United States District Court, D. Hawaii
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH
LEAVE TO AMEND
DERRICK K. WATSON UNITED STATES DISTRICT
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.
State Court Foreclosure Action
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. 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.
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.
Plaintiffs' Federal Court Action
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.
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.”
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.
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.
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.
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).
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.
Colorado River Abstention Is Not Warranted Under The
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). “Such
circumstances are, however, ...