JEREMY FOGEL, District Judge.
Plaintiffs Gabriel and Shawna DeLeon (the "DeLeons") move to remand the instant action to the San Benito Superior Court for lack of diversity jurisdiction pursuant to 28 U.S.C. § 1332, et seq. Defendant Wells Fargo Bank, N.A. ("Wells Fargo") moves to dismiss the action pursuant to Fed.R.Civ.P. 12(b)(6) and to strike portions of the complaint pursuant to Fed. R.Civ.P. 12(f). The Court has considered the moving and responding papers and the
In 2004, the DeLeons purchased a home in San Benito County (the "Property") for $804,000, secured by a note to World Savings Bank, FSB in the amount of $562,800. Compl. ¶ 10. In 2007, World Savings offered the DeLeons the option of refinancing their existing loan because the home had appreciated in value. Compl. ¶ 11. The DeLeons and World Savings entered into a refinance agreement in which the note was refinanced for $787,500 subject to a four-year adjustable rate mortgage. Compl. ¶ 11. Beginning in August 2008, the DeLeons were unable to afford the payments on the new note. Compl. ¶ 12. They allege that at that point the new loan balance was greater than the market value of the Property. Compl. ¶ 12.
In or around September 2009, after World Savings had changed its name to Wachovia Mortgage, FSB and then merged into Wells Fargo Bank, N.A., Mot. to Dismiss 1:16-18, a notice of default was recorded and sent to the DeLeons. Compl. ¶ 13. Thereafter and through December 2009, the parties engaged in discussions about a possible loan modification. Compl. ¶ 13. The DeLeons allege that Wells Fargo expressed confidence that a loan modification could be worked out once all necessary documents had been received from the DeLeons. Compl. ¶ 14.
On January 16, 2010, the DeLeons were told by a realtor that the Property had been sold at a trustee's sale in which Wells Fargo was the purchaser. Compl. ¶ 15. The DeLeons allege that even after the sale, a Wells Fargo agent continued to tell them that there would be no foreclosure because parties still were engaged in the loan modification process. Compl. ¶ 15. Following the January sale, Wells Fargo gave the DeLeons notice to vacate the Property within thirty days. Compl. ¶ 18.
The DeLeons allege that they never received notice of a trustee's sale and that the notice of such a sale never was posted on the Property. Compl. ¶ 19. They also allege they never were advised by Wells Fargo that they had a right to request a meeting or provided a toll-free number to find a HUD-Certified Housing Counseling Agency. Compl. ¶ 19.
On February 10, 2010, the DeLeons filed suit in the San Benito Superior Court, asserting seven claims for relief: (1) wrongful foreclosure under California Civil Code § 2924; (2) cancellation of trustees' deed; (3) violation of California Business and Professions code § 17200, et seq.; (4) violation of California Civil Code § 2923.5; (5) predatory lending under California Financial Code §§ 4973 and 4979.6; (6) quiet title; and (7) preliminary and permanent injunction. In April 2010, Defendant removed the action to this Court pursuant to pursuant to 28 U.S.C. § 1332, et seq.
The DeLeons are citizens of California, and Wells Fargo is a nationally-chartered bank, with its main corporate office in South Dakota. Pls. Reply to Mot. 8:10. Wells Fargo also maintains a principal place of business in San Francisco, California and does business throughout the state. See Mount v. Wells Fargo Bank, N.A., No. CV 08-6298 GAF (MANx), 2008 WL 5046286, at *1, 2008 U.S. Dist. LEXIS 98193, at *3 (C.D.Cal. Nov. 24, 2008). See also Wells Fargo Bank, N.A. v. Siegel, No. 05 C 5635, 2007 WL 1686980, at *1, 2007 U.S. Dist. LEXIS 41886 at *2 (N.D. Ill. June 8, 2007). A threshold legal question is whether Wells Fargo is a citizen of
Federal courts are courts of limited jurisdiction. That jurisdiction includes civil actions between "citizens of different States" where the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a)(1) (2006). A non-natural person such as a corporation may be a citizen of two different states. 28 U.S.C. 1332(c) ("[A] corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business....") Here, this Court has jurisdiction only if Wells Fargo's citizenship is diverse from the DeLeons'. See Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996) (stating that diversity jurisdiction requires "complete diversity of citizenship"). Any moving party asserting diversity jurisdiction bears the burden of showing that diversity exists. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Similarly, when an action has been removed from state court to federal court under 28 U.S.C. § 1441, there is an equally "strong presumption" against removal jurisdiction, unless the defendant can establish that removal was proper. Gaus v. Miles, 980 F.2d 564, 566 (1992). Any such doubt as to removability must be made in favor of remand to state court. Id.
28 U.S.C. § 1348 limits the citizenship of a national banking association to the state in which the association is "located."
In Schmidt, the Supreme Court reaffirmed that a national bank is a citizen of the state in which its main office is located. 546 U.S. at 313-14, 126 S.Ct. 941. However, it reversed the determination of the Fourth Circuit that "located" could be interpreted to mean that a national bank is a citizen of any state in which it maintains a branch office. Id. "[W]hile corporations ordinarily rank as citizens of at most 2 States, Wachovia, under the Court of Appeals' novel citizenship rule, would be a citizen of 16 States." Id. at 317, 126 S.Ct. 941. While the holding in Schmidt could be narrowly limited to a rejection of a "branch office" interpretation of § 1348, thus remitting dual citizenship based on a bank's principal place of business, lower courts since Schmidt have taken the view that the "main office" standard is the only way to determine the citizenship of a national bank. See Hicklin Eng'g, L.C. v. Bartell, 439 F.3d 346, 348 (7th Cir.2006).
Relying on Schmidt, Wells Fargo contends that it is neither located in nor a citizen of California. The Court agrees. Plaintiffs argue that footnote 8 of Schmidt supports a conclusion that a bank may be "located" at a principal place of business, but it is clear from the entire text of the footnote that the Court expressed no such view:
Id. at 315 n. 8, 126 S.Ct. 941.
Moreover, in footnote 9, the Court recognized the imperfect parity between corporations and national banks:
Id. at 318 n. 9, 126 S.Ct. 941. Subsequently, in Hertz v. Friend, ___ U.S. ____, 130 S.Ct. 1181, 1185, ___ L.Ed.2d ____ (2010), the Supreme Court has defined "principal place of business" under 28 U.S.C. § 1332(c)(1) as a corporation's "nerve center" where "the corporation's high level officers direct, control, and coordinate the corporation's activities." Id. at 1185. By adopting such a definition, the Court implicitly furthered parity between state chartered banks and corporations and national banks.
The DeLeons rely upon Mount v. Wells Fargo Bank, N.A., in which the district court found that Wells Fargo was a citizen of California for diversity purposes. No. CV 08-6298 GAF (MANx), 2008 U.S. Dist. LEXIS 98193, at *4-5 (C.D.Cal. Nov. 24, 2008). However, a later district court decision in Peralta v. Countrywide Home Loans, No. C 09-3288 PJH, 2009 U.S. Dist. LEXIS 112387 (N.D.Cal. Nov. 16, 2009), explicitly rejected Mount and adopted the holding in Excelsior Funds, Inc. v. J.P. Morgan Chase Bank, N.A., 470 F.Supp.2d 312 (S.D.N.Y.2006), that for purposes of diversity jurisdiction a national bank is a citizen of the state in which its main office as specified in its articles of association is located. Id. at *4-5, 2009 U.S. Dist. LEXIS 112387 at *13-14. See also Wells Fargo Bank, N.A. v. WMR e-Pin, LLC, No. 08-5472 (JNE/FLN), 2008 WL 5429134 *1, 2008 U.S. Dist. LEXIS 104558 *4 (D.Minn. Dec. 29, 2008) ("[T]he Court concludes that Wells Fargo Bank does not take the citizenship of the state of its principal place of business. Because Wells Fargo Bank is not a citizen of California, the Court rejects Respondents' assertion that complete diversity of citizenship does not exist.")
Wells Fargo moves to dismiss all of the DeLeons' claims as preempted by the Home Owners' Loan Act ("HOLA"). The Court agrees that the first, second, fifth, and seventh claims are preempted and cannot be saved by amendment. The motion will be granted with leave to amend with respect to the DeLeons' remaining claims.
"Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008). For purposes of a motion to dismiss, "all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). However, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a Plaintiffs' obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Leave to amend must be granted, unless it is clear that the complaint's deficiencies cannot be cured by amendment. Lucas v. Dep't. of Corrs., 66 F.3d 245, 248 (9th Cir.1995).
"[T]he laws of the United States ... shall be the supreme law of the land; ... any Thing in the Constitution or laws of any state to the contrary notwithstanding." U.S. Const., art. VI, cl. 2. The Constitution through the Supremacy Clause allows for federal law and regulations to preempt state laws, however, "[i]t will not be presumed that a federal statute was intended to supersede the exercise of the power of the state unless there is a clear manifestation of intention to do so." Schwartz v. Texas, 344 U.S. 199, 202-03, 73 S.Ct. 232, 97 L.Ed. 231 (1952). Such intent may be "explicitly stated in the statute's language or implicitly contained in its structure and purpose." Fidelity Federal Sav. & Loan Assn. v. de la Cuesta, 458 U.S. 141, 152-53, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982). A federal agency regulation also may result in preemption. Gibson v. World Savings & Loan Assn., 103 Cal.App.4th 1291, 128 Cal.Rptr.2d 19, 23 (2002). However, in the regulatory context, courts consider whether (1) the agency intended its regulation to have a preemptive effect, and (2) the agency acted within the scope of its congressionally delegated authority by issuing the preemptive regulation. de la Cuesta, 458 U.S. at 154, 102 S.Ct. 3014. If these conditions are met, "[f]ederal regulations have no less pre-emptive effect than federal statutes." Id. at 153, 102 S.Ct. 3014. The construction of statutes, legislative intent, interpretation of administrative regulations are all questions of law. See Bravo Vending v. City of Rancho Mirage, 16 Cal.App.4th 383, 20 Cal.Rptr.2d 164, 166-67 (1993).
While preemption analysis begins with the presumption that Congress did not
As relevant to the current motion, HOLA sets forth "without limitation" a list of illustrative examples of the types of state laws that are expressly preempted. § 560.2(b):
Section 560.2(b)(4), (b)(9)-(10).
However, HOLA preemption of state laws affecting federal savings associations is not absolute. Section 560.2(c) carves out state laws that "only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) of this section." (Emphasis added). The Ninth Circuit has given further guidance with respect to whether a state law is preempted by HOLA:
Silvas, 514 F.3d at 1005 (quoting OTS, Final Rule, 61 Fed. Reg. 50951, 50966-67 (Sep. 30, 1996)).
Wells Fargo notes that at the time the loan was made to the DeLeons, "World Savings Bank, FSB was a federally chartered savings bank organized and operating under HOLA" and observes correctly that the same preemption analysis would apply to any alleged conduct after November 1, 2009, when the lender merged into a national banking association.
The DeLeons allege that prior to the non-judicial foreclosure and sale, Wells Fargo violated California Civil Code § 2924 by failing to give them notice and to publish, post and record said notice. In Stefan v. Wachovia, another court in this district concluded that a claim based on comparable facts was preempted by HOLA. No. C 09-2252 SBA, 2009 WL 4730904, at *2-3, 2009 U.S. Dist. LEXIS 113480, at *7-8 (N.D.Cal. Dec. 7, 2009). Judge Armstrong held that the plaintiff's claim of misconduct surrounding the foreclosure proceedings plainly involved `processing, origination, sale or purchase of... mortgages' and `disclosure....' Id. at *9. Because § 2924 would regulate Wells Fargo's disclosure of credit related documents and its ability to participate and service its mortgages, this Court reaches the same conclusion.
The DeLeons allege violations of California's Unfair Competition Law ("UCL"), Business and Professions Code § 17200 et seq. Specifically, they complain that they were given false assurances that their loan modification with Wells Fargo would be approved and that there would be no foreclosure while the loan modification process was pending. Comp. ¶ 33. While this claim invokes a broad state law of general applicability, the Ninth Circuit recognized in Silvas that HOLA preemption still may apply. 514 F.3d at 1005. The court expressly declined to analyze the UCL under 560.2(c). Id. Accord Casey v. Federal Deposit Insurance Co., 583 F.3d 586, 593-94 (8th Cir.2009); State Farm Bank, FSB v. Reardon, 539 F.3d 336, 345 (6th Cir.2008) ("[N]othing in the text of [] § 560.2 indicates that it only preempts state laws that directly regulate federal savings associations."); State Farm Bank, FSB v. District of Columbia, 640 F.Supp.2d 17, 23 (D.D.C.2009).
The DeLeons rely on Gibson v. World Savings and Loan Association, 103 Cal.App.4th 1291, 1306, 128 Cal.Rptr.2d 19 (2002), to support their assertion that there is no preemption, but Gibson is factually distinguishable. In that case, the plaintiffs alleged that borrowers with secured loans made or serviced by the defendant, a national savings association, were forced to pay for more expensive property insurance selected by the defendant after the borrowers had failed to maintain their own bank approved insurance on the secured property. 128 Cal.Rptr.2d at 21. The plaintiffs claimed that this practice
Silvas and Gibson are consistent in holding that a law of general applicability that does not directly affect a national bank's lending is not preempted by HOLA. In this case, the DeLeons provide only a conclusory statement that they were deceived when Wells Fargo foreclosed on the property while their loan modification still was pending. Compl. ¶ 33. While they assert that there was an agreement to complete the loan modification, Compl. ¶ 33, they allege only that Wells Fargo expressed "confidence that the modification would be approved once all documents had been received ...." and "received encouragement from WELLS FARGO that the loan modification would be approved." Compl. ¶¶ 14-15. Without more, such statements do not create a duty or contract to modify a loan. Huerta v. Ocwen Loan Servicing, Inc., No. C 09-05822(HRL), 2010 WL 728223, *4-5, 2010 U.S. Dist. LEXIS 17970, *11-12 (N.D.Cal. Mar. 1, 2010). However, because the DeLeons may be able to allege additional facts more analogous to those alleged in Gibson, leave to amend will be granted.
The DeLeons allege that Wells Fargo violated California Civil Code § 2923.5 by failing to comply with statutory notice requirements. Compl. ¶ 3 8. As discussed above, § 2923.5 affects the servicing of mortgages
The DeLeons allege that Wells Fargo engaged in predatory lending in violation of California Financial Code §§ 4973 and 4979.6 when it encouraged them to refinance their loan in September 2007. Compl. ¶ 45. Wells Fargo argues that to the extent that this claim is not preempted by HOLA, it is time-barred. The Court agrees that the claim is time-barred.
The DeLeons seek to cancel the deed resulting from the trustee's sale or in the alternative to quiet title in their favor notwithstanding the deed recorded by Wells Fargo on January 20, 2010. These claims are premised on DeLeons' claims of wrongful foreclosure and defective notice, which are preempted by HOLA.
The DeLeons seek a preliminary and permanent injunction enjoining Wells Fargo from evicting them from the Property. A preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the Plaintiffs is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 129 S.Ct. 365, 376, 172 L.Ed.2d 249 (2008). "The proper legal standard for preliminary injunctive relief requires a party to demonstrate (1) `that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in the public interest.'" Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (citing Winter, 129 S.Ct. at 374). The issuance of a preliminary injunction is committed to the discretion of the district court. Indep. Living Ctr. v. Maxwell-Jolly, 572 F.3d 644, 651 (9th Cir.2009).
Here, the DeLeons have failed to show that they are likely to succeed on the merits with respect to their state law claims. Their claims are either preempted by HOLA, time-barred, or insufficiently pled. Accordingly, the request for a preliminary injunction will be denied. The claim for permanent injunction relief will be dismissed without prejudice pending amendment of the UCL claim.
Pursuant to Federal Rules of Civil Procedure 12(f), the Court may strike "from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Motions to strike generally will not be granted unless it is clear that the matter to be stricken could not have any possible bearing on the subject matter of the litigation. See LeDuc v. Ky. Cent. Life Ins. Co., 814 F.Supp. 820, 830 (N.D.Cal.1992). Allegations "supplying background or historical material or other matter of an evidentiary nature will not be stricken unless unduly prejudicial to defendant." Id. Moreover, allegations which contribute to a full understanding of the complaint as a whole need not be stricken. See id.
Defendant moves to strike several portions of the complaint, Def's. Mot. to Strike 2:2-25. Because the Court has granted Wells Fargo's motion to dismiss all of the DeLeons' claims, the motion to strike will be terminated as moot.
Good cause therefor appearing:
IT IS SO ORDERED.
