United States District Court, W.D. Washington, Seattle
MICHAEL KLEIN, as Trustee for the estate of Christine Tavares, DENNIS LEE BURMAN, as Trustee for the estate of Edward Anzaldua, Appellants/Plaintiffs,
ALABAMA HOUSING FINANCE AUTHORITY, doing business in Washington as SERVISOLUTIONS, Appellee/Defendant.
ORDER DENYING APPELLANTS' BANKRUPTCY
Honorable Richard A. Jones, United States District Judge.
matter comes before the Court on Appellants' appeal from
the bankruptcy court's dismissal of Plaintiff Christine
Tavares' Second Amended Complaint. Dkt. # 6. For the
reasons that follow, the Court DENIES
Appellants' appeal and AFFIRMS the
bankruptcy court's decision.
March 2014, Plaintiff Christine Tavares
(“Tavares” or “Ms. Tavares”)
purchased a home with her former domestic partner, Edward
Anzaldua (“Anzaldua”). DR # 13 at ¶ 11. The
purchase was financed with a Federal Housing Administration
(“FHA”) insured loan. DR # 13 at ¶ 13.
Tavares and Anzaldua also executed a Deed of Trust against
the property. DR # 13 at ¶ 12. In November 2015,
Anzaldua and Tavares separated after allegations emerged that
Anzaldua was sexually assaulting Tavares' daughter. DR #
13 at ¶17. Tavares and Anzaldua continued to make
payments on the loan until April 2016, when Anzaldua stopped
making payments in lieu of child support. DR # 13 at ¶
Anzaldua stopped making payments on the loan, Tavares
approached Defendant/Appellee Alabama Housing Finance
Authority (“Appellee” or “AHFA”)
about a possible loan modification. DR # 13 at ¶ 22.
AHFA told Tavares that in order to obtain a loan
modification, she would need to default on the mortgage. DR #
13 at ¶ 21. After defaulting, Tavares again approached
AHFA and was told that in order to apply for a loan
modification both borrowers (Tavares and Anzaldua)
would need to apply or Tavares would need Anzaldua to execute
a quitclaim deed. DR # 13 at ¶ 22.
September 26, 2016, Tavares filed a voluntary petition for
Chapter 7 bankruptcy. DR # 13 at ¶ 23. Tavares also
engaged a housing counselor to help her apply for the loan
modification. DR # 13 at ¶ 25. According to Tavares,
AHFA tried to talk her out of hiring the housing counselor
and told her that the quitclaim deed would no longer be
helpful for the loan modification process. DR # 13 at
¶¶ 25-26. Tavares opted to continue using the
housing counselor and submitted an application to AHFA for a
HAMP loan modification with a partial claim in June 2017. DR
# 13 at ¶ 27. According to Tavares, AHFA did not respond
to her first application other than to deny the use of child
support in her income calculation. DR # 13 at ¶ 27.
Tavares submitted a second application in September 2017. DR
# 13 at ¶ 30. AHFA denied Tavares' second loan
modification application. DR # 13 at ¶ 31. In the denial
letter, AHFA detailed the bases for its denial including,
among other things, Tavares' failure to include detailed
income information from both borrowers (Tavares and
Anzaldua). DR # 22, Ex. 8.
November 2016, the bankruptcy court granted AHFA relief from
the automatic stay and AHFA began nonjudicial foreclosure
proceedings. DR # 26 at 8. In October 2017, Ms. Tavares
brought this action in federal court, seeking an injunction
to prohibit the sale of the property and damages (Tavares
v. AHFA, No. 2:17-cv-01599-MJP (W.D. Wash.)). Dkt. # 6
at 13. AHFA filed a motion to dismiss and the Court granted
Ms. Tavares' motion to amend the complaint. DR # 26 at 8.
The Honorable Marsha J. Pechman also referred the action to
bankruptcy court for pre-trial proceedings. Id. In
February 2018, Ms. Tavares filed her first amended complaint.
DR # 1. AHFA again filed a motion to dismiss and on June 7,
2018 the bankruptcy court granted the motion, with leave to
amend. DR # 26 at 8. One month later, Ms. Tavares filed a
second amended complaint, asserting a single claim under the
Washington Consumer Protection Act. DR # 13. AHFA moved to
dismiss for the third time (DR # 22) and the bankruptcy court
granted the motion to dismiss, this time with prejudice. DR #
26. Appellants promptly appealed. DR # 31.
courts have jurisdiction to hear appeals from a final
judgment and order in a bankruptcy proceeding. See
28 U.S.C. § 158(a)(1). A district court reviews the
bankruptcy court's conclusions of law de novo and reviews
determinations of fact for clear error. See In re Crow
Winthrop Operating P'ship, 241 F.3d 1121, 1123 (9th
Cir. 2001); In re Olshan, 356 F.3d 1078, 1083 (9th
Cir. 2004). A motion to dismiss for failure to state a claim
will be denied unless it appears that the plaintiff can prove
no set of facts which would entitle him to relief.
Fidelity Fin. Corp. v. Federal Home Loan Bank of San
Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986). All
material allegations in the complaint will be taken as true
and construed in the light most favorable to the plaintiff.
NL Indust., Inc. v. Kaplan, 792 F.2d 896, 898 (9th
issue is whether the second amended complaint (the
“Complaint”) pled sufficient facts to state a
claim under Washington's Consumer Protection Act
(“CPA”). To prevail in a CPA action, the
plaintiff must satisfy the following five elements: (1) an
unfair or deceptive act or practice, (2) occurring in trade
or commerce, (3) impacting the public interest, (4) causing
injury to plaintiff's business or property, and (5)
causation. Hangman Ridge Training Stables, Inc. v. Safeco
Title Ins. Co., 719 P.2d 531, 532 (Wash. 1986.
Complaint alleges five “unfair or deceptive acts”
underlying her CPA claim: (1) AHFA failed to make a partial
claim against FHA's Mutual Mortgage Insurance Fund”
and failed to apply the proceeds to cure the default, (2)
AHFA evaded a “real review” of Tavares'
second loan modification application by “only
mentioning the parameters of HAMP standalone
modifications” and not applying the parameters to
Tavares' income, (3) AHFA misled Tavares with conflicting
directives regarding the necessity for a quitclaim deed, (4)
AHFA discouraged the use of a housing counselor, and (5) AHFA
misled Tavares regarding the exclusion of child support
payments from her income calculation. DR # 13.
bankruptcy court dismissed the Complaint, holding that
Tavares failed to plead sufficient facts to show: (1)
AHFA's failure to apply for a partial claim constituted
an unfair or deceptive act, (2) Plaintiff suffered an injury
resulting from AHFA's conflicting directives regarding
the quitclaim deed, (3) Plaintiff suffered an injury
resulting from AHFA discouraging the use of a housing
counselor, and (4) AHFA's denial of the loan modification
constituted an unfair or deceptive act. DR # 26.
Appellants now seek review of the bankruptcy court's
ruling that the Complaint failed to state a claim under the
CPA and that further amendment would be futile. Dkt. # 6.
Failure to ...