Foth et al v. BAC Home Loans Servicing, LP et al

Filing 33

ORDER: (1) GRANTING BAC AND MERS'S MOTION TO DISMISS 10 ; (2) GRANTING CRABTREE OLSEN, P.S.'S JOINDER IN MOTION TO DISMISS 12 ; AND (3) GRANTING PLAINTIFFS' MOTION TO REMOVE DOUGLAS B. HACKETT, TRUSTEE FOR THE HAKU PLACE TRUST, AS A PLAINTIFF IN THE COMPLAINT 25 . ~ excerpt of order: "The Complaint is DISMISSED WITHOUT PREJUDICE as against all Defendants in this action with leave to amend no later than 30 days from the filing of this Ord er. Failure to do so and to cure the pleading deficiencies will result in dismissal of this action with prejudice." ~ Signed by JUDGE DAVID ALAN EZRA on 8/4/2011. [Order follows hearing held 8/3/2011 on Motions, doc nos. (10), (12), and (25). Minutes of hearing: docket entry no. 32 ] (afc) CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications will be served by first class mail on Friday, August 5, 2011.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
STEVEN MARK FOTH; KRISTY
DIANE FOTH; and DOUGLAS B.
HACKETT, as Trustee of the Haku
Place Trust,

)
)
)
)
)
Plaintiffs,
)
)
vs.
)
)
BAC HOME LOANS SERVICING, )
LP; ROUTH CRABTREE OLSEN )
LAW OFFICE; and MORTGAGE
)
ELECTRONIC REGISTRATION
)
SYSTEMS, INC.,
)
)
Defendants.
)
_____________________________ )

CV. NO. 11-00114 DAE-BMK

ORDER: (1) GRANTING BAC AND MERS’S MOTION TO DISMISS; (2)
GRANTING CRABTREE OLSEN, P.S.’S JOINDER IN MOTION TO DISMISS;
AND (3) GRANTING PLAINTIFFS’ MOTION TO REMOVE DOUGLAS B.
HACKETT, TRUSTEE FOR THE HAKU PLACE TRUST, AS A PLAINTIFF IN
THE COMPLAINT
On August 3, 2011, the Court heard BAC Home Loans Servicing, LP
(“BAC”) and Mortgage Electronic Registration Systems, Inc.’s (“MERS”) Motion
to Dismiss, Routh Crabtree Olsen’s (“RCO”) (collectively, “Defendants”) Motion
for Joinder in Motion to Dismiss, and Plaintiffs Steven Mark Foth and Kristy
Diane Foth’s (collectively, “Plaintiffs”) Motion to Remove Douglas B. Hackett,

Trustee for the Haku Place Trust, as Plaintiff in the Complaint. Plaintiffs, pro se,
appeared on their own behalf via telephone at the hearing; Andrew J. Lautenback,
Esq., appeared on behalf of BAC and MERS; Charles R. Prather appeared on
behalf of RCO. After reviewing the motions and the supporting and opposing
memoranda, the Court GRANTS BAC and MERS’s Motion to Dismiss (Doc.
# 10), GRANTS RCO’s Motion for Joinder (Doc. # 12), and GRANTS Plaintiffs’
Motion to Remove Douglas B. Hackett (Doc. # 25). The Complaint is
DISMISSED WITHOUT PREJUDICE as against all Defendants.
BACKGROUND
On November 19, 2007, Plaintiffs obtained a $510,000 loan from
MortgageIt, Inc. (“Loan”). (“Mort.,” Doc. # 10-3, at 2.)1 To secure payment on
the Loan, Plaintiffs executed a mortgage encumbering real property located at

1

BAC and MERS submitted a copy of the subject mortgage as Exhibit A to
their Motion to Dismiss. They also submitted a copy of the subject assignment as
Exhibit B to the Motion. “[A] district court ruling on a motion to dismiss may
consider documents ‘whose contents are alleged in a complaint and whose
authenticity no party questions, but which are not physically attached to the
[plaintiffs’] pleading.’” Parrino v. FHP, Inc., 146 F.3d 699, 705 (9th Cir. 1998)
(quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994)); see also Lee v. City
of L.A., 250 F.3d 668, 688 (9th Cir. 2001). In the instant case, Plaintiffs’ entire
Complaint revolves around the subject mortgage and subsequent assignment. The
mortgage and assignment are clearly essential to the Complaint, and neither party
disputes their authenticity. Accordingly, it is appropriate for the Court to consider
the mortgage and assignment when ruling on the Motion to Dismiss.
2

76-6311 Haku Place, Kailua Kona, Hawaii 96740 (the “Property”) on the same
day. (Id. at 3.) The mortgage was recorded in the State of Hawaii Bureau of
Conveyances on November 30, 2007 as Document Number 2007-207555. (Id. at
1.) MortgageIt, Inc. is listed on the mortgage as the originating lender. (Id. at 2.)
MERS is listed as the mortgagee. (Id. at 1.) Specifically, the mortgage provides
as follows with respect to MERS:
“MERS” is Mortgage Electronic Registration Systems, Inc. MERS is
a separate corporation that is acting solely as nominee for Lender and
Lender’s successors and assigns. MERS is the mortgagee under
this Security Instrument.
(Id.) The mortgage goes on to state
The Security Instrument secures to Lender: (i) the repayment of the
Loan, and all renewals, extensions and modifications of the Note; and
(ii)the performance of Borrower’s covenants and agreements under
this Security Instrument and the Note. For this purpose, Borrower
does hereby mortgage, grant and convey to MERS (solely as nominee
for Lender and Lender’s successors and assigns) and to the successors
and assigns of MERS, with power of sale, [the Property.]
(Id. at 3.)
On May 26, 2010, MERS executed an assignment to BAC.
(“Assignment,” Doc. # 10-4, at 2.) The assignment provides as follows:

3

FOR VALUE RECEIVED [MERS] solely as nominee for MortgageIt,
Inc., does hereby transfer without recourse to [BAC] . . . all of its
right, title and interest in and to that certain mortgage recorded on
11/20/07 in the Bureau of Conveyances . . . document number
2007-207555.
(Id. at 1.) The assignment was duly recorded in the State of Hawaii Bureau of
Conveyances on June 8, 2010 as Document Number 2010-079298. (Id.)
On February 15, 2011, Plaintiffs filed a Second Amended Complaint
(“Complaint”) in Hawaii state court against Defendants. (“SAC,” Doc. # 1, Ex. 1.)
On February 22, 2011, Defendants BAC and MERS removed the action to this
Court. (Doc. # 1.) Since then Plaintiffs have sought a series of Temporary
Restraining Orders which would prevent Defendant BAC from foreclosing on
Plaintiffs’ property. (See Docs. ## 6, 16, 18.) The Court denied each as moot as
Defendant BAC has twice postponed the foreclosure sale. (See Docs. ## 9, 24.)
On March 9, 2011, Defendants MERS and BAC filed the instant
Motion to Dismiss. (“Mot.,” Doc. # 10.) On March 14, 2011, Defendant RCO
filed its Joinder Motion. (Doc. # 12.) On July 7, 2011, Plaintiffs filed both their
Opposition to the Motion to Dismiss, (“Opp’n,” Doc. # 26,) as well as the Motion
to Remove Douglas B. Hackett (Doc. # 25). On July 18, 2011, Defendants MERS
and BAC filed their Reply. (“Reply,” Doc. # 30.)

4

Plaintiffs allege that Defendants are illegally attempting to foreclose
on the Property. (SAC at 1–2.) Although difficult to discern, the thrust of
Plaintiffs’ Complaint seems to be that because Defendants do not possess the
original promissory note, they cannot enforce the note. (Id. at 17.) Plaintiffs also
argue that there was an improper split between the mortgage and promissory note,
and that the debt is “settled in full” because Defendants failed to validate it in
accordance with the requirements of the Fair Debt Collection Practices Act
(“FDCPA”). (Id.) Additionally, Plaintiffs seem to challenge the purported
“Assignment of Mortgage” from MERS to BAC.
STANDARD OF REVIEW
I.

Federal Rule of Civil Procedure 12(b)(6)
Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure

(“Rule”), a motion to dismiss will be granted where the plaintiff fails to state a
claim upon which relief can be granted. Review is limited to the contents of the
complaint. See Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir.
1994). A complaint may be dismissed as a matter of law for one of two reasons:
“(1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable
legal claim.” Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.
1984) (citation omitted). Allegations of fact in the complaint must be taken as true
5

and construed in the light most favorable to the plaintiff. See Livid Holdings Ltd.
v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).
A complaint need not include detailed facts to survive a Rule 12(b)(6)
motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007).
In providing grounds for relief, however, a plaintiff must do more than recite the
formulaic elements of a cause of action. See id. at 556–57; see also McGlinchy v.
Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988) (“[C]onclusory allegations
without more are insufficient to defeat a motion to dismiss for failure to state a
claim.”) (citation omitted). “The tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions,” and
courts “are not bound to accept as true a legal conclusion couched as a factual
allegation.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations
and citations omitted). Thus, “bare assertions amounting to nothing more than a
formulaic recitation of the elements” of a claim “are not entitled to an assumption
of truth.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[T]he
non-conclusory ‘factual content,’ and reasonable inferences from that content,
must be plausibly suggestive of a claim entitling the plaintiff to relief.”) (internal
quotations and citations omitted).

6

A court looks at whether the facts in the complaint sufficiently state a
“plausible” ground for relief. See Twombly, 550 U.S. at 570. A plaintiff must
include enough facts to raise a reasonable expectation that discovery will reveal
evidence and may not just provide a speculation of a right to relief. Id. at 586.
When a complaint fails to adequately state a claim, such deficiency should be
“exposed at the point of minimum expenditure of time and money by the parties
and the court.” Id. at 558 (citation omitted). If a court dismisses the complaint or
portions thereof, it must consider whether to grant leave to amend. Lopez v.
Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (finding that leave to amend should be
granted “if it appears at all possible that the plaintiff can correct the defect”)
(internal quotations and citations omitted).
When a plaintiff appears pro se, the court has an obligation to
construe the plaintiff’s complaint liberally. See Bernhardt v. Los Angeles County,
339 F.3d 920, 925 (9th Cir. 2003); Jackson v. Carey, 353 F.3d 750, 757 (9th Cir.
2003) (“Pro se complaints are held to less stringent standards than formal
pleadings drafted by lawyers.” (citation omitted)). “Pro se litigants must
[nonetheless] follow the same rules of procedure that govern other litigants.” King
v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987).

7

II.

Federal Rule of Civil Procedure 9(b)
Federal Rule of Civil Procedure 9(b) requires that “[i]n alleging fraud

or mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” Fed. R. Civ. P. 9(b). Under Ninth Circuit law, “Rule 9(b)
requires particularized allegations of the circumstances constituting fraud.” In re
GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547–48 (9th Cir. 1994) (en banc),
superseded on other grounds by 15 U.S.C. § 78u-4.
In their pleadings, plaintiffs must include the time, place, and nature
of the alleged fraud; “mere conclusory allegations of fraud are insufficient” to
satisfy this requirement. Id. at 1548 (quoting Moore v. Kayport Package Express,
Inc., 885 F.2d 531, 540 (9th Cir. 1989)). “[T]he circumstances constituting the
alleged fraud [must] ‘be specific enough to give defendants notice of the particular
misconduct . . . so that they can defend against the charge and not just deny that
they have done anything wrong.’” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124
(9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 10104, 1019 (9th Cir.
2001)); see also Moore, 885 F.2d at 540 (finding that Rule 9(b) requires a plaintiff
to attribute particular fraudulent statements or acts to individual defendants).
However, “[m]alice, intent, knowledge, and other conditions of a person’s mind
may be alleged generally.” Fed. R. Civ. P. 9(b); see also In re GlenFed, Inc. Sec.
8

Litig., 42 F.3d at 1547 (“We conclude that plaintiffs may aver scienter . . . simply
by saying that scienter existed.”); Walling v. Beverly Enter., 476 F.2d 393, 397
(9th Cir. 1973) (finding that Rule 9(b) “only requires the identification of the
circumstances constituting fraud so that the defendant can prepare an adequate
answer from the allegations” (citations omitted)).
A motion to dismiss for failure to plead with particularity is the
functional equivalent of a motion to dismiss under Rule 12(b)(6) for failure to state
a claim. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). In
considering a motion to dismiss, the court is not deciding the issue of “whether a
plaintiff will ultimately prevail but whether the claimant is entitled to offer
evidence to support the claims.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)
overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984).
DISCUSSION
For the reasons set forth below, the Court concludes that BAC and
MERS’s Motion to Dismiss should be granted.
I.

Plaintiffs’ Opposition to the Motion to Dismiss
As a preliminary matter, the Court observes that Plaintiffs’ Opposition

to the Motion to Dismiss was untimely filed. Although the Opposition was due on
or before June 13, 2011 (Doc. # 14), Plaintiffs did not file it until July 7, 2011,
9

nearly a month past the Court’s deadline. See Local Rule 7.4 (“Any opposition or
reply that is untimely filed may be disregarded by the court or stricken from the
record.”). Despite its untimeliness, the Court in its discretion will consider
Plaintiffs’ Opposition, particularly because Plaintiffs are proceeding pro se. The
Court will not, however, in the future accept late filings from Plaintiffs.
Plaintiffs are also advised that an opposition to a motion to dismiss is
not a proper vehicle for adding claims to his complaint. See Schneider v. Cal.
Dep’t of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998) (“In determining the
propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint
to a plaintiff’s moving papers . . . .”) (citations omitted); Clegg, 18 F.3d at 754
(finding that for purposes of a motion to dismiss, the court’s review is limited to
the contents of the complaint). In their Opposition, Plaintiffs for the first time
request a “declaratory judgment to determine that [BAC] does not have legal
authority to foreclose on the [Property].” (Opp’n ¶ 16.) Plaintiffs also appear to
attempt to clarify for the first time how specifically Defendants engaged in
fraudulent conduct. (Id. ¶¶ 29–45.). The Court will not here consider Plaintiffs’
attempts at bolstering the Complaint via their Opposition.

10

II.

Plaintiffs’ Motion to Remove Douglas B. Hackett
In their Motion, Defendants argue that “[t]he SAC cannot move

forward because Plaintiff Hackett has not asserted any claims on his own behalf,
and cannot appear pro se to assert claims as the ‘trustee’ on behalf of the ‘Haku
Place Trust.’” (Mot. at 7.) Plaintiffs, for their part, agreed and filed a Motion to
Remove Hackett as a Plaintiff. (Doc. # 25.)
It is well established that “[p]arties may plead and manage their own
causes personally” before federal courts. 28 U.S.C. § 1654. However, “[a]lthough
a non-attorney may appear in pria persona on his own behalf, that privilege is
personal to him. He has no authority to appear as an attorney for others than
himself.” C.E. Pope Equity Trust v. United States, 818 F.2d 696, 679–98 (9th Cir.
1987); see also Simon v. Hartford Life, Inc., 546 F.3d 661, 664 (9th Cir. 2008)
(“[C]ourts routinely adhered to the general rule prohibiting pro se plaintiffs from
pursuing claims on behalf of others in a representative capacity.”) Similarly, Local
Rule 83.11 provides that “[b]usiness entities . . . cannot appear before this court pro
se and must be represented by an attorney.”
In accordance with these rules, other judges in this District have
denied Plaintiff Hackett’s attempts to represent plaintiffs as “trustee” of their
property. (See, e.g., Doc. # 10-6; Cv. No. 11-00140-SOM-BMK, Doc. # 70.) This
11

Court agrees—Plaintiff Hackett cannot proceed pro se on behalf of Plaintiffs or
Plaintiffs’ property held in trust. The Court disagrees with Defendants, however,
that this “must” result in dismissal of the SAC. (Mot. at 8.) Instead, the Court
believes that removing Plaintiff Hackett as a party to this action is an appropriate
remedy. Accordingly, the Court GRANTS Plaintiffs’ Motion to Remove Douglas
B. Hackett, Trustee for the Haku Place Trust, as a Plaintiff in the Complaint.
III.

Motion to Dismiss
Defendants contend that the Complaint is vague and conclusory and

therefore should be dismissed for failure to comply with Federal Rules of Civil
Procedure 8, 9 and 12(b)(6). The Court agrees.
The Court begins by noting there are myriad problems with the
Complaint generally. As discussed, Rule 8(a)(2) requires that a complaint contain
“a short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). Although a court must construe a pro se Plaintiff’s
complaint liberally, the complaint must still “give defendant fair notice of what the
plaintiff’s claim is and the grounds upon which it rests.” Swierkiewicz v. Sorema,
N.A., 534 U.S. 506, 512 (2002). The Complaint here contains only broad
allegations which lump together defendants and do not identify which defendants
are responsible for which specific wrong. (See, e.g., Compl. at 13 (claiming
12

“Defendants” re-sold a promissory note “jointly and/or separately”); id. (claiming
“Defendants, jointly and/or separately, have failed to uphold Defendants’
requirement, jointly and/or separately, under the purported LOAN by not
presenting the amount stated in the Mortgage to Plaintiffs”); id. at 22 (stating
“Defendants claim to be the creditor upon the instrument” without distinguishing
between Defendants).) Defendants are not required to speculate as to wrong the
Plaintiffs have alleged they committed. See Sakugawa v. Countrywide Bank
F.S.B., 769 F. Supp. 2d 1211, 1221 (“Although FRCP Rule 8 requires only that a
complaint include a ‘short and plain statement of the claims showing that the
pleader is entitled to relief,” the complaint must sufficiently put Defendants on fair
notice of the claim asserted and the ground upon which it rests. [Neither]
Defendants, nor the Court, are required to speculate . . . .”).
Moreover, the legal theories Plaintiffs allege are confused at best.
(See, e.g., Compl. at 31–36 (asserting causes of action for “no standing”).)
Plaintiffs do not clearly identify the causes of action they are asserting, and
Plaintiffs’ legal claims themselves are scattered throughout the complaint. Indeed,
the allegations in the Complaint are excessively verbose and nearly
incomprehensible, contrary to Rule 8’s requirement that a complaint contain “a
short and plain statement of the claim showing that the pleader is entitled to relief.”
13

See Fed. R. Civ. P. 8(a)(2). Under these circumstances, Plaintiffs plainly cannot be
said to have satisfied Rule 8. See Cafasso v. Gen. Dynamics C4 Sys., 637 F.3d
1047 (9th Cir. 2011) (citing cases upholding Rule 8 dismissals of complaints that
are confusing, conclusory, ambiguous, and prolix); McHenry v. Renne, 84 F.3d
1172, 1180 (9th Cir. 1996) (“Something labeled a complaint but written . . . prolix
in evidentiary detail, yet without simplicity, conciseness and clarity as to whom
plaintiffs are suing for what wrongs, fails to perform the essential functions of a
complaint.”);
The Complaint also fails to satisfy the heightened pleading
requirements of Rule 9. Fraud allegations “must be specific enough to give
defendants notice of the particular misconduct which is alleged to constitute the
fraud charged so that they can defend against the charge and not just deny that they
have done anything wrong.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir.
2007) (citation omitted). Moreover, “[a]verments of fraud must be accompanied
by the who, what, when, where, and how of the misconduct charged.” Kearns,
567 F.3d at 1124. Indeed, when multiple defendants are involved,
Rule 9(b) does not allow a complaint to merely lump multiple
defendants together but require[s] plaintiffs to differentiate their
allegations when suing more than one defendant . . . and inform each
defendant separately of the allegations surrounding his alleged
participation in fraud . . . . In the context of a fraud suit involving
14

multiple defendants, a plaintiff must, at a minimum, identif[y] the role
of [each] defendant[] in the alleged fraudulent scheme.
Swartz, 476 F.3d at 764–65 (citations and quotations omitted).
Here Plaintiffs’ Complaint is littered with allegations of fraudulent
conduct which simply do not include “the who, what, when, where, and how of the
misconduct charged.” Kearns, 567 F.3d at 1124. Nor do Plaintiffs differentiate
between Defendants in his allegations as required by Swartz. For instance,
Plaintiffs charge that “Defendants, jointly and/or separately, . . . filed numerous
forged, fraudulent, and/or false documents into the Hawaii County Recorder’s
Office,” but do not provide specifics surrounding this allegation. (SAC at 10.)
Plaintiffs make similar allegations devoid of specifics throughout their Complaint.
(Id. at 11 (accusing Defendants “jointly and separately” of engaging in “criminal
and fraudulent conduct”); id. at 14 (“Plaintiffs discovered the forged, fraudulent
and/or false documents Defendants filed and/or recorded . . . .”); id. at 23
(“Defendant debt collectors . . . are persisting in their intention to conduct a
fraudulent foreclosure on Plaintiffs’ Property.”); id. at 25 (similar); id. at 26
(similar); id. at 39 (similar).). To the extent that Plaintiffs allege fraudulent
conduct, there are simply insufficiently specific factual allegations to satisfy Rule
9’s heightened pleading standard.

15

In sum, the Complaint has failed to satisfy the federal pleading
requirements of either Rule 8 or Rule 9. This alone is sufficient grounds to grant
Defendants’ Motion and dismiss the Complaint. The Court, however, will
nonetheless attempt to discern the claims set forth therein.
A.

First Cause of Action: “The Alleged Debt is Settled”
Plaintiffs’ first cause of action states “The Alleged Debt is Settled in

Full under the FDCPA and U.C.C. 3-603.” (Id. at 22.) Plaintiffs’ argument seems
to be that they asked for a “debt verification,” but “Defendants” failed to respond.2
(See id. at 23.) As a result, there is no debt. (See id.) The Court is not persuaded.
The FDCPA prohibits various collection practices by “debt collectors”
to “eliminate abusive debt collection practices.” See 15 U.S.C. § 1692(e)
(describing the purpose of the FDCPA). The FDCPA defines a “debt collector” as:
any person who uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is the collection
of any debts, or who regularly collects or attempts to collect, directly
or indirectly, debts owed or due or asserted to be owed or due another.
Notwithstanding the exclusion provided by clause (F) of the last
2

Once more, Plaintiffs do not specify any specifics with respect to this
allegation. In addition to not mentioning when they filed a request and pursuant to
what statute they filed a request, they do not specify which defendant was
obligated to respond or why. This is another instance of Plaintiffs plainly failing to
satisfy Rule 8. See Iqbal, 129 S. Ct. at 1949 (“[T]he pleading standard Rule 8
announces does not require ‘detailed factual allegations,’ but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation.”).
16

sentence of this paragraph, the term includes any creditor who, in the
process of collecting his own debts, uses any name other than his own
which would indicate that a third person is collecting or attempting to
collect such debts. For the purpose of section 1692f(6) of this title,
such term also includes any person who uses any instrumentality of
interstate commerce or the mails in any business the principal purpose
of which is the enforcement of security interests . . . .
15 U.S.C. § 1692a(6). To be liable for a violation of the FDCPA, a defendant
must, as a threshold requirement, be a “debt collector” within the meaning of the
FDCPA. Heintz v. Jenkins, 514 U.S. 291, 294 (1995).
Here, Plaintiffs’ conclusory and confused Complaint does not
sufficiently allege facts suggesting that Defendants are “debt collectors” as
contemplated by the FDCPA. This proposition is not self-evident as many district
courts across the country have held mortgage servicing companies are not debt
collectors liable under the FDCPA. See Williams v. Countrywide, 504 F. Supp. 2d
176, 190 (S.D. Tex. 2007) (“lenders and mortgage companies are not ‘debt
collectors’ within the meaning of the FDCPA”); Hulse v. Ocwen Fed Bank FSB,
195 F. Supp. 2d 1188, 1204 (D. Or. 2002) (noting that the “activity of foreclosing
on [a] property pursuant to a deed of trust is not the collection of a debt within the
meaning of the” FDCPA). Indeed, one important factor in determining whether a
“mortgage servicing company” is a “debt collector” is whether “the debt was [] in
default at the time it was assigned.” Caraang v. PNC Mortg., --- F. Supp. 2d ---,
17

No. 10-00594 LEK-BMK, 2011 WL 2470637, at * 24 (D. Haw. June 20, 2011)
(quoting Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985)). The
Complaint alleges no facts to suggest that any of the Defendants are, in fact, “debt
collectors” within the meaning of the FDCPA.
Plaintiffs also rely upon Uniform Commercial Code (“U.C.C.”) 3-603
to argue the “debt is settled in full.”3 (SAC at 25–26.) Plaintiffs claim that they
sent a “Qualified Written Request . . . tendering full payment to a third party
escrow agent, . . . under the condition that Debt Collector Defendants provide
proof of debt and the . . . Promissory Note to establish proof of claim within 15
days.” (Id. at 25.) By failing to comply, Defendants have allegedly violated
Hawaii Revised Statute (HRS) § 490:3-603. (See id. at 25–26.)
It is entirely unclear to the Court how Defendants’ alleged failure to
respond to Plaintiffs request leads to a violation of this provision. HRS 490:3-603
provides:
(a) If tender of payment of an obligation to pay an instrument is made
to a person entitled to enforce the instrument, the effect of tender is
governed by principles of law applicable to tender of payment under a
simple contract.
3

Conceivably, Plaintiffs meant to allege a violation of the Hawaii’s
adaptation of U.C.C. 3-603, which is codified at Haw. Rev. Stat. § 490:3-603.
Although the Complaint refers to the U.C.C., the Court will cite to the appropriate
section of the Hawaii Revised Statutes in this Order.
18

(b) If tender of payment of an obligation to pay an instrument is made
to a person entitled to enforce the instrument and the tender is refused,
there is discharge, to the extent of the amount of the tender, of the
obligation of an indorser or accommodation party having a right of
recourse with respect to the obligation to which the tender relates.
(c) If tender of payment of an amount due on an instrument is made to
the person entitled to enforce the instrument, the obligation of the
obligor to pay interest after the due date on the amount tendered is
discharged. If presentment is required with respect to an instrument
and the obligor is able and ready to pay on the due date at every place
of payment stated in the instrument, the obligor is deemed to have
made tender of payment on the due date to the person entitled to
enforce the instrument.
Haw. Rev. Stat. § 490:3-603. The Complaint does not understandably explain how
any of the Defendants have violated this statute or even how this statute relates to
Plaintiffs’ claim that the “debt is settled in full.” Moreover, Plaintiffs complain of
fraud with respect to Defendants’ alleged violation of this statute without providing
any specifics as required by Rule 9. Without more, the Court simply cannot
conclude Plaintiffs have stated a claim with respect to HRS § 490:3-603.
B.

Second Cause of Action: “Show me the Note”
Plaintiffs here seem to assert that because Defendants do not possess

the original promissory note, they are not holders in due course and cannot initiate
a nonjudicial foreclosure on the Subject Property.4 (SAC at 26–31.) Although the
4

This so-called show me the note theory has been routinely rejected by
(continued...)
19

Complaint cites Article 3 of the U.C.C. in support of this claim (id. at 27), it
seemingly references Article 3 provisions solely as support for legal conclusions.
For instance, Plaintiffs baldly assert that “[Defendants] do not have standing to
enforce the note in this action, because they are not a true party in interest and/or
do not have enough actual authority to qualify for standing, and/or do not have
actual possession of the note.” (Id. at 28.) This assertion, however, is not
coherently explained. The Complaint also refers to Hawaii Revised Statute
§ 490:3-501, which defines and discusses “presentment,” but it fails to state why
this statute provides Plaintiffs a “common law and statutory right to inspect that the
documents are in GOOD and VALID conditions” as alleged. (Id. at 27.) See Haw.
Rev. Stat. § 490:3-501 (defining presentment as “a demand made by or on behalf
of a person entitled to enforce an instrument” and noting that it must be done so
reasonably). Additionally, although Plaintiffs cite Hawaii Revised Statute § 490:3501(b)(2), the Complaint does not reference the Hawaii statutes governing

4

(...continued)
district courts throughout the Ninth Circuit. Although the Court does not cite
unpublished opinions as precedent, the following cases from the District of Hawaii
reject the show me the note argument: Krakauer v. IndyMac Mortg. Servs., 2010
WL 5174380, at *9 (D. Haw. Dec. 14, 2010); Brenner v. Indymac Bank, F.S.B.,
2010 WL 4666043, at *7 (D. Haw. Nov. 9, 2010); Angel v. BAC Home Loan
Servicing, 2010 WL 4386775, at *10 (D. Haw. Oct. 26, 2010).
20

nonjudicial foreclosure, which do not expressly require that the foreclosing party
produce a physical copy of the original promissory note. See Haw. Rev. Stat.
§ 667-5 to -10. In the absence of any coherent factual or legal support for this
claim, it cannot withstand a motion to dismiss. See Iqbal, 129 S. Ct. at 1949
(stating that although a complaint need not include “detailed factual allegations,”
there must be more than an “unadorned, the-defendant-unlawfully-harmed-me
accusation” (citations and quotations omitted)).5
C.

Causes of Action Three through Nine: No Standing
Plaintiffs remaining causes of action are that “Defendants have No

Standing for Enforcement of Power of Sale,” “Defendants have no Standing as a
Real Party of Interest,” “Defendants have No Standing as a Creditor in Due Course

5

In their Complaint and Opposition, Plaintiffs rely upon U.S. Bank National
Association v. Ibanez, 941 N.E.2d 40 (Mass. 2011). The case is inapposite. Aside
from the fact that Ibanez is a Massachusetts Supreme Court case applying
Massachusetts law, the procedural posture of that case is readily distinguishable
from that of the instant lawsuit. In Ibanez, purported assignees, who purchased the
subject properties back at the foreclosure sales, filed complaints seeking a
declaration that they had title to the properties in fee simple, whereas here,
Plaintiffs as borrowers have filed a complaint to challenge Defendants’ ability to
enforce the mortgage and note. These two situations are completely separate and
distinct. Thus, Plaintiffs’ reliance on Ibanez is misplaced.
21

in this Matter,” “Defendants have No Standing as the Actual and Current Holder of
the Promissory Note,” and “Violations of the Uniform Commercial Code.”
(Compl. at 31–36.) The Court finds that Plaintiffs have failed to state a claim on
these theories.
As a preliminary matter, “No Standing” is not a cognizable cause of
action upon which Plaintiffs may recover. It may be that Defendants’ attempt to
foreclose on the Property when they do not allegedly have a right to the property is
the basis of some other legal theory, but “no standing” is not a cause of action unto
itself. This alone warrants dismissal of these counts of the Complaint.
In any event, it seems that the underlying theory of liability behind
Plaintiffs’ “No Standing” Causes of Action is identical the Complaint’s second
cause of action.6 Specifically that Defendants7 must show Plaintiffs the Note in
order to foreclose. As discussed above, the Court is not persuaded by this

6

Plaintiffs also seem to recycle their U.C.C. arguments discussed, supra.
(See SAC at 36–39.) For the reasons discussed, the Court is not persuaded. To the
extent Plaintiffs may be alleging new causes of action stemming from the U.C.C.,
the Court finds, as with the rest of the Complaint, that it has not satisfied Rules 8 or
9 of the Federal Rules of Civil Procedure.
7

Again, it is unclear from the Complaint which Defendant is at issue with
respect to these Counts.
22

argument absent some showing that the Hawaii non-judicial foreclosure statutes
require that the original mortgage be shown.8
D.

Injunctive Relief
Plaintiffs finally claim they are entitled to injunctive relief. Injunctive

relief is a remedy, not an independent cause of action. See Kendall v. Visa U.S.A.,
Inc., 518 F.3d 1042, 1051 (9th Cir. 2008). Because Plaintiffs have not stated a
claim upon which relief can be granted, they are not entitled to injunctive relief.
See Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008) (requiring
Plaintiff demonstrate a likelihood of success on the merits for injunctive relief).

8

Plaintiffs also seem to be attempting to assert a “split the note” theory of
wrongful disclosure. (See id. at 6, 31, 33, 35–36.) The argument goes that because
the note and deed of trust are no longer together, the holders of the note are no
longer allowed to enforce the note through nonjudicial foreclosure. (See id.)
Plaintiffs, however, have failed to coherently allege any facts supporting their
assertion that the promissory note and the deed of trust have been truly bifurcated.
Nor have Plaintiffs cited authority controlling upon this Court that holds MERS
cannot have standing as a nominee beneficiary in connection with a nonjudicial
foreclosure proceeding under Hawaii law. Indeed, as discussed supra, Plaintiffs
have not even referenced the Hawaii nonjudicial foreclosure statute anywhere in
their Complaint. The Court will not consider the merits of this argument until
Plaintiffs present a clear and coherent argument on this point.
23

IV.

Leave to Amend
The Court recognizes that it may be possible for Plaintiffs to state a

claim if provided the opportunity to amend their Complaint.9 Accordingly, the
Complaint is DISMISSED WITHOUT PREJUDICE as against all Defendants in
this action with leave to amend no later than 30 days from the filing of this Order.
Failure to do so and to cure the pleading deficiencies will result in dismissal of this
action with prejudice. Plaintiffs are advised that the amended complaint must
clearly state how each of the named defendants have injured him, and it must also
clearly identify the statutory provisions, if any, under which Plaintiffs’ claims are
brought.
CONCLUSION
For the reasons stated above, the Court GRANTS BAC and MERS’s
Motion to Dismiss (Doc. # 10), GRANTS RCO’s Motion for Joinder (Doc. # 12),

9

Defendants argue that the Complaint should be dismissed with prejudice as
this is Plaintiffs’ Second Amended Complaint. (See Mot. at 19.) The Court,
however, notes that this is the first time Plaintiffs have had to satisfy the federal
pleading standards of Rules 8 and 9. Accordingly, the Court believes Plaintiffs
should be provided another opportunity to amend their Complaint.
24

and GRANTS Plaintiffs’ Motion to Remove Douglas B. Hackett (Doc. # 25). The
Complaint is DISMISSED WITHOUT PREJUDICE as against all Defendants.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, August 4, 2011.

_____________________________
David Alan Ezra
United States District Judge

Foth et al. v. BAC Home Loans Servicing, LP, et al., Cv. No. 11-00114 DAEBMK; ORDER: (1) GRANTING BAC AND MERS’S MOTION TO DISMISS; (2)
GRANTING CRABTREE OLSEN, P.S.’S JOINDER IN MOTION TO DISMISS;
AND (3) GRANTING PLAINTIFFS’ MOTION TO REMOVE DOUGLAS B.
HACKETT, TRUSTEE FOR THE HAKU PLACE TRUST, AS A PLAINTIFF IN
THE COMPLAINT

25