Lindsey et al v. Meridias Capital, Inc. et al
Filing
24
ORDER Granting Defendants Mortgage Electronic Registrations Systems, Inc.; Bank Of America, N.A.; And U.S. Bank, N.A.'s Motion To Dismiss Plaintiffs' Complaint re 6 . Signed by JUDGE J. MICHAEL SEABRIGHT on 2/13/12. (gls, )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
STEVEN L. LINDSEY; TIFFANY
LINDSEY,
)
)
)
Plaintiffs,
)
)
vs.
)
)
MERIDIAS CAPITAL, INC.;
)
MORTGAGE ELECTRONIC
)
REGISTRATION SYSTEMS, INC.;
)
BANK OF AMERICA fka
)
COUNTRYWIDE HOME LOANS,
)
INC. TX; BAC HOME LOANS
)
SERVICING, LP; U.S. BANK
)
NATIONAL ASSOCIATIONS as
)
TRUSTEE FOR THE CERTIFICATE )
HOLDERS LXS 2007-15N; JOHN
)
DOES 1-10; JANE DOES 1-10; DOE )
CORPORATIONS 1-10; DOE
)
ENTITIES 1-10;
)
)
Defendants
)
________________________________ )
CIVIL NO. 11-00653 JMS/KSC
ORDER GRANTING
DEFENDANTS MORTGAGE
ELECTRONIC REGISTRATIONS
SYSTEMS, INC.; BANK OF
AMERICA, N.A.; AND U.S. BANK,
N.A.’S MOTION TO DISMISS
PLAINTIFFS’ COMPLAINT
ORDER GRANTING DEFENDANTS MORTGAGE ELECTRONIC
REGISTRATIONS SYSTEMS, INC.; BANK OF AMERICA, N.A.; AND U.S.
BANK, N.A.’S MOTION TO DISMISS PLAINTIFFS’ COMPLAINT
I. INTRODUCTION
On May 31, 2011, Plaintiffs Steven and Tiffany Lindsey (“Plaintiffs”)
filed a Complaint in the Third Circuit Court of the State of Hawaii against
Defendants Meridias Capital, Inc. (“Meridias”), Mortgage Electronic Registration
Sytems, Inc. (“MERS”), Bank of America fka Countrywide Home Loans, Inc.
(“BANA”); BAC Home Loans Servicing LP (“BAC”); and U.S. Bank National
Association as Trustee for the Certificate Holders LXS 2007-15N (“U.S. Bank”)
(collectively “Defendants”) asserting claims titled (1) Violation of the Real Estate
Settlement Procedures Act [(“RESPA”)] 12 U.S.C. § 2605 et seq., and Accounting;
(2) Stay of Nonjudicial Proceedings; and (3) Quiet Title. On October 26, 2011,
MERS, BANA, and U.S. Bank removed the action to this court.
Currently before the court is MERS, BANA, and U.S. Bank’s
(“Moving Defendants”) Motion to Dismiss, in which they argue that the Complaint
fails to state a claim upon which relief can be granted.1 Based on the following, the
court GRANTS the Motion to Dismiss.
II. BACKGROUND
A.
Factual Background
As alleged in the Complaint, in April 2007, Plaintiffs entered into a
mortgage loan transaction for $425,600 with Meridias secured by real property
located at 64-5244 Puu Nani Drive, Kamuela, HI 9643 (the “subject property”).
1
Meridias has not appeared in the action, but remains as a named Defendant. Although
Meridias has not appeared, Moving Defendants’ arguments apply equally to Meridias such that
the court sua sponte dismisses Meridias for the same reasons set forth by Moving Defendants.
See Abagninin v. AMVAC Chem. Corp., 545 F.3d 733, 742-43 (9th Cir. 2008) (upholding
dismissal in favor of a party which had not appeared, on the basis of facts presented by other
defendants which had moved to dismiss) (citations omitted).
2
Doc. No. 1-2, Compl. at 5.2 The mortgage lists Meridias as the lender, and states
that MERS “is acting solely as a nominee for Lender and Lender’s successors and
assigns. MERS is the mortgagee under this Security Instrument.” Doc. No. 11-1,
Defs.’ Ex. A.3 According to the Complaint, “[t]he mortgage security was granted
to MERS, so the note and the mortgage were split from the inception.” Doc. No.
1-2, Compl. at 5.
According to the Complaint, the mortgage loan had a “rapidly
adjusting rate mortgage,” and Plaintiffs began to have difficulty making payments
after their tenant moved out and Plaintiffs were unable to find a replacement. Doc.
No. 1-2, Compl. at 5-6. Plaintiffs therefore attempted to modify or rework the loan
with Countrywide, who at that time purported to be their lender. Id. at 6.
In addition to Countrywide, various other Defendants have allegedly asserted
2
The Complaint, by and large, does not number individual paragraphs. It also attaches
as exhibits collections of documents such that each “exhibit” includes multiple documents. The
court cites to the Complaint and exhibits as best it can.
3
The court takes judicial notice of the mortgage, which is a public document recorded in
the Bureau of Conveyances. See United States v. 14.02 Acres of Land More or Less in Fresno
Cnty., 547 F.3d 943, 955 (9th Cir. 2008) (“Although, as a general rule, a district court may not
consider materials not originally included in the pleadings in deciding a Rule 12 motion, Fed. R.
Civ. P. 12(d), it ‘may take judicial notice of matters of public record’ and consider them without
converting a Rule 12 motion into one for summary judgment.” (citing Lee v. City of Los Angeles,
250 F.3d 668, 688 (9th Cir. 2001)).
3
ownership of the loan, including BANA, BAC, and U.S. Bank.4 Id. at 6. The only
assignment of mortgage recorded with Hawaii’s Bureau of Conveyances, however,
was a December 8, 2009 assignment from MERS, on behalf of Meridias, to U.S.
Bank, whose address is listed as “C\O Bank of America fka Countrywide Home
Loans, Inc.” Id. at Compl. Ex. 2. The Complaint asserts that the recording of
transfers regarding the subject property is incomplete, causing a cloud upon the
title. Id. at Compl. at 6-7.
On December 8, 2009, U.S. Bank recorded a notice of intent to
foreclose under power of sale. Id. at 6; see also id. at Compl. Ex. 2. On December
15, 2009, U.S. Bank provided Plaintiffs a “Notice Required by the Fair Debt
Collection Practices Act [“FDCPA”], 15 U.S.C. Section 1692, et seq.” Id. at
Compl. Ex. 1. The December 15, 2009 letter explained, among other things, that
(1) Routh Crabtree Olson (“RCO”) “has been retained to initiate foreclosure
proceedings” on the subject property, (2) the amount of the debt is $459,455.76,
(3) the FDCPA entitles Plaintiffs to dispute the debt and/or request the name of the
original creditor within thirty days of the letter, and (4) if Plaintiffs request such
information, then RCO will suspend foreclosure efforts until the information is
4
It appears that Plaintiffs may have confused loan ownership with loan servicing.
Indeed, the Complaint alleges that BANA and BAC serviced the mortgage loan. Doc. No. 1-2,
Compl. at 4 ¶¶ 5-6; see also id. at Compl. Ex. 4 (letter from Routh Crabtree Olsen explaining
that U.S. Bank employed BANA to service the loan on its behalf).
4
provided. Id.
A January 7, 2010 letter from Plaintiffs to RCO provides:
As required by the [FDCPA], please provide me with the
following:
1.
2.
3.
4.
You have not provided me with the “ledger of
payments”. When I made payments I sent them
registered mail.
I do dispute this debt.
I want to know the name of the original creditor
and who has legitimate “possession of the original
note”.
You have not provided me with the “original note”
with my signature.
Id. at Compl. Ex. 4.
On January 18, 2010, RCO responded by, among other things,
(1) providing a copy of the note, mortgage, and payment history of the loan; and
(2) explaining that MERS assigned the loan to U.S. Bank, that U.S. Bank
employed BANA to service the obligation, and that BANA retained RCO to
initiate foreclosure proceedings. Id. On January 30, 2010, Plaintiffs reiterated the
requests in their January 7, 2010 letter, and on February 22, 2010, RCO responded
by directing Plaintiffs to RCO’s January 18, 2010 letter. Id.
On June 10, 2010, Plaintiffs sent RCO a twelve-page letter titled
“Affidavit of Truth and Statement of Facts[;] ‘Qualified written request.’” Id. The
June 10, 2010 letter asserts that it is a request pursuant to the FDCPA and a
5
qualified written request (“QWR”) pursuant to RESPA. The letter then proceeds to
demand that RCO (1) investigate and audit Plaintiffs’ account, (2) produce copies
of “all pertinent information regarding this loan,” and (3) answer an exhaustive list
of questions. The documents requested and questions seeking information span an
array of topics including ensuring compliance with federal laws, accounting and
servicing systems used, debits and credits, mortgages and assignments, attorneys’
fees, suspense/unapplied accounts, late fees, property inspections, broker price
opinion fees, force-placed insurance, and servicing of the mortgage loan. Id.
As alleged in the Complaint, Plaintiffs’ January 7, 2010 letter
qualifies as a QWR under RESPA and RCO “sent an inadequate response to
Plaintiff’s requests and refused to produce even a certified copy of the original
promissory note to show that his clients had any right to enforce the note or the
security that was placed thereon.” Id. at Compl. at 8.
B.
Procedural Background
On May 31, 2011, Plaintiffs filed this action in the Third Circuit Court
of the State of Hawaii, asserting claims against Defendants titled
(1) Violation of the Real Estate Settlement Procedures Act 12 U.S.C. § 2605 et
seq., and Accounting; (2) Stay of Nonjudicial Proceedings; and (3) Quiet Title. On
October 26, 2011, MERS, BANA, and U.S. Bank removed the action to this court.
6
On November 10, 2011, Moving Defendants filed their Motion to
Dismiss. Plaintiffs filed an Opposition on January 23, 2012, and Moving
Defendants filed a Reply on January 30, 2012. Pursuant to Local Rule 7.2(d), the
court determines the Motion to Dismiss without a hearing.
III. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]”
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S. Ct. 1937, 1949 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also
Weber v. Dep’t of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). This
tenet -- that the court must accept as true all of the allegations contained in the
complaint -- “is inapplicable to legal conclusions.” Iqbal, 129 S. Ct. at 1949.
Accordingly, “[t]hreadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at
555); see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“[A]llegations
in a complaint or counterclaim may not simply recite the elements of a cause of
7
action, but must contain sufficient allegations of underlying facts to give fair notice
and to enable the opposing party to defend itself effectively.”).
Rather, “[a] claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949 (citing
Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader
is entitled to relief as required by Rule 8. Iqbal, 129 S. Ct. at 1950.
IV. DISCUSSION
Moving Defendants argue that the Complaint must be dismissed for a
variety of reasons. The court addresses Moving Defendants’ arguments in turn.
A.
Failure to Plead Facts as to Each Party
As an initial matter, Moving Defendants argue that the Complaint
must be dismissed because it is unclear exactly what Plaintiffs are asserting against
each particular party. Doc. No. 6-1, Defs.’ Mot. at 5. The court agrees -- none of
the individual counts makes any particular allegations as to any specific party, and
8
the general allegations for the most part lump all the parties together. Such
conclusory pleading fails to state a claim that is plausible on its face as to any
Defendant.
In opposition, Plaintiffs do not address this argument and indeed fail
to address any of Plaintiffs’ claims and/or Defendants’ arguments. Instead,
Plaintiffs make generalized (and at times nonsensical) arguments that Defendants
cannot foreclose without establishing a chain of title and/or establishing its interest
in the subject property, and that Defendants caused various title defects due to
unrecorded transfers and securitization of the mortgage loan.5 Putting aside that
these arguments are unsupported by law,6 such arguments are irrelevant to whether
Plaintiffs have stated any claims. Simply put, Plaintiffs’ Opposition is completely
unhelpful to determining whether the Complaint states a claim upon which relief
can be granted.
5
Plaintiffs go so far as to argue that Defendants are not the real party in interest and have
no standing. Plaintiffs, not Defendants, brought this action and it should go without saying that a
defendant has the right to defend itself in a litigation.
6
As explained below, a borrower may not assert a claim based on a lender’s nonpossession of and/or failure to produce the original Note and Mortgage. Further, “any argument
that MERS lacked the authority to assign its right to foreclose and sell the property based on its
status as ‘nominee’ cannot stand in light of [Cervantes v. Countrywide Home Loans, Inc., 656
F.3d 1034 (9th Cir. Sept. 7, 2011).]” Velasco v. Sec. Nat’l Mortg. Co., 2011 WL 4899935, at
*11 (D. Haw. Oct. 14, 2011). Specifically, Cervantes held that claims attacking the MERS
recording system as fraudulent fail given that mortgages generally disclose that MERS’s role as
acting “solely as nominee for Lender and Lender’s successors and assigns,” and that MERS has
the right to foreclose and sell the property. Cervantes, 656 F.3d at 1042. Plaintiffs must
consider these authorities in determining whether they can amend their claims.
9
Accordingly, the court finds that as a general matter, the Complaint
fails to state a claim as to any party.
B.
Violation of RESPA and Accounting (Count I)
Count I asserts that Plaintiffs’ January 7, 2010 letter was a QWR
pursuant to RESPA and that Defendants failed “to provide a written response
acknowledging receipt of [the QWR]” and “never responded adequately to
Plaintiffs’ reasonable requests.” Doc. No. 1-2, Compl. at 8. Count I further asserts
that “[t]he amount of money still owed, if any, to Defendants or anyone else
claiming an interest in the loan is unknown and cannot be determined without an
accounting.” Id. at 9. Defendants argue that Count I, whether read as asserting a
claim for a RESPA violation or for an accounting, fails to state a claim for relief.7
The court agrees.
1.
RESPA
Plaintiffs’ RESPA claim fails to allege sufficient facts to plausibly
support that Defendants failed to properly respond to a QWR or that Plaintiffs
suffered damages.
7
Count I also references Hawaii Revised Statutes (“HRS”) §§ 667-4 and 667-37. The
court addresses HRS § 667-37 in its discussion of why Count II fails to state a claim. HRS
§ 667-4, titled “Defenses,” provides that in a foreclosure action, the mortgagor may defend such
suit by “show[ing] any matter in legal or equitable avoidance of the mortgage.” According to its
plain language, § 667-4 does not create a private cause of action and to the extent Plaintiffs
assert a claim pursuant to § 667-4, the court dismisses it as a matter of law.
10
a.
Servicer’s response to a QWR
RESPA provides that “[i]f any servicer of a federally related mortgage
loan receives a [QWR] from the borrower (or an agent of the borrower) for
information relating to the servicing of such loan, the servicer shall provide a
written response acknowledging receipt of the correspondence within 20 days[.]”
12 U.S.C. § 2605(e)(1)(A). A QWR is defined as:
a written correspondence, other than notice on a payment
coupon or other payment medium supplied by the
servicer, that: (i) includes, or otherwise enables the
servicer to identify, the name and account of the
borrower; and (ii) includes a statement of the reasons for
the belief of the borrower, to the extent applicable, that
the account is in error or provides sufficient detail to the
servicer regarding other information sought by the
borrower.
12 U.S.C. § 2605(e)(1)(B). “Servicing” is defined as:
receiving any scheduled periodic payments from a
borrower pursuant to the terms of any loan, including
amounts for escrow accounts described in section 2609
of this title, and making the payments of principal and
interest and such other payments with respect to the
amounts received from the borrower as may be required
pursuant to the terms of the loan.
12 U.S.C. § 2605(i)(3).
After receiving the QWR, within sixty days, the loan servicer must, if
the servicer determines an error in the account, make appropriate corrections to the
11
borrower’s account and notify the borrower of the correction in writing. 12 U.S.C.
§ 2605(e)(2)(A). If the servicer determines that the account is not in error, the
servicer must provide the borrower with a written explanation or clarification
stating the reasons why the servicer believes the borrower’s account is correct. Id.
§ 2605(e)(2)(B). If the request pertains to a request for information, the servicer
must either provide the information to the borrower or explain why such
information is unavailable. Id. § 2605(e)(2)(C).
Defendants argue that Plaintiffs’ January 7, 2010 letter asked for
information beyond the proper subject of a QWR, and in any event, Defendants
responded to the January 7, 2010 letter by providing servicing information. The
court agrees that the January 7, 2010 letter (and indeed, all of Plaintiffs’ letters to
RCO)8 sought information beyond “information relating to the servicing” of
8
The court recognizes that Plaintiffs sent, and RCO responded to, several other letters
requesting information. Count I, however, asserts a RESPA violation based on the January 7,
2010 letter only. But even if the Complaint had alleged that Plaintiffs’ other letters constitute
QWRs, such assertion would fail to state a claim upon which relief can be granted for the same
reasons explained below as to the January 7, 2010 letter.
Indeed, Plaintiffs’ January 30, 2010 and April 6, 2010 letters simply reiterated the
requests in Plaintiffs’ January 7, 2010 letter. In contrast, Plaintiffs’ June 10, 2010 letter took a
shot-gun approach by requesting any and all information and documents related in any manner to
Plaintiffs’ loan. Although the Complaint does not assert RESPA violations based on any of
Plaintiffs’ letters beyond the January 7, 2010 letter, Plaintiffs should be aware that this court has
rejected the proposition that RESPA allows a borrower to request, and forces a servicer to
provide, “any and all” documents vaguely relating to servicing of the loan. See Menashe v. Bank
of N.Y., 2012 WL 397437, at *7 (D. Haw. Feb. 6, 2012). Rather, the plain language of RESPA
requires a servicer to provide information -- not necessarily documents -- “relating to servicing
of” a loan, which in turn is defined as “receiving any scheduled periodic payments from a
(continued...)
12
Plaintiffs’ loan. Specifically, requests seeking information on the validity of the
loan and mortgage documents (such as documents relating to the original loan
transaction and its subsequent history) simply “do not fall within the confines of
RESPA.” Junod v. Dream House Mortg. Co., 2012 WL 94355, at *3 (C.D. Cal.
Jan. 5, 2012) (citing Consumer Solutions REO, LLC v. Hillery, 658 F. Supp. 2d
1002, 1014 (N.D. Cal. 2009) (dismissing RESPA claim with prejudice after
observing that the requirement “[t]hat a QWR must address the servicing of the
loan, and not its validity, is borne out by the fact that § 2605(e) expressly imposes
a duty upon the loan servicer, and not the owner of the loan”); MorEquity, Inc. v.
Naeem, 118 F. Supp. 2d 885, 901 (N.D. Ill. 2000) (dismissing a RESPA claim
because “[a]ccording to the allegations . . . , the letter sought information about the
validity of the loan and mortgage documents, but made no inquiry as to the status
of the [ ] account balance”); see also Thurman v. Barclays Cap. Real Estate Corp.,
2011 WL 846441, at *4 (E.D. Cal. Mar. 7, 2011) (“A QWR must seek information
relating to the servicing of the loan; a request for loan origination documents is not
a QWR.”); Jones v. PNC Bank, N.A., 2010 WL 3325615, at *2 (N.D. Cal. Aug. 20,
2010) (“A QWR must seek information relating to the servicing of the loan; a
request for loan origination documents is not a QWR.”).
8
(...continued)
borrower pursuant to the terms of any loan.” 12 U.S.C. § 2605(i)(3).
13
Plaintiffs’ January 7, 2010 letter requested: (1) a “ledger of
payments,” (2) “the name of the original creditor and who has legitimate
‘possession of the original note,’” and (3) the “‘original note’ with my signature.”
Doc. No. 1-2, Compl. Ex. 4. Although the first request for a “ledger of payments”
is arguably directed to loan servicing information, the latter two requests are
directed to loan origination, as opposed to loan servicing. Thus, Plaintiffs cannot
base a RESPA violation on any failure of RCO to provide information in response
to the latter two requests.
That Plaintiffs’ January 7, 2010 letter (or any of their subsequent
letters for that matter) may qualify at least in part as a QWR, however, does not
end the analysis. A violation of § 2605(e)(2) occurs only if, after receiving a
QWR, a loan servicer fails within sixty days to “either provide the information to
the borrower or explain why such information is unavailable.” As to this element,
the Complaint asserts that “RCO sent an inadequate response . . . and refused to
produce even a certified copy of the original promissory note.” Doc. No. 1-2,
Compl. at 8. As explained above, a failure to provide a certified copy of the Note
is not the proper basis of a RESPA violation. Further, as to the Complaint’s
assertion that “RCO sent an inadequate response,” it is wholly unclear what
response was inadequate, and Plaintiffs apparently believed that a QWR could
14
include requests well beyond servicing information. And this allegation is
especially inadequate given that the attachments to the Complaint reveal that on
January 18, 2010 (well before the expiration of RESPA’s sixty-day time period),
RCO responded to Plaintiffs’ January 7, 2010 letter by providing, among other
things, “a payment history for the loan.” Id. at Compl. Ex. 4. In short, the
Complaint fails to explain how RCO’s January 18, 2010 letter was an insufficient
response to a QWR, and therefore fails to provide notice to Defendants of what
servicing information they allegedly failed to timely provide Plaintiffs that is the
basis of this claim.
b.
Damages
Plaintiffs’ RESPA claim also fails because they have not alleged any
actual damages. Pursuant to 12 U.S.C. § 2605(f)(1), Plaintiffs have a burden to
plead and demonstrate they have suffered damages. Specifically, § 2605(f)(1)
provides:
Whoever fails to comply with any provision of this
section shall be liable to the borrower for each such
failure in the following amounts:
(1) Individuals
In the case of any action by an individual, an
amount equal to the sum of -(A) any actual damages to the borrower as a result
of the failure; and
(B) any additional damages, as the court may
allow, in the case of a pattern or practice of
15
noncompliance with the requirements of this section, in
an amount not to exceed $1,000.
Because damages are a necessary element of a RESPA claim, failure to plead
damages is fatal to a RESPA claim. See, e.g., Esoimeme v. Wells Fargo Bank,
2011 WL 3875881, at *14 (E.D. Cal. Sept. 1, 2011) (dismissing claim where the
plaintiff failed to “allege any pecuniary loss from defendant’s alleged failure to
respond to the QWR”); Soriano v. Countrywide Home Loans, Inc., 2011 WL
1362077, at *6 (N.D. Cal. Apr. 11, 2011) (reasoning that “even if a RESPA
violation exists, Plaintiff must show that the losses alleged are causally related to
the RESPA violation itself to state a valid claim under RESPA”); Shepherd v. Am.
Home Mortg. Servs., 2009 WL 4505925, at *3 (E.D. Cal. Nov. 20, 2009)
(“[A]lleging a breach of RESPA duties alone does not state a claim under RESPA.
Plaintiff must, at a minimum, also allege that the breach resulted in actual
damages.” (quoting Hutchinson v. Del. Sav. Bank FSB, 410 F. Supp. 2d 374, 383
(D. N.J. 2006))).
The requirement that a plaintiff plead damages is interpreted
“liberally.” Shepherd, 2009 WL 4505925, at *4. With that said, however, “the
plaintiff must at least allege what or how the plaintiff suffered the pecuniary loss.”
Ash v. OneWest Bank, FSB, 2010 WL 375744, at *6 (E.D. Cal. Jan. 26, 2010).
The Complaint asserts that “[a]s a direct and proximate result of
16
Defendants’ failure to comply with RESPA, as set forth herein, Plaintiff has
suffered and continues to suffer damages and costs of suit.” Doc. No. 1-2, Compl.
at 9. This conclusory allegation fails to explain how Plaintiffs suffered actual
damages as a result of the alleged RESPA violations. See Shepherd, 2009 WL
4505925, at *3.
For these reasons, the court GRANTS Defendants’ Motion to Dismiss
Count I to the extent it asserts a RESPA violation against any Defendant.
2.
Accounting
To the extent that Count I asserts a claim for an accounting, such
claim fails to state a claim upon which relief can be granted.
As an initial matter, to the extent Plaintiffs seek an accounting under
RESPA, “there is no statutory basis for an accounting under RESPA.” Farias v.
FCM Corp., 2010 WL 4806894, at *3 (S.D. Cal. Nov. 18, 2010) (citing Orozco v.
DHI Mortg., Co., 2010 WL 2757283, *6 (S.D. Cal. July 13, 2010)). Specifically,
the remedy provisions of RESPA, 12 U.S.C. § 2605(f), include damages and costs
and does not provide for an accounting. See also Gaitan v. Mortg. Elec.
Registration Sys., 2009 WL 3244729, at *13 (C.D. Cal. Oct. 5, 2009).
Further, to the extent Plaintiffs seek an accounting as a stand-alone
claim, this court has rejected similar claims in other cases. See, e.g., Gaspar v.
17
Bank of Am., N.A., 2010 WL 4226466, at *7 (D. Haw. Oct. 18, 2010). As
explained in Gaspar, “[t]he action of accounting is designed to provide a remedy to
compel a person who, by virtue of some confidential or trust relationship, has
received or been entrusted with money or property belonging to another or which
is to be applied or disposed of in a particular manner, to render an account
thereof.” Block v. Lea, 5 Haw. App. 266, 277, 688 P.2d 724, 732-33 (1984)
(quoting 1 Am.Jur.2d Accounts & Accounting § 45 (1962)). “The necessary
prerequisite to the right to maintain a suit for an equitable accounting, like all other
equitable remedies is . . . the absence of an adequate remedy at law.” Porter v. Hu,
116 Haw. 42, 55, 169 P.3d 994, 1007 (Haw. App. 2007) (citation and quotation
signals omitted).
The Complaint contains no facts explaining why Plaintiffs are entitled
to an equitable accounting from Defendants. Although Defendants were Plaintiffs’
mortgagee and/or mortgagee servicers, a mortgagee does not have a “confidential
or trust relationship” with its mortgagor unless the mortgagee exceeds its role as a
lender of money. See, e.g., McCarty v. GCP Mgmt., LLC, 2010 WL 4812763, at
*5 (D. Haw. Nov. 17, 2010) (adopting the well-settled proposition that a borrowerlender relationship is not fiduciary in nature absent some special circumstances);
see also Anderson v. Cent. Pac. Home Loans, Inc., 2011 WL 3439939, at *6 (D.
18
Haw. Aug. 8, 2011) (“Unless a special relationship exists between a borrower and
lender that elevates the lender’s responsibility, the standard ‘arms-length business
relationship’ applies.” (citing Giles v. Gen. Motors Acceptance Corp., 494 F.3d
865, 883 (9th Cir. 2007)); Solomon v. E-Loan, Inc., 2011 WL 1253840, at *7 (E.D.
Cal. Mar. 30, 2011) (“The relationship between a lending institution and its
borrower-client is not fiduciary in nature.” (citing California law)).
Further, Plaintiffs have pled no factual allegations from which the
court can infer that no adequate remedy at law exists, such as, for example, that an
accounting is necessary because the mortgage accounts are so complicated that
only a court can discern them. See Dairy Queen, Inc. v. Wood, 369 U.S. 469,
478-79 (1962).
In sum, Plaintiffs are not entitled to an equitable accounting; indeed, if
they are able to state a claim upon which relief may be granted, they may seek such
information through discovery. The court therefore GRANTS Defendants’ Motion
to Dismiss Count I to the extent it asserts a claim for an accounting.
C.
Stay of Nonjudicial Proceedings (Count II)
Count II asserts that “Plaintiffs are entitled to a stay of Non-Judicial
foreclosure proceedings under Hawaii Revised Statutes § 667-37 because this
action is filed before the property was sold, even though a Non-Judicial sale may
19
take place.” Doc. No. 1-2, Compl. at 10. Count II explains that an “illegal sale
will cause Plaintiffs great and irreparable injury in that real property is unique and
Hawaii Revised Statutes allows for judicial redress under § 667-37.” Id. The sale
of the subject property is allegedly illegal because “Defendants have not proved up
their actual authority and right to foreclose . . . by proving that all the proper
assignments, documentation, and note with mortgage security are held by them.”
Id.
Defendants correctly argue that this claim fails to state a claim upon
which relief can be granted because § 667-37 does not provide for a stay of
foreclosure pending resolution of civil action filed by the borrower. Although
§ 667-37 contemplates that the borrower may file a civil action while the
mortgagee is seeking foreclosure, it is silent regarding any stay of foreclosure.
Specifically, § 667-37 provides:
This part shall not prohibit the borrower, the foreclosing
mortgagee, or any other creditor having a recorded lien
on the mortgaged property before the recordation of the
notice of default under section 667-23, from filing an
action for the judicial foreclosure of the mortgaged
property in the circuit court of the circuit where the
mortgaged property is located.
Plaintiffs base this claim on an earlier version of § 667-37, which
included an additional sentence that “[w]hile that circuit court foreclosure action is
20
pending, the power of sale foreclosure process shall be stayed.” See Doc. No. 1-2,
Compl. at 9 (citing repealed language). This language, however, was repealed
effective May 5, 2011, prior to Plaintiffs’ May 31, 2011 Complaint.9 See 2011
Haw. Sess. Laws Act 48. Thus, § 667-37 does not create a claim for Plaintiffs to
stay any foreclosure of the subject property.
Further, to the extent that Plaintiffs attempt to assert a claim against
Defendants based on their alleged failure to hold the note, courts have soundly
rejected borrowers’ claims based on a lender’s non-possession of and/or failure to
produce the original Note and Mortgage. See Krakauer v. IndyMac Mort. Servs.,
2010 WL 5174380, at *9 (D. Haw. Dec. 14, 2010) (citing Angel v. BAC Home
Loan Servicing, LP, 2010 WL 4386775, at *9-10 (D. Haw. Oct. 26, 2010) (“[T]his
Court and other district courts have rejected “show me the note” arguments like
Plaintiffs’.”); Brenner v. Indymac Bank, F.S.B., 2010 WL 4666043, at *7 (D.
Haw. Nov. 9, 2010) (explaining that “[n]o law requires a lender to show a
borrower an ‘original’ mortgage” prior to initiating foreclosure); Mansour v.
9
The court recognizes that HRS § 667-53(a)(1) allows the owner-occupant of a
residential property that is subject to a nonjudicial foreclosure to convert the action to a judicial
foreclosure by filing a petition making this election in the circuit court where the property is
located no later than thirty days after the foreclosure notice is served. Such petition “shall
automatically stay the nonjudicial foreclosure action unless and until the judicial proceeding has
been dismissed.” HRS § 667-53(a)(3). The court does not speculate whether § 667-53(a)(1)
might apply to the facts of this action.
21
Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009)
(discussing why courts routinely reject “show me the note” arguments to avoid
foreclosure)). Thus, Count II fails as a matter of law.
D.
Quiet Title (Count III)
Plaintiffs assert that they are the “equitable owners of the Subject
Property,” and that they “seek to quiet title against the claims of [Defendants] and
all persons . . . . claiming any legal or equitable right, title, estate, lien, or interest
in the [subject property] adverse to [P]laintiffs’ title” because they “have no right,
title, estate, lien or interest in the Subject Property.” Doc. No. 1-2, Compl. at 1112.
As this court has explained in numerous orders alleging similar
claims, see, e.g., Teaupa v. U.S. Nat’l Bank N.A., --- F. Supp. 2d ----, 2011 WL
6749813, at *15 (D. Haw. Dec. 22, 2011); Abubo v. Bank of N.Y. Mellon, 2011 WL
6011787, at *5 (D. Haw. Nov. 30, 2011); Long v. Deutsche Bank Nat’l Trust Co.,
2011 WL 5079586, at *12 (D. Haw. Oct. 24, 2011), the court construes such claim
as being brought under Hawaii Revised Statutes (“HRS”) § 669-1(a) (“[Quiet title]
[a]ction may be brought by any person against another person who claims, or who
may claim adversely to the plaintiff, an estate or interest in real property, for the
purpose of determining the adverse claim.”). Plaintiffs, however, have not alleged
22
sufficient facts regarding the interests of various parties to make out a cognizable
claim for “quiet title.” Plaintiffs have merely alleged elements of § 669-1, and thus
the Count fails to state a claim. See Iqbal, 129 S. Ct. at 1949 (“A pleading that
offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause
of action’” is insufficient.).
Further, in order to assert a claim for “quiet title” against a mortgagee,
a borrower must allege he has paid, or is able to tender, the amount of
indebtedness. “A basic requirement of an action to quiet title is an allegation that
plaintiffs ‘are the rightful owners of the property, i.e., that they have satisfied their
obligations under the deed of trust.’” Rosenfeld v. JPMorgan Chase Bank, N.A.,
732 F. Supp. 2d 952, 975 (N.D. Cal. 2010) (quoting Kelley v. Mortg. Elec.
Registration Sys., 642 F. Supp. 2d 1048, 1057 (N.D. Cal. 2009)). “[A] borrower
may not assert ‘quiet title’ against a mortgagee without first paying the outstanding
debt on the property.” Id. (citations omitted). Applying this law here, Plaintiffs
have not indicated that they have paid their outstanding loan balance, much less
that they are able to do so. In short, they fail to state a claim for quiet title.
The court therefore GRANTS the Motions to Dismiss as to Count III.
V. CONCLUSION
Based on the above, the court GRANTS Moving Defendants’ Motion
23
to Dismiss. This dismissal is as to all claims against all parties.
If Plaintiffs so choose, they may file an Amended Complaint,
consistent with this Order, by March 12, 2012. Plaintiffs are further notified that
an Amended Complaint will supersede the Complaint. Ferdik v. Bonzelet, 963
F.2d 1258 (9th Cir. 1992); Hal Roach Studios v. Richard Feiner & Co., 896 F.2d
1542, 1546 (9th Cir. 1990). After amendment, the court will treat the Complaint as
nonexistent. Ferdik, 963 F.2d at 1262. Any cause of action that was raised in the
Complaint is waived if it is not raised in the Amended Complaint. King v. Atiyeh,
814 F.2d 565, 567 (9th Cir. 1987).
If Plaintiffs choose to file an Amended Complaint, they must assert
basic factual allegations in sufficient detail to state a “plausible” claim, and then
clearly set forth separate counts for each cause of action. That is, such pleading
must:
(1)
state clearly how each of the Defendants has injured Plaintiffs, or how
the court can provide relief against each Defendant. In other words,
Plaintiffs should explain, in clear and concise allegations, what each
Defendant did (or failed to do) and how those specific facts create a
plausible claim for relief in reference to a specific statute or
common-law cause of action;
24
(2)
set forth separate counts for each cause of action. In other words,
Plaintiffs should not lump multiple causes of action within a single
count; and
(3)
state clearly the relief sought and how there is basis for a claim in
federal court. In other words, Plaintiffs must explain the basis of this
court’s jurisdiction.
Leave is not granted, however, for Plaintiffs to assert claims for an equitable
accounting or violation of HRS §§ 667-4 or 667-37. Granting leave to amend such
claims would be futile for the reasons described above.
If Plaintiffs fail to file an Amended Complaint by March 12, 2012,
this action will be automatically dismissed.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, February 13, 2012.
/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge
Lindsey et al. v. Meridias Cap., Inc. et al., Civ. No. 11-00653 JMS/KSC, Order Granting
Defendants Mortgage Electronic Registrations Systems, Inc.; Bank of America, N.A.; and U.S.
Bank, N.A.’s Motion to Dismiss Plaintiffs’ Complaint
25
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