Felisa Todd v. Rocket Mortgage, LLC

Case 5:23-cv-00031-JFW-KK Document 22 Filed 02/15/23 Page 1 of 4 Page ID #:310

UNITED STATES DISTRICT COURT JS-6

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES -- GENERAL

Case No. ED CV 23-31-JFW(KKx) Date: February 15, 2023

Title: Felisa Todd -v- Rocket Mortgage, LLC, et al.

PRESENT:

HONORABLE JOHN F. WALTER, UNITED STATES DISTRICT JUDGE

Shannon Reilly None Present

Courtroom Deputy Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS:

None None

PROCEEDINGS (IN CHAMBERS): ORDER REMANDING ACTION TO SAN BERNARDINO

SUPERIOR COURT

On October 24, 2022, Plaintiff Felisa Todd (“Plaintiff”) filed a Complaint against Defendants

Rocket Mortgage, LLC (“Rocket Mortgage”) and Clear Recon Corp. (“(“Clear Recon”) (collectively,

“Defendants”) in San Bernardino Superior Court, alleging causes of action for: (1) violation of

California Civil Code § 2923.5; (2) negligence; (3) violation of California Business & Professions

Code § 17200; and (4) quiet title. On January 9, 2023, Rocket Mortgage filed a Notice of Removal,

alleging that this Court has jurisdiction pursuant to 28 U.S.C. § 1332(a).

Federal courts are courts of limited jurisdiction, having subject matter jurisdiction only over

matters authorized by the Constitution and Congress. See Bender v. Williamsport Area School

District, 475 U.S. 534, 541 (1986). “Because of the Congressional purpose to restrict the

jurisdiction of the federal courts on removal, the statute is strictly construed, and federal jurisdiction

must be rejected if there is any doubt as to the right of removal in the first instance.” Duncan v.

Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996) (citations and quotations omitted). There is a strong

presumption that the Court is without jurisdiction unless the contrary affirmatively appears. See

Fifty Associates v. Prudential Insurance Company of America, 446 F.2d 1187, 1190 (9th Cir. 1990).

As the party invoking federal jurisdiction, Rocket Mortgage bears the burden of demonstrating that

removal is proper. See, e.g., Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992); Emrich v. Touche

Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988).

Diversity jurisdiction founded under 28 U.S.C. § 1332(a) requires that (1) all plaintiffs be of

different citizenship than all defendants, and (2) the amount in controversy exceed $75,000. See 28

U.S.C. § 1332. In its Notice of Removal, Rocket Mortgage alleges that Plaintiff is a resident of

California. Notice of Removal, ¶ 7. However, “the diversity jurisdiction statute, 28 U.S.C. § 1332,

speaks of citizenship, not of residency.” Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir.

2001). To be a citizen of a state, a natural person must be a citizen of the United States and be

Page 1 of 4 Initials of Deputy Clerk sr

Case 5:23-cv-00031-JFW-KK Document 22 Filed 02/15/23 Page 2 of 4 Page ID #:311

domiciled in a particular state. Id. Persons are domiciled in the places they reside with the intent to

remain or to which they intend to return. Id. “A person residing in a given state is not necessarily

domiciled there, and thus is not necessarily a citizen of that state.” Id. As a result, Rocket Mortgage

has failed to allege the citizenship of Plaintiff.

In addition, Rocket Mortgage alleges in the Notice of Removal that the citizenship of Clear

Recon, a corporation existing under the laws of the State of California, is irrelevant to the diversity

analysis because Clear Recon, as the trustee of the Deed of Trust encumbering the property at

issue in this action, is a nominal defendant. Rocket Mortgage is correct that “courts should ‘ignore

the citizenship of nominal or formal parties who have no interest in the action, and are merely joined

to perform the ministerial act of conveying the title if adjudged to the complainant.’” Silva v. Wells

Fargo Bank NA, 2011 WL 2437514, *3 (C.D. Cal. June 16, 2011) (citing Prudential Real Estate

Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 873 (9th Cir.2000)); Wise, 2011 WL 1466153 at *4

(holding that an “exception to the complete diversity requirement applies to nominal parties.

‘Defendants who are nominal parties with nothing at stake may be disregarded in determining

diversity, despite the propriety of their technical joinder’”) (quoting Strotek Corp. v. Air Transport

Ass'n of America, 300 F.3d 1129, 1133 (9th Cir. 2002)); see also Daniels v. Wells Fargo Bank, N.A.,

2012 WL 10649202, *4 (C.D. Cal. Sept. 11, 2012) (“[A] federal court must disregard nominal or

formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy”)).

Moreover, California Civil Code § 2924l permits a trustee to file a declaration of non-monetary

status if it is named in an action concerning a deed of trust, and it has a reasonable belief that it has

been named solely in its capacity as trustee, and not as a result of any wrongful acts or omissions in

the performance of its duties. If no objection is served within fifteen days of the date of the

declaration being served, the trustee is not required to participate in the action and is not subject to

any damages award. Cal. Civ. Code § 2924l (c), (d). “District courts have recognized that

defendants who file a declaration of non-monetary status to which plaintiffs do not object are merely

nominal parties whose citizenship does not count for diversity jurisdiction purposes,” so long as the

fifteen-day period for objections passed prior to removal of the action to federal court and no timely

objection was filed. Silva, 2011 WL 2437514 at *4; see Chancellor v. OneWest Bank, 2012 WL

3834951, *2 (N.D. Cal. Sept.4, 2012) (concluding that a defendant trustee was “no longer

considered a party to this action” where it filed a declaration of non-monetary status in Alameda

Superior Court more than fifteen days prior to removal and no objection was asserted).

In this case, there is no evidence in the record that Clear Recon filed a declaration of non-

monetary status in San Bernardino Superior Court at least fifteen days prior to Rocket Mortgage’s

removal. To the contrary, it appears that Clear Recon filed a Declaration of Non-Monetary Status

on January 6, 2023, a mere three days before Rocket Mortgage filed its Notice of Removal.

However, because “[r]emoving [d]efendants must show that diversity of citizenship existed at the

time of removal” (Silva, 2011 WL 2437514 at *4), 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, Rocket Mortgage has failed to demonstrate that Clear Recon is a nominal party and its

citizenship is irrelevant for diversity purposed based on Clear Recon’s filing of a Declaration of Non-

Monetary Status three days before the Notice of Removal was filed. See, e.g., Silva, 2011 WL

2437514 at *4 (“Here, Removing Defendants filed their notice of removal before the 15 days had

passed . . . Thus, at the time of removal, Cal–Western had not yet become a nominal party by

virtue of its declaration of non-monetary status. Removing Defendants must show that diversity of

citizenship existed at the time of removal. At the time of removal, the declaration of non-monetary

status had not rendered Cal–Western a nominal party whose citizenship was irrelevant for diversity

Page 2 of 4 Initials of Deputy Clerk sr

Case 5:23-cv-00031-JFW-KK Document 22 Filed 02/15/23 Page 3 of 4 Page ID #:312

purposes” (citations omitted)); Wise, 2011 WL 1466153 at *4 (“Here, Defendant alleges that as

trustee, Wolf Firm is a nominal defendant to this action because it filed a statement of non-monetary

status pursuant to California Civil Code § 2924l on March 18, 2011 . . . In this case, Wolf Firm had

not attained nominal party status at the time of removal. As noted above, a party gains

non-monetary status and is transformed into a nominal party only if no objection is served within the

15–day objection period. Cal. Civ. Code § 2924l. Sun Trust removed this action to federal court on

March 22, 2011, approximately 4 days after Wolf Firm filed its Declaration of Non–Monetary Status

and 11 days before the objection period expired. Accordingly, at the time of removal, Wolf Firm had

not yet attained non-monetary status and was not yet a nominal party for purposes of diversity

jurisdiction. Because the Court has found that Wolf Firm . . . was not a nominal party at the time of

removal, its presence in this action prevented removal based on diversity jurisdiction. Accordingly,

the Court finds that diversity jurisdiction was not a proper basis for removal of this action to federal

court”); Sun v. Bank of America Corp., 2010 WL 454720, *2–3 (C.D. Cal. Feb. 8, 2010)

(“Defendants argue that because ReconTrust filed a Declaration of Non-monetary Status with the

state court on December 22, ReconTrust is a nominal party and its citizenship should not be

considered for diversity. The Court disagrees. Federal diversity jurisdiction must exist ‘as of the

time the complaint is filed and removal is effected.’ See id.; see also Morongo Band of Mission

Indians v. California State Bd. of Equalization, 858 F.2d 1376, 1380 (9th Cir.1988) (diversity is

determined by citizenship of parties as of filing of the original complaint); Newcombe v. Adolf Coors

Co., 157 F.3d 686, 690 (9th Cir.1998) (diversity must exist when action is removed). At the time of

removal, ReconTrust had not attained nominal party status. A party that files a declaration of

non-monetary status does not actually become a nominal party until 15 days pass without objection.

Cal. Civ. Code § 2924l (d), see also Kang v. Bank of Am. Home Loans Servicing, LP, No. 09–8890

(C.D. Cal. Jan. 5, 2010) (order denying reconsideration). Here, Defendants removed the action to

federal court on January 4, only 13 days after ReconTrust filed its Declaration of Non–Monetary

Status on December 22. Thus, at the time of removal ReconTrust did not have nominal status. The

nominal party status exception does not apply”).

Furthermore, despite Rocket Mortgage’s argument to the contrary, Clear Recon’s “status as

a trustee is not itself sufficient to render it a nominal party.” Natividad v. Ocwen Loan Servicing,

LLC, 2014 WL 6611054, *4 (E.D. Cal. Nov.19, 2014) (citing Couture v. Wells Fargo Bank, N.A.,

2011 WL 3489955, * 3 (S.D. Cal. Aug.9, 2011)). Although Rocket Mortgage contends in the Notice

of Removal that Plaintiff’s Complaint contains no substantive allegations against Clear Recon, the

Court disagrees. Plaintiff’s Complaint includes substantive allegations against Clear Recon.

Plaintiff alleges all causes of action against both Rocket Mortgage and Clear Recon jointly as

“defendants” and seeks damages against both Rocket Mortgage and Clear Recon. For example,

Plaintiff alleges that Defendants jointly “engaged in a campaign of misinformation and undermined

California’s housing security . . . by taking steps toward foreclosure against California homeowners,

such as Plaintiff” Complaint, ¶ 23. In addition, Plaintiff alleges that Defendants violated California

Civil Code §§ 2923.55 by attaching a “patently false” declaration of due diligence to the Notice of

Default recorded against her property. Complaint, ¶¶ 26-28. Plaintiff alleges that the declaration of

due diligence is false because neither of the Defendants “contacted Plaintiff by telephone or in

person, as required by code, assessed Plaintiff’s finances, or explored all non-foreclosure options

other than a COVID-related forbearance that was denied on extension,” despite the fact that she

had submitted a police report demonstrating that the loan against her property had been obtained

as a result of identity theft. Complaint, ¶ 28. Plaintiff also alleges that “Defendants breached their

duty of due care owed to Plaintiff to investigate her fraud claims” and “breached their duty of due

care owed to Plaintiff by failing to . . . first identify the validity of the individual taking out the Loan, by

Page 3 of 4 Initials of Deputy Clerk sr

Case 5:23-cv-00031-JFW-KK Document 22 Filed 02/15/23 Page 4 of 4 Page ID #:313

failing to look into the validity of the Loan and investigate Plaintiff’s claims of fraud against her sister

so as to mitigate damages.” Complaint, ¶¶ 62 and 64. In addition, Plaintiff alleges that Clear

Recon’s “conduct of signing off on a patently false declaration of due diligence was negligent.”

Complaint, ¶ 65. Courts have consistently found similar allegations sufficient to demonstrate that a

trustee is not a nominal party and that its citizenship must be considered in ascertaining whether

diversity jurisdiction exists. See, e.g., Alabastro, 2015 WL 138235 at *3 & n. 2 (concluding that “the

allegations in the Complaint are sufficient to preclude a finding that Cal–Western should be

disregarded from the jurisdictional analysis as a nominal party” where the complaint's “factual

allegations, when taken as whole, imply that Cal–Western may have conspired with other

defendants to improperly or fraudulently initiate foreclosure proceedings against the Milpitas

property); Raissian v. Quality Loan Service Corp., 2014 WL 6606802, *4 (C.D. Cal. Nov. 19, 2014)

(“Quality cannot be deemed a nominal defendant because the Complaint clearly demonstrates it is

not a mere stakeholder. This is because a court need not regard a trustee as a nominal party

where the complaint pleads substantive allegations against and seeks money damages from the

trustee. Plaintiff's Complaint alleges a claim under California Civil Code section 2923.55 against

both SPS and Quality. Under the statute, a mortgage servicer, mortgagee, trustee, beneficiary, or

authorized agent may not record a notice of default until the mortgage servicer sends certain

information and documentation to the borrower as required by subdivision (b)(1) . . . Plaintiff alleges

he did not receive any of the required documents. Plaintiff also alleges SPS and Quality

nevertheless recorded a notice of default on the subject property”); Pardo v. Sage Point Lender

Services LLC, 2014 WL 3503095, *3–4 (S.D. Cal. July 14, 2014) (“The Court concludes that

Defendants have not met their heavy burden of establishing that Sage Point is a nominal defendant

with no real interest in this lawsuit. First, Sage Point's status as trustee is only determinative if Sage

Point is being sued solely in its role as trustee and ‘merely to perform [a] ministerial act.’ There is no

rule that a party's status as a trustee renders him or her a nominal party . . . Second, Plaintiff is

actually suing Sage Point for wrongdoing, not merely as a formal party in order to facilitate

collection. Plaintiff notes at the outset of his Complaint that the four defendants would be

‘collectively referred to as Defendant,’ and Sage Point, along with RCS's other unnamed agents,

would be ‘collectively referred to as Defendants.’ Plaintiff makes several allegations against

Defendants collectively. For example, Plaintiff alleges that Defendants have ‘purposefully and

willfully harassed Plaintiff’ by ‘trespassing’ and putting the house up for sale, despite him qualifying

for a loan modification”). As a result, the Court concludes that Rocket Mortgage has failed to meet

the burden of establishing that diversity jurisdiction exists. See Harris v. Bankers Life and Cas. Co.,

425 F.3d 689, 694 (9th Cir. 2005).

Accordingly, this action is REMANDED to San Bernardino Superior Court for lack of subject

matter jurisdiction. See 28 U.S.C. § 1447(c).

IT IS SO ORDERED.

Page 4 of 4 Initials of Deputy Clerk sr