Campollo et al v. Bank of America et al
Filing
19
ORDER GRANTING DEFENDANTS BANK OF AMERICA, N.A. AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.'S MOTION TO DISMISS, AND GRANTING IN PART AND DENYING IN PART DEFENDANT COUNTRYWIDE BANK, FSB'S MOTION TO DISMISS 15 - Signed by CHIEF JUDG E SUSAN OKI MOLLWAY on 6/16/11. ("The court GRANTS Countrywide's motion to dismiss as to all Counts except the rescission claim in Count IV. With respect to all Defendants, the Campollos are granted leave to amend Counts VII, VIII, IX, X, and XI. The Campollos may also bring a separate claim for fraud. The Campollos are further granted leave to amend Count XII as to MERS. Counts I, II, III, V, and VI are DISMISSED without leave to amend. The TILA damage claim in Count IV is also dismissed without leave to amend as to all Defendants, and the TILA rescission claim in Count IV against Bank of America and MERS is dismissed without leave to amend. Any Amended Complaint must be filed not later than 14 days after the d ate this order is filed. ") (emt, )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). Juralda and Ferdinand Campollo served by first class mail at the addresses of record on June 16, 2011.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
JURALDA CAMPOLLO, an
individual; FERDINAND
CAMPOLLO; an individual,
)
)
)
)
Plaintiffs,
)
)
vs.
)
)
)
BANK OF AMERICA, a Business
Entity, form unknown;
)
COUNTRYWIDE BANK, FSB, a
)
Business Entity, form
)
unknown; MORTGAGE ELECTRONIC )
)
REGISTRATION SYSTEMS, a
Business Entity, form
)
unknown; and DOES 1-100
)
inclusive,
)
)
Defendants.
)
_____________________________ )
CIVIL NO. 11-00052 SOM/BMK
ORDER GRANTING DEFENDANTS
BANK OF AMERICA, N.A., AND
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.’S
MOTION TO DISMISS, AND
GRANTING IN PART AND DENYING
IN PART DEFENDANT COUNTRYWIDE
BANK, FSB’S MOTION TO DISMISS
ORDER GRANTING DEFENDANTS BANK OF AMERICA, N.A., AND MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS, INC.’S MOTION TO DISMISS,
AND GRANTING IN PART AND DENYING IN PART
DEFENDANT COUNTRYWIDE BANK, FSB’S MOTION TO DISMISS
I.
INTRODUCTION.
This case arises out of an April 2008 loan and mortgage
transaction.
Plaintiffs Juralda and Ferdinand Campollo assert
federal and state law claims against various entities that
allegedly “participated in, [have] been assigned or been
transferred Rights, or hold[] a position or interest under [the
Campollos’] loan agreement.”
Defendants Bank of America, N.A.
(“Bank of America”), Countrywide Bank, FSB (“Countrywide”), and
Mortgage Electronic Registration Systems, Inc. (“MERS”), now seek
dismissal of all counts.
The court finds that a hearing on this
matter is neither necessary nor appropriate.
See LR7.2(d).
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, as to Bank of America and MERS.
As to Countrywide, the
court DENIES the motion with respect to the Campollos’ claim for
rescission under Count IV, alleging a violation of the Truth in
Lending Act (“TILA”).
The court GRANTS the motion with respect
to all other Counts, including Count IV’s TILA damages claim.
II.
FACTUAL BACKGROUND.
The Campollos allege that they obtained a loan from
Countrywide for $327,200 on or about April 25, 2008.
ECF No. 1.
Compl. ¶ 2,
They allege that this transaction refinanced a loan
involving property in Kapaau, Hawaii, and that they pledged the
subject property as security.
Compl. ¶¶ 1-2.
The Complaint does
not describe the roles of Bank of America and MERS in the
transaction, asserting only that these Defendants have
“participated in, been assigned or been transferred Rights, or
hold[] a position or interest under [the Campollos’] loan
agreement.”
Compl. ¶ 19.1
The Complaint is not entirely clear,
but appears to allege that the property is in foreclosure
proceedings.
Compl. ¶ 41.
1
The court notes that Bank of America’s corporate disclosure
statement indicates that the corporate entity “Bank of America,
N.A.,” includes Countrywide. ECF No. 16.
2
The Campollos recite, in general terms,2 that mortgage
brokers and lenders have engaged in predatory lending practices
and that the Campollos’ loan was in fact a predatory lending
transaction.
See, e.g., Compl. ¶¶ 17-18, 36-37.
The Campollos
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. ¶ 19.
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. ¶ 20.
The Complaint
also alleges that Countrywide failed to verify the Campollos’
prior or current income or their employment.
Compl. ¶¶ 24, 28.
The Complaint says that the terms of the loan are such that the
Campollos “can never realistically repay the loan,” and that
Defendants knowingly made it impossible for the Campollos to ever
own the subject property free and clear.
Compl. ¶¶ 25, 29.
Compl. ¶ 20; see also
The Complaint further alleges that Defendants
2
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
failed to explain the “workings” of the mortgage transaction to
the Campollos.
Compl. ¶ 27.
The Complaint alleges both that Countrywide charged the
Campollos a higher interest rate than they could have gotten from
another lender, and that they would not have qualified for the
Countrywide loan had Countrywide employed proper underwriting
standards.
Compare Compl. ¶ 20 (alleging that the “fees,
charges, and or interest rate[]” were more expensive than
alternative financing for which the Campollos could have
qualified) with Compl. ¶¶ 25, 32-33 (“Plaintiff should have been
declined for this loan”).
The Complaint also alleges that the
Campollos paid “egregious” fees in an unspecified amount.
Compl.
¶ 21.
According to the Complaint, Defendants violated TILA,
15 U.S.C. §§ 1601-1667, through Countrywide’s alleged failure to
issue to the Campollos TILA initial disclosures, an accurate Good
Faith Estimate, notice of right to cancel, a disclosure relating
to Property/Hazard Insurance, and a “CHARM booklet.”
¶¶ 58-59, 61.
Compl.
The Campollos also allege that “Defendants, and
each of them, did give, provide or receive a hidden fee or thing
of value for the referral of settlement business, including but
not limited to, kickbacks, hidden referral fees, and/or yield
spread premiums,” in violation of the Real Estate Settlement
Procedures Act (“RESPA”), 12 U.S.C. §§ 2601-2617.
4
Compl. ¶ 71.
The Complaint asserts eleven causes of action against
all Defendants: (1) declaratory relief; (2) injunctive relief;
(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. ¶¶ 40-106.
The Complaint also
asserts as a twelfth cause of action, solely against MERS, “Lack
of Standing; Improper Fictitious Entity.”
Compl. ¶¶ 107-14.
The
Campollos seek declaratory relief, an injunction enjoining
foreclosure, quiet title, rescission of the loan, damages, and
attorney’s fees.
Compl. p.24.
On May 10, 2011, Defendants filed the present motion to
dismiss.
ECF No. 15.
The Campollos filed no opposition briefing
and did not return a call placed by the court on June 14, 2011,
regarding this motion.
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.’”
Ashcroft v.
Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007).
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.”
Iqbal, 129 S. Ct. at 1949; 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.
Defendants raise a myriad of challenges to the
Complaint.
They argue that the Complaint fails to identify
sufficiently specific allegations against any particular
Defendant and that each of the twelve causes of action fails for
various reasons.3
ECF No. 15-1.
See generally Mem. Supp. Mot. (“Mot.”) 5-22,
The court first addresses the global attack on the
Complaint, then turns to the arguments as to each specific Count.
Because of the similarity of the Complaints and the respective
Defendants’ motions to dismiss, portions of the court’s analysis
here draw heavily from its analysis in Asao.
3
See Order Granting
The Complaint also mentions the Equal Opportunity Credit
Act, Compl. ¶ 11; the “Fair Lending/Fair Debt Collection Act,”
id.; and the Federal Trade Commission Act, id. ¶ 38. The
Campollos, 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
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.
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).
Defendants argue that the entire Complaint should be
dismissed because it fails to allege specific wrongdoing by any
Defendant.
Mot. 5.
lacks specificity.
The court agrees that the Complaint largely
The Complaint primarily relies on general
allegations regarding wrongdoing by “Defendants,” without
identifying specific actions undertaken by specific Defendants.
However, it does identify some specific wrongdoing.
See, e.g.,
Compl. ¶¶ 11 (alleging generally that “Defendants . . . failed to
8
provide the requisite Federal forms and disclosures”), 19
(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 Countrywide Bank,
FSB, Bank of America, and MERS DEFENDANTS . . . failed to perform
their due diligence in investigat[ing] the legal requirements
that this loan should have been processed within”), 27 (alleging
generally that Defendants failed to explain the loan); 58-59
(alleging that Countrywide failed to issue documents required by
TILA).
se.
The court is also aware that the Campollos are acting pro
See ECF No. 1.
Moreover, it appears from Defendants’ motion
to dismiss that they were able to sufficiently respond to the
Complaint as drafted.
On balance, the court is unable to conclude that the
Complaint is so deficient under Rule 8(a) that it merits
dismissal in toto on this basis.
However, to the extent one or
more specific Counts fail to comply with Rule 8(a), the court
will analyze Defendants’ argument with respect to those Counts.
The court counsels the Campollos that any Amended
Complaint they may file should name, as specifically as possible,
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” because it requires both to
9
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.
Counts I (Declaratory Relief), II (Injunctive
Relief), and VI (Rescission).
Defendants contend that Count I (declaratory relief)
Count II (injunctive relief), and Count VI (rescission) fail to
state claims upon which relief can be granted because the claims
are remedies, not independent causes of action.
that these Counts fail to state claims.
The court agrees
Mot. 21-23.
Count I appears to seek relief under the Declaratory
Judgment Act, 28 U.S.C. § 2201.4
Count I alleges that “[a]n
actual controversy has arisen and now exists between Plaintiff
and Defendants regarding their respective rights and duties, in
that Plaintiff contends that Defendants did not have the right to
foreclose on the Subject Property.”
Compl. ¶ 41.
The Campollos
4
The Declaratory Judgment Act provides in pertinent part:
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).
10
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. ¶ 42.
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. ¶ 43.
As pled, the Campollos’ 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
cases where a party who could sue for coercive relief has not yet
done so.”) (citation and quotation marks omitted).
That is,
because the Campollos’ 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.’”) (alteration in
original, citation omitted); Ruiz v. Mortg. Elec. Registration
Sys., Inc., 2009 WL 2390824, at *6 (E.D. Cal. Aug. 3, 2009)
11
(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., Henke v. Arco Midcon,
L.L.C., 750 F. Supp. 2d 1052, 1059-60 (E.D. Mo. 2010)
(“Injunctive relief, however, is a remedy, not an independent
cause of action.”); Jensen v. Quality Loan Serv. Corp., 702 F.
Supp. 2d 1183, 1201 (E.D. Cal. 2010) (“A request for injunctive
relief by itself does not state a cause of action”) (quotation
marks and citation omitted); 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 Campollos are entitled to such a
remedy on an independent cause of action.
12
Finally, 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.
Like injunctive and declaratory relief, 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).
A right of rescission
thus “rises or falls with [the] other claims.”
5114952, at *8 (alteration in original).
Ballard, 2010 WL
Indeed, as alleged
here, Count VI specifically acknowledges that it is seeking
rescission based upon “independent grounds for relief.”
Accordingly, the court DISMISSES Counts I, II, and VI
without leave to amend.
If the Campollos eventually prevail on
an independent claim, the court will necessarily render a
judgment setting forth (i.e., “declaring”) as much and providing
appropriate remedies.
If injunctive relief is proper, it will be
because the Campollos 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.
The court will
address the merits of rescission when addressing any independent
claim allowing rescission.
13
C.
Count III (Contractual Breach of Implied Covenant
of Good Faith and Fair Dealing).
Count III asserts a “Contractual Breach of Implied
Covenant of Good Faith and Fair Dealing.”
The Campollos allege
that every contract imposes a duty of good faith and fair dealing
“in its performance and its enforcement,” Compl. ¶ 50, 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 they did not
qualify for”).
Id. ¶ 53.
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
14
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
Enters., 89 Haw. 234, 238, 971 P.2d 707, 711 (1999)).
The
Campollos 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
15
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.”).
Even if the Campollos 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.
D.
Count IV (TILA).
Alleging that Defendants violated TILA in issuing the
mortgage and loan, the Campollos seek rescission and damages.
See Compl. ¶¶ 56-65, 74.
As explained below, the court concludes
that the Campollos’ TILA damages claim is subject to dismissal,
with prejudice.
Defendants’ motion to dismiss challenges the
16
Complaint on statute of limitations grounds and the Campollos,
having failed to oppose the motion to dismiss, have forgone any
argument that equitable tolling may apply.
15 U.S.C. § 1640(a);
Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 79 (9th Cir. 1996).
With respect to Bank of America and MERS, the TILA rescission
claim must also be dismissed, without prejudice, because the
Campollos fail to allege any wrongdoing as to these Defendants.
However, with respect to Countrywide, the court declines to
dismiss the TILA rescission claim.
The Campollos’ damage remedy under TILA is time-barred.
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 v. Cal.,
784 F.2d 910, 915 (9th Cir. 1986); 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 Campollos
seek money damages for TILA violations arising out of the April
2008 loan, those claims are barred by the one-year statute of
17
limitation, as the Campollos did not file their Complaint until
January 21, 2011.
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).5
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
the creditor, the right to rescind expires three years after the
transaction’s consummation.
915.
Id. § 1635(f); King, 784 F.2d at
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.
The Complaint fails to allege facts suggesting that
Bank of America or MERS should be liable for a violation of
TILA’s right to rescission.
The Campollos allege only that
Countrywide failed to provide them with notice of the right to
5
The Campollos 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
cancel when the loan was executed.
Compl. ¶ 59.
Consequently,
the court dismisses the claim for rescission, with leave to
amend, as to Bank of America or MERS.
See Fed. R. Civ. P. 8.
The court declines to dismiss this Count with respect to the
Campollos’ claim for rescission against Countrywide.
Defendants
argue that Plaintiffs “fail to allege how” their failure to
receive “various periphery documents,” including the notice of
right to cancel, constitutes a violation of TILA.
Mot. 10.
On a
review of the Complaint, the court cannot conclude that the
allegations with respect to this Count fall below the burden of
pleading articulated in Iqbal and Twombly.
The simple allegation
that Countrywide failed to provide the Campollos with a right-tocancel notice when their loan was executed in April 2008
plausibly alleges a violation of TILA, for which the prescribed
remedy is a three-year extension of the right of rescission.
15 U.S.C. § 1635(a); 12 C.F.R. § 226.23.
See
The Campollos’
Complaint was filed within the three-year period.
Defendants also argue that the Campollos’ claim for
rescission must be dismissed because the Campollos fail to allege
they can tender the amount of their debt.
Id.
As this court has
previously held, however, an ability to tender loan proceeds is
not an element set forth in TILA, and so need not be alleged in
the Complaint.
In Agustin v. PNC Financial Services Group, Inc.,
707 F. Supp. 2d 1080 (D. Haw. 2010), the court rejected a motion
19
to dismiss on this ground.
Id. at 1090.
As the court noted,
district courts appear to be split on the question of whether an
ability to tender must be alleged in the Complaint.
See id.
(citing Valdez v. Am.’s Wholesale Lender, 2009 WL 5114305, at *4
(N.D. Cal. Dec. 18, 2009 (noting split among courts)).
Because
“TILA itself contains no such requirement,” the court reasoned,
the defendant failed to “establish that a failure to allege
tender renders the rescission claims defective.”
at 1090.
707 F. Supp. 2d
Accord Sakugawa v. Countrywide Bank F.S.B., 2011 WL
572528, at *5-*6 (D. Haw. Feb. 14, 2011) (declining to dismiss
TILA rescission claim for failure to allege tender).
The tender
issue is more properly raised in a summary judgment motion.
Accordingly, the court GRANTS the motion to dismiss the
Campollos’ TILA claim for damages, with prejudice.
The court
DENIES the motion to dismiss the Campollos’ TILA rescission claim
as to Countrywide, but GRANTS the motion, with leave to amend, as
to Bank of America and MERS.
E.
Count V (RESPA).
The Campollos’ RESPA claim is subject to dismissal.
The Complaint alleges that: (1) Defendants received “egregious”
fees for making the loan; and (2) Defendants “did give, provide
or receive a hidden fee or thing of value for the referral of
settlement business, including but not limited to, kickbacks,
20
hidden referral fees and/or yield spread premiums,” in violation
of 24 C.F.R. § 3500.14.
Compl. ¶¶ 70-71.
Defendants argue that these claims are time-barred, and
the court agrees.
Violations of 24 C.F.R. § 3500.14 constitute
violations of 12 U.S.C. § 2607, section 8 of RESPA.
§ 3500.14(a).
24 C.F.R.
The statute of limitations for violations of
§ 2607 is one year from the date of the violation.
12 U.S.C.
§ 2614.
Here, the alleged RESPA violations occurred nearly
three years before the Campollos filed their Complaint.
Complaint makes no allegation of equitable tolling.
The
Defendants’
motion gave the Campollos notice that their RESPA claims were
time-barred, and the Campollos did not file an opposition.
The
Campollos have not provided the court with any legal or factual
reason justifying tolling of RESPA’s statute of limitations.
The
court therefore concludes that the Campollos’ RESPA claim is
time-barred.
Moreover, 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
21
services actually performed,” § 2607, “by negative implication, .
. . cannot be read to prohibit charging fees, excessive or
otherwise, when those fees are for services that were actually
performed”).
Accordingly, because the Complaint fails to state a
cause of action for violation of RESPA, the court GRANTS
Defendants’ motion to dismiss the RESPA claim, with prejudice.
F.
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
deprive Plaintiffs of their home, equity, as well as their past
and future investment.”
Compl. ¶ 82.
The Campollos 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.”
¶ 79.
Id.
Finally, the Campollos allege that they were not provided
information in their native language.
Id. ¶ 80.
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.”
22
The Campollos 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
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 Campollos an opportunity to amend Count VII
23
to attempt to state a section 480-2 claim.
Count VII is DISMISSED, with leave to amend.
G.
Count VIII (Breach of Fiduciary Duty).
Count VIII alleges, without distinguishing between
various Defendants, that “Defendants owed a fiduciary duty to
Plaintiff and breached that duty by [f]ailing to advise or notify
Plaintiff . . . that Plaintiff would or had a likelihood of
defaulting on the loan.”
Compl. ¶ 85.
Defendants also allegedly
breached a fiduciary duty owed to the Campollos by “exercis[ing]
a greater level of loyalty to each other by providing each other
with financial advantages under the loan without disclosing their
relation to one another to Plaintiff.”
Id. ¶ 86.
The Campollos
also allege that Defendants’ “fail[ure] to fully comply with TILA
and RESPA” violated Defendants’ fiduciary duties.
Id. ¶ 88.
Count VIII fails to state a claim against Defendants.
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
24
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.
Count VIII is DISMISSED, with leave to amend.
H.
Count IX (Unconscionability).
Count IX asserts “Unconscionability-UCC-2-3202 [sic
2-302].”
Count IX further asserts that courts may refuse to
enforce a contract or portions of a contract that are
unconscionable, Compl. ¶ 90, 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. ¶ 91.
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
25
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
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).6
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
6
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.
26
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.
I.
Count X (Predatory Lending).
Count X asserts “Predatory Lending” and lists a variety
of alleged wrongs (e.g., failure to disclose terms and conditions
or material facts, targeting of unsophisticated persons, unfair
loan terms, and improper underwriting) that form the bases of
other causes of action.
Compl. ¶¶ 93-102.
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
27
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.’”).
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.
The
Campollos 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
Campollos may not simply reallege a general claim for “predatory
lending.”
28
J.
Count XI (Quiet Title).
Count XI alleges that “Defendants have no legal or
equitable right, claim, or interest in the Property,” Compl.
¶ 105, and that the Campollos are entitled to “a declaration that
the title to the Subject Property is vested in Plaintiff’s [sic]
alone.”
Id. ¶ 106.
The Campollos 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 Campollos 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.).
Accordingly,
Count XI is DISMISSED with leave to amend as to all Defendants.
K.
Count XII (Lack of Standing; Improper Fictitious
Entity).
Count XII asserts a claim for “Lack of Standing;
Improper Fictitious Entity” against MERS.
Compl. ¶¶ 107-14.
Count XII fails to state a claim because a claim for “lack of
29
standing” may not be alleged against a defendant.
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. ¶ 110.
Plaintiffs assert that an assignment of the note or mortgage to
MERS is illegal, id. ¶ 111, and that therefore “MERS has no legal
standing to foreclose.”
Id. ¶ 114.
The Campollos 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 Campollos an
opportunity to clarify the factual allegations as to MERS.
The
Campollos 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.
30
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
GRANTS Countrywide’s motion to dismiss as to all Counts except
the rescission claim in Count IV.
With respect to all
Defendants, the Campollos are granted leave to amend Counts VII,
VIII, IX, X, and XI.
claim for fraud.
The Campollos may also bring a separate
The Campollos are further granted leave to
amend Count XII as to MERS.
Counts I, II, III, V, and VI are
DISMISSED without leave to amend.
The TILA damage claim in Count
IV is also dismissed without leave to amend as to all Defendants,
and the TILA rescission claim in Count IV against Bank of America
and MERS is 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, June 16, 2011.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge
Campollo v. Bank of America; Civil No. 11-00052 SOM/BMK; ORDER GRANTING DEFENDANTS
BANK OF AMERICA, N.A., AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.’S MOTION TO
DISMISS, AND GRANTING IN PART AND DENYING IN PART DEFENDANT COUNTRYWIDE BANK, FSB’S
MOTION TO DISMISS.
31
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