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Ibarra v. Kennedy Funding, Inc.

United States District Court, D. Arizona

May 12, 2014

Alberto Sanchez Ibarra and Martha Gayou Matiella, husband and wife; Alberto Martin Sanchez Gayou and Kristy Anne Shannon, husband and wife; and Luis Carlos Sanchez Gayou and Margot Padres Elias, husband and wife, Plaintiffs,
v.
Kennedy Funding, Inc., a foreign corporation; Fuentes, Gomez & Associates, LLC, an Arizona limited liability company; Ramon Alberto Fuentes and Lilia Lizeth Corrales, husband and wife; Efrain Corrales and Cecilia Corrales; husband and wife; and Jose Martin Fuentes and Jane Doe Fuentes, husband and wife, Defendants. Kennedy Funding, Inc., a foreign corporation, Counterclaimant,
v.
Alberto Sanchez Ibarra and Martha Gayou Matiella, husband and wife; et al. Counterdefendants.

REPORT AND RECOMMENDATION

LESLIE A. BOWMAN, Magistrate Judge.

Pending before the court is an amended motion to remand, filed by the plaintiffs on January 22, 2014. (Doc. 13)

This action arises out of a loan in the amount of $3.46 million made by the defendant, Kennedy Funding, Inc. (Kennedy), to the defendant, Fuentes, Gomez & Associates, LLC (FG&A). The loan was secured by a mortgage granted by the plaintiffs on certain property in Mexico. FG&A subsequently defaulted on the loan, and so far, Kennedy has been unable to foreclose on the Mexican property. On May 28, 2012, Kennedy sent the plaintiffs a letter accompanied by four documents dated June 15, 2004 - a Loan and Security Agreement, a Promissory Note, a Guaranty, and an Assignment of Licenses. Kennedy asserts that, pursuant to these documents, the plaintiffs are personally liable for FG&A's debt. The plaintiffs maintain these documents are forgeries, and they are not indebted to Kennedy for any amount.

In the pending motion, the plaintiffs move that the action be remanded to state court because, contrary to the notice of removal, this court lacks diversity jurisdiction. Specifically, the plaintiffs argue the individual defendants are not diverse from the plaintiffs, Kennedy's assertion of fraudulent joinder notwithstanding. See 28 U.S.C. § 1332(a)(1).

The case has been referred to Magistrate Judge Bowman for report and recommendation pursuant to the Local Rules of Practice. LRCiv 72.1. The court finds the motion suitable for decision without oral argument.

The motion should be granted. There is no fraudulent joinder, and this court does not have diversity jurisdiction.

Background

This action was originally filed in Santa Cruz County Superior Court on October 29, 2013. (Doc. 1-4, p. 2) The complaint contains five counts but only three of them are relevant to the pending motion. In Count 1, the plaintiffs seek a declaratory judgment stating that the documents that purport to hold them personally liable are forgeries that are "null, void, and of no effect against the [plaintiffs]." (Doc. 1-4, p. 8) In Count 3, the plaintiffs assert a claim for civil conspiracy against the individual defendants, Ramon Alberto Fuentes, Efrain Corrales, and Jose Martin Fuentes, who the plaintiffs believe procured the forged documents. (Doc. 1-4, p. 9) In Count 4, the plaintiffs claim the individual defendants have engaged in a pattern of unlawful activities. (Doc. 1-4, p. 9)

The complaint gives the following information concerning the citizenship of the various parties: The plaintiffs, Luis Carlos Sanchez Gayou, Margot Padres Elias, Alberto Sanchez Gayou, and Kristy Anne Shannon, "are citizens of and reside in Santa Cruz County, Arizona." (Doc. 1-4, p. 3) The plaintiffs, Alberto Sanchez Iberra and Martha Gayou Matiella, "reside in Pima County, Arizona." Id.

The individual defendants, Ramon Alberto Fuentes, Efrain Corrales, and Jose Martin Fuentes, "claimed to reside in and to be a citizen of Santa Cruz County, Arizona, but whose current place of residence and citizenship are unknown." Id. The defendant, Fuentes, Gomez & Associates, LLC (FG&A), was incorporated in Arizona and has its principal place of business here. Id. Kennedy Funding (Kennedy) is New Jersey corporation. Id. The complaint does not state Kennedy's principal place of business. See 28 U.S.C.A. § 1332 ("[A] corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business....").

The defendant, Kennedy, was served on November 21, 2013. (Doc. 7, p. 2) On December 19, 2013, Kennedy filed a notice of removal in this court pursuant to 28 U.S.C. § 1446 alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332. (Doc. 1, p. 1) Kennedy asserts that "all legitimately named Defendants to this action are diverse in citizenship from all Plaintiffs" and "[a]ny named Defendants that may be citizens of Arizona were fraudulently joined and must be disregarded for diversity jurisdiction purposes." (Doc. 1, p. 2)

Shortly afterwards, the plaintiffs filed an application for entry of default against Kennedy, which was granted by the Clerk. (Docs. 4, 5) Kennedy filed a motion to vacate entry of default on January 3, 2014. (Doc. 7)

On January 21, 2014, the plaintiffs filed a motion to remand. The next day, they filed the pending amended motion to remand. (Doc. 13) The District Court vacated the entry of default against Kennedy on February 26, 2014. (Doc. 26)

In the pending motion, the plaintiffs argue this court lacks subject matter jurisdiction because all defendants are not diverse from all plaintiffs, Kennedy's assertion of fraudulent joinder notwithstanding. (Doc. 13)

As a preliminary matter, Kennedy argues the plaintiffs waived their right to object to procedural defects in the removal notice when they filed their motion for entry of default against Kennedy. The plaintiffs, however, argue the action must be remanded because this court does not have diversity jurisdiction. This is not a procedural defect. It is a failure to assert subject matter jurisdiction, an issue that cannot be waived. ...


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