Casino et al v. Bank of America et al

Filing 31

ORDER GRANTING DEFENDANTS BANK OF AMERICA, N.A., AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.'S MOTION TO DISMISS AND PARTIALLY DISMISSING CLAIMS AGAINST NONMOVING DEFENDANTS SUA SPONTE 9 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 5/4/ 11. ( "Any Amended Complaint must be filed not later than 14 days after the date this order is filed.") (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notific ations 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
MARIANO C. CASINO, an
individual; ESTELITA B.
CASINO, an individual,

)
)
)
)
Plaintiffs,
)
)
vs.
)
)
)
BANK OF AMERICA, a Business
Entity, form unknown; FIRST
)
MAGNUS FINANCIAL CORPORATION, )
a Business Entity, form
)
)
unknown; FIDELITY NATIONAL
TITLE CORPORATION, a Business )
)
Entity, form unknown;
)
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, a
)
Business Entity, form
)
unknown; and DOES 1-100
)
inclusive,
)
)
Defendants.
)
_____________________________ )

CIVIL NO. 10-00728 SOM/BMK
ORDER GRANTING DEFENDANTS
BANK OF AMERICA, N.A., AND
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.’S
MOTION TO DISMISS AND
PARTIALLY DISMISSING CLAIMS
AGAINST NONMOVING DEFENDANTS
SUA SPONTE

ORDER GRANTING DEFENDANTS BANK OF AMERICA, N.A.,
AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.’S
MOTION TO DISMISS AND PARTIALLY DISMISSING CLAIMS
AGAINST NONMOVING DEFENDANTS SUA SPONTE
I.

INTRODUCTION.
Plaintiffs Mariano and Estelita Casino assert federal

and state law claims against several entities that participated
in the origination, settlement, and servicing of their mortgage
and loan, including Defendants Bank of America, N.A. (“Bank of
America”), First Magnus Financial Corporation (“First Magnus”),
Fidelity National Title Corporation (“Fidelity”), and Mortgage
Electronic Registration Systems, Inc. (“MERS”).
occurred in May 2007.

The transaction

Bank of America and MERS now seek dismissal of all
counts.

For the reasons set forth in this order, the court

GRANTS the motion and dismisses the Complaint with leave to amend
as to certain counts.

Given obvious pleading defects applicable

to all Defendants, the court also grants dismissal sua sponte as
to the majority of claims against the other Defendants.
II.

FACTUAL BACKGROUND.
The Casinos allege that they obtained a loan from First

Magnus for $1,000,000 on or about May 2, 2007.
No. 1.

Compl. ¶ 3, ECF

Plaintiffs allege that this transaction refinanced a

piece of property in Kailua Kona, Hawaii, and that they pledged
the subject property as security.

Compl. ¶¶ 2, 4-5.

The Casinos allege that the interest rate they received
was higher than the average 30-year fixed rate at that time.
Compl. ¶ 5.

They allege that they paid a “Loan Discount Fee” of

$2,500 and an “egregious” origination fee of $10,000.
¶¶ 5, 20, 28.

Compl.

The Complaint is not entirely clear, but appears

to allege that the property is in foreclosure proceedings.
Compl. ¶ 40.

2

The Casinos recite, in general terms,1 that mortgage
brokers and lenders have engaged in predatory lending practices
and that their loan was in fact a predatory lending transaction.
See, e.g., Compl. ¶¶ 18-19, 35-36.

The Casinos allege that

“[e]ach subsequent Defendant who has participated in, been
assigned or been transferred Rights, or holds a position or
interest under loan agreement [sic] . . . failed to perform their
due diligence in investigation [sic] the legal requirements that
this loan should have been processed within.”

Compl. ¶ 20 at

6:16-21.
The Complaint asserts that the loan terms were “not
clear or conspicuous, nor consistent, and are illegal, and
include, for example, extremely high ratios with respect to
Plaintiff’s Income and Liabilities.”

Compl. ¶ 21.

The Complaint

alleges that First Magnus, Fidelity, and MERS failed to verify
the Casinos’ prior or current income or their employment.
¶¶ 23, 27.

Compl.

The Complaint asserts that the terms of the loan were

such that the Casinos “can never realistically repay the loan,”
and that Defendants knowingly made it impossible for the Casinos
to ever own the subject property free and clear.

1

Compl. ¶ 21 at

In fact, this Complaint appears to be nearly identical in
form to several other complaints filed by pro se plaintiffs in
this court, all asserting the same twelve causes of action and
attaching a “Forensic Audit Report” by Francha Services, LLC.
See Asao v. Citi Mortgage, Inc., Civ. No. 10-00553 SOM/KSC (D.
Haw. Apr. 28, 2011) (citing several identical complaints).
3

7:1-2; see also Compl. ¶¶ 25, 29.

The Complaint further alleges

that Defendants failed to explain the “workings” of the mortgage
transaction to the Casinos.

Compl. ¶ 26.

The Complaint appears to allege both that First Magnus
gave the Casinos a higher interest rate than they should have
qualified for, but also that they could not have qualified for
the loan at all if First Magnus had employed proper underwriting
standards.

Compare Compl. ¶ 22 (“FIRST [Magnus] placed

Plaintiffs into a loan that had a significantly higher interest
rate than what was qualified for”) with Compl. ¶¶ 24, 31-32
(“Plaintiffs should have been declined for this loan”).
According to the Complaint, Defendants violated the
Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667, by failing
to issue to the Casinos TILA initial disclosures, a correct
payment schedule, their proper interest rate, an accurate Good
Faith Estimate, a disclosure relating to Property/Hazard
Insurance, or a “CHARM booklet.”

Compl. ¶¶ 57-58.

The Casinos

allege that materials were not provided in their native language.
Compl. ¶ 61.

The Casinos also allege that they did not receive a

“Special Information Booklet” explaining the loan’s settlement
costs, in violation of the Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. §§ 2601-2617.

Compl. ¶ 71.

The Complaint asserts eleven causes of action against
all Defendants: (1) declaratory relief; (2) injunctive relief;

4

(3) breach of implied covenant of good faith and fair dealing;
(4) violations of TILA; (5) violations of RESPA; (6) rescission;
(7) unfair and deceptive business practices; (8) breach of
fiduciary duty; (9) unconscionability; (10) predatory lending;
and (11) quiet title.

Compl. ¶¶ 39-109.

The Complaint also

asserts as a twelfth cause of action, solely against MERS, “Lack
of Standing; Improper Fictitious Entity.”

Compl. ¶¶ 110-17.

The

Casinos seek declaratory relief, an injunction enjoining
foreclosure, quiet title, rescission of the loan, damages, and
attorney’s fees.

Compl. p.25.

On February 14, 2011, Bank of America and MERS filed a
motion to dismiss.

ECF No. 9.

Although the Casinos filed their

Complaint pro se, they subsequently obtained counsel, who
prepared their brief opposing the motion to dismiss.
23.

See ECF No.

Neither Fidelity nor First Magnus has entered an appearance

in this case.
III.

STANDARD.
Rule 12(b)(6) of the Federal Rules of Civil Procedure

provides for dismissal of a complaint, or a claim therein, when a
claimant fails “to state a claim upon which relief can be
granted.”

Dismissal under Rule 12(b)(6) may be based on either:

(1) lack of a cognizable legal theory; or (2) insufficient facts
under a cognizable legal theory.

Balistreri v. Pacifica Police

Dep’t, 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v.

5

Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.
1984)).
“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.’”

That is, a

plaintiff must “plead[] factual content that allows the court to
draw the reasonable inference that the defendant is liable for
the misconduct alleged.”

Ashcroft v. Iqbal, ___ U.S. ___, 129 S.

Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 556, 570 (2007); see Evanns v. AT&T Corp., 229 F.3d
837, 839 (9th Cir. 2000).
Under Rule 12(b)(6), the court’s review is generally
limited to the contents of the complaint.

See Marder v. Lopez,

450 F.3d 445, 448 (9th Cir. 2006); Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

All allegations of

material fact are taken as true and construed in the light most
favorable to the nonmoving party.
1068, 1072 (9th Cir. 2005).

See Knievel v. ESPN, 393 F.3d

Conclusory allegations and

unwarranted inferences, however, are insufficient to defeat a
motion to dismiss.

See Sanders v. Brown, 504 F.3d 903, 910 (9th

Cir. 2007); Cholla Ready Mix, Inc. v. Civish, 382 F.3d 969, 973
(9th Cir. 2004).
In particular, the court should “identify[] pleadings
that, because they are no more than conclusions, are not entitled

6

to the assumption of truth.”

Iqbal, 129 S. Ct. at 1950.

The

court should disregard “[t]hreadbare recitals of the elements of
a cause of action, supported by mere conclusory statements.”
at 1949.

Id.

After eliminating such unsupported legal conclusions,

the court must identify “well-pleaded factual allegations,” which
are assumed to be true, “and then determine whether they
plausibly give rise to an entitlement to relief.”
IV.

Id. at 1950.

ANALYSIS.
Bank of America and MERS raise a myriad of challenges

to the Complaint.

They argue that the Complaint fails to

identify sufficiently specific allegations against them, that the
allegations allege fraudulent conduct without sufficient
particularity, and that each of the twelve causes of action fails
for various reasons.2
6-38, ECF No. 9-1.

See generally Mem. Supp. Mot. (“Mot.”) at

The court first addresses the global attacks

on the Complaint, then turns to the arguments as to each specific
Count.

Because of the similarity between the Complaints, and the

respective Defendants’ motions to dismiss, portions of the

2

The Complaint also mentions the Equal Opportunity Credit
Act, Compl. ¶ 12; the “Fair Lending/Fair Debt Collection Act,”
id.; and the Federal Trade Commission Act, id. ¶ 37. The
Casinos, however, assert no claims for relief (i.e., no Counts)
for any alleged violations of those federal laws. The Complaint
as written fails to state a claim for violations of those
statutes. Cf. Bautista v. Los Angeles Cnty., 216 F.3d 837, 840-41
(9th Cir. 2000) (“Courts have required separate counts where
multiple claims are asserted, where they arise out of separate
transactions or occurrences, and where separate statements will
facilitate a clear presentation.”) (citations omitted).
7

court’s analysis here draw heavily from its analysis in Asao.
See Order Granting Def. Island Title Corp.’s Mot. Dismiss Compl.,
Dismissing All Claims Against All Defs., & Granting Leave to
Amend Certain Claims, ECF No. 50, Civ. No. 10-00553 SOM/KSC (D.
Haw. Apr. 28, 2011).
A.

Specificity of Allegations Against Bank of America
and MERS.

Rule 8(a) of the Federal Rules of Civil Procedure
mandates a “short and plain statement of the claim showing that
the pleader is entitled to relief.”

Fed. R. Civ. P. 8(a)(2).

This rule requires that “allegations in a complaint or
counterclaim must be sufficiently detailed to give fair notice to
the opposing party of the nature of the claim so that the party
may effectively defend against it.”
1191, 1204 (9th Cir. 2011).

Starr v. Baca, 633 F.3d

Failure to draft a complaint that

complies with Rule 8 is grounds for dismissal under Rule 41(b) of
the Federal Rules of Civil Procedure.

See Nevijel v. N. Coast

Life Ins. Co., 651 F.2d 671, 673 (9th Cir. 1981).
Bank of America and MERS argue that the allegations
against them should be dismissed because the Complaint fails to
allege specific wrongdoing by either Defendant.

Mot. at 6-8.

The court agrees that the Complaint largely lacks specificity.
Bank of America is not described at all in the “Parties” section
of the Complaint, and the Complaint primarily relies on general
allegations regarding wrongdoing by “Defendants,” rather than
8

naming specific actions undertaken by Bank of America and MERS
(although MERS is mentioned by name in a few places).

See, e.g.,

Compl. ¶¶ 6-9 (describing all named Defendants except Bank of
America), 12 (alleging generally that “Defendants . . . failed to
provide the requisite Federal forms and disclosures”), 20
(alleging that “[e]ach subsequent Defendant who has participated
in, been assigned or been transferred Rights, or holds a position
or interest under loan agreement, including . . . MERS . . .
failed to perform their due diligence in investigat[ing] the
legal requirements that this loan should have been processed
within”), 26 (alleging generally that Defendants failed to
explain the loan), 27 (alleging that Defendants, including MERS,
failed to verify the Casinos’ income).
However, the court is also aware that the Casinos were
acting pro se at the time they filed the Complaint.
1.

See ECF No.

Moreover, it appears from Bank of America and MERS’s motion

to dismiss that they were able to sufficiently respond to the
Complaint as drafted.

Therefore, the court does not rely on Rule

8 in this dismissal order.

However, the court counsels the

Casinos to ensure that any Amended Complaint they may file names,
as specifically as they are able, the wrongdoing they allege on
the part of each Defendant.

A complaint that fails to explain

which allegations are relevant to which defendants is confusing.
This, in turn, “impose[s] unfair burdens on litigants and judges”

9

because it requires both to waste time formulating their own best
guess of what the plaintiff may or may not have meant to assert,
risking substantial confusion if their understanding is not
equivalent to plaintiff’s.

See McHenry v. Renne, 84 F.3d 1172,

1179-80 (9th Cir. 1996).
B.

Whether the Complaint Alleges Fraud.

Bank of America and MERS argue that the court should
strip the Complaint of averments of fraud because the Complaint
does not meet the particularity requirement of Rule 9(b) of
Federal Rules of Civil Procedure.

See Fed. R. Civ. P. 9(b) (“In

alleging fraud or mistake, a party must state with particularity
the circumstances constituting fraud or mistake.”).

They argue

that, because multiple Defendants are involved, the Complaint is
deficient; that is, it does not identify each Defendant’s
separate role in a fraudulent scheme and fails to give each
Defendant notice of particular misconduct.

See Mot. at 8-9.

See

also Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540
(9th Cir. 1989) (stating that Rule 9(b) requires a plaintiff to
attribute particular fraudulent statements or acts to individual
defendants).

In short, Bank of America and MERS argue that the

Complaint fails to explain the “who, what, when, where, and how
of the misconduct alleged.”

Kearns v. Ford Motor Co., 567 F.3d

1120, 1124 (9th Cir. 2009).

10

Although these arguments regarding lack of
particularity might be correct, the Casinos have not asserted a
separate claim for fraud.
court to dismiss.

There simply is no fraud claim for the

The Complaint does touch on fraudulent conduct

in various counts (e.g., Count I, Compl. ¶ 40 (“fraudulent loan
transaction”); Count III, Compl. ¶ 54 (“Defendants’ actions in
this matter have been . . . fraudulent”); Count IV, Compl. ¶ 65
(same)).

It does not, however, contain a Count asserting a state

aw claim for fraud, and it is unclear whether the Casinos are
even seeking relief based on common law fraud.

The court

therefore declines as a general matter to strip all “averments of
fraud” from the Complaint.

Each Count stands or falls on its

own; if particularity is required for a specific Count, the court
will address that requirement in the context of that Count.
C.

Counts I and II (Declaratory and Injunctive
Relief).

Bank of America and MERS contend that Count I
(Declaratory Relief) and Count II (Injunctive Relief), as pled,
fail to state claims upon which relief can be granted because the
claims are remedies, not independent causes of action.
agrees that these Counts fail to state a claim.

The court

Mot. at 9-13.

Count I appears to seek relief under the Declaratory
Judgment Act, 28 U.S.C. § 2201.3

3

Count I alleges that “[a]n

The Declaratory Judgment Act provides in pertinent part:
11

actual controversy has arisen and now exists between Plaintiffs
and Defendants regarding their respective rights and duties, in
that Plaintiffs contends [sic] that Defendants did not have the
right to foreclose on the Subject Property.”

Compl. ¶ 40.

The

Casinos ask the court to declare that “the purported power of
sale contained in the Loan [is] of no force and effect at this
time” because of “numerous violations of State and Federal laws
designed to protect borrowers.”

Id. ¶ 41.

The Complaint alleges

that, “[a]s a result of the Defendants’ actions, Plaintiffs have
suffered damages . . . and seeks [sic] declaratory relief that
Defendants’ purported power of sale is void.”

Id. ¶ 42.

As pled, the Casinos’ declaratory relief claim is not
cognizable as an independent cause of action.

See Seattle

Audubon Soc’y v. Moseley, 80 F.3d 1401, 1405 (9th Cir. 1996) (“A
declaratory judgment offers a means by which rights and
obligations may be adjudicated in cases brought by any interested
party involving an actual controversy that has not reached a
stage at which either party may seek a coercive remedy and in

a) In a case of actual controversy within its
jurisdiction . . . any court of the United States, upon
the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested
party seeking such declaration, whether or not further
relief is or could be sought. Any such declaration
shall have the force and effect of a final judgment or
decree and shall be reviewable as such.
28 U.S.C. § 2201(a).
12

cases where a party who could sue for coercive relief has not yet
done so.”) (citation and quotation marks omitted).

That is,

because the Casinos’ claims are based on allegations regarding
Defendants’ past wrongs, a claim under the Declaratory Judgment
Act is improper and essentially duplicates the other causes of
action.

See, e.g., Ballard v. Chase Bank USA, N.A., 2010 WL

5114952, at *8 (S.D. Cal. Dec. 9, 2010) (“A claim for declaratory
relief ‘rises or falls with [the] other claims.’”) (altaration in
original, citation omitted); Ruiz v. Mortg. Elec. Registration
Sys., Inc., 2009 WL 2390824, at *6 (E.D. Cal. Aug. 3, 2009)
(dismissing claim for declaratory judgment when foreclosure had
already occurred and the plaintiff was seeking “to redress past
wrongs”); Edejer v. DHI Mortg. Co., 2009 WL 1684714, at *11 (N.D.
Cal. June 12, 2009) (“Plaintiff’s declaratory relief cause of
action fails because she seeks to redress past wrongs rather than
a declaration as to future rights.”); Mangindin v. Washington
Mut. Bank, 637 F. Supp. 2d 700, 707 (N.D. Cal. 2009) (“A claim
for declaratory relief is unnecessary where an adequate remedy
exists under some other cause of action.”).
With respect to Count II, the court follows the
well-settled rule that a claim for “injunctive relief” standing
alone is not a 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

13

action”) (quotation marks and citation omitted); Henke v. Arco
Midcon, L.L.C., 2010 WL 4513301, at *6 (E.D. Mo. Nov. 2, 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).

Injunctive relief

may be available if the Casinos are entitled to such a remedy on
an independent cause of action.
Accordingly, the court DISMISSES Counts I and II
without leave to amend.

If the Casinos eventually prevail on an

independent claim, the court will necessarily render a judgment
setting forth (i.e., “declaring”) as much and providing
appropriate remedies.

Similarly, if injunctive relief is proper,

it will be because the Casinos prevail (or have met the necessary
test for such relief under Rule 65 of the Federal Rules of Civil
Procedure) on an independent cause of action.

Although only two

Defendants have moved to dismiss, this dismissal is as to all
Defendants because the Casinos cannot prevail on these Counts as
to any Defendant.

See Omar v. Sea-Land Serv. Inc., 813 F.2d 986,

991 (9th Cir. 1987).
D.

Count III (Covenant of Good Faith and Fair
Dealing).

Count III asserts a “Contractual Breach of Implied
Covenant of Good Faith and Fair Dealing.”
14

The Casinos allege

that every contract imposes a duty of good faith and fair dealing
“in its performance and its enforcement,” Compl. ¶ 49, and that
“Defendants willfully breached their implied covenant of good
faith and fair dealing” by engaging in the acts alleged in the
Complaint (such as withholding disclosures or information, and
“willfully plac[ing] Plaintiffs in a loan that he [sic] did not
qualify for”).

Id. ¶ 52.

This claim in essence asserts the tort of “bad faith.”
See Best Place, Inc. v. Penn Am. Ins. Co., 82 Haw. 120, 128, 920
P.2d 334, 342 (1996) (adopting tort of bad faith for breach of
implied covenant of good faith and fair dealing in an insurance
contract).

Although bad faith is an accepted tort when a

plaintiff is a party to an insurance contract, the tort has not
been recognized in Hawaii based on a mortgage loan contract.
Moreover, although commercial contracts for sale of
goods also require good faith in their performance and
enforcement, this obligation does not create an independent cause
of action.

See Stoebner Motors, Inc. v. Automobili Lamborghini

S.P.A., 459 F. Supp. 2d 1028, 1037-38 (D. Haw. 2006).

Hawaii

courts have noted that “[o]ther jurisdictions recognizing the
tort of bad faith . . . limit such claims to the insurance
context or situations involving special relationships
characterized by elements of fiduciary responsibility, public
interest, and adhesion.”

Id. at 1037 (quoting Francis v. Lee

15

Enters., 89 Haw. 234, 238, 971 P.2d 707, 711 (1999)).

The

Casinos thus do not properly plead an independent claim of bad
faith.
Importantly, even assuming a bad faith tort exists
outside the insurance context, “[a] party cannot breach the
covenant of good faith and fair dealing before a contract is
formed.”

Contreras v. Master Fin., Inc., 2011 WL 32513, at *3

(D. Nev. Jan. 4, 2011) (citing Indep. Order of Foresters v.
Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 941 (2d Cir. 1998)
(“[A]n implied covenant relates only to the performance under an
extant contract, and not to any pre-contract conduct.”)).
follows this distinction.

Hawaii

See Young v. Allstate Ins. Co., 119

Haw. 403, 427, 198 P.3d 666, 690 (2008) (indicating that the
covenant of good faith does not extend to activities occurring
before consummation of an insurance contract).
All of Count III’s allegations concern precontract
activities (failing to disclose terms, failing to conduct proper
underwriting, and making an improper loan).

Defendants cannot be

liable for breaching a contract covenant when no contract
existed.

See id.; see also Larson v. Homecomings Fin., LLC, 680

F. Supp. 2d 1230, 1237 (D. Nev. 2009) (“Because Plaintiffs’ claim
revolves entirely around alleged misrepresentations made before
the [mortgage loan] contract was entered into, [the bad faith
claim] fails as a matter of law.”).

16

Even if the Casinos were attempting to assert bad faith
in the performance of a contractual right to foreclose, “a court
should not conclude that a foreclosure conducted in accordance
with the terms of a deed of trust constitutes a breach of the
implied covenant of good faith and fair dealing.”

Davenport v.

Litton Loan Servicing, LP, 725 F. Supp. 2d 862, 884 (N.D. Cal.
2010) (citation omitted).

“The covenant [of good faith] does not

‘impose any affirmative duty of moderation in the enforcement of
legal rights.’”

Id. (quoting Price v. Wells Fargo Bank, 261 Cal.

Rptr. 735, 742 (Cal. Ct. App.), modified on denial of reh’g, 261
Cal. Rptr. 735 (Cal. Ct. App. 1989)).
Accordingly, Count III is DISMISSED.

Because further

amendment would be futile, dismissal of Count III is without
leave to amend.

This dismissal is as to all Defendants.

See

Omar, 813 F.2d at 991.
E.

Count IV (TILA).

Alleging that Defendants violated TILA in issuing the
mortgage and loan, the Casinos seek rescission and damages.
Compl. ¶¶ 55-65, 74.

See

As explained below, the court concludes

that the Casinos’ TILA rescission claim is subject to dismissal
as to all Defendants because the Casinos lack a timely
rescissionary remedy for any asserted violations of TILA (and are
precluded from asserting any right to equitable tolling).
U.S.C. § 1635(a).

See 15

The Casinos’ TILA damages claim is subject to

17

dismissal as to Bank of America and MERS because their motion to
dismiss challenges the Complaint on statute of limitations
grounds and the Casinos fail to plausibly argue that equitable
tolling may apply.

15 U.S.C. § 1640(a); Hubbard v. Fidelity Fed.

Bank, 91 F.3d 75, 79 (9th Cir. 1996).

However, because First

Magnus is not a moving party and has not sought to assert the
affirmative defense of statute of limitations, the court declines
to dismiss the Casinos’ TILA damages claim sua sponte as to First
Magnus.

Finally, the damages claim is subject to dismissal as to

Fidelity because, as an escrow agent, it is not liable for TILA
violations.

Manuel v. Discovery Home Loans, LLC, 2010 WL

2889510, at *3 (N.D. Cal. July 22, 2010).
Under TILA, borrowers have the right to rescind certain
credit transactions in which the lender retains a security
interest in the borrower’s principal dwelling.
§ 1635(a).4

15 U.S.C.

The borrower has the right to rescind the

transaction for three business days following the later of the
date of the transaction’s consummation or the date of the
delivery of the information, rescission forms, and material
disclosures required by TILA.

Id.

If the required information,

rescission forms, or material disclosures are not delivered by

4

The Casinos allege that the loan was for the purpose of
refinancing their home. Compl. ¶ 4. Refinance transactions are
subject to a right of rescission under TILA. See, e.g., Jones v.
E*Trade Mortg. Corp., 397 F.3d 810 (9th Cir. 2005).
18

the creditor, the right to rescind expires three years after the
transaction’s consummation.

Id. § 1635(f); King v. Cal., 784

F.2d 910, 915 (9th Cir. 1986).

The statute of limitations

applicable to TILA rescission is not subject to equitable
tolling.

See Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411–13

(1998).
Pursuant to the statute and Regulation Z, 12 C.F.R.
Pt. 226, a borrower may exercise the right to rescind by
notifying the creditor of his intention to do so.

See 15 U.S.C.

§ 1635(a); 12 C.F.R. § 226.23.
In this case, the Casinos allege that the transaction
was consummated “on or about” May 2, 2007.

See Compl. ¶ 3.

Even

assuming the Casinos were entitled to the extended rescission
period, their time to rescind the loan expired three years from
that date, in May 2010.

The Casinos did not file their Complaint

seeking rescission until December 2010.

Because more than three

years have passed, the Casinos cannot rescind their loan.5

5

The Casinos oppose the motion to dismiss by arguing that
they “may be able to show they requested rescission” “[o]nce
discovery is completed.” See Mem. Opp. Mot. Dismiss (“Opp.”) at
22 (requesting to take discovery under Federal Rule of Civil
Procedure 56(d)), ECF No. 23. However, on a motion to dismiss,
the court is bound by Iqbal and Twombly, not Rule 56. There are
no facts suggesting the Casinos sought to rescind at any time
prior to the filing of the Complaint, and any attempt by the
Casinos to rescind earlier is within their knowledge and does not
require discovery.
19

The Casinos’ damage remedy under TILA is also
time-barred as to Bank of America and MERS.

A TILA plaintiff may

seek actual damages for a lender’s failure to provide proper
disclosures.

See 15 U.S.C. § 1640(a).

Under 15 U.S.C. §

1640(e), however, an action for damages by a private individual
must be instituted “within one year from the date of the
occurrence of the violation.”

The Ninth Circuit has interpreted

this to mean that the limitations period for a damage claim based
on allegedly omitted or inaccurate disclosures begins on “the
date of consummation of the transaction.”

King, 784 F.2d at 915;

see also Hubbard, 91 F.3d at 79 (holding that when a lender fails
to comply with TILA’s initial disclosure requirements, a borrower
has one year from obtaining the loan to file suit).

To the

extent the Casinos seek money damages for TILA violations arising
out of the May 2007 loan, those claims are barred by the one-year
statute of limitation, as the Casinos did not file their
Complaint until December 9, 2010.
The Casinos argue that the statute should be equitably
tolled because they were tricked by Defendants into letting the
filing deadline pass and because they only recently learned about
predatory lending practices from the national media.
20.

See Opp. at

Courts may toll the limitations period if the one-year rule

would be unjust or would frustrate TILA’s purpose.
F.2d at 915.

See King, 784

For example, if a borrower had no reason or

20

opportunity to discover the fraud or nondisclosures that form the
basis of a borrower’s TILA claim, the court may toll the statute
of limitations.

Id.; see also Huseman v. Icicle Seafoods, Inc.,

471 F.3d 1116, 1120 (9th Cir. 2006) (explaining that tolling the
statute of limitations is a factual determination that “focuses
on whether there was excusable delay by the plaintiff and may be
applied if, despite all due diligence, a plaintiff is unable to
obtain vital information bearing on the existence of his claim”).
The Casinos do not point to any specific information
that was concealed or even allege any specific matter somehow
prevented them from discovering any potential TILA claim.

The

acts of qualifying the Casinos for a loan they could not repay,
failing to make disclosures, charging “exorbitant fees,” and
transferring the loan, do not suggest that Defendants sought to
conceal information from the Casinos about what they were legally
entitled to have received.

It therefore appears that any TILA

money damage claim arising out allegedly inaccurate or incomplete
disclosures is time-barred as to Bank of America and MERS.

Cf.

Hubbard, 91 F.3d at 79 (denying equitable tolling because
borrower had the ability to compare the initial disclosures she
received with TILA’s requirements and thereby learn that the loan
disclosures were inadequate).
In considering the TILA damage claims against nonmoving
Defendants First Magnus and Fidelity, this court takes a more

21

restrained approach to the statute of limitations issue than it
does with moving Defendants.

This is the same approach this

court took in its earlier decision in Asao.

Here, Bank of

America and MERS have placed the limitations issue squarely
before the court in their motion, which meets their burden with
respect to this affirmative defense.
to address this issue in response.

The Casinos were obligated

The other Defendants, by

contrast, have as of yet made no showing of carrying their burden
on this affirmative defense.
This court hesitates to dismiss claims sua sponte in
reliance on an affirmative defense that has not been raised.

The

court concludes that, with respect to nonmoving Defendants, the
better course is either to allow the Casinos to be heard on the
issue via the issuance of an order to show cause why a claim
should not be dismissed for untimeliness, or to wait for other
Defendants to bring their own motion on the issue.

Although it

does appear to this court that the Casinos may face a limitations
problem with their TILA damage claim against nonmoving
Defendants, this court declines to dismiss sua sponte on the
limitations issue and opts to wait for a motion by Defendants
that have yet to move.

The court sees little likelihood that,

having failed to establish equitable tolling of the limitations
period with respect to Bank of America and MERS, the Casinos
could establish that equitable tolling overcomes the limitations

22

statute with respect to TILA damage claims against nonmoving
Defendants.

Still, to deny the Casinos the opportunity to make

that attempt would be tantamount to requiring a plaintiff to
include averments about equitable tolling in a complaint.

Such a

requirement would turn the concept of an affirmative defense on
its head; it would require a plaintiff to address an affirmative
defense before it was even raised by a defendant and would
entirely erase a defendant’s burden to assert and establish an
affirmative defense.
The court, of course, is aware that any claim may be
dismissed under Rule 12(b)6) on limitations grounds when that
ground is “apparent on the face of the complaint.”

Von Saher v.

Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th
Cir. 2010).

A sua sponte dismissal, however, does not have the

benefit of the adversarial system contemplated by a motion
brought under Rule 12(b)(6).

This gives the court pause even

though the court would apply Rule 12(b)(6) tenets to a sua sponte
dismissal.

Thus, the court notes that the Ninth Circuit was

examining an element of a claim on which the plaintiff had the
burden of proof when it said in Omar that a court may dismiss a
claim sua sponte if “the claimant cannot possibly win relief.
813 F.2d at 991.

As the limitations period is a matter on which

a defendant bears the burden, this court does not here sua sponte

23

dismiss the damage claim against First Magnus and Fidelity on
statute of limitations grounds.6
While not dismissed on limitations grounds, the
Casinos’ TILA damage claim against Fidelity is dismissed on
another ground.

It is clearly the Casinos’ burden to show that

TILA applies to Fidelity.

Far from doing that, the Casinos plead

facts that make it clear that Fidelity, which acted only as an
escrow agent in the loan transaction, was not obligated to make
TILA disclosures.

See, e.g., Manuel, 2010 WL 2889510, at *3

(reasoning that because “neither [escrow holder nor loan
servicer] was obligated to make TILA disclosures in connection
with Plaintiffs’ loan, neither party can be liable for violations
of TILA”); In re Ameriquest Mortg. Co. Mortg. Lending Practices
Litig., 589 F. Supp. 2d 987, 992 (N.D. Ill. 2008) (dismissing
TILA claims against escrow company on ground that TILA “imposes
no such duty” on noncreditors and “TILA burdens only creditors
with disclosure obligations”) (citations omitted); Phleger v.
Countrywide Home Loans, Inc., 2008 WL 65771, at *6 (N.D. Cal.
Jan. 4, 2008) (dismissing TILA claim because “[a]n escrow agent
is not . . . a creditor for purposes of TILA”) (citations
omitted).

6

Nor does the court rely on Bank of America and MERS’s
argument that the Complaint fails to plead reliance. See Mot. at
21. Reliance is not a requirement to state a claim for statutory
damages, which are available for the failure to make certain
initial disclosures. See 15 U.S.C. § 1640.
24

Accordingly, the court GRANTS the motion to dismiss the
Casinos’ TILA claims as to Bank of America, MERS, and Fidelity.
With respect to First Magnus, the court dismisses sua sponte the
Casinos’ rescission claim only, leaving the TILA damage claim
against First Magnus in issue.

See Omar, 813 F.2d at 991. The

dismissal is with prejudice as to Fidelity and without prejudice
as to Bank of America, MERS, and First Magnus.
F.

Count V (RESPA).

The Casinos’ RESPA claim is also subject to dismissal.
The Complaint alleges that: (1) First Magnus received “egregious”
fees for making the loan; and (2) the Casinos did not receive a
“Special Information Booklet” explaining the settlement costs.
Compl. ¶¶ 70-71.

Without specifying any particular section of

the statute, the Complaint asserts violations of 12 U.S.C.
§§ 2601-2617.

Compl. ¶ 67.

RESPA requires mortgage lenders to disclose the costs
associated with real estate closings and prohibits sellers and
lenders from engaging in certain practices during escrow and
closing.

See Bloom v. Martin, 77 F.3d 318, 320 (9th Cir. 1996);

12 U.S.C. §§ 2601-2610.

One of its disclosure provisions

requires lenders to provide to loan applicants, shortly after
applying, a standardized “special information booklet” that
discusses the settlement costs associated with the loan.
U.S.C. § 2604; 24 C.F.R. § 3500.6.

25

See 12

Defendants argue that the

Casinos have no private right of action for any alleged violation
of § 2604.

See Mot. at 23-24.
This court has recently had occasion to consider

whether RESPA creates a private right of action for the
disclosure violations associated with failing to provide a
special information booklet.

See Santiago v. Bismark Mortg. Co.,

LLC, Civ. No. 10-00467 SOM/KSC, 2011 WL 839762, at *5-*6 (D. Haw.
Mar. 4, 2011).

The court considered the statutory language, as

well as relevant precedent from the Ninth Circuit and other
district courts within this circuit, and determined that no such
private right of action exists.

See id.

Accordingly, for the

reasons stated in Santiago, the Casinos may not assert a claim
for their failure to receive a special information booklet.
The Casinos also appear to be asserting a RESPA claim
under 12 U.S.C. § 2607 for illegal fees at closing.

To the

extent Count V claims that Defendants received excessive fees,
that claim under RESPA fails as a matter of law because § 2607
does not prohibit excessive fees, provided the fees were in
exchange for real estate settlement services that were actually
performed by the recipient.

See Martinez v. Wells Fargo Home

Mortg., Inc., 598 F.3d 549, 553-54 (9th Cir. 2010) (concluding
that, by prohibiting fees “other than for services actually
performed,” § 2607, “by negative implication, . . . cannot be

26

read to prohibit charging fees, excessive or otherwise, when
those fees are for services that were actually performed”).
The Casinos attach to their opposition brief
declarations stating that Mr. Casino sent “a qualified written
request to the lender” requesting various documents related to
his mortgage, but never received a response.

See Decl. Mariano

C. Casino, Apr. 8, 2011, ECF No. 23-5 (“M. Casino Decl.”); Decl.
Estelita B. Casino, Apr. 8, 2011, ECF No. 23-6 (“E. Casino
Decl.”).

They argue that these declarations establish a

violation of § 2605 of RESPA, for which a private right of action
exists.

See Opp. at 17-18.

They also argue that the lender

(without naming a specific Defendant) “failed to a) provide them
with a signed and dated copy of the Servicing Transfer
disclosure, b) inform them it intended to securitize and sell the
note to other lenders and loan services, and c) properly identify
transfers of the note and mortgage, and d) properly identify who,
if anyone is the holder in due course entitled to enforce the
note and mortgage.”

Opp. at 18.7

According to the Casinos,

these actions all constitute violations of § 2605.

Defendants

respond that dismissal is nevertheless appropriate because these
allegations are not in the Complaint, because § 2605 applies only

7

The Opposition asserts that these allegations are contained
in the Complaint, see Opp. at 18, but the court has located no
such allegations in the RESPA count or elsewhere in the
Complaint.
27

to requests for information related to loan servicing, not loan
origination, and because the Casinos fail to allege that they
suffered any actual damages.

Reply at 9-10.

The court need not decide whether the allegations set
forth in the Casinos’ declarations would survive a motion to
dismiss because it is plain that none of these allegations
appears in the Casinos’ Complaint.

The district court is not

permitted to look beyond the complaint to a plaintiff’s papers in
deciding a motion to dismiss.

See Schneider v. Cal. Dep’t of

Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998) (declining to
consider “new” allegations that would have allowed a complaint to
survive a motion to dismiss because the plaintiffs argued the new
facts for the first time in their opposition briefing).

The

court may, however, consider a plaintiff’s opposition papers in
deciding whether to dismiss a complaint with prejudice.

See

Orion Tire Corp. v. Goodyear Tire & Rubber Co., 268 F.3d 1133,
1137-38 (9th Cir. 2001) (granting leave to amend because
opposition suggested amendment might be possible).
Accordingly, because the Complaint fails to state a
cause of action for violation of RESPA, but because the Casinos’
opposition suggests amendment is possible, the court GRANTS
Defendants’ motion to dismiss the RESPA claim with leave to
amend.

The dismissal is as to all Defendants.

F.2d at 991.

See Omar, 813

By granting leave to amend, the court does not

28

intend to suggest that the proposed amendments will or will not
survive any subsequent motion to dismiss that may be brought.
G.

Count VI (Rescission).

Count VI asserts that “Plaintiffs are entitled to
rescind the loan for all of the foregoing reasons: 1) TILA
Violations; 2) RESPA; 3) Fraudulent Concealment; 4) Deceptive
Acts and Practices (UDAP) and 5) Public Policy Grounds, each of
which provides independent grounds for relief.”

Compl. ¶ 74.

As

the court noted with respect to the remedies sought in Counts I
and II, the remedy sought in Count VI (rescission) “is only a
remedy, not a cause of action.”

Bischoff v. Cook, 118 Haw. 154,

163, 185 P.3d 902, 911 (Ct. App. 2008).
or falls with [the] other claims.”
*8 (alteration in original).

The remedy thus “rises

Ballard, 2010 WL 5114952, at

Indeed, as alleged here, Count VI

specifically acknowledges that it is seeking rescission based
upon “independent grounds for relief.”
Accordingly, Count VI is DISMISSED without leave to
amend.

The court will address the merits of rescission when

addressing any independent claim allowing rescission.
dismissal is as to all Defendants.
H.

The

See Omar, 813 F.2d at 991.

Count VII (Unfair and Deceptive Acts and
Practices).

Count VII alleges that all Defendants are liable for
Unfair and Deceptive Acts and Practices “by consummating an
unlawful, unfair, and fraudulent business practice, designed to
29

deprive Plaintiffs of her [sic] home, equity, as well as her
[sic] past and future investment.”

Compl. ¶ 81.

The Casinos

allege that Defendants “failed to undergo a diligent underwriting
process,” failed to disclose matters, should not have approved
the loan because they could not afford it, and had “knowledge of
these facts, circumstances and risks but failed to disclose
them.”

Id. ¶ 79.

Count VII appears to be brought under Hawaii’s

UDAP law, section 480-2(a) of Hawaii Revised Statutes, which
states, “Unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce are
unlawful.”
The Casinos do not state a claim under section 480-2 of
the Hawaii Revised Statutes because “lenders generally owe no
duty to a borrower ‘not to place borrowers in a loan even where
there was a foreseeable risk borrowers would be unable to
repay.’”

McCarty v. GCP Mgmt., LLC, 2010 WL 4812763, at *6 (D.

Haw. Nov. 17, 2010) (quoting Champlaie v. BAC Home Loans
Servicing, LP, 706 F. Supp. 2d 1029, 1061 (E.D. Cal. 2009)).

See

also Sheets v. DHI Mortg. Co., 2009 WL 2171085, at *4 (E.D. Cal.
July 20, 2009) (reasoning that no duty exists “for a lender ‘to
determine the borrower’s ability to repay the loan. . . . The
lender’s efforts to determine the creditworthiness and ability to
repay by a borrower are for the lender’s protection, not the

30

borrower’s.’” (quoting Renteria v. United States, 452 F. Supp. 2d
910, 922-23 (D. Ariz. 2006)).
“[A]s a general rule, a financial institution owes no
duty of care to a borrower when the institution’s involvement in
the loan transaction does not exceed the scope of its
conventional role as a mere lender of money.”

Nymark v. Heart

Fed. Sav. & Loan Ass’n, 283 Cal. Rptr. 53, 56 (Cal. Ct. App.
1991).

Nothing in the Complaint indicates that any Defendant

“exceed[ed] the scope of [a] conventional role as a mere lender
of money.”

The claims fail on that basis alone.

The court,

however, cannot conclude at this time that further amendment is
futile and allows the Casinos an opportunity to amend Count VII
to attempt to state a section 480-2 claim.
Count VII is DISMISSED with leave to amend as to all
Defendants.
I.

See Omar, 813 F.2d at 991.
Count VIII (Breach of Fiduciary Duty).

Count VIII alleges, without distinguishing between
various Defendants, that “Defendants owed a fiduciary duty to
Plaintiffs and breached that duty by [f]ailing to advise or
notify Plaintiffs . . . that Plaintiffs would or had a likelihood
of defaulting on the loan.”

Compl. ¶ 84.

Defendants also

allegedly breached a fiduciary duty owed to the Casinos by
“exercis[ing] a greater level of loyalty to each other by
providing each other with financial advantages under the loan

31

without disclosing their relation to one another”

Id. ¶ 85.

The

Casinos also allege that the failure to provide material
disclosures “while in the capacity of Plaintiff’s Lender” and
“fail[ure] to fully comply with TILA and RESPA” violated
Defendants’ fiduciary duties.

Id. ¶¶ 86-87.

Count VIII fails to state a claim against the lender
Defendants, including Bank of America and MERS.

As noted

earlier, McCarty held that a borrower-lender relationship is not
fiduciary in nature:
Lenders generally owe no fiduciary duties to
their borrowers. See, e.g., Spencer v. DHI
Mortg. Co., 642 F. Supp. 2d 1153, 1161 (E.D.
Cal. 2009) (“Absent ‘special circumstances’ a
loan transaction ‘is at arms-length and there
is no fiduciary relationship between the
borrower and lender.’”) (quoting Oaks Mgmt.
Corp. v. Super. Ct., 51 Cal. Rptr. 3d 561
(Cal. Ct. App. 2006)); Ellipso, Inc. v. Mann,
541 F. Supp. 2d 365, 373 (D.D.C. 2008)
(“[T]he relationship between a debtor and a
creditor is ordinarily a contractual
relationship . . . and is not fiduciary in
nature.”) (citation omitted); Nymark v. Heart
Fed. Sav. & Loan Ass’n, 283 Cal. Rptr. 53, 54
n.1 (Cal. Ct. App. 1991) (“The relationship
between a lending institution and its
borrower-client is not fiduciary in
nature.”).
McCarty, 2010 WL 4812763, at *5.
The allegations also fail to state a claim against
Fidelity, the title and escrow company Defendant.

The “[g]eneral

rule is that [an] escrow depository occupies [a] fiduciary
relationship with parties to [the] escrow agreement or

32

instructions and must comply strictly with the provisions of such
agreement or instructions.”

Stanton v. Bank of Am., N.A., 2010

WL 4176375, at *3 (D. Haw. Oct. 19, 2010) (quoting DeMello v.
Home Escrow, Inc., 4 Haw. App. 41, 47, 659 P.2d 759, 763 (Ct.
App. 1983) (citation omitted)).

But “an escrow holder has no

general duty to police the affairs of its depositors; rather, an
escrow holder’s obligations are limited to faithful compliance
with [the depositors’] instructions.”

Id. (quoting Summit Fin.

Holdings, Ltd. v. Continental Lawyers Title Co., 27 Cal. 4th 705,
711 (Cal. 2002)).

The Hawaii Supreme Court has found that, when

a party to a transaction in which an escrow is utilized engages
in fraudulent activity, the escrow entity is not liable when it
acts in good faith and does not have actual knowledge of
wrongdoing.

Matter of Bishop, Baldwin, Rewald, Dillingham &

Wong, Inc., 69 Haw. 523, 529, 751 P.2d 77, 78, 81 (1988).

The

Complaint includes no allegations supporting a breach by Fidelity
of any fiduciary duty owed to the Casinos.

For example, the

Casinos do not allege that Fidelity failed to follow the
provisions of any particular agreement or instruction.
Count VIII is DISMISSED with leave to amend as to all
Defendants.
J.

Count IX (Unconscionability).

Count IX asserts “Unconscionability-UCC-2-3202 [sic
2-302].”

Count IX further asserts that courts may refuse to

33

enforce a contract or portions of a contract that are
unconscionable, Compl. ¶ 89, and that courts are to give parties
an opportunity to present evidence regarding a contract’s
“commercial setting, purpose and effect” to determine if a
contract is unconscionable.

Id. ¶ 90.

It goes on to allege:

Here, based on the deception, unfair
bargaining position, lack of adherence to the
regulations, civil codes and federal
standards that the Defendants were require[d]
to follow; coupled with the windfall that the
Defendants reaped financially from their
predatory practices upon Plaintiff[]s, the
court may find that the loan agreement and
trust deed are unconscionable and of no force
or effect.
Id. ¶ 91.
Unconscionability is generally a defense to the
enforcement of a contract, not a proper claim for affirmative
relief.

See, e.g., Gaitan v. Mortg. Elec. Registration Sys.,

2009 WL 3244729, at *13 (C.D. Cal. Oct. 5, 2009)
(“Unconscionability may be raised as a defense in a contract
claim, or as a legal argument in support of some other claim, but
it does not constitute a claim on its own.”); see also Barnard v.
Home Depot U.S.A., Inc., 2006 WL 3063430, at *3 n.3 (W.D. Tex.
Oct. 27, 2006) (citing numerous cases for the proposition that
neither the common law nor the Uniform Commercial Code allows
affirmative relief for unconscionability).
To the extent unconscionability can be addressed
affirmatively as part of a different or independent cause of
34

action, such a claim “is asserted to prevent the enforcement of a
contract whose terms are unconscionable.”

Skaggs v. HSBC Bank

USA, N.A., 2010 WL 5390127, at *3 (D. Haw. Dec. 22, 2010)
(emphasis in original).8

Skaggs dismissed a “claim” for

unconscionability because it challenged only conduct such as
“obtaining mortgages under false pretenses and by charging
Plaintiff inflated and unnecessary charges,” and “failing to give
Plaintiff required documents in a timely manner,” but not the
breach of any specific contractual term.

Id.

Count IX similarly

fails to identify or challenge any particular contract term as
unconscionable.
Count IX is DISMISSED with leave to amend.
dismissal is as to all Defendants.
K.

This

See Omar, 813 F.2d at 991.

Count X (Predatory Lending).

Count X asserts “Predatory Lending” and lists a variety
of alleged wrongs (e.g., failure to disclose terms and conditions

8

In Skaggs, the court noted in dicta that “at least one
Hawaii court has addressed unconscionability when raised as a
claim seeking rescission.” 2010 WL 5390127, at *3 n.2 (citing
Thompson v. AIG Haw. Ins. Co., 111 Haw. 413, 142 P.3d 277
(2006)). This was not an indication that one could raise an
affirmative claim for “unconscionability.” Indeed, in Thompson,
the complaint did not assert a separate count for rescission or
unconscionability. See Thompson, 111 Haw. at 417, 142 P.3d at
281 (indicating that the specific counts were for negligence,
fraud, breach of duty, and unfair and deceptive trade practices
under Haw. Rev. Stat. § 480-2). In Thompson, the remedy of
rescission was based on an independent claim. Similarly, a
remedy for an unconscionable contract may be possible; a
stand-alone claim asserting only “unconscionability,” however, is
improper. See, e.g., Gaitan, 2009 WL 3244729, at *13.
35

or material facts, targeting of unsophisticated persons, unfair
loan terms, and improper underwriting) that form the bases of
other causes of action.

Compl. ¶¶ 92-105.

The common law does not support a claim for “predatory
lending.”

See Haidar v. BAC Home Loans Servicing, LP, 2010 WL

3259844, at *2 (E.D. Mich. Aug. 18, 2010) (agreeing that “there
is no cause of action for predatory lending”); Pham v. Bank of
Am., N.A., 2010 WL 3184263, at *4 (N.D. Cal. Aug. 11, 2010)
(“There is no common law claim for predatory lending”).

To the

extent such “predatory” practices provide a claim for relief,
they appear to be grounded in statutes or other common-law causes
of action such as fraud.
otherwise too broad.

The term “predatory lending” is

See Vissuet v. Indymac Mortg. Servs., 2010

WL 1031013, at *3 (S.D. Cal. Mar. 19, 2010) (dismissing claim for
“predatory lending” with leave to amend and noting that the term
is expansive and fails to provide proper notice, leaving
defendants “to guess whether this cause of action is based on an
alleged violation of federal law, state law, common law, or some
combination”); see also Hambrick v. Bear Stearns Residential
Mortg., 2008 WL 5132047, at *2 (N.D. Miss. Dec. 5, 2008)
(dismissing a claim for predatory lending that failed to cite any
“[state] or applicable federal law, precedential or statutory,
creating a cause of action for ‘predatory lending.’”).

36

Count X fails to state a cause of action.

This does

not, of course, mean that “predatory lending” cannot form the
basis of some cause of action.

Instead, the dismissal signifies

that Hawaii courts have not recognized “predatory lending” itself
as a common law cause of action.

The ambiguous term “predatory

lending” potentially encompasses a wide variety of alleged
wrongdoing.

The cause of action pled here fails to provide

notice to any Defendant of what is being claimed.

See Vissuet,

2010 WL 1031013, at *3.
Count X is DISMISSED with leave to amend as to all
Defendants except Fidelity.

The Casinos may attempt to state a

cause of action based on specific activities (which might be
described as “predatory”) provided that any new predatory lending
claim is based on a recognized statutory or common law theory.
In other words, the Casinos may not simply reallege a general
claim for “predatory lending.”

The dismissal as to Fidelity is

without leave to amend because the Casinos recognize that
Fidelity acted as an escrow agent.

An escrow agent is not a

lender, and Fidelity therefore cannot have engaged in lending,
predatory or otherwise.
L.

Count XI (Quiet Title).

Count XI alleges that Defendants have “no legal or
equitable right, claim, or interest in the Property,” Compl.
¶ 108, and that the Casinos are entitled to a declaration that

37

“the title to the Subject Property is vested in Plaintiff’s [sic]
alone.”

Id. ¶ 109.
The Casinos appear to be making a claim under section

669-1(a) of Hawaii Revised Statutes.

That statute provides that

a quiet title “[a]ction may be brought by any person against
another person who claims, or who may claim adversely to the
plaintiff, an estate or interest in real property, for the
purpose of determining the adverse claim.”

The Casinos have not

alleged sufficient facts regarding the interests of various
parties to make out a cognizable claim for “quiet title.”

They

has merely alleged elements of section 669-1 without stating a
claim.

See Iqbal, 129 S. Ct. at 1949 (“A pleading that offers

‘labels and conclusions’ or ‘a formulaic recitation of the
elements of a cause of action’” is insufficient.).
As to Fidelity, the Casinos cannot state a cognizable
claim against Fidelity for quiet title because they do not even
allege that Fidelity, as an escrow agent, is asserting any right
to the subject property.

Accordingly, Count XI is DISMISSED with

leave to amend as to all Defendants except Fidelity.
M.

Count XII (Lack of Standing; Improper Fictitious
Entity).

Count XII asserts a claim for “Lack of Standing;
Improper Fictitious Entity” against MERS.

Compl. ¶¶ 110-17.

Count XII fails to state a claim because a claim for “lack of
standing” may not be alleged against a defendant.
38

Rather,

standing is a requirement for a plaintiff in order to proceed in
a civil lawsuit.

See generally Lujan v. Defenders of Wildlife,

504 U.S. 555, 560 (1992) (explaining requirements for plaintiffs
to establish constitutional standing); Lake Washington Sch. Dist.
No. 414 v. Office of Superintendent of Pub. Instruction, 634 F.3d
1065, 1067-68 (9th Cir. 2011) (explaining that plaintiffs must
also establish statutory standing, when applicable).
Count XII alleges generally that MERS is an artificial
entity that is “designed to circumvent certain laws and other
legal requirements dealing with mortgage loans.”

Compl. ¶ 113.

Plaintiffs assert that an assignment of the note or mortgage to
MERS is illegal, id. ¶ 114, and that therefore “MERS has no legal
standing to foreclose.”

Id. ¶ 117.

The Casinos appear to be

alleging that MERS may not foreclose (or has improperly
foreclosed) because it is not a holder of the note.

If this is

the purpose of Count XII, the court will allow the Casinos an
opportunity to clarify the factual allegations as to MERS.

The

Casinos may, if appropriate, attempt in an Amended Complaint to
assert alleged illegalities as to MERS’s status in an independent
cause of action, but not based on “Lack of Standing; Improper
Fictitious Entity.”

Accordingly, Count XII is DISMISSED with

leave to amend as to MERS only.

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V.

CONCLUSION.
For the reasons stated above, the court GRANTS Bank of

America and MERS’s motion to dismiss as to all Counts.

The court

dismisses all Counts sua sponte with respect to Fidelity, and all
Counts except Count IV with respect to First Magnus.

With

respect to all Defendants, the Casinos are granted leave to amend
part of Count V (not including “excessive” fee claims or claims
made under 12 U.S.C. § 2604), and the entirety of Counts VII (for
unfair and deceptive trade practices), VIII, and IX.
may also bring a separate claim for fraud.

The Casinos

The Casinos are

further granted leave to amend Counts IV, X, and XI as to all
Defendants except Fidelity, and may amend Count XII as to MERS.
Counts I, II, III, and part of Count V (for “excessive”
fees and for any claim under 12 U.S.C. § 2604), as well as all of
Count VI, are DISMISSED without leave to amend.

Any Amended

Complaint must be filed not later than 14 days after the date
this order is filed.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, May 4, 2011.

/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge

Casino v. Bank of America; Civil No. 10-00728 SOM/BMK; ORDER GRANTING DEFENDANTS’ BANK
OF AMERICA, N.A., AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.’S MOTION TO
DISMISS AND PARTIALLY DISMISSING CLAIMS AGAINST NONMOVING DEFENDANTS SUA SPONTE.

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