Northern Trust, NA v. Wolfe

Filing 35

ORDER GRANTING 17 NORTHERN TRUST'S MOTION TO DISMISS DEFENDANT KENNETH I. WOLFE'S COUNTERCLAIM AND DENYING 20 NORTHERN TRUST'S MOTION FOR SUMMARY JUDGMENT AS TO THE COMPLAINT FILED HEREIN ON AUGUST 30, 2011, INTERLOCUTORY DECREE OF FORECLOSURE, AND ORDER OF SALE: "To the extent that the Court has dismissed some of the counts in the Counterclaim without prejudice, the Court GRANTS Wolfe leave to submit a motion to the magistrate judge seeking permission to file an amend ed counterclaim addressing those claims. This Court CAUTIONS Wolfe that, if he fails to file his motion by June 28, 2012, the claims which this Court has dismissed without prejudice will be automatically dismissed with prejudice. Further, if Wolfe� 39;s amended counterclaim does not address the deficiencies identified in this Order, the claims which this Court has dismissed without prejudice may be dismissed with prejudice. IT IS SO ORDERED." Signed by JUDGE LESLIE E. KOBAYASHI on May 31, 2012. (bbb, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
NORTHERN TRUST, NA,

)
)
Plaintiff,
)
)
vs.
)
)
KENNETH I. WOLFE,
)
)
)
Defendant.
_____________________________ )

CIVIL NO. 11-00531 LEK-BMK

ORDER GRANTING NORTHERN TRUST’S MOTION TO DISMISS
DEFENDANT KENNETH I. WOLFE’S COUNTERCLAIM AND DENYING
NORTHERN TRUST’S MOTION FOR SUMMARY JUDGMENT AS TO
THE COMPLAINT FILED HEREIN ON AUGUST 30, 2011,
INTERLOCUTORY DECREE OF FORECLOSURE, AND ORDER OF SALE
Before the Court are: Plaintiff/Counterclaim Defendant
Northern Trust, NA’s (“Northern Trust”) Motion to Dismiss
Defendant Kenneth I. Wolfe’s Counterclaim (“Motion to Dismiss”),
filed on December 7, 2011; and Northern Trust’s Motion for
Summary Judgment as to the Complaint Filed Herein on August 30,
2011, Interlocutory Decree of Foreclosure, and Order of Sale
(“Motion for Summary Judgment”), filed on January 26, 2011.
Defendant/Counterclaimant Kenneth I. Wolfe (“Wolfe”) filed a
memorandum in opposition to each motion on April 16, 2012.
Northern Trust filed a reply in support of each motion on
April 23, 2012.
2012.

These matters came on for hearing on May 7,

Appearing on behalf of Northern Trust were Jonathan Lai,

Esq., and Michael Bird, Esq., and appearing on behalf of Wolfe

was John Harris Paer, Esq.

After careful consideration of the

motions, supporting and opposing memoranda, and the arguments of
counsel, Norther Trust’s Motion to Dismiss is HEREBY GRANTED and
Northern Trust’s Motion for Summary Judgment is HEREBY DENIED for
the reasons set forth below.
BACKGROUND
Northern Trust filed the instant action on August 30,
2011 based on diversity jurisdiction.

[Complaint at ¶ 3.]

The

Complaint seeks foreclosure of property securing a loan that
Northern Trust made to Wolfe.
Wolfe filed his Answer to Complaint (“Answer”), with a
Setoff and Counterclaim (“Counterclaim”), on November 17, 2011.
[Dkt. no. 12.]

The Counterclaim asserts the following claims:

unfair and deceptive acts and practices (“UDAP”) in violation of
Haw. Rev. Stat. Chapter 480 (“Count I”); unconscionability
(“Count II”); fraud and misrepresentation (“Count III”);
negligence (“Count IV”); breach of contract (“Count V”);
violation of the duty of good faith and fair dealing (“Count
VI”); and promissory estoppel (“Count VII”).
I.

Motion for Summary Judgment
Wolfe executed a Promissory Note in favor of Northern

Trust in the principal amount of $1,080,000.00, at an interest
rate of 7.000% (“the Note”).

The date of the Note is August 22,

2

2007.1

[Motion for Summary Judgment, Aff. of Shawn T. Roland

(“Roland Aff.”), Exh. A at 1.]

The Note states, in pertinent

part:
PAYMENT. I will pay this loan in one principal
payment of $1,080,000.00 plus interest on
August 22, 2010. This payment due on August 22,
2010, will be for all principal and all accrued
interest not yet paid. In addition, I will pay
regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning
September 22, 2007, with all subsequent interest
payments to be due on the same day of each month
after that. . . .
[Id.]

The Note is secured by a Mortgage on Maniniowali Phase II,

Lot 17, Kailua Kona, Hawai`i (“the Property”).

The Mortgage was

recorded in the Bureau of Conveyances on September 7, 2007 as
Document Number 2007-159365.

[Roland Aff., Exh. B at 1.]

Northern Trust presented an affidavit from Shawn T.
Roland, the Second Vice President for “The Northern Trust Company
as successor by merger to Northern Trust, NA (‘Northern Trust
[Company]’).”

[Roland Aff. at ¶ 1.]

Roland states that Wolfe is

in default under the terms of the Note and Mortgage because Wolfe
has refused to make his required full payment, in spite of “due
and proper demand made upon Defendant Wolfe for payment of the
amounts due and owing to Northern Trust [Company]”
5.]

[Id. at ¶¶ 4-

Roland certifies that Northern Trust Company is still the

1

Wolfe, however, alleges that the date of the transaction
at issue in this case was “[o]n or about August 29, 2007[.]”
[Mem. in Opp. to Motion for Summary Judgment, Decl. of Kenneth I.
Wolfe (“Def. Decl.”) at ¶ 2.]
3

holder of the Note and Mortgage and that, as of January 25, 2012,
Wolfe owed Northern Trust Company the following amounts:
Principal Balance:
Interest to 08/30/11:
Interest from 08/31/11 to 01/25/12:
Accumulated Late Charges:
TOTAL:

$ 1,069,079.32
$
59,311.93438
$
34,444.857
$
27.63
$ 1,162,863.471

[Id. at ¶ 7, Exh. C (Pay-Off Statement dated 1/25/12).]

Interest

until August 30, 2011 accrued at 5.000% per annum, resulting in a
per diem rate of $146.4492219.

Effective August 31, 2011, the

interest rate was 8.000% per annum, resulting in a per diem rate
of $234.3187551.

In addition, Northern Trust Company also

continues to accrue attorneys’ fees and costs, which are also
secured by the Note and Mortgage.

[Roland Aff. at ¶¶ 8-9.]

Roland states that, under the terms of the Note and Mortgage,
Northern Trust Company is entitled to foreclose upon its first
mortgage lien.

[Id. at ¶ 11.]

Northern Trust filed a First Amended Notice of Pendency
of Action (“Notice”) on August 31, 2011.

[Dkt. no. 5.]

The

Notice was recorded in the Bureau of Conveyances on September 1,
2011 as Document Number 2011-140442.

[Motion for Summary

Judgment, Decl. of Michael C. Bird (“Bird Decl.”) at ¶ 8.]
Northern Trust asserts that all parties to the foreclosure of the
Mortgage have been named and served.

[Id. at ¶ 9.]

In the Motion for Summary Judgment, Northern Trust
argues that it served the Complaint on Wolfe via certified mail,
4

postage prepaid, return receipt requested to Wolfe’s address in
New York, and there is no record that Wolfe is a servicemember to
whom the Servicemembers Civil Relief Act of 2003 applies.

[Mem.

in Supp. of Motion for Summary Judgment at 6-7 (citing Bird
Decl., Exhs. 2-3).]

Further, Northern Trust does not need to

name any other parties, and therefore,
any and all other or further encumbrances or
purchasers of the Mortgaged Property, or any part
thereof, whose interest arises by, through and
under Defendant Wolf, and from and after the
recording of Northern Trust’s First Amended NOPA
should be perpetually barred from all rights,
title, and interest in the subject property, or
any part thereof.
[Id. at 8 (citing Haw. Rev. Stat. § 634-51).]
Northern Trust argues that Wolfe’s failure to make the
full payment required under the Note and Mortgage, and Wolfe’s
failure to respond to due and proper demand for the payment of
the amounts owed, constitute default under the Note and Mortgage.
[Id. at 8-9.]

Northern Trust argues that it is entitled to

foreclose upon its first mortgage lien and its interest in the
Property and that it is entitled to its reasonable attorneys’
fees and costs associated with the foreclosure.

[Id. at 9

(citing Roland Aff., Exh. A (Note); Exh B. (Mortgage) at pg. 4,
¶ 16 (“Payment Default”), pg. 4, ¶ 18 (“Break Other Promises”),
pg. 5 ¶ 14 (“Judicial Foreclosure”), pg. 5 ¶ 18 (“Other
Remedies”),

pg. 5 ¶ 19 (“Sale of the Property”), pg. 6 ¶ 3

(“Attorneys’ Fees; Expenses”)).]
5

Northern Trust argues that Haw. Rev. Stat. §§ 667-1
through 667-4 provide for judicial foreclosure of a mortgage and,
based on the pleadings and submissions with the Motion for
Summary Judgment, Northern Trust has an enforceable claim.
Northern Trust also argues that there are no genuine issues of
material fact, and therefore it is entitled to judgment as a
matter of law.

In addition, Northern Trust requests the entry of

final judgment in its favor on the Complaint pursuant to Fed. R.
Civ. P. 54(b), and the entry of a separate judgment on the
Counterclaim pursuant to Fed. R. Civ. P. 58.
A.

[Id. at 10.]

Wolfe’s Opposition
In his memorandum in opposition, Wolfe states that

Kurt Nielsen (“Nielsen”), the loan broker for the transaction at
issue, led Wolfe to believe that Nielsen was a dual agent,
representing both Northern Trust and Wolfe.

Nielsen prepared

Wolfe’s loan application and other documents necessary for
Wolfe’s application and the closing of the transaction.
Decl. at ¶ 3.]

[Def.

Nielsen also led Wolfe to believe that, when the

loan matured, Wolfe would be able to obtain a “permanent
financing” arrangement from Northern Trust without Wolfe having
to qualify for a loan again.

According to Wolfe, were it not for

that understanding, he would have found a lender who could
guarantee permanent financing.

Thus, Wolfe entered into the loan

in reliance on those representations.

6

[Id. at ¶¶ 5-6.]

Wolfe made all monthly payments as they became due,
until the final payment became due.

When the loan became due in

August 2010, Wolfe offered to continue making the mortgage
payments as he had been doing.

According to Wolfe, Northern

Trust told him to send in his financial documents and that they
would work out a new loan or other permanent financing plan.
Northern Trust said that it did not intend to foreclose.

[Id. at

¶¶ 9-12.]
Northern Trust subsequently informed Wolfe that the
loan to value ratio had changed and that Wolfe would have to
either pay $300,000 or offer new collateral for that amount to
obtain a permanent financing arrangement.

Wolfe protested, but

Northern Trust refused to honor its prior representations that it
would arrange for permanent financing.

All Northern Trust

offered was a loan extension in exchange for one percent of the
loan amount.

Wolfe objected to the amount, and Northern Trust

never granted a loan extension or other permanent financing.
[Id. at ¶¶ 13-15.]
According to Wolfe, at the time of the permanent
financing dispute, the Property was worth approximately
$1,000,000.00.

The lot next to the Property, which Wolfe states

was inferior to the Property, sold for $1,000,000.00.

Wolfe

offered to either give Northern Trust a deed in lieu of a
foreclosure or allow a short sale, but Northern Trust refused.

7

[Id. at ¶¶ 17-19.]

Northern Trust also refused to accept

continuing payments on the Mortgage.

[Id. at ¶ 21.]

After September 2010, Wolfe did not hear from Northern
Trust until Wolfe received service of a notice of non-judicial
foreclosure in early May 2011.

Wolfe did not oppose the non-

judicial foreclosure and reiterated his offer to allow a short
sale or to grant a deed in lieu of foreclosure, but Northern
Trust continued to refuse.

[Id. at ¶¶ 22-23.]

Wolfe asserts that he has suffered damages because of
Northern Trust’s actions.
and a possible deficiency.

He is faced with losing the Property
In addition, he has incurred

attorneys’ fees and various charges, such as postage and travel
costs, in responding to Wolfe’s actions.

[Id. at ¶¶ 24-25.]

Wolfe argues that the Court should deny the Motion for
Summary Judgment because of the claims in the Counterclaim.

As

to the UDAP claim, Wolfe argues that the following
representations by Northern Trust created a likelihood of
confusion for a reasonable consumer: 1) in 2007, Northern Trust
represented that Wolfe could obtain permanent financing without
having to re-qualify; 2) in 2010, Northern Trust represented that
it did not intend to foreclose; and 3) Northern Trust proceeded
toward foreclosure while simultaneously evaluating Wolfe’s
request for modification.

Northern Trust failed to honor its

representations, which were material, and its actions constituted

8

a “bait and switch”.
Judgment at 5-6.]

[Mem. in Opp. to Motion for Summary

Wolfe argues that allegations of a Chapter 480

violation similar to Count I of his Counterclaim were held to be
sufficient to withstand motions to dismiss and motions for
summary judgment in Tedder v. Deutsche Bank National Trust Co.,
Civ. No. 11-00083 LEK-KSC, 2012 WL 1028125 (D. Hawai`i Mar. 23,
2012), and Skaggs v. HSBC Bank, N.A., Civ. No. 10-00247 JMS-KSC,
2010 WL 5390127 (D. Hawai`i Dec. 22, 2010), and 2011 WL 3861373
(D. Hawai`i Aug. 31, 2011).

Wolfe argues that Count I is viable

and sufficiently pled.
Wolfe argues that, in light of Northern Trust’s
violations of § 480-2, the Note and Mortgage are void pursuant to
Haw. Rev. Stat. § 480-12.

Wolfe emphasizes that his UDAP claim

is not based on fraud, but merely on the confusion created by
Northern Trust’s actions.

Wolfe notes that a void obligation

cannot be revived by an assignment.

Wolfe urges this Court to

deny the Motion for Summary Judgment because Northern Trust
cannot foreclose upon a void obligation.

[Id. at 7-10.]

As to the unconscionability claim, Wolfe states that
this is a defense.

The unconscionable term was the false promise

to provide Wolfe with permanent financing without requalification.

[Id. at 11.]

As to the fraud and misrepresentation claim, the
fraudulent misrepresentations were the 2007 promise of permanent

9

financing without re-qualification and the 2010 representation
that Northern Trust was not going to foreclose.

Wolfe argues

that he justifiably relied on these representations and therefore
his claims should survive a motion to dismiss or a motion for
summary judgment as in Tedder and Skaggs.

[Id.]

As to the negligence claim, Wolfe asserts that Northern
Trust owed him a duty to be truthful when making representations
to solicit his business.

Wolfe argues that, when a bank makes

false promises to its customers, it exceeds its role as a mere
money lender.

Northern Trust put him in an unreasonably risky

position in which he faces losing the Property and a possible
deficiency judgment.

Wolfe emphasizes that he is not asserting a

claim based on fiduciary duty.

He also argues that courts have

recognized a negligence claim based on a bank’s failure to follow
Home Affordable Modification Program (“HAMP”) guidelines.

[Id.

at 11-12 (citing Speleos v. BAC Home Loans Servicing, LP, 755 F.
Supp. 2d 304, 310-11 (D. Mass 2010)).2]

Wolfe therefore argues

that he has asserted a valid defense to the foreclosure.
The breach of contract claim is based upon Northern
Trust’s promise that Wolfe would be able to obtain permanent

2

Wolfe also cites two decisions without a Westlaw or Lexis
citation: In re Cruz, Case No. 10-43793; and Cruz v. Hacienda
Associates, LLC and Wells Fargo Bank, Adv. Pro. 11-04006 (Bankr.
Mass. Jan. 26, 2011). [Mem. in Opp. to Motion for Summary
Judgment at 12.] Insofar as Wolfe has neither provided publicly
available citations for these cases nor submitted copies of these
orders, this Court will not consider them.
10

financing without additional qualification requirements.
Northern Trust breached that agreement, and the breach
constitutes a defense to the Motion for Summary Judgment.

[Id.

at 12-13.]
Wolfe argues that Northern Trust’s actions were not in
good faith, and he contends that there is a special relationship
in this case because of the public interest and the fact that the
loan agreement was a contract of adhesion.

Wolfe argues that the

Ninth Circuit has recognized, albeit in the context of a Truthin-Lending Act (“TILA”) violation, that all consumers are
inherently at a disadvantage in loan and credit transactions.
Wolfe contends that this principle applies even when the case
does not involve a TILA violation.

[Id. at 13 (citing Semar v.

Platte Valley Fed. Savings and Loan Ass’n, 791 F.2d 699, 705 (9th
Cir. 1986)).]

Wolfe contends that Northern Trust’s breach of the

covenant of good faith and fair dealing is a defense to the
Motion for Summary Judgment.

[Id. at 13-14.]

The promissory estoppel claim is based on Northern
Trust’s oral promises of that it would grant permanent financing
and that it would not foreclose.

Wolfe alleges that he

justifiably relied on those promises to his detriment.

Wolfe

argues that the consideration was that he would not have entered
into the transaction but for the promise of permanent financing
without additional qualification requirements.

11

Wolfe argues that

his promissory estoppel claim is a defense to the Motion for
Summary Judgment.

[Id. at 14.]

Finally, Wolfe argues that the Roland Affidavit is
defective.

Roland is with Northern Trust Company, which Roland

states is the successor by merger to Northern Trust, but there is
no documentary support for this.

Wolfe argues that Roland does

not have personal knowledge of the loan at issue because he was
not involved in the loan origination.

Further, Roland did not

produce the demand letter to support his claim that Northern
Trust made a proper demand.

Wolfe also argues that Exhibit B to

the Roland Affidavit “was created for this litigation, and the
underlying documents are not attached.”

[Id. at 15 (citations

omitted).]
Wolfe therefore urges the Court to deny Northern
Trust’s Motion for Summary Judgment.
B.

Northern Trust’s Reply
In its reply in support of the Motion for Summary

Judgment (“Summary Judgment Reply”), Northern Trust first notes
that Wolfe’s memorandum in opposition to the Motion for Summary
Judgment asserts the same arguments as his memorandum in
opposition to the Motion to Dismiss.

Northern Trust therefore

incorporates by reference the arguments it presented in its reply
in support of the Motion to Dismiss.
2.]

12

[Summary Judgment Reply at

Northern Trust reiterates that, as a matter of law, it
is entitled to summary judgment, interlocutory decree of
foreclosure, and a order of sale because: 1) all parties to the
foreclosure have been served; 2) Wolfe defaulted under the terms
of the Note and Mortgage; and 3) the default entitles Northern
Trust to foreclose on the Mortgage.

Northern Trust argues that

Wolfe has not identified any genuine disputes of material fact in
these areas.

[Id. at 3.]

As to Wolfe’s objections to the Roland Affidavit,
Northern Trust points out that corporate officers are presumed to
have personal knowledge of their corporation’s acts, and
employees who are familiar with a business’s record-keeping
practices can testify from personal knowledge about documents
that are admissible business records.

Roland therefore does not

need to have been a first-hand witness to the transaction at
issue in this case.

[Id. at 4-5 (citing Barthelemy v. Air Lines

Pilots Ass’n, 897 F.2d 999, 1018 (9th Cir. 1990); Nadir v. Blair,
549 F.3d 953, 963 (4th Cir. 2008)).]

As to Wolfe’s argument that

Northern Trust Company is not a party in this action, Northern
Trust notes that, because the merger occurred after the filing of
the Complaint in this action, Fed. R. Civ. P. 25(c) does not
require that Northern Trust be substituted by its successor-ininterest, unless the Court orders substitution in its discretion.
[Id. at 5-6.]

As to Wolfe’s argument that there was no demand

13

letter, Northern Trust states that a Notice of Default, Final
Demand for Payment and Notice of Acceleration, dated November 19,
2010, was mailed to Wolfe, and Wolfe’s former counsel
acknowledged receipt thereof in a December 6, 2010 letter.

[Id.

at 6 (citing Decl. of Jonathan W.Y. Lai (“Lai Decl.”), Exhs. A,
B).]
Northern Trust argues that Wolfe has not presented any
evidence that Nielsen was Northern Trust’s agent.

Generally, a

mortgage broker is the borrower’s agent, and a lender is not
liable for the mortgage broker’s actions unless there is an
agency relationship between the lender and the broker.

[Id. at 7

(some citations omitted) (citing Sandry v. First Franklin
Financial Corp., 2011 WL 202285 (E.D. Cal. Jan. 20, 2011);
Menashe v. Bank of New York, 2012 WL 397437, at *11 (D. Haw. Feb.
6, 2012)).]

Wolfe has not alleged that Northern Trust manifested

any express or implied intent that Nielsen act as its agent, nor
does Wolfe allege that Northern Trust led Wolfe to believe
Nielsen was its agent, nor does Wolfe allege that Northern Trust
ratified Nielsen’s actions, representations, or omissions.

If

Wolfe has any claims based on the alleged false representation of
an agency relationship, they are against Nielsen, not against
Northern Trust.

Thus, Nielsen’s alleged misrepresentations

cannot be imputed to Northern Trust and cannot preclude summary
judgment.

[Id. at 8-9.]

14

Northern Trust emphasizes that Wolfe does not dispute
proper service of the Complaint or that he is in default under
the Note and Mortgage.

To the extent that Wolfe relies on an

alleged agreement for a permanent loan modification, Wolfe has
not identified any admissible evidence of a loan modification.
There is no genuine issue of material fact regarding his default.
Northern Trust reiterates that its claims are enforceable under
the terms of the Note and Mortgage and pursuant to Haw. Rev.
Stat. §§ 667-1 through 667-4.

[Id. at 10-13.]

Northern Trust therefore urges the Court to grant the
Motion for Summary Judgment, including issuing an interlocutory
decree of foreclosure and order of sale.
II.

[Id. at 13.]

Motion to Dismiss
In the Motion to Dismiss, Northern Trust notes that the

Property is a vacant lot in “an exclusive oceanfront residential
community[.]”

[Mem. in Supp. of Motion to Dismiss at 2.]

Northern Trust argues that Count I (UDAP) is not
sufficiently pled.

Wolfe has merely recited the elements of a

UDAP claim without providing factual allegations to support any
of the required elements.

Further, Wolfe’s UDAP claim sounds in

fraud, and Count I does not satisfy the heightened pleading
requirements of Fed. R. Civ. P. 9(b).

The Court therefore cannot

consider the allegations of fraudulent misrepresentations.

Wolfe

has not alleged the time, place, and specific content of the

15

misrepresentations, or the identifies of the parties to the
misrepresentations.

Wolfe therefore has not provided Northern

Trust with sufficient notice of the claim against it.
Trust urges the Court to dismiss Count I.

Northern

[Id. at 6-9.]

Northern Trust emphasizes that unconscionability is not
an affirmative claim for relief, but merely a defense to the
enforcement of a contract or other legal claim.

Even if Wolfe

only asserts unconscionability as a defense, he has not
identified the specific terms of an enforceable contract which
are unconscionable.

Wolfe has not identified the unconscionable

contract or its specifically unconscionable terms.
should therefore dismiss Wolfe’s claim/defense.

The Court

[Id. at 9-11.]

Wolfe failed to plead Count III (fraud and
misrepresentation) with particularity.

Count III is presumably

based on the same insufficient allegations of misrepresentations
set forth in Count I.

Count III also fails to plead the other

elements of a fraud/fraudulent misrepresentation claim.

Wolfe

has not provided Northern Trust with fair notice of the grounds
Count III is based on, and the Court should dismiss Count III.
[Id. at 11-13.]
Northern Trust argues that Count IV (negligence) fails
because Wolfe fails to establish that Northern Trust owed him a
duty of care.

Lenders generally do not owe their borrowers a

duty of care because there is no fiduciary duty and no duty

16

sounding in negligence, and the Counterclaim does not set forth
any allegations establishing an exception to these general rules.
Northern Trust and Wolfe merely had an arms-length business
relationship.

[Id. at 14-15.]

Although Wolfe contends that

Northern Trust had a duty under HAMP not to proceed with
foreclosure while evaluating him for loan modification, there is
no express or implied private right of action for a violation of
HAMP.

[Id. at 15-16 (citing Cleveland v. Aurora Loan Services,

LLC, No. C 11-0773 PJH, 2011 WL 2020565, at *4 (N.D. Cal. May 24,
2011); Singh v. Wells Fargo Bank, No. 1:10 CV 1659 AWI SMS, 2011
WL 66167, at *5 (E.D. Cal. Jan. 7, 2011)).]

Moreover, even if

there was a cause of action for a HAMP violation, the
Counterclaim does not allege that Wolfe was eligible for a HAMP
loan modification, that Northern Trust approved him for a HAMP
modification, or that Northern Trust agreed to suspend
foreclosure proceedings.

[Id. at 16.]

Northern Trust also

argues that Wolfe failed to sufficiently plead the remaining
requirements of a negligence claim.

Northern Trust therefore

urges the Court to dismiss Count IV.

[Id. at 16-17.]

As to Count V (breach of contract), Northern Trust
emphasizes that the claim is based on an alleged oral contract
that Northern Trust would suspend foreclosure proceedings.
Northern Trust argues that there is no oral contract because
there was a lack of consideration.

17

[Id. at 17-18.]

Further, if

there was such an agreement, it would be an agreement to modify
the Mortgage.

The Mortgage is subject to the statute of frauds

and requires a writing.

An agreement to modify the Mortgage

therefore also requires a writing.

[Id. at 18-19 (citing Secrest

v. Security National Mortgage Loan Trust 2002-2, 167 Cal. App.
4th 544, 553, 84 Cal. Rptr. 3d 275, 282 (2008)).]

The

Counterclaim does not allege there was a writing to evidence the
oral contract for a permanent loan modification, and the
Counterclaim fails to sufficiently describe the alleged oral
contract.

In addition, Wolfe fails to sufficient plead the other

requirements of a breach of contract claim.

Count V merely

recites the elements of breach of contract and does not provide
Northern Trust with sufficient notice.
Court to dismiss Count V.

Northern Trust urges the

[Id. at 19-20.]

As to Count VI (breach of the duty of good faith and
fair dealing), Northern Trust argues that there is no implied
covenant of good faith and fair dealing without an enforceable
contract.

Further, there is no independent cause of action based

on the implied covenant of good faith and fair dealing.

[Id. at

20 (citing Stoebner Motors, Inc. v. Automobili Lamborghini
S.P.A., 459 F. Supp. 2d 1028, 1036–38 (D. Haw. 2006)).]

Count VI

is based on the alleged oral contract to modify the Mortgage
alleged in Count V.

Thus, insofar as Count V fails, Count VI

should fail as well.

Even assuming, arguendo, that Count V

18

alleges a contract upon which Wolfe can state a breach of
contract claim, Count VI still fails because Wolfe does not
allege any facts showing that Northern Trust violated the duty of
good faith and fair dealing.
Court to dismiss Count VI.

Northern Trust therefore urges the

[Id. at 21-22.]

As to Count VII (promissory estoppel), Wolfe has only
alleged vague and indefinite promises regarding future
refinancing and the lack of foreclosure proceedings.

The

promises for a promissory estoppel claim must be clear and
unambiguous.

Even if the Court assumes that a Northern Trust

representative actually made the statements alleged in the
Complaint, the statements must be clear and unambiguous to state
a promissory estoppel claim.
unambiguous statements.

Wolfe has not identified clear and

[Id. at 22-23 (citing Aguilar v.

International Longshoremen’s Union Local #10, 966 F.2d 443, 446
(9th Cir. 1992)).]

Wolfe has only recited the elements of a

promissory estoppel claim, which is insufficient to state a claim
upon which relief can be granted.
the Court to dismiss Count VII.

Northern Trust therefore urges

[Id. at 24.]

Thus, Northern Trust argues that the Court should
dismiss the Counterclaim in its entirety.
A.

Wolfe’s Opposition
Wolfe’s memorandum in opposition to the Motion to

Dismiss raises the same arguments as in his memorandum in

19

opposition to the Motion for Summary Judgment.
B.

Northern Trust’s Reply
In its reply in support of the Motion to Dismiss

(“Dismissal Reply”), Northern Trust states that the core of
Wolfe’s Counterclaim is his allegation that he was promised a
permanent loan modification.

Northern Trust, however, argues

that it never promised Wolfe a loan modification because Northern
Trust is not responsible for the representations or omissions of
the loan broker who allegedly made that promise to Wolfe.

Wolfe

has not pled any facts showing any agency relationship between
Northern Trust and the broker.

Northern Trust therefore argues

that the Court should dismiss all claims based upon the loan
broker’s alleged representations or omissions.

[Dismissal Reply

at 3-4.]
As to the UDAP claim, Northern Trust argues that
Tedder, 2012 WL 1028125, does not support Wolfe’s position.

The

plaintiff in Tedder raised similar allegations to those in the
instant case, and this Court dismissed Tedder’s UDAP claim
without reaching the issue whether such a UDAP violation would
render the note and mortgage void.

Northern Trust also

emphasizes that this district court, including this Court in
Tedder, has repeatedly ruled that there is no private right of
action for HAMP violations.

[Id. at 5-6.]

Northern Trust argues

that the district court’s orders in Skaggs, 2011 WL 3861373 and

20

2010 WL 5390127, are inapplicable because that case addressed
whether a UDAP claim based on the borrower’s alleged incapacity
was a valid defense to a foreclosure by a holder in due course.
In the instant case, Wolfe has not sufficiently pled a UDAP
violation, so the issue whether Wolfe’s Mortgage is void against
a holder in due course is irrelevant.

Although Wolfe recited the

elements of UDAP claim, he failed to allege any supporting
factual allegations.
claim for relief.

This is not enough to state a cognizable

[Id. at 6 & n.3.]

Northern Trust also points

out that voiding a mortgage transaction under § 480-12 requires
that the plaintiff place the parties in the positions that they
held before the transaction in question.
he can do that.

Wolfe has not alleged

[Id. at 7.]

As to the unconscionability claim, Northern Trust
reiterates that it is a defense, not an independent claim.
Northern Trust argues that it is not clear what contract term
Wolfe alleges was unconscionable.

If he is referring to the

Mortgage, the Mortgage contains no promise of permanent
financing.

To the extent that Wolfe relies upon the oral promise

of a permanent loan modification, that agreement is barred by the
statute of frauds.

[Id. at 7-8.]

Northern Trust argues that the fraud and
misrepresentation claims fail because they are not pled with the
requisite particularity.

Wolfe’s reliance on Tedder in support

21

of this claim is also misplaced.

This Court ruled in Tedder that

the fraud claim based on alleged misrepresentations about the
receipt of documents during the loan modification process was
sufficient to survive dismissal.

This Court dismissed Tedder’s

fraud claim based on an alleged promise of a loan modification
because it was insufficiently pled.

Further, a promise regarding

a future event cannot support a fraud claim.

[Id. at 8-10.]

As to the negligence claim, Northern Trust reiterates
that it owed Wolfe no duty because generally lenders owe no duty
to refrain from placing borrowers in loans that they cannot
repay.

Northern Trust also argues that Wolfe’s reliance on

Speleos, 755 F. Supp. 2d at 310-11, is misplaced.

The court in

that case recognized that a common law negligence claim cannot be
based on a HAMP violation because there is no private right of
action.

Under Massachusetts law, however, evidence of a HAMP

violation could constitute evidence of a negligence claim.

Wolfe

has not identified any Hawai`i statute or case law similarly
recognizing that a HAMP violation constitutes evidence of
negligence.

[Id. at 10-11.]

As to Count V, which alleges a breach of the oral
contract for a permanent loan modification, Northern Trust
reiterates its argument that the claim is barred by the statute
of frauds.

[Id. at 11-13.]

22

As to Count VI, alleging a violation of the duty of
good faith and fair dealing, Northern Trust reiterates that,
without a valid agreement to permanently modify the loan, there
is no implied covenant of good faith and fair dealing.

As to the

Mortgage itself, Northern Trust contends that Wolfe has not
identified any term of the Mortgage which Northern Trust
allegedly breached.

Northern Trust therefore argues that this

Court must dismiss Count VI as a matter of law.

[Id. at 13-14.]

Finally, as to the promissory estoppel claim, Northern
Trust argues that Wolfe’s memorandum in opposition does not
address the defects in the claim that Northern Trust identified
in the Motion to Dismiss, and therefore the Court should dismiss
Count VII.

[Id. at 14-15.]
Northern Trust urges the Court to grant the Motion to

Dismiss.
DISCUSSION
I.

Motion for Summary Judgment
In the Motion for Summary Judgment, Northern Trust

argues that there are no genuine issues of material fact
regarding: Wolfe’s breach of the Note; Wolfe’s breach of the
Mortgage; and Northern Trust’s entitlement to relief under the
terms of those documents.

Northern Trust therefore argues that

it is entitled to judgment as a matter of law.

See Fed. R. Civ.

P. 56(a) (stating that summary judgment is warranted “if the
23

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”).
A.

Northern Trust’s Merger
Before the Court addresses the merits of the Motion for

Summary Judgment, it must address the issue of the sufficiency of
Northern Trust’s evidence regarding the merger of Northern Trust,
N.A. and The Northern Trust Company.

The primary evidence that

Northern Trust relies upon in its Motion for Summary Judgment is
the Roland Affidavit and the documents attached thereto.

Roland

asserts that he has personal knowledge and can testify as to
these matters because he is the Second Vice President for “The
Northern Trust Company as successor by merger to Northern Trust,
NA . . . .”

[Roland Aff. at ¶ 1.]

Northern Trust, however, did

not include any supporting documents regarding the merger.
This Court recognizes that Roland’s “personal knowledge
and competence to testify are reasonably inferred from [his]
position[] . . . .”

See Barthelemy v. Air Lines Pilots Ass’n,

897 F.2d 999, 1018 (9th Cir. 1990) (holding that the district
court reasonably relied on an affidavit by an entity’s chairman
about the entity’s fears and search for potential buyers).

This

Court therefore can accept his testimony that a merger occurred
and that The Northern Trust Company is the successor to Northern
Trust, NA.

This Court can also accept Roland’s testimony that he

has knowledge of the relevant records of Northern Trust, N.A.

24

The Roland Affidavit, however, does not state when the merger
occurred or the terms thereof, such as whether The Northern Trust
Company has assumed all rights and responsibilities arising from
outstanding litigation involving Northern Trust, NA.
In its Summary Judgment Reply, Northern Trust states:
Effective October 1, 2012,3 “Northern Trust,
N.A.,” merged with and into “The Northern Trust
Company,” an Illinois banking corporation. As a
result of this merger, The Northern Trust Company
is the successor-by-merger of Northern Trust,
N.A., and is the real party-in-interest in this
lawsuit. See Roland Affidavit at ¶ 1 . . . .
Because the merger occurred after Northern Trust,
N.A. filed its Complaint, [Fed. R. Civ. P.] 25(c)
does not require that Northern Trust, N.A. be
substituted by its successor-in-interest, except
that this Court may order the transferee to be
substituted as a party, if in its discretion, the
transferee’s presence would facilitate the case.
[Summary Judgment Reply at 5-6 (emphasis in original) (some
citations omitted).]

First, to the extent that the Summary

Judgment Reply contains factual representations which are not
contained within the cited Roland Affidavit, the Court cannot
consider those factual representations because Northern Trust did
not provide the requisite support.

See Fed. R. Civ. P. 56(c).

Northern Trust did file a Corporate Disclosure Statement on
November 17, 2011, stating that “Plaintiff NORTHERN TRUST, NA is
a wholly-owned subsidiary of Northern Trust Corporation.”
No. 7.]

[Dkt.

The Corporate Disclosure Statement, however, does not

3

The Court assumes this is a typographical error and that
Northern Trust is referring to October 1, 2011.
25

provide evidence of the date or terms of the merger.
Northern Trust acknowledges that this Court, in its
discretion, may order The Northern Trust Corporation to be
substituted for, or joined with, Northern Trust, N.A. if its
presence would facilitate the case.

This Court, however, cannot

determine whether the presence of The Northern Trust Company
would facilitate the case without weighing evidence of the terms
of the merger.
Although this Court can accept Roland’s testimony
about, and authentication of, the documents attached to his
affidavit, in light of the issue regarding evidence of the
merger, this Court cannot make a ruling at this time as to
whether Northern Trust, N.A. is able to litigate the claims at
issue in this case.

The Court now turns to the merits of the

Motion for Summary Judgment, to the extent that this Court is
able to address the motion on the current record.
B.

Default
Wolfe apparently argues that the Court should deny the

Motion for Summary Judgment because Northern Trust did not
establish his default by presenting evidence that it issued a
proper demand letter to him.

Roland’s unsupported statement that

Northern Trust made a proper demand is not sufficient.
Opp. to Motion for Summary Judgment at 15.]

26

[Mem. in

Northern Trust responds that it mailed a NOTICE OF
DEFAULT, FINAL DEMAND FOR PAYMENT AND NOTICE OF ACCELERATION Promissory Note and Mortgage dated August 22, 2007; Northern
Trust Loan No. (ending in) 743 to Wolfe, and his former counsel
acknowledged receipt of the demand letter.

[Lai Decl., Exh. A

(demand letter), Exh. B (letter dated 12/6/10 to Jonathan W.Y.
Lai, Esq., from Mark Van Pernis).]

Local Rule 56.1(h), however,

states: “Affidavits or declarations setting forth facts and/or
authenticating exhibits, as well as exhibits themselves, shall
only be attached to the concise statement.

Supplemental

affidavits and declarations may only be submitted with leave of
court.”

Northern Trust did not obtain leave of court to submit

the Lai Declaration, with its exhibits, in conjunction with the
Summary Judgment Reply.

This Court therefore declines to

consider the demand letter and the letter acknowledging receipt
thereof.
The lack of a demand letter, in and of itself, is not
fatal to the Motion for Summary Judgment.

Northern Trust

submitted the Note and Mortgage with the Motion for Summary
Judgment.

[Roland Aff., Exhs. A, B.]

Wolfe did not contest the

authenticity of the copy of the Note that Northern Trust
submitted.

Wolfe’s memorandum in opposition to the Motion for

Summary Judgment does argue that Exhibit B to the Roland
Affidavit “was created for this litigation, and the underlying

27

documents are not attached.”

[Mem. in Opp. to Motion for Summary

Judgment at 15 (citing Hawaii Community Federal Credit Union v.
Keka, 94 Haw. 213 (2000); Pacific Concrete Federal Credit Union
v. Kauanoe, 62 Haw. 334 (1980)).]

Based on Wolfe’s arguments at

the hearing, however, it appears that he is directing this
challenge to Northern Trust’s Pay-off Statement, which is Exhibit
C to the Roland Affidavit.

Thus, neither the contents of the

Note nor the contents of the Mortgage are in dispute in this
case.
The Note states that the principal amount is
$1,080,000.00, and the interest rate is 7.000%.
Exh. A at 1.]

[Roland Aff.,

It also states that the borrower, Wolfe,

will pay this loan in one principal payment of
$1,080,000.00 plus interest on August 22, 2010.
This payment due on August 22, 2010, will be for
all principal and all accrued interest not yet
paid. In addition, [the borrower] will pay
regular monthly payments of all secured unpaid
interest due as of each payment date, beginning
September 22, 2007 . . . .
[Id. (emphasis added).]

Other relevant provisions of the Note

provide:
LATE CHARGE. If a payment is 18 days or more
late, [the borrower] will be charged 5.000% of the
unpaid portion of the regularly scheduled payment.
INTEREST AFTER DEFAULT. Upon default, including
failure to pay upon final maturity, the interest
rate on this Note shall be increased by 3.000
percentage points. However, in no event will the
interest rate exceed the maximum interest rate
limitations under applicable law.

28

DEFAULT. [The borrower] will be in default under
this Note if any of the following happen:
Payment Default. [The borrower] fail[s] to
make any payment when due under this Note.
. . . .
LENDER’S RIGHTS. Upon default, Lender may declare
the entire unpaid principal balance under this
Note and all accrued unpaid interest immediately
due, and then [the borrower] will pay that amount.
[Id.]
In his declaration attached to the memorandum in
opposition to the Motion for Summary Judgment, Wolfe states that
he “made all monthly payments on the mortgage as they became due
until the final payment.”

[Def. Decl. at ¶ 9.]

When the loan

matured, Wolfe “offered to continue paying the mortgage as he had
been[,]” i.e. to make interest-only payments.

[Id. at ¶ 10.]

Wolfe acknowledges that Northern Trust neither extended the terms
of the loan nor granted permanent financing, [id. at ¶ 16,] and
he states that he “did not oppose the non-judicial foreclosure
and has consistently offered to allow a short sale and/or to give
a deed in lieu of foreclosure” [id. at ¶ 23].
Thus, based on the record properly before the Court,
there are no genuine issues of material fact as to Wolfe’s
default under the terms of the Note.

The Court therefore FINDS

that Wolfe is in default under the terms of the Note.
The relevant terms of the Mortgage vary slightly from
the terms of the Note.

The Mortgage states:
29

EVENTS OF DEFAULT. At Lender’s option, Grantor
will be in default under this Mortgage if any of
the following happen:
Payment Default. Grantor fails to make any
payment when due under the indebtedness.[4]
. . . .
RIGHTS AND REMEDIES ON DEFAULT. Upon the
occurrence of an Event of Default and at any time
thereafter, Lender, at Lender’s option, may
exercise any one or more of the following rights
and remedies, in addition to any other rights or
remedies provided by law:
. . . .
Judicial Foreclosure. Lender may obtain a
judicial decree foreclosing Grantor’s
interest in all or any part of the Property.
Nonjudicial Sale. If permitted by applicable
law, Lender may foreclose Grantor’s interest
in all or in any part of the Personal
Property or the Real Property by non-judicial
sale.
Deficiency Judgment. If permitted by
applicable law, Lender may obtain a judgment
for any deficiency remaining in the
4

The term “indebtedness” refers to
all principal, interest, and other amounts, costs
and expenses payable under the Note or Related
Documents, together with all renewals of,
extensions of, modifications of, consolidations of
and substitutions for the Note or Related
Documents and any amounts expended or advanced by
Lender to discharge Grantor’s obligations or
expenses incurred by Lender to enforce Grantor’s
obligations under this Mortgage, together with
interest on such amounts as provided in this
Mortgage.

[Roland Aff., Exh. B at 7.]
30

indebtedness due to Lender after application
of all amounts received from the exercise of
the rights provided in this section.
. . . .
[Roland Aff., Exh. B at 4-5 (emphases added).]
Insofar as the Mortgage provides that Northern Trust
may declare Wolfe in default, and may choose from its available
remedies upon default, at its option, this Court cannot find that
Wolfe is in default under the terms of the Mortgage without
evidence that Northern Trust exercised its option by declaring
default and electing its remedies.

Although the most obvious

evidence of these elections, the demand letter, is not properly
before this Court, and although the document was available to
Northern Trust at the time it filed the Motion for Summary
Judgment, Northern Trust’s failure to submit the demand letter is
not fatal to the Motion for Summary Judgment.

Roland states that

Northern Trust made “due and proper demand . . . upon Defendant
Wolfe for payment of the amounts due and owing to Northern
Trust[.]”

[Roland Aff. at ¶ 5.]

Roland also states that Wolfe

is in default under both the Note and the Mortgage.
¶¶ 5-6.]

[Id. at

Wolfe admits that he was served with a notice of non-

judicial foreclosure in early May 2011, and that he did not
oppose the non-judicial foreclosure.

[Def. Decl. at ¶¶ 22-23.]

Further, the Complaint and the First Amended Notice of Pendency
of Action, [filed 8/30/11 (dkt. no. 5),] establish that Northern

31

Trust elected to pursue a judicial decree of foreclosure and a
deficiency judgment.
Thus, based on the record properly before the Court,
there are no genuine issues of material fact as to Wolfe’s
default under the terms of the Mortgage.

The Court therefore

FINDS that Wolfe is in default under the terms of the Mortgage.
C.

Amounts Due and Decree of Foreclosure
The Motion for Summary Judgment seeks judgment in favor

of Northern Trust on all claims in the Complaint.
Summary Judgment at 2.]

[Motion for

The Complaint seeks, inter alia: 1) a

money judgment equal to “the total amount of all principal,
interest, advances, costs, expenses, attorneys’ fees, and late
fees, pursuant to the Note and Mortgage[;]” [Complaint at pgs. 45;] and 2) an order directing the sale of the Property and
directing the distribution of the proceeds of the sale, first to
the reasonable and necessary expenses of the sale, and then to
the payment of the amounts due to Northern Trust under the Note
and Mortgage [id. at pg. 5].
As evidence of the amount due, Northern Trust submits a
Pay-off Statement, dated January 25, 2012 and signed by Roland.
It states that:
The payoff amount on our books and records as
of January 25, 2012 . . . is as follows:
Principal

$ 1,069,079.32

Late fees for periods through

$

32

27.36

January 25, 2012, but unpaid
Interest accrued through
August 30, 2011, but unpaid

$

59,311.934

Interest accrued from
August 31, 2011, but unpaid

$

34,444.857

Total

$ 1,162,863.471

[Roland Aff., Exh. C (footnotes omitted).]
attorneys’ fees and other costs.

This amount excludes

[Id. at n.3.]

The Roland Affidavit states that the Pay-off Statement
“reflects the current amount due to Northern Trust under the Note
and Mortgage.”

[Roland Aff. at ¶ 10.]

The Roland Affidavit does

not identify the documents that the Pay-off Statement is based
upon.

The Roland Affidavit merely states:
All documents or data compilation that are
attached hereto as Exhibits “A”-“C”, as well as
other factual information contained herein,
represent records of regularly conducted activity
as follows:
a.
The records of acts were and are made in
the course of Northern Trust’s regular conducted
business activity of loan and loan servicing;
b.
All herein referenced records of acts
were and are made at or near the time of the acts
reported. Entries into these records are made by
Affiant, as well as by persons having personal
knowledge of such event.
c.
Northern Trust maintains all records and
files in a routine manner in the ordinary course
of business in a filing and computer system.

[Id. at ¶ 12.]

33

At the hearing and in his memorandum in opposition to
the Motion for Summary Judgment, Wolfe argued that Roland’s
purported authentication of the Pay-off Statement was
insufficient evidence of the amount outstanding under the Note
and Mortgage.

This Court agrees.

First, the Court notes that Wolfe relies primarily on
Hawaii Community Federal Credit Union v. Keka, 94 Hawai`i 213, 11
P.3d 1 (2000).
15.]

[Mem. in Opp. to Motion for Summary Judgment at

In Keka, the Hawai`i Supreme Court held that an affidavit

from an officer of the credit union, who stated that he was
“personally familiar with the payment history of” the Keka’s
mortgage, was not sufficient to establish a foundation for his
statements regarding the Keka’s default and the outstanding
amount of their indebtedness.
6, 10.

94 Hawai`i at 218, 222, 11 P.3d at

Keka, however, is based upon provisions of Haw. R. Civ.

P. 56(e)5 that do not have a counterpart in Fed. R. Civ. P. 56.

5

Haw. R. Civ. P. 56(e) states:
Supporting and opposing affidavits shall be made
on personal knowledge, shall set forth such facts
as would be admissible in evidence, and shall show
affirmatively that the affiant is competent to
testify to the matters stated therein. Sworn or
certified copies of all papers or parts thereof
referred to in an affidavit shall be attached
thereto or served therewith. The court may permit
affidavits to be supplemented or opposed by
depositions, answers to interrogatories, or
further affidavits. When a motion for summary
judgment is made and supported as provided in this
(continued...)
34

In spite of this important distinction, the reasoning in Keka is
instructive in the instant case.
Fed. R. Civ. P. 56(c)(4) states: “An affidavit or
declaration used to support or oppose a motion must be made on
personal knowledge, set out facts that would be admissible in
evidence, and show that the affiant or declarant is competent to
testify on the matters stated.”

The Roland Affidavit does not

explain why Roland is competent to testify as to the amounts
outstanding under the Note and Mortgage.

For example, Roland

does not state that, in his position, he routinely prepares payoff statements such as the one attached as Exhibit C, nor does he
state that Wolfe’s Pay-off Statement is a routinely kept business
record, nor does he identify the records which he reviewed or
relied upon in preparing the Pay-off Statement.

This Court

therefore concludes that Northern Trust has not established that
Roland is competent to testify as to the amounts outstanding
under the Note and Mortgage.

This Court will not consider the

Pay-off Statement or Roland’s testimony in the Roland Affidavit

5

(...continued)
rule, an adverse party may not rest upon the mere
allegations or denials of the adverse party’s
pleading, but the adverse party’s response, by
affidavits or as otherwise provided in this rule,
must set forth specific facts showing that there
is a genuine issue for trial. If the adverse
party does not so respond, summary judgment, if
appropriate, shall be entered against the adverse
party.
35

about the amounts outstanding.

The Court further concludes that

Northern Trust has failed to establish the amounts outstanding
under the Note and Mortgage.
In light of the unresolved issue regarding the proper
plaintiff in this action and Northern Trust’s failure to
establish the amounts due under the Note and Mortgage, there are
genuine issues of material fact which preclude summary judgment
at this time.

In addition, although this Order dismisses all of

the counts in the Counterclaim, the Order dismisses most of the
claims without prejudice.

If Wolfe is able to successfully amend

the counts that this Order dismisses without prejudice, such
claim may constitute a defense to Northern Trust’s claims in the
Complaint.

The Court therefore DENIES Northern Trust’s Motion

for Summary Judgment WITHOUT PREJUDICE.
II.

Motion to Dismiss
In the Motion to Dismiss, Northern Trust urges the

Court to dismiss each of the counts in the Counterclaim because
each count fails to state a claim that is plausible on its face.
See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Further, to the extent that some of the counts in the
Counterclaim sound in fraud, Wolfe has failed to plead these
counts with the required particularity.

See Fed. R. Civ. P. 9(b)

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

36

The Court addresses each of count in the Counterclaim in turn.
A.

Count I - UDAP
Count I alleges:
The false representations as to the terms of the
loan as well as the loan application, the
misrepresentations regarding loan modification and
foreclosure, . . . and the excessive charges, all
in connection with the above-described extension
of credit were immoral, unethical, oppressive,
unscrupulous, and substantially injurious to
[Wolfe] as a consumer, in violation of H.R.S.
Chapter 480.

[Counterclaim at ¶ 19.6]
First, Count I alleges that the loan broker who Wolfe
worked with was an agent of Northern Trust.

The loan broker

represented that, when the term of the instant loan terminated,
Northern Trust would give Wolfe permanent financing without
requiring Wolfe to re-qualify.

[Id. at ¶¶ 4-5.]

This district

court has recognized:
In general, a lender is not liable for the
actions of a mortgage broker unless there “there
is an agency relationship between the lender and
the broker.” Gonzalez v. First Franklin Loan
Servs., 2010 WL 144862, at *13 (E.D. Cal. Jan. 11,
2010); see also Kennedy v. Wells Fargo Bank, N.A.,
2011 WL 3359785, at *2 n.5 (N.D. Cal. Aug. 2,
2011) (noting that mortgage broker is generally an
agent of the borrower, and not that of the lender,
unless there is an agency relationship); Mangindin
v. Wash. Mut. Bank, 637 F. Supp. 2d 700, 710 (N.D.
Cal. 2009) (explaining that “courts have rejected

6

Paragraph 19 includes an allegation regarding the failure
to timely provide documents, but there are no factual allegations
in this case that Northern Trust failed to provide Wolfe with
loan documents on a timely basis.
37

a bright line rule that a mortgage broker may
never be the agent of a lender”).
Under Hawaii law, “[a]n agency relationship
may be created through actual or apparent
authority.” See [State v.] Hoshijo ex rel. White,
102 Hawai`i [307,] 318, 76 P.3d [550,] 561
[(2003)] (quoting Cho Mark Oriental Food, Ltd. v.
K & K Int’l, 73 Haw. 509, 515, 836 P.2d 1057, 1061
(1992)). To establish actual authority, there
must be “a manifestation by the principal to the
agent that the agent may act . . . , and may be
created by express agreement or implied from the
conduct of the parties or surrounding
circumstances.’” Id. (quoting State Farm Fire &
Cas. Co. v. Pac. Rent–All, Inc., 90 Hawai`i 315,
325, 978 P.2d 753, 763 (1999)). In comparison,
“[a]pparent authority arises when ‘the principal
does something or permits the agent to do
something which reasonably leads another to
believe that the agent had the authority he was
purported to have.’” Cho Mark Oriental Food,
Ltd., 73 Haw. at 515, 836 P.2d at 1061 (quoting
Hawaiian Paradise Park Corp. v. Friendly Broad.
Co., 414 F.2d 750, 756 (9th Cir. 1969)).
Menashe v. Bank of New York, Civil No. 10-00306 JMS/BMK, 2012 WL
397437, at *11 (D. Hawai`i Feb. 6, 2012) (some alterations in
Menashe).
Wolfe has not pled any facts “plausibly suggesting that
any type of agency relationship existed between” Northern Trust
and the loan broker.

See id.

Thus, the Court must dismiss Count

I to the extent that it relies upon alleged misrepresentations by
Wolfe’s loan broker.
The remainder of Count I is based upon Wolfe’s attempt
to modify the loan after the Note matured.

According to Wolfe,

Northern Trust told him that “they would work out a new loan or

38

other payment plan as they did not intend to foreclose.”
[Counterclaim at ¶ 8.]

The Counterclaim also alleges that

Northern Trust demanded that Wolfe pay $300,000.00 or offer new
collateral to obtain a new loan.

[Id. at ¶ 9.]

In Casino v. Bank of America, this district court
stated:
The Casinos do not state a claim under
section 480–2 of the Hawaii Revised Statutes
because “lenders generally owe no duty to a
borrower ‘not to place borrowers in a loan even
where there was a foreseeable risk borrowers would
be unable to repay.’” McCarty v. GCP Mgmt., LLC,
2010 WL 4812763, at *6 (D. Haw. Nov. 17, 2010)
(quoting Champlaie v. BAC Home Loans Servicing,
LP, 706 F. Supp. 2d 1029, 1061 (E.D. Cal. 2009)).
See also Sheets v. DHI Mortg. Co., 2009 WL
2171085, at *4 (E.D. Cal. July 20, 2009)
(reasoning that no duty exists “for a lender ‘to
determine the borrower’s ability to repay the
loan. . . . The lender’s efforts to determine the
creditworthiness and ability to repay by a
borrower are for the lender’s protection, not the
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. . . .
Civil No. 10–00728 SOM/BMK, 2011 WL 1704100, at *12-13 (D.
Hawai`i May 4, 2011).

39

Similarly, nothing in Wolfe’s Counterclaim indicates
that Northern Trust exceeded its conventional role as a money
lender.

Thus, the portions of Count I based on representations

or demands that Northern Trust made when Wolfe sought to modify
his loan also fail.
This Court therefore GRANTS the Motion to Dismiss as to
Count I.

The dismissal is WITHOUT PREJUDICE because it is

arguably possible for Wolfe to cure the defects in Count I by
amendment.

See Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th

Cir. 2009).

The Court GRANTS Wolfe leave to file a motion

seeking leaving to file an amended counterclaim that cures the
defects in Count I.
B.

Count II - Unconscionability
Northern Trust argues that unconscionability is a

defense, not an affirmative claim for relief.

Further, even if

Wolfe is asserting unconscionability as a defense, he has not
identified the specific term of a contract that is allegedly
unconscionable.

[Mem. in Supp. of Motion to Dismiss at 9-11.]

This district court has recognized that:
“Unconscionability” is generally a defense to
the enforcement of a contract, and is not a proper
claim for affirmative relief. See, e.g., Gaitan
v. Mortg. Elec. Registration Sys., 2009 WL
3244729, at *13 (C.D. Cal. Oct. 5, 2009)
(“Unconscionability may be raised as a defense in
a contract claim, or as a legal argument in
support of some other claim, but it does not
constitute a claim on its own.”); Carey v. Lincoln
Loan Co., 125 P.3d 814, 829 (Or. App. 2005)
40

(“[U]nconscionability is not a basis for a
separate claim for relief.”); 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 or the UCC allows affirmative relief for
unconscionability).
To the extent unconscionability can be
addressed affirmatively as part of a
different-that is, 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). 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,” and not any specific contractual
term. Id.
Phillips v. Bank of Am., Civil No. 10-00551 JMS-KSC, 2011 WL
240813, at *12 (D. Hawai`i Jan. 21, 2011) (footnote omitted).
Wolfe states in his memorandum in opposition to the
Motion to Dismiss that he is asserting unconscionability as a
defense.

[Mem. in Opp. to Motion to Dismiss at 10.]

Insofar as

Wolfe asserted unconscionability as a separate count in the
Counterclaim, as opposed to just a defense in his Answer, it
appears that he is asserting unconscionability both as a defense
to Northern Trust’s attempt to enforce the Note and Mortgage and
as an independent claim for relief.

The issue before this Court

in the Motion to Dismiss is whether Wolfe has alleged a plausible
independent claim for relief based on unconscionability in Count

41

II of the Counterclaim.
Wolfe merely alleges that Northern Trust obtained his
mortgage under false pretenses and that Northern Trust made
unreasonable demands when he tried to modify his loan.

Pursuant

to Phillips and Skaggs, Wolfe’s claim for unconscionability
fails.

This Court therefore GRANTS the Motion to Dismiss as to

Count II.

The dismissal is WITHOUT PREJUDICE because it is

arguably possible for Wolfe to cure the defects in Count II by
amendment.

See Harris, 573 F.3d at 737.

The Court GRANTS Wolfe

leave to file a motion seeking leaving to file an amended
counterclaim that cures the defects in Count II.
C.

Count III - Fraud and Misrepresentation
Count III alleges:
24. During the calendar years 2007 and 2010,
[Northern Trust] made numerous false
representations to [Wolfe] as described in the
FACTS above.
25. [Northern Trust] knew or should have
known that the (sic) these representations were
false and misleading, and that [Wolfe] would rely
on these representations and failures to his
detriment.
26. [Wolfe] did rely on these
representations to his detriment, and was
justified in his reliance.
27. As a result, [Wolfe] has been damaged in
an amount to be proved at trial.

[Counterclaim at pg. 7.]

In spite of the allegation of

“numerous” misrepresentations, the only allegedly false
representations identified in the Counterclaim are: the loan
broker’s representation that Wolfe would receive permanent
42

financing without having re-qualify; and Northern Trust’s
representation that it could work out a new loan with Wolfe
because it did not intend to foreclose.

[Id. at ¶¶ 5, 8.]

In a pleading alleging fraud, a plaintiff “must allege
the time, place, and content of the fraudulent representation;
conclusory allegations do not suffice.”

Shroyer v. New Cingular

Wireless Servs., Inc., 622 F.3d 1035, 1042 (9th Cir. 2010)
(citation omitted).

Wolfe failed to sufficiently plead the time

and place of the alleged misrepresentations, and he failed to
sufficiently plead the identity of the person making the alleged
misrepresentations.

Further, as stated previously, Wolfe failed

to plead a plausible basis for the alleged agency relationship
between the loan broker and Northern Trust.
In addition, this Court has recognized that:
under Hawai`i law, the false representation
forming the basis of a fraud claim “must relate to
a past or existing material fact and not the
occurrence of a future event.” Joy A. McElroy,
M.D., Inc. v. Maryl Group, Inc., 107 Hawai`i 423,
433, 114 P.3d 929, 939 (Ct. App. 2005) (citations
and block quote format omitted) (emphasis in
original). Further, even if the allegations
satisfy the other elements of a fraud claim,
“[f]raud cannot be predicated on statements which
are promissory in their nature, or constitute
expressions of intention, and an actionable
representation cannot consist of mere broken
promises, unfulfilled predictions or expectations,
or erroneous conjectures as to future events[.]”
Id. (citations and block quote format omitted)
(emphasis in original). The exception to this
general rule is that “[a] promise relating to
future action or conduct will be actionable,
however, if the promise was made without the
43

present intent to fulfill the promise.” Id.
(citations and block quote format omitted)
(emphasis in McElroy).
Doran v. Wells Fargo Bank, Civil No. 11–00132 LEK–BMK, 2011 WL
2160643, at *12 (D. Hawai`i May 31, 2011).

Both the loan

broker’s alleged promise of permanent financing and Northern
Trust’s alleged promise that it would work out a new loan deal
with future events.
Finally, this Court notes that Wolfe’s Counterclaim
merely pled conclusory allegations, without supporting factual
allegations, about the remaining elements of a fraud or
fraudulent misrepresentation claim: the defendant’s knowledge
that the representations were false (or lack of knowledge whether
the representations were true or false); the defendant’s
contemplation that the plaintiff would rely on the
representations; and the plaintiff’s detrimental reliance.7

See

Miyashiro v. Roehrig, Roehrig, Wilson & Hara, 122 Hawai`i 461,
482-83, 228 P.3d 341, 362-63 (Ct. App. 2010) (citing Hawaii’s
Thousand Friends v. Anderson, 70 Haw. 276, 286, 768 P.2d 1293,
1301 (1989)).

For all of these reasons, Wolfe’s fraud/fraudulent

representation claim fails.

7

The Court acknowledges that, in conjunction with the
Motion for Summary Judgment, Wolfe has presented some additional
testimony about the facts underlying his claims, but for purposes
of the Motion to Dismiss, this Court only considers the contents
of the Counterclaim. See Enriquez v. Countrywide Home Loans,
FSB, 814 F. Supp. 2d 1042, 1055 (D. Hawai`i 2011).
44

This Court therefore GRANTS the Motion to Dismiss as to
Count III.

The dismissal is WITHOUT PREJUDICE because it is

arguably possible for Wolfe to cure the defects in Count III by
amendment.

See Harris, 573 F.3d at 737.

The Court GRANTS Wolfe

leave to file a motion seeking leaving to file an amended
counterclaim that cures the defects in Count III.
D.

Count IV - Negligence
Count IV alleges that: Northern Trust was negligent in

making the previously described representations; Northern Trust
owed Wolfe a duty of ordinary care in processing his request for
loan modification; and Northern Trust had a duty under HAMP
guidelines not to go forward with foreclosure proceedings while
it was evaluating Wolfe’s loan for modification; and Northern
Trust’s breach of these duties cause Wolfe to suffer damages.
[Counterclaim at ¶¶ 30, 32-35.]
A successful negligence claim must satisfy the
following four elements:
1. A duty, or obligation, recognized by the
law, requiring the actor to conform to a
certain standard of conduct, for the
protection of others against unreasonable
risks.
2. A failure on [the actor’s] part to conform
to the standard required. . . .
3. A reasonable close causal connection
between the conduct and the resulting
injury. . . .
4. Actual loss or damage resulting to the
interests of another. . . .
45

Ono [v. Applegate], 62 Haw. [131,] 137, 612 P.2d
[568,] 538-39 [(1980)].
White v. Sabatino, 415 F. Supp. 2d 1163, 1173 (D. Hawai`i 2006)
(some alterations in original).
This district court has recognized that:
Lenders generally owe no duty of care
sounding in negligence to their borrowers.
Caraang v. PNC Mortg., 795 F. Supp. 2d 1098, 1122
(D. Haw. 2011); see also Champlaie v. BAC Home
Loans Servicing, LP, 706 F. Supp. 2d 1029, 1061
(E.D. Cal. 2009) (“[A]s a matter of law, [a]
lender [does] not owe a duty in negligence not to
place borrowers in a loan even where there was a
foreseeable risk borrowers would be unable to
pay.”); Nymark v. Heart Fed. Sav. & Loan Ass’n,
231 Cal. App. 3d 1089, 283 Cal. Rptr. 53, 56 (Cal.
Ct. App. 1991) (“[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.”)
Pagano v. OneWest Bank, F.S.B., CV. No. 11–00192 DAE–RLP, 2012 WL
74034, at *4 (D. Hawai`i Jan. 10, 2012) (footnote omitted).
As previously stated, Wolfe has not presented a
plausible basis for his claim that the loan broker was Northern
Trust’s agent.

He therefore cannot maintain a negligence claim

against Northern Trust based on representations that the loan
broker allegedly made.

Further, Northern Trust’s alleged

representations that it would work out a new loan with Wolfe and
that it did not intend to foreclose occurred in the course of
Northern Trust’s consideration of Wolfe’s loan modification
application, a transaction that occurred within the scope of

46

Northern Trust’s conventional role as a money lender.

Wolfe’s

Counterclaim fails to sufficiently allege that Northern Trust
owed him a duty of care as to the alleged negligent
misrepresentations during the loan modification process.

See

Pagano, 2012 WL 74034, at *4.
Wolfe also argues that, under HAMP, Northern Trust owed
him additional duties to process his application for loan
modification with ordinary care and to forbear from any
foreclosure proceedings while it was considering his application.
This district court, however, has rejected UDAP claims based on
alleged HAMP violations, ruling that “to the extent Plaintiff
asserts that Defendants breached the HAMP guidelines, ‘there is
no express or implied private right of action to sue lenders or
loan servicers for violation of HAMP.’”

Rey v. Countrywide Home

Loans, Inc., Civil No. 11–00142 JMS/KSC, 2012 WL 253137, at *9
(D. Hawai`i Jan. 26, 2012) (quoting Dodd v. Fed. Home Loan Mortg.
Corp., 2011 WL 6370032, at *12 (E.D. Cal. Dec. 19, 2011)).

Wolfe

cites Speleos v. BAC Home Loans Servicing, LP, 755 F. Supp. 2d
304, 310-11 (D. Mass. 2010), for the proposition that courts have
recognized that HAMP violations may form the basis of a
negligence claim.

In Speleos, however, the district court

recognized that there was no private right of action under HAMP,
but concluded that the plaintiffs alleged a plausible negligence
claim because

47

in Massachusetts, violations of a statute or
regulation may constitute evidence of negligence.
Berish v. Bornstein, 437 Mass. 252, 770 N.E.2d
961, 979 (2002). A claim for negligence based on
a statutory or regulatory violation can survive
even where there is no private cause of action
under that statute or regulation. See, e.g.,
Practico v. Portland Terminal Co., 783 F.2d 255,
265 (1st Cir. 1985) (finding that plaintiffs could
bring a negligence per se claim based on a
violation of Occupational Safety and Health Act
even though the statute did not provide a private
cause of action); Sorenson v. H & R Block, Inc.,
No. 99–cv–10268–DPW, 2002 WL 31194868, at *10,
2002 U.S. Dist. LEXIS 18689, at *29 (D. Mass. Aug.
27, 2002).
755 F. Supp. 2d at 311.
Hawai`i courts also recognize that violations of law
may constitute evidence of negligence.

See, e.g., State v.

Tabigne, 88 Hawai`i 296, 304, 966 P.2d 608, 616 (1998)
(“nonconformity with relevant statutory standards may be
admissible as evidence of negligence in civil cases”).
rule, however, appears to be limited to Hawai`i law.

This

See Rapoza

v. Willocks Constr. Corp., No. 22052, 2004 WL 27460, at *15
(Hawai`i Jan. 2, 2004).

In that case, the Hawai`i Supreme Court

held:
The court’s giving of court’s instruction no. 4.4,
which stated that the a “violation of law may be
evidence of negligence[,]” necessitated a
designation of what the “law” was. It is not
reasonable to assume that the jury would be able
to distinguish which jury instructions were “laws”
that would be evidence of negligence. Therefore,
the court erred in omitting modifying language in
instructions no. 19, 20, 21, 22, 27, 28 and 29
because the omission of “under Hawaii law”
rendered those instructions “prejudicially
48

insufficient . . . [and] misleading.” See
Tabieros [v. Clark Equip. Co.], 85 Hawai`i [335,]
350, 944 P.2d [1279,] 1293 [(1997)].
Id. (some alterations in original).

Wolfe has not identified any

Hawai`i statute or case law stating that violations of any
federal statute or regulation can support a negligence claim,
even where the federal statute or regulation does not provide for
a private right of action, nor is this Court aware of any.
Cf. Hulsman v. Hemmeter Dev. Corp., 65 Haw. 58, 68, 647 P.2d 713,
720 (1982) (“We find that the federal statutes regulating firearm
sales did not create a duty on a seller in a negligence action
nor did it create a private right of action for damages.”).
Wolfe has not identified any Hawai`i statute or case law stating
that HAMP violations in particular can support a negligence
claim, nor is this Court aware of any.

For all of these reasons,

Wolfe’s negligence claim fails.
This Court therefore GRANTS the Motion to Dismiss as to
Count IV.

The dismissal is WITHOUT PREJUDICE because it is

arguably possible for Wolfe to cure the defects in Count IV by
amendment.

See Harris, 573 F.3d at 737.

The Court GRANTS Wolfe

leave to file a motion seeking leaving to file an amended
counterclaim that cures the defects in Count IV.
E.

Count V - Breach of Contract
Count V alleges that Wolfe and Northern Trust “had an

oral contract such that [Northern Trust] would suspend any

49

attempts to foreclose upon [Wolfe]’s property and would not reinstitute foreclosure proceedings without first notifying
Plaintiff.”

[Counterclaim at ¶ 37.]

Wolfe alleges that Northern

Trust breached the oral agreement, causing Wolfe to suffer
damages.

[Id. at ¶¶ 38-39.]
Count V alleges that Northern Trust and Wolfe entered

into an oral forbearance agreement.

Hawaii’s statute of frauds

states:
No action shall be brought and maintained in any
of the following cases:
. . . .
(4) Upon any contract for the sale of lands,
tenements, or hereditaments, or of any
interest in or concerning them;
. . . .
unless the promise, contract, or agreement, upon
which the action is brought, or some memorandum or
note thereof, is in writing, and is signed by the
party to be charged therewith, or by some person
thereunto by the party in writing lawfully
authorized. . . .
Haw. Rev. Stat. § 656-1.

Wolfe’s Mortgage was an agreement

concerning the transfer of an interest in land, and therefore the
Mortgage was subject to the statute of frauds.

The alleged

agreement in which Northern Trust agreed not to exercise its
right under the Mortgage to foreclose in light of Wolfe’s default
and to give Wolfe additional time to either make the final
payment or secure other financing is an agreement concerning a

50

further transfer of interest in land.

Thus, the alleged

forbearance agreement is also subject to the statute of frauds.
Cf. Eckerle v. Deutsche Bank Nat’l Trust, Civil No. 10–00474
SOM/BMK, 2011 WL 4971128, at *3-4 (D. Hawai`i Oct. 18, 2011)
(granting summary judgment to lender on breach of contract claim
where the plaintiff did not produce any writing evidencing the
alleged loan modification agreement).
The alleged oral forbearance agreement between Northern
Trust and Wolfe is unenforceable.

Wolfe has not alleged a

plausible claim for breach of the oral forbearance agreement,8
and he cannot cure the defect in this claim by amendment.
Harris, 573 F.3d at 737.

See

The Court therefore GRANTS the Motion

to Dismiss as to Count V, and DISMISSES Count V WITH PREJUDICE.
F.

Count VI - Good Faith and Fair Dealing
Count VI alleges that every contract imposes an implied

duty of good faith and fair dealing on the parties to the
contract.

Wolfe alleges that Northern Trust violated its duty of

good faith and fair dealing, causing Wolfe to suffer damages.
[Counterclaim at ¶¶ 41-43.]

Count VI does not clearly state

8

In the memorandum in opposition to the Motion to Dismiss,
Wolfe argues that Northern Trust breached the agreement that he
would receive permanent financing without having to re-qualify.
[Mem. in Opp. to Motion to Dismiss at 12.] Count V, however,
specifically refers to the oral forbearance agreement.
[Counterclaim at ¶ 37.] Thus, the breach of contract claim based
on the loan broker’s promise of permanent financing is not before
the Court.
51

which of Northern Trust’s actions constituted a breach of its
duty of good faith and fair dealing.
This district court has characterized similar claims as
attempts to allege claims for the tort of bad faith.

See, e.g.,

Phillips, 2011 WL 240813, at *5 (citing Best Place 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)).
“In Best Place, the Hawaii Supreme Court
noted that although Hawaii law imposes a duty of
good faith and fair dealing in all contracts,
whether a breach of this duty will give rise to a
bad faith tort cause of action depends on the
duties inherent in a particular type of contract.”
Jou v. Nat’l Interstate Ins. Co. of Haw., 114 Haw.
122, 129, 157 P.3d 561, 568 (Haw. App. 2007)
(citing Best Place, 82 Haw. at 129, 920 P.2d at
334). “The court concluded that special
characteristics distinguished insurance contracts
from other contracts and justified the recognition
of a bad faith tort cause of action for the
insured in the context of first- and third-party
insurance contracts.” Id. (citing Best Place, 82
Haw. at 131-32, 920 P.2d at 345-46). Indeed, “the
Hawaii Supreme Court emphasized that the tort of
bad faith, as adopted in Best Place, requires a
contractual relationship between an insurer and an
insured.” Id. (citing Simmons v. Puu, 105 Haw.
112, 120, 94 P.3d 667, 675 (2004)).
Moreover, although commercial contracts for
“sale of goods” also contain an obligation of 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). And Hawaii courts have noted that
“[o]ther jurisdictions recognizing the tort of bad
faith . . . limit such claims to the insurance
context or situations involving special
52

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)). It is thus unlikely that Plaintiffs
could recover for bad faith as alleged in Count
III.
Id. at *5-6 (alterations in original).
To the extent that Wolfe alleges that Northern Trust
violated the duty of good faith and fair dealing implied in the
oral forbearance agreement, Wolfe fails to state a claim because
the oral agreement is not enforceable.

Further, Wolfe cannot

cure the defect in this claim by amendment.
at 737.

See Harris, 573 F.3d

The Court therefore GRANTS the Motion to Dismiss as to

the portion of Count VI based on the implied duty of good faith
and fair dealing in the alleged oral forbearance agreement, and
DISMISSES that portion of Count VI WITH PREJUDICE.
The only other apparent basis for Count VI is Northern
Trust’s alleged failure to honor the loan broker’s representation
that, at the end of the term of the Note, Northern Trust would
give Wolfe permanent financing without requiring him to requalify.

As previously stated, however, Wolfe failed to plead a

plausible basis for his claim that there was an agency
relationship between the loan broker and Northern Trust.

Thus,

to the extent that Count VI is based on Northern Trust’s failure
to fulfill the loan broker’s promise, Wolfe has failed to plead a
plausible claim.

In is, however, arguably possible for Wolfe to

53

cure the defect in this claim by amendment.

See id.

The Court

therefore GRANTS the Motion to Dismiss as to the portion of Count
VI based on Northern Trust’s failure to fulfill the loan broker’s
promise of permanent financing, and DISMISSES that portion of
Count VI WITHOUT PREJUDICE.

The Court GRANTS Wolfe leave to file

a motion seeking leaving to file an amended counterclaim that
cures the defects in the portion of Count VI based on Northern
Trust’s failure to fulfill the loan broker’s promise of permanent
financing.
G.

Count VII - Promissory Estoppel
Count VII alleges that Northern Trust “made numerous

promises to [Wolfe], including, but not limited to, the promise
that it would refinance his loan when it came due and would not
institute foreclosure proceedings.”

[Counterclaim at ¶ 45.]

Count VII alleges that Wolfe justifiably relied on these promises
to his detriment and that Northern Trust failed to honor these
promises, causing Wolfe to suffer damages.

[Id. at ¶¶ 46-48.]

The Hawai`i Supreme Court has stated that:
the four elements of promissory estoppel are:
(1) There must be a promise;
(2) The promisor must, at the time he or she
made the promise, foresee that the
promisee would rely upon the promise
(foreseeability);
(3) The promisee does in fact rely upon the
promisor’s promise; and

54

(4) Enforcement of the promise is necessary
to avoid injustice.
In re Herrick, 82 Hawai`i [329,] 337-38, 922 P.2d
[942,] 950-51 [(1996)] (quoting 4 R. Lord, A
Treatise on the Law of Contracts by Samuel
Williston § 8:5, at 85-95 (4th ed. 1992)). The
“essence” of promissory estoppel is “detrimental
reliance on a promise.” Ravelo [v. Cnty. of
Hawai`i], 66 Haw. [194,] 199, 658 P.2d [883,] 887
[(1983)].
Gonsalves v. Nissan Motor Corp. in Hawaii, Ltd., 100 Hawai`i 149,
164-65, 58 P.3d 1196, 1211-12 (2002) (footnote omitted).
The alleged promises pled in the Counterclaim are: the
loan broker’s promise that Northern Trust would grant Wolfe
permanent financing without requiring him to re-qualify; and
Northern Trust’s promise that it would work out a new loan with
Wolfe because it did not intend to foreclose.

As previously

stated, however, Wolfe failed to plead a plausible basis for his
claim that there was an agency relationship between the loan
broker and Northern Trust.

As to Northern Trust’s alleged

promise that it would modify Wolfe’s loan and would not
foreclose, the Counterclaim does not allege how Wolfe
detrimentally relied on Northern Trust’s promise.

For all of

these reasons, Wolfe’s promissory estoppel claim fails.
This Court therefore GRANTS the Motion to Dismiss as to
Count VII.

The dismissal is WITHOUT PREJUDICE because it is

arguably possible for Wolfe to cure the defects in Count VII by
amendment.

See Harris, 573 F.3d at 737.

55

The Court GRANTS Wolfe

leave to file a motion seeking leaving to file an amended
counterclaim that cures the defects in Count VII.
Finally, to the extent that there are allegations in
the Counterclaim which this Court has not specifically addressed,
the Court finds that those allegations do not provide sufficient
support for the counts in the Counterclaim to survive the Motion
to Dismiss.
III. Leave to Amend
The Court has granted the Motion to Dismiss and
dismissed all of the counts in the Counterclaim without
prejudice, with the exception of Count V and the portion of Count
VI based on the implied duty of good faith and fair dealing in
the alleged oral forbearance agreement, which this Court has
dismissed with prejudice.

Wolfe is granted until June 28, 2012

to file a motion to the magistrate judge which seeks permission
to file an amended counterclaim addressing the deficiencies noted
in this Order.

The Court CAUTIONS Wolfe that, if he fails to

timely file a motion seeking leave to file an amended
counterclaim, the claims which this Court has dismissed without
prejudice will be automatically dismissed with prejudice.
Further, if Wolfe files an amended counterclaim pursuant to leave
from the magistrate judge, but the amended counterclaim fails to
address the defects identified in this Order, the Court may
dismiss such claims with prejudice.
56

The Court emphasizes that Wolfe is not granted leave to
add new parties, claims or theories of liability.

If Wolfe

wishes to add new parties, claims or theories of liability, Wolfe
must either obtain a stipulation from Northern Trust or file a
separate motion seeking leave to amend according to the deadlines
in the Rule 16 Scheduling Order.

The magistrate judge will rule

upon such a motion in the normal course.

The Court CAUTIONS

Wolfe that, if he includes new parties, claims or theories of
liability in the amended counterclaim without obtaining either a
stipulation or leave from the magistrate judge, the new parties,
claims, or theories of liability may be dismissed with prejudice.
CONCLUSION
On the basis of the foregoing, Northern Trust’s Motion
for Summary Judgment as to the Complaint Filed Herein on
August 30, 2011, Interlocutory Decree of Foreclosure, and Order
of Sale, filed January 26, 2011, is HEREBY DENIED WITHOUT
PREJUDICE, and Northern Trust’s Motion to Dismiss Defendant
Kenneth I. Wolfe’s Counterclaim, filed December 7, 2011, is
HEREBY GRANTED.

Specifically, this Court DISMISSES WITH

PREJUDICE Count V and the portion of Count VI based on the
implied duty of good faith and fair dealing in the alleged oral
forbearance agreement.

The Court DISMISSES all of the remaining

counts in the Counterclaim WITHOUT PREJUDICE.

57

To the extent that the Court has dismissed some of the
counts in the Counterclaim without prejudice, the Court GRANTS
Wolfe leave to submit a motion to the magistrate judge seeking
permission to file an amended counterclaim addressing those
claims.

This Court CAUTIONS Wolfe that, if he fails to file his

motion by June 28, 2012, the claims which this Court has
dismissed without prejudice will be automatically dismissed with
prejudice.

Further, if Wolfe’s amended counterclaim does not

address the deficiencies identified in this Order, the claims
which this Court has dismissed without prejudice may be dismissed
with prejudice.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, May 31, 2012.

/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

NORTHERN TRUST, NA V. KENNETH I. WOLFE; ORDER GRANTING NORTHERN
TRUST’S MOTION TO DISMISS DEFENDANT KENNETH I. WOLFE’S
COUNTERCLAIM AND DENYING NORTHERN TRUST’S MOTION FOR SUMMARY
JUDGMENT AS TO THE COMPLAINT FILED HEREIN ON AUGUST 30, 2011,
INTERLOCUTORY DECREE OF FORECLOSURE, AND ORDER OF SALE

58