Grapentine v. Pawtucket Credit Union ( 2014 )

United States Court of Appeals
For the First Circuit
No. 13-1897
JANET S. GRAPENTINE,
Plaintiff, Appellant,
v.
PAWTUCKET CREDIT UNION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. John J. McConnell, Jr., U.S. District Judge]
Before
Lynch, Chief Judge,
Howard, and Thompson, Circuit Judges.
Keven A. McKenna, on brief for appellant.
Joel E. Votolato, John T. Gannon, and McCorry and Gannon, PC.,
on brief for appellee.
June 16, 2014
THOMPSON, Circuit Judge. The sole question presented on
this appeal is whether the district court properly dismissed the
appellant's complaint for lack of subject matter jurisdiction.
Finding that dismissal was proper, we affirm the ruling of the
district court.
BACKGROUND
In September 2008, appellant Janet S. Grapentine
("Grapentine") entered into a mortgage contract with appellee
Pawtucket Credit Union ("PCU") for the purchase of real estate in
Bristol, Rhode Island. The mortgage agreement included a covenant
permitting PCU to accelerate its loan and invoke its statutory
power of sale in the event Grapentine defaulted on her loan
payments. This private contractual remedy, to which the contract
expressly referred, is authorized by Rhode Island General Laws
§ 34-11-22. That statute provides, in pertinent part:
The following power shall be known as the
'statutory power of sale' and may be
incorporated in any mortgage by reference:
(Power)
But if default shall be made in the
performance or observance of any of the
foregoing or other conditions . . . then it
shall be lawful for the mortgagee . . . to
sell, together or in parcels, all and singular
the premises hereby granted or intended to be
granted, or any part or parts thereof . . . .
R.I. Gen. Laws. § 34-11-22.
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After Grapentine fell behind on her loan in October 2012,
PCU declared her in default, invoked its statutory power of sale,
and began to foreclose on the property. In response, Grapentine
filed suit against PCU in the district court. She alleged in her
amended complaint (which we refer to simply as her complaint) that
the foreclosure pursuant to § 34-11-22 violated her federal and
state due process rights because the state statute permitted PCU to
foreclose on her property without a judicial hearing. PCU fired
back with a motion to dismiss for lack of subject matter
jurisdiction.
The district court granted PCU's motion on June 17, 2013,
finding that none of the statutory bases cited in Grapentine's
complaint conferred federal jurisdiction. Grapentine timely
appealed.
STANDARD OF REVIEW
The existence of subject matter jurisdiction is a
question of law, and we review de novo the district court's grant
of a motion to dismiss for lack of subject matter jurisdiction.
Esso Standard Oil Co. (P.R.) v. Rodríguez-Pérez, 455 F.3d 1, 4 (1st
Cir. 2006).
DISCUSSION
The parties agree they are non-diverse and it is
uncontested that the diversity statute, 28 U.S.C. § 1332, does not
confer federal jurisdiction over Grapentine's claims. We therefore
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review the only other basis for federal jurisdiction asserted by
Grapentine, 42 U.S.C. § 1983. For the reasons set forth below, we
find no federal jurisdiction.
A. 42 U.S.C. § 1983Generally speaking, 42 U.S.C. § 1983 provides a cause of
action for the "deprivation of any rights, privileges, or
immunities secured by the Constitution and laws" by any person
acting "under color of any statute, ordinance, regulation, custom,
or usage, of any State or Territory." To state a claim under that
statute, a plaintiff must assert two allegations: (1) "that some
person deprived [her] of a federal right," and (2) that such person
"acted under color of state or territorial law." Gomez v. Toledo,
446 U.S. 635, 640 (1980) (citing Monroe v. Pape, 365 U.S. 167, 171
(1961)). Significantly, § 1983 does not apply to "'merely private
conduct, no matter how discriminatory or wrongful.'" American
Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 50 (1999) (quoting
Blum v. Yaretsky, 457 U.S. 991, 1002 (1982)). This is where
Grapentine's complaint falls short.
We note first that in Rhode Island, the existence of
§ 34-11-22 notwithstanding, "the right to exercise the power of
sale in a mortgage is derived from contract, not statute." Bucci
v. Lehman Bros. Bank, FSB, 68 A.3d 1069, 1084 (R.I. 2013) (citing
Thurber v. Carpenter, 31 A. 5, 6 (R.I. 1895)). This "contractual
power of sale was recognized long before § 34-11-22 was enacted in
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1927." Id. at 1085. Thus, "'though regulated by
statute . . . nonjudicial foreclosure is a private procedure
involving private parties, occurring pursuant to a private power of
sale contained in a [mortgage].'" Id. (alterations in original)
(quoting 55 Am.Jur.2d Mortgages § 472 at 202 (2009)).
There is no dispute here that PCU--the only defendant
named in Grapentine's complaint--is a private entity. At first
glance, it appears Grapentine cannot satisfy the under color of
state law requirement since she has not sued the State, any of its
subdivisions, or any public employee. This is not by itself
dispositive, however, as "a private party can be fairly
characterized as a state actor if the circumstances of the case
meet one of three tests: the public function test, the joint
action/nexus test, or the state compulsion test." Alberto San,
Inc. v. Consejo De Titulares Del Condomonio San Alberto, 522 F.3d
1, 4 (1st Cir. 2008).1 Grapentine asserts PCU is a state actor
1
We note that in Alberto San we cautioned district courts
against dismissing diversity actions asserting claims under § 1983
for lack of jurisdiction because, "[a]lmost by definition, a claim
under § 1983 arises under federal law and will support federal-
question jurisdiction" pursuant to § 1331. 522 F.3d at 3 (quoting
Local Union No. 12004, United Steelworkers v. Massachusetts, 377
F.3d 64, 75 (1st Cir. 2004)). The plaintiff in Alberto San
asserted that a state statute acted directly upon him by reducing
his voting power in a condominium association. Id. at 2.
Grapentine's claims here are quite different: her complaint simply
fails to allege any state action apart from the mere existence of
§ 34-11-22. As we discuss, the fact that Rhode Island law permits
a private mortgage contract to incorporate a non-judicial power of
sale, without more, does not implicate state action.
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under all of these tests. She bears the burden of proving as much,
Mead v. Independence Ass’n, 684 F.3d 226, 231 (1st Cir. 2012), and
after careful review we find that she fails to carry her burden
here, as her complaint does not set forth any allegations of state
action.
i. The Public Function Test
"The public function [test] is designed to flush out a
State’s attempt to evade its responsibilities by delegating them to
private entities." Perkins v. Londonderry Basketball Club, 196
F.3d 13, 18-19 (1st Cir. 1999). Common sense tells us that PCU was
not performing any sort of public function when it entered into a
mortgage contract with Grapentine or when it subsequently exercised
the power of sale contemplated in the parties' agreement.
Nonetheless, Grapentine attempts to counter this point by arguing
that legislation authorizing non-judicial foreclosures and sales in
itself constitutes state action.
The Supreme Court, unfortunately for Grapentine, has
squarely rejected the argument that mere legislative authorization
of a creditor's private power of sale with respect to a debt owed
constitutes a delegation of a traditional government function.
Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 162-64 (1978); see
also Apao v. Bank of N.Y., 324 F.3d 1091, 1094 (9th Cir. 2003)
(recognizing Flagg Brothers's holding that "legislative approval of
a private self-help remedy was not the delegation of a public
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function"). We see no reason to depart from this logic here.
Grapentine's allegations simply do not permit any inference that
PCU was performing a public function when it invoked a private
contractual remedy, even though that remedy was permitted by state
law.
ii. Joint Action/Nexus Test
We move on to consider whether Grapentine's allegations
satisfy the joint action/nexus test. "[A] private party's joint
participation with state officials in the seizure of disputed
property is sufficient to characterize that party as a 'state
actor' for purposes of the Fourteenth Amendment." Lugar v.
Edmondson Oil Co., Inc., 457 U.S. 922, 941 (1982). We note first
that Grapentine did not come right out and allege joint action in
her complaint, nor did she name Rhode Island as a party to this
litigation. Accordingly, her complaint's bare allegations do not
satisfy the joint action/nexus test. Nonetheless, on appeal
Grapentine feebly posits an attenuated theory of joint action.
Grapentine contends that the state "dominates the
foreclosure process" through its police and legislative power, thus
meeting the joint action/nexus test. We find no allegations here
to support any inference that the state exercised its police power
in conjunction with PCU to effectuate the foreclosure process. Cf.
Lugar, 457 U.S. at 924-25, 940-42 (finding state action where
private party utilized prejudgment attachment procedure set forth
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in state law, pursuant to which a state court issued, and the
sheriff executed, a writ of attachment sequestering another's
property). And with respect to the implication that the joint
action/nexus test is met simply by the existence of § 34-11-22, we
return to the principle set out in Flagg Brothers, supra, and
conclude that mere legislative sanction of a private remedy does
not constitute state action. Indeed, far from involving state
action, § 34-11-22 simply permits a lender to exercise a right that
the borrower voluntarily granted to it in a mortgage contract.
The allegations in Grapentine's complaint do not permit
us to infer that PCU acted in conjunction with any state agency or
public official in connection with the foreclosure. To the
contrary, from all that appears in her complaint, PCU acted alone,
and as a private entity, when it sought to enforce a contractual
right in the mortgage agreement between two private parties.
Grapentine thus fails to allege sufficient facts to find joint
action between PCU and the state.
iii. State Compulsion Test
Lastly, under the state compulsion test we will find the
state action requirement has been satisfied when a plaintiff
demonstrates that "the state has 'exercised coercive power or has
provided such significant encouragement, either overt or covert,
that the [challenged conduct]'" must be attributed to the state.
Alberto San, 522 F.3d at 4 (alteration in original) (quoting
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Estades-Negroni v. CPC Hosp. San Juan Capestrano, 412 F.3d 1, 5
(1st Cir. 2005)).
Grapentine's complaint is bereft of any allegation of
state coercion or encouragement, explicit or otherwise. Nor can
Grapentine rely on the naked existence of § 34-11-22 to satisfy
this test. In Van Daam v. Chrysler First Fin. Servs. Corp. of
R.I., we explained in an unpublished opinion that, in general, non-
judicial foreclosure statutes do not implicate state action because
(1) state officials do not play any
significant role (and often play no role at
all) in the proceedings, and (2) the statutes
which authorize 'power of sale' foreclosures
generally do not create the right or compel
its exercise, but simply confirm and to some
extent regulate a right which was recognized
under common law and which exists in a given
case by virtue of an agreement between parties
to the mortgage.
No. 90-1116, 1990 WL 151385, at *2 (1st Cir. 1990) (per curiam)
(unpublished). This holding is in accordance with those of our
sister circuits. See Apao, 324 F.3d at 1094 ("When the
constitutionality of such [non-judicial foreclosure] statutes was
challenged in a series of cases beginning in the 1970s, six
circuits, including our own [i.e., the Ninth], found that the
provisions did not violate the Fourteenth Amendment.").
We went on to hold in Van Daam that the specific statute
at issue here, § 34-11-22, "is entirely permissive" and simply
"prescribes the form to be used if the parties agree to include" a
non-judicial power of sale in their mortgage agreement. No. 90-
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1116, 1990 WL 151385, at *3.2 In the end, we upheld dismissal of
the plaintiff's complaint due to the lack of any basis to find that
a foreclosure pursuant to § 34-11-22 involved any state action.
Id.
Van Daam's reasoning is persuasive and we adopt it here.
Accordingly, we find that Grapentine was not compelled by Rhode
Island law to grant PCU a power of sale, and we conclude that she
has failed to satisfy the state compulsion test.
iv. Recap
After careful review of Grapentine's complaint, we find
that none of PCU's alleged conduct can be ascribed to the state.
Without a showing of state action, the district court had no
jurisdiction under 42 U.S.C. § 1983 and properly dismissed
Grapentine's complaint.
B. Alternative Bases of Jurisdiction
In addition to 42 U.S.C. § 1983, Grapentine's complaint
asserts federal jurisdiction pursuant to the following federal
statutes: 28 U.S.C. § 1331; 28 U.S.C. § 1337; and 28 U.S.C.
§ 2201. When it granted PCU's motion to dismiss, the district
court speculated that Grapentine may also have intended to assert
jurisdiction under 28 U.S.C. § 1367. We have parsed Grapentine's
2
Although § 34-11-22 has been amended on several occasions
since our decision in Van Daam, those amendments have not
materially altered the statute with respect to the issues raised in
this appeal.
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brief, and her entire appellate argument is predicated on her
assertion of jurisdiction under § 1983. Indeed, she does not even
so much as mention any of these statutes, much less provide the
sort of developed argument required to raise an issue on appeal.
Accordingly, we find that Grapentine has waived any argument that
jurisdiction is proper under any statute other than § 1983. See
United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).
CONCLUSION
Grapentine's complaint does no more than allege "merely
private conduct" over which we have no jurisdiction pursuant to 28
U.S.C. § 1983, "no matter how . . . wrongful." American Mfrs., 526
U.S. at 50. To the extent Grapentine is aggrieved by PCU's
foreclosure process, her remedy lies not here, but with the courts
of Rhode Island.
The judgment of the district court is affirmed.
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