Wilmington Savings Fund Society v. Perreria et al

Filing 23

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND ACTION REMOVED FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT, STATE OF HAWAI'I re 5 Motion to Remand to State Court. Signed by JUDGE LESLIE E. KOBAYASHI on 05/27/2016. This Court HEREBY REMANDS this action to the State of Hawai'i Third Circuit Court. The Court DIRECTS the Clerk's Office to transmit a certified copy of this Order to the clerk of the Third Circuit. (eps)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications served by first class mail on May 31, 2016

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
WILMINGTON SAVINGS FUND
SOCIETY, FSB DBA CRISTIANA
TRUST AS TRUSTEE FOR HLSS
MORTGAGE MASTER TRUST FOR THE
BENEFIT OF THE HOLDERS OF THE
SERIES 2014-1 CERTIFICATES
ISSUED BY HLSS MORTGAGE
MASTER TRUST,

)
)
)
)
)
)
)
)
)
Plaintiffs,
)
)
vs.
)
)
AUDREY ANNE PERREIRA, JUSTIN )
KEHAU PERREIRA, ANDREW H.
)
DONALDSON, ET AL. AND ROES 1- )
10,
)
)
Defendants.
)
_____________________________ )

CIVIL 16-00029 LEK-KSC

ORDER GRANTING PLAINTIFF’S MOTION TO REMAND ACTION REMOVED
FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT, STATE OF HAWAI`I
On February 18, 2016, Plaintiff Wilmington Savings Fund
Society, FSB doing business as Christiana Trust as Trustee for
HLSS Mortgage Master Trust for the Benefit of the Holders of the
Series 2014-1 Certificates Issued by HLSS Mortgage Master Trust
(“Plaintiff”) filed a Motion to Remand Action Removed from the
Circuit Court of the Third Circuit, State of Hawai`i (“Motion to
Remand”).

[Dkt. no. 5.]

Pro se Defendants Audrey Anne Perreira,

Justin Kehau Perreira, and Andrew H. Donaldson (collectively
“Defendants”) filed their memorandum in opposition on April 1,
2016, and Plaintiff filed its reply on April 12, 2016.

[Dkt.

nos. 16, 18.]

On April 29, 2016, Defendants filed a document

titled “Notice of Applicability and Invocation of the Fourteenth
Amendment to the United States Constitution Civil Right of Due
Process” (“4/29/16 Notice”).1

[Dkt. no. 20.]

The Court finds this matter suitable for disposition
without a hearing pursuant to Rule LR7.2(d) of the Local Rules of
Practice of the United States District Court for the District of
Hawai`i.

After careful consideration of the Motion to Remand,

supporting and opposing memoranda, and the relevant legal
authority, Plaintiff’s Motion to Remand is HEREBY GRANTED for the
reasons set forth below.
BACKGROUND
On November 27, 2015, Plaintiff filed its Complaint in
the State of Hawai`i Third Circuit Court (“Third Circuit”).
[Motion to Remand, Decl. of Counsel (“Ohara Decl.”) Exh. 1.2]

1

This Court construes the 4/29/16 Notice as a supplemental
memorandum in opposition to the Motion to Remand. Defendants did
not obtain leave of court to file the 4/29/16 Notice. See Local
Rule LR7.4 (stating that, other than filing a memorandum in
opposition or a reply, “[n]o further or supplemental briefing
shall be submitted without leave of court”). However, because
Defendants are proceeding pro se, this Court will consider the
4/29/16 Notice.
2

Plaintiff also filed a First Amended Complaint in the
Third Circuit on January 27, 2016. [Ohara Decl., Exh. 2.] The
First Amended Complaint was filed the day after Defendants filed
their Notice of Removal. Defendants filed a Rule 16 Scheduling
Conference Statement, Motion to Strike, Request for Extension of
Time, and Request for Telephonic Participation in Hearing
(continued...)
2

Plaintiff claims that it owns a promissory note of $206,755
(“Note”), which secures a mortgage executed by Defendants on
certain property in Kea`au, Hawai`i (“Mortgage” and “the
Property”).

[Id. at ¶¶ 11-14.]

Plaintiff alleges that

Defendants defaulted on the Note and Mortgage by not paying the
principal and interest and that Defendants did not cure the
default.

[Id. at ¶¶ 26-27.]

In Count I of the Complaint,

Plaintiff requests a declaratory judgment that it is the current
holder of the Note and Mortgage, and that it has priority over
the interests of all of the defendants in this case.3
¶ 24.]

[Id. at

In Count II, Plaintiff requests judicial foreclosure of

the Property.

[Id. at ¶ 28.]

2

(...continued)
(“Motion to Strike”) requesting, inter alia, that the First
Amended Complaint be stricken from the record. [Motion to
Strike, filed 2/25/16 (dkt. no. 10), at 2.] The magistrate judge
denied the request to strike the First Amended Complaint in an
entering order filed on March 2, 2016. [Dkt. no. 11.] Since
jurisdiction is determined at the time of removal, however, this
Order addresses the allegations in the Complaint only. See
Morongo Band of Mission Indians v. Cal. State Bd. of
Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988) (“In
determining federal court jurisdiction, we look to the original,
rather than to the amended, complaint. Subject matter
jurisdiction must exist as of the time the action is
commenced.”).
3

In addition to Defendants Audrey Anne Perreira, Justin
Kehau Perreira, and Andrew H. Donaldson, the Complaint also names
as defendants Hawaiian Paradise Park Owners Association, USAA
Federal Savings Bank, and Rescap Liquidating Trust, successor-ininterest to Residential Capital, LLC. There is no evidence that,
at time of removal, Plaintiff had served any of these defendants
with the Complaint.
3

Defendants removed the action to this district court
based on federal question and diversity jurisdiction.
Removal, filed 1/26/16 (dkt. no. 1), at pgs. 2-4.]

[Notice of

In support of

the existence of federal question jurisdiction, Defendants cite
the Fourteenth Amendment to the United States Constitution and
various federal statutes.

[Id. at pgs. 4-5.]

Defendants assert

that diversity jurisdiction exists because the amount-incontroversy requirement is satisfied and Plaintiff is a Delaware
corporation and Defendants are Hawai`i citizens.

[Id. at pgs. 2-

3.]
In the Motion to Remand, Plaintiff counters that: the
Complaint alleges only causes of action under state law;
Defendants cannot create federal subject matter jurisdiction by
attempting to raise defenses or counterclaims based on federal
law; and Defendants are all Hawai`i citizens, which bars removal
under the forum defendant rule.

In their memorandum in

opposition, Defendants reiterate the arguments from their Notice
of Removal.

Defendants also request sanctions against Plaintiff

and Plaintiff’s attorneys for “improperly attempting to prevent
pro se homeowner defendants from raising legitimate defenses and
counter-claims based on federal consumer protection laws.”
in Opp. at 6.]

4

[Mem.

STANDARD
Civil actions “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,”
unless expressly prohibited by a federal statute.
§ 1441(a).

28 U.S.C.

District courts have federal question jurisdiction

over “all civil actions arising under the Constitution, laws, or
treaties of the United States.”

28 U.S.C. § 1331.

District

courts have diversity jurisdiction when “the matter in
controversy exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between,” inter alia, “citizens of
different States.”

28 U.S.C. § 1332(a)(1).

This district court has stated:
There is a strong presumption against removal.
Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.
1992). The statute authorizing removal is
strictly construed, and the removing party has the
burden of establishing that removal was proper.
Moore–Thomas v. Alaska Airlines, Inc., 553 F.3d
1241, 1244 (9th Cir. 2009).
Brown v. City & Cty. of Honolulu, CV No. 14-00354 HG-KSC, 2015 WL
1564961, at *2 (D. Hawai`i Apr. 7, 2015).

5

DISCUSSION
I.

Federal Question Jurisdiction
Federal question jurisdiction
exists when a plaintiff’s well-pleaded complaint
establishes either (1) that federal law creates
the cause of action or (2) that a state law claim
“necessarily raises 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.” Provincial
Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d
1083, 1086–87 (9th Cir. 2009) (quoting Grable &
Sons Metal Prod., Inc. v. Darue Eng’g & Mfg., 545
U.S. 308, 314 (2005)).

Id. at *3.
A.

Federal Question Based on the Complaint
Plaintiff’s declaratory judgment claim addresses its

rights to enforce the Note and Mortgage.

Establishing ownership

of a note and mortgage and determining an owner’s rights are
issues governed by state law.

See Haw. Rev. Stat. § 490:3-203

(governing the transfer of an instrument and the rights acquired
by transfer); Haw. Rev. Stat. § 490:3-301 (defining “person
entitled to enforce” an instrument); see also U.S. Bank N.A. v.
Mattos, 137 Hawai`i 209, 211, 367 P.3d 703, 705 (Ct. App. 2016)
(“‘In order to enforce a note and mortgage under Hawaii law, a
creditor must be “a person entitled to enforce” the note.

One

person entitled to enforce an instrument is a “holder” of the
instrument.

A “holder” is the “person in possession of a
6

negotiable instrument.”’” (quoting In re Tyrell, 528 B.R. 790,
794 (Bankr. D. Haw. 2015) (citing Hawaii Revised Statute (HRS)
§ 490:3–301 (2008 Repl.) and HRS § 490:1–201(b) (2008 Repl.))));
In re Mortg. Store, 509 B.R. 292, 296 & nn. 10-11 (Bankr. D.
Hawai`i 2014) (“Under Hawaii law (and the law of most other
states), the collateral follows the obligation.

A transfer of a

promissory note automatically transfers any security for that
note.” (some citations omitted) (citing S.N. Castle Estate v.
Haneberg, 20 Haw. 123, 130 (1910))).
Plaintiff’s foreclosure claim is also governed by state
law.

See Haw. Rev. Stat. §§ 667-1.5 to 667-20.1 (governing

foreclosure by action); see also OneWest Bank, FSB v. Farrar,
Civ. No. 12-00108 ACK-KSC, 2014 WL 5023472, at *5 (D. Hawai`i
Oct. 8, 2014) (“Under Hawaii law, a court may issue a foreclosure
decree when the moving party establishes 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 the cancellation notice and
recordation of an affidavit to such effect.” (some citations
omitted) (citing IndyMac Bank v. Miguel, 184 P.3d 821, 835 (Ct.
App. 2008))).

7

Both of the counts in the Complaint allege state law
claims, and neither count contains a cause of action based on
federal law.

Therefore, this Court CONCLUDES that the Complaint

does not present a federal question on its face.
B.

Federal Question Necessarily Raised
Even where a complaint does not raise a federal

question on its face, the case may “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, 545 U.S. at 314.

This is not one of those cases,

however.
In their Notice of Removal, Defendants point to the
Fourteenth Amendment, the Securities Act of 1933, the Racketeer
Influenced and Corrupt Organizations Act, the Consumer Credit
Protection Act, the Fair Debt Collection Practices Act, and the
Real Estate Settlement Procedures Act.
pgs. 4-5.]

[Notice of Removal at

Defendants refer to the latter three as consumer

protection laws.

[Mem. in Opp. at 2-3.]

Defendants go on to

state that their “defenses and counterclaims are founded and
based on federal consumer protection laws.”
omitted).]

[Id. at 3 (emphasis

But, “a defendant cannot create federal subject

matter jurisdiction on the basis of claims or defenses asserted
in a notice of removal.”

U.S. Bank, N.A. v. Mizukami, CIVIL NO.
8

15-00523 JMS-BMK, 2016 WL 632195, at *2 (D. Hawai`i Feb. 17,
2016) (some citations omitted) (citing Takeda v. Nw. Nat’l Life
Ins. Co., 765 F.2d 815, 822 (9th Cir. 1985)).

Likewise, a

defendant cannot create federal subject matter jurisdiction on
the basis of claims or defenses asserted in his or her opposition
to a motion to remand.
In a case with very similar circumstances, this
district court has stated:
Defendant does not (and cannot) argue that
foreclosure itself is a federal claim. Rather, he
argues that various federal laws 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,
deceptive, and racketeering practices. The court
finds these federal issues to be peripheral to the
foreclosure claim, and not “(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.” Gunn [v. Minton], 133 S.
Ct. [1059,] 1065 [(2013)]. Rather, Defendant’s
federal issues are more properly viewed as
defenses or possible counterclaims to Plaintiff’s
foreclosure action. And Defendant cannot create
federal subject matter jurisdiction based on an
attempt to raise such defenses or counterclaims
under federal law.
Deutsche Bank Nat’l Trust Co. v. Hagan, CIVIL NO. 15-00376
JMS-KSC, 2015 WL 7720465, at *3 (D. Hawai`i Nov. 27, 2015)
(footnote and some citations omitted).
9

Here, as in Hagan, the Fourteenth Amendment and the
federal statutes cited by Defendants may support possible
defenses or counterclaims.

But, neither these citations nor

Defendants’ possible defenses or counterclaims satisfy their
burden to show that removal was proper.

See id. at *2-3; cf.

Pasion v. Cty. of Kauai, No. CV 13–00676 ACK–RLP, 2014 WL 957433,
at *3 (D. Hawai`i Mar. 11, 2014) (“[T]he Supreme Court has made
clear that the mere presence of a federal issue in a state suit
does not, by itself, give rise to federal question jurisdiction.”
(citing Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg.,
545 U.S. 308, 314 (2005))).

This Court therefore CONCLUDES that

it does not have federal question jurisdiction over the instant
case.
II.

Diversity Jurisdiction
Plaintiff also asserts that this Court has diversity

jurisdiction over the instant case.

However, “[a] civil action

otherwise removable solely on the basis of the jurisdiction under
section 1332(a) of this title may not be removed if any of the
parties in interest properly joined and served as defendants is a
citizen of the State in which such action is brought.”
§ 1441(b)(2).

28 U.S.C.

This is known as the “‘forum defendant rule’ which

‘confines removal on the basis of diversity jurisdiction to
instances where no defendant is a citizen of the forum state.’”
Watanabe v. Lankford, 684 F. Supp. 2d 1210, 1215 (D. Hawai`i
10

2010) (quoting Lively v. Wild Oats Mkts., Inc., 456 F.3d 933, 939
(9th Cir. 2006)).

Simply stated, if a Hawai`i citizen is sued in

a Hawai`i state court by a non-Hawai`i citizen, the case cannot
be removed to federal court on diversity grounds.
situation here.

That is the

See Notice of Removal at pg. 3 (stating that

Defendants are Hawai`i citizens).

This Court CONCLUDES that the

forum defendant rule applies, and therefore removal of this
action was improper.
III. Request for Sanctions
Defendants ask this Court to sanction Plaintiff for
bringing the Motion to Remand.

Although this Court has concluded

that it does not have jurisdiction over the instant case, “it may
have jurisdiction to determine whether the parties have abused
the judicial system and whether sanctions are appropriate to
remedy such abuse.”

See Westlake N. Prop. Owners Ass’n v. City

of Thousand Oaks, 915 F.2d 1301, 1303 (9th Cir. 1990).
Defendants have not specified the legal authority that their
request for sanctions relies upon, but this Court liberally
construes Defendants’ request as a request pursuant to this
Court’s inherent authority.

See Pregana v. CitiMortgage, Inc.,

Civil No. 14-00226 DKW-KSC, 2015 WL 1966671, at *2 (D. Hawai`i
Apr. 30, 2015) (“The Court liberally construes the [plaintiffs’]
filings because they are proceeding pro se.” (citing Eldridge v.
Block, 832 F.2d 1132, 1137 (9th Cir. 1987))).
11

“A court may . . . impose sanctions under its inherent
power for conduct taken in bad faith.”

Horowitz v. Sulla, Civil

No. 13-00500 HG-BMK, 2014 WL 1048798, at *11 (D. Hawai`i Mar. 14,
2014) (citing Gomez v. Vernon, 255 F.3d 1118, 1134 (9th Cir.
2001)).

“Before awarding sanctions under its inherent powers,

however, the court must make an explicit finding that counsel’s
conduct ‘constituted or was tantamount to bad faith.’”

Primus

Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir.
1997) (some citations omitted) (quoting Roadway Express, Inc. v.
Piper, 447 U.S. 752, 767, 100 S. Ct. 2465 (1980)).

“[S]anctions

should be reserved for the rare and exceptional case where the
action is clearly frivolous, legally unreasonable or without
legal foundation, or brought for an improper purpose.”

Id. at

649 (citation and internal quotation marks omitted).
The conduct complained of is the filing of the Motion
to Remand.

The Motion to Remand was not frivolous, unreasonable,

or without legal foundation, as evidenced by the fact that this
Court has granted the motion.

Further, there is no indication in

the record that Plaintiff filed the Motion to Remand for an
improper purpose.

This Court therefore CONCLUDES that the filing

of the Motion to Remand does not warrant sanctions and DENIES
Defendants’ request.

12

CONCLUSION
On the basis of the foregoing, Plaintiff’s Motion to
Remand Action Removed from the Circuit Court of the Third
Circuit, State of Hawai`i, filed February 18, 2016, is HEREBY
GRANTED.

This Court HEREBY REMANDS this action to the State of

Hawai`i Third Circuit Court.

The Court DIRECTS the Clerk’s

Office to transmit a certified copy of this Order to the clerk of
the Third Circuit.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, May 27, 2016.

/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

WILMINGTON SAVINGS FUND SOCIETY VS. AUDREY ANNE PERREIRA; CIVIL
16-00029 LEK-KSC; ORDER GRANTING PLAINTIFF’S MOTION TO REMAND
ACTION REMOVED FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT, STATE
OF HAWAII

13