Deutsche Bank Nat'l Trust Co. v. Hagan, CIVIL NO. 15-00376 JMS-KSC

Decision Date27 November 2015
Docket NumberCIVIL NO. 15-00376 JMS-KSC
CourtUnited States District Courts. 9th Circuit. United States District Court (Hawaii)

On March 2, 2015, Plaintiff Deutsche Bank National Trust Company as Trustee for IndyMac Index Mortgage Loan Trust 2005-AR21, Mortgage Pass-Through Certificate Series 2005-AR21 ("Plaintiff") filed a Complaint for Mortgage Foreclosure in the Third Circuit Court of the State of Hawaii against pro se Defendant Jeffrey Goff Hagan ("Defendant"). On September 22, 2015, Defendant removed the action to this court asserting federal subject matter jurisdiction on the basis of federal question jurisdiction. See Doc. No. 1, Notice of Removal at 2-4.

Currently before the court is Plaintiff's October 16, 2015 Motion to Remand, arguing that Defendant's removal of this action was improper because there is no basis for federal question or diversity jurisdiction, and seeking Federal Rule of Civil Procedure 11 sanctions for attempting removal despite prior court orders explaining that removal would be improper. Doc. No. 4-1, Mot. at 1. Defendant filed an Opposition on November 4, 2015, Doc. No. 7, Plaintiff filed a Reply on November 13, 2015, Doc. No. 8, and Defendant filed a Sur-Reply (without court permission) on November 17, 2015. Doc. No. 9. Pursuant to Local Rule 7.2(d), the court determines the Motion without a hearing. For the reasons discussed below, the court (1) GRANTS the Motion in part, remanding this action to the Third Circuit Court of the State of Hawaii, and (2) DENIES Plaintiff's request for Rule 11 sanctions.


This is an action to foreclose Defendant's real property located at 28-2856 Onomea Place, Pepe'ekeo, Hawaii 96783 (the "subject property"). Doc. No. 1-6, Compl. at ¶ 3. Defendant is a resident of Hawaii. See id. ¶ 2. As alleged in the Complaint, on or about July 27, 2005, Defendant executed a promissory note("Note") in the amount of $259,000 to IndyMac Bank, F.S.B., which was then negotiated to Plaintiff. Id. ¶¶ 5, 7. The Note is secured by a Mortgage on the subject property, id. ¶ 6, which was later assigned to Plaintiff. Id. ¶ 7. Defendant allegedly defaulted on the Note and Mortgage, and on March 2, 2015, Plaintiff filed the instant foreclosure action in state court.

In response, on May 20, 2015, Defendant filed a separate federal action against Plaintiff and other financial institutions asserting numerous federal and state claims essentially challenging the securitization of the Note and Mortgage and Plaintiff's right to foreclose. See Hagan v. Deutsche Bank, Civ. No. 15-00189 JMS-KSC ("Hagan"); see also Doc. No. 1-9, Def.'s Ex. (attaching copy of Hagan Compl.) ¶ 21;1 And on June 1, 2015, Defendant attempted to remove the underlying state action directly into Hagan. The court struck that attempted removal without prejudice to refile as a separate federal case, but noted several barriers to removal that Defendant would have to overcome. See Hagan, Civ. No. 15-00189 JMS-KSC, Doc. No. 12 (noting that "[a] case may not be removed tofederal court on the basis of a federal defense . . . [or if] based on diversity jurisdiction if any of the defendants is a citizen of the State in which such action is brought") (internal citations omitted). On September 22, 2015, Defendant filed the Notice of Removal at issue here initiating the instant federal action. Doc. No. 1.


Under the general removal statute, "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). Such removal can be based on either diversity jurisdiction or federal question jurisdiction. See 28 U.S.C. §§ 1441(b) & (c). Plaintiff may seek remand, and 28 U.S.C. § 1447(c) provides:

If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.

"Removal and subject matter jurisdiction 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 Nev., N.A., 761 F.3d 1027, 1034 (9th Cir. 2014) (quoting Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008)). Thus, "'[i]t is to be presumed that a cause lies outside [the] limited jurisdiction [of the federal courts] and the burden of establishing the contrary rests upon the party asserting jurisdiction.'" Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (quoting Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006)) (alterations in original). This "'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." Id. (quoting Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam)).


The Notice of Removal asserts federal question jurisdiction based on Defendant's arguments that (1) the alleged securitization and assignment of the Note and Mortgage to Plaintiff, upon which the foreclosure action rests, necessarily invokes federal laws governing securities, consumer credit, debt collection, and fraudulent, deceptive, and racketeering practices; and (2) "matters of federal law can only be heard as issues of original jurisdiction in the federal court." Doc. No. 1, Notice of Removal at 2. Defendant is mistaken as to botharguments.

A. Federal Question Jurisdiction

A federal court has jurisdiction over a removed action if the complaint alleges a claim that "aris[es] under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Whether a claim arises under federal law is generally determined by the "'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of plaintiff's properly pleaded complaint." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). Thus, a defendant cannot create federal subject matter jurisdiction on the basis of claims or defenses asserted in a notice of removal. Takeda v. Nw. Nat'l Life Ins. Co., 765 F.2d 815, 822 (9th Cir. 1985) ("The federal question must be disclosed upon the face of the complaint, unaided by the answer or by the petition for removal.") (citation omitted); Fed. Nat'l Mortg. Assoc. v. Bravo, 2013 WL 812705, at *1 (C.D. Cal. 2013) (citing McAtee v. Capital One, F.S.B., 479 F.3d 1143, 1145 (9th Cir. 2007)).

"For statutory purposes, a case can 'aris[e] under' federal law in two ways." Gunn v. Minton, 133 S. Ct. 1059, 1064 (2013). The "vast bulk of suits that arise under federal law" are those where "federal law creates the cause of action asserted." Id. The second and "less frequently encountered" category offederal question jurisdiction cases are those asserting state law claims that "necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable & Sons Metal Prods. v. Darue Eng'g & Mfg., 545 U.S. 308, 312, 314 (2005); see also Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986). Gunn clarifies that under this second category, "federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." 133 S. Ct. at 1065.

Here, Plaintiff's Complaint alleges only one state law claim for judicial foreclosure. Doc. No. 1-6, Compl.; see OneWest Bank, FSB v. Farrar, 2014 WL 5023472, at *5 (D. Haw. Oct. 8, 2014) ("In general, there is no federal foreclosure law; rather, state law serves as the law of decision in foreclosure actions."). To obtain a judicial foreclosure decree under Hawaii law, Plaintiff must establish "all four of the following: (1) the existence of a promissory note, mortgage, or other debt agreement; (2) the terms of the promissory note, mortgage, or other debt agreement; (3) default by the borrower under the terms of the promissory note, mortgage, or other debt agreement; and (4) the giving of thecancellation notice and recordation of an affidavit to such effect." OneWest Bank, FSB, 2014 WL 5023472, at *5 (citing IndyMac Bank v. Miguel, 117 Haw. 506, 520, 184 P.3d 821, 835 (Haw. Ct. App. 2008) and Bank of Honolulu, N.A. v. Anderson, 3 Haw. App. 545, 551, 654 P.2d 1370, 1375 (1982)); see also Haw. Rev. Stat. §§ 667-1 et seq. (providing for judicial foreclosure). "The material inquiry relevant to a foreclosure decree is whether a default occurred[.]" IndyMac Bank, 117 Haw. at 520, 184 P.3d at 835.

Defendant does not (and cannot) argue that foreclosure itself is a federal claim. Rather, he argues that various federal laws2 are necessarily invoked as a result of the securitization and assignment of the Note and Mortgage, as well as Plaintiff's attempt to foreclose. But Plaintiff's foreclosure claim -- which essentially requires a determination of whether default has occurred -- does not require resolution of issues pursuant to federal laws governing securities, consumer credit, debt collection, and fraudulent,...

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