Vongsvirates v. Rushmore Loan Management Services ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 VICHAI VONGSVIRATES, Case No. 1:21-cv-00012-NONE-SAB 12 Plaintiff, SCREENING ORDER GRANTING PLAINTIFF LEAVE TO FILE AMENDED 13 v. COMPLAINT 14 RUSHMORE LOAN MANAGEMENT (ECF No. 1) SERVICES, 15 THIRTY DAY DEADLINE Defendant. 16 17 18 Vichai Vongsvirates (“Plaintiff”) is proceeding in in this action pro se and in forma 19 pauperis. Currently before the Court is Plaintiff’s complaint, filed on January 4, 2021. (ECF 20 No. 1.) 21 I. 22 SCREENING STANDARD 23 Notwithstanding any filing fee, the court shall dismiss a case if at any time the Court 24 determines that the complaint “(i) is frivolous or malicious; (ii) fails to state a claim on which 25 relief may be granted; or (iii) seeks monetary relief against a defendant who is immune from 26 such relief.” 28 U.S.C. § 1915(e)(2); see Lopez v. Smith, 203 F.3d 1122, 1129 (9th Cir. 2000) 27 (section 1915(e) applies to all in forma pauperis complaints, not just those filed by prisoners); Calhoun v. Stahl, 254 F.3d 845 (9th Cir. 2001) (dismissal required of in forma pauperis 1 proceedings which seek monetary relief from immune defendants); Cato v. United States, 70 2 F.3d 1103, 1106 (9th Cir. 1995) (district court has discretion to dismiss in forma pauperis 3 complaint under 28 U.S.C. § 1915(e)); Barren v. Harrington, 152 F.3d 1193 (9th Cir. 1998) 4 (affirming sua sponte dismissal for failure to state a claim). The Court exercises its discretion to 5 screen the plaintiff’s complaint in this action to determine if it “(i) is frivolous or malicious; (ii) 6 fails to state a claim on which relief may be granted; or (iii) seeks monetary relief against a 7 defendant who is immune from such relief.” 28 U.S.C. § 1915(e)(2). 8 In determining whether a complaint fails to state a claim, the Court uses the same 9 pleading standard used under Federal Rule of Civil Procedure 8(a). A complaint must contain “a 10 short and plain statement of the claim showing that the pleader is entitled to relief. . . .” Fed. R. 11 Civ. P. 8(a)(2). Detailed factual allegations are not required, but “[t]hreadbare recitals of the 12 elements of a cause of action, supported by mere conclusory statements, do not suffice.” 13 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 14 544, 555 (2007)). 15 In reviewing the pro se complaint, the Court is to liberally construe the pleadings and 16 accept as true all factual allegations contained in the complaint. Erickson v. Pardus, 551 U.S. 89, 17 94 (2007). 18 II. 19 ALLEGATIONS IN COMPLAINT 20 The Court accepts Plaintiff's allegations in the complaint as true only for the purpose of 21 the sua sponte screening requirement under 28 U.S.C. § 1915. 22 Plaintiff brings this action against Rushmore Loan Management Services on the basis of 23 federal question and diversity jurisdiction. (Compl. 3, 4.1) Plaintiff alleges that he is a citizen of 24 California and that Rushmore Loan Management Services is a corporation under the laws of 25 Texas with its principal place of business in Texas. (Id.) Plaintiff alleges that due to the 26 mortgage disaster around 2011 the note and deed of trust have taken “divergent paths” causing a 27 1 All references to pagination of specific documents pertain to those as indicated on the upper right corners via the 1 cloud on the title to property at 74507 Letzring Lane in Bakersfield, California. (Id. at 4.) 2 Plaintiff has been suffering from prostate and spinal cancer for the past year and has been in and 3 out of surgery, chemotherapy, radiation treatment, and on heavy pain medication. (Id.) Plaintiff 4 contends that there have been improper mortgage company procedures, both servicing through 5 an independent broker and otherwise, and improper noticing of the mortgage note and deed 6 activities. (Id. at 4-5.) He asserts that due to the cloud on the title of the property there is no 7 definitive claim of ownership of the note because of the divergent paths taken by the note and 8 deed of trust. (Id. at 5.) Plaintiff asserts that since there is no valid trustee deed Defendant’s 9 claim to the property is null and void. (Id.) 10 Plaintiff brings this action alleging violations of 42 U.S.C. § 264(e), 42 C.F.R. § 70.2, 5 11 U.S.C. § 553(b)(3)(b) and is seeking criminal penalties under 18 U.S.C §§ 3559, 3571; 42 U.S.C. 12 §§ 243, 268, 271; and 42 C.F.R. § 70.18. (Compl. 3.) He also states that the improper mortgage 13 company procedures denied him of due process and this action is for fraud, negligence, and 14 misrepresentation. (Id. at 5.) Plaintiff is seeking monetary and punitive damages in the amount 15 of $400,000.00. (Id.) 16 Based upon review of the exhibits that are attached to the complaint, the subject property 17 was sold at a trustee sale on November 23, 2020, and the proceeds exceeded the amount of the 18 foreclosure and indebtedness that was owed to the foreclosing beneficiary. (Notice of Surplus 19 Proceeds, ECF No. 1 at 9.) On December 4, 2020, Plaintiff was served with a notice that the 20 property had been purchased at a trust deed foreclosure sale in accordance with section 2924 of 21 the California Civil Code on November 23, 2020 and they had three days if a tenant and ninety 22 days if a former owner to quit and deliver up possession of the property. (Three and Ninety Day 23 Notice to Quit, ECF No. 1 at 14.) 24 III. 25 DISCUSSION 26 Plaintiff’s complaint fails to allege sufficient facts to state a plausible claim in this action. 27 Plaintiff shall be provided with the legal standards that apply to his claims and be granted an 1 A. Federal Question Jurisdiction 2 Federal courts are courts of limited jurisdiction and their power to adjudicate is limited to 3 that granted by Congress. U.S. v. Sumner, 226 F.3d 1005, 1009 (9th Cir. 2000). Pursuant to 28 4 U.S. C. § 1331, federal courts have original jurisdiction over “all civil actions arising under the 5 Constitution, laws, or treaties of the United States. “A case ‘arises under’ federal law either 6 where federal law creates the cause of action or where the vindication of a right under state law 7 necessarily turns on some construction of federal law.” Republican Party of Guam v. Gutierrez, 8 277 F.3d 1086, 1088 (9th Cir. 2002) (internal punctuation omitted) (quoting Franchise Tax Bd. 9 v. Construction Laborers Vacation Trust, 463 U.S. 1, 8–9 (1983) (citations omitted)). “[T]he 10 presence or absence of federal-question jurisdiction is governed by the ‘well-pleaded complaint 11 rule,’ which provides that federal jurisdiction exists only when a federal question is presented on 12 the face of the plaintiff's properly pleaded complaint.” Republican Party of Guam, 277 F.3d at 13 1089 (citations omitted). 14 For the reasons discussed below, Plaintiff’s complaint fails to allege facts to state a claim 15 based on any violation of his constitutional rights or federal law. 16 1. 42 U.S.C. § 264(e) 17 Plaintiff brings this action under 42 U.S.C. § 264 which addresses regulations to control 18 communicable diseases. Specifically, Plaintiff cites to subsection e which states, “Nothing in 19 this section or section 266 of this title, or the regulations promulgated under such sections, may 20 be construed as superseding any provision under State law (including regulations and including 21 provisions established by political subdivisions of States), except to the extent that such a 22 provision conflicts with an exercise of Federal authority under this section or section 266 of this 23 title.” Section 266 authorizes the Secretary to provide regulations and to quarantine persons to 24 protect the military and naval forces and war workers of the United States during times of war. 25 42 U.S.C. § 266. Section 264 does not apply to the claims raised in this action. 26 2. 42 C.F.R. § 70.2 27 Similarly, 42 C.F.R. § 70.2 provides that when the Director of the Centers for Disease 1 to prevent the spread of any communicable disease, he or she may take any measures necessary 2 to prevent the spread of the disease. This section does not apply to the claims raised in this 3 action. 4 3. 5 U.S.C. § 553(b)(3)(B) 5 The next section relied on by Plaintiff is 5 U.S.C. § 553(b)(3)(B) which addresses the 6 general notice of proposed rulemaking which is inapplicable here. 7 4. Criminal Penalties 8 Plaintiff seeks criminal penalties under 18 U.S.C §§ 3559, 3571; 42 U.S.C. §§ 243, 268, 9 271; and 42 C.F.R. § 70.18. “[T]he fact that a federal statute has been violated and some person 10 harmed does not automatically give rise to a private cause of action in favor of that person.” 11 Touche Ross & Co. v. Redington, 442 U.S. 560, 568 (1979) (quoting Cannon v. University of 12 Chicago, 441 U.S. 677, 688 (1979). Rather, the court is to consider Congress intended to create 13 the private right of action in the statute and begins with the language of the statute itself. Touche 14 Ross & Co., 442 U.S. at 568. “Civil causes of action ... do not generally lie under the criminal 15 statutes contained in Title 18 of the United States Code.” Del Elmer; Zachay v. Metzger, 967 F. 16 Supp. 398, 403 (S.D. Cal. 1997). Here, the sections cited under Title 18 address sentencing and 17 fines for criminal offenses and do not set forth a private cause of action or imply that a cause of 18 action exists to allow Plaintiff to seek a remedy in this action. 19 Similarly, the public health statutes cited by Plaintiff do not imply that a private cause of 20 action exists nor are they related to Plaintiff’s claims regarding the title to the subject property. 21 Section 243 addresses the cooperation between state and federal agencies in controlling 22 epidemics of disease and provides for assistance to the states, that the federal government may 23 charge reasonable fees to private entities for training personnel, and may provide assistance to 24 states or localities in meeting health emergencies that warrant federal assistance and 25 reimbursement may be required if the Secretary determines it is reasonable under the 26 circumstances. 42 U.S.C. § 243. 27 Section 268 provides that “[i]t shall be the duty of the customs officers and of Coast 1 compensation, except actual and necessary traveling expenses, shall be allowed any such officer 2 by reason of such services. 42 U.S.C. § 268(b). Section 271 provides for a fine and 3 imprisonment for any person who disregards a quarantine rule or regulation without the 4 permission of the quarantine officer; and for forfeiture of up to $5,000.00 that would become a 5 lien on the vessel for any vessel that does not possess a bill of health or violates any regulations 6 under section 267 or 269 of Title 42, or enters in “or departs from the limits of any quarantine 7 station, ground, or anchorage in disregard of the quarantine rules and regulations or without 8 permission of the officer in charge.” 2 U.S.C. § 271(a)(b). “In all such proceedings the United 9 States attorney shall appear on behalf of the United States; and all such proceedings shall be 10 conducted in accordance with the rules and laws governing cases of seizure of vessels for 11 violation of the revenue laws of the United States.” 42 U.S.C. § 271(b). Finally, 42 C.F.R. § 12 70.18 provides for fines and imprisonment for violations of quarantine regulations. 13 5. Section 1983 14 Plaintiff contends that Defendant has violated his right to due process through improper 15 mortgage company procedures, in servicing through an independent broker/realtor and improper 16 noticing of the mortgage note and deed activities. (Compl. at 5.) Section 1983 provides a cause 17 of action for the violation of a plaintiff’s constitutional or other federal rights by persons acting 18 under color of state law. Nurre v. Whitehead, 580 F.3d 1087, 1092 (9th Cir 2009); Long v. 19 County of Los Angeles, 442 F.3d 1178, 1185 (9th Cir. 2006); Jones v. Williams, 297 F.3d 930, 20 934 (9th Cir. 2002). 21 In this action, Plaintiff names as a defendant the company that was servicing his 22 mortgage. An individual acts under color of state law under section 1983 where he has 23 “exercised power ‘possessed by virtue of state law and made possible only because the 24 wrongdoer is clothed with the authority of state law.’ ” West v. Atkins, 487 U.S. 42, 49 (1988) 25 (quoting United States v. Classic, 313 U.S. 299, 326 (1941)). This does not require that the 26 defendant be an employee of the state, but he must be “a willful participant in joint action with 27 the State or its agents. Private persons, jointly engaged with state officials in the challenged 1 449 U.S. 24, 27–28 (1980). Here, there are no facts alleged by which the Court could infer that 2 Defendant was acting under color of law in servicing the mortgage on the subject property nor 3 that state action was involved in the transfer of the deed of trust or mortgage note. 4 Further, to the extent that Plaintiff seeks to allege a due process violation based upon the 5 nonjudicial foreclosure on his property, “[t]he Ninth Circuit Court of Appeals has held that a 6 private entity’s use of a state’s non-judicial foreclosure procedures does not constitute state 7 action sufficient to support a claim of a violation of Fourteenth Amendment due process rights 8 under Section 1983.” Kuder v. Haas, No. 2:10-CV-00404, 2010 WL 4983455, at *5 (E.D. Cal. 9 Dec. 2, 2010), report and recommendation adopted, No. 2:10-CV-00404-MCE, 2011 WL 10 346442 (E.D. Cal. Feb. 1, 2011). 11 Plaintiff has failed to allege any claims that would provide federal question jurisdiction in 12 this action. 13 B. Jurisdiction Based on Diversity of Citizenship 14 Plaintiff also alleges that diversity jurisdiction exists. District courts also have original 15 jurisdiction of all civil actions between citizens of different States in which “the matter in 16 controversy exceeds the sum or value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 17 1332(a). This requires complete diversity of citizenship and the presence “of a single plaintiff 18 from the same State as a single defendant deprives the district court of original diversity 19 jurisdiction over the entire action.” Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 20 679 (9th Cir. 2006) (citations omitted). 21 Here, Plaintiff alleges that he is citizen of California and that Defendant is a corporation 22 organized in and with its principle place of business in Texas. Courts may take judicial notice of 23 “a fact that is not subject to reasonable dispute because it . . . can be accurately and readily 24 determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 25 201(b). The Court takes judicial notice of the records of the State of Texas. Daniels –Hall v. 26 National Educ. Ass’n, 629 F.3d 992, 998-99 (9th Cir. 2010). The records of the Comptroller’s 27 Office for the State of Texas show that Rushmore Loan Management Services is a limited 1 Management Services LLC, available at https://mycpa.cpa.state.tx.us/coa, search Rushmore 2 Loan Management Services, last visited January 7, 2021. A limited liability company is a citizen 3 of every state of which its owners or members are citizens. Johnson v. Columbia Properties 4 Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). Plaintiff has not alleged the citizenship of the 5 owners or members of Rushmore Loan Management Company and therefore diversity of 6 citizenship has not been shown to exist. 7 Since Plaintiff is being provided with leave to file an amended complaint, the Court will 8 provide the standards that apply to his state law claims in case he is able to correct the 9 jurisdictional deficiencies identified. 10 1. Fraud 11 While Rule 8 applies to the other claims in this action, allegations of fraud of subject to 12 the pleading requirement of Rule 9 of the Federal Rules of Civil Procedure. Rule 9 provides that 13 “[i]n alleging fraud or mistake, a party must state with particularity the circumstances 14 constituting fraud or mistake.” Fed. R. Civ. P. 9(b). This requires a plaintiff to plead with “more 15 specificity including an account of the time, place, and specific content of the false 16 representations as well as the identities of the parties to the misrepresentations.” Swartz v. 17 KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal punctuation and citations omitted). 18 Plaintiff’s conclusory allegation of fraud is insufficient to plead fraud with particularity as 19 required under Rule 9. 20 To allege fraud with particularity, a plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is 21 false or misleading about a statement, and why it is false. In other words, the plaintiff must set forth an explanation as to why the statement or omission 22 complained of was false or misleading. A plaintiff might do less and still identify the statement complained of; indeed, the plaintiff might do less and still set forth 23 some of the circumstances of the fraud. But the plaintiff cannot do anything less and still comply with Rule 9(b)’s mandate to set forth with particularity those 24 circumstances which constitute the fraud. 25 In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994). 26 The elements of a fraud claim under California law are “(a) misrepresentation (false 27 representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent 1 Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009); Lazar v. Superior Court, 12 Cal. 4th 631, 2 638 (1996). 3 2. Misrepresentation 4 Plaintiff also makes conclusory allegations of misrepresentation which are insufficient to 5 state a cognizable claim. “The elements of a cause of action for intentional misrepresentation are 6 (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another’s 7 reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage.” 8 Zetz v. Bos. Sci. Corp., 398 F. Supp.3d700, 712 (E.D. Cal. 2019) (quoting Daniels v. Select 9 Portfolio Servicing, Inc., 246 Cal.App.4th 1150, 1166 (2016). The elements of negligent 10 misrepresentation are: “(1) a misrepresentation of a past or existing material fact, (2) without 11 reasonable grounds for believing it to be true, (3) with intent to induce another’s reliance on the 12 fact misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to 13 whom the misrepresentation was directed, and (5) damages.” Zetz, 298 F.Supp.3d at 713 14 (quoting Fox v. Pollack, 181 Cal.App.3d 954, 962 (1986)). 15 Further, Plaintiff is advised that a claim that a defendant engaged in a unified course of 16 fraudulent conduct is grounded in fraud and the complaint as a whole must satisfy the 17 particularity pleading requirement of Rule 9(b). Kearns, 567 F.3d at 1125; Vess v. Ciba-Geigy 18 Corp. USA, 317 F.3d 1097, 1104 (9th Cir. 2003). Therefore, a fraudulent misrepresentation 19 claim will also be subject to pleading requirement of Rule 9. See Zetz, 298 F.Supp.3d at 713. 20 3. Negligence 21 Plaintiff makes a conclusory allegation of negligence that is insufficient to state a 22 plausible claim. Under California law “[t]he elements of a negligence cause of action are: (1) a 23 legal duty to use due care; (2) a breach of that duty; (3) the breach was the proximate or legal 24 cause of the resulting injury; and (4) actual loss or damage resulting from the breach of the duty 25 of care.” Brown v. Ransweiler, 171 Cal.App.4th 516, 534 (2009); accord Mendoza v. City of 26 Los Angeles, 66 Cal.App.4th 1333, 1339 (1998). 27 C. Leave to Amend 1 Federal Rules of Civil Procedure, leave to amend shall be freely given when justice so requires. 2 Fed. R. Civ. P. 15(a)(2). Plaintiff shall be granted leave to file an amended complaint to correct 3 the deficiencies identified in this order. 4 Plaintiff is advised that under Twombly and Iqbal “a complaint must contain sufficient 5 factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 6 U.S. at 678. This requires factual content for the court to draw the reasonable inference that the 7 defendant is liable for the alleged misconduct. Id. A complaint stops short of the line between 8 probability and the possibility of relief where the facts pled are merely consistent with a 9 defendant’s liability. Id. Further, while the court is to accept all “well pleaded factual 10 allegations” in the complaint as true, id. at 679, it is not bound to accept as true labels, 11 conclusions, formulaic recitations of the elements of a cause of action or legal conclusions 12 couched as factual allegations, Twombly, 550 U.S. at 555. Finally, the conclusory allegations in 13 the complaint are not entitled to the presumption of truth. Iqbal, 556 U.S. at 681. 14 IV. 15 CONCLUSION AND ORDER 16 For the reasons discussed, Plaintiff has failed to state a cognizable claim for a violation of 17 his federal rights. Plaintiff shall be granted leave to file an amended complaint to cure the 18 deficiencies identified in this order. See Lopez, 203 F.3d at 1127. 19 Plaintiff’s amended complaint should be brief, Fed. R. Civ. P. 8(a), but it must state what 20 each named defendant did that led to the deprivation of Plaintiff’s constitutional rights, Iqbal, 21 556 U.S. at 678-79. Although accepted as true, the “[f]actual allegations must be [sufficient] to 22 raise a right to relief above the speculative level . . . .” Twombly, 550 U.S. at 555 (citations 23 omitted). Further, Plaintiff may not change the nature of this suit by adding new, unrelated 24 claims in his amended complaint. George v. Smith, 507 F.3d 605, 607 (7th Cir. 2007) (no 25 “buckshot” complaints). 26 Finally, Plaintiff is advised that an amended complaint supersedes the original complaint. 27 Lacey v. Maricopa Cnty., 693 F.3d 896, 927 (9th Cir. 2012). Therefore, Plaintiff’s amended 1 | Local Rule 220. 2 Based on the foregoing, it is HEREBY ORDERED that: 3 1. Within thirty (30) days from the date of service of this order, Plaintiff shall file 4 an amended complaint; and 5 2. If Plaintiff fails to file an amended complaint in compliance with this order, the 6 Court will recommend to the district judge that this action be dismissed consistent 7 with the reasons stated in this order. 8 9 IT IS SO ORDERED. OF a Se 19 | Dated: _January 8, 2021 _ Of 4 UNITED STATES MAGISTRATE JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28