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Siruno v. Deutsche Bank National Trust Co.

United States District Court, D. Hawaii

May 4, 2018

FRELYN CESAR SANTELLA SIRUNO; and AGNES SONIDO SIRUNO, Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY; WELLS FARGO BANK, N.A.; ASC AMERICA'S SERVICING COMPANY; SPECIALIZED LOAN SERVICING, and LLC, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR JUDGMENT ON THE PLEADINGS AND SUBSTANTIVE JOINDER THEREIN

          Susan Oki Mollway, United States District Judge

         I. INTRODUCTION.

         This case involves a state-court foreclosure of property arising out of a default by Plaintiffs Frelyn Cesar Santella Siruno and Agnes Sonido Siruno on their home mortgage loan obligations. Rather than appeal to the state appellate courts the state-court judgment as to the default and as to the lenders' right to foreclose on the mortgage securing the loan, to sell the mortgaged property at public auction, and to use the proceeds to pay the debt, the Sirunos filed this action. Their Verified Complaint asserts claims of wrongful foreclosure sale (Count I); fraud (Counts II and IV); unfair or deceptive acts or practices (Count III); breach of duty to act in good faith (Count V); unjust enrichment (Count VI); mistake (Count VII); violation of Hawaii Bureau of Conveyance regulations (Count VIII); improper securitization (Count IX); wrongful conversion of note (Count X); breach of contract (Count XI); and quiet title (Count XII). See Verified Complaint, ECF No. 1.

         The Sirunos' lenders, Defendants in this case, have moved for judgment on the pleadings. The Sirunos did not file any opposition to the motion. Pursuant to Local Rule 7.2(d), the court decides this motion without a hearing, granting it in large part and denying it only with respect to the unjust enrichment claim asserted in Count VI.

         II. BACKGROUND.

         In February 2006, the Sirunos purchased real property located in Ewa Beach, Oahu, Hawaii (the “Property”). To purchase the Property, the Sirunos obtained a $384, 000 loan from New Century Mortgage Corporation. The loan was secured by a mortgage recorded in the State of Hawaii Office of Assistant Register (“Land Court”) on February 16, 2016, as Document No. 3392888 and was noted on Certificate of Title 612, 121. See ECF No. 1-17 (copy of recorded mortgage).[1]

         It appears that Defendant Wells Fargo Bank, N.A., was New Century Mortgage's attorney-in-fact. See ECF No. 1-18, PageID # 345 (showing Wells Fargo signing as New Century Mortgage's attorney-in-fact). In May 2009, Wells Fargo Bank, though its alleged subsidiary Wells Fargo Home Mortgage dba Defendant America's Servicing Company, gave the Sirunos a $200 loan modification, which the Sirunos allege was not sufficient. ECF No. 1, PageID #s 13, 20.

         On November 8, 2013, New Century Mortgage Corporation (by Wells Fargo Bank, N.A., its attorney-in-fact) assigned the mortgage to Defendant Deutsche Bank National Trust Company, as Trustee for Morgan Stanley ABS Capital I Inc. Trust 2006-HE4. This assignment was not recorded in the Land Court until almost a year later, on October 9, 2014, when it was filed as Document No. T-9047242 and noted on Certificate of Title 612, 121. See ECF No. 1-18.

         On November 7, 2014, Deutsche Bank filed a state-court action to foreclose on the Sirunos' mortgage. See Civil. No. 14-1-2325-11(BIA); state-court docket sheet, available at hoohiki.courts.hawaii.gov (enter case ID 1CC141002325). Deutsche Bank then filed a motion for summary judgment, seeking foreclosure of the mortgage and an interlocutory decree of foreclosure. On June 14, 2016, that motion was granted. See ECF No. 26-7 (Findings of Fact and Conclusions of Law; Order Granting Plaintiff's Motion for Summary Judgment and for Interlocutory Decree of Foreclosure).

         In its order, the state court found that the Sirunos had obtained a loan from New Century Mortgage and had signed a note and a mortgage securing the note. The state court further found that the mortgage was assigned to Deutsche Bank and that Deutsche Bank was the holder of the Sirunos' note. See ECF No. 26-7, PageID # 591-92. The state court found that the Sirunos had defaulted under the terms of the note and mortgage, that Deutsche Bank had declared the entire balance due, and that the Sirunos owed Deutsche Bank $453, 212.53, plus interest of $44.48 per day from December 19, 2014. Id., PageID # 593. The state court further found that Deutsche Bank was entitled to foreclose on the mortgage, that Deutsche Bank was entitled to purchase the Property at the foreclosure sale, and that there was no just reason to delay the entering of final judgment in favor of Deutsche Bank pursuant to Rule 54(b) of the Hawaii Rules of Civil Procedure. Id., PageID # 593-94. The state court appointed Calvin T. Nakagawa as the court commissioner tasked with selling the Property. Id., PageID # 596. Judgment in favor of Deutsche Bank was filed in the state court on June 14, 2016. See ECF No. 26-8, PageID # 600. The Sirunos did not timely appeal this judgment. There is no dispute that this state-court judgment became final before the Sirunos filed the Verified Complaint in this case more than a year later, on September 7, 2017.

         Several months after the Sirunos filed the Complaint in this matter, on December 19, 2017, the state court approved the commissioner's report and motion for confirmation of sale. A second judgment in the state-court case was entered the same day. See state court docket sheet, available at hoohiki.courts.hawaii.gov (enter case ID 1CC141002325). On January 12, 2018, the Sirunos filed a notice of appeal (ICA CAAP-18-0000030). Id. That appeal is pending. According to the Notice of Appeal, the Sirunos are appealing: 1) the state court's December 2017 denial of their September 21, 2017, motion to vacate or set aside all prior and new orders, decrees, and judgments; 2) the state court's order approving the commissioner's report, confirming the sale of the property, and distributing the proceeds of the sale; and 3) the judgment with respect to the state court's order approving the commissioner's report, confirming the sale of the property, and distributing the proceeds of the sale.

         The Verified Complaint names as Defendants Deutsche Bank, Wells Fargo Bank, America's Servicing Company, and Specialized Loan Servicing, LLC. The Verified Complaint does not allege any facts establishing why Specialized Loan Servicing was named. The court presumes for purposes of this motion that Specialized Loan Servicing was Deutsche Bank's loan servicer with respect to the Sirunos' loan.

         III. MOTION FOR JUDGMENT ON THE PLEADINGS STANDARD.

         Rule 12(c) states, “After the pleadings are closed--but early enough not to delay trial--a party may move for judgment on the pleadings.” The standard governing a Rule 12(c) motion for judgment on the pleadings is “functionally identical” to that governing a Rule 12(b)(6) motion. United States ex rel. Caffaso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011); accord Pit River Tribe v. Bureau of Land Mgmt., 793 F.3d 1147, 1155 (9th Cir. 2015) (“Analysis under Rule 12(c) is ‘substantially identical' to analysis under Rule 12(b)(6) because, under both rules, a court must determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy.”).

         For a Rule 12(c) motion, the allegations of the nonmoving party are accepted as true, while the allegations of the moving party that have been denied are assumed to be false. See Hal Roach Studios v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989). A court evaluating a Rule 12(c) motion must construe factual allegations in a complaint in the light most favorable to the nonmoving party. Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). Under Rule 12(c), “‘Judgment on the pleadings is properly granted when, accepting all factual allegations as true, there is no material fact in dispute, and the moving party is entitled to judgment as a matter of law.'” Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012) (quoting Fleming, 581 F.3d at 925).

         IV. ANALYSIS.

         A. The Rooker-Feldman Doctrine Bars Claims Seeking to Challenge the Validity of the January 14, 2016, State-Court Order and Judgment With Respect to the Sirunos' Default and Deutsche Bank's Entitlement to Foreclose on the Sirunos' Mortgage.

         The motion for judgment on the pleadings and the substantive joinder therein argue that the Rooker-Feldman doctrine bars any of the Sirunos' claims asking this court to review the state-court foreclosure order and judgment. This court agrees.

         Any attempt to appeal the June 2016 state-court foreclosure order and judgment to this court violates the Rooker-Feldman doctrine. See D.C. Court of Appeals v. Feldman, 460 U.S. 462, 482-86 (1983); Rooker v. Fid. Trust Co., 263 U.S. 413, 415-16 (1923). The Rooker-Feldman doctrine prohibits a state-court loser from complaining in federal court about injuries allegedly caused by a state-court judgment rendered before the federal district court proceeding commenced, and from inviting federal district court review and rejection of the judgment. See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).

         Under the Rooker-Feldman doctrine, federal courts lack subject matter jurisdiction to conduct a direct review of state-court judgments even when a federal question is presented. See Cooper v. Ramos, 704 F.3d 772, 777 (9th Cir. 2012) (“The Rooker-Feldman doctrine instructs that federal district courts are without jurisdiction to hear direct appeals from the judgments of state courts”); Doe v. Mann, 415 F.3d 1038, 1041 (9th Cir. 2005) (“the Rooker-Feldman doctrine bars federal courts from exercising subject-matter jurisdiction over a proceeding”); Noel v. Hall, 341 F.3d 1148, 1154 (9th Cir. 2003) (“Under Rooker-Feldman, a federal district court does not have subject matter jurisdiction to hear a direct appeal from the final judgment of a state court.”). Accord Mackay v. Pfeil, 827 F.2d 540, 543 (9th Cir. 1987) (“Federal district courts, as courts of original jurisdiction, may not serve as appellate tribunals to review errors allegedly committed by state courts.” (footnote omitted)).

         Subject matter jurisdiction is lacking even if a state court's decision is challenged as unconstitutional. See Feldman, 460 U.S. at 486; Branson v. Nott, 62 F.3d 287, 291 (9th Cir. 1995) (“As courts of original jurisdiction, federal district courts have no authority to review the final determinations of a state court in judicial proceedings. This is true even when the challenge to a state court decision involves federal constitutional issues.” (citations omitted)). Litigants who believe that a state judicial proceeding has violated their rights must appeal that decision through their state courts and then seek review in the Supreme Court. See Feldman, 460 U.S. 482-483; Bennett v. Yoshina, 140 F.3d 1218, 1223 (9th Cir. 1998) (noting that the rationale behind the Rooker-Feldman doctrine “is that the only federal court with the power to hear appeals from state courts is the United States Supreme Court”).

         The Rooker-Feldman doctrine bars this court from reviewing not only direct appeals, but also “de facto” appeals complaining of a legal wrong committed by the state court and seeking relief from a state-court judgment. See Cooper, 704 F.3d at 778. The Ninth Circuit has explained:

To determine whether the Rooker-Feldman bar is applicable, a district court first must determine whether the action contains a forbidden de facto appeal of a state court decision. Noel v. Hall, 341 F.3d 1148, 1158 (9th Cir. 2003). A de facto appeal exists when “a federal plaintiff asserts as a legal wrong an allegedly erroneous decision by a state court, and seeks relief from a state court judgment based on that decision.” Id. at 1164. In contrast, if “a federal plaintiff asserts as a legal wrong an allegedly illegal act or omission by an adverse party, Rooker-Feldman does not bar jurisdiction.” Id. Thus, even if a plaintiff seeks relief from a state court judgment, such a suit is a forbidden de facto appeal only if the plaintiff also alleges a legal error by the state court. Maldonado v. Harris, 370 F.3d 945, 950 (9th Cir. 2004); Kougasian v. TMSL, Inc., 359 F.3d 1136, 1140 (9th Cir. 2004) (“[A] plaintiff must seek not only to set aside a state court judgment; he or she must also allege a legal error by the state court as the basis for that relief”).

Bell v. City of Boise, 709 F.3d 890, 897 (9th Cir. 2013) (footnote omitted).

         When a federal court is dealing with a de facto appeal of a state-court decision, “it must also refuse to decide any issue raised in the suit that is ‘inextricably intertwined' with an issue resolved by the state court in its judicial decision.” Noel, 341 F.3d at 1158. Claims are “inextricably intertwined” when the relief requested “would effectively reverse the state court decision or void its ruling.” Cooper, 704 F.3d at 779 (quotation marks and citations omitted). The Sirunos ask this court “[t]o vacate and set aside the foreclosure sale.” ECF No. 1, PageID # 46. In relevant part, the Sirunos argue that the “Foreclosing Defendants [had] no legal ‘standing with its [sic] foreclosure complaint as Defendants have failed to show their proof of claim they are the legal owner of Plaintiffs' Note and Mortgage bearing the original ‘wet' signatures of both parties involved . . . and/or that this was properly and completely securitized . . . .” Id., PageID # 22. In challenging the propriety of the foreclosure proceedings, the Sirunos are necessarily arguing that the state court erred in its foreclosure order and judgment that (1) found that Deutsche Bank had been assigned the Sirunos' note and mortgage; (2) found that the Sirunos had defaulted on the terms of their note and mortgage, (3) concluded that Deutsche Bank was entitled to foreclose on the mortgage and sell the Property at a foreclosure sale, and (4) ordered that the Property be sold at public auction.

         The state court entered judgment in favor of Deutsche Bank, which the Sirunos did not timely appeal, making the order and judgment final. See Beneficial Haw., Inc. v. Casey, 98 Haw. 159, 165, 45 P.3d 359, 365 (2002) (noting that “foreclosure cases are bifurcated into two separately appealable parts: (1) the decree of foreclosure and the order of sale, if the order of sale is incorporated within the decree; and (2) all other orders”; and also stating, “A litigant who wishes to challenge a decree of foreclosure and order of sale may--and, indeed, must--do so within the thirty[-]day period following entry of the decree or will lose the right to appeal that portion of the foreclosure proceeding.”).

         This case is a federal appeal from the state-court foreclosure order and judgment and is barred by the Rooker-Feldman doctrine. The Sirunos are seeking relief from alleged legal errors by the state court that resulted in the final state-court judgment with respect to the foreclosure. See Magbual v. Fed. Nat'l Mortg. Ass'n (Fannie Mae), 2016 WL 7478958, at *5 (D. Haw. Dec. 29, 2016) (ruling that the Rooker-Feldman doctrine bars claims “seek[ing] to reverse the state Circuit Court's Judgment concerning the foreclosure as to their home”); Sakuma v. Ass'n of Apartment Owners of the Tropics at Waikele, 2016 WL 6433842, at *6 (D. Haw. Oct. 28, 2016) (same), aff'd, 707 Fed.Appx. 906 (9th Cir. 2017). To the extent that the court grants Defendants judgment on the pleadings based on the Rooker-Feldman doctrine, the court denies leave to amend the Verified Complaint to reassert those claims.

         This court next turns to identifying exactly which claims are so barred.

         1. The Rooker-Feldman Doctrine Bars the Wrongful Foreclosure Claim Asserted in Count I to the Extent it Seeks Reversal of the State Court Foreclosure Order and Judgment, But Not With Respect to Claims Asserted Before Entry of the Judgment Regarding Confirmation of the Foreclosure Sale.

         Count I asserts a wrongful foreclosure claim, arguing that Deutsche Bank “wron[g]fully and without legal right, initiated and conducted a judicial foreclosure of Plaintiffs' property.” ECF No. 1, PageID #s 28-29. The Sirunos additionally allege that they received no notice of the judicial sale of the Property until they received the motion for confirmation of sale. Id., PageID # 29. They also say that Deutsche Bank sold the Property without the right to do so and without valid documents. Id.

         To the extent the Sirunos argue that Deutsche Bank lacked the right to foreclose on the Property, as allowed by the state court, that claim is inextricably intertwined with issues resolved by the state court in its judicial decision, making the claim barred by the Rooker-Feldman doctrine. See Noel, 341 F.3d at 1158. Declaring the judicial foreclosure sale wrongful “would effectively reverse the state court decision or void its ruling.” Cooper, 704 F.3d at 779 (quotation marks and citations omitted). In essence, such claims amount to assertions that the state court erred. Accordingly, the Rooker-Feldman doctrine bars them.

         However, to the extent the Sirunos argue that they received no notice of the judicial foreclosure sale and that the lack of notice made the sale wrongful, the Rooker-Feldman doctrine does not apply, as the Sirunos initiated this action before judgment was entered with respect to the confirmation of the foreclosure sale. The court recognizes that the same argument was made to the state court, which necessarily rejected it in confirming the sale of the Property. See Sirunos' Memorandum in Opposition to Plaintiff's Motion for Confirmation of Foreclosure Sale, Allowance of Costs, Commissions and Fees, Distribution of Proceeds, Directing Conveyance and for Writ of Possession/Ejectments (Aug. 23, 2017), ECF No. 1-4, PageID # 73. But the Verified Complaint, filed on September 7, 2017, was filed before December 19, 2017, when the order confirming the sale of the property was filed, with judgment entered the same day. See state court docket sheet, available at hoohiki.courts.hawaii.gov (enter case ID 1CC141002325). Any defect in the notice claim therefore cannot be said to implicate the Rooker-Feldman doctrine. See Exxon Mobil Corp., 544 U.S. at 284.

         2. The Rooker-Feldman Doctrine Bars Part of the Fraud Claim Asserted in Count II.

         To the extent the Sirunos assert fraud based on Deutsche Bank's alleged use of “fabricated” documents in the state-court foreclosure proceeding, the Rooker-Feldman doctrine bars the claim. The state court determined that Deutsche Bank had submitted valid documentation demonstrating that it was entitled to foreclose on the Sirunos' mortgage and sell the property. A claim that the documents were “fabricated” is a claim that is “inextricably intertwined” with that determination. If this court were to determine that the documents were fabricated and therefore fraudulent, that determination “would effectively ...


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