Lindsay et al v. Bank of America, N.A. et al

Filing 16

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS COMPLAINT FILED ON APRIL 26, 2012. re: 5 . Signed by JUDGE LESLIE E. KOBAYASHI on 10/18/2012. ~ "Plaintiffs' Complaint is HEREBY DISMISSED WITH PREJUDICE...." ~ [Order follows hearing held 9/24/2012 on Motion to Dismiss 5 . Minutes: 15 ] (afc)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MARIA LINDSAY and DEAN
LINDSAY,

)
)
)
)
Plaintiffs,
)
vs.
)
)
BANK OF AMERICA, N.A.,; BAC
)
)
HOME LOANS SERVICING, LP;
BANK OF NEW YORK MELLON; JOHN )
)
AND MARY DOES 1-10,
)
)
Defendants.
_____________________________ )

CIVIL NO. 12-00277 LEK-BMK

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
COMPLAINT FILED ON APRIL 26, 2012
Before the Court is the Motion to Dismiss Complaint
Filed on April 26, 2012 (“Motion”), filed June 11, 2012 by
Defendants Bank of America, N.A. (“BANA”), BAC Home Loans
Servicing, LP (“BAC”), and Bank of New York Mellon (“BONY,”
collectively, “Defendants”).

Plaintiffs Maria Lindsay and

Dean Lindsay (“Plaintiffs”) filed their memorandum in opposition
on September 4, 2012, and Defendants filed their reply on
September 10, 2012.
This matter came on for hearing on September 24, 2012.
Appearing on behalf of Defendants was Patricia McHenry, Esq., and
appearing on behalf of Plaintiffs was James Fosbinder, Esq.
After careful consideration of the Motion, supporting and
opposing memoranda, and the arguments of counsel, Defendants’

Motion is HEREBY GRANTED for the reasons set forth below.
BACKGROUND
On April 26, 2012, Plaintiffs filed their Complaint
against Defendants in state court.
following claims:

The Complaint asserts the

Claim I - Negligence; Claim II - Unfair and

Deceptive Acts and Practices (“UDAP”).

On May 21, 2012,

Defendants removed the action to this district court based on
diversity jurisdiction.

[Dkt. no. 1 at ¶ 4.]

On July 26, 2005, Plaintiffs executed an Adjustable
Rate Note in favor of non-party Countrywide Home Loans, Inc.
(“Countrywide”), for the principal amount of $735,000 (“Note”).
[Complaint at ¶ 5.]

The Note was secured by a mortgage on

Plaintiffs’ property, located at 2760 Puu Hoolai Street, Kihei,
Hawai`i 96753 (“Mortgage” and “Subject Property”).
5.]

[Id. at ¶¶ 1,

Eventually, Countrywide’s nominee executed an Assignment of

Mortgage (“Assignment”) in favor of BONY, which purported to
transfer to BONY, “‘all of [Countrywide’s] right, title and
interest in and to the Mortgage.[’]”

[Id. at ¶ 7.]

On or about April 7, 2009, Plaintiffs hired Kucsan &
McCrea to assist them with their loan modification application,
which would be sent to BAC, the loan servicer.

Plaintiffs

provided all documents required for a BAC loan modification
application.

On or about May 19, 2009, Kucsan & McCrea submitted

Plaintiffs’ loan modification application and supporting

2

documents to BAC for consideration.

During this process,

Plaintiffs continued to make payments under the Mortgage.

[Id.

at ¶¶ 3, 8-9.]
Shortly thereafter, BAC denied Plaintiffs’ request for
loan modification because Plaintiffs were current on the
Mortgage.

BAC informed Plaintiffs that they must be delinquent

in order to be considered for loan modification.

Although

Plaintiffs could have continued making payments under the
Mortgage, for the sole purpose of being able to qualify for a
loan modification, and relying on the representation and
instruction of BAC, Plaintiffs made their last payment on or
about June 16, 2009.

Plaintiffs continued to miss payments under

the Mortgage, and on or about August 20, 2009, Plaintiffs
received a Notice of Intent to Accelerate with respect to the
Mortgage (“Notice of Intent”).

[Id. at ¶¶ 10-13.]

On September 8, 2009, Plaintiffs received an email from
Kucsan & McCrea informing them that their application for a loan
modification was still under review with BAC.

Plaintiffs

continued to receive similar emails on September 22, 2009,
October 15, 2009, November 11, 2009, and December 7, 2009.
Meanwhile, Plaintiffs also received calls from BAC regarding
their delinquent account.

After Plaintiffs mentioned that they

were under review for a loan modification, BAC agents would
continue to reaffirm to Plaintiffs that they must remain

3

delinquent on the Mortgage in order to qualify for a loan
modification.

[Id. at ¶¶ 14-16.]

On December 28, 2009, Plaintiffs received a proposed
modification agreement from BAC, under which Plaintiffs’
principal and interest payments would ultimately increase.
Plaintiffs could not afford such an increase and accordingly
declined the proposed modification on February 2, 2010.

[Id. at

¶¶ 17-20.]
In late February 2010, Plaintiffs retained The Law Firm
of Carlos Negrete (“Negrete”) to assist them with a second loan
modification application.

Plaintiffs sent Negrete all the

required documents, and on March 11, 2010, Negrete informed
Plaintiffs that their second application was ready for
submission.

Negrete also informed Plaintiffs that, pursuant to

Negrete’s conversation with a BAC Home Retention Department
employee, Plaintiffs would need to cancel their original loan
modification in order to apply for the new loan modification.
[Id. at ¶¶ 21-23.]
On October 12, 2010, pursuant to Negrete’s conversation
with another BAC employee, Negrete instructed Plaintiffs to
submit updated financial information to BAC in order to continue
the processing of their loan modification application.

In late

October 2010, BAC sent Plaintiffs a letter indicating that their
home loan was referred to the Foreclosure Review Committee.

4

The

letter also stated that Plaintiffs may be eligible to participate
in several different programs, including loan modification.

[Id.

at ¶¶ 24-25.]
On November 11, 2010, Negrete informed Plaintiffs that
they received an email from Rodrigo Valdez at BAC, requesting
more information, some of which Plaintiffs had already submitted.
One week later, Negrete informed Plaintiffs that a BAC employee
confirmed that all requisite documents had been received and the
checklist for final approval of Plaintiffs’ loan modification
review was complete.

The BAC employee also stated that the

Subject Property was in foreclosure with no sale date, and that
the Notice of Intent had expired on September 16, 2010.

[Id. at

¶¶ 26-27.]
In late November 2010, Negrete informed Plaintiffs that
Mr. Valdez had verbally advised that Plaintiffs’ request for loan
modification was denied on the basis that “‘the investor said
no.’”

[Id. at ¶ 28.]

Plaintiffs assert that they never received

written communication of this denial from BAC.

In February 2011,

Negrete again informed Plaintiffs that the Mortgage on the
Subject Property was in foreclosure, although no foreclosure sale
date had been set.

The Complaint alleges that BAC’s

representations that Plaintiffs had to remain delinquent on the
Mortgage in order to qualify for loan modification caused
significant damage to Plaintiffs’ credit scores.

5

[Id. at ¶¶ 28-

30.]
In Claim I, Plaintiffs contend that BAC acted beyond
its role as a money lender and actively engaged in loan
modification negotiations, thereby creating a duty of care owed
to Plaintiffs.

[Id. at ¶¶ 33-34.]

Plaintiffs allege that BAC

initially told Plaintiffs it would take three to six months to
process their loan modification application and, by failing to
adequately process Plaintiffs’ loan modification application
after two years of review, BAC breached the duty of care it owes
to borrowers such as Plaintiffs.

Plaintiffs further contend

that, because BAC was in full control of the loan modification
application review process, it was reasonably foreseeable that
Plaintiffs would rely on BAC’s direction that they had to remain
delinquent on the Mortgage before they would qualify for a loan
modification.

Plaintiffs assert that BAC reported their

delinquencies to credit reporting agencies, resulting in
significant damage to their credit scores.

[Id. at ¶¶ 48-50.]

Under Claim II, Plaintiffs allege that BAC committed
unfair and deceptive acts or practices in violation of Haw. Rev.
Stat. § 480-2.

[Id. at ¶¶ 51-74.]

Plaintiffs contend that BAC

never intended to provide Plaintiffs with a loan modification,
but merely made such representations in order to “maximize its
fees and the payments it [could] extract from Plaintiffs.”
at ¶ 67.]

[Id.

Plaintiffs allege that BAC was deceptive in making the

6

representation that Plaintiffs would only qualify for loan
modification if they remained delinquent on the Mortgage, and in
reporting these delinquencies to credit reporting agencies.
Plaintiffs contend that, because BAC has unilateral control over
the modification process, Plaintiffs had no choice but to meet
its demands for financial documents in hopes of receiving a loan
modification.

Although BAC allegedly made express or implied

representations that Plaintiffs were eligible for a loan
modification, Plaintiffs assert that BAC does not in fact possess
the authority to modify Plaintiffs’ Mortgage, making BAC’s
representations deceptive acts.

[Id. at ¶¶ 62-64, 70-73.]

The Complaint prays for the following relief:

an order

enjoining BONY from foreclosing upon the Subject Property;
statutory damages; punitive damages; treble damages pursuant to
Claim II; attorney’s fees; compensatory damages; and other
appropriate relief.
I.

[Id. at pg. 18.]

Defendants’ Motion
Defendants filed their Motion pursuant to Federal Rule

of Civil Procedure 12(b)(6), and assert that each claim of the
Complaint fails to state a claim upon which relief can be
granted.

Defendants also allege that Plaintiffs failed to plead

sufficient facts to support their claims, as required by Fed. R.
Civ. P. 8 and 9(b).

[Motion at 1.]

7

A.

Claim I - Negligence
1.

As Against BONY

Defendants assert that the Court should dismiss Claim I
as against BONY because Claim I does not contain any allegations
against BONY.

[Mem. in Supp. of Motion at 6.]

Defendants argue

that Plaintiffs only name BONY as a defendant “in hopes of
enjoining BONY from evoking its properly-assigned power of sale
on the [Subject] Property, even though BONY played no role in the
loan modification process, and even though Plaintiffs admit that
they intentionally defaulted on the [Mortgage].”

[Id. at 6-7

(emphasis in Mem. in Supp. of Motion) (citing Complaint at
¶ 11).]

Accordingly, Defendants urge the Court to dismiss Claim

I as against BONY with prejudice.
2.

[Id. at 7.]

As Against Remaining Defendants

Defendants also urge this Court to dismiss Claim I as
against BANA and BAC (collectively, “BANA Defendants”1) because
the BANA Defendants owed no duty to modify the Mortgage, and even
assuming, arguendo, that they had a duty of care, Plaintiffs are
unable to establish breach, causation, or damages.

[Id.]

Defendants urge this Court to dismiss Claim I as against the BANA
Defendants with prejudice because it “consists of nothing more
than vague and conclusory ‘naked assertions’ devoid of ‘further
1

Bank of America, N.A. is defending this suit on its own
behalf and as the successor-by-merger to BAC. [Mem. in Supp. of
Motion at 1.]
8

factual enhancement.’”

[Id. at 9 (some citations and quotation

marks omitted) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949
(2009)).]

Furthermore, Defendants argue that Claim I should be

dismissed with prejudice because Plaintiffs cannot establish
causation or damages.
a.

[Id. at 14-15.]

Duty of Care

Defendants point to Plaintiffs’ concession that, in
terms of originating mortgage loans, lenders generally owe no
duty of care to borrowers.

[Id. at 8 (some citations omitted)

(citing Complaint at ¶ 34).]

Defendants further contend that

loan servicers also do not owe such a duty.

According to

Defendants, the BANA Defendants acted within their roles as loan
servicers to analyze Plaintiffs’ multiple loan modification
applications, and no special circumstances existed that would
give rise to a common law duty owed to Plaintiffs.

[Id. at

8-10.]
b.

Breach of Duty

Defendants also assert that, even if the BANA
Defendants owed Plaintiffs a duty of care as to their loan
modification applications, Plaintiffs are unable to establish a
breach of the BANA Defendants’ alleged duty.

Defendants argue

that, despite Plaintiffs’ failure “to supply any facts or law in
support of their allegations that a loan modification is
‘adequately processed’ within three (3) to six (6) months,” each
9

of Plaintiffs’ multiple modification applications was indeed
adequately processed according to Plaintiffs’ own alleged
standard.

[Id. at 10-11 (quoting Complaint at ¶¶ 48-49).]
c.

Causation

Defendants argue that, because Plaintiffs decided to
intentionally default on the Mortgage and have not made a payment
on the Mortgage since June 2009, Plaintiffs are unable to
establish causation.
d.

[Id. at 14 (citing Complaint at ¶ 11).]
Damages

Defendants further assert that Plaintiffs have failed
to allege damages.

Defendants argue that Plaintiffs have not

alleged facts to demonstrate that Plaintiffs’ default on the
Mortgage alone was negatively affecting their credit scores.
Defendants contend that any damage to Plaintiffs’ credit scores
is a “direct result of their own decision to intentionally
default” on the Mortgage.

[Id. at 15 (emphasis in original).]

Accordingly, Defendants urge the Court to dismiss Count I as
against the BANA Defendants with prejudice for Plaintiffs’
failure to state a negligence claim.
B.

Claim II - UDAP
1.

As Against BONY

Defendants urge the Court to dismiss Claim II as
against BONY because, like Claim I, Claim II does not contain any
allegations against BONY.

[Id. at 6-7.]
10

Accordingly, Defendants

urge this Court to dismiss Claim II as against BONY with
prejudice.
2.

As Against Remaining Defendants

Finally, Defendants argue that Claim II as against the
BANA Defendants fails because of insufficient pleading.
2, 16.]

[Id. at

According to Defendants, there are three essential

elements to a UDAP claim:

“‘(1) a violation of [Haw. Rev. Stat.]

chapter 480; (2) which causes an injury to the plaintiff’s
business or property; and (3) proof of the amount of damages.’”
[Id. at 16 (emphasis Mem. in Supp. of Motion) (quoting Davis v.
Four Seasons Hotel, Ltd., 122 Hawaii 423, 435, (2010)).]
Defendants contend that satisfaction of the first element “‘is
not sufficient ipso facto to support the action,’ because
‘forbidden acts cannot be relevant unless they cause [some]
private damage.’”

[Id. (alteration in Mem. in Supp. of Motion)

(quoting Robert’s Hawaii Sch. Bus, Inc. v. Laupahoehoe Transp.
Co., 91 Haw. 225, 254 n.30 (1999)).]

Thus, Defendants contend

that Plaintiffs have not pled sufficient facts to support their
UDAP claim because damage to their credit scores does not
constitute an injury to Plaintiffs’ “business or property” under
the statute.

[Id. (citing Haw. Rev. Stat. § 480-13(a)).]

Defendants assert that Claim II also fails because “it
is predicated on the faulty notion that [the BANA Defendants
were] required to give Plaintiff [sic] a modification.”
11

[Id.

(citing Complaint at ¶ 67).]

Defendants point to the lack of

supporting case law in the Complaint, and argue that courts have
held to the contrary.

[Id. at 17 (citing Nool v. HomeQ

Servicing, 653 F.Supp.2d 1047, 1052 (E.D. Cal. 2009)).]
Furthermore, Defendants contend that Plaintiffs’
allegations of misrepresentations ground Claim II in fraud.
According to Defendants, Plaintiffs’ allegations lack the
particular circumstances constituting the alleged fraud to
satisfy the pleading requirements of Federal Rule of Civil
Procedure 9(b).

Defendants argue that Plaintiffs cannot claim

the BANA Defendants committed a misrepresentation just because
Plaintiffs did not accept the terms of the proposed modification,
nor can Plaintiffs establish that Defendants’ modification
process is unfair.

Accordingly, Defendants urge this Court to

dismiss Claim II as against the BANA Defendants with prejudice.
[Id. at 17-19.]
II.

Plaintiffs’ Memorandum in Opposition
A.

Claim I - Negligence
1.

Duty of Care

In their Memorandum in Opposition, Plaintiffs maintain
that the BANA Defendants’ actions to engage in the loan
modification process with Plaintiffs established a duty of care.
[Mem. in Opp. at 3-4.]

Plaintiffs emphasize the “asymmetry in

power” between Plaintiffs and the BANA Defendants, and argue that
12

Plaintiffs are “powerless” in this loan modification process.
[Id. at 4.]

Plaintiffs contend, therefore, that special factors

exist so as to “characterize the relationship between Plaintiffs
and [the BANA Defendants] as one in which [the BANA Defendants
are] acting beyond that of a mere lender of money.”

[Id. at 5.]

Plaintiffs acknowledge the rule that a financial
institution acting within the scope of its conventional role as a
lender of money owes no duty of care to a borrower.

Although

Plaintiffs acknowledge this rule, pronounced in Nymark v. Heart
Federal Savings & Loan Ass’n, 283 Cal. Rptr. 53 (Cal. Ct. App.
1991), they argue that it is merely a general rule.

[Id. at 3.]

“Plaintiffs maintain that mortgage servicers, including [the BANA
Defendants], by definition and in the performance of their
services, are at all times acting beyond the conventional role as
a mere lender of money.”

[Id.]

In the alternative, Plaintiffs argue that this Court
should find that BANA owed a duty of care to them by applying the
six-factor test used by the Nymark court, which considers:
[1] the extent to which the transaction was
intended to affect the plaintiff, [2] the
foreseeability of harm to him, [3] the degree of
certainty that the plaintiff suffered injury, [4]
the closeness of the connection between the
defendant’s conduct and the injury suffered, [5]
the moral blame attached to the defendants’s
conduct, and [6] the policy of preventing future
harm.
Nymark, 283 Cal. Rptr. at 58 (citation and quotation marks

13

omitted).
According to Plaintiffs, the application of the sixfactor test used in Nymark to the instant case would establish
that the BANA Defendants owed Plaintiffs a duty of care in
processing their loan modification applications.
at 5.]

[Mem. in Opp.

Plaintiffs appear to align their argument with the Nymark

six-factor test, and contend that:

(1) the transaction was

intended to affect Plaintiffs in their ability to keep their
home; (2) the harm resulting from mishandling Plaintiffs’
modification application process was readily foreseeable; (3) the
injury to Plaintiffs is certain, as their home is now facing
foreclosure; (4) there is a close connection between the BANA
Defendants’ conduct and Plaintiffs’ injury to the extent that
Plaintiffs’ credit scores would not have been so damaged but for
the BANA Defendants’ conduct in reporting delinquency on the
Mortgage; and (5) recent actions taken by state and federal
governments indicate a public policy of preventing future harm to
home loan borrowers, such as Plaintiffs.

Based on these factors,

Plaintiffs argue that the BANA Defendants owed them a duty of
care during the loan modification application process.

[Id. at

5-7.]
2.

Breach of Duty

In arguing that Defendants breached the duty of care,
Plaintiffs emphasize the Complaint’s allegation that the BANA

14

Defendants “systemically failed to timely and accurately process
each of Plaintiffs’ modification applications.”

[Id. at 8.]

Plaintiffs further allege that their first loan modification
application was entirely ignored by the BANA Defendants because
Plaintiffs had been current on the Mortgage.

[Id.]

Plaintiffs

argue that the BANA Defendants “failed to provide Plaintiffs with
proper notice of the outcomes of their application[,]” which
ultimately resulted in a breach of the duty to properly process
their loan modification applications.
3.

[Id. at 9.]

Causation

Plaintiffs maintain that a causal connection exists
between Defendants’ breach and Plaintiffs’ harm.

Again,

Plaintiffs argue that it was “palpably reasonable for Plaintiffs
to believe that they had no other alternative but to stop making
their mortgage payments in order to qualify for a loan
modification.”

[Id. at 11.]

Moreover, but for Defendants’

misrepresentations, Plaintiffs would have sought alternate
foreclosure avoidance relief.
B.

[Id.]

Claim II - UDAP
Contrary to Defendants’ argument, Plaintiffs contend

that their UDAP claim is actually based upon the assumption that
the BANA Defendants were “required to process Plaintiffs’ loan
modification application in a fair, transparent and honest
manner,” and that the BANA Defendants failed to do so.
15

[Id. at

12.]

Plaintiffs point to a twenty-five billion dollar settlement

resulting from a complaint by forty-nine state attorneys general
alleging that banks, including BANA, “engaged in a pattern of
unfair, deceptive and unlawful practices in the course of their
conduct, management and oversight of loan modification . . . .”
[Id.]

In sum, Plaintiffs argue that they have sufficiently plead

the who, what, when, where, and how of their UDAP claim.
III. Defendants’ Reply
A.

Claim I - Negligence
In reply, Defendants argue that there is no legal

support for Plaintiffs’ claim that an absolute duty exists
between every loan servicer and borrower.

[Reply at 4-5.]

Defendants cite to multiple cases supporting their argument that,
absent special circumstances, loan servicers owe no duty to
borrowers.

Defendants also argue that an imbalance of power in

favor of the loan servicer, without more, does not constitute a
special factor that gives rise to a duty of care.

[Id. at 5-6.]

Defendants also deny that the six-factor Nymark test establishes
a duty of care owed by Defendants.

[Id. at 9-13.]

For the same

reasons as set forth in the Motion, Defendants contend that
Plaintiffs are still unable to establish the remaining requisite
elements of a negligence claim.
B.

[Id. at 13-15.]

Claim II - UDAP
Defendants maintain that Plaintiffs’ allegations are
16

“vague, conclusory, and factually unsupported[,]” and, therefore,
Plaintiffs have failed to state a UDAP claim.

[Id. at 15 (some

citations omitted) (citing Iqbal, 129 S. Ct. 1937 at 1949).]
Defendants argue that, even if Plaintiffs have met the pleading
requirements, Plaintiffs will be unable to establish a loss of
business or property sufficient to maintain their UDAP claim.
[Id. at 16.]
Defendants also maintain that Plaintiffs’ UDAP claim
fails to state with particularity the circumstances constituting
fraud or mistake, as required by Rule 9(b).

[Id. (citing Kearns

v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009)).]
Defendants state:
Plaintiffs cannot allege that but for the alleged
misrepresentations, they “would have sought
alternate foreclosure avoidance relief [Opp. at
11],” when they claim that “it is palpably
reasonable for Plaintiffs to believe that they had
no other alternative but to stop making their
mortgage payments in order to qualify for a loan
modification.” Opp. at 11 (emph. added).
[Id. at 17.]
Accordingly, Defendants urge this Court to dismiss the
Complaint with prejudice.

[Id.]
DISCUSSION

I.

Dismissal of the Complaint as Against BONY
As an initial matter, Defendants urge the Court to

dismiss the Complaint as against BONY.

Defendants assert, and

the Court agrees, that neither Claim I nor Claim II contain any
17

allegations of wrong-doing against BONY.
Motion at 6; Reply at 3.]

[Mem. in Supp. of

The Court therefore concludes that

Plaintiffs have failed to state a claim against BONY.
In determining whether to dismiss a claim with or
without prejudice, this Court has stated, “‘Dismissal without
leave to amend is improper unless it is clear that the complaint
could not be saved by any amendment.’”

Tedder v. Deutsche Bank

Nat’l Trust Co., Civil No. 11-00083 LEK-KSC, 2012 WL 1028125, at
*7 (D. Hawai`i March 23, 2012) (quoting Harris v. Amgen, Inc.,
573 F.3d 728, 737 (9th Cir. 2009)).

The Court notes that, at the

hearing on the Motion, it presented Plaintiffs’ counsel with the
opportunity to address whether the Complaint should be dismissed
with prejudice or, if dismissed without prejudice, how the
Complaint could be amended so as to properly state a claim.
Plaintiffs’ counsel, however, did not address either issue.
The Court therefore FINDS that it is clear that the
Complaint as against BONY could not be saved by any amendment.
The Court GRANTS the Motion as to the claims against
BONY, which are hereby DISMISSED WITH PREJUDICE.
II.

Dismissal of Claim I - Negligence as
Against the BANA Defendants
Defendants seek dismissal of Claim I against the BANA

Defendants pursuant to Federal Rule of Civil Procedure 12(b)(6),
which permits a motion to dismiss a claim for “failure to state a
claim upon which relief can be granted[.]”
18

Under Rule 12(b)(6), review is generally
limited to the contents of the complaint.
Sprewell v. Golden State Warriors, 266 F.3d 979,
988 (9th Cir. 2001). If matters outside the
pleadings are considered, the Rule 12(b)(6) motion
is treated as one for summary judgment. See Keams
v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th
Cir. 1997); Anderson v. Angelone, 86 F.3d 932, 934
(9th Cir. 1996). However, courts may “consider
certain materials-documents attached to the
complaint, documents incorporated by reference in
the complaint, or matters of judicial
notice-without converting the motion to dismiss
into a motion for summary judgment.” United
States v. Ritchie, 342 F.3d 903, 908 (9th Cir.
2003).
On a Rule 12(b)(6) motion to dismiss, all
allegations of material fact are taken as true and
construed in the light most favorable to the
nonmoving party. Fed’n of African Am. Contractors
v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir.
1996). To survive a motion to dismiss, a
complaint must contain sufficient factual matter
to “state a claim to relief that is plausible on
its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929
(2007). “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.”
Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937,
1949, 173 L. Ed. 2d 868 (2009). “Threadbare
recitals of the elements of a cause of action,
supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 554,
127 S. Ct. 1955).
Haw. Motorsports Inv., Inc. v. Clayton Grp. Servs., Inc., 693 F.
Supp. 2d 1192, 1195-96 (D. Hawai`i 2010).
In order to establish a negligence claim, Plaintiffs
“must demonstrate a duty, breach of that duty, legal causation,
and actual injury[.]”

See Black v. Correa, CV. No. 07-00299

19

DAE-LEK, 2007 WL 3195122, at *8 (D. Hawai`i Oct. 30, 2007).
Courts generally hold that lenders do not owe
their borrowers a duty of care sounding in
negligence. McCarty v. GCP Mgmt., LLC, 2010 WL
4812763, at *6 (D. Haw. Nov. 17, 2010) (citing
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 repay.”) (some citations omitted)).
Caraang v. PNC Mortg., 795 F. Supp. 2d 1098, 1122 (D. Hawai`i
2011).
Plaintiffs acknowledge this general rule.
at ¶ 34; Mem. in Opp. at 3.]

[Complaint

Nevertheless, Plaintiffs argue that

Defendants owed them a duty of care in processing their loan
modification applications pursuant to the six-factor test used in
Nymark.

[Mem. in Opp. at 5.]

Although this district court has

previously cited Nymark for its general rule that a lender does
not owe a duty of care to its borrower, see, e.g., Paik Apau v.
Deutsche Bank Nat’l Trust Co., Civil No. 10-00699 SOM/RLP, 2012
WL 300417, at *5 (D. Hawai`i Jan. 31, 2012), it does not appear
to have cited the alternative six-factor test.
In further support of its argument that the BANA
Defendants owed Plaintiffs a duty of care, the Complaint relies
on Ansanelli v. JP Morgan Chase Bank, N.A., No. C 10-03892 WHA,
2011 WL 1134451 (N.D. Cal. Mar. 28, 2011).

[Complaint at ¶ 34.]

In Ansanelli, the plaintiffs, homeowners, sought a loan
modification from the defendant loan servicer.
20

2011 WL 1134451,

at *1.

The plaintiffs alleged that the defendant delayed the

loan modification process before eventually placing them on a
trial modification plan, with the guarantee of permanent
modification in the future if payments were timely.

The

plaintiffs remained on the trial modification plan, but were
twice denied permanent modification over a period of eighteen
months.

The plaintiffs alleged that, during this period, the

defendant informed them their loan was current and instructed
them to continue paying the modified amount, when, in fact, the
defendant had been reporting the plaintiffs’ loan as past due.
Id.
The plaintiffs filed suit, and the defendant moved to
dismiss, arguing that, with regard to the plaintiff’s negligence
claim, the defendant owed no duty of care to the plaintiffs.
at *7.

Id.

The court denied the defendant’s motion as to the

negligence claim, concluding that the plaintiffs alleged
sufficient facts that the “defendant went beyond its role as a
silent lender and loan servicer [so as to]

.

.

.

constitute

sufficient active participation to create a duty of care[.]”

Id.

In response, Defendants argue, and this Court agrees,
that the facts of Ansanelli are distinguishable from those of the
present action.

[Mem. in Supp. of Motion at 10.]

In Ansanelli,

although the plaintiffs initially contacted the defendant to
request loan modification, the defendant loan servicer was

21

actually the party that prompted the plaintiffs to engage in a
trial modification plan, whereas this action resulted after
Plaintiffs initiated contact with the BANA Defendants to apply
for a loan modification.

Compare Ansanelli, 2011 WL 1134451, at

*1, with Complaint at ¶¶ 9-10.

Furthermore, the plaintiffs in

Ansanelli never received a permanent loan modification, merely a
trial modification, whereas, in the instant case, Defendants
offered Plaintiffs a permanent loan modification, which
Plaintiffs voluntarily declined.

Compare Ansanelli, 2011 WL

1134451, at *1, with Complaint at ¶¶ 17-20.

Without more,

Plaintiffs have not alleged that the BANA Defendants acted
“beyond the domain of a usual money lender” so as to create a
duty of care owed to Plaintiffs.

See Ansanelli, 2011 WL 1134451,

at *7 (internal quotation marks omitted).

Because the Complaint

does not allege sufficient facts to establish a duty of care owed
by Defendants, Plaintiffs have failed to state a claim for
negligence.
The Court notes that it presented Plaintiffs’ counsel
with the opportunity to address whether the Claim I should be
dismissed with prejudice or, if dismissed without prejudice, how
Claim I could be amended so as to properly state a claim.

See

Tedder, 2012 WL 1028125, at *7 (quoting Harris, 573 F.3d at 737).
Plaintiffs’ counsel, however, did not address either issue.

The

Court therefore FINDS that it is clear that Claim I as against

22

the BANA Defendants could not be saved by any amendment.
The Court GRANTS the Motion as to Claim I against the
BANA Defendants, which is hereby DISMISSED WITH PREJUDICE.
III. Dismissal of Claim II - UDAP as Against the BANA Defendants
Defendants also seek dismissal of Claim II as against
the BANA Defendants pursuant to Rule 12(b)(6).

Defendants argue

that Claim II is grounded in fraud, and does not satisfy the
pleading requirements of Federal Rule of Civil Procedure 9(b).
Rule 9(b) requires that, “[i]n alleging fraud or
mistake, a party must state with particularity the circumstances
constituting fraud or mistake.”

Pursuant to Rule 9(b), a party

is required to make particularized allegations of the
circumstances constituting fraud.

See Sanford v. MemberWorks,

Inc., 625 F.3d 550, 557-58 (9th Cir. 2010).
In their pleadings, Plaintiffs “must allege the time,
place, and content of the fraudulent representation; conclusory
allegations do not suffice.”

See Shroyer v. New Cingular

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

“Malice, intent, knowledge, and other

conditions of a person’s mind may be alleged generally.”

Fed. R.

Civ. P. 9(b); see also Odom v. Microsoft Corp., 486 F.3d 541, 554
(9th Cir. 2007) (en banc) (“[T]he state of mind - or scienter of the defendants may be alleged generally.” (citation omitted));
Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973)

23

(stating that Rule 9(b) “only requires the identification of the
circumstances constituting fraud so that the defendant can
prepare an adequate answer from the allegations” (citations
omitted)).
When there are multiple defendants,
Rule 9(b) does not allow a complaint to merely
lump multiple defendants together but require[s]
plaintiffs to differentiate their allegations when
suing more than one defendant . . . and inform
each defendant separately of the allegations
surrounding his alleged participation in the
fraud. In the context of a fraud suit involving
multiple defendants, a plaintiff must, at a
minimum, identif[y] the role of [each] defendant[]
in the alleged fraudulent scheme.
Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007)
(alterations in Swartz) (internal quotation marks and citations
omitted); see also Meridian Project Sys., Inc. v. Hardin Constr.
Co., 404 F. Supp. 2d 1214, 1226 (E.D. Cal. 2005) (“When fraud
claims involve multiple defendants, the complaint must satisfy
Rule 9(b) particularity requirements for each defendant.”
(citations omitted)).
A motion to dismiss for failure to plead with
particularity is “the functional equivalent of a motion to
dismiss under Rule 12(b)(6)[.]”

Vess v. Ciba-Geigy Corp. USA,

317 F.3d 1097, 1107 (9th Cir. 2003).

In considering a motion to

dismiss, the court is not deciding whether a claimant will
ultimately prevail but rather whether the claimant is entitled to
offer evidence to support the claims asserted.
24

Twombly, 550 U.S.

at 563-64 n.8 (citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.
Ct. 1683, 40 L. Ed. 2d 90 (1974)).
Plaintiffs allege that the BANA Defendants “deceive[d]
Plaintiffs into believing that they [would] get a loan
modification” in order to keep the Mortgage in default before
ultimately foreclosing on the Subject Property.
¶¶ 67, 72.]

[Complaint at

Plaintiffs assert that, “[d]espite [the BANA

Defendants’] repeated assurances, . . . [the BANA Defendants
have] still failed to provide Plaintiffs with a meaningful
modification after two years.”

[Id. at ¶ 72.]

According to

Plaintiffs, the BANA Defendants did this in order to “increase
their profits by abusing the modification process and continuing
to mislead borrowers, like Plaintiffs, rather than genuinely
offering permanent loan modifications.”

[Id. at ¶ 62.]

Plaintiffs allege that these acts by the BANA
Defendants constitute violations of Haw. Rev. Stat. § 480-2(a).
[Id. at ¶¶ 51-74.]

Section 480-2(a) states, “Unfair methods of

competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce are unlawful.”

“A practice is

unfair when it ‘offends established public policy and when the
practice is immoral, unethical, oppressive, unscrupulous or
substantially injurious to consumers.’”

Long v. JP Morgan Chase

Bank, N.A., 848 F. Supp. 2d 1166, 1179 (D. Hawai`i 2012) (quoting
Balthazar v. Verizon Hawaii, Inc., 109 Hawai`i 69, 123 P.3d 194,

25

202 (2005)).

Haw. Rev. Stat. § 481A-3 also sets forth various

forms of deceptive trade practices.
After careful consideration of the allegations
regarding the terms of the December 28, 2009 proposed
modification and the surrounding facts, this Court concludes that
Plaintiffs failed to plead a plausible UDAP claim.

This district

court has recognized that:
“[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. . . .
Casino v. Bank of Am., Civil No. 10–00728 SOM/BMK, 2011 WL
1704100, at *13 (alterations in Casino) (D. Hawai`i May 4, 2011).
First, Plaintiffs admit receiving a proposed
modification agreement from the BANA Defendants on or about
December 28, 2009, and rejecting the same on or about February 2,
2010.

[Complaint at ¶¶ 17, 20.]

Plaintiffs apparently do not

consider the proposed modification to be a “meaningful” response
to their loan modification applications because, under the terms
of the proposal, their monthly mortgage payments would have
actually increased.

[Id. at ¶¶ 18, 72.]

Nevertheless, the Court FINDS that the terms of the
proposed modification were reasonable under the circumstances,
26

and that the proposal was neither deceptive nor unfair.

Compare

Complaint, Exh. A at 35-40 (Adjustable Rate Rider),2 with
Complaint at ¶ 18.

By the time the BANA Defendants offered the

proposed modification, Plaintiffs had already been in default for
about six months, and a total of $20,147.59 in delinquent
interest and fees was added to the original principal under the
Mortgage.

[Complaint at ¶ 18.]
Moreover, Plaintiffs’ Mortgage was an adjustable rate

mortgage, which contained a teaser interest rate of one percent,
and could go as high as 9.950%.

[Id., Exh. A at 36.]

In the

proposed modification, the BANA Defendants offered Plaintiffs a
three-tiered fixed rate mortgage, the terms of which would have
been more favorable to Plaintiffs’ than those of their current
adjustable rate mortgage.

Under the terms of the proposed

modification, Plaintiffs interest rate would have been 3.750% for
the first five years, 4.750% during the sixth year, and 5.000%
for the remaining years.

[Complaint at ¶ 18.]

Because

Plaintiffs’ intentional default on the Mortgage resulted in
additional interest and fees, the proposed modification for a
fixed rate mortgage, though higher in monthly payments, was
nevertheless reasonable under the circumstances.

2

Because Exhibit A
forms of pagination, and
consecutively paginated,
reflect the page numbers

contains multiple documents with varying
the Exhibit as a whole is not
the Court’s citations to Exhibit A
in the CM/ECF system.
27

Second, Plaintiffs allege that damage to their credit
scores occurred because of Defendants’ deceptive representation
that Plaintiffs would not be considered for a loan modification
unless they remained delinquent under the Mortgage.
¶¶ 10, 73.]

[Id. at

At the hearing on the instant Motion, Defendants’

counsel argued, and this Court agrees, that the BANA Defendants
are within their rights, as money lenders, to prioritize the
processing of loan modification applications according to the
needs of their borrowers.

The BANA Defendants, therefore, were

neither unfair nor deceptive in informing Plaintiffs that their
loan modification application would not be processed unless they
remained in default on the Mortgage, which would eventually make
Plaintiffs’ application a higher priority for loan modification.
For the above reasons, this Court CONCLUDES that
Plaintiffs have failed to sufficiently allege a UDAP claim
against the BANA Defendants.

Contrary to Plaintiffs’

contentions, the BANA Defendants did not exceed their
conventional roles as a mere lenders of money in processing
Plaintiffs’ loan modification applications.

In fact, the

Complaint indicates that, even after Plaintiffs voluntarily
denied the proposed modification they received from the BANA
Defendants, Plaintiffs were the ones who decided to apply for
another loan modification.

In effect, it was Plaintiffs who

insisted on continuing the loan modification process, and they

28

admit that the Mortgage remains in default.

[Complaint at

¶¶ 20-23.]
Moreover, the Court notes that, at all times relevant
to the instant action, Plaintiffs were represented by counsel.
Again, Plaintiffs’ counsel did not address the issue as
to whether Claim II as against the BANA Defendants should be
dismissed with or without prejudice.

Plaintiffs’ counsel also

did not speak to how Claim II as against the BANA Defendants
could be amended to properly state a claim.

The Court therefore

FINDS that it is clear that Claim II could not be saved by any
amendment.

See Tedder, 2012 WL 1028125, at *7 (quoting Harris,

573 F.3d at 737).
Defendants’ Motion is therefore GRANTED as to Claim II
against the BANA Defendants, which is hereby DISMISSED WITH
PREJUDICE.
CONCLUSION
On the basis of the foregoing, Defendants’ Motion to
Dismiss Complaint Filed April 26, 2012, filed June 11, 2012, is
HEREBY GRANTED.

Plaintiffs’ Complaint is HEREBY DISMISSED WITH

PREJUDICE, and the Court directs the Clerk’s Office to close the
instant case.
IT IS SO ORDERED.

29

DATED AT HONOLULU, HAWAII, October 18, 2012.

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

MARIA LINDSAY, ET AL. V. BANK OF AMERICA, N.A., ET AL; CIVIL NO.
12-00277 LEK-BMK; ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
COMPLAINT FILED ON APRIL 26, 2012

30