Copeland v. PNC Bank, N.A.

• Decision Date: 28 June 2019
• Docket Number: CIVIL NO. 19-00029 JAO-WRP
• Parties: DOUGLAS NEWTON COPELAND, et al., Plaintiffs, v. PNC BANK, N.A., A NATIONAL BANKING ASSOCIATION, et al., Defendants.
• Court: U.S. District Court — District of Hawaii

DOUGLAS NEWTON COPELAND, et al., Plaintiffs, v. PNC BANK, N.A., A NATIONAL BANKING ASSOCIATION, et al., Defendants.

CIVIL NO. 19-00029 JAO-WRP

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

June 28, 2019

ORDER MODIFYING FINDINGS AND RECOMMENDATION TO DENY PLAINTIFFS' MOTION FOR ORDER OF REMAND

Before the Court is Plaintiffs Douglas Newton Copeland, Cerilene Tacderan Copeland, and Kaleimaeole Nola Lindsey Latronic's (collectively "Plaintiffs") Objections to Magistrate-Judge's April 29, 2019 Findings and Recommendation to Deny Plaintiffs' Motion for Order of Remand [ECF 21]. ECF No. 23. After careful consideration of the Magistrate Judge's Findings and Recommendation to Deny Plaintiffs' Motion for Order of Remand ("F&R"), ECF No. 21, the parties' submissions, and the applicable law, the Court MODIFIES the F&R for the reasons set forth below.

BACKGROUND

The instant action arises out of the allegedly wrongful foreclosures of Plaintiffs' properties. Plaintiffs commenced this action on December 11, 2018 in the Circuit Court of the Third Circuit, State of Hawai'i. The Complaint asserts the following causes of action: (1) wrongful deprivation of real property (Count I); (2) unfair and deceptive trade practices and unfair methods of competition under H.R.S. Chapter 480 (Count II); and (3) quiet title and ejectment against Defendants David Shishikin ("David"); Anna V. Shishikin ("Anna"); Vyacheslav Tkach ("Vyacheslav"); Alla Tkach ("Alla"); Mortgage Electronic Registration Systems ("MERS"), Inc.; Caliber Home Loans, Inc. ("CHL"); May Lee ("Lee"), individually and as Trustee of the May Ming-Wah Lee Revocable Living Trust Dated May 2, 2002 ("the Trust"); and DHI Mortgage Company, Ltd. ("DHI") (Count III).¹

On January 18, 2019, Defendant PNC Bank N.A. ("PNC") removed this action on the basis of diversity jurisdiction. Notice of Removal ("Notice"), ECF No. 1 at ¶ 12. PNC argues that the citizenships of the Shishikins; the Tkachs; Lee,individually and as Trustee of the Trust; MERS; and CHL² may be disregarded because they were fraudulently joined. Id. at ¶¶ 14-15. Following removal, Plaintiffs filed a Motion for Order of Remand ("Remand Motion"). ECF No. 7.

In the F&R, the Magistrate Judge recommended that Plaintiffs' Remand Motion be denied. F&R, ECF No. 21 at 15. The F&R contained the following findings:

(1) [I]t is obvious from the face of the [] Complaint that Plaintiffs fail to state a claim against the Individual Defendants under settled Hawaii law. Contrary to Plaintiffs' assertions, the court is not required to conduct a searching inquiry into the merits of Plaintiffs' claims. Id. at 8.

(2) Viewing Plaintiffs' allegations in light of the applicable authority, the Court finds that Plaintiffs' claims against the Individual Defendants obviously fail under settled Hawaii law. SeeMcCabe, 811 F.2d at 1339. Plaintiffs do not allege that that the Individual Defendants colluded with Defendant PNC, were involved in a scheme to wrongfully obtain title from Plaintiffs, or had actual knowledge of Defendant PNC's alleged misconduct. Id. at 13-14.

(3) After considering the parties' arguments and Plaintiffs' allegations in the Complaint, the Court finds that Defendant PNC has met its burden to show that Plaintiffs' claims for quiet title and ejectment obviously fail under settled Hawaii law. Id. at 14-15.

The Magistrate Judge ultimately concluded that "PNC has shown that there is no possibility that Plaintiffs can state a cause of action against the Individual Defendants." Id. at 15.

On May 13, 2019, Plaintiffs filed Objections to the F&R. ECF No. 23. PNC filed a Response on May 28, 2019. ECF No. 25.

LEGAL STANDARD

The Court treats a motion to remand as a dispositive motion. Keown v. Tudor Ins. Co., 621 F. Supp. 2d 1025, 1029 (D. Haw. 2008); Bralich v. Sullivan, No. CV 17-00203 ACK-RLP, 2017 WL 4883221, at *4 (D. Haw. Oct. 30, 2017). Magistrate judges may be assigned to prepare findings and recommendations of pretrial matters dispositive of a claim or defense. Fed. R. Civ. P. 72(b)(1). Parties may object to a magistrate judge's findings and recommendation. Id.; Local Rule 74.2. "The district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to. The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed. R. Civ. P. 72(b)(3); Local Rule 74.2; 28 U.S.C. § 636(b)(1). Under a de novo standard, there is no deference to the lower court's ruling; rather, the Court "freely consider[s] the matter anew, as if no decision had been rendered below." Dawson v. Marshall,561 F.3d 930, 933 (9th Cir. 2009) (alteration in original); Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006).

ANALYSIS

Plaintiffs object to the F&R on the following grounds: (1) the Magistrate Judge did not mention the common defense rule set forth in Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009); (2) the Magistrate Judge did not mention Jebo v. Aurora Loan Services LLC or In re Ho, which together show that the question of whether the deeds are "void and not merely voidable" is unsettled; and (3) the Magistrate Judge erroneously rejected Plaintiffs' argument that the Court cannot decide whether the individual Defendants are bona fide purchasers at this stage in the litigation because that requires an inquiry into the merits of the case.³ Objections, ECF No. 23 at 12-35.

PNC counters that: (1) the Magistrate Judge correctly declined to apply the common defense exception to fraudulent joinder; (2) Silva v. Lopez, 5 Haw. 262 (Haw. Kingdom 1884), does not mandate that defective nonjudicial foreclosuresare considered void even as against innocent purchasers; (3) the Magistrate Judge correctly concluded that Plaintiffs failed to offer any imaginable basis for challenging the innocence of the subsequent purchasers of the subject properties; and (4) Plaintiffs' arguments founded upon Nevada and Mississippi law are inapplicable, distinguishable, and ultimately irrelevant. Response at 1-2.

The Court finds it unnecessary to evaluate many of the arguments raised in the Objections and Response because they are irrelevant to the fraudulent joinder determination.

A. Removal Jurisdiction

Under 28 U.S.C. § 1441, a defendant may remove a civil action brought in a state court to federal district court if the district court has original jurisdiction. Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 679-80 (9th Cir. 2006). "Removal . . . statutes are 'strictly construed,' and a 'defendant seeking removal has the burden to establish that removal is proper and any doubt is resolved against removability.'" Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., 761 F.3d 1027, 1034 (9th Cir. 2014) (quoting Luther v. Countrywide Home Loans Serv. LP, 533 F.3d 1031, 1034 (9th Cir. 2008)); Hunter, 582 F.3d at 1042 (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)) ("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 infavor of remand to state court."); Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006). Courts should presume that a case lies outside the limited jurisdiction of the federal courts. Hunter, 582 F.3d at 1042.

B. Diversity of Citizenship

PNC asserted diversity jurisdiction as the basis for removal. Federal district courts have original jurisdiction over cases where the amount in controversy exceeds $75,000, exclusive of interest and costs, and where the matter in controversy is between citizens of different states. 28 U.S.C. § 1332(a)(1). Complete diversity of citizenship requires that each of the plaintiffs be a citizen of a different state than each of the defendants. Williams v. United Airlines, Inc., 500 F.3d 1019, 1025 (9th Cir. 2007) (citing Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005)); Morris v. Princess Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001). Moreover, actions based on diversity jurisdiction may only be removed if none of the properly joined and served defendants is a citizen of the state in which the action is brought. 28 U.S.C. § 1441(b). Thus, "[d]efendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum State." Lincoln Prop. Co. v. Roche, 546 U.S. 81, 84 (2005).

Here, complete diversity is lacking, and the citizenships of several parties are unknown. Plaintiffs are citizens of Hawai'i. Notice, ECF No. 1-2 at ¶¶ 3-5. PNC is a citizen of Delaware, where it maintains it principal office. Notice, ECF No. 1 at ¶ 12; Wachovia Bank v. Schmidt, 546 U.S. 303, 303 (2006) ("A national bank, for § 1348 purposes, is a citizen of the State in which its main office, as set forth in its articles of association, is located."); Rouse v. Wachovia Mortg., FSB, 747 F.3d 707, 708 (9th Cir. 2014). The Shishikins and Lee, individually and as Trustee of the Trust, are citizens of Hawai'i. Notice, ECF No. 1-2 at ¶¶ 7-8, 14; Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) ("A trust has the citizenship of its trustee or trustees."). The Tkachs' citizenships are unknown. Notice, ECF No. 1-2 at ¶¶ 9-10. PNC identified MERS and CHL as Delaware corporations but did not provide their complete citizenship. 28 U.S.C. § 1332(c)(1) (Corporations are deemed to be citizens of "every State . . . by which it has been incorporated and of the State . . . where it has its principal place of business."). Finally, assuming Plaintiffs intended to include DHI as a Defendant, PNC represented that Plaintiffs identified DHI as a Texas citizen. Notice, ECF No. 1 at 7 n.3. Plaintiffs did not provide DHI's citizenship; they merely identified DHI as a limited...