Fed. Deposit Ins. Corp. v. Davidyuk

Decision Date25 June 2014
Docket NumberCASE NO. C13-1592JLR
CourtU.S. District Court — Western District of Washington

Before the court are: (1) Plaintiff Federal Deposit Insurance Corporation as Receiver for Westsound Bank's ("FDIC-R") motion for a decree of judicial foreclosure and award of attorney's fees on summary judgment (FDIC Mot. (Dkt. # 9)), and (2) Defendants Eduard Davidyuk and Larissa Davidyuk's cross motion for summary judgment (Def. Mot. (Dkt. # 12)). The court has considered the motions, all submissions filed is support of and opposition thereto, the balance of the record, and the applicablelaw. The court also heard the argument of counsel on June 23, 2014. Being fully advised, the court GRANTS FDIC-R's summary judgment motion for a decree of judicial foreclosure and an award of attorney's fees under the Deed of Trust at issue. The court DENIES Defendants' cross motion for summary judgment, except with respect to their motion regarding Ms. Davidyuk. The court GRANTS Defendants' motion for summary judgment only with respect to Ms. Davidyuk and DISMISSES her with prejudice from this action.


On July 11, 2006, Defendant Eduard Davidyuk took out a loan from Westsound Bank to buy real property and build a single family residence in Bellevue, Washington. (Rossiter Aff. (Dkt. # 10) ¶ 4.) The loan was in the form of a promissory note by Mr. Davidyuk in the principal amount of $1.4 million payable to Westsound Bank d/b/a Westsound Mortgage ("the Note"). (Rossiter Aff. ¶ 5, Ex. A.) The Note was secured by a recorded Deed of Trust, dated July 11, 2006. (Request for Judicial Notice ("RJN") (Dkt. # 11) Ex. 1.)1

Mr. Davidyuk modified the loan terms with Westsound Bank three times. First, on June 28, 2007, he entered into an agreement which extended the maturity date and increased the available principal to $1.5 million. (Rossiter Aff. ¶ 6, Ex. B.) He entered into a modification to the Deed of Trust to secure the additional $100,000.00 of debt, which was recorded on July 27, 2007. (See RJN Ex. 2.) Second, on February 1, 2008, he entered into a Change of Terms Agreement with Westsound Bank, which extended the maturity date, changed the interest rate, and increased the available principal by $172,000.00 to $1,672,100.00. (Rossiter Aff. ¶ 7, Ex. C.) He entered into a modification of the Deed of Trust to secure this additional $172,000.00, which was recorded on March 5, 2008. (See RJN Ex. 3.) Third, on April 15, 2008, he entered into another Change of Terms Agreement with Westsound Bank to alter the maturity date of the loan to August 10, 2008. (Rossiter Aff. ¶ 8, Ex. D.)

Westsound Bank filed a complaint against Mr. Davidyuk on September 26, 2008, in King County Superior Court for the State of Washington, alleging that he had defaulted on his loan obligations. (See RJN Ex. 4.) On May 6, 2009, King County Superior Court awarded Westsound Bank a default judgment against Mr. Davidyuk. (See id. Ex. 5.) Judgment was entered against Mr. Davidyuk in the amount of $1,648,355.48, plus pre-judgment interest, attorney's fees, costs, and expenses, totaling $1,766,760.44. (See id.) Mr. Davidyuk did not appeal this judgment (see id. Ex. 6), and he has made no payments on the judgment to Westsound Bank (Rossiter Aff. ¶ 10). The parties do notdispute that, although Westsound Bank sued on the Note and obtained a default judgment, Westsound Bank did not seek to foreclose on the property. (See FDIC-R Mot. at 4-5, 8-9; Def. Mot. at 4.)

Two days later, on May 8, 2009, the Washington State Department of Financial Institutions closed Westsound Bank and appointed FDIC-R as receiver. (See id. Ex. 7.) As Westsound Bank's successor-in-interest, FDIC-R assumed all of Westsound Bank's rights, titles, powers, privileges, operations, and assets. (Rossiter Aff. ¶ 10.) Due to its appointment as receiver, FDIC-R became the holder of the Note and the beneficial interest in the Deed of Trust. FDIC-R has not received any payment on the judgment since it succeeded to Westsound Bank's assets, although insurance proceeds were applied to reduce the interest due on the judgment. (Rossiter Aff. ¶ 11.) The amount of $2,045,102.40, including interest through April 2014, is currently due and owing on the judgment. (Id. ¶ 12.)

On August 29, 2012, FDIC-R filed a complaint against Defendants for judicial foreclosure in King County Superior Court. (Notice (Dkt. # 1) ¶ 3.) On June 7, 2013, Defendants filed an Answer, Affirmative Defenses, and Set-Offs in response to FDIC-R's complaint. (Id. ¶ 3.) Unlike Westsound Bank's action in King County Superior Court against Mr. Davidyuk on the Note, the FDIC-R's action for judicial foreclosure included Ms. Davidyuk as a defendant. (See id. Ex. A.)

On September 4, 2013, over a year after filing in state court, FDIC-R removed the suit to federal district court. (See generally Notice.) Defendants did not initially oppose FDIC-R's removal by filing a motion for remand. On April 17, 2014, FDIC-R filed thismotion for summary judgment seeking a decree of judicial foreclosure on the property and an award of attorney fees under the Deed of Trust. (See generally FDIC-R Mot.) FDIC-R argues that Defendants various affirmative defenses are either invalid or do not otherwise prevent the entry of summary judgment in its favor. (See id. at 8-19.)

On May 5, 2014, Defendants responded to FDIC-R's motion and also cross-moved for summary judgment. (See generally Def. Mot.) Although Defendants did not move for remand when FDIC-R initially removed this case to federal court, they now argue in their cross-motion for summary judgment that FDIC-R improvidently removed the action from state court and that this court therefore lacks subject matter jurisdiction. (Id. at 8-15.) Defendants also argue that (1) this action must be dismissed because the statute of limitations on the Note has expired (id. at 15-16), and (2) Ms. Davidyuk should be dismissed because she is an improper party (id. at 16-19). Finally, Defendants argue that their various affirmative defenses prevent the entry of summary judgment in FDIC-R's favor and that FDIC-R is not entitled to an award of attorney fees. (Id. at 19-28.)2

Defendants have raised a challenge to the court's subject matter jurisdiction, and therefore the court must initially address this issue before turning to any others. As discussed below, however, the court finds that it has subject matter jurisdiction over this proceeding, and that FDIC-R is entitled to a decree of judicial foreclosure and an award of attorney fees. As such, the court GRANTS FDIC-R's motion for summary judgment and DENIES Defendants' cross motion.

A. Standards Governing the Parties' Motions

The parties have styled their motions as cross motions for summary judgment. (See Stip. (Dkt. # 13) at 1-2.) The standards that govern such motions under Federal Rule of Civil Procedure 56 are familiar. Summary judgment is appropriate if the evidence, when viewed in the light most favorable to the non-moving party, demonstrates "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Galen v. Cnty. of L.A., 477 F.3d 652, 658 (9th Cir. 2007). Where cross motions are at issue, the court must "evaluate each motion separately, giving the nonmoving party in each instance the benefit of all reasonable inferences." ACLU of Nev. v. City of Las Vegas, 466 F.3d 784, 790-91 (9th Cir. 2006) (citations omitted); see also Friends of Columbia Gorge, Inc. v. Schafer, 624 F. Supp. 2d 1253, 1263 (D. Or. 2008).

Defendants have also moved to dismiss under Federal Rule Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. (Def. Mot. at 3.) The Ninth Circuitrecently clarified that the existence of removal jurisdiction should be resolved within the same framework as Rule 12(b)(1) motion. Leite v. Crane Co., --- F.3d ----, 2014 WL 1646924, at *3 (9th Cir. 2014).3 Under Rule 12(b)(1), a defendant may challenge the plaintiff's jurisdictional allegations in one of two ways: (1) a "facial" attack that accepts the truth of the plaintiff's allegations by asserts that they are insufficient on their fact to invoke federal jurisdiction, or (2) a "factual" attack that contests the truth of the plaintiff's factual allegations, usually by introducing evidence outside the pleadings. Id. at *2.

When a party raises a facial attack, the court resolves the motion as it would under Federal Rule of Civil Procedure 12(b)(6)—accepting all reasonable inferences in the plaintiff's favor and determining whether the allegations are sufficient as a legal matter to invoke the court's jurisdiction. Leite, 2014 WL 1646924, at *2. When a party raises a factual attack, the court applies the same evidentiary standard as it would in the context of a motion for summary judgment. Id. The party invoking the court's subject matter jurisdiction "bears the burden of proving by a preponderance of the evidence that each ofthe requirements for subject-matter jurisdiction has been met."4 Id. However, "if the existence of jurisdiction turns on disputed factual issues, the district court may resolve those factual disputes itself." Id.

B. Removal Jurisdiction

FDIC-R removed this action pursuant to a provision of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, § 407, 103 Stat. 183, 363 (1989), which provides in part that FDIC-R may "remove any action, suit, or proceeding from a State court to the appropriate United States [d]istrict [c]ourt before the end of the 90-day period beginning on the date the action, suit, or proceeding is filed against [FDIC-R] or [FDIC-R] is substituted as a party." (See Notice ¶ 5 (quoting 12...

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