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Tavares v. Alabama Housing Finance Authority

United States District Court, W.D. Washington, Seattle

January 8, 2018



          Marsha J. Pechman, United States District Judge

         THIS MATTER comes before the Court on Plaintiff's Motion for Leave to File Amended Complaint. (Dkt. No. 24.) Having considered the Motion, the Response (Dkt. No. 26), the Reply (Dkt. No. 28), and all related papers, the Court hereby GRANTS the Motion and REFERS this case to the Bankruptcy Court for all pre-trial proceedings.


Plaintiff is the co-owner of a residential property in Mount Vernon, Washington (the “property”), which she purchased with a loan serviced by Alabama Housing Finance Authority d/b/a ServiSolutions (“AHFA” or “Defendant”). (Dkt. No. 1 at 3-4, 12.) Around April-June 2016, Plaintiff contacted AHFA to request a loan modification. (Id. at 5.) AHFA refused, and informed Plaintiff that if she wanted a modification, she would have to first default. (Id.) After defaulting, Plaintiff again requested a modification. (Id.) AFHA then informed her that it required a quitclaim deed from the co-borrower and that the co-borrower's child support payments could not be relied upon in calculating her income. (Id.)

         In September 2016, Plaintiff filed a voluntary petition for Chapter 7 bankruptcy, on which she listed the property as an asset. (Dkt. No. 26 at 2; see also In re Tavares, Case No. 16-14901-MLB (Bankr. W.D. Wash.).) AHFA moved the Bankruptcy Court for relief from the automatic stay to foreclose upon the property. (Dkt. No. 26 at 2; see also Dkt. No. 21-3.) The Bankruptcy Court granted the motion in November 2016. (Dkt. No. 26 at 2; see also Dkt. No. 21-4.) In March 2017, Plaintiff's bankruptcy was discharged. (Dkt. No. 25 at 6.) In May 2017, the Bankruptcy Court appointed a relator to sell the property. (In re Tavares, Case No. 16-14901-MLB, Dkt. Nos. 34, 38 (Bankr. W.D. Wash.).)

         Once her debt was discharged in bankruptcy, Plaintiff continued to seek a loan modification, and in May 2017, engaged a housing counselor to assist in the process. (Dkt. No. 1 at 5.) Plaintiff alleges AHFA attempted to dissuade her from using the housing counselor, and informed her it would no longer require a quitclaim deed from the co-borrower. (Id. at 5-6.) In June 2017, Plaintiff submitted a modification application. (Id. at 6.) Plaintiff alleges she had sufficient income to qualify under the FHA Home Affordable Modification Program (“HAMP”). (Id. at 6.) Plaintiff alleges AHFA never responded to the application, other than to reject Plaintiff's reliance on child support payments in calculating her income. (Id.) In September 2017, Plaintiff submitted another modification application. (Id.) AHFA denied the application in October 2017, but did not provide an explanation of the basis for denial. (Id. at 6-7.)

         Plaintiff filed this action on October 27, 2017, alleging that AHFA's failure to apply for a claim against the FHA's Mutual Mortgage Insurance Fund and its eighteen-month delay in accurately assessing her eligibility for a loan modification (1) increased the principal and accrued interest on her loan and (2) delayed resolution past the expiration of HAMP, precluding her participation in the program. (Id. at 5, 7, 11; Dkt. No. 6 at 3.) Plaintiff asserted claims under Washington's Consumer Protection Act (“WCPA”) and the Equal Credit Opportunity Act (“ECOA”); claims for discrimination based on race, color, or national origin under 42 U.S.C. § 2000d and the Fair Housing Act; and a claim for the tort of outrage. (See Dkt. No. 1.)

         On December 6, 2017, Defendant moved to dismiss under Rules 12(b)(1) and 12(b)(6). (Dkt. No. 21.) On December 18, 2017, Plaintiff filed this Motion for Leave to Amend. (Dkt. No. 24.) AHFA opposes the motion, and argues that (1) this Court does not have subject-matter jurisdiction to hear this case and (2) the case should be referred to the Bankruptcy Court. (See Dkt. No. 26.)


         I. Motion to Amend

         In general, “[a] party may amend its pleading once as a matter of course within . . . 21 days after service of a motion under Rule 12(b).” Fed.R.Civ.P. 15(a)(2). The Court considers the following factors when leave to amend is requested: (1) bad faith, (2) undue delay, (3) prejudice to opposing party, (4) futility of amendment, and (5) whether the complaint was previously amended. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). Absent a strong showing of any one of these factors, there is a presumption that leave to amend should be granted. Id.

         Plaintiff seeks leave to amend to add (1) factual allegations in support of her discrimination claims, and (2) a claim under the Real Estate Settlement Procedures Act (“RESPA”). (Dkt. No. 24 at 1; see also Dkt. No. 24-1.) Plaintiff has not amended her complaint previously, and it is undisputed that the motion is not brought in bad faith or for purposes of delay. (See Dkt. Nos. 24, 26.) However, AHFA opposes the motion, and argues that the proposed amendments are futile because this Court lacks subject matter to hear the case. (Dkt. No. 26 at 1-4.) Essentially, AHFA claims that because the Bankruptcy Court previously exercised in rem jurisdiction over the property, the prior exclusive jurisdiction doctrine applies. (Id.) Plaintiff responds that the Bankruptcy Court lifted its automatic stay, and that resolution of Plaintiff's claims does not require determination of interests in the property. (Dkt. No. 28 at 2.)

         The Court finds that it has subject-matter jurisdiction to hear this case, and to rule on Plaintiff's Motion for Leave to Amend. The Bankruptcy Court relinquished its exclusive jurisdiction over the property when it lifted the automatic stay to allow AHFA to foreclose upon the property. See In re Mellor, 31 B.R. 151, 154 (9th Cir. B.A.P. 1983), rev'd on other grounds, 734 F.2d 1396 (9th Cir. 1984) (“Although a non-bankruptcy court may not, by its own power, choose to exercise in rem jurisdiction over estate property . . . nothing prevents a bankruptcy court from surrendering its exclusive jurisdiction in appropriate circumstances. . . . Once [an] automatic stay has been terminated, with respect to an action against estate property, there is no question that the party requesting that termination may subsequently seek relief against the subject property in a non-bankruptcy court.”); see also Wilson v. Bill Barry Enters., Inc., 822 F.2d 859, 860 (9th Cir. 1987) (bankruptcy court “relinquished its jurisdiction when it granted relief from the automatic stay”); Chao v. Hosp. Staffing Servs., Inc., 270 F.3d 374, 383 (6th Cir. 2001) (“[T]he exclusivity of the bankruptcy court's jurisdiction reaches only as far as the automatic stay provisions of 11 U.S.C. § 362. . . . [I]f the bankruptcy court grants relief from the stay with respect to certain property or claims . . . [its] jurisdiction is concurrent with that of other courts of competent jurisdiction.”) (citations omitted).

         Therefore, the Court finds that Plaintiff's proposed amendments are not futile, and GRANTS ...

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