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Burke v. Countrywide Mortgage Ventures, LLC

United States District Court, D. Hawaii

August 7, 2017





         In an effort to rescind a mortgage that is currently the subject of a pending state court foreclosure action, Plaintiffs Thomas Michael Burke and Elizabeth Braxton Burke, proceeding pro se, bring claims in federal court against Countrywide Mortgage Ventures, LLC dba Western Paradise Financial (“Countrywide”) under the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”). Countrywide seeks dismissal of the Burkes' federal claims under abstention principles or, alternatively, for failure to state a claim. Because the claims for violation of 15 U.S.C. §§ 1635(b) and 1641(g) are time-barred and otherwise fail to state a claim, the Court GRANTS Countrywide's Motion to Dismiss. The Court grants the Burkes limited leave to amend as detailed below.


         I. State Court Foreclosure Action

         The Burkes' federal claims against Countrywide relate to the same Mortgage on their real property, located at 2073 Kahaapo Loop, Kihei, Hawaii 96753 (“Property”), that is at issue in a pending state foreclosure proceeding filed on October 20, 2014 in the Circuit Court of the Second Circuit, State of Hawaii. Def.'s Ex. 2 (Certified Copy of Compl.); Dkt. No 10-2.[1] In Christiana Trust, a Division of Wilmington Savings Fund Society, FSB, not in Its Individual Capacity but as Trustee of ARLP Trust 3 v. T. Michael Burke, et al., Civil No. 14-1-0603(1) (“state foreclosure action”), the foreclosing mortgagee seeks to enforce its interest in the $800, 000 Mortgage on the Property, and Promissory Note secured by the Mortgage, both executed on December 11, 2007. See Def.'s Ex. 2 ¶¶ 10-13; see also Verified Complaint, Ex. B (12/11/07 Mortgage), Dkt. No 1-2; Ex. C (12/11/07 Note), Dkt. No. 1-3.

         The foreclosing mortgagee, Christiana Trust, asserts that it is the holder of the Note and assignee of the Mortgage by way of assignments from Countrywide to non-party Bank of America, N.A. on February 10, 2012, and then from Bank of America to Christiana Trust on February 7, 2014. See Def.'s Ex. 2 ¶¶ 6-9. Christiana Trust alleges that the Burkes received a notice of default and intent to accelerate and foreclose the Mortgage in 2012, but despite the notice, the Burkes neglected to cure the default. See Def.'s Ex. 2 ¶ 11. The Burkes challenge Christiana Trust's standing to foreclose on the Property, based in part on their Notice of Rescission/Right to Cancel, recorded at the State of Hawaii Bureau of Conveyances on March 18, 2016. Verified Complaint, Ex. A (Notice of Rescission), Dkt. No. 1-1.

         II. Plaintiffs' Federal Court Action

         On May 17, 2017, the Burkes initiated this federal civil action against Countrywide and any “Un-Noticed New Creditor” defendants purporting to be “successors and/or assigns.” The Verified Complaint alleges that defendants failed to comply with 15 U.S.C. §§ 1635(b) and 1641(g) and seeks “statutory damages, civil liability, attorneys' fees and actual damages [and] a judicial declaration that Plaintiffs are not liable for any finance or other charge relating to the cancelled transaction identified herein, ” and also requests an “Order Setting Aside any and every Mortgage or any and every other instrument that is or may be purported to secure the said cancelled transaction, under [Section] 1635(b), requiring Defendant to return to Plaintiff[s] the[ir] original Note.” Verified Complaint at 3.

         According to the Burkes, their Notice of Rescission, mailed on November 13, 2015, delivered on November 16, 2015, and publicly recorded in March 2016, “canceled the Transaction identified as ‘Loan No 182078358 . . . under authority of [Section] 1635(b).” Verified Complaint at 5. Plaintiffs assert that the “only conclusive evidence of the Defendant's compliance with 15 U.S.C. § 1635(b)'s mandate would be Defendant[']s return (to Plaintiff[s]) of Plaintiff(s)' original Note.” Id. The Defendant has failed to return (to Plaintiff[s]) . . . Plaintiff(s)' original Note.” Id.

         The Burkes allege four causes of action, each directed at rescinding, voiding, or canceling their loan on the Property: (1) failure to comply with the requirements of 15 U.S.C. § 1635(b) by returning Plaintiffs' original Note (Count I); (2) violation of 15 U.S.C. § 1641(g) that seeks to remove any cloud on the Property's title (Count II); (3) request to void or cancel the mortgage under 15 U.S.C. § 1635(b) (Count III); and (4) an action to quiet title pursuant to 15 U.S.C. §§ 1635(b) and 1641(g) (Count IV). Among other relief, the Verified Complaint asks that the Court “set[] aside any and every Mortgage or . . . instrument that is or may be purported to ‘secure' the said cancelled transaction, ” and that, any “Un-Noticed, ” “New Creditor” be enjoined from taking any action “based upon any security interest that Defendant failed to ‘take any action necessary or appropriate to reflect the termination of . . .', as mandated by law in [Section] 1635(b).” Verified Complaint at 11.

         Countrywide moves for dismissal of the Verified Complaint because it fails to state a claim for relief or, alternatively, under the Colorado River abstention doctrine due to the parallel foreclosure proceeding.


         Federal Rule of Civil Procedure 12(b)(6) authorizes the Court to dismiss a complaint that fails “to state a claim upon which relief can be granted.” Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The Court may dismiss a complaint either because it lacks a cognizable legal theory or because it lacks sufficient factual allegations to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1988). Pursuant to Ashcroft v. Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” 555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. Accordingly, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555). Rather, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Factual allegations that only permit the court to infer “the mere possibility of misconduct” do not constitute a short and plain statement of the claim showing that the pleader is entitled to relief as required by Rule 8(a)(2). Id. at 679.

         Because Plaintiffs are proceeding pro se, the Court liberally construes their filings. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987) (“The Supreme Court has instructed the federal courts to liberally construe the ‘inartful pleading' of pro se litigants.”) (citing Boag v. MacDougall, 454 U.S. 364, 365 (1982) (per curiam)). The Court recognizes that “[u]nless it is absolutely clear that no amendment can cure the defect . . . a pro se litigant is entitled to notice of the complaint's deficiencies and an opportunity to amend prior to dismissal of the action.” Lucas v. Dep't of Corr., 66 F.3d 245, 248 (9th Cir. 1995); see also Crowley v. Bannister, 734 F.3d 967, 977-78 (9th Cir. 2013).


         Countrywide asks the Court to either abstain from exercising jurisdiction over the Burkes' claims or to dismiss all Counts for failure to state a claim upon which relief may be granted under TILA. The Court, exercising its discretion, declines Countrywide's request to dismiss or stay this matter under Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 818 (1976), based on the pending state foreclosure action. However, because the Verified Complaint fails to timely allege any claim upon which relief can be granted, all time-barred claims are DISMISSED with prejudice. The Burkes are granted limited leave to amend, with instructions below.

         I. Colorado River Abstention Is Not Warranted Under The Circumstances

         “In Colorado River, the Supreme Court was concerned with the problem posed by the contemporaneous exercise of concurrent jurisdiction by state and federal courts.” Smith v. Central Ariz. Water Conservation Dist., 418 F.3d 1028, 1032-33 (9th Cir. 2005) (citation omitted). “In such cases, the Court recognized there may be circumstances in which traditional abstention principles do not apply, yet considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation, nonetheless justify a decision to stay or dismiss federal proceedings pending resolution of concurrent state court proceedings.” Smith, 418 F.3d at 1033 (internal quotation marks and citations omitted). ‚ÄúSuch circumstances are, however, ...

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