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Thunder Properties, Inc. v. Wood

United States District Court, D. Nevada

February 28, 2017

JAMES L. WOOD et al., Defendants.


          ROBERT C. JONES United States District Judge

         This case arises from a residential foreclosure by the Wingfield Springs Community Association (“Wingfield” or “HOA”) for failure to pay HOA assessments. Pending before the Court are a Motion for Summary Judgment (ECF Nos. 78, 85) and a Motion to Remand (ECF No. 90). For the reasons given herein, the Court denies the Motion to Remand and grants the Motion for Summary Judgment.


         On or about August 22, 1997, Defendants James and Cynthia Wood (“the Woods”) acquired title to real property at 7365 Grand Island Drive, Sparks, Nevada 89436 (“the Property”). (Compl. ¶¶ 8, 13, ECF No. 1-1.) Defendant Bank of America holds first and second deeds of trust against the Property recorded in 2003 and 2006, respectively. (Id. at ¶¶ 16-17.) The Property is also subject to Covenants, Conditions, and Restrictions (“CC&Rs”) of Wingfield, which were recorded in 1996. (Id. at ¶¶ 8, 19.) The Woods became delinquent in their dues to the HOA, and as such the HOA caused non-party ATC Assessment Collection Group (“ATC”) to record one or more notices of delinquent association lien and a subsequent notice of default and election to sell and notice of trustee's sale. (Id. at ¶¶ 21-25.) ATC sold the Property at a trustee's sale to Plaintiff Thunder Properties (“Thunder”) on or about August 8, 2013. (Id. at ¶ 27.) However, Bank of America has caused Defendant National Default Servicing Corp. (“NDSC”) to record a notice of breach and election to sell and a notice of trustee's sale as to the Property. (Id. at ¶¶ 48-49.)

         Thunder sued Defendants in state court to quiet title to the Property, among other claims. On January 31, 2014, Defendants removed the action to this Court on the basis of diversity jurisdiction under 28 U.S.C. §§ 1332 and 1441(b). (ECF No. 1.) More than two and a half years later, Thunder now moves to remand the case to state court. (ECF No. 90.) Thunder asserts that, contrary to the petition for removal which alleged Thunder was a citizen of Nevada only, Thunder's principal place of business has been located in California at all times relevant to the question of diversity. Bank of America has also moved for summary judgment on Thunder's quiet title claim. (ECF Nos. 78, 85.)


a. Legal Standards

         For diversity jurisdiction to exist, Thunder's citizenship must be diverse from the citizenship of all named defendants. 28 U.S.C. § 1332(a); see also Rouse v. Wachovia Mortg., FSB, 747 F.3d 707, 709 (9th Cir. 2014) (requiring “complete diversity”). While an individual is considered a citizen of his or her state of domicile, a corporation is a citizen of both its state of incorporation and the state in which it has its principal place of business. See Kantor v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983); Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (citing 28 U.S.C. § 1332(c)(1)). It is now well established that a corporation's principal place of business is its “nerve center, ” i.e. the state in which its officers “direct, control, and coordinate the corporation's activities.” Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010).

         Diversity of citizenship must exist at the time an action is commenced. See Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 570-71 (2004). In addition, in the case of removal jurisdiction, diversity must also exist at the time federal-court jurisdiction is invoked. See Strotek Corp. v. Air Transp. Ass'n. of Am., 300 F.3d 1129, 1130-31 (9th Cir. 2002); Reece v. Bank of N.Y. Mellon, 760 F.3d 771, 777 (8th Cir. 2014). “The burden of persuasion for establishing diversity jurisdiction, of course, remains on the party asserting it. When challenged on allegations of jurisdictional facts, the parties must support their allegations by competent proof.” Id. at 96-97.

         b. Analysis

Here, the parties agree that Thunder is citizen of Nevada, because it is incorporated here. The parties also agree that Defendants James and Cynthia Wood are citizens of California. (Mot. Remand 3, ECF No. 90; Resp. 3, ECF No. 94.) Thunder now asserts that complete diversity does not exist because Thunder is also a citizen of California due to its principal place of business being located there. Thus the dispute centers on where Thunder maintained its principal place of business at the time the action was filed and removed in January 2014. (See Compl., ECF No. 1-1; Pet. Removal, ECF No. 1.) To resolve the dispute, the Court must determine where Thunder's “high-level officers” directed, controlled, and coordinated Thunder's activities in January 2014. See Hertz, 559 U.S. at 80.

         The record before the Court indicates that Thunder has only ever had two high-level officers: Jon Jentz and Charles Schmidt. At the time of incorporation in 2012, Jentz was the sole officer and director. (Jentz Dep. 16:2-8, ECF No. 94-5.) Schmidt came on as President of Thunder at some time prior to August 8, 2013. (Id. at 17:1-8.) It is undisputed that at the time of filing and removal, Jentz was Secretary, Treasurer, Director, and owner of Thunder, and Schmidt was President. (Jentz Decl. ¶¶ 1-5, ECF No. 98-1; Resp. 9, ECF No. 94; September 2013 Annual List of Officers 2, ECF No. 94-1 at 5.)

         Thunder proffers the declaration of Jon Jentz, in which Jentz states that “at all points since the company was formed, [he has] made all decisions related to Thunder's business operations, ” and that “[v]irtually all these decisions have been made . . . from Thunder's corporate headquarters [in California].” (Jentz Decl. ¶¶ 3-4, ECF No. 98-1.) Jentz further states that Schmidt (1) “did not have any active role in the decision making related to Thunder's business”; (2) never “possessed any ownership interest in Thunder”; and (3) served merely as a “man on the ground in Nevada, carrying out more mundane and clerical tasks at [Jentz's] instruction.” (Id. at ¶¶ 5-7.) Jentz's declaration is more or less consistent with his deposition testimony of September 22, 2015. At that time, he testified that he “made most of the business decisions of the corporation, such as hiring a property manager, buying the properties, ” and handling all the accounting. (Jentz Dep. 18:19-23, 20:21-25, ECF No. 94-5.) He further testified that he performed these duties from California. (Id. at 21:4-20.) In contrast, Jentz declares, Schmidt was “somewhat of an advisor, ” and performed routine business tasks like “getting cashier's checks or being on bank accounts.” (Id. at 21:4-10.)

         In response, Bank of America argues, among other things, that (1) Thunder is not registered with the California Secretary of State; (2) Thunder is not and has not been paying franchise tax in California; and (3) the Nevada Secretary of State's records show that Thunder's corporate address is and always has been in Nevada. The fact that Thunder's administrative filings in Nevada (and lack thereof in California) indicate on their face a corporate address in Nevada is not, by itself, dispositive of the principal place of business inquiry. See, e.g., Hertz, 559 U.S. at 97 (rejecting the suggestion that a mere administrative filing, such as SEC Form 10- K, “listing a corporation's ‘principal executive offices' would, without more, be sufficient proof to establish a corporation's ‘nerve center.'”). However, Bank of America has provided more than a bare allegation of the location of Thunder's principal corporate offices. It is undisputed that Charles Schmidt was Thunder's President and was residing in Nevada at the time of filing and removal. At the very least, Schmidt acted as an advisor to Jentz, was a “man on the ground” in Nevada, and handled various important aspects of the business, including tasks related to managing payments and corporate bank accounts. The ...

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