Brumfeil v. U.S. Bank et al
Filing
200
ORDER granting Defendants Motions to Dismiss the Amended Complaint 51 , 69 , 90 , and 91 due to lack of jurisdiction. Plaintiffs Amended Complaint is DISMISSED WITHOUT PREJUDICE in its entirety; and Judgment shall be entered in favor of Defendants, and Defendants shall have their costs, by Judge William J. Martinez on 10/2/2013.(ervsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 12-cv-02716-WJM
LISA KAY BRUMFIEL,
Plaintiff,
v.
U.S. BANK,
LARRY CASTLE, in his individual and corporate capacity, and
CASTLE STAWIARSKI, LLC,
ROBERT J. HOPP, in his and corporate and individual capacities,
CYNTHIA MARES, Public Trustee in her official capacity,
MERS, a division of MERSCorp, and
DOES 1-100,
Defendants.
ORDER GRANTING MOTIONS TO DISMISS
Pro se Plaintiff Lisa Kay Brumfiel (“Plaintiff”) has filed this action against
Defendants U.S. Bank, Larry Castle, Castle Stawiarski, LLC, Robert J. Hopp, Cynthia
Mares, MERS, and Does 1-100 contesting the foreclosure of her property. This matter
is before the Court on four Motions to Dismiss (“Motions”) filed by Defendants Larry
Castle and Castle Stawiarski (the “Castle Defendants”), U.S. Bank, MERS, Cynthia
Mares, and Robert J. Hopp (collectively “Defendants”). (ECF Nos. 51, 69, 90, 91). For
the reasons set forth below, the Motions are granted.
I. BACKGROUND
On or about November 14, 2006, Plaintiff entered into a mortgage loan
transaction secured by her primary residence located at 1499 S. Jasper Street, Aurora,
Colorado (the “Property”). (ECF No. 86 at 1.) Plaintiff subsequently failed to pay the
amounts due under the (1) promissory note and (2) secured by the deed of trust against
the Property. (ECF No. 86 at 2.) As a result, in October 2011, Defendant U.S. Bank
commenced a non-judicial foreclosure action against the Property pursuant to Colorado
Rule of Civil Procedure 120. (Id.) Plaintiff opposed the foreclosure, arguing in the Rule
120 proceeding that U.S. Bank is not the real party in interest and that it lacks standing
to foreclose. (ECF No. 21-1 at 4-5.)
On December 30, 2011, Plaintiff filed for Chapter 7 bankruptcy protection in the
United States Bankruptcy Court for the District of Colorado. (ECF No. 9-5.) Plaintiff
was granted an Order of Discharge by the Bankruptcy Court on April 24, 2012. (ECF
No. 9-6.)
On October 12, 2012, Plaintiff brought this action against the Castle Defendants
and U.S. Bank, alleging procedural defects in the foreclosure process under Rule 120,
common law tort claims, and constitutional claims. (ECF No. 1.) Among other alleged
constitutional defects, Plaintiff’s Complaint challenged Colorado Revised Statute § 3838-101, which allows a foreclosing entity in a Rule 120 proceeding to obtain an order
permitting foreclosure by simply providing a document signed by its attorney which
certifies or states that the entity has the right to foreclose. (See id. (referring to “HB1387,” a Colorado bill amending § 38-38-101, which the Castle Defendants allegedly
drafted). This statute obviates the requirement to submit the “original evidence of debt.”
See Colo. Rev. Stat. § 38-38-101(b)(III). Plaintiff’s Complaint sought compensatory
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and punitive damages, an order of mandamus1, injunctive relief, and fees and costs.
(ECF No. 1 at 14.)
On December 7, 2012, Plaintiff stipulated to an order authorizing the foreclosure
sale and agreeing to vacate the Rule 120 hearing, noting in the stipulation that Plaintiff
was contesting the constitutionality of the Rule 120 proceeding in her federal case.
(ECF No. 51-8 at 2.) Based upon this stipulation, an order authorizing the foreclosure
sale was entered in the Rule 120 proceeding. (ECF No. 51-9.)
On March 22, 2013, Plaintiff filed an Amended Complaint adding Defendants
Robert J. Hopp, MERS, and Cynthia Mares, the Arapahoe County Public Trustee.
(ECF No. 45.) Plaintiff’s Amended Complaint sought compensatory and punitive
damages, an injunction against the Rule 120 proceeding and foreclosure sale by the
Public Trustee, and fees and costs. (Id.)
On April 5, 2013, the Castle Defendants filed a Motion to Dismiss. (ECF No. 51.)
U.S. Bank and MERS then filed their own Motion to Dismiss on April 12, 2013. (ECF
No. 69.) Plaintiff filed a single Response to both Motions (ECF No. 83), and the Castle
Defendants, U.S. Bank, and MERS filed Replies (ECF Nos. 126 & 146). On May 3,
2013, Defendants Cynthia Mares and Robert J. Hopp filed Motions to Dismiss (ECF
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Plaintiff’s original Complaint asked the Court to “require the lender to show by ‘clear
and convincing’ evidence that the lender is the real party in interest or [in the] alternative require
referral to a judicial foreclosure [under] Rule 105 which is compliant with due process.” (ECF
No. 1 at 14.) Plaintiff’s Amended Complaint withdrew this request. (See ECF No. 45 at 18.) It
is notable, after U.S. Bank withdrew the challenged Rule 120 foreclosure proceeding and
initiated a judicial foreclosure under Rule 105, that Plaintiff now finds fault in the due process
afforded her in the Rule 105 proceeding. (See, e.g., ECF No. 183.) Regardless, Plaintiff’s
Amended Complaint makes clear that her claims challenge § 38-38-101 as applied to the Rule
120 process (see ECF No. 45 at 2, 5-18); thus, any argument she now raises against the Rule
105 process is outside the scope of the claims brought in the instant case.
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Nos. 90 & 91), to which Plaintiff filed a single Response (ECF No. 142). Defendants
Mares and Hopp filed Replies. (ECF Nos. 160 & 162.)
On May 6, 2013, prior to the foreclosure sale, the Court granted Plaintiff’s motion
for emergency injunctive relief, entered an Interim Preliminary Injunction against the
Public Trustee’s execution of the foreclosure sale, and set an evidentiary hearing for a
full preliminary injunction. (ECF No. 94.) On May 13, 2013, before the hearing took
place, U.S. Bank moved to vacate the hearing, indicating that it had filed a withdrawal of
the Rule 120 proceeding in Arapahoe County District Court and asserting that Plaintiff’s
request for injunctive relief was now moot. (ECF No. 116.) U.S. Bank further
consented to a permanent injunction against the use of the Rule 120 foreclosure
process against the Property, and stated its intention to file a judicial foreclosure action
under Colorado Rule of Civil Procedure 105 in lieu of any Rule 120 proceeding. (Id.)
As a result, the Court vacated the evidentiary hearing and granted Plaintiff’s now
unopposed Motion for a Preliminary Injunction, which enjoined the challenged Rule 120
process against the Property and prevented the Public Trustee from executing the
foreclosure sale. (ECF No. 120.) The Court found that any determination of mootness
was premature, as Plaintiff had opposed the withdrawal of the Rule 120 proceeding,
and the Court had received no notice of any ruling by the state court on the motion to
dismiss the foreclosure action. (Id.)
On May 21, 2013, the Arapahoe County District Court granted U.S. Bank’s
motion to dismiss the Rule 120 proceeding. (ECF No. 142-3.) On May 24, 2013, U.S.
Bank filed a judicial foreclosure action under Rule 105 in Arapahoe County District
Court. (See ECF No. 161 at 2.)
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II. LEGAL STANDARD2
Rule 12(b)(1) empowers a court to dismiss a complaint for “lack of jurisdiction
over the subject matter.” Fed. R. Civ. P. 12(b)(1). Dismissal under Rule 12(b)(1) is not
a judgment on the merits of a plaintiff’s case. Rather, it calls for a determination that
the court lacks authority to adjudicate the matter, attacking the existence of jurisdiction
rather than the allegations of the complaint. See Castaneda v. INS, 23 F.3d 1576,
1580 (10th Cir. 1994) (recognizing federal courts are courts of limited jurisdiction and
may only exercise jurisdiction when specifically authorized to do so).
A Rule 12(b)(1) motion to dismiss “must be determined from the allegations of
fact in the complaint, without regard to mere conclusory allegations of jurisdiction.”
Groundhog v. Keeler, 442 F.2d 674, 677 (10th Cir. 1971). When considering a Rule
12(b)(1) motion, however, the court may consider matters outside the pleadings without
transforming the motion into one for summary judgment. Holt v. United States, 46 F.3d
1000, 1003 (10th Cir. 1995). Where a party challenges the facts upon which subject
matter jurisdiction depends, a district court may not presume the truthfulness of the
complaint’s “factual allegations . . . [and] has wide discretion to allow affidavits, other
documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts
under Rule 12(b)(1).” Id.
The burden of establishing subject matter jurisdiction is on the party asserting
jurisdiction. Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974). A
court lacking jurisdiction “must dismiss the cause at any stage of the proceeding in
2
Although Defendants’ Motions include arguments for dismissal pursuant to both Rules
12(b)(1) and 12(b)(6), the Court addresses herein only Rule 12(b)(1) because it is dispositive of
the Motions.
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which it becomes apparent that jurisdiction is lacking.” See id.
III. ANALYSIS
Article III of the United States Constitution limits a federal court’s jurisdiction to
the adjudication of “cases” or “controversies.” U.S. Const. Art. III, § 2. This “bedrock
requirement,” Valley Forge Christian Coll. v. Ams. United for Separation of Church &
State, Inc., 454 U.S. 464, 471 (1982), protects the system of separated powers and
respect for the coequal branches by restricting the province of the judiciary to
“decid[ing] on the rights of individuals.” Marbury v. Madison, 5 U.S. 137, 170 (1803).
Indeed, “‘[n]o principle is more fundamental to the judiciary’s proper role in our system
of government than the constitutional limitation of federal-court jurisdiction to actual
cases or controversies.’” Raines v. Byrd, 521 U.S. 811, 818 (1997) (quoting Simon v.
E. Ky. Welfare Rights Org., 426 U.S. 26, 37 (1976)).
Defendants’ Motions raise myriad arguments against each of Plaintiff’s claims,
arguing that dismissal is required both under Rule 12(b)(1) because the Court lacks
jurisdiction, and under Rule 12(b)(6) because Plaintiff fails to state a claim upon which
relief can be granted. (See ECF Nos. 51, 69, 90, 91.) Because the jurisdictional
questions are dispositive of the Motions, the Court will begin its analysis with those
arguments.
A.
Damages
Plaintiff’s Amended Complaint requests damages, injunctive relief, and fees and
costs. (ECF No. 45 at 18.) The Motions filed by the Castle Defendants and U.S. Bank
both contend that Plaintiff has no standing to request monetary damages because,
after Plaintiff’s bankruptcy, she is no longer the real party in interest with respect to her
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damages claims, which are instead owned by the bankruptcy trustee. (ECF No. 51 at
4; ECF No. 69 at 6-10.)
Of the justiciability doctrines created to enforce the case-or-controversy
requirement, “perhaps the most important of these doctrines” is the requirement that “a
litigant have ‘standing’ to invoke the power of a federal court.” Allen v. Wright, 486 U.S.
737, 750 (1984). “[T]he standing question is whether the plaintiff has ‘alleged such a
personal stake in the outcome of the controversy’ as to warrant his invocation of
federal-court jurisdiction and to justify exercise of the court’s remedial powers on his
behalf.” Warth v. Seldin, 422 U.S. 490, 498-99 (1975) (citing Baker v. Carr, 369 U.S.
186, 204 (1962)).
The Tenth Circuit “has repeatedly characterized standing as an element of
subject matter jurisdiction.” Hill v. Vanderbilt Capital Advisors, LLC, 702 F.3d 1220,
1224 (10th Cir. 2012). Thus, Plaintiff bears the burden of establishing that jurisdiction
exists, and that she has standing to pursue her claims. See Basso, 495 F.2d at 909.
To demonstrate that a plaintiff has standing to assert a claim, three elements are
required:
[1] The plaintiff must have suffered an injury in fact . . . ,
[2] there must be a causal connection between the injury
and the conduct complained of—the injury has to be fairly
traceable to the challenged action of the defendant, and . . .
[3] it must be likely, as opposed to merely speculative, that
the injury will be redressed by a favorable decision.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal citations omitted).
Defendants contend that Plaintiff lacks standing to pursue her damages claims
because her alleged monetary injury is not likely redressable; that is, any award from a
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favorable decision would be owned not by Plaintiff, but by the trustee of her bankruptcy
estate. This is so because Plaintiff’s claims accrued prior to her bankruptcy petition,
she failed to disclose those claims as assets in her bankruptcy schedules, and
therefore her claims, as with all unscheduled assets, remain property of the bankruptcy
estate and she has lost any right to enforce them. (ECF No. 69 at 9-10.)
The Court agrees. The filing of a bankruptcy petition transforms the filing party’s
“legal or equitable interests” into property of the bankruptcy estate, at which point the
bankruptcy trustee becomes the real party in interest with respect to those claims. 11
U.S.C. §§ 323(a), 541(a); see Eastman v. Union Pac. R.R. Co., 493 F.3d 1151, 1159
(10th Cir. 2007) (“The bankruptcy code imposes a duty upon a debtor to disclose all
assets, including contingent and unliquidated claims. . . . That duty encompasses
disclosure of all legal claims and causes of action, pending or potential, which a debtor
might have.”); see also Barger v. City of Cartersville, Ga., 348 F.3d 1289, 1297 (11th
Cir. 2003). While this requirement does not apply to Plaintiff’s claims for injunctive
relief, it does apply to any claims with monetary value that accrued prior to the
bankruptcy. See Barger, 348 F.3d at 1297 (“Barger’s claim for injunctive relief . . .
would have added nothing of value to the bankruptcy estate even if she properly
disclosed it. Therefore, . . . [her failure to disclose does] not prohibit Barger from
pursuing any claims for injunctive relief that she may have.”). Therefore, Plaintiff’s
claims for damages are not redressable such that she could obtain relief from a
favorable decision of this Court.
Plaintiff argues that she retains standing to assert her damages claims because
they did not accrue prior to filing her bankruptcy petition. (ECF No. 83 at 3-9.) Plaintiff
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contends that her damages claims did not accrue until she became aware of
Defendants’ alleged conspiracy to deprive her of due process through their drafting of
the amendments to § 38-38-101, and that the accrual date was further deferred
because she continued to incur damages after the bankruptcy was filed. (Id.) In
response, Defendants argue that Plaintiff demonstrated her awareness of the alleged
procedural defects she challenges in the instant case when she opposed the Rule 120
proceeding in October and November 2011, wherein she argued that U.S. Bank could
not prove its right to foreclose. (ECF No. 69 at 3-5, 9-10.)
The Court finds that Plaintiff’s claims accrued prior to the filing of the bankruptcy
petition. The challenged amendments to § 38-38-101 were drafted in 2006 and
became effective in 2008—nearly four years before Plaintiff filed for bankruptcy
protection. See 2006 Colo. Legis. Serv. Ch. 305 (H.B. 06-1387); Colo. Rev. Stat. § 3838-101, Credits (“Repealed and reenacted by Laws 2006, Ch. 305, § 7, eff. Jan. 1,
2008.”). The instigation of the Rule 120 foreclosure proceeding, which applied the
provisions of § 38-38-101 to Plaintiff’s Property, and Plaintiff’s opposition thereto,
occurred in October and November 2011. (See ECF No. 86 at 2.) Once the Rule 120
foreclosure was initiated and Plaintiff attempted to assert her real party in interest
defense, she had reason to know of the damages the alleged conspiracy would cause
her. She filed her bankruptcy petition more than a month later, on December 30, 2011.
(ECF No. 9-5.)
To the extent that Plaintiff’s assertion that she was unaware of the facts
constituting her damages claims can be construed as a request to excuse her failure to
disclose those claims during her bankruptcy proceeding due to inadvertence or mistake,
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the Court finds this principle inapplicable here. See Eastman, 493 F.3d at 1157 (a
debtor’s failure to disclose is deemed inadvertent or mistaken “only when, in general,
the debtor either lacks knowledge of the undisclosed claims or has no motive for their
concealment”) (quoting In re Coastal Plains, Inc., 179 F.3d 197, 210 (5th Cir. 1999)). It
is apparent through Plaintiff’s filings in her Rule 120 proceeding that she had enough
information to apprise her of her possible cause of action. See In re Coastal Plains,
179 F.3d at 208 (“if the debtor has enough information . . . prior to confirmation to
suggest that it may have a possible cause of action, then it is a ‘known’ cause of action
such that it must be disclosed.”).
In sum, because Plaintiff’s claims for monetary damages were not disclosed
during her bankruptcy proceeding, those claims are the property of the bankruptcy
estate. Therefore, the bankruptcy trustee is the real party in interest with respect to
those claims, and Plaintiff lacks standing to bring them. Accordingly, Defendants’
Motions are granted to the extent they seek dismissal of Plaintiff’s claims for damages.
B.
Injunctive Relief
While Defendants do not dispute that Plaintiff’s claim for injunctive relief survives
her bankruptcy petition, they argue instead that this claim did not survive the withdrawal
of the Rule 120 proceeding, and that such claim is now moot. (See ECF No. 116 at 36.)
Mootness, another doctrine used to enforce the case-or-controversy
requirement, requires a federal court to dismiss a claim when a favorable decision from
the court would have no effect on the rights of the litigants in the case. See DeFunis v.
Odegaard, 416 U.S. 312, 316 (1974); see also Murphy v. Hunt, 455 U.S. 478, 481
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(1982) (“a case becomes moot when the issues presented are no longer ‘live’ or the
parties lack a legally cognizable interest in the outcome.”) (internal quotation marks
omitted). Because U.S. Bank has already agreed to a permanent injunction on the use
of the Rule 120 foreclosure proceeding against Plaintiff’s Property (see ECF No. 116 at
3), Defendants argue that there is no longer any live controversy with respect to that
proceeding, because “[t]here is no Rule 120 Public Trustee Foreclosure affecting this
Plaintiff or this Property for this Court to enjoin.” (Id. at 2.) Accordingly, Defendants
contend that the Court should dismiss Plaintiff’s remaining claim for injunctive relief.
Plaintiff does not dispute the fact that the Rule 120 proceeding has been
withdrawn, and that there is no longer any such proceeding for the Court to enjoin.
Rather, Plaintiff contends that her case falls under an exception to mootness doctrine,
which permits a moot case to proceed where the dispute is “capable of repetition, yet
evading review.”3 (ECF No. 142 at 8-10.) The Supreme Court has held this exception
to be “limited to the situation where two elements combine[]: (1) the challenged action
was in its duration too short to be fully litigated prior to its cessation or expiration, and
(2) there was a reasonable expectation that the same complaining party would be
subjected to the same action again.” Murphy, 455 U.S. at 482 (quoting Weinstein v.
Bradford, 423 U.S. 147, 149 (1975) (per curiam)).
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Plaintiff also argues that her case falls under a “public importance” exception to
mootness doctrine, citing to Colorado state case law. (ECF No. 142 at 8.) However, that
exception is not recognized in a federal court, where Article III limits the Court’s jurisdiction. Cf.
DeFunis, 416 U.S. at 316 (“Although as a matter of Washington state law it appears that this
case would be saved from mootness by ‘the great public interest in the continuing issues raised
by this appeal,’ the fact remains that under Art. III, ‘(e)ven in cases arising in the state courts,
the question of mootness is a federal one which a federal court must resolve before it assumes
jurisdiction.’”) (internal quotations omitted).
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Because the Rule 120 proceeding was terminated prior to the completion of
Plaintiff’s due process challenge, the first of the elements of the mootness
exception—the short duration—is satisfied. However, Plaintiff has failed to satisfy the
second element by showing a reasonable expectation that she, “the same complaining
party,” will be subjected to the challenged Rule 120 process again. Instead, it is
apparent that U.S. Bank’s commencement of a judicial foreclosure under Rule 105
obviates any need for it to pursue foreclosure of Plaintiff’s Property via any other
method. Under these circumstances, it would be unreasonable to expect Plaintiff to
face another Rule 120 proceeding against her Property. Therefore, the Court finds that
the “capable of repetition, yet evading review” exception to the mootness doctrine does
not apply to Plaintiff’s injunctive claims.
Because Plaintiff’s request for injunctive relief can no longer be remedied by this
Court due to the withdrawal of the challenged proceeding, the Court finds that Plaintiff’s
injunctive claims are moot. Accordingly, dismissal is appropriate with regard to those
claims. As Article III restricts the Court’s jurisdiction such that it extends over neither
Plaintiff’s damages claims, nor her injunctive claims, the Court finds that it lacks
jurisdiction over the entirety of Plaintiff’s Amended Complaint. Therefore, the Court
must dismiss the Amended Complaint pursuant to Rule 12(b)(1).
IV. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.
Defendants’ Motions to Dismiss the Amended Complaint (ECF Nos. 51, 69, 90,
91) are GRANTED due to lack of jurisdiction;
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2.
Plaintiff’s Amended Complaint is DISMISSED WITHOUT PREJUDICE in its
entirety; and
3.
Judgment shall be entered in favor of Defendants, and Defendants shall have
their costs.
Dated this 2nd day of October, 2013.
BY THE COURT:
William J. Martínez
United States District Judge
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