Forbes et al v. Bank of America NA et al

Filing 20

ORDER denying 9 Motion to Remand to State Court. See attached Order for details. Signed by Judge G Murray Snow on 11/30/2017.(KFZ)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Andrew K. Forbes, et al.,
Plaintiffs,

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ORDER

v.

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No. CV-17-03295-PHX-GMS

Bank of America NA, et al.,

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Defendants.

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Pending before the Court is the Motion to Remand of Plaintiffs Andrew and Julia

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Forbes. (Doc. 9). For the following reasons, the Court denies the motion.

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Background

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On August 22, 2017, Plaintiffs Andrew and Julia Forbes of Arizona filed a

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Complaint, pro se, in Maricopa County Superior Court against Defendants Bank of

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America, N.A. (BANA) and Leonard J. McDonald. (Doc. 1-1). In 2006, Plaintiffs

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executed a promissory note with BANA in the amount of $399,900.00 in order to

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purchase real property in Wittmann, Arizona. This note was secured by a deed of trust on

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the land, with BANA as the beneficiary. Plaintiffs defaulted on the loan in 2009, and

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were unable to agree on loan modification programs with BANA. After default, the

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trustee sent notice to Plaintiffs of a sale of the property. Plaintiffs realized that BANA

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was foreclosing on the wrong property and informed the trustee of this mistake. Plaintiffs

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received no further correspondence from BANA or the trustee, causing them to believe

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the property has been foreclosed.

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A Notice of Substitution of Trustee was recorded on May 31, 2017 and Mr.

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McDonald was appointed the successor trustee. Plaintiffs then received a notice of

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trustee’s sale referencing a renewed effort to foreclose on the property. Plaintiffs’

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Complaint asserts wrongful foreclosure, claiming that the statute of limitations has

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expired. Additionally, Plaintiffs allege that BANA breached their fiduciary duties of good

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faith and fair dealing. Plaintiff’s Complaint seeks injunctive relief to stop the foreclosure

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and alleges injuries in excess of $150,000.

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Defendant BANA removed the action to federal court on September 22, 2017.

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BANA, a citizen of North Carolina, alleges that Defendant McDonald, a citizen of

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Arizona, has been fraudulently joined to the lawsuit. BANA asserts that Arizona law and

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the Complaint provide no basis for relief against Defendant McDonald as Trustee. BANA

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also states that the amount in controversy exceeds $75,000. Plaintiffs filed a Motion to

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Remand on October 17, 2017.

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Discussion

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I.

Legal Standard

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“[A]ny civil action brought in a State court of which the district courts of the

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United States have original jurisdiction, may be removed by the defendant or the

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defendants, to the district court of the United States for the district and division

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embracing the place where such action is pending.” 28 U.S.C. § 1441(a). A party may

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remove an action from state court only if the action could have been brought in the

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district court originally. Ramirez v. Fox Television Station, Inc., 998 F.2d 743, 747 (9th

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Cir. 1993). The party asserting federal jurisdiction has the burden of proof on a motion to

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remand to state court, and the removal statute is strictly construed against removal

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jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (noting a “strong

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presumption” against removal jurisdiction, and stating that “[f]ederal jurisdiction must be

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rejected if there is any doubt as to the right of removal in the first instance”).

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II.

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Analysis
Federal jurisdiction is proper in all cases that present a federal question on the face

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of the complaint. 28 U.S.C. § 1331. In addition, the Court has subject-matter jurisdiction

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to rule on cases in which defendants and plaintiffs are citizens of different states and the

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amount in controversy is greater than $75,000. 28 U.S.C. § 1332. The Supreme Court has

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interpreted § 1332 to require complete diversity between parties, such that “the

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citizenship of each plaintiff is diverse from the citizenship of each defendant.”

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Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). However, if a plaintiff “fails to state a

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cause of action against a resident defendant, and the failure is obvious according to the

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settled rules of the state,” the district court may claim that the party is fraudulently joined,

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and assert jurisdiction. McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir.

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1987).
A. Diversity Jurisdiction
1. Diversity of Citizenship

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Plaintiffs, Arizona citizens, have filed suit against BANA, a citizen of North

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Carolina, and Mr. McDonald, a citizen of Arizona. On its face, the presence of Mr.

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McDonald destroys diversity between the parties. However, if the “settled rules of the

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state” prevent Plaintiffs from “stat[ing] a cause of action” against Mr. McDonald, then

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Mr. McDonald is considered fraudulently joined and his presence would not preclude

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removal on diversity grounds. McCabe, 811 F.2d at 1339. Under Arizona law, the

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“trustee need only be joined as a party in legal actions pertaining to a breach of the

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trustee’s obligation.” A.R.S. § 33-807(E). A court order “entered against the beneficiary

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[BANA] is binding upon the trustee with respect to any actions that the trustee is

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authorized to take by the trust deed or by this chapter. Id. A trustee joined in an action “is

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entitled to be immediately dismissed.” Id. Three elements must be established for a

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trustee to fall under § 33-807(E)’s protections: the trustee is a defendant in the action, the

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claim “relates to the authority of the trustee to act,” and the claims “do not allege that the

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trust breached any of his or her obligations that arise under either the deed of trust” or

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statutes that regulate deeds of trust. Puzz v. Chase Home Finance, LLC, 763 F.Supp.2d

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1116, 1125 (D. Ariz. 2011).

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The first two elements of § 33-807 are met here. The trustee, Mr. McDonald, is

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named as a party in the complaint. The complaint deals with whether the Plaintiffs’

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property may be foreclosed, an issue that relates to the authority of the trustee’s ability to

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act with regards to a deed of trust sale. As to the third element, in their Motion to Remand

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Plaintiffs assert that “Defendant Leonard J. McDonald breached his fiduciary duty to

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Plaintiffs.” (Doc. 9, pg. 4). Plaintiffs argue that this fiduciary duty was breached by Mr.

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McDonald continuing to proceed with the foreclosure after Plaintiffs informed him of

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their claim that the foreclosure is barred by the statute of limitations. Plaintiffs state an

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intent to “provide further clarification to these allegations against Defendant Leonard J.

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McDonald by filing an amended complaint upon remand.” (Doc. 9, pg. 5). This Court

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cannot engage in speculation as to what Plaintiffs may allege in an amended complaint.

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The Complaint filed in Superior Court only mentions Mr. McDonald twice: once to state

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that he is a resident of Arizona, and once to state that he was appointed as a Successor

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Trustee. (Doc. 1-1, pgs. 3, 6, ¶¶ 3, 17). The Complaint, therefore, makes neither factual

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allegations that would support an independent claim against Mr. McDonald nor actually

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brings a claim against Mr. McDonald for a breach of duties. Any order this Court might

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issue against BANA about the foreclosure would apply to Mr. McDonald under A.R.S. §

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33-807(E). Thus, Mr. McDonald has been fraudulently joined to the suit and his presence

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does not destroy the diversity requirement. See Webb v. CitiMortgage, Inc., No. CV-10-

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2455-PHX-SRB, 2011 WL 13142488, at *4–5 (D. Ariz. July 13, 2011) Tietjen v. Wells

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Fargo Home Mortg., No. CV-10-06122-PHX-GMS, 2011 WL 379306, at *2 & n. 2 (D.

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Ariz. Feb. 3, 2011); Dumont v. HSBC Mortg. Corp., USA, No. CV-10-1106-PHX-MHM,

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2010 WL 3023885, at *2 (D. Ariz. Aug. 2, 2010); Cervantes v. Countrywide Home

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Loans, Inc., No. CV-09-517-PHX-JAT, 2009 WL 3157160, at *12–13 (D. Ariz. Sept. 24,

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2009).

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2. Amount in Controversy

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Plaintiffs contend that the amount-in-controversy requirement has not been met.

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They state that they are seeking only an injunction. When the relief sought is injunctive in

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nature, and not monetary, “the amount in controversy is measured by the value of the

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object of the litigation.” Hunt v. Washington State Apple Advertising Com’n, 432 U.S.

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333, 347 (1977). Plaintiffs assert that the value of the object of the litigation is properly

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measured using the value of the property to be foreclosed on: $14,100. (Doc. 9, Ex. B).

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Defendants, however, would use the balance of the loan secured by the property:

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$173,231.20. The Court need not resolve this dispute. Plaintiffs’ Complaint does not seek

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only injunctive relief. The Complaint states twice that “Plaintiffs have suffered and will

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continue to suffer if the trustee’s sale is conducted in excess of $150,000.00.” (Doc. 1-1,

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pgs. 6, 7 ¶¶ 22, 26). Plaintiffs do later seek injunctive relief, but that is in addition to their

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claims of wrongful foreclosure and breach of good faith and fair dealing where Plaintiffs

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assert damages in excess of $150,000. This exceeds the amount-in-controversy

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requirement of $75,000.

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B. Federal Question Jurisdiction

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Federal courts have federal question jurisdiction “only when a federal question is

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presented on the face of the plaintiff’s properly pleaded complaint.” Caterpillar Inc. v.

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Williams, 519 U.S. 386, 392 (1987). In this way, “the plaintiff [is] the master of the

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claim; he or she may avoid federal jurisdiction by exclusive reliance on state law.” Id.

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Plaintiffs’ Complaint alleges that “Defendant [BANA] engaged in unfair and deceptive

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practices in violation of the Federal Fair Debt Practices Act.” (Doc. 1-1, pg. 7, ¶ 24). This

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is seemingly a reference to the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §

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1692 et seq. Without making any determination as to the merits of Plaintiff’s suit, the

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FDCPA does contain prohibitions on various unfair practices and deceptive actions. See

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15 U.S.C. § § 1692f, 1692g. To the extent Plaintiffs are raising claims under the FDCPA,

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this Court has jurisdiction to hear those claims. The Court also has supplemental

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jurisdiction to hear the remaining state law claims under 28 U.S.C. § 1367(a).

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Conclusion

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Plaintiff’s Motion to Remand is denied because this Court has diversity

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jurisdiction. Defendant McDonald is not a proper party under Arizona law, and his

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presence in the suit constitutes fraudulent joinder. Without Mr. McDonald, there is

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complete diversity between the parties: the Plaintiffs are Arizona citizens and Defendant

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BANA is a North Carolina citizen. Although Plaintiffs claim to only be seeking

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injunctive relief, their Complaint contains causes of action where they assert damages in

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excess of $150,000, surpassing the required amount in controversy. Plaintiffs’ Complaint

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also raises a federal question related to the FDCPA, giving this Court federal question

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jurisdiction over that claim and supplemental jurisdiction over the remaining state law

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claims.

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IT IS THEREFORE ORDERED that the Motion to Remand of Plaintiffs

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Andrew and Julia Forbes (Doc. 9) is DENIED.

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Dated this 30th day of November, 2017.

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Honorable G. Murray Snow
United States District Judge

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