SFR Investments Pool 1, LLC v. Bank Of America, N.A.

Opinion

1 UNITED STATES DISTRICT COURT

2 DISTRICT OF NEVADA

3 SFR INVESTMENTS POOL 1, LLC; ) 4 ) Plaintiff, ) Case No.: 2:22-cv-01864-GMN-BNW 5 vs. ) 6 ) ORDER BANK OF AMERICA, et al., ) 7 ) Defendants. ) 8 ) 9 10 Pending before the Court is the Emergency Motion to Expunge Lis Pendens, (ECF No. 11 5), filed by Defendant Bank of America, N.A. (“BANA”). Plaintiff SFR Investment Pool 1, 12 LLC (“SFR”) filed a Response, (ECF No. 8), to which BANA filed a Reply, (ECF No. 12). 13 Further pending before the Court is SFR’s Motion to Remand, (ECF No. 9). BANA 14 filed a Response, (ECF No. 13), to which SFR has yet to file a Reply. 15 Further pending before the Court is SFR’s Motion for Preliminary Injunction, (ECF No. 16 10). BANA filed a Response, (ECF No. 14), to which SFR has yet to file a Reply. 17 For the reasons set forth below, SFR’s Motion to Remand is GRANTED. Additionally, 18 BANA’s Emergency Motion to Expunge Lis Pendens and SFR’s Motion for Preliminary 19 Injunction are DENIED as moot. 20 I. BACKGROUND 21 This case arises out of an impending judicial foreclosure sale of real property located at 22 325 Point Loma Avenue, Las Vegas, NV 89031 (the “Property”). (Compl. ¶ 5, Ex. 1-A to Pet. 23 Removal, ECF No. 1-2); (Notice of Trustee Sale at 2, Ex. 14 to BANA’s Reply to Mot. to 24 Expunge Lis Pendens (“BANA’s Reply”), ECF No. 12-14). On January 31, 2007, John Wesley 25 McAnally III and Jennifer Lynn McAnally (collectively, “Borrowers”) financed the purchase of 1 the Property, as joint tenants, by way of a $268,000 loan secured by a Deed of Trust (“DOT”) 2 identifying Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary. (DOT 3 at 2–3, Ex. 2 to BANA’s Reply, ECF No. 12-2). Fannie Mae acquired the loan in February 4 2007 and remains the owner. (Ex. 5 to BANA’s Reply No. 12-5). On December 24, 2012, 5 MERS then assigned its interest to BANA. (Assignment of DOT at 2, Ex. 3 to BANA’s Reply, 6 ECF No. 12-3). 7 Borrowers failed to pay the payment of principal and interest, which became due on 8 September 1, 2010. (Notice of Default at 2, Ex. 4 to BANA’s Reply, ECF No. 12-4). On May 9 30, 2014, SFR obtained title to the Property by acquiring the Property at a publicly-held 10 foreclosure auction. (Compl. ¶ 6, Ex. 1-A to Pet. Removal, ECF No. 1-2); (Foreclosure Deed at 11 2, Ex. 7 to BANA’s Reply, ECF No. 12-7). On June 2, 2014, the resulting Foreclosure Deed 12 was recorded. (Compl. ¶ 7, Ex. 1-A to Pet. Removal). On June 6, 2022, a Notice of Default and 13 Election to Sell Under DOT was recorded against the Property. (Notice of Default at 2, Ex. 4 to 14 BANA’s Reply). In response, SFR alleges in its Complaint that it sent BANA a request for 15 statements pursuant to NRS §§ 107.200 and 107.210. (Compl. ¶¶ 10–11, Ex. 1-A to Pet. 16 Removal). Prior to the initiation of this lawsuit, BANA allegedly had not yet responded to 17 SFR’s request. (Id. ¶ 12, Ex. 1-A to Pet. Removal). 18 On September 27, 2022, a Notice of Trustee sale was recorded on the Property, 19 identifying November 16, 2022, as the sale date. (Notice of Trustee Sale at 2, Ex. 14 to 20 BANA’s Reply). On October 3, 3022, SFR filed the present Complaint in the Eighth Judicial 21 Court of Nevada asserting that BANA violated NRS § 107.200 et seq. (Comp. ¶¶ 13–29, Ex. 1- 22 A to Pet. Removal). That same day, SFR additionally filed a Motion for Preliminary 23 Injunction. (See generally SFR’s Prelim. Inj., Ex. 1-B to Pet. Removal, ECF No. 1-2). On 24 October 6, 2022, SFR filed a Notice of Lis Pendens on the Property. (Lis Pendens at 2, Ex. 17 25 to BANA’s Reply, ECF No. 12-17). On November 4, 2022, BANA removed this action to 1 federal court on the basis of diversity jurisdiction. (See generally Pet. Removal, ECF No. 1).On 2 November 8, 2022, SFR filed the present Motion to Remand. (See generally Mot. Remand, 3 ECF No. 9). 4 II. LEGAL STANDARD 5 Federal courts are courts of limited jurisdiction. In re Hunter, 66 F.3d 1002, 1005 (9th 6 Cir. 1995). A federal court therefore has a sua sponte obligation to ensure that it has subject 7 matter jurisdiction. Kwai Fun Wong v. Beebe, 732 F.3d 1030, 1036 (9th Cir. 2013) (citations 8 omitted); see also Gonzalez v. Thaler, 565 U.S. 134, 141 (2012) (“When a requirement goes to 9 subject-matter jurisdiction, courts are obligated to consider sua sponte issues that the parties 10 have disclaimed or have not presented.”). Indeed, “subject matter jurisdiction can never be 11 waived or forfeited.” Gonzalez, 565 U.S. at 134. 12 The federal removal statute provides that a defendant may remove an action to federal 13 court based on federal question or diversity jurisdiction. 28 U.S.C. § 1441. “The ‘strong 14 presumption against removal jurisdiction means that the defendant has the burden of 15 establishing that removal is proper,’ and the court resolves all ambiguity in favor of remand to 16 state court.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (quoting Gaus 17 v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)). “If at any time before final 18 judgment it appears that the district court lacks subject matter jurisdiction, the case shall be 19 remanded.” 28 U.S.C. § 1447(c). 20 To remove a state law civil action to federal court on the basis of diversity jurisdiction, a 21 removing defendant must show that the parties are completely diverse and that the matter in 22 controversy exceeds the sum or value of $75,000. 28 U.S.C. § 1332(a). Complete diversity of 23 citizenship under 28 U.S.C. § 1332 requires that each plaintiff must be a citizen of a different 24 state than each defendant. Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 25 2001). Additionally, 28 U.S.C. § 1446 requires a removing defendant asserting diversity 1 jurisdiction to file the notice of removal within 30 days of receipt by the defendant of the initial 2 pleading or, if the case stated by the initial pleading is not removable, within 30 days after 3 receipt by the defendant “of a copy of an amended pleading, motion, order or other paper from 4 which it may first be ascertained that the case is one which is or has become removable.” Id. 5 III. DISCUSSION 6 As an initial matter, SFR contends that BANA has not met its burden of proving that 7 subject matter jurisdiction exists because it fails to show that the object of the litigation exceeds 8 $75,000. (SFR’s Resp. to Mot. Expunge Lis Pendens 4:11–17, ECF No. 8); (Mot. Remand 9 4:11–17, ECF No. 9). In rebuttal, BANA argues that the object of the litigation, which it avers 10 is the Property, exceeds the jurisdictional amount because the Property is valued at $446,400 11 and SFR’s loan balance is $515,411.10. (BANA’s Reply 5:17–6:6, ECF No. 12); (BANA’s 12 Resp. to Mot. Remand 5:17–6:6, ECF No. 13). 13 “Where it is not facially evidence from the complaint that more than $75,000 is in 14 controversy, the removing party must prove, by a preponderance of the evidence, that the 15 amount in controversy meets the jurisdictional threshold . . . . Conclusory allegations as to the 16 amount in controversy are insufficient.” Matheson v. Progressive Specialty Ins. Co., 319 F.3d 17 1089, 1090 (9th Cir. 2003). A removing party must provide specific, factual allegations 18 showing how the case in controversy exceeds $75,000. See id. Further, the Court may consider 19 “facts presented in the removal petition as well as any ‘summary-judgment-type evidence 20 relevant to the amount in controversy at the time of removal.’” Id. The removing party may not 21 rely on speculation to demonstrate that the amount in controversy is met. Roberts v. Walmart 22 Inc., No. 2:19-cv-00509, 2019 WL 4696400, at *2 (D. Nev. Sept. 26, 2019). 23 /// 24 /// 25 /// 1 A. Object of the Litigation 2 As stated, BANA argues that the object of the litigation, which it advances is the 3 Property, exceeds the amount in controversy requirement because the Property is valued at 4 $446,400 and SFR’s loan balance is $515,411.10. (BANA’s Reply 5:17–6:6). In rebuttal, SFR 5 contends the object of the litigation is not the Property, but rather, the alleged willful violation 6 of NRS 107.200 and NRS 107.210 and its statutory damages. (Mot. Remand 2:11-13 and 5:23). 7 In Corral v. Select Portfolio Servicing, Inc., the Ninth Circuit explained that “[i]n 8 actions seeking declaratory or injunctive relief, it is well established that the amount in 9 controversy is measured by the value of the object of the litigation.” 878 F.3d 770, 775 (9th Cir. 10 2017) (quoting Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002)). The Corral court 11 further articulated that where the plaintiff seeks to “permanently enjoin foreclosure, the object 12 of the litigation is the ownership of the property,” thus, “the value of the property or the amount 13 of indebtedness on the property is the proper measure of the amount in controversy.” Id. at 776. 14 However, in cases where the plaintiff seeks a temporary injunction pending review of a loan 15 modification application, “the amount in controversy does not equal the value of the property or 16 the amount of indebtedness.” Id. at 776. This is because, even if the plaintiff succeeds in his or 17 her lawsuit, they would not be able to retain possession and ownership of the subject property 18 without paying off their debt. Id. 19 In the present suit, ownership of the property is not being contested; the temporality of 20 the injunction sought is. (See BANA’s Reply 6:14–15) (“This case is not centered on title to 21 real estate like the prior suit was.”). BANA correctly notes that included in SFR’s Complaint is 22 a request for “a preliminary and permanent injunction that BANA, and its successors, assigns 23 and agents, are prohibited from continuing foreclosure proceedings, including scheduling or re- 24 scheduling a sale, and from selling or transferring the Property.” (Compl. 6:5–8, Ex. 1-A to Pet. 25 /// 1 Removal). Despite this language, SFR now asserts it “does not seek permanent injunctive 2 relief, only temporary until such time as SFR has received the statutorily required information 3 so it can determine if it is financially sound to discharge the debt.” (SFR’s Resp. to Mot. 4 Expunge Lis Pendens 5:19–22). 5 The Court finds that SFR’s use of the phrase “permanent injunction” is misleading. See 6 Greene v. Wells Fargo Bank, N.A., No. 18-cv-06689, 2019 WL 1331027, at *4 (N.D. Cal. Mar. 7 25, 2019) (finding that the plaintiff’s use of the phrase “permanent injunction” was similarly 8 misleading where if the plaintiff prevailed, “he would still be liable for the debt owed on the 9 [s]ubject [p]roperty” and therefore could not “obtain injunctive relief permanently enjoining 10 foreclosure on the property”); Adam v. Wells Fargo Bank, N.A., No. 8:16-cv-1630, at *3 (C.D. 11 Cal. Feb. 5, 2018) (concluding that the plaintiff did not seek a permanent injunction” despite 12 the plaintiff’s prayer for relief stating they sought a “permanent injunction”). Even if SFR 13 prevails on its claims, it would still be liable for the debt owed on the Property. See Corral, 878 14 F.3d at 776 (distinguishing cases “in which plaintiff seeks to enjoin foreclosure indefinitely as 15 part of an effort to quite title to the property or rescind their loan agreements,” and noting that 16 “even if Appellants were to succeed on this lawsuit, they would not be able to retain possession 17 and ownership of their property without paying off the debt”). SFR appears to instead seek 18 temporary injunctive relief pending the completion of its requests under NRS §§ 107.200 and 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 1 210.1 Accordingly, pursuant to Corral, the amount in controversy does not equal the value of 2 the property or the amount of indebtedness.2 3 B. Attorney’s Fees 4 BANA alternatively contends that the amount in controversy requirement is met because 5 SFR seeks more than $75,000 in actual damages under NRS § 107.200, including attorney’s 6 fees. (BANA’s Reply 12:5–22). 7 “Where an underlying statute authorizes an award of attorneys’ fees, either with 8 mandatory or discretionary language, such fees may be included in the amount in controversy.” 9 Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1156 (9th Cir. 1998). This Court considers 10 attorneys’ fees to be within the amount in controversy if the removing part: “(1) identifies ‘an 11 applicable statute which could authorize an award of attorneys’ fees and (2) provide[s] an 12 estimate as to the time the case will require and opposing counsel’s hourly billing rate.” Cayer 13 v. Vons Companies, No. 2:16-cv-02387, 2017 WL 3115294, at *2 (D. Nev. July 21, 2017) 14 15

16 1 The same reasoning holds true for SFR’s lis pendens on the Property. Title to the property has already been 17 determined in BANA’s favor, so the amount in controversy cannot be tied to the market value of the property. (BANA’s Reply 6:14–15). Here, the only issue is whether to discharge the lis pendens. Regardless of the 18 outcome, no damages will be assessed, and no property will change hands, because the only legal effect of filing a notice of lis pendens is to provide “constructive notice to the world that a dispute involving real property is 19 ongoing.” Weddell v. H20, Inc., 271 P.3d 743, 751 (Nev. 2012). Therefore, SFR’s lis pendens is not measured by the value of the Property or the amount of SFR’s indebtedness. 20 2 BANA’s alternative arguments that the taxable value of the property or the amount of the original loan should 21 be used to assess the amount in controversy requirement are equally unavailing. (Reply 6:1–5). Prior decisions which used the taxable value of the property to assess the amount in controversy requirement involved suits in 22 which ownership of a property was the object of the litigation. See Sarro v. Nevada State Bank, No. 2:16-cv- 01756, 2016 WL 6909105 (D. Nev. Nov. 23, 2016); Gustafson v. Bank of America, N.A., No. 16-cv-1733, 2016 23 WL 7438326 (S.D. Cal. Dec. 27, 2016). The Court declines to apply the taxable value of the property in assessing the amount of controversy requirement based on its previous finding that the object of the instant suit is 24 not the Property. Moreover, “[n]umerous other courts have found that when a plaintiff does not seek to rescind the loan at issue, but instead seeks damages in an unspecified amount . . . the amount in controversy is not 25 properly gauged by the loan amount.” Vonderscher v. Green Tree Servicing, LLC, No. 2:13-cv-00490, 2013 WL 1858431, at *4 (E.D. Cal. May 2, 2013). Because SFR does not seek to rescind its loan, the Court declines to gauge the amount in controversy by the loan amount. 1 (quoting Hannon v. State Farm Mut. Auto. Ins. Co., No. 2:14-cv-1623, 2014 WL 7146659, at 2 *5 (D. Nev. Dec. 12, 2014). 3 Here, BANA has identified that that attorneys’ fees are authorized under NRS § 107.200 4 as “actual damages.” (BANA’s Reply 7:13-16). As an initial matter, BANA incorrectly relies 5 on NRS § 107.200 for its argument. Damages based on violations of NRS §§ 107.200 and 6 107.210 are codified in NRS § 107.300. NRS § 107.300 provides that “[a] beneficiary who 7 willfully fails to deliver a statement requested pursuant to NRS 107.200 or 107.210 within 21 8 days after it is requested is liable to the person who requested the statement in an amount of 9 $300 and any actual damages suffered by the person who requested the statement.” NRS § 10 107.300’s explicit language does not appear to provide for attorneys’ fees. Moreover, BANA 11 has not cited to any cases in which attorneys’ fees were awarded as actual damages pursuant to 12 NRS § 107.300. (See generally BANA’s Reply). As stated, future attorneys’ fees are only 13 included in the amount in controversy requirement if the underlying statute authorizes such an 14 award. See Fristch v. Swift Transportation Company of Arizona, LLC., 899 F.3d 785, 788 (9th 15 Cir. 2018) (“[I]f a plaintiff would be entitled under a contract or statute to future attorneys’ 16 fees, such fees are at stake in the litigation and should be included in the amount in controversy 17 requirement.”). Here, the express language of NRS § 107.300 does not authorize or entitle a 18 plaintiff to an award of attorneys’ fees. Accordingly, the Court declines to assess SFR’s 19 potential future attorneys’ fees in assessing whether the amount in controversy requirement is 20 met. 21 In the absence of attorney’s fees, BANA’s estimation of SFR’s actual damages only 22 amounts to approximately $72,000. (BANA’s Reply 7:5–12). Therefore, BANA has not met its 23 burden of showing, by a preponderance of the evidence, that more than $75,000 is at stake in 24 this Court. Accordingly, the Court cannot exercise diversity jurisdiction over this matter. 25 /// 1 C. SFR’s Request for Fees and Costs 2 SFR additionally requests the Court impose costs and actual expenses, including 3 attorney’s fees, for drafting the instant Motion to Remand. (SFR’s Resp. to Mot. Expunge Lis 4 Pendens 6:9–7:2); (Mot. Remand 6:9–7:2). Costs and attorney’s fees may be awarded against 5 defendants if its decision to remove was objectively unreasonable. “Absent unusual 6 circumstances, a court may award costs and attorney’s fees under § 1447(c) only where the 7 removing party lacked an objectively reasonable basis for seeking removal.” Grancare, LLC v. 8 Thrower by and through Mills, 889 F.3d 543, 552 (9th Cir. 2018) (citing Martin v. Franklin 9 Capital Corp., 546 U.S. 132, 141 (2005). Removal is not objectively unreasonable “solely 10 because the removing party’s arguments lack merit, or else attorney’s fees would always be 11 awarded whenever remand is granted.” Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 12 (9th Cir. 2008). 13 Here, BANA’s argument was unpersuasive, but not objectively unreasonable as to 14 warrant attorney’s fees and costs. See Lussier, 518 F.3d at 1065 (noting that while “[t]here is no 15 question that [the defendant's] arguments were losers[,] . . . removal is not objectively 16 unreasonable solely because the removing party's arguments lack merit, or else attorney's fees 17 would always be awarded whenever remand is granted”); see also Morales v. Gruma Corp., 18 No. 13-7341, 2013 WL 6018040, *6 (C.D. Cal. Nov. 12, 2013) (declining to award attorneys' 19 fees). The Court accordingly denies SFR’s request for attorney’s fees and costs. 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 1 IV. CONCLUSION 2 IT IS HEREBY ORDERED that SFR’s Motion to Remand, (ECF No. 9), is 3 GRANTED. IT IS FURTHER ORDERED that the case be remanded to the Eighth Judicial 4 District Court. The Clerk of the Court shall remand this case back to state court and thereafter 5 close this Court’s case. 6 IT IS FURTHER ORDERED that BANA’s Emergency Motion to Expunge Lis 7 Pendens (ECF No. 5), and SFR’s Motion for Preliminary Injunction, (ECF No. 10), are 8 DENIED as moot. 9 DATED this _1_4__ day of November, 2022. 10 11 ___________________________________ 12 Gloria M. Navarro, District Judge United States District Court 13 14 15 16 17 18 19 20 21 22 23 24 25