Valencia et al v. Carrington Mortgage Services, LLC. et al
Filing
168
ORDER GRANTING: (1) DEFENDANTS CARRINGTON MORTGAGE SERVICES, LLC AND DEUTSCHE BANK NATIONAL TRUST COMPANY'S MOTION TO DISMISS THE FOURTH AMENDED COMPLAINT FILED 9/14/12 AS AGAINST MOVANTS 162 ; AND (2) DEFENDANTS EQUITY FINANCIAL GROUP OF HONOL ULU, LLC, EQUITY FINANCIAL, LLC, AND BRAD B. KANESHIRO'S MOTION TO DISMISS THE FOURTH AMENDED COMPLAINT FILED ON SEPTEMBER 14, 2012 164 . Signed by JUDGE LESLIE E. KOBAYASHI on 1/29/2013. (afc)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
WANDA VALENCIA and MARK
VALENCIA,
)
)
)
)
plaintiffs,
)
vs.
)
)
CARRINGTON MORTGAGE SERVICES, )
)
LLC; DEUTSCHE BANK NATIONAL
TRUST COMPANY, AS TRUSTEE,
)
)
FOR CARRINGTON HOME EQUITY
)
LOAN TRUST, SERIES 2005-NC4
)
ASSET BACKED PASS THROUGH
)
CERTIFICATES; EQUITY
FINANCIAL GROUP OF HONOLULU, )
)
LLC; EQUITY FINANCIAL LLC;
)
BRAD B. KANESHIRO,
)
)
Defendants.
_____________________________ )
CIVIL 10-00558 LEK-RLP
ORDER GRANTING: (1) DEFENDANTS CARRINGTON MORTGAGE SERVICES, LLC
AND DEUTSCHE BANK NATIONAL TRUST COMPANY’S MOTION TO DISMISS THE
FOURTH AMENDED COMPLAINT FILED 09/14/12 AS AGAINST MOVANTS; AND
(2) DEFENDANTS EQUITY FINANCIAL GROUP OF HONOLULU, LLC,
EQUITY FINANCIAL, LLC, AND BRAD B. KANESHIRO’S MOTION TO
DISMISS THE FOURTH AMENDED COMPLAINT FILED ON SEPTEMBER 14, 2012
Before the Court are: (1) Defendants Carrington
Mortgage Services, LLC (“CMS”) and Deutsche Bank National Trust
Company, as Trustee for Carrington Home Equity Loan Trust, Series
2005-NC4 Asset Backed Pass-through Certificates’ (“DBNT”) Motion
to Dismiss The Fourth Amended Complaint filed 09/14/12 as Against
Movants (“Carrington Motion”), filed on September 28, 2012; and
(2) Defendants Equity Financial Group of Honolulu, LLC (“Equity
Honolulu”), Equity Financial, LLC (“Equity Financial”), and Brad
B. Kaneshiro’s Motion to Dismiss The Fourth Amended Complaint
Filed on September 14, 2012 (“Equity Financial Motion”), filed on
September 28, 2012.
Plaintiffs Wanda Valencia and Mark Valencia
(“Plaintiffs”), who are represented by counsel, did not file a
memorandum in opposition to either motion.
Defendants CMS and
DBNT filed a Statement of No Position regarding the Equity
Financial Motion on December 20, 2012.
The Court finds these
matters 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 (“Local Rules”).
After careful consideration of the motions, supporting memoranda,
and the relevant legal authority, both motions are HEREBY GRANTED
for the reasons set forth below.
BACKGROUND
I.
Factual Background
Plaintiffs filed their original Complaint on September
29, 2010.
Their Third Amended Complaint was dismissed with leave
to amend by United States Senior District Judge David Alan Ezra
on August 1, 2012 (“8/1/12 Order”).1
[Dkt. no. 154.]
filed their Fourth Amended Complaint on July 30, 2012.
Plaintiffs
[Dkt. no.
158.]
1
2012.
This case was reassigned to this Court on September 18,
[Dkt. no. 160.]
2
Plaintiffs sought financing to purchase the subject
property located at 45-531B Halekou Road, Kaneohe, Hawai‘i 96744
(the “Property”), in 2005.
They met with Kaneshiro in April
2005, and allege that they entered into a verbal agreement that
he would act as their loan broker.
Equity Honolulu steered
Plaintiffs to New Century Mortgage Corporation (“NCM”) as a
lender.
[Fourth Amended Complaint ¶¶ 15-17.]
On April 22, 2005,
Plaintiffs executed a mortgage in favor of NCM, which was
recorded in the Bureau of Conveyances on April 28, 2005, as
Document No. 2005-084212. (“Mortgage”).
That same day,
Mr. Valencia executed two notes in favor of NCM: the first was a
thirty-year Adjustable Rate Note in the amount of $516,000.00
(“Note”); the second note was for the remaining $129,000.00 and
was paid in full through subsequent refinancing (“Second Note”).
[Id. at ¶¶ 29-32.]
According to Plaintiffs, Equity Honolulu and
NCM “obtained an appraisal of the Property, which inflated the
value of the Property to be consistent with the amounts of the
First Note and Second Note.”
[Id. at ¶ 33.]
On July 12, 2007, CMS sent Mr. Valencia a Joint Notice
of Assignment, Sale or Transfer of Servicing Rights, notifying
him that the servicing rights to his loan were transferred from
NCM to CMS effective July 1, 2007.
[Id. at ¶ 40.]
NCM endorsed
and transferred the Note to Defendant Deutsche Bank National
Trust Co. (“DBNT”), as Trustee for Carrington Home Equity Loan
3
Trust, and NCM also assigned the Mortgage to DBNT, as Trustee, by
an Assignment of Mortgage recorded in the Bureau of Conveyances
as Document No. 2010-053721.
Note and Mortgage.
DBNT is the current holder of the
In a March 26, 2010 letter, CMS notified
Plaintiffs of its intention to non-judicially foreclose due to
non-payment.
On April 26, 2010, counsel for CMS sent a second
notice of intent to foreclose.
On October 6, 2010, DBNT executed
a release and discharge of its notice of foreclosure.
Plaintiffs assert the following claims in their Fourth
Amended Complaint: Count I - breach of contract and constructive
fraud against Equity Financial, Equity Honolulu, and Kaneshiro;
Count II - violation of Fair Debt Collection Practices Act, 15
U.S.C. § 1692(e) (“FDCPA”), against DBNT and CMS; Count III violation of federal Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. § 1962 (“RICO”), against all
Defendants; Count IV - violation of Haw. Rev. Stat. § 842-2
(“state RICO claims”) against all Defendants; Count V - wrongful
foreclosure, against CMS and DBNT; Count VI - breach of fiduciary
duty, against Equity Financial, Equity Honolulu, and Kaneshiro
and; Count VII - negligence, against Equity Financial, Equity
Honolulu, and Kaneshiro.
II.
Carrington Motion
CMS, the loan servicer, and DBNT, the current holder of
the Note, move to dismiss all of the claims against them, and
4
seek an order expunging any Notices of Pendency of Action,
including the Notice filed September 4, 2010, recorded in the
Bureau of Conveyances [dkt. no. 4 (Notice of Lis Pendens)].
[Motion at 1.]
They present evidence that the Note bears a
special endorsement from NCM to DBNT, and that the servicing
rights were transferred from NCM to CMS, effective July 1, 2007.
[Mem. in Supp. of Carrington Motion at 2 (citing Note [dkt. no.
84-8]; Notice of Joint Assignment [dkt. no. 84-8]).]
A.
Count II - FDCPA
Movants first note that the FDCPA claim was dismissed
with prejudice as to CMS.
As for DBNT, they argue that it is not
a “debt collector,” it has not engaged in any improper acts, and
Plaintiffs have not alleged actual damages.
B.
[Id. at 5-6.]
Counts III and IV - Federal and State RICO Claims
Next, movants argue that Plaintiffs have not cured the
defects in Counts III and IV that were identified in the previous
orders of dismissal in this case.
To the extent these claims are
based on fraud, movants argue that Defendants fail to plead them
with particularity or show that the alleged RICO violations were
the proximate cause of their injury, as noted in the 8/1/12
Order.
C.
[Id. at 12-14.]
Count V - Wrongful Foreclosure
Movants note that DBNT released and discharged the
notice of foreclosure, and there has been no foreclosure of the
5
Property.
They argue that state courts have not recognized a
common law wrongful foreclosure cause of action, and that
Plaintiffs do not allege any violation of Haw. Rev. Stat. Chapter
667.
[Id. at 26.]
III. Equity Financial Motion
Equity Financial seeks dismissal of the Fourth Amended
Complaint without leave to amend, and argues that none of the
previously noted defects have been cured.
[Mem. in Supp. of
Equity Financial Motion at 1-4.]
A.
Claims Against Kaneshiro
Kaneshiro argues that Plaintiffs again fail to allege
facts that would plausibly suggest that he is liable as an alterego of Equity Financial or Equity Honolulu.
He asserts that the
Fourth Amended Complaint does not allege specific facts that
would support veil-piercing or alter-ego liability.
[Id. at 5-
6.]
B.
Claims Against Equity Financial
Next, Equity Financial argues that the claims against
it should be dismissed because it did not exist at the time of
the transaction.
It was first organized and registered on
November 17, 2005, several months after Plaintiffs’ loan had
closed.
[Id. at 7 (citing Decl. of Counsel, Exh. A (DCCA
Business Registration)).]
C.
Claims Against Equity Honolulu
6
Equity Honolulu urges the dismissal of the Counts
against it for failure to state claim.
1.
Count I - Breach of Contract/Constructive Fraud
Equity Honolulu notes that Plaintiffs’ allegation that
it breached an oral promise to find a mortgage that they could
afford is vague and unenforceable.
To the extent Plaintiffs
signed the Note and Mortgage agreeing to the stated terms, Equity
Honolulu argues that they waived any breach of an oral promise.
[Id. at 9-10.]
To the extent Plaintiffs allege constructive fraud,
Equity Honolulu argues that the vague allegations fail to state a
claim.
It argues that Plaintiffs are responsible for the
representations in the loan applications that they signed, and
that they did not reasonably rely upon any misstatements made by
others.
[Id. at 11-12.]
2.
Counts III and IV - Federal and State RICO Claims
It next argues that Plaintiffs’ civil RICO allegations
are based on fraud, and fail to satisfy Rule 9(b).
Equity
Honolulu also argues that the federal claims are time barred by
the four-year state of limitations, which began to run from the
April 2005 date of closing.
3.
[Id. at 16-17.]
Count VI - Breach of Fiduciary Duty
Equity Honolulu contends that Plaintiffs fail to allege
injuries, causation, and damages required to state a claim for
7
breach of fiduciary duty.
4.
[Id. at 18.]
Count VII - Negligence
Next, it argues that Plaintiffs’ negligence claims are
time barred, and that Plaintiffs are not entitled to equitable
tolling.
[Id. at 19-21.]
STANDARD
Federal Rule of Civil Procedure 12(b)(6) permits a
motion to dismiss a claim for failure to state a claim upon which
relief can be granted.
“To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its
face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see
also Weber v. Dep’t of Veterans Affairs, 521 F.3d 1061, 1065 (9th
Cir. 2008).
This tenet – that the court must accept as true all
of the allegations contained in the complaint – “is inapplicable
to legal conclusions.”
Iqbal, 556 U.S. at 678.
Accordingly,
“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”
(citing Twombly, 550 U.S. at 555).
Id.
Rather, “[a] claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Id. (citing
Twombly, 550 U.S. at 556).
Federal Rule of Civil Procedure 9(b) requires that
8
“[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.”
The rule requires that a party make particularized allegations of
the circumstances constituting fraud, including the “time, place,
and content of the fraudulent representation.”
Shroyer v. New
Cingular Wireless Servs., Inc., 622 F.3d 1035, 1042 (9th Cir.
2010).
DISCUSSION
The Court first notes that, although Plaintiffs are
represented by counsel, they failed to file any opposition to the
motions.
The Court therefore treats the motions as unopposed.
Second, the Court notes that the instant Fourth Amended Complaint
is Plaintiffs’ fifth attempt to state actionable claims relating
to this loan transaction.
In the 8/1/12 Order dismissing the
Third Amended Complaint in its entirety, Senior Judge Ezra
cautioned Plaintiffs as follows:
The Court recognizes that it may be possible for
Plaintiffs to state a claim for relief against the
moving Defendants. Therefore, the Court DISMISSES
the claims dismissed in this Order WITHOUT
PREJUDICE and grants Plaintiffs one final
opportunity to amend their Complaint. The Fourth
Amended Complaint shall be filed by no later than
forty-five (45) days from the filing of this
Order. Failure to do so and to cure the pleading
deficiencies identified above will result in
dismissal of those claims with prejudice.
[8/1/12 Order at 26.]
I.
Carrington Motion
A.
Count II - FDCPA
9
This claim has already been dismissed with prejudice as
to CMS.
As for DBNT, the Fourth Amended Complaint indicates that
it purchased Plaintiffs’ loan in 2005, which was prior to
Plaintiffs’ default in 2008.
37, 54.]
[Fourth Amended Complaint at ¶¶ 36-
DBNT, which owned the loan at the time of default, was
not attempting to collect a debt on behalf of another lender.
Accordingly,
original lenders, creditors, mortgage servicing
companies, and mortgage brokers generally do not
qualify as “debt collectors.” See, e.g., Lyons v.
Bank of Am., NA, 2011 WL 3607608, at *12 (N.D.
Cal. Aug. 15, 2011) (“The FDCPA applies to those
who collect debts on behalf of another; it does
not encompass creditors who are collecting their
own past due accounts.”); Radford v. Wells Fargo
Bank, 2011 WL 1833020, at *15 (D. Haw. May 13,
2011) (collecting cases stating that original
lenders and mortgage servicing companies are not
“debt collectors”); Sakugawa v. IndyMac Bank,
F.S.B., 2010 WL 4909574, at *5 (D. Haw. Nov. 24,
2010) (dismissing FDCPA claim because the mortgage
broker was not a “debt collector”).
Long v. Deutsche Bank Nat. Trust Co., Cv. No. 10–00359 JMS/KSC,
2011 WL 5079586, at *14 (D. Hawai‘i Oct. 24, 2011); see also Nool
v. HomeQ Servicing, 653 F. Supp. 2d 1047, 1053 (E.D. Cal. 2009)
(quoting Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th
Cir. 1985) (“The legislative history of section 1692a(6)
indicates conclusively that a debt collector does not include the
consumer’s creditors, a mortgage servicing company, or an
assignee of a debt, as long as the debt was not in default at the
time it was assigned.”)).
10
Because neither CMS nor DBNT qualify as “debt
collectors,” Plaintiffs fail to state a claim for violation of
the FDCPA against them.
Count II is HEREBY DISMISSED WITH
PREJUDICE.
B.
Counts III and IV - Federal and State RICO Claims
Next, movants argue that Plaintiffs have not cured the
defects in Counts III and IV that were identified in the previous
orders of dismissal in this case.
The district court’s most
recent order stated, in pertinent part:
Since Plaintiffs’ RICO claim is premised on
allegations of fraud, it is subject to Rule 9(b)’s
heightened pleading requirements. See Lancaster
Community Hospital v. Antelope Valley Hospital
Dist., 940 F.2d 397, 405 (9th Cir. 1991) (“The
Ninth Circuit has repeatedly insisted that this
rule be followed in RICO actions alleging the
predicate act of mail fraud.”); see id. (holding
that with respect to the predicate act of mail
fraud, a plaintiff must allege with “particularity
the time, place, and manner of each act of fraud,
plus the role of each defendant in each scheme”).
Plaintiffs’ general allegations, devoid of
reference to identities, time, date, and place,
are insufficient to meet the heightened pleading
requirements of Rule 9(b). See McAnelly v. PNC
Mortg., Civ. No. 10-02754 MCE-GGH, 2011 WL
6260537, at *7 (E.D. Cal. Dec. 15, 2011)
(plaintiff’s allegation that defendants used
“intentional nondisclosure, fraud, and creation of
fraudulent loan documents” to “perpetuate a fraud”
had “not sufficiently tethered the specific
conduct falling within RICO to the specific
defendants in order to demonstrate a plausible
claim.”); Cross v. Wells Fargo Bank, N.A., Civ.
No. 11-00447 AHM, 2011 WL 6136734, at * 9–10 (C.D.
Cal. Dec.9, 2011) (finding the allegations that
defendants’ “use of intentional nondisclosure” and
“creation of fraudulent loan documents” failed “to
meet the particularity requirements for a RICO
11
claim because they fail to state the time, place,
and specific content of the false
representations.”).
Moreover, even if Plaintiffs’ allegations met
Rule 9(b)’s heightened pleading requirements,
Plaintiffs’ claim would still fail because they
have not adequately alleged that they suffered
injury “by reason of” the alleged RICO violation.
A claim under § 1962(c) of RICO, which forbids
conducting or participating in the conduct of an
enterprise’s affairs through a pattern of
racketeering activity, requires a showing that the
alleged violation was not only the “but for” cause
of plaintiff’s injury, but also the proximate
cause. Anza v. Ideal Steel Supply Corp., 547 U.S.
451, 457 (2006). Compensable injury under the
statute “is the harm caused by predicate acts
sufficiently related to constitute a pattern.”
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497
(1985). Plaintiffs allege that they suffered
damages, including: (1) accelerated amounts
demanded from CMS and [DBNT], (2) decreased market
value of the Property, (3) detrimental effect to
the marketability and financing of the Property,
(4) clouded title of the Property, and (5) threats
to the availability of Property insurance. (TAC ¶
85.) However, the RICO violation alleged is wire
and mail fraud and the direct victims of that
fraud were the lending institutions and other
entities that allegedly received the fraudulent
documents. Moreover, as this Court has made clear
in previous orders, the validity of the assignment
and representations regarding the identity of the
mortgagee do not affect Plaintiffs’ obligation to
pay back their loan. The Court therefore
concludes that Plaintiffs’ factual allegations do
not raise a reasonable inference that Defendants’
allegedly fraudulent scheme proximately caused
Plaintiffs’ injuries.
[8/1/12 Order at 17-19.]
Plaintiffs made no attempt to set forth additional
factual allegations with respect to their allegations of fraud,
as required by Fed. R. Civ. P. 9(b), or their Federal and State
12
RICO claims.
For the reasons set forth in the 8/1/12 Order, and
for the reasons stated in the Carrington Motion, Counts III and
IV are HEREBY DISMISSED WITH PREJUDICE.
C.
Count V - Wrongful Foreclosure
Count V alleges that none of the Defendants “had the
right to declare a default . . . or otherwise foreclose on the
Valencias’ ownership interest in the Property.
Defendants were
neither the legal nor beneficial owner of the Note.”
Amended Complaint at ¶ 93.]
[Fourth
They also repeat their “wet ink”
theory, which has been repeatedly rejected by this district
court.
[Id. at ¶ 94.]
First, the Court notes that there has been no
foreclosure of the Property.
As the district court set forth in
a previous order:
By letter dated March 26, 2010, CMS notified
Plaintiffs of its intention to non-judicially
foreclose due to non-payment. (Croft Decl. ¶ 17;
Doc. # 84-15.) On April 26, 2010, counsel for CMS
sent a second notice of intent to foreclose.
(Doc. # 84-16.) In response to an email from Mr.
Valencia on April 28, 2010, counsel sent him
verification of the debt. (Doc. # 84-17.)
On October 6, 2010, DBNT executed a release
and discharge of its notice of foreclosure. (Doc.
# 84-18.)
[4/30/12 Order at 7 (dkt. no. 119).]
To the extent Plaintiffs attempt to allege a common law
wrongful foreclosure claim, they fail to state a claim.
13
Hawai‘i
courts have not specifically recognized a common law wrongful
foreclosure cause of action.
“Substantive wrongful foreclosure
claims [in other jurisdictions] typically are available after
foreclosure and are premised on allegations that the borrower was
not in default, or on procedural issues that resulted in damages
to the borrower.”
Cervantes v. Countrywide Home Loans, 656 F.3d
1034, 1043 (9th Cir. 2011) (emphasis added).
Plaintiffs provide
no other legal authority or actionable theory of liability for
the wrongful foreclosure claim.
Count V is HEREBY DISMISSED WITH
PREJUDICE.
In sum, the Court HEREBY GRANTS the unopposed
Carrington Motion in its entirety, and all of the claims against
CMS and DBNT are DISMISSED WITH PREJUDICE.
II.
Equity Financial Motion
A.
Claims Against Kaneshiro
Kaneshiro argues that Plaintiffs fail to allege facts
that would plausibly suggest that he is liable as an alter-ego of
Equity Financial or Equity Honolulu.
In the 8/1/12 Order, Senior
Judge Ezra ruled as follows with respect to the claims against
Kaneshiro:
The only allegation in the complaint regarding
Kaneshiro’s purported alter ego status is that he
“improperly dominated and disregarded the separate
corporate forms of Defendants Equity Financial,
commingling the assets of the corporate Defendants
as his alter ego, agent and/or instrumentality, so
that a unity of interest, ownership and control
14
have and presently exists amongst Defendants
Equity Financial and Kaneshiro.” (TAC ¶ 13.)
Plaintiff does not allege any facts to
substantiate this wholly conclusory allegation.
Plaintiff’s bald assertion, devoid of any further
factual enhancement, is simply not sufficient to
support a claim based on an alter ego theory of
liability. See Television Events & Mktg., Inc. v.
Amcon Dist. Co., 416 F. Supp. 2d 948, 963 (D. Haw.
2006) (“Courts have stated that a plaintiff may
not simply make ‘conclusory allegations’ to find
liability under an alter ego theory.”); Neilson v.
Union Bank of California, 290 F. Supp. 2d 1101,
1116 (C.D. Cal. 2003) (“a plaintiff must allege
specifically both of the elements of alter ego
liability, as well as facts supporting each”); In
re Currency Conversion Fee Antitrust Litigation,
265 F. Supp. 2d 385, 426 (S.D.N.Y. 2003) (“These
purely conclusory allegations cannot suffice to
state a claim based on veil-piercing or alter-ego
liability, even under the liberal notice pleading
standard.”). Accordingly, the Court DISMISSES all
the claims alleged against Kaneshiro in the [Third
Amended Complaint].
[8/1/12 Order at 10-11.]
Plaintiffs again fail in their Fourth Amended Complaint
to cure the defects in their claims against Kaneshiro, despite
the district court’s directions in the 8/1/12 Order.
The Claims
against Kaneshiro are HEREBY DISMISSED WITH PREJUDICE.
B.
Claims Against Equity Financial
Next, Equity Financial argues that the claims against
it should be dismissed because it was first organized and
registered on November 17, 2005, several months after Plaintiffs’
loan had closed.
The Court notes that the Fourth Amended
Complaint is devoid of specific factual allegations as to Equity
Financial that suggest it is liable for the conduct alleged.
15
Plaintiffs allege only that Equity Financial “is a Hawaii limited
liability company and is the alter ego and/or successor entity of
[Equity Honolulu] by virtue of the identical ownership and
management of the entities by Brad B. Kaneshiro.”
Amended Complaint at ¶ 12.]
[Fourth
In any event, because the Court
concludes that Plaintiffs fail to state actionable claims against
Kaneshiro and Equity Honolulu, for the same reasons, Plaintiffs
fail to state a claim against Equity Financial.
The Claims
against Equity Financial are HEREBY DISMISSED WITH PREJUDICE.
C.
Claims Against Equity Honolulu
Equity Honolulu urges the dismissal of the claims
against it for failure to state claim.
1.
Count I - Breach of Contract/Constructive Fraud
To the extent Plaintiffs allege a breach of contract,
the 8/1/12 Order previously disposed of the claim as follows:
The Court concludes that these allegations
are largely conclusory and fail to state a claim
upon which relief can be granted. To allege
breach of contract, the complaint must, at a
minimum, cite the contractual provision allegedly
violated. See Otani v. State Farm Fire & Cas.
Co., 927 F. Supp. 1330, 1335 (D. Haw. 1996)
(“Generalized allegations of a contractual breach
are not sufficient.”). Plaintiff fails to allege
even the basic elements of a breach of contract
claim, much less factual allegations to support
such a claim. See Iqbal, 129 S. Ct. at 1949
(stating that Rule 8 requires more than
“the-defendant-unlawfully-harmed-me accusation[s]”
and “[a] pleading that offers labels and
conclusions or a formulaic recitation of the
elements of a cause of action will not do”). The
[Third Amended Complaint] does not identify: (1)
16
the contract at issue, (2) the parties to the
contract, (3) whether Plaintiffs performed under
the contract, and (4) the particular provision
that Defendants allegedly violated. See
Rodenhurst v. Bank of America, 773 F. Supp. 2d
886, 898 (D. Haw. 2011). Since Plaintiffs have
not even identified the contract at issue, it
follows that they also have not stated a claim for
the breach of an implied covenant of good faith
and fair dealing contained in any such contract.
[8/1/12 Order at 14.]
Plaintiffs failed to address these
shortcomings in their Fourth Amended Complaint.
To the extent Plaintiffs allege constructive fraud, the
district court has repeatedly directed Plaintiffs to plead their
fraud claims with particularity, which they have failed to do.
To the extent this Count is based on accusations that Equity
Honolulu falsified Plaintiffs’ income information on the loan
application, this district court previously ruled as follows:
Here, Plaintiffs have not alleged that they relied
upon any alleged representations to their
detriment. Indeed, it is unclear to the Court how
Mr. Valencia could have reasonably relied on
Equity Financial’s alleged misrepresentation
regarding his own income and employment
information in the loan application, which was
presumably a representation to a third party, and
not to Plaintiffs. See Newsom v. Countrywide Home
Loans, Inc., 714 F. Supp. 2d 1000, 1014 (N.D. Cal.
2010) (holding that plaintiff borrower could not
establish reliance for fraud claim because alleged
misstatement in loan application was made to the
lender, not to plaintiffs).
[8/1/12 Order at 20.]
Plaintiffs, again, fail to cure the shortcomings of
this claim.
For the reasons set forth in the 8/1/12 Order, and
17
for the reasons stated in the Equity Financial Motion, Count I is
HEREBY DISMISSED WITH PREJUDICE as to Equity Honolulu.
2.
Counts III and IV - Federal and State RICO Claims
For the same reasons set forth above with respect to
CMS and DBNT, Plaintiffs fail to state Federal and State RICO
claims against Equity Honolulu.
Counts III and IV are HEREBY
DISMISSED WITH PREJUDICE as to Equity Honolulu.
3.
Count VI - Breach of Fiduciary Duty
In the 8/1/12 Order, the district court dismissed
Plaintiffs’ breach of fiduciary duty claim as follows:
Unlike lenders, brokers generally owe fiduciary
duties to their clients. See, e.g., Ramos v.
Chase Home Finance, 810 F. Supp. 2d 1125, 1140
n.13 (D. Haw. 2011); Mortensen v. Home Loan Ctr.,
Inc., 2009 WL 113483, at *4 (D. Ariz. Jan. 16,
2009) (citing cases indicating that mortgage
brokers have fiduciary duties to their clients);
Brewer v. Indymac Bank, 609 F. Supp. 2d 1104, 1119
(E.D. Cal. 2009) (same); cf. Han v. Yang, 931 P.2d
604, 614 (Haw. App. 1997) (“A real estate broker
is a fiduciary and consequently must exercise the
‘utmost good faith, integrity, honesty, and
loyalty,’ and must diligently uphold a legally
imposed duty of due care.”) (citations omitted).
Accepting the allegations of the [Third
Amended Complaint] as true, Equity Financial acted
as Plaintiffs’ mortgage broker and thus owed
Plaintiffs a fiduciary duty. Plaintiffs also
allege that Equity Financial breached their
fiduciary duty by failing to disclose material
facts regarding the loan and deliberately
falsifying information on Plaintiffs’ loan
application in order to qualify Plaintiffs for a
high risk loan so that Equity Financial could earn
a commission. However, Count VIII nonetheless
fails to state a claim for relief because
Plaintiffs have not alleged any injuries caused by
18
Defendants’ alleged breach of fiduciary duty.
[8/1/12 Order at 22.]
Equity Honolulu contends that the Fourth Amended
Complaint still fails to sufficiently allege injuries caused by
the alleged breach, and does not include specific facts that
would establish when or why Plaintiffs’ credit scores were
damaged, or how such occurrence was related to Equity Honolulu’s
alleged breach.
The Court agrees.
Although Plaintiffs now allege in a conclusory manner
that “they have suffered numerous injuries, including but not
limited to, a severe decrease in their FICO credit scores and
downgrading of their creditworthiness,” [Fourth Amended Complaint
at ¶ 101,] they fail to allege when, why, or how their scores
suffered as a result of Equity Honolulu’s alleged breach, and how
they suffered damages as a result.
See BlueEarth Biofuels, LLC
v. Hawaiian Elec. Co., Inc., CIV. No. 09–00181 DAE–KSC, 2011 WL
2116989, 14-15 (D. Hawai‘i May 25, 2011) (Dismissing fiduciary
duty claim where the claimants “failed to plead how this alleged
breach of fiduciary duty has resulted in injury to them” and
“simply do not allege in any way that the breach of BlueEarth’s
fiduciary duty via Maez’s conduct resulted in any injury.”);
Scribner v. Ally Bank, N.A., Civ. No. 11–3360 (SRN/JJG), 2012 WL
2999776, at *4 (D. Minn. July 6, 2012) (“Here, Plaintiff alleges
loss of equity in his home and damage to his credit score.
19
The
Court finds that Plaintiff has not connected any alleged
misrepresentations as the cause of his damages . . . the collapse
of the real estate market and Plaintiff’s ensuing inability to
meet his mortgage obligations intervened between the alleged
misrepresentations and the damages.
Accordingly, the pleadings
do not show that the alleged misrepresentations were the
proximate cause of Plaintiff’s damages, and his claim fails.”).
Instead, the Fourth Amended Complaint contains vague
allegations and mere labels and conclusions, which are
insufficient to withstand a motion to dismiss.
Further, to the
extent this claim relies on allegations of fraud, Plaintiffs fail
to plead fraud with particularity as discussed above.
For these
reasons, and for the reasons set forth in the 8/1/12 Order, Count
VI is HEREBY DISMISSED WITH PREJUDICE as to Equity Honolulu.
4.
Count VII - Negligence
The basis for Plaintiffs’ negligence claim is the
Defendants’ alleged misstatements in Plaintiffs’ loan
application.
Equity Honolulu argues that Plaintiffs’ negligence
claims are time barred, and that Plaintiffs are not entitled to
equitable tolling.
In the 8/1/12 Order, the district court
dismissed the negligence claims, concluding that Plaintiffs had
not sufficiently alleged facts to support equitable tolling.
Plaintiffs have not demonstrated a basis for
equitable tolling of their claim. Equitable
tolling applies “where, despite all due diligence,
the party invoking equitable tolling is unable to
20
obtain vital information bearing on the existence
of the claim.” Cervantes v. Countrywide Home
Loans, Inc., 656 F.3d 1034, 1045 (9th Cir. 2011)
(quoting Socop–Gonzalez v. I.N.S., 272 F.3d 1176,
1193 (9th Cir. 2001)); see also O’Donnell v.
Vencor Inc., 466 F.3d 1104, 1112 (9th Cir. 2006)
(“Equitable tolling is generally applied in
situations where the claimant has actively pursued
his judicial remedies by filing a defective
pleading during the statutory period, or where the
complainant has been induced or tricked by his
adversary’s misconduct into allowing the filing
deadline to pass.”) (internal quotation marks
omitted). Plaintiffs argue in their Opposition
brief that their negligence claim should be tolled
because “information was concealed.” However, the
[Third Amended Complaint] does not allege any
facts indicating that the Equity Defendants and/or
Kaneshiro concealed the alleged misrepresentations
in Plaintiffs’ loan application that form the
basis of Plaintiffs’ negligence claim. Plaintiffs
also have not alleged any circumstances beyond
their control that prevented them from reviewing
the loan documents that they received and signed.
See e.g., Hubbard v. Fidelity Fed. Bank, 91 F.3d
75, 79 (9th Cir. 1996) (per curiam) (declining to
toll TILA’s statute of limitations when “nothing
prevented [the mortgagor] from comparing the loan
contract, [the lender’s] initial disclosures, and
TILA’s statutory and regulatory requirements”).
Accordingly, reading the TAC with the required
liberality, the Court concludes that Plaintiffs’
allegations “would not permit the plaintiff[s] to
prove that the statute was tolled.” Cervantes,
656 F.3d at 1045.
[8/1/12 Order at 24-25.]
The Fourth Amended Complaint does not cure the defects
previously identified in Plaintiffs’ equitable tolling
allegations.
They do not allege any circumstances beyond their
control that prevented them from reviewing the loan documents
that they received and signed.
Id. at 25; see also Mills v.
21
Equicredit Corp., 294 F. Supp. 2d 903, 909 (E.D. Mich. 2003)
(declining to equitably toll the limitations period because
“Plaintiffs could have discovered the terms of the loans by
reading the loan documents”).
Further, where the basis for
equitable tolling is fraudulent concealment, the circumstances
amounting to fraud must be alleged with particularity, which
Plaintiffs fail to do.
Count VII is HEREBY DISMISSED WITH
PREJUDICE as to Equity Honolulu.
In sum, the Court HEREBY GRANTS the unopposed Equity
Financial Motion in its entirety, and all of the claims against
Kaneshiro, Equity Financial, and Equity Honolulu are DISMISSED
WITH PREJUDICE.
CONCLUSION
On the basis of the foregoing, (1) Defendants
Carrington Mortgage Services, LLC and Deutsche Bank National
Trust Company’s Motion to Dismiss The Fourth Amended Complaint
filed 09/14/12 as Against Movants; and (2) Defendants Equity
Financial Group of Honolulu, LLC, Equity Financial, LLC, and Brad
B. Kaneshiro’s Motion to Dismiss The Fourth Amended Complaint
Filed on September 14, 2012, both filed on September 28, 2012,
are HEREBY GRANTED.
Plaintiffs’ Fourth Amended Complaint is
DISMISSED WITH PREJUDICE.
The Clerk’s Office is directed to
close this case.
IT IS SO ORDERED.
22
DATED AT HONOLULU, HAWAII, January 29, 2013.
/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
WANDA VALENCIA V. CARRINGTON MORTGAGE SERVICES; CIVIL NO. 1000558 LEK-RLP; ORDER GRANTING: (1) DEFENDANTS CARRINGTON MORTGAGE
SERVICES, LLC AND DEUTSCHE BANK NATIONAL TRUST COMPANY; MOTION TO
DISMISS THE FOURTH AMENDED COMPLAINT FILED 9/14/13 AS AGAINST
MOVANTS; AND (2) DEFENDANTS EQUITY FINANCIAL GROUP OF HONOLULU,
LLC, EQUITY FINANCIAL, LLC, AND BRAD B,. KANESHIRO’S MOTION TO
DISMISS THE COURT AMENDED COMPLAINT FILED ON SEPTEMBER 14 2012
23
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?