Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-01702/USCOURTS-casd-3_10-cv-01702-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 15:1601 Truth in Lending

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1 10cv1702 BTM(POR)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ERNESTO CASTENON,

MARIA CASTENON, individuals,

Plaintiffs,

Case No. 10cv1702 BTM(POR)

ORDER REMANDING CASE

v.

CHAPEL MORTGAGE, et al.,

Defendants.

In an order filed on August 24, 2010, the Court ordered Defendants Bank of America

Home Loans Servicing and Recontrust Company to show cause why this case should not

be remanded for lack of removal jurisdiction. On September 8, 2010, Defendants filed their

response to the OSC. The Court has reviewed Defendants’ response and determines that

it lacks removal jurisdiction over this action.

On August 13, 2010, Defendants removed this action from the Superior Court of

California, County of San Diego, Vista Branch. Defendants contend that the Court has

federal question jurisdiction over the action because the action is “founded on claims arising

under federal laws, including the Real Estate Settlement Procedures Act (“RESPA), 12

U.S.C. §§ 2601 et seq.; and the Truth In Lending Act (“TILA”), 15 U.S.C. §§ 1601 et seq.”

(Notice of Removal ¶ 4.)

Under the “well-pleaded complaint” rule, federal-question jurisdiction extends over

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2 10cv1702 BTM(POR)

“only those cases in which a well-pleaded complaint establishes either that federal law

creates the cause of action or that the plaintiff’s right to relief necessarily depends on

resolution of a substantial question of federal law.” Franchise Tax Bd. of California v.

Construction Laborers Vacation Trust, 463 U.S. 1, 14 (1983). This rule makes a plaintiff the

“master of his complaint” and allows him to “avoid federal jurisdiction by relying exclusively

on state law.” Balcorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102, 1106 (9th Cir.

2000). 

An exception to the “well-pleaded complaint rule” is the “artful pleading” doctrine.

Under this doctrine, “a plaintiff may not defeat removal by omitting to plead necessary federal

questions in a complaint.” Franchise Tax Board, 463 U.S. at 22. Courts have applied the

artful pleading doctrine in (1) complete preemption cases; and (2) substantial federal

question cases. Lippitt v. Raymond James Fin. Serv., 340 F.3d 1033, 1041-42 (9th Cir.

2003). 

Although Plaintiffs’ Complaint asserts state law claims only, Defendants contend that

Plaintiffs’ ninth cause of action for fraudulent concealment arises entirely under TILA and

RESPA. Therefore, Defendants argue, Plaintiffs’ fraudulent concealment claim raises a

substantial federal question. The Court disagrees.

When determining whether state claims implicate federal issues giving rise to federal

question jurisdiction, the pertinent inquiry is, “[D]oes a state-law claim necessarily raise 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

responsibilities.” Grable & Sons Metal Prod., Inc. v. Daure Eng’g & Mfg., 545 U.S. 308, 314

(2005). “Federal issue” is not a “password opening federal courts to any state action

embracing a point of federal law.” Id. 

In cases where the violation of TILA and/or RESPA is one of several independent

allegations supporting a claim of fraud or other state claim, courts have held that the state

law claim does not necessarily turn on the federal issue. See, e.g., Ortega v. HomEq

Servicing, 2010 WL 383368, at *6 (C.D. Cal. Jan 25, 2010) (holding that plaintiff’s fraud claim

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– which alleged that defendants through misrepresentations, failure to disclose, and failure

to investigate induced plaintiff to enter into a loan – did not necessarily raise substantial and

disputed questions under TILA); Caampued v. First Federal Bank of California, 2010 WL

963080, at *3-4 (N.D. Cal. Mar. 16, 2010) (explaining that plaintiffs’ fraud argument did not

necessarily require resolution of disputed issues of federal law because plaintiffs’ fraud claim

was not limited to any single misrepresentation, but, rather, alleged a scheme of

misrepresentations, deceit, and inducements); Myung v. Washington Mutual Bank, 2009 WL

4123467, at *2 (C.D. Cal. Nov. 23, 2009) (holding that although state causes of action,

including breach of the covenant of good faith and fair dealing and fraud, alleged TILA and

RESPA violations, those violations formed only part of the basis for those causes of action,

and the complaint therefore did not present a substantial federal issue). In this case,

Plaintiffs allege that they were victims of a fraudulent scheme, whereby Defendants tricked

them into entering into a loan they could not afford. Plaintiffs allege that Defendants falsely

inflated Plaintiffs’ stated income on the loan application without telling them. (Compl. ¶¶ 8-

10.) Plaintiffs also allege that all of the loan documentation was in English even though

Plaintiffs’ primary language is Spanish and they do not read or write English. (Compl. ¶ 7.)

In Plaintiffs’ ninth cause of action, Plaintiffs allege that Defendants fraudulently

concealed the true cost of the loan by providing false Truth in Lending documents and

statements, and “failed to provide disclosures required by federal and state law, including

disclosures required under RESPA and TILA.” (Compl. ¶¶ 62-63) (emphasis added). The

ninth cause of action also incorporates by reference the preceding allegations of the

Complaint. In the first claim for relief, Plaintiffs alleges that Defendants concealed material

facts, including the facts that Defendants falsely inflated Plaintiffs’ stated income on the loan

application, that Plaintiffs would not have qualified for the loan based on their actual income,

and that Defendants placed Plaintiffs into a loan where it was reasonably foreseeable that

there was a high probability of default and failure. (Compl. ¶¶ 18-19.)

Although the fraudulent concealment claim alleges failure to provide disclosures under

RESPA and TILA, the claim is also premised upon the concealment of material facts in

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violation of state common law. The alleged fraudulent concealment goes beyond RESPA

and TILA violations and encompasses an entire fraudulent scheme aimed at preventing

Plaintiffs from learning that their income was falsely inflated and that they were entering into

a loan they could not afford. 

Because the alleged TILA and RESPA violations are not a necessary element of

Plaintiffs’ fraudulent concealment claim, the Complaint’s references to the federal statutes

do not convert the state claim into a federal cause of action. The Court does not have

federal question jurisdiction over this action.

Accordingly, the Court REMANDS this case to the Superior Court of the State of

California, County of San Diego, Vista Branch.

IT IS SO ORDERED.

DATED: October 4, 2010

Honorable Barry Ted Moskowitz

United States District Judge

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