Vincent Tod Beazie vs. Amerifund Financial Inc.

Filing 52

Amended ORDER In Part And Denying In Part Defendants Mortgage Electronic Registration Systems, Inc. And Deutsche Bank National Trust Company As Trustee For American Mortgage-Backed Pass-Through Certificates, Series 2007-5's Motion For Summary Ju dgment re 44 . Signed by JUDGE J. MICHAEL SEABRIGHT on 6/16/11. (gls, )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 were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
VINCENT TOD BEAZIE, Individually
and as Trustee of the Vincent T. Beazie
Revocable Living Trust Dated April 17,
2001,

)
)
)
)
)
Plaintiff,
)
)
vs.
)
)
AMERIFUND FINANCIAL, INC. dba )
ALL FUND MORTGAGE, a
)
Washington corporation registered
)
previously as a foreign corporation
)
doing unlicensed business in the State of )
Hawaii, its successors and assigns;
)
MORTGAGE ELECTRONIC
)
REGISTRATION SYSTEMS, INC., a )
Delaware corporation; DEUTSCHE
)
BANK NATIONAL TRUST
)
COMPANY, as Trustee for American )
Mortgage-Backed Pass-Through
)
Certificates, Series 2007-5, a New York )
corporation; and DOES 1-30,
)
)
Defendants.
)
________________________________ )

CIVIL NO. 09-00562 JMS/KSC
AMENDED ORDER GRANTING
IN PART AND DENYING IN
PART DEFENDANTS
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.
AND DEUTSCHE BANK
NATIONAL TRUST COMPANY
AS TRUSTEE FOR AMERICAN
MORTGAGE-BACKED PASSTHROUGH CERTIFICATES,
SERIES 2007-5’S MOTION FOR
SUMMARY JUDGMENT

AMENDED ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS MORTGAGE ELECTRONIC REGISTRATION SYSTEMS,
INC. AND DEUTSCHE BANK NATIONAL TRUST COMPANY AS
TRUSTEE FOR AMERICAN MORTGAGE-BACKED PASS-THROUGH
CERTIFICATES, SERIES 2007-5’S MOTION FOR SUMMARY
JUDGMENT

I. INTRODUCTION
On July 22, 2009, Plaintiff Vincent Tod Beazie, Individually and as
Trustee of the Vincent T. Beazie Revocable Living Trust Dated April 17, 2001
(“Plaintiff”) filed this action in the First Circuit Court of the State of Hawaii.
Plaintiff’s First Amended Complaint (“FAC”) asserts claims against Defendants
Amerifund Financial Inc. dba All Fund Mortgage (“Amerifund”), Mortgage
Electronic Registration Systems (“MERS”), and Deutsche Bank National Trust
Company as Trustee for American Mortgage-backed Pass-through Certificates,
Series 2007-5 (“DBNTC” or “Deutsche Bank”) for violations of the Truth in
Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., the Real Estate Settlement
Procedures Act of 1974 (“RESPA”), 12 U.S.C. § 2601, et seq., and various state
law claims stemming from a mortgage transaction concerning real property located
at 91-423 Pupu Street, Ewa Beach, Hawaii 96706 (the “subject property”). The
action was subsequently removed to this court.
Currently before the court is MERS and DBNTC’s (collectively,
“Moving Defendants”) Motion for Summary Judgment in which they argue that
there is no genuine issue of material fact supporting any of Plaintiff’s claims
against them. On April 14, 2011, the court originally granted Moving Defendants’
Motion for Summary Judgment (“the April 14 Order”), Beazie v. Amerifund Fin.,
2

Inc., 2011 WL 1437888 (D. Haw. Apr. 14, 2011), and Plaintiff filed a Motion for
Reconsideration on April 9, 2011. As a result, the court vacated the April 14, 2011
Order and now enters this Amended Order GRANTING in part and DENYING in
part Moving Defendants’ Motion for Summary Judgment, which addresses the
parties’ arguments both on summary judgment and for reconsideration.
II. BACKGROUND
A.

Factual Background
On March 26, 2007, Plaintiff refinanced his existing loan on the

subject property by executing an adjustable rate note in the amount of $1,260,000
in favor of Amerifund, which was secured by a mortgage on the subject property.
Doc. No. 34-2, Defs.’ Ex. 1; Doc. No. 34-4, Defs.’ Ex. 3. The mortgage explains
that MERS is the mortgagee, and is “acting solely as nominee” for Amerifund.
Doc. No. 34-4, Defs.’ Ex. 3 at 1-2.
In consummating this loan, Plaintiff signed a Uniform Residential
Loan Application (the “Application”), which states that Plaintiff was applying for a
480-month adjustable rate mortgage in the amount of $1,260,000. Doc. No. 34-3,
Defs.’ Ex. 2 at 56; Doc. No. 34-5, Defs.’ Ex. 4 at 1. The Application states that
Plaintiff acknowledges that “the information provided in this application is true
and correct as of the date set forth opposite my signature,” and Plaintiff admits that
3

he signed this acknowledgment. Doc. No. 34-3, Defs.’ Ex. 2 at 58-59; Doc. No.
34-5, Defs.’ Ex. 4 at 3. The Application nonetheless included false information,
including that Plaintiff’s gross monthly income was $18,000 when in fact it was
much less. Doc. No. 37-1, Pl.’s Decl. ¶ 6.
In addition to the Application, Plaintiff signed the note, mortgage,
Adjustable Rate Mortgage Loan Disclosure Statement, TILA Disclosure Statement,
and Notice of Right to Cancel. See Doc. No. 34, Defs.’ Concise Statement of Facts
(“CSF”) ¶ 7.1 Although Plaintiff acknowledged that his signature indicates that he
received these documents, Doc. No. 34-3, Defs.’ Ex. 2 at 78-81, Plaintiff disputes
that he received two completed and accurate copies of the Notice of the Right to
Cancel. Doc. No. 37-1, Pl.’s Decl. ¶ 7. Plaintiff further conceded that he
understood that the interest rate on the loan would change, but believed that his
payment would not exceed more than $100 of his initial monthly payment. Doc.
No. 34-3, Defs.’ Ex. 2 at 60-61. Plaintiff understood, however, that he would be
responsible for any default on the loan. Id. at 61.
According to Plaintiff, he was aware there was another appointment
after him such that he had only a half hour to complete the documents, but nobody
told him that he had only a specific amount of time to review and sign the

1

Where a fact is not in dispute, the court cites directly to Moving Defendants’ CSF.
4

documents or that he needed to hurry. Id. at 57, 62. Plaintiff asserts that although
his signature states that he read and understood the documents, he did not read
each document because he relied “on the professionality [sic] of the qualified
person” to sign the documents and that it is “common practice” to sign without
reading them. Id. at 59, 66, 70.
In November 2008, Plaintiff started defaulting on the loan. Id. at 60.
On June 1, 2009, an “Assignment of Mortgage” was recorded in the Hawaii State
Bureau of Conveyances, asserting that MERS had transferred the mortgage to
DBNTC. Doc. No. 34-9, Defs.’ Ex. 8. That same day, DBNTC’s servicing agent
American Home Mortgage Servicing, Inc. (“AHMSI”) commenced a nonjudicial
foreclosure action of DBNTC’s interests under the mortgage by recording a Notice
of Mortgagee’s Intention to Foreclose Under Power of Sale. Doc. No. 34-9, Defs.’
Ex. 9. Pursuant to that notice, on July 22, 2009, the subject property was sold
through auction to DBNTC. Doc. No. 34-12, Defs.’ Ex. 11; Doc. No. 34-13,
Defs.’ Ex. 12.
The same day as the auction, Plaintiff sent via certified mail a letter
cancelling the loan transaction due to alleged TILA violations. See Doc. No. 37-9,
Pl.’s Ex. H; Doc. No. 37-10, Pl.’s Ex. I. The letter was delivered to DBNTC on
July 24, 2009. Doc. No. 37-10, Pl.’s Ex. I.
5

B.

Procedural Background
On July 22, 2009, Plaintiff filed this action in the First Circuit Court

of the State of Hawaii. Plaintiff’s FAC alleges claims against Defendants2 titled
(1) Declaratory Judgment Re: Title to the Subject Property Against Deutsche Bank
(Count I); (2) Declaratory Judgment Re: Fraud and Rescission and Common Law
Damages Against Amerifund, MERS, and Deutsche Bank (Count II);
(3) Declaratory Judgment Re: Chapter 480 HRS Rescission and Treble Damages
Against Amerifund, MERS, and Deutsche Bank (Count III); (4) Injunctive Relief
Against Deustche Bank and Real Time (Count IV); (5) Declaratory Judgment Re:
TILA and RESPA Statutory Damages Against Amerifund, MERS, and/or Deutsche
Bank (Count V); (6) Breach of Fiduciary Duty Against Amerifund (Count VI); and
(7) Punitive Damages Against Amerifund (Count VII). DBNTC subsequently
removed the action to this court.
On December 29, 2010, Moving Defendants filed their Motion for
Summary Judgment. Plaintiff filed a Concise Statement on March 8, 2011, and an
Opposition on March 9, 2011. Moving Defendants filed a Reply on March 14,

2

Although Amerifund was served with the Complaint on October 22, 2009, it has not
appeared in this action and default was entered against it on May 12, 2010. See Doc. No. 21.
Plaintiff has asserted that he will seek dismissal of Amerifund without prejudice upon the court’s
determination of Plaintiff’s Motion for Reconsideration. See Doc. No. 49, Gary Dubin Decl. ¶ 9.
Plaintiff is requested to seek dismissal of Amerifund by July 1, 2011.
6

2011. A hearing was held on March 29, 2011. Plaintiff filed a Supplemental
Memorandum on March 30, 2011.
The April 14 Order followed. On April 29, 2011, Plaintiff filed his
Motion for Reconsideration.3 On May 13, 2011, Moving Defendants filed their
Opposition, and Plaintiff filed a Reply on May 27, 2011. Contemporaneously with
this Order the court granted in part and denied in part Plaintiff’s Motion for
Reconsideration and vacated the April 14 Order.
III. STANDARD OF REVIEW
Summary judgment is proper where there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(a). Rule 56(a) mandates summary judgment “against a party who
fails to make a showing sufficient to establish the existence of an element essential
to the party’s case, and on which that party will bear the burden of proof at trial.”
3

Plaintiff has made a habit of filing papers late -- Plaintiff’s Opposition to Moving
Defendants’ Motion for Summary Judgment was due March 7, 2011, and Plaintiff’s Motion for
Reconsideration was due by April 28, 2011. See Local Rule 60.1. Moving Defendants request
that the court strike both filings as untimely filed. As to Plaintiff’s Opposition, although Plaintiff
did not seek an extension to file it late and his delay is inexplicable given that he had almost
three months to draft it, the court finds that such sanction under these circumstances is not
warranted. The court further finds that striking Plaintiff’s Motion for Reconsideration is not
appropriate given that it raises a valid point for reconsideration. The court therefore GRANTS
Plaintiff’s Ex Parte Motion for Extension of Time to File his Motion for Reconsideration. See
Doc. No. 49.
With that said, however, both Plaintiff and his counsel (who has multiple mortgage
foreclosure actions before this court and who has missed filing deadlines in other cases) is
cautioned that the court expects parties to follow the rules of this court and further violation of
this court’s rules may result in sanctions.
7

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Broussard v. Univ. of
Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).
“A party seeking summary judgment bears the initial burden of
informing the court of the basis for its motion and of identifying those portions of
the pleadings and discovery responses that demonstrate the absence of a genuine
issue of material fact.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th
Cir. 2007) (citing Celotex, 477 U.S. at 323); see also Jespersen v. Harrah’s
Operating Co., 392 F.3d 1076, 1079 (9th Cir. 2004). “When the moving party has
carried its burden under Rule 56[(a)] its opponent must do more than simply show
that there is some metaphysical doubt as to the material facts [and] come forward
with specific facts showing that there is a genuine issue for trial.” Matsushita
Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal
quotation signals omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986) (stating that a party cannot “rest upon the mere allegations or
denials of his pleading” in opposing summary judgment).
“An issue is ‘genuine’ only if there is a sufficient evidentiary basis on
which a reasonable fact finder could find for the nonmoving party, and a dispute is
‘material’ only if it could affect the outcome of the suit under the governing law.”
In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson, 477 U.S. at

8

248). When considering the evidence on a motion for summary judgment, the
court must draw all reasonable inferences on behalf of the nonmoving party.
Matsushita Elec. Indus. Co., 475 U.S. at 587; see also Posey v. Lake Pend Oreille
Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that “the evidence
of [the nonmovant] is to be believed, and all justifiable inferences are to be drawn
in his favor” (citations omitted)).
IV. DISCUSSION
As a starting place, the court first must determine the precise factual
basis of Plaintiff’s claims. The FAC asserts in very general terms that Amerifund
engaged in various misdeeds in consummating the loan with Plaintiff, and
Plaintiff’s claims against Moving Defendants are based on Amerifund’s
misconduct. Doc. No. 1-1, FAC ¶¶ 10-13. At the hearing and in his Motion for
Reconsideration, however, Plaintiff’s counsel argues that Plaintiff also asserts
claims against Moving Defendants for misconduct that occurred in the transfer of
the mortgage to DBNTC and DBNTC’s failure to honor Plaintiff’s rescission.4
The FAC, however, does not include any facts that would give notice to

4

Plaintiff also attempts to inject into the action the assertion that DBNTC is not a holder
in due course of the mortgage and/or note due to recording improprieties and various other
issues. See Doc. No. 37, Pl.’s CSF ¶¶ 31-33; Doc. No. 46, Pl.’s Recons. Mot. at 7-15; Doc. No.
50, Pl.’s Recons. Reply at 9-11. Again, Plaintiff is limited by what is alleged in the FAC, and
Plaintiff failed to include any such allegations.
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Defendants, much less the court, that Plaintiff is asserting such claims.
Specifically, although the FAC asserts that (1) DBNTC noticed a nonjudicial
auction of the subject property without proof that the loan was in default or that
DBNTC was the current assignee, and (2) Plaintiff cancelled the loan transaction,
id. ¶¶ 14-15, the FAC does not assert that DBNTC was not an assignee of the
mortgage loan or engaged in any particular misconduct in the nonjudicial auction.
Indeed, the actual counts of the FAC refer to “mortgage fraud” and/or “deceit and
misrepresentation,” and the only factual allegations suggesting misconduct are
regarding the loan consummation. Id. ¶¶ 17-21. Further, given that Plaintiff
provided his notice of rescission on the day the FAC was filed, any failure to honor
a rescission notice necessarily occurred later and is not part of the FAC. Plaintiff
has not sought to amend the FAC to include such allegations in this action and it
should go without saying that allegations raised only in briefs and not pleadings are
not part of a plaintiff’s claims. In other words, regardless of when the controversy
arose between the parties, Plaintiff is limited by what is alleged in his FAC. The
court therefore finds that these additional allegations are not part of the present
dispute between the parties.
As to Plaintiff’s actual claims, the FAC asserts a total of five separate
Counts against Moving Defendants based on this conduct, but these Counts assert
10

only four legal bases for relief: TILA (Count V); RESPA (also Count V), common
law fraud (Count II), and violation of Hawaii Revised Statutes (“HRS”) § 480-2
(Count III). As to the RESPA violation, the FAC fails to include any allegations
whatsoever explaining the basis of this claim, and for that reason Moving
Defendants argue that this claim fails. Doc. No. 33-1, Defs.’ Summ. J. Mot. at 13.
Plaintiff failed to oppose this argument and the court agrees that the FAC does not
assert a RESPA claim.5
As to Counts I and IV, neither are stand-alone claims. Specifically,
Count I does not assert a legal claim, but rather seeks a declaration that the
foreclosure and transfer of the subject property to DBNTC is void “due to
mortgage fraud in violation of federal and state law” such that the transfer should
be set aside and Plaintiff should be awarded his damages. Doc. No. 1-1, FAC
¶ 17. The alleged violations of federal and state law, however, are already recited
in other claims.
Similarly, Count IV does not state a legal claim and instead seeks
injunctive relief to prevent the transfer of the title of the subject property and
otherwise prevent DBNTC from further damaging Plaintiff’s finances. Id. ¶ 20. It
5

In addition to these claims, the FAC refers to violations of “due process” and “all
related federal consumer protections [a]cts.” See Doc. No. 1-1, FAC ¶¶ 17, 21, 22. Given that
the FAC fails to outline any facts that would support the basis of such claims, the court
concludes that like the RESPA claim, Plaintiff is not actually asserting these claims.
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is well-settled, however, that injunctive relief is only a possible remedy if Plaintiff
succeeds on one of his independent causes of action; it is not its own cause of
action. See, e.g., Jensen v. Quality Loan Serv. Corp., 702 F. Supp. 2d 1183, 1201
(E.D. Cal. 2010) (“A request for injunctive relief by itself does not state a cause of
action”); Henke v. Arco Midcon, L.L.C., 750 F. Supp. 2d 1052, 1059-60 (E.D. Mo.
2010) (“Injunctive relief, however, is a remedy, not an independent cause of
action.”); Plan Pros, Inc. v. Zych, 2009 WL 928867, at *2 (D. Neb. Mar. 31, 2009)
(“no independent cause of action for injunction exists”); Motley v. Homecomings
Fin., LLC, 557 F. Supp. 2d 1005, 1014 (D. Minn. 2008) (same).
Thus, the court finds that Plaintiff is asserting claims against Moving
Defendants for violation of TILA, common law fraud, and violation of HRS
§ 480-2, all stemming from Amerifund’s alleged misconduct. The court addresses
the parties’ arguments as they relate to these claims.
A.

TILA
In support of a TILA violation, paragraph 21 of the FAC asserts:
Beazie seeks a declaratory judgment that said 2007 Note
and said 2007 Mortgage and as may have been assigned,
as a result of said mortgage fraud, violate the Federal
Truth-In-Lending Act, Section 1601, as amended, et seq.,
. . . and that therefore Beazie is entitled to statutory
damages, as well as his actual damages against
Amerifund, MERS, and/or Deutsche Bank and
subsequent assignees of theirs, including attorneys’ fees
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and costs and including against Does once identified, as
appropriate pursuant to Section 1640(a) of Title 15 of the
United States Code and other such federal consumer
protection Acts, as their individual involvement may
warrant.
When read with Count I’s request that the current title to the subject property be set
aside, it appears that Plaintiff is asserting a TILA claim for both damages and
rescission.
1.

TILA Damages
Moving Defendants argue, among other things,6 that this claim is

time-barred. The court agrees.
TILA provides that any claim for damages must be brought “within
one year from the date of the occurrence of the violation,” 15 U.S.C. § 1640(e),
which generally begins to run from the date of consummation of the loan. King v.
California, 784 F.2d 910, 915 (9th Cir. 1986). Equitable tolling may nonetheless
apply in certain circumstances:
[T]he limitations period in Section 1640(e) runs from the
date of consummation of the transaction but . . . the
doctrine of equitable tolling may, in the appropriate
circumstances, suspend the limitations period until the
borrower discovers or had reasonable opportunity to
discover the fraud or nondisclosures that form the basis
6

Moving Defendants raise a number of arguments on each of Plaintiff’s claims; the
court addresses only those arguments necessary to determine the Motion for Summary Judgment.
13

of the TILA action. Therefore, as a general rule, the
limitations period starts at the consummation of the
transaction. The district courts, however, can evaluate
specific claims of fraudulent concealment and equitable
tolling to determine if the general rule would be unjust or
frustrate the purpose of the Act and adjust the limitations
period accordingly.
Id.; see also 389 Orange St. Partners v. Arnold, 179 F.3d 656, 662 (9th Cir. 1999).
The basis of Plaintiff’s TILA claim is mortgage fraud -- i.e., alleged
misconduct that occurred in consummating the mortgage loan -- which occurred on
March 26, 2007. Accordingly, Plaintiff was required to bring this action within
one year unless equitable tolling applies. Plaintiff has come forward with no
evidence, however, suggesting that he is entitled to tolling because any Defendant
either prevented Plaintiff from discovering the alleged TILA violations or caused
Plaintiff to allow the filing deadline to pass. Given that Plaintiff entered into the
loan transaction on March 26, 2007, and did not file this action until November 22,
2009, the statute of limitations on this claim has long passed.
In opposition, Plaintiff argues that he “is not requesting damages
relating to what happened at the closing of his loan, but as a result of MERS and
[DBNTC’s] failure to honor his TILA rescission.” Doc. No. 38, Pl.’s Summ. J.
Opp’n ¶ 78. As explained above, however, the FAC does not assert any facts
supporting such claim, and Plaintiff did not seek leave to amend the FAC to allege
14

this claim. Specifically, the FAC asserts that on July 22, 2009 (the date of the
auction and the date the FAC was filed), Plaintiff cancelled the mortgage
transaction based on alleged TILA violations by mailing a letter to Defendants.
See Doc. No. 1-1, FAC ¶ 15; Doc. No. 37-9, Pl.’s Ex. H; Doc. No. 37-10, Pl.’s Ex.
I. But the FAC does not assert that Moving Defendants failed to honor this
cancellation. Indeed, Moving Defendants did not receive the rescission notice until
two days after the FAC was filed such it could not include such allegations. See
Doc. No. 19, Pl.’s Ex. I (certified mail receipt showing DBNTC received Plaintiff’s
letter on July 24, 2009). Thus, the Complaint does not assert a claim against
Moving Defendants for failure to honor a rescission request. See Rodrigues v.
Newport Lending Corp., 2010 WL 4960065, at *6 (D. Haw. Nov. 29, 2010)
(addressing similar circumstances where notice of rescission was sent on the same
day as action was filed and granting summary judgment because “Plaintiffs cannot
seek damages for Defendants’ failure to honor a request for rescission before
Defendants received such request and had an opportunity to respond to it”).
Accordingly, the court GRANTS Moving Defendants’ Motion for
Summary Judgment as to Plaintiff’s claim for TILA damages.
2.

TILA Rescission
Moving Defendants argue that they are entitled to summary judgment
15

on Plaintiff’s TILA claim for rescission for a number of reasons. The court
addresses these arguments in turn.
a.

Inability to tender loan proceeds

Moving Defendants argue that the court may condition TILA
rescission on Plaintiff’s tender of the loan proceeds, and there is no genuine issue
of material fact that Plaintiff can tender the proceeds. The court agrees with
Moving Defendants on their legal proposition, but rejects that the undisputed facts
establish Plaintiff’s inability to tender.
As for the legal proposition, TILA contemplates that once a creditor
receives a notice of rescission, the creditor shall return any money or payments
received and terminate the security interest, and afterwards, the borrower must
tender the loan or property. Specifically, 15 U.S.C. § 1635(b) provides:
Within 20 days after receipt of a notice of rescission, the
creditor shall return to the obligor any money or property
given as earnest money, downpayment, or otherwise, and
shall take any action necessary or appropriate to reflect
the termination of any security interest created under the
transaction. . . . Upon the performance of the creditor’s
obligations under this section, the obligor shall tender the
property to the creditor, except that if return of the
property in kind would be impracticable or inequitable,
the obligor shall tender its reasonable value.
Despite this sequence of events outlined in § 1635(b), the court may
require borrowers to prove ability to pay as a condition of rescission. The Ninth
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Circuit has explained:
As rescission under § 1635(b) is an on-going process
consisting of a number of steps, there is no reason why a
court that may alter the sequence of procedures after
deciding that rescission is warranted, may not do so
before deciding that rescission is warranted when it finds
that, assuming grounds for rescission exist, rescission
still could not be enforced because the borrower cannot
comply with the borrower’s rescission obligations no
matter what. Such a decision lies within the court’s
equitable discretion, taking into consideration all the
circumstances including the nature of the violations and
the borrower’s ability to repay the proceeds. If, as was
the case here, it is clear from the evidence that the
borrower lacks capacity to pay back what she has
received (less interest, finance charges, etc.), the court
does not lack discretion to do before trial what it could do
after.
Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1173 (9th Cir. 2003) (affirming
summary judgment for lender in absence that borrowers could refinance or sell the
property); see also Henderson v. GMAC Mortg. Corp., 347 Fed. Appx. 299, 302
(9th Cir. 2009) (acknowledging that the court could require borrowers to prove
ability to tender before granting them the right to rescind); Am. Mortg. Network,
Inc. v. Shelton, 486 F.3d 815, 821 (4th Cir. 2007) (“Once the trial judge in this case
determined that the [plaintiffs] were unable to tender the loan proceeds, the remedy
of unconditional rescission was inappropriate.”); LaGrone v. Johnson, 534 F.2d
1360, 1362 (9th Cir. 1976) (“We conclude, however, that the district court erred in
17

not conditioning rescission on the tender of the net amounts advanced by the
Johnsons. The discretion of the court to impose this condition is settled.”).
Based upon the evidence presented, the court exercises its discretion
in finding that rescission should be conditioned on Plaintiff’s tender of the loan
proceeds. Requiring Plaintiff to prove an ability to tender ensures that rescission is
more than a hollow remedy and that the parties will be placed in the positions they
held before consummation of the loan transaction. Further, Plaintiff suggests no
reason why the particular circumstances of this action support that Plaintiff should
not be required to tender the loan proceeds before DBNTC releases the mortgage.
See Riopta v. Amresco Residential Mortg. Corp., 101 F. Supp. 2d 1326, 1334-35
(D. Haw. 1999) (rejecting argument that the TILA violations were so egregious to
change the court’s discretion in requiring plaintiffs to tender the loan proceeds
before mortgagee released security interest in the property).7
7

Plaintiff argues that the court cannot rely on Riopta v. Amresco Residential Mortgage
Corp., 101 F. Supp. 2d 1326, 1334-35 (D. Haw. 1999), to support the proposition that a borrower
must first tender in order to secure a TILA rescission remedy. Doc. No. 46, Pl.’s Recons. Mot. at
4. Plaintiff is mistaken. Riopta specifically found that “in the exercise of its equitable
discretion, that it is appropriate to condition rescission of the mortgage on Plaintiffs’ tender of
payment.” Riopta, 101 F. Supp. at 1334. Although Plaintiff correctly points out that Riopta
granted “Plaintiffs ninety (90) days from the date of this Order to repay the principal to
Amresco,” it further ordered that Amresco “shall not be required to release its security interest in
the property until Plaintiffs have actually tendered repayment.” Id. at 1336. Although Plaintiff
submits the docket sheet in Riopta to show that the plaintiff was given further time to meet his
repayment obligations and the court reduced his payment obligations, Doc. No. 50, Pl.’s Recons.
Reply at 5-6, it does not change Riopta’s holding. Further, whatever happened in Riopta after
(continued...)
18

In opposition, Plaintiff argues that the Board of Governors of the
Federal Reserve Board administratively overruled the proposition that a court may
require a borrower to tender the loan proceeds before the transaction is voided.
Doc. No. 42, Pl.’s Suppl. Summ. J. Opp’n at 8-10. Plaintiff is mistaken -- he relies
upon language of a proposed rule, not language that was actually adopted, and the
current regulations specifically acknowledge that the court may determine the
order of steps for rescission. Specifically, 12 C.F.R. 226.15(d) provides:
Effects of rescission.
(1) When a consumer rescinds a transaction, the security
interest giving rise to the right of rescission becomes
void, and the consumer shall not be liable for any
amount, including any finance charge.
(2) Within 20 calendar days after receipt of a notice of
rescission, the creditor shall return any money or
property that has been given to anyone in connection
with the transaction and shall take any action necessary
to reflect the termination of the security interest.
(3) If the creditor has delivered any money or property,
the consumer may retain possession until the creditor has
met its obligation under paragraph (d)(2) of this section.
When the creditor has complied with that paragraph, the
consumer shall tender the money or property to the
creditor or, where the latter would be impracticable or
inequitable, tender its reasonable value. . . .
(4) The procedures outlined in paragraphs (d)(2) and (3)
of this section may be modified by court order.

7

(...continued)
the decision is not persuasive and does not change Riopta’s reasoning.
19

(emphasis added).8
In sum, both Yamamoto and the regulations acknowledge the court’s
discretion to reorder the steps of rescission outlined in 15 U.S.C. § 1635(b) to
require that Plaintiff first establish that he is able to place the parties in the
positions they previously held before the transaction is declared void.
With that said, however, the court finds that genuine issues of material
fact exist regarding whether Plaintiff can indeed tender the loan proceeds. In
effecting a rescission pursuant to TILA, “the security interest is dissolved, the
lender returns the borrower’s payments, and the borrower returns the loan
proceeds, less any ‘finance or other charge.’” Semar v. Platte Valley Fed. Sav. &
Loan Ass’n, 791 F.2d 699, 702 (9th Cir. 1986) (quoting 15 U.S.C. § 1635(b)). A
“finance charge” includes interest. Id. at 705. Thus, the tender amount can be
calculated by taking “the loan amount less all charges in the loan agreement.” Id.
Using this formula for determining the tender amount, Moving
Defendants failed to establish that Plaintiff could not tender this amount. Rather,
in his deposition Plaintiff answered a different question of whether he could pay

8

Plaintiff also relies on cases from other circuits and that were decided prior to
Yamamoto to suggest that borrowers should not be required to tender before the court adjudicates
the validity of their rescission claim. See Doc. No. 42, Pl.’s Suppl. Summ. J. Opp’n at 2-4.
These cases are not binding on this court and in any event do not conflict with Yamamoto’s
recognition that the court has discretion in altering the order of the steps for rescission.
20

back the loan plus its associated fees and costs:
Q.

A.

So you would not have the financial ability to pay
back the $1.26 million plus late fees and costs as
called for in the mortgage if that option was
presented to you, correct?
Correct.

Doc. No. 34-3, Defs.’ Ex. 2 at 83. Thus, a genuine issue of material fact remains
whether Plaintiff can tender the loan proceeds.
b.

Moving Defendants’ additional arguments

Moving Defendants also argue that they are entitled to summary
judgment on Plaintiff’s TILA claim for rescission because there is no genuine issue
of material fact that (1) Plaintiff received two copies of the Right to Cancel Notice;
and (2) Plaintiff received sufficient, accurate, and material disclosures as to the
terms of the loan. Doc. No. 39, Defs.’ Summ. J. Reply at 4-7. The court disagrees.
Moving Defendants argue that Plaintiff admitted in his deposition that
he did not receive two copies of the Right to Cancel Notice such that Plaintiff
cannot create a genuine issue of material fact by denying this fact in his
Declaration. Doc. No. 39, Defs.’ Summ. J. Reply at 3-4. During his deposition,
however, Plaintiff acknowledged only that his signature indicates that he received
these documents, not that he actually received the documents. Doc. No. 34-3,
Defs.’ Ex. 2 at 78-81. Thus, this testimony does not contradict Plaintiff’s
21

Declaration that he did not receive the two copies. See Doc. No. 37-1, Pl.’s Decl. ¶
7. Accordingly, viewing the facts in a light most favorable to Plaintiff, there is a
genuine issue of material fact whether Plaintiff received two copies of the Right to
Cancel Notice.
As to Moving Defendants’ second argument, Moving Defendants fail
to explain in any meaningful manner how and why Plaintiff received “sufficient,
and accurate, material disclosures as to the terms of the loan.” See Doc. No. 39,
Defs.’ Summ. J. Reply at 5. Rather, to establish this fact, Moving Defendants
instruct the court to “Compare Exh. “3” (Mortgage) with Exh. “5” (ARM
Disclosures) and Exh. “6” (TILA Disclosure) (evidencing a $1.26 million loan, to
be repaid over 40 years at an annual percentage rate of 8.629%).” Id. at 5-6. It is
not the court’s job, however, to hunt through a party’s exhibits to determine
whether these documents provide consistent loan terms, and in any event such
documents do not establish the actual loan terms that were applied to Plaintiff.
The court therefore DENIES Moving Defendants’ Motion for
Summary Judgment on Plaintiff’s TILA claim for rescission.
B.

Common Law Fraud
While not entirely clear, the FAC appears to state a claim for fraud

against all Defendants based on the consummation of the mortgage loan.
22

Specifically, paragraph 18 of the FAC alleges:
Beazie seeks a declaratory judgment that said 2007 Note
and said 2007 Mortgage and as may have been assigned
are void and unenforceable as procured by deceit and
misrepresentation, with entitlement to actual damages,
including attorneys’ fees and costs and including against
Does once identified, as found to be appropriate upon the
trial of this case.
Moving Defendants argue that this claim fails as to them because the
FAC does not assert that they committed any wrongful acts. Plaintiff does not
dispute this fact, and instead argues that “[h]e seeks instead a judgment declaring
the Amerifund loan transaction fraudulent and unenforceable, and hence
unenforceable by [DBNTC].” Doc. No. 38, Pl.’s Summ. J. Opp’n ¶ 49. In other
words, Plaintiff is not seeking damages against Moving Defendants and instead
only seeks that the court declare that Moving Defendants cannot enforce the
mortgage loan transaction and that the parties should be returned to their positions
before the loan. Plaintiff’s argument is not supported in law.
To establish that the loan transaction is void as to Moving Defendants
-- who were not a party to the loan transaction -- Plaintiff must establish that the
transaction is void, and not merely voidable. This distinction is necessary because
a void note is invalid even as to a bona fide purchaser, whereas a voidable
document cannot be set aside as to a bona fide purchaser. Adair v. Hustace,
23

64 Haw. 314, 320 n.4, 640 P.2d 294, 299 n.4 (1982); see also In re Hokulani
Square, Inc., 413 B.R. 706, 714 (Bkrtcy. D. Haw. 2009).
To establish that the mortgage transaction is void for fraud -- and can
be cancelled against a bona fide purchaser such as DBNTC9 -- Plaintiff must
establish fraud in the factum, as opposed to fraud in the inducement. See Aames
Funding Corp. v. Mores, 107 Haw. 95, 103-104, 110 P.3d 1042, 1050-51 (Haw.
2005) (explaining the three types of fraud in the mortgage context, including fraud
in the factum, fraud in the inducement, and constructive fraud); Adair, 64 Haw. at
320 n.4, 640 P.2d at 299 n.4; Standard Fin. Co. v. Ellis, 3 Haw. App. 614, 619, 657
P.2d 1056, 1060 (1983). “Fraud in the factum is fraud which goes to the nature of
the document itself.” Aames Funding Corp., 107 Haw. at 103, 110 P.3d at 1050
(quotations omitted); Gonsalves v. Ikei, 47 Haw. 145, 147, 384 P.2d 300, 303
(1963). A “common illustration” of this type of fraud “is that of the ‘maker who is
tricked into signing a note in the belief that it is merely a receipt or some other
document.’” Standard Fin. Co., 3 Haw. App. at 619, 657 P.2d at 1060 (quoting
U.C.C. § 3-305, comment 7); see also Black’s Law Dictionary 732, fraud in the
factum (9th ed. 2009) (“Compared to fraud in the inducement, fraud in the factum

9

Although Plaintiff asserts that the mortgage assignment to DBNTC is fraudulent, see
Doc. No. 37-1, Pl.’s Decl. ¶ 13, Plaintiff offers no evidence to support that Moving Defendants
engaged in any fraud whatsoever that would call into question DBNTC’s status as a bona fide
purchaser.
24

occurs only rarely, as when a blind person signs a mortgage when misleadingly
told that it is just a letter.”). In comparison, “[f]raud in the inducement is fraud
which induces the transaction by misrepresentation of motivating factors.” Aames
Funding Corp., 107 Haw. at 103-04, 110 P.3d at 1050-51 (quotations omitted).
The FAC asserts fraud in the inducement -- that Amerifund’s alleged
fraud prevented Plaintiff from understanding the details of the mortgage
transaction. See Doc. No. 1-1, FAC ¶¶ 11-13. In contrast, the FAC does not assert
fraud in the factum -- Plaintiff knew he was entering into a mortgage loan
transaction on the subject property. Further, in response to Moving Defendants’
argument that they did not engage in any wrongful conduct, Plaintiff came forward
with evidence suggesting at most fraud in the inducement and not fraud in the
factum. Accordingly, even if Amerifund induced Plaintiff into entering into a
mortgage transaction that he otherwise would not have entered into, the transaction
is only voidable such that Plaintiff cannot seek rescission and/or cancellation of
this transaction against Moving Defendants, who were not a party to the fraudulent
transaction.
The court therefore GRANTS Moving Defendants’ Motion for
Summary Judgment on Plaintiff’s claim for common law fraud.
///
///
25

C.

HRS § 480-2
Plaintiff asserts a claim for violation of HRS § 480-2 against all

Defendants based on Amerifund’s alleged unfair or deceptive acts or practices in
consummating the mortgage loan. See Doc. No. 1-1, FAC ¶ 20. Although Plaintiff
recognizes that Moving Defendants committed no unfair or deceptive practices
relating to the consummation of the loan, § 480-12 provides that “[a]ny contract or
agreement in violation of this chapter is void and is not enforceable at law or in
equity.” Plaintiff therefore seeks to have the court declare the mortgage and note
“void and unenforceable,” entitling him to rescission against Moving Defendants
and any and all subsequent assignees. Id. ¶ 19.10
Moving Defendants argue that this claim fails for a variety of reasons,
and the court addresses these arguments in turn.
1.

Inability to Return the Parties to their Original Positions
Moving Defendants argue that even if there were any § 480-2

violations, Plaintiff is still not entitled to the relief he seeks where he cannot tender
the loan proceeds. Similar to the TILA rescission claim, the court agrees with
10

Although the FAC also seeks damages “against Amerifund and its successors and
assigns,” Doc. No. 1-1, FAC ¶ 19, Plaintiff offers no basis for why damages based on
Amerifund’s alleged violations of HRS § 480-2 would be appropriate against Moving
Defendants -- there is no evidence that Moving Defendants engaged in any misconduct in
consummating the loan transaction and Plaintiff does not suggest any basis for why Moving
Defendants should be held liable in damages for Amerifund’s violations of HRS § 480-2. The
court therefore addresses the §480-2 claim as seeking declaratory relief against Moving
Defendants.
26

Moving Defendants’ legal proposition, but finds that genuine issues of material
fact still exist regarding ability to tender.
As to the legal proposition, Hawaii courts have not addressed the
particular issue of what remedies a borrower is entitled to based on HRS § 48012’s mandate that contracts in violation of Chapter 480 are void and unenforceable.
It is clear enough from the plain language of § 480-12 that if a plaintiff seeks to
enforce a contract that violates Chapter 480, a defendant may raise § 480-12 as a
defense to the action. See, e.g., 808 Dev., LLC v. Murakami, 111 Haw. 349, 357,
141 P.3d 996, 1004 (2006) (holding that the plaintiff was not entitled to a
mechanic’s lien on defendant’s property where the contract under which the work
was performed was void pursuant to § 480-12, but that the plaintiff could seek
relief for quantum meruit); Hiraga v. Baldonado, 96 Haw. 365, 372-73, 31 P.3d
222, 229-30 (Haw. App. 2001) (similar). What is not so clear -- and what Hawaii
courts have not addressed -- is what remedies are available to a plaintiff who seeks
to affirmatively void a contract in violation of Chapter 480.
As a starting point, in determining appropriate equitable relief for
violations of Chapter 480, the Hawaii Supreme Court has relied on the common
law fraud principle that an injured person should be put “in the position he would
have been had he not been defrauded.” Leibert v. Fin. Factors, Ltd., 71 Haw. 285,
290, 788 P.2d 833, 837 (1990) (quoting Ellis v. Crockett, 51 Haw. 45, 52, 451 P.2d
27

814, 820 (1969); see also Davis v. Wholesale Motors, Inc., 86 Haw. 405, 421, 949
P.2d 1026, 1042 (Haw. App. 1997) (“Correspondingly, while a plaintiff should be
compensated for loss suffered, he or she should not be permitted to reap a benefit
received from the defendant under the contract.”); see also Hiraga, 96 Haw. at
370, 31 P.3d at 227.
To illustrate this point, Davis, 86 Haw. at 421, 949 P.2d at 1042,
relied upon Majcher v. Laurel Motors, 680 N.E.2d 416, 422 (Ill. App. 1997),
which found that a plaintiff who was entitled to rescission under the Illinois
Consumer Fraud and Deceptive Business Practices Act should return “any
consideration or property received” and “account for any benefits it received from
the other party under the contract.” Agreeing with Majcher, Davis reasoned that
accounting for the benefits a plaintiff receives makes common sense because “a
plaintiff cannot be unjustly enriched at a defendant’s expense simply because the
defendant is liable for unfair or deceptive trade practices.” Id.
Turning to this action, merely voiding the transaction on its own is not
an appropriate remedy because Plaintiff would receive a windfall of holding title to
the subject property free and clear of any mortgage, as well as taking benefit of the
$1.26 million that was originally loaned by Amerifund. In comparison, DBNTC
would have neither an enforceable note nor mortgage. This windfall for Plaintiff,
28

at DBNTC’s expense, runs wholly counter to the Hawaii courts’ acknowledgment
that a plaintiff cannot “be unjustly enriched at a defendant’s expense simply
because the defendant is liable for unfair or deceptive trade practices.” Davis, 86
Haw. at 421, 949 P.2d at 1042.
That merely voiding the transaction (and not requiring Plaintiff to
establish ability to put DBNTC in the position it held prior to the transaction) is
improper is confirmed by other authorities. For example, 17A Am. Jur. 2d
Contracts § 301, explains that a party seeking to void a contract must first return
the benefits received:
A party to an illegal agreement will not be permitted to
avail himself or herself of its illegality until he or she
restores to the other party all that has been received from
such a party on the illegal agreement.
Indeed, avoidance of a contract and restitution and/or rescission, i.e., treating the
agreements as void ab initio and placing the parties in the positions they held prior
to the transaction, go hand-in-hand to carry out this result and prevent a windfall to
one party. See Lee v. HSBC Bank USA, 121 Haw. 287, 292, 218 P.3d 775, 780
(2009) (holding that where an agreement created at a foreclosure sale is void and
unenforceable for failure to comply with HRS § 667-5, then “[t]he high bidder at
such a sale is entitled only to return of his or her downpayment plus accrued
interest”); Bischoff v. Cook, 118 Haw. 154, 162, 185 P.3d 902, 910 (Haw. App.
29

2008) (“Where a contract has been avoided, the plaintiff is asking only that the
contract be declared null and void and that restitution be awarded.”); Hiraga, 96
Haw. at 372, 31 P.3d at 229 (holding that even though plaintiff-general contractor
could not enforce contract that was void pursuant to HRS § 480-12, he could still
recover in quantum meruit for work performed according to the contract); see also
Pan-American Petroleum & Transp. Co. v. United States, 273 U.S. 456, 505
(1927) (collecting cases discussing void contracts and holding that rescission
requires that the “the party against whom relief is sought shall be remitted to the
position he occupied before the transaction complained of”); Estate of Luster v.
Allstate Ins. Co., 598 F.3d 903, 907-08 (9th Cir. 2010) (providing that under
Indiana law, a “contract is voidable at the election of the injured party. If he elects
to affirm the transaction, he has his remedy by way of damages. If he elects to
rescind, he must return back what he has received, and in turn he is entitled to
receive what he has parted with”); Williams v. Homestake Mortg. Co., 968 F.2d
1137 (11th Cir. 1992) (“Under common law rescission, the rescinding party must
first tender the property that he has received under the agreement before the
contract may be considered void. Once the rescinding party has performed his
obligations, the contract becomes void and the rescinding party may then bring an
action in replevin or assumpsit to insure that the non-rescinding party will restore
30

him to the position that he was in prior to entering into the agreement, i.e., return
earnest money or monthly payments and void all security interests.” (citations
omitted)); Cestro v. LNV Corp., 2010 WL 4642488, at *3 (D. Ariz. Nov. 9, 2010)
(“[E]ven if the Court were to find that the loan was void due to Ms. Cestro’s
incapacity, the equitable remedy of rescission would require Ms. Cestro to tender
the loan proceeds to Defendant LNV Corporation.”).
Thus, the court finds that to void the mortgage transaction as Plaintiff
seeks pursuant to HRS § 480-12, Plaintiff must establish that he place the parties in
as close a position as they held prior to the transaction.11
In opposition, Plaintiff asserts that the court should follow Beneficial
Haw., Inc. v. Kida, 96 Haw. 289, 30 P.3d 895 (2001). Beneficial Hawaii did not
address HRS § 480-12, but rather HRS § 454-8, which provides that “any contract
entered into by any person with any unlicensed mortgage broker or solicitor shall
be void and unenforceable.” Beneficial Hawaii found that the mortgage at issue
was void for violation of Chapter 454, and that the current mortgagee (who was
transferred the mortgage and note subsequent to the contract) was not entitled to
restitution because it failed to present any evidence of what it had paid for

11

At this time, the court need not determine precisely how a plaintiff can establish how
to place the parties back to their original positions for purposes of a § 480-2 claim.
31

mortgage and note. Id. at 315-16, 30 P.3d at 921-22. Given that Beneficial
Hawaii addressed HRS Chapter 454 and not Chapter 480, it is unclear whether it is
at all relevant to this analysis. Regardless, Beneficial Hawaii’s holding was limited
to a conclusion that Beneficial was not entitled to seek equitable relief based on a
failure of proof, not as a matter of law. In fact, the court did not appear to question
the general proposition that a lender does have equitable rights to recover advanced
funds to avoid unjust enrichment. Beneficial Hawaii provides Plaintiff no relief.
In further opposition, Plaintiff invokes a general public policy
argument in favor of consumers and to “punish predatory offenders with a
complete loss of any remuneration or consideration whatsoever.” Doc. No. 50,
Pl.’s Recons. Reply at 9.12 The general public policy in favor of consumers,
however, does not suggest that violations of HRS Ch. 480 should result in the type
of windfall that would be created by the court simply voiding all contracts without
addressing the consideration exchanged between the parties. Rather, as explained
above, Hawaii caselaw specifically addressing remedies under Chapter 480
supports that parties must be returned to the positions they previously held.
12

Plaintiff also argues that Butler v. Obayashi, 71 Haw. 175, 785 P.2d 1324 (1990), and
Jones v. Phillipson, 92 Haw. 117, 987 P.2d 1015 (Haw. App. 1999), support that a consumer
need not return consideration on a void contract, but these cases are unhelpful as they address a
specific statute, HRS § 444-22, which specifically prevents unlicensed contractors from
recovering for work performed. In other words, § 444-22 explicitly rejects that the parties
should be placed back in their original positions.
32

As to the facts of this case, despite the court’s finding that Plaintiff
must establish an ability to tender and/or place the parties back to their original
positions, the court finds that a genuine issue of material fact exists regarding this
issue. As explained above for Plaintiff’s claim for TILA rescission, Moving
Defendants did not establish that Plaintiff cannot tender the loan proceeds, and the
parties have not addressed the original position DBNTC held given that it is a
subsequent holder of the note. Accordingly, Moving Defendants are not entitled to
summary judgment.
2.

Moving Defendants’ Additional Arguments
Moving Defendants raised three additional arguments why this claim

fails, none of which carries their summary judgment burden.
First, Moving Defendants rely on Kajitani v. Downey Sav. & Loan
Ass’n, 647 F. Supp. 2d 1208 (D. Haw. 2008), to argue that TILA preempts
Plaintiff’s HRS Ch. 480 claim because they are both based on Amerifund’s actions
and representations in originating the loan. Doc. No. 33-1, Defs.’ Summ. J. Mot. at
18. The court agrees with the reasoning of Kajitani, which held that where “state
law claims rest on TILA violations or concern subject matters explicitly preempted
in [the regulations], those claims are clearly preempted.” Kajitani, 647 F. Supp. 2d
at 1220. But Plaintiff’s Ch. 480 claim is not based solely on TILA violations -33

rather, the FAC also asserts that (1) Plaintiff was not “allowed adequate time to
read and to understand the terms and the language” of the mortgage, Doc. No. 1-1,
FAC ¶ 11; (2) Amerifund intentionally falsified Plaintiff’s monthly income,
presumably so that Plaintiff would qualify for a loan that he could not afford, id. ¶
12; and (3) Amerifund improperly conducted business in Hawaii without a
license.13 Thus, federal preemption principles do not apply.
Second, Moving Defendants argue that Plaintiff cannot assert a
§ 480-2 claim against them because Ch. 480 “does not contemplate vicarious
liability for assignees.” Doc. No. 33-1, Defs.’ Summ. J. Mot. at 19. Although it is
true that the FAC does not allege that Moving Defendants engaged in any conduct
that violates § 480-2, as explained above, § 480-12 declares that contracts in
violation of Ch. 480 are void such that a consumer may seek rescission against a
subsequent assignee.14
Third, Moving Defendants argue that the undisputed facts establish
13

Moving Defendants did not address, and the court therefore need not determine,
whether each of these allegations constitute violations of HRS § 480-2. Rather, the court merely
recites these facts to establish that Plaintiff’s § 480-2 claim does not appear to be limited to
TILA violations.
14

Moving Defendants cite to Araki v. One West Bank FSB, 2010 WL 5625969 (D. Haw.
Sept. 8, 2010), as supporting that a § 480-2 claim cannot stand against a subsequent assignee. In
Araki, it was unclear whether the plaintiff was seeking damages or rescission against a
subsequent assignee. To the extent Araki can be read as supporting that a HRS Ch. 480 claim for
rescission cannot stand against a subsequent assignee, the court takes this opportunity to reject it.
34

that no unfair or deceptive practices occurred during the origination of the loan
because Plaintiff was an experienced mortgagor, signed the loan documents
without reading them, and was not hurried in completing the loan process. Id. at
20. Viewing the evidence in a light most favorable to Plaintiff, however, the court
finds that genuine issues of material fact exist regarding whether there was a
§ 480-2 violation. Specifically, although Plaintiff was not expressly told to hurry
in completing the mortgage loan documents, Plaintiff was aware there was another
appointment after him such that he had only a half hour to complete the
documents. Doc. No. 34-3, Defs.’ Ex. 2 at 57, 62. Plaintiff therefore did not read
the documents and instead relied upon the advice of Amerifund’s loan officer, Max
Clark, to guide him through the documents. Doc. No. 37-1, Pl.’s Decl. ¶ 5. Given
that Plaintiff had previously worked with Mr. Clark on four other loans, see id., the
court cannot say that a reasonable consumer in these circumstances would have
necessarily read all the documents.
The court therefore DENIES Moving Defendants’ Motion for
Summary Judgment on Plaintiff’s HRS § 480-2 claim.
V. CONCLUSION
Based on the above, the court GRANTS in part and DENIES in part
Moving Defendants’ Motion for Summary Judgment. As a result of this Order,
35

Plaintiff’s claims against Amerifund remain, as well as Plaintiff’s claims against
Moving Defendants for rescission pursuant to TILA and HRS § 480-2.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, June 16, 2011.

/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge

Beazie v. Amerifund Fin., Inc., Civ. No. 09-00562 JMS/KSC, Amended Order Granting in Part and
Denying in Part Defendants Mortgage Electronic Registration Systems, Inc. and Deutsche Bank
National Trust Company as Trustee for American Mortgage-backed Pass-through Certificates,
Series 2007-5’s Motion for Summary Judgment

36