Koga v. Eastern Savings Bank, FSB

Filing 146

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT EASTERN SAVINGS BANK, FSB'S MOTION FOR SUMMARY JUDGMENT AS TO COUNTS IV OF PLAINTIFF'S FIRST AMENDED COMPLAINT 119 . Signed by JUDGE DERRICK K. WATSON on 08/19/2013. (eps) -- Defendant ESB's Motion for Summary Judgment as to Counts IIV is hereby GRANTED IN PART and DENIED IN PART. The rescission portion of Count I remains. Summary judgment as to Count V is denied as moot because the claim is withdrawn. Th e Motion is GRANTED in all other respects. CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I

WENDELL TATSUMI KOGA,
individually, as attorney in fact for
Ichiyo Eko Koga, and as trustee of the
William Tsugio Koga and Ichiyo Eko
Koga Revocable Living Trust, dated
February 4, 1991,
Plaintiff,
vs.
EASTERN SAVINGS BANK, FSB,

Defendant.
_______________________________
EASTERN SAVINGS BANK, FSB,
Third-Party
Plaintiff,
vs.
WILLIAM J. VROOM; ALII
FINANCIAL CORPORATION;
PRIORITY ONE DEBT RELIEF
SERVICES, LLC; JANICE M. K.
GANITANO; and SONIA M. EVANS,
Third-Party
Defendants.

CIVIL NO. 11-00123 DKW-BMK
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT
EASTERN SAVINGS BANK, FSB’s
MOTION FOR SUMMARY
JUDGMENT AS TO COUNTS I–V
OF PLAINTIFF’S
FIRST AMENDED COMPLAINT

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT
EASTERN SAVINGS BANK, FSB’S MOTION FOR SUMMARY
JUDGMENT AS TO COUNTS I–V OF PLAINTIFF’S
FIRST AMENDED COMPLAINT
INTRODUCTION
Before the Court is Defendant Eastern Savings Bank, FSB’s (“ESB”)
Motion for Summary Judgment as to Counts I–V of Plaintiff’s First Amended
Complaint (“Motion”), filed on May 15, 2013. Plaintiff Wendell Tatsumi Koga
(“Wendell Koga”), individually, as attorney in fact for Ichiyo Eko Koga (“Ms.
Koga”), and as trustee of the William Tsugio Koga and Ichiyo Eko Koga
Revocable Living Trust (collectively, “Plaintiff”) opposed the Motion. A hearing
was held on August 2, 2013. After careful consideration of the supporting and
opposing memoranda, the accompanying documentation, and the relevant legal
authority, the Motion is hereby GRANTED as to Plaintiff’s damages claims and
DENIED as to Plaintiff’s rescission claim under Count I; GRANTED as to Counts
II, III, and IV; and DEEMED MOOT as to Count V because Plaintiff has
withdrawn that claim.
BACKGROUND
This dispute arose out of a loan transaction initiated in 2008 between
ESB and Ms. Koga, in her capacity as trustee of her own revocable living trust. At
the time of the loan transaction, Ms. Koga was 82 years old. ESB’s internal
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records from February 12, 2008 describe Ms. Koga’s representations to ESB as to
the purpose of the loan as follows:
I spoke with Ichiyo Koga and she plans on using the proceeds
to purchase a condo for her and her daughter (Janice Ganitano)
to live in, she also wishes to gift 200k to her grandchild who is
settling on a home in Washington state within the next 30 days.
Ichiyo lives with her daughter who has agreed to go onto our
loan. Her daughter is in foreclosure and will be letting her
home go to sale (but no sale date is set yet). I also asked Ms.
Koga why the appraisal and our bpo agent both noted that the
property was noted as owner occupied. She says that just
within the last 30 days she has moved in to her daughter’s
because she will be renting out her home. She collected a
deposit in December and the tenants will occupy the property in
the middle of February.
Paer Decl. Ex. A (ESB000863).
A few weeks after these representations, on or around March 6, 2008,
there is no dispute that Ms. Koga (in her capacity as trustee) signed a promissory
note, mortgage, assignment of rents and security agreement, and assignment of
leases, rents, and profits. The loan was for $275,000 and was secured by a
mortgage on a home owned by Ms. Koga in Waipahu (the “Property”). Ms. Koga
also signed a universal residential loan application, where the purpose of the loan
was marked as “refinance” and the Property was characterized as “investment.”
Kennedy Decl. Ex. 3 (ESB0233-36, 474-91, 500-03, 581).
Plaintiff selected Title Guaranty Escrow Services, Inc. (“Title
Guaranty”) as the escrow company for the loan transaction. Pursuant to the escrow
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instructions, ESB wired $247,371.84 on March 4, 2008 (followed by an additional
$167.90 on March 7, 2008) to Title Guaranty’s escrow account. On March 11,
2008, Title Guaranty then wired the loan funds to a Bank of America account
belonging to Alii Financial Corporation (“Alii Financial”), which at the time was a
Hawai‘i licensed mortgage broker, and the mortgage broker selected by Ms.
Ganitano. Kennedy Decl. Ex. 6 (0000241); Hrg. Tr. 33:4.
Although Plaintiff does not dispute that ESB paid the loan funds to
Alii Financial’s account per the escrow instructions, Plaintiff disputes the validity
of the escrow instructions and argues that Ms. Koga’s signature on those
instructions was forged, along with her signature on a rental agreement that was
submitted to ESB as part of the loan transaction, and a letter of refinancing
justification, dated February 15, 2008. Josey Decl. at p. 1. However, Plaintiff does
not assert that ESB had any involvement in any forgery of Ms. Koga’s signature on
any documents, nor does Plaintiff contend that ESB had any knowledge of the
alleged forgery at the time of the loan transaction.1
After the loan funds were transferred to Alii Financial, William
Vroom, the then-president of Alii Financial and a Hawai‘i licensed mortgage
solicitor, apparently made some initial loan payments to ESB. The payments from

1

Wendell Koga stated that Ms. Ganitano, his sister and Ms. Koga’s daughter, “kind of
manipulated my mom into co-signing a note with my mom’s house as collateral.” ESB Ex. 13;
Wendell Koga Dep. 119:24–120:4. Plaintiff’s counsel alluded to the same at the hearing. Hrg.
Tr. 25:11–16.

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Vroom and Alii, however, ultimately stopped2 and ESB began sending loan default
notices to Plaintiff at least as early as 2009. William Koga Dep. 151:15–153:9.
Upon inquiry from Mr. Koga, Ms. Ganitano initially said she would “take care of
it,” so Mr. Koga did nothing. Id. at 152:3–18. When ESB sent a foreclosure notice
to Plaintiff in 2011, Mr. Koga, apparently for the first time, inquired into the
details of the loan and sought representation. Id. at 171:7–172:12.
On February 23, 2011, counsel for Plaintiff sent a letter to ESB
purporting to rescind the loan, asserting that rescission was proper because ESB
never made the material disclosures it was required to make under the Truth in
Lending Act (“TILA”). Specifically, Plaintiff claimed that ESB did not provide
notice of the right to cancel. Paer Decl. Ex. B. A few days later, on February 28,
2011, Plaintiff initiated this action.
On March 15, 2013, Plaintiff filed its First Amended Complaint
(“Complaint”), asserting six counts: (Count I) violations of TILA; (Count II)
unfair and deceptive acts or practices (“UDAP”) under Chapter 480 of the Hawaii
Revised Statutes; (Count III) breach of contract; (Count IV) intentional and/or
negligent misrepresentation; (Count V) unlicensed brokering; and (Count VI) Ms.

2

In November 2008, Mr. Vroom was convicted in California of embezzlement, identify theft,
and offering false documents to a government office. He is presently serving a prison sentence
in California. Complaint Ex. D.

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Koga’s incompetence to enter into the loan contract. ESB moves for summary
judgment on Counts I-V of the Complaint.
STANDARD OF REVIEW
The purpose of summary judgment is to identify and dispose of
factually unsupported claims and defenses. See Celotex Corp. v. Catrett, 477 U.S.
317, 323–24 (1986). A party is entitled to summary judgment “if the movant
shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A fact is
‘material’ when, under the governing substantive law, it could affect the outcome
of the case. A ‘genuine issue’ of material fact arises if ‘the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.’” Thrifty Oil Co. v.
Bank of Am. Nat’l Trust & Sav. Ass’n, 322 F.3d 1039, 1046 (9th Cir. 2003)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
When evaluating a motion for summary judgment, the court must
construe all evidence and reasonable inferences drawn therefrom in the light most
favorable to the nonmoving party. See T.W. Elec. Serv., Inc. v. Pac. Elec.
Contractors Ass’n, 809 F.2d 626, 630-31 (9th Cir. 1987). Thus, the moving party
has the burden of persuading the court as to the absence of a genuine issue of
material fact. Celotex, 477 U.S. at 323. If the moving party satisfies its burden,
the nonmoving party must set forth “‘significant probative evidence’” in support of
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its position. T.W. Elec. Serv., 809 F.2d at 630 (quoting First Nat’l Bank v. Cities
Serv. Co., 391 U.S. 253, 290 (1968)). “A party asserting that a fact cannot be or is
genuinely disputed must support the assertion,” and can do so by either “citing to
particular parts of materials in the record” or by “showing that the materials cited
do not establish the absence or presence of a genuine dispute, or that an adverse
party cannot produce admissible evidence to support the fact.” Fed. R. Civ. P.
56(c)(1).
DISCUSSION
I.

Count I: TILA Claim
ESB moves for summary judgment on Count I based on the

contention that TILA does not apply to the loan transaction between ESB and
Koga because the transaction was of a commercial nature. Alternatively, ESB
argues that even if TILA applies, summary judgment should be entered for ESB, at
least as to Plaintiff’s request for damages under Count I, because Plaintiff is barred
by the statute of limitations from obtaining damages on the TILA claim. The
Court concludes that TILA does apply to the loan transaction at issue here.
However, the statute of limitations expired for any claim of damages under TILA.
Accordingly, summary judgment for ESB is proper on Plaintiff’s claims for
damages, but is denied for Plaintiff’s rescission claim under TILA.

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A.

The Loan is a Consumer Transaction
ESB argues that the loan transaction was primarily commercial in

nature because Ms. Koga stated and evidenced an intention to rent the Property and
because the Uniform Residential Loan Application characterized the Property as an
“investment.” However, ESB was plainly aware from the outset of the transaction
that Ms. Koga’s primary purpose for the loan had nothing to with any commercial
activity. There is no dispute that Ms. Koga told ESB that the purpose of the loan
was to “us[e] the proceeds to purchase a condo for her and her daughter (Janice
Ganitano) to live in.” Paer Decl. Ex. A (ESB000863, part of ESB’s internal
records of the loan transaction). ESB’s own representative, Linda Cashman, stated
her understanding of the loan as follows:
[Ms. Koga] was an 82-year-old woman, who lived by herself,
and was interested in downsizing, moving out of the house that
she had lived in by herself, and moving in with her daughter . . .
[t]o buy a small condo and to help her daughter, who was in a
financial hardship . . . . So, her daughter was in a foreclosure
situation. She wanted to help her daughter. She wanted to help
her grand -- a grandchild, providing them some cash. She
wanted to downsize, buy a small condo for $100,000. And I
believe there were some small medical -- some small debts of
her deceased husband that she intended to pay off.
Cashman Dep. 13:12-24. Nothing in these representations indicated a “[c]redit
transaction[] involving extensions of credit primarily for business, commercial, or
agricultural purposes,” that would render TILA inapplicable. 15 U.S.C. § 1603.
To the contrary, the Court concludes that ESB itself understood the loan to be
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“primarily for personal, family, or household purposes.” 15 U.S.C. § 1602(i).3
Even assuming, without finding, that Ms. Koga intended to rent the Property, this
fact would not alter the undisputed purpose that Ms. Koga had in mind for the
funds—to assist her daughter and grandchild, buy a smaller owner-occupied
residential property, and pay off the medical bills of her deceased husband.
ESB has had a full and fair opportunity to set forth its best evidence
on the nature of the loan. Although Plaintiff has not filed a cross-motion for
summary judgment at this time, the Court determines, as a matter of law, that there
is no genuine issue of material fact that the loan by ESB to Ms. Koga was a
consumer loan for TILA purposes. Gospel Missions of America v. City of Los
Angeles, 328 F.3d 548, 553 (9th Cir. 2003) (quoting Cool Fuel, Inc. v. Connett,
685 F.2d 309, 312 (9th Cir. 1982) (“Even when there has been no cross-motion for

3

In its Motion, ESB also contends that TILA cannot apply because Ms. Koga’s trust is the
borrowing party to the transaction. ESB contends that Ms. Koga’s revocable living trust cannot
be considered a “consumer” for TILA purposes because it is not a natural person as defined by
the statute. 15 U.S.C. § 1602(i) (defining a consumer transaction as “as one in which the party to
whom credit is offered or extended is a natural person, and the money, property, or services
which are the subject of the transaction are primarily for personal, family, or household
purposes”). As ESB notes, however, this very question was carefully analyzed by Judge Samuel
King in Amonette v. Indymac Bank, FSB, 515 F. Supp. 2d 1176 (D. Haw. 2007). The Court
agrees with and adopts here the interpretation and holding from Amonette that ownership through
a revocable living trust does not disqualify the owner from TILA protection. Id. at 1181-87.
This is particularly so given the requirement to construe TILA liberally in favor of the consumer,
Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118 (9th Cir. 2009), and after considering
Ms. Koga’s stated purpose for this particular transaction, as discussed above. See Bloom v. I.C.
System, Inc., 972 F.2d 1067, 1068 (9th Cir. 1992) (“When classifying a loan [under the
Consumer Credit Protection Act, of which TILA is a part], courts typically ‘examine the
transaction as a whole,’ paying particular attention to ‘the purpose for which [the] credit was
extended in order to determine whether the transaction was primarily consumer or commercial in
nature.’ ”) (quoting Tower v. Moss, 625 F.2d 1161, 1166 (5th Cir. 1980)) (second brackets in
original).

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summary judgment, a district court may enter summary judgment sua sponte
against a moving party if the losing party has had a ‘full and fair opportunity to
ventilate the issues involved in the matter.’”). Consequently, TILA applies to this
consumer loan transaction.
B.

Plaintiff’s Claim for Damages Related to Failure to Disclose by
ESB is Time-Barred
Although the Court concludes that TILA is applicable to the loan

transaction, ESB is entitled to summary judgment on Plaintiff’s claims for
damages. Those claims are governed by a 1-year statute of limitations that expired
long before Plaintiff initiated this lawsuit.
Damages (both statutory and actual damages) are recoverable under
TILA for violations of disclosure requirements. 15 U.S.C. § 1640(a). However,
section 1640(e) imposes a 1-year statute of limitations on claims for damages.
That 1-year period typically “runs from the date of consummation of the
transaction . . . .” King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986).
Further, the 1-year period applies to both actual and statutory damages. See Vietor
v. Commonwealth Land Title, 2010 WL 545856, at *3 (N.D. Cal. Feb. 11, 2010);
In re Wentz, 393 B.R. 545, 553 (S.D. Ohio 2008).
There is no dispute that the loan transaction here was consummated
on or around March 6, 2008 and the Complaint in this action was not filed until
almost 3 years later, on February 28, 2011. Plaintiff’s only argument against the
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applicability of the 1-year statute of limitations for damages is that the limitations
period should be equitably tolled. “[T]he doctrine of equitable tolling may, in the
appropriate circumstances, suspend the limitations period until the borrower
discovers or had reasonable opportunity to discover the fraud or nondisclosures
that form the basis of the TILA action.” King, 784 F.2d at 915. Here, however,
even if Ms. Koga cannot be considered to have understood any TILA violations at
the time of the transaction, Wendell Koga received default notices from ESB
beginning in 2009, more than a year before the Complaint was filed in this action.
Wendell Koga Dep. 151:15–153:9. Once ESB sent the default notices, there is no
dispute that Plaintiff discovered or could have reasonably discovered any potential
TILA violations; yet Mr. Koga did nothing other than rely on the representations of
Ms. Ganitano that she would “take care of it.” This level of diligence prevents the
Court from applying the doctrine of equitable tolling beyond 2009.4
ESB is entitled to summary judgment on Plaintiff’s claims for
damages under TILA.
C.

Plaintiff’s Rescission claim under TILA
ESB’s Motion does not address Plaintiff’s claim for rescission under

TILA, other than through ESB’s overarching argument that TILA does not apply

4

Indeed, at oral argument, Plaintiff’s counsel conceded that the facts in support of equitable
tolling were not particularly compelling. Hrg. Tr. 33:17–24.

11

because of the commercial nature of the loan.5 The Court, however, has already
disposed of this argument and concluded that TILA does apply because this is
primarily a consumer transaction. Consequently, ESB is not entitled to summary
judgment on Plaintiff’s TILA claim to rescind the loan transaction.6
Going forward, and in considering the circumstances surrounding the
loan transaction, the Court instructs the parties that the equities may warrant that
Plaintiff repay the proceeds of the loan as a condition of rescission. “[W]here [(as
here)] the creditor disputes the consumer’s asserted ground for rescission,
rescission is not accomplished until a court determines that the consumer had the
right to rescind.” Causey v. U.S. Bank Nat’l. Ass’n, 464 Fed. Appx. 634, 635 (9th
Cir. 2011). That determination is subject to the Court’s equitable discretion to
consider all the circumstances, “including the nature of the violations and the
borrower’s ability to repay the proceeds.” Yamamoto v. Bank of New York, 329
F.3d 1167, 1173 (9th Cir. 2003). One prerequisite to a determination of a right to
rescind may be to require tender by the borrower of the proceeds received from the
lender. Id. at 1171; see, e.g., LaGrone v. Johnson, 534 F.2d 1360, 1362 (9th Cir.

5

At the hearing, ESB’s counsel conceded that the rescission claim under TILA was not timebarred under the 3-year statute of limitations applicable to the request to rescind (as opposed to
the 1-year limitations period for the damages claim). Hrg. Tr. 11:22–12:1.

6

In its Reply brief, ESB argues for the first time that Plaintiff should be required to plead the
ability to tender the proceeds of the loan as a condition of rescission. The Court declines to
consider this argument for purposes of this Motion. See LR7.4 (“Any argument raised for the
first time in the reply shall be disregarded.”).

12

1976) (holding that rescission should be conditioned on repayment by the borrower
because the TILA violations were not particularly egregious and because the
equities favored the creditor).
The Court notes that in a February 23, 2011 letter to ESB, Plaintiff’s
counsel offered “to tender the appropriate rescission amount upon the creditor’s
performance of its statutory duties under the Truth in Lending Act.” Complaint
Ex. B. At oral argument, Plaintiff reiterated its willingness to tender the proceeds
as part of any rescission. Hrg. Tr. 15:16–21. Assuming, without deciding, that
these representations sufficiently establish Plaintiff’s ability to repay the loan
proceeds, rescission for the Plaintiff may be appropriate when (and if) that question
is brought before the Court.
II.

Count II: UDAP claim
ESB moves for summary judgment on Count II based on the

contention that TILA preempts the portions of the UDAP claim that merely
reassert allegations of TILA violations. ESB further posits that summary judgment
on Count II is proper on any allegations not preempted by TILA because Plaintiff
has provided insufficient evidentiary support for those allegations. The Court
concludes that Plaintiff’s allegations of TILA violations under Count I preempt any
allegations of TILA violations for Count II. Further, Plaintiff has failed to satisfy
its burden as a non-moving party to affirmatively provide evidence of a genuine
13

issue of material fact as to the remaining allegations included in Count II.
Additionally, summary judgment is proper on the UDAP claim because of the
disconnect in causation between any alleged act or omission by ESB and an injury
to Plaintiff that is fairly traceable to ESB’s conduct.
The substantive allegations of Plaintiff’s UDAP claim appear in
paragraphs 36–40 of the Complaint. At the hearing and in its papers, Plaintiff’s
counsel conceded that any allegations of TILA violations in Count II (i.e.,
paragraph 36) are preempted. Hrg. Tr. 20:1–4; see Enriquez v. Countrywide Home
Loans, FSB, 814 F. Supp. 2d 1042, 1063 (D. Haw. 2011) (“TILA does preempt
UDAP claims that are based on alleged TILA violations.”).
It is also undisputed that Plaintiff has not provided any evidentiary
support for paragraph 37 of the Complaint related to the terms of the loan.
Wendell Koga Dep. 139:2–12. Thus, Plaintiff has failed to satisfy its burden as a
non-moving party to preclude summary judgment for these allegations. Fed. R.
Civ. P. 56(c)(1); see Celotex, 477 U.S. at 324. Moreover, Plaintiff has failed to
show how any misrepresentation as to the terms of the loan resulted in any injury
to Plaintiff. To recover under UDAP, “[a]ny injury must be fairly traceable to the
defendant’s actions.” In re Kekauoha-Alisa, 674 F.3d 1083, 1092 (9th Cir. 2012).
Plaintiff does not contend that it was injured because of the allegedly unfair terms
of the loan. Consequently, the required causal link for a successful UDAP claim is
14

absent here. See Haw. Med. Ass’n v. Haw. Med. Serv. Ass’n, 113 Hawai‘i 77, 114,
148 P.3d 1179, 1216 (2006) (recounting that one of the “three elements essential
to recovery under [UDAP] . . . [is] injury to the plaintiff’s business or property
resulting from [a UDAP] violation” (emphasis added)).
The remainder of the UDAP claim (i.e., paragraphs 38–40) alleges
that ESB knew or should have known that some of the loan documents contained
the forged signatures of Ms. Koga and that ESB knew or should have known that
Ms. Koga was not competent to enter into the loan transaction. It is undisputed
that ESB had no knowledge of any potentially forged loan documents. Thomas J.
Kennedy Decl. ¶ 10. Moreover, Plaintiff has failed to satisfy its burden to
affirmatively set forth some evidence that ESB knew or should have known about
Ms. Koga’s mental condition. Wendell Koga Dep. 121:9–22. Thus, Plaintiff fails
to satisfy its burden as a non-moving party to preclude summary judgment for
these allegations as well. Fed. R. Civ. P. 56(c)(1); see Celotex, 477 U.S. at 324.
The Court therefore grants summary judgment to ESB in full as to
Count II.
III.

Count III: Breach of Contract
ESB moves for summary judgment on Count III based on the

assertion that ESB had no obligation to pay the loan funds directly to Ms. Koga,
and ESB only transferred the money to Title Guaranty pursuant to the escrow
15

instructions. Count III only states that “Defendant has breached the original loan
agreement by failing to pay the proceeds of the loan to Eko.” Complaint ¶ 42. The
Court concludes that Plaintiff has failed to point to any contractual provision
requiring ESB to pay the loan proceeds directly to Plaintiff, as opposed to
depositing them in Title Guaranty’s account pursuant to the escrow instructions.7
Plaintiff has provided no evidence of ESB’s knowledge (or putative knowledge)
that the escrow instructions may have contained a forged signature.
The Court therefore grants summary judgment for ESB on Count III.
IV.

Count IV: Intentional/Negligent Misrepresentation
ESB moves for summary judgment on Count IV because Plaintiff’s

factual allegations of Ms. Koga’s incompetence are inconsistent with a showing of
reliance by Ms. Koga necessary to support a claim of intentional or negligent
misrepresentation. The elements of intentional misrepresentation or fraud under
Hawai‘i law are as follows: “(1) false representations were made by defendants,
(2) with knowledge of their falsity (or without knowledge of their truth or falsity),
(3) in contemplation of plaintiff’s reliance upon these false representations, and
(4) plaintiff did rely upon them.” Shoppe v. Gucci America, Inc., 94 Hawai‘i 368,

7

Plaintiff contends that the promissory note, which states that the funds will be loaned to Ms.
Koga as trustee, is evidence of a requirement to pay the loan directly to Ms. Koga. ESB Ex. 3
(ESB0233–36). However, Plaintiff points to nothing requiring that a payee to a promissory note
be the same individual or entity that receives the loan amount via the escrow instructions. To the
contrary, it is common for escrow instructions to direct that loan proceeds be paid to someone
other than a party to the note (e.g., the seller of a home for which the money has been borrowed).

16

386, 14 P.3d 1049, 1067 (2000). The elements of negligent misrepresentation
under Hawai‘i law are as follows: “(1) false information [was] supplied as a result
of the failure to exercise reasonable care or competence in communicating the
information; (2) the person for whose benefit the information is supplied suffered
the loss; and (3) the recipient relies upon the misrepresentation.” Smallwood v.
Ncsoft Corp., 730 F. Supp. 2d 1213, 1231 (D. Haw. 2010). Both claims have an
essential element of reliance.
Plaintiff alleges that “[a]t all times surrounding the making of this
loan, and at all times thereafter, Eko was incompetent to enter into the subject
transaction and incapable of understanding the terms of her loan and making
reasonable decisions about the loan . . . .” Complaint ¶ 14. To further this
allegation, Plaintiff sought out an expert opinion to establish that Ms. Koga lacked
the sufficient mental condition “at the time she signed the mortgage document.”
ESB Ex. 13. Simultaneously, Plaintiff tries to show that Ms. Koga was competent
and relied on alleged misrepresentations made by ESB. However, the only support
Plaintiff points to for this showing is the loan documents and the declaration of
Charles Wheeler, which simply analyzed the loan terms. Wheeler Decl. at pp. 1-2.
At the same time, Wendell Koga affirmatively stated that there was no evidence of
his mother’s reliance on any misrepresentations. Wendell Koga Dep. 129:1–4.
Consequently, Plaintiff has failed to set forth probative evidence to counter what
17

ESB has provided to show a lack of reliance.8 As a matter of law, because Plaintiff
has not established reliance, ESB is entitled to summary judgment on Plaintiff’s
claims for intentional and negligent misrepresentation under Count III.9
V.

Count V: Unlicensed Brokering Claim
In the Memorandum in Opposition to the Motion, Plaintiff withdrew

this claim. Consequently, the Court denies summary judgment on this claim as
moot. Count V is no longer a part of this action.
CONCLUSION
Defendant ESB’s Motion for Summary Judgment as to Counts I–IV is
hereby GRANTED IN PART and DENIED IN PART. The rescission portion of

8

In reaching this conclusion, the Court is not making any determination as to whether Ms. Koga
was in fact competent to enter into the loan transaction. The Court’s determination on Count III
is based only on Plaintiff’s failure to provide evidence to counter ESB’s evidence that Ms. Koga
did not rely on any alleged misrepresentations.
9

Additionally, as laid out in the Memorandum in Opposition, the alleged misrepresentations by
ESB all relate to the terms of the loan or ESB’s failure to make required disclosures. See Mem.
in Opp. at 24-26 (listing misrepresentations related to (1) whether the loan was a fixed rate or
balloon type; (2) ESB’s failure to inform Ms. Koga of her right to rescind; (3) the high interest
rate for a consumer loan; and (4) the change in Ms. Ganitano’s status from co-borrower to
guarantor). The Court notes that claims of ESB’s failure to make required disclosures are
preempted by TILA, as discussed above. Kajitani v. Downey Sav. & Loan Ass’n, F.A., 647 F.
Supp. 2d 1208, 1220 (D. Haw. 2008). The Court further notes (also as discussed above) that
Plaintiff has not established (or even argued) any injury that came about because of the alleged
misrepresentations in the loan terms. 

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Count I remains. Summary judgment as to Count V is denied as moot because the
claim is withdrawn. The Motion is GRANTED in all other respects.
IT IS SO ORDERED.
DATED: HONOLULU, HAWAI‘I, August 19, 2013.

Derrick K. Watson
United States District Judge

Koga v. Eastern Savings Bank; CV 11-00123 DKW/BMK; ORDER GRANTING
IN PART AND DENYING IN PART DEFENDANT EASTERN SAVINGS
BANK, FSB’S MOTION FOR SUMMARY JUDGMENT AS TO COUNTS I–V
OF PLAINTIFF’S FIRST AMENDED COMPLAINT
19