the court believes that Quality

should not be considered a nonmonetary defendant.

Section 2924l of the California Civil Code provides that where

“trustee under a deed of trust [who] is named in an action or

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proceeding in which the deed of trust is the subject, and in the

event that the trustee maintains a reasonable belief that it has

been named in the action or proceeding solely in its capacity as

trustee” it may file a declaration of nonmonetary status. Id. at

§ 2924l(a). If unopposed, “the trustee shall not be required to

participate any further in the action or proceedings, shall not be

subject to any monetary awards as and for damages, attorneys’ fees

or costs, shall be required to respond to any discovery requests

as a nonparty, and shall be bound by any court order relating to

the subject deed of trust that is subject to the action or

proceeding. Id. at § 2924l(d). See, e.g., Kachlon v. Markowitz, 168

Cal. App. 4th 316 (Cal. Ct. App. 2008).

Here, plaintiffs did not timely file their objections, which

were mistakenly labeled an opposition, to Quality’s declaration of

nonmonetary status. Cal. Civ. Code § 2924l(e). Nonetheless, the

court cannot recognize nonmonetary status of a defendant without

any basis that such status may be recognized in federal courts. A

few federal cases discuss the application of this status in federal

court. However, all of these cases concern situations where a

trustee was granted nonmonetary status in state court, and then the

case was removed to federal court. In these cases, the federal

courts viewed the trustee as a “nominal third party.” Amaro v.

Option One Mortgage, Corp., 2009 WL 103302, at *1 (C.D. Cal. Jan.

14, 2009); see also Hafiz v. Greenpoint Mortgage Funding, Inc.,

2009 WL 2137423, at *2 (N.D. Cal. Jul. 16, 2009). Several federal

cases have recognized the status of the nominal defendant where an

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entity or person is in possession of fraudulently obtained

property, but committed no wrongful act itself to obtain the

property. S.E.C. v. Colello, 139 F.3d 674, 676 (9th Cir. 1998);

S.E.C. v. Cherif, 933 F.2d 403, 414 (7th Cir. 1991). In Cherif, the

court described this status as “the rather obscure common law

concept of the ‘nominal defendant.’” 933 F.2d at 414. 

It appears to this court, however, that California Civil Code

§ 2924l is a state procedural rule, and not state substantive law.

See Erie R.R. v. Tompkins, 304 U.S. 64 (1938). Accordingly,

nonmonetary status may not be granted in federal court. Moreover,

even if this court were to construe Quality’s declaration of

nonmonetary status as a declaration of the status of a nominal

defendant, such a status is not warranted here where plaintiff

objects to the declaration. Specifically, plaintiff argues that

Quality is liable of wrongful conduct and thereby may be subject

to damages as well as injunctive relief. 

For the foregoing reasons, defendant Quality shall not be

considered a nonmonetary or a nominal defendant. Accordingly,

Quality is given twenty one (21) days from the issuance of this

order to file a responsive pleading.

IT IS SO ORDERED.

DATED: February 11, 2010.

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