26th Corporation, a Nevada Corporation et al v. Clear Recon Corp. et al, No. 3:2018cv06662 - Document 36 (N.D. Cal. 2019)
Court Description: ORDER GRANTING PLAINTIFFS' MOTION TO REMAND by Judge Jon S. Tigar; granting 11 Motion to Remand. (wsn, COURT STAFF) (Filed on 2/6/2019)
Download PDF
<![CDATA[
26th Corporation, a Nevada Corporation et al v. Clear Recon Corp. et al Doc. 36 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 THE 26TH CORPORATION, et al., 7 Plaintiffs, 8 ORDER GRANTING PLAINTIFFS’ MOTION TO REMAND v. 9 CLEAR RECON CORP., et al., 10 Re: ECF No. 11 Defendants. 11 United States District Court Northern District of California Case No. 18-cv-06662-JST 12 Before the Court is Plaintiffs’ motion to remand. ECF No. 11. The Court will grant the 13 14 motion. 15 I. BACKGROUND 16 Plaintiffs The 26th Corporation and Douglas Whitney filed this case in the Superior Court 17 of California for the County of Santa Clara on September 21, 2018. ECF No. 1 at 12. Defendants 18 J.P. Morgan Securities LLC and JP Morgan Chase Bank, N.A. (collectively, “Defendants”) were 19 served on October 5, 2018, and removed this case on November 1, 2018. ECF No. 1 at 3. In their 20 notice of removal, Defendants stated that Defendant Clear Recon Corporation had not “been 21 formally served with the Summons and Complaint based on a review of the information available 22 for the State Court’s docket.” Id. 23 The complaint alleges the following: A predecessor of J.P. Morgan Securities issued two 24 mortgages on real property located in San Jose, California, and the second mortgage was 25 reassigned to 26th Corporation. Id. at 14-15. 26th Corporation was subsequently the highest 26 bidder at a non-judicial foreclosure sale of the property. Id. at 15. Plaintiffs’ counsel received a 27 letter from Chase stating that the pay-off on the first mortgage was $1,028,531.85, and the 28 reinstatement amount was $444,693.58. Id. Plaintiffs wired the full reinstatement amount to Dockets.Justia.com United States District Court Northern District of California 1 Chase on May 16, 2018. Id. at 16. Chase returned the funds on May 23, 2018, “with the 2 explanation that the funds are not sufficient.” Id. “On May 29, 2018, Defendant Clear Recon 3 Corporation, Trustee caused a Notice of Default to be recorded with respect to CHASE’s First 4 Trust Deed loan and the subject property. Said Notice of Default recites a reinstatement amount 5 of $438,664.19.”1 Id. The following day, a Chase employee “signed for a certified letter from 6 Plaintiffs’ attorney that included a tender of $444,693.58 from attorney’s trust account to reinstate 7 the First Trust loan.” Id. The funds were returned the following day with a statement that, “‘The 8 funds aren’t enough to pay off the loan.’” Id. Chase later responded “that the reinstatement funds 9 ‘were returned because a Notice of Default had not yet been recorded. . . .’” Id. (ellipsis in 10 original). Clear Recon “recorded a Notice of Trustee’s Sale of the [subject] property . . . setting 11 October 4, 2018 as the sale date.” Id. Plaintiffs assert five causes of action, all of which arise under California state law: breach 12 13 of duty under California Code of Civil Procedure section 2942c; promissory estoppel; accounting; 14 unfair business practices; and preliminary injunction. Id. at 17-20. Chase removed the complaint 15 on diversity grounds, contending that the amount in controversy exceeds $75,000 and that 16 complete diversity exists between the parties. Id. at 3-8. Plaintiffs now move to remand this case 17 to state court. 18 II. LEGAL STANDARD “A defendant may remove an action to federal court based on federal question jurisdiction 19 20 or diversity jurisdiction.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) 21 (citing 28 U.S.C. § 1441). Diversity jurisdiction “requires complete diversity of citizenship; each 22 of the plaintiffs must be a citizen of a different state than each of the defendants.” Morris v. 23 Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). In addition, the amount in 24 controversy must exceed $75,000. 28 U.S.C. § 1332(a). 25 “Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of 26 Am., 511 U.S. 375, 377 (1994). It is “presumed that a cause lies outside this limited jurisdiction, 27 28 1 The complaint does not describe why the reinstatement amount in the Notice of Default is less than the reinstatement amount in the letter Plaintiffs’ counsel received. 2 1 and the burden of establishing the contrary rests upon the party asserting jurisdiction.” Id. 2 (citations omitted). “Federal jurisdiction must be rejected if there is any doubt as to the right of 3 removal in the first instance.” Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992) (per curiam). 4 “The ‘strong presumption’ against removal jurisdiction means that the defendant always has the 5 burden of establishing that removal is proper.” Id. (citation omitted). The court “resolves all 6 ambiguity in favor of remand.” Hunter, 582 F.3d at 1042. 7 III. Plaintiffs have moved to remand based on Defendant Clear Recon’s California citizenship. 8 United States District Court Northern District of California DISCUSSION 9 ECF No. 11. Defendants agree that Clear Recon is a California citizen. ECF No. 21 at 2. They 10 oppose the motion to remand on grounds that (1) complete diversity still exists because Plaintiffs 11 are both citizens of Nevada and (2) that, even if one or both Plaintiffs is a California citizen, Clear 12 Recon’s citizenship should be disregarded because it is both a nominal and fraudulently joined 13 defendant. Id. at 2-8. Plaintiffs failed to file a timely reply, but the Court allowed them to file a 14 late reply. ECF No. 33. Plaintiffs’ reply is silent on Plaintiffs’ citizenship but repeats their 15 contention that Clear Recon is a non-diverse party. ECF No. 35 at 1. Plaintiffs also dispute that 16 Clear Recon is a nominal or fraudulently joined defendant. Id. at 1-3. Neither party disputes that 17 the amount-in-controversy requirement is satisfied. Consideration of Clear Recon’s Citizenship 18 A. 19 The Court first considers whether Clear Recon’s citizenship can be disregarded for 20 purposes of the diversity jurisdiction analysis. The Court concludes that it cannot. 21 Defendants argue that Clear Recon is a nominal party because it has filed in state court a 22 declaration of non-monetary status pursuant to California Civil Code section 2924l.2 However, 23 the declaration was not filed until November 5, 2018 – four days after this case was removed. 24 ECF No. 22 at 4. This was too late for Clear Recon to have become a nominal party under the 25 statute: 26 27 28 The Court grants Defendants’ request for judicial notice of this court document. ECF No. 22; Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (“We may take judicial notice of court filings and other matters of public record.”). 3 2 1 4 Because removing defendants must show that diversity of citizenship existed at the time of removal, . . . and a party filing a declaration of non-monetary status does not become a nominal party until fifteen days have passed without objection by plaintiffs, courts refuse to ignore the ‘nominal’ party’s citizenship for purposes of diversity jurisdiction when the case is removed to federal court before the fifteen-day objection period has expired. 5 Jenkins v. Bank of Am., N.A., No. CV 14-04545 MMM (JCx), 2015 WL 331114, at *7 (C.D. Cal. 6 Jan. 26, 2015) (internal quotation marks, alterations, emphasis, and citation omitted). Here, not 7 only was the case removed before the expiration of the fifteen-day objection period; it was 8 removed before the declaration was even filed. The Court therefore does not ignore Clear Recon’s 9 citizenship based on its filing of a declaration of non-monetary status in state court. 2 3 Defendants also contend that Clear Recon’s citizenship should be disregarded because United States District Court Northern District of California 10 11 Clear Recon is a nominal party who “[has] no interest in the action, and [is] merely joined to 12 perform the ministerial act of conveying the title if adjudged to the complainant.” Prudential Real 13 Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 873 (9th Cir. 2000) (internal quotation 14 marks and citation omitted). But Plaintiffs assert that Clear Recon breached its duties under 15 California Code of Civil Procedure section 2924c,3 “engaged in unfair competition within the 16 meaning of California Business and Professions Code § 17200,” and is liable for money damages. 17 ECF No. 1 at 17, 19, 21. Clear Recon is therefore not simply a nominal party with no interest in 18 the action. See, e.g., Latino v. Wells Fargo Bank, N.A., No. 2:11-CV-02037-MCE, 2011 WL 19 4928880, at *3 (E.D. Cal. Oct. 17, 2011) (“[W]hile trustees on a [deed of trust] are often nominal 20 parties, Plaintiff’s Complaint contains substantive allegations against Cal-Western and seeks to 21 recover money damages or restitution from all Defendants, including Cal-Western, as well. 22 Accordingly, while Removing Defendants may believe Plaintiff cannot state a claim against Cal- 23 Western, they have failed to show that Cal-Western has been joined in a merely nominal 24 25 26 27 28 California Civil Code section 2924c(a)(2) provides: “If the trustor, mortgagor, or other person authorized to cure the default pursuant to this subdivision does cure the default, the beneficiary or mortgagee or the agent for the beneficiary or mortgagee shall, within 21 days following the reinstatement, execute and deliver to the trustee a notice of rescission that rescinds the declaration of default and demand for sale and advises the trustee of the date of reinstatement. The trustee shall cause the notice of rescission to be recorded within 30 days of receipt of the notice of rescission and of all allowable fees and costs.” 4 3 1 2 capacity.” (citations omitted)). Similarly, Defendants have not met their burden of demonstrating that Clear Recon was 3 fraudulently joined as a defendant. Defendants argue that “the test for fraudulent joinder 4 resembles a Rule 12(b)(6) analysis.” ECF No. 21 at 7 (quoting TPS Utilicom Servs. v. AT&T 5 Corp., 223 F. Supp. 2d 1089, 1102 (C.D. Cal. 2002)). This statement, while true, is incomplete. 6 The test for fraudulent joinder and for failure to state a claim under Rule 12(b)(6) are not equivalent. A claim against a defendant may fail under Rule 12(b)(6), but that defendant has not necessarily been fraudulently joined. . . . If a plaintiff’s complaint can withstand a Rule 12(b)(6) motion with respect to a particular defendant, it necessarily follows that the defendant has not been fraudulently joined. But the reverse is not true. If a defendant cannot withstand a Rule 12(b)(6) motion, the fraudulent inquiry does not end there. For example, the district court must consider, as it did in this case, whether a deficiency in the complaint can possibly be cured by granting the plaintiff leave to amend. 7 8 9 10 United States District Court Northern District of California 11 12 Grancare, LLC v. Thrower by & through Mills, 889 F.3d 543, 549-50 (9th Cir. 2018). 13 Consequently, fraudulent joinder is established only if there is no “possibility that a state court 14 would find that the complaint states a cause of action against any of the [non-diverse] defendants.” 15 Id. at 549 (emphasis and alteration in original) (quoting Hunter, 582 F.3d at 1046). 16 This is a “heavy burden” that Defendants have not satisfied. Hunter, 582 F.3d at 1046. 17 Although Defendants correctly observe that the complaint’s only factual allegations concerning 18 Clear Recon are that it caused a notice of default to be recorded and that it subsequently recorded a 19 notice of trustee’s sale, ECF No. 1 at 16, they have not presented any argument, let alone 20 persuaded the Court, that there is no possibility that Plaintiffs can state a claim against Clear 21 Recon under section 2924c, for unfair business practices, or otherwise. See, e.g., Alkana v. ING 22 Bank, F.S.B., No. 10-04079 MMM (VBKx), 2010 WL 11601042, at *4-6 (C.D. Cal. July 30, 23 2010) (declining to consider trustee as fraudulently joined based in part on defendant’s failure to 24 show that, if given leave to amend, plaintiff could not state a claim against the trustee under 25 section 2924c). The Court will consider Clear Recon’s undisputed California citizenship in 26 determining whether diversity jurisdiction exists. 27 B. Complete Diversity 28 Defendants argue that even if Clear Recon’s California citizenship is considered, complete 5 1 diversity still exists because both Plaintiffs are citizens of Nevada. ECF No. 21 at 2. However, 2 they have failed to persuade the Court that neither Plaintiff is a citizen of California. United States District Court Northern District of California 3 For purposes of diversity jurisdiction, a corporation is considered a citizen of every state in 4 which it has been incorporated and of the “state where it has its principal place of business.” 28 5 U.S.C. § 1332(c)(1). Defendants assert that the 26th Corporation is both incorporated in and has 6 had its principal place of business in Nevada. ECF No. 1 at 4. For support, they cite to the 7 complaint and to the “Nevada Secretary of State Entity Detail for Plaintiff 26th Corporation.” Id. 8 But neither of these documents contains any information about the 26th Corporation’s principal 9 place of business. The entity detail indicates only that the 26th Corporation is registered in 10 Nevada and has a registered agent and officers with a Nevada address. Id. at 26-27. And the 11 complaint alleges only that the 26th Corporation “is a Nevada Corporation doing business in the 12 County of Santa Clara, California.” Id. at 13. Because the 26th Corporation’s principal place of 13 business is unknown, the Court cannot determine its citizenship. 14 As to Plaintiff Whitney, the complaint is silent as to his citizenship and alleges only that he 15 “is an individual and the sole owner and officer of Plaintiff 26th Corp.” Id. Defendants argue that 16 Whitney is a citizen of Nevada because “[t]he Nevada Secretary of State Entity Detail for Plaintiff 17 26th Corporation shows Plaintiff Whitney’s address as 5606 Riggins Court, Suite 200, in Reno, 18 Nevada.” ECF No. 1 at 4. However, that document lists the same address for the 26th 19 Corporation’s registered agent, Corporate Service Center, Inc., and for another officer of the 20 corporation. Id. at 26. From these facts, the Court cannot conclude that Riggins Court is a 21 residential address as opposed to a business address. Moreover, a “natural person’s state 22 citizenship is . . . determined by her state of domicile, not her state of residence. A person’s 23 domicile is her permanent home, where she resides with the intention to remain or to which she 24 intends to return.” Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001). Defendants 25 have presented no evidence of Whitney’s residence, let alone his domicile, and the Court therefore 26 also cannot determine his citizenship. 27 28 Because Defendants have not persuaded the Court that neither Plaintiff is a citizen of California, they have failed to meet their burden of demonstrating complete diversity. 6 CONCLUSION 1 2 3 4 5 6 7 Plaintiffs’ motion to remand is granted. This matter is hereby remanded to the Superior Court of California for the County of Santa Clara. The Clerk shall close the file. IT IS SO ORDERED. Dated: February 6, 2019 ______________________________________ JON S. TIGAR United States District Judge 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
