Sharma v. HSI Asset Loan Obligation Tr. 2001-1

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VINOD SHARMA AND VINJAY L. SHARMA, Plaintiffs, v. HSI ASSET LOAN OBLIGATION TRUST 2001-1, et al., Defendants.

No. 2:22-cv-928-TLN-CKD (PS)

United States District Court, E.D. California

July 28, 2022

FINDINGS AND RECOMMENDATIONS (ECF NOS. 7, 9)

CAROLYN K. DELANEY UNITED STATES MAGISTRATE JUDGE

Plaintiffs^[1] initiated this action 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 does in connection with plaintiffs' residential mortgage. (ECF No. 1-1 at 2.) As trustee for the HSI Trust, Deutsche Bank National Trust Company (“DBNTC”) intervened as real party in interest defendant. Defendants then removed the case to this court and moved to dismiss. (ECF Nos. 1, 7.) Plaintiffs have filed a motion to remand. (ECF No. 9.)

On July 27, 2022, the parties appeared via videoconference for a hearing on defendants' motion to dismiss and plaintiffs' motion to remand. Plaintiffs Vinod Sharma and Vinjay L Sharma appeared pro se. Attorney Mark Gerard Rackers appeared for the defendants HSI Trust, HSI Corp., and DBNTC. As set forth below, the undersigned recommends denying plaintiffs' motion to remand and dismissing plaintiffs' complaint with prejudice based on California res judicata.

BACKGROUND^[2]

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 Road in Elk Grove, California. (See ECF No. 8 at 7-22 (“Exhibit A”).) Plaintiffs initially purchased the property in July 2000. (ECF No. 1-1 at 24.) The deed of trust listed plaintiffs as the borrowers and American Brokers Conduit as the lender. (See ECF No. 8 at 7.) In January 2010, a notice of default was recorded, indicating that plaintiffs were approximately $30,000 in arrears. (See ECF No. 8 at 24-26 (“Exhibit B”).) 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 20017.” (See ECF No. 8 at 28-29 (“Exhibit C”).)

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. 8 at 83, 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 Cal. Bus. Code § 17200. (See ECF No. 8 at 31-55.) On January 28, 2013, the California Superior Court sustained defendants' demurrer of plaintiffs' 3AC, dismissing plaintiffs' 3AC with prejudice, and closed the case. (See ECF No. 8 at 83-84, 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. 8 at 86.) The subject property was vacated, and DBNTC sold the property to a third party in December 2013. (See ECF No. 8 at 89-92.)

On July 18, 2019, plaintiffs filed the operative complaint in this action in California Superior Court (Sacramento County) against only 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 22, 38-56.)

DBNTC, who at the time was not a defendant, first 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, resulting in case number 2:20-cv-0921-KJN-JAM in this court (“first removed case”). In the first removed case, this court granted DBNTC's motion to dismiss based on California res judicata and plaintiffs appealed, resulting in a reversal of the dismissal on procedural grounds. In particular, the Ninth Circuit found that DBNTC, as Trustee for the HSI Trust, had to first intervene in state court and become a defendant in the case prior to removing it to federal court. (See 2:20-cv-0921-KJN-JAM, ECF Nos. 29, 32, 34.) The first removed case was remanded to California Superior Court, where DBNTC successfully intervened as defendant. After DBNTC intervened, defendants removed to this court, resulting in the present case.

DISCUSSION

I. Defendants' Removal and Plaintiffs' Motion to Remand

Plaintiffs seek remand, claiming federal question jurisdiction does not exist and the Rooker-Feldman doctrine bars removal. (ECF No. 9.) In the alternative, plaintiffs now state they wish to voluntarily dismiss their federal claims (the Eighth, Tenth, Eleventh and Twelfth Causes of Action) in order for the state law claims can be remanded. (ECF No. 9 at 2, 6.)

Defendants assert 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.) Defendants argue this court has supplemental jurisdiction over plaintiffs' state law claims under 28 U.S.C. § 1367(a). (Id.) Finally, defendants argue that plaintiffs have not actually agreed to dismiss their federal claims to date. (ECF No. 13 at 8.) Defendants ask the court to exercise its discretion to retain jurisdiction over the state law claims, and dismiss those claims with prejudice, because substantial resources have already been committed and sending the case to another court would cause a duplication of effort. (Id. at 1719.)

Legal Standard - Removal and Remand

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).

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). A district court may remand a case for lack of subject-matter jurisdiction sua sponte at any time, but 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).

Analysis

Removal is proper under 28 U.S.C. §§ 1331, 1367(a), and 1446. Moreover, because plaintiffs' federal and state law claims are based on the same facts and allegations plaintiff's request to sever and remand the state law claims should be denied.

A. Federal question Jurisdiction and Supplemental Jurisdiction

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 “[a]t the time the [defendants claimed they 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 defendants “made demands . . . for payments . . . by means of the U.S. 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 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) (finding removal to be proper based on plaintiff's claim under the FDCPA, and exercising supplemental jurisdiction over plaintiff's state law claims).

B. Plaintiff's Request to Sever and Remand

Plaintiffs request the court to sever and remand plaintiffs' state law claims in the event the entire case is not remanded. (ECF No. 9 at...