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Carpenter v. PNC Bank, N.A.

United States District Court, D. Hawaii

May 22, 2019



          Leslie E. Kobayashi, United Stares District Judge.

         Before the Court is Plaintiffs Christopher Carpenter, Mary T. Bulzomi, Daniel K. Iwasaki, Bernie L. Acoba, Roman Gulla Bibat, and Angie Siapno Bibat's (“Plaintiffs”) Motion for Order of Remand (“Motion”), filed on February 28, 2019. [Dkt. no. 13.] Defendant PNC Bank, N.A. (“PNC”) filed its memorandum in opposition on March 29, 2019, and Plaintiffs filed their reply on April 5, 2019. [Dkt. nos. 21, 22.] This matter came on for hearing on April 19, 2019. For the reasons set forth below, Plaintiffs' Motion is hereby granted in part and denied in part. The Motion is granted insofar as the instant case is remanded to the state court because the non-diverse defendants were not fraudulently joined. The Motion is denied as to Plaintiffs' request for an award of removal-related attorneys' fees and costs because, although the removal was improper, PNC had an objectively reasonable basis for attempting removal.


         The instant case arises out of the foreclosures of Plaintiffs' respective properties. Plaintiffs filed their Complaint in the State of Hawai'i Second Circuit Court (“state court”) on December 21, 2018, and the action was removed to federal court on January 30, 2019. [Notice of Removal (dkt. no. 1), Decl. of Lauren K. Chun, Exh. 1 (Complaint), Exh. 2 (First Amended Complaint, filed 12/27/18).]

         According to the First Amended Complaint: Plaintiffs Christopher Carpenter (“Carpenter”) and Mary T. Bulzomi (“Bulzomi”) are residents and citizens of New Jersey; Plaintiffs Daniel K. Iwasaki (“Iwasaki”) and Bernie L. Acoba (“Acoba”) are residents and citizens of Hawai'i; and Plaintiffs Roman Gulla Bibat and Angie Siapno Bibat (“Bibats”) are residents of Nevada, but they are in the process of moving to Hawai'i, which they intend to make their permanent residence. [First Amended Complaint at ¶¶ 3-8.] PNC is the successor by merger to National City Bank (“NCB”). PNC is organized under United States law and Delaware law, and has its principal place of business in Pennsylvania. [Id. at ¶ 9.]

         Plaintiffs acknowledge their respective mortgages each gave the mortgagee a power of sale, which authorized the mortgagee to sell the property in the event of default. Plaintiffs contend each mortgagee agreed to sell the property “in a manner reasonably calculated to obtain the best possible price for the” property. [Id. at ¶ 36.] According to the First Amended Complaint, National City Mortgage (“NCM”) and/or PNC asserted the right to use Haw. Rev. Stat. Chapter 667, Part I (2008) for the power of sale as the mortgagee and/or the assignee of each of Plaintiffs' mortgages. [Id. at ¶ 37.]

         From 2009 through 2011, PNC was represented by the law firm Routh Crabtree Olson, which later became known as RCO Hawaii LLLC (“RCO”), in PNC's nonjudicial foreclosures in Hawai'i. [Id. at ¶ 21.] NCM and/or PNC, acting through RCO, commenced nonjudicial foreclosure proceedings against Plaintiffs, pursuant to the respective mortgages and Haw. Rev. Stat. § 667-5 (2008). [Id. at ¶ 38.]

         Plaintiffs allege that the foreclosure notices prepared for the foreclosure of each of Plaintiffs' properties violated Haw. Rev. Stat. § 667-7(a)(1) (2008) because none contained an adequate description of the property to be sold. [Id. at ¶ 43.] Plaintiffs also allege that, in each foreclosure, only a quitclaim deed was offered. [Id. at ¶ 44.] Offering and selling only a quitclaim deed, Plaintiffs contend, breached the mortgagee's duties because it was not reasonably calculated to obtain the best price for the property. [Id. at ¶ 46.]

         Further, in each foreclosure, the auction was held on a date other than that specified on the respective foreclosure notice, i.e. the actual auction date was unpublished, and no notice of the postponement of the sale was published. Either PNC or its nominee was the successful bidder at each auction; the properties were conveyed to PNC or its nominee; and foreclosure affidavits were recorded. In this manner, Plaintiffs assert they were wrongfully deprived of their properties, and these sales are either void or voidable because of PNC's failure to comply with Chapter 667, Part I and the applicable case law. [Id. at ¶¶ 47-48.]

         Defendant Robert White (“White”) claims current title to Carpenter and Bulzomi's property, Defendant Guinevere Ray Stromberg (“Stromberg”) claims current title to Iwasaki and Acoba's property, and Defendants Enrique Piano Paa, Jr. and Joyce Lan Kim Paa (“Paas”) claim current title to the Bibats' property. [Id. at ¶ 77.] White, Stromberg, and the Paas (collectively “Purchaser Defendants”) are all residents and citizens of Hawai'i. [Id. at ¶¶ 10, 12, 17.]

         In a nutshell, Plaintiffs' claims against the Purchaser Defendants arise out of the contention that the foreclosure affidavits used to support the foreclosures of each of Plaintiffs' properties constitute constructive or actual notice of apparent defects in the chain of title. As a result, Plaintiffs contend the Purchaser Defendants are not bona fide purchasers (“BFPs”). Plaintiffs also argue PNC's quitclaim deeds to its nominees were void ab initio, and therefore the special warranty deed from the nominees to each of the Purchaser Defendants is also void. See, e.g., id. at ¶¶ 82-83.

         Plaintiffs assert they were all members of the putative class in Fergerstrom v. PNC Bank, N.A., CV 13-00526 DKW-RLP (“Fergerstrom”), which was originally filed in the State of Hawai'i First Circuit Court on September 9, 2013.[1]Fergerstrom was removed to this district court, and class certification was denied on September 18, 2018. Thus, Plaintiffs argue the statute of limitations on their claims was tolled starting September 9, 2013 until September 18, 2018, and therefore their claims against PNC are timely. [Id. at ¶ 18.]

         Plaintiffs assert the following claims: a wrongful foreclosure claim against PNC (“Count I”); unfair and deceptive trade practices and unfair methods of competition, in violation of Haw. Rev. Stat. Chapter 480, against PNC (“Count II”); and quiet title and ejectment against the Purchaser Defendants, and against: First California Mortgage Company (“FCMC”) - White's mortgagee; Defendant Bank of America, N.A. (“Bank of America”) - Stromberg's mortgagee; Defendant Wells Fargo Bank, N.A. - the Paas' mortgagee; and Defendant Mortgage Electronic Registration Systems, Inc. - FCMC and Bank of America's nominee (“Lienholder Defendants” and “Count III”).

         PNC removed this case based on diversity jurisdiction. [Notice of Removal at ¶ 10.] PNC contends Plaintiffs are either citizens of Hawai'i or New Jersey, although the Bibats may be citizens of Nevada. PNC is a Delaware citizen. Thus, there is complete diversity between Plaintiffs and PNC. PNC argues the citizenship of the Purchaser Defendants and Lienholder Defendants need not be considered because they were fraudulently joined.

         Plaintiffs now seek remand of this case: 1) because this Court lacks subject matter jurisdiction under 28 U.S.C. § 1332;[2] and/or 2) based on the forum defendant rule, 28 U.S.C. § 1441(b)(2), and also seek an award of attorneys' fees and costs, pursuant to 28 U.S.C. § 1447(c).


         I. General Removal Principles

         The general statute governing removal, 28 U.S.C. § 1441, is “strictly construe[d] . . . against removal jurisdiction.” Hansen v. Grp. Health Coop., 902 F.3d 1051, 1056 (9th Cir. 2018) (citations and quotation marks omitted).

If a district court determines at any time that less than a preponderance of the evidence supports the right of removal, it must remand the action to the state court. See Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010); California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004). The removing defendant bears the burden of overcoming the “strong presumption against removal jurisdiction.” Geographic Expeditions, 599 F.3d at 1107 (citation omitted).

Id. at 1057. The “‘strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper,' and that the court resolves all ambiguity in favor of remand to state court.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)).

         II. Diversity Jurisdiction and Fraudulent Joinder

         PNC removed this case pursuant to 28 U.S.C. § 1332(a), which provides, in relevant part, that federal district courts “shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between - (1) citizens of different States.” Diversity jurisdiction requires complete diversity of citizenship, i.e., that every plaintiff be a citizen of a different state from every defendant. Grancare, LLC v. Thrower ex rel. Mills, 889 F.3d 543, 548 (9th Cir. 2018) (citing Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.E.2d 437 (1996)). However, when determining if complete diversity exists, the court disregards the citizenship of any fraudulently joined defendants. Id. (citing Chesapeake & Ohio Ry. Co. v. Cockrell, 232 U.S. 146, 152, 34 S.Ct. 278, 58 L.Ed. 544 (1914)).

There are two ways to establish fraudulent joinder: “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.” Hunter v. Philip Morris USA, 582 F.3d 1039, 1044 (9th Cir. 2009) (quoting Smallwood v. Illinois Cent. RR. Co., 385 F.3d 568, 573 (5th Cir. 2004)). Fraudulent joinder is established the second way if a defendant shows that an “individual[] joined in the action cannot be liable on any theory.” Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998). But “if there is a possibility that a state court would find that the complaint states a cause of action against any of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court.” Hunter, 582 F.3d at 1046 (quoting Tillman v. R.J. Reynolds Tobacco, 340 F.3d 1277, 1279 (11th Cir. 2003) (per curiam)) (emphasis added). A defendant invoking federal court diversity jurisdiction on the basis of fraudulent joinder bears a “heavy burden” since there is a “general presumption against [finding] fraudulent joinder.” Id. (citations omitted).
. . . We have declined to uphold fraudulent joinder rulings where a defendant raises a defense that requires a searching inquiry into the merits of the plaintiff's case, even if that defense, if successful, would prove fatal. See Hunter, 582 F.3d at 1046 (holding that an implied preemption affirmative defense was not a permissible ground for finding fraudulent joinder).

Id. at 548-49 (emphasis and some alterations in Grancare ...

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