March v. Mortgage Electronic Registration Systems, Inc. et al

Filing 112

ORDER DENYING PLAINTIFF'S 89 MOTION FOR SUMMARY JUDGMENT. Signed by JUDGE DERRICK K. WATSON on 9/26/2014. (ecs, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received t his document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants (Debra L. March) not registered to receive electronic notifications were served by first class mail on the date of this docket entry

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

DEBRA L. MARCH,

CIVIL NO. 12-00306 DKW-BMK

Plaintiff,
ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY
JUDGMENT

vs.
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.;
JPMORGAN CHASE BANK, N.A.;
BANK OF AMERICA, N.A.; and U.S.
BANK, N.A.,
Defendants.
________________________________
U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE,
SUCCESSOR IN INTEREST TO
BANK OF AMERICA, NATIONAL
ASSOCIATION AS SUCCESSOR BY
MERGER TO LASALLE BANK
NATIONAL ASSOCATION, AS
TRUSTEE FOR
CERTIFICATEHOLDERS OF BEAR
STEARNS ASSET BACKED
SECURITIES I LLC, ASSETBACKED CERTIFICATES, SERIES
2005-HE8,
Counterclaimant and
Third-Party Plaintiff,
vs.
DEBRA L. MARCH; and DOES 1

through 20, inclusive,
Counterclaim Defendants,
and
UNITED STATES OF AMERICA,
DEPARTMENT OF TREASURY,
INTERNAL REVENUE SERVICE;
STATE OF HAWAII, DEPARTMENT
OF TAXATION; and DOES 1 through
20, inclusive,
Third-Party Defendants.

ORDER DENYING PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT
Debra L. March seeks summary judgment on her claims that the note and
mortgage on her property in Hanalei, Hawai‘i are unenforceable. She also seeks
summary judgment on Defendant U.S. Bank’s counterclaim for foreclosure on the
property. Because March has no right to challenge the assignment of her mortgage
and because U.S. Bank holds the note and mortgage and has standing to foreclose,
March’s motion for summary judgment is DENIED.
BACKGROUND
March seeks declaratory relief that a $463,000 note, the mortgage executed
as security in conjunction with that note, as well as subsequent assignments of the
same, all relating to her property in Hanalei, Hawai‘i (the “property”), are void and
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invalid. See First Amended Complaint (“FAC”) ¶¶ 11, 15–16. March executed the
note in 2005 in favor of Resmae Mortgage Corporation (“Resmae”). Decl. of Tina
L. Colman (“Colman Decl.”), Ex. A (Note).
Concurrent with the note, March also executed a mortgage on the property
as a security for the loan. Colman Decl., Ex. B (Mortgage). The mortgage
identified Resmae as the lender and Mortgage Electronic Registration Systems,
Inc. (“MERS”) as the mortgagee “acting solely as a nominee for Lender and
Lender’s successors and assigns.” Id. at 2.
In December 2008, MERS, as nominee for Resmae, assigned the note and
mortgage to Lasalle Bank National Association, as trustee for Certificateholders of
Bear Stearns Asset Backed Securities. Colman Decl., Ex. C (Assignment from
MERS to Lasalle). In December 2012, as a result of a merger, Bank of America
became the successor to Lasalle Bank National Association. Colman Decl., Ex. D
(Recorded Order Noting Bank of America as Successor by Merger to Lasalle).
Finally, in May 2013, U.S. Bank became the successor to Bank of America.
Colman Decl., Ex. F (Corporate Assignment of Mortgage from Bank of America to
U.S. Bank). As a result, U.S. Bank is the owner of the note and mortgage, and
JPMorgan Chase is the current mortgage servicer. Colman Decl., Exs. K (Chase’s
Declaration of Amounts Due and Owing), L (Decl. of Amber Alegria for Chase).

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On October 1, 2008, March stopped making payments on the loan and has
not made any payments for six years. As of May 14, 2014, March owes
$447,254.51 of the original $463,000 principal amount, plus an additional
$216,312.70 in interest, escrow, and other fees. Colman Decl., Ex. K (Chase’s
Declaration of Amounts Due and Owing) ¶¶ 6–7.
March initiated this action on May 29, 2012. On November 5, 2013, U.S.
Bank filed a counterclaim, seeking to foreclose on the property. Counterclaim
¶¶ 15–18. Because of tax liens recorded against the property at the Hawai‘i Bureau
of Conveyances, U.S. Bank also named the United States Internal Revenue Service
(the “IRS”) and the State of Hawai‘i Department of Taxation (the “State”) as thirdparty defendants to the foreclosure action. Counterclaim ¶¶ 20–21. The IRS
disclaimed all right, title, and interest arising from the lien alleged in the thirdparty complaint but the State made an affirmative statement of claim that its tax
liens have priority over the rights of U.S. Bank. Dkt. no. 66 (State’s Answer) at 4.
March moves for summary judgment on her first amended complaint and
U.S. Bank’s counterclaim.1

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Concurrently, Defendants also move for summary judgment on the first amended complaint and
counterclaim. Third-party defendant State of Hawai‘i Department of Taxation also moves for
summary judgment. This order disposes only of March’s motion for summary judgment (Dkt.
No. 89). The Court will adjudicate Defendants’ motion for summary judgment and the State’s
motion for summary judgment in a separate order. However, because Defendants incorporated
their arguments and evidence in favor of their own motion for summary judgment into their
opposition to March’s motion for summary judgment, the Court will consider those arguments
and exhibits as part of Defendants’ opposition.

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

March’s First Amended Complaint
March makes two general contentions in support of her motion for summary

judgment on her first amended complaint. First, March contends that the mortgage
was void because Resmae was not licensed in Hawai‘i as a mortgage broker or
lender at the time of the loan. Second, March challenges the assignment of the
note and mortgage by MERS as invalid. The Court concludes that, as a matter of
law, neither of these arguments can be sustained. Each is discussed in turn below.
A.

The Mortgage Is Not Void Under HRS § 454-8

There is no dispute that Resmae was not a Hawai‘i licensed mortgage broker
when the note and mortgage were executed in 2005. Under HRS § 454-8, which
was repealed in 2011 but in effect at the time of the mortgage transaction in 2005,
“[a]ny contract entered into by any person with any unlicensed mortgage broker or
solicitor shall be void and unenforceable.” HRS § 454-8 (repealed 2011).
However, Resmae was exempt from the licensing requirements of § 454-8 because
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it was a foreign lender. This Court has previously addressed this same question on
several occasions. See, e.g., Au v. Republic State Mortgage Co., 2013 WL
1339738, at *9–10 (D. Haw. March 29, 2013); Skaggs v. HSBC Bank USA, N.A.,
2011 WL 3861373, at *7 (D. Haw. Aug. 31, 2011). The Court has explained that
§ 454-8 does not void a mortgage with a foreign lender:
[u]nder HRS § 454–1 . . . a mortgage broker “means a person not
exempt under section 454-2 who for compensation or gain . . . makes,
negotiates, acquires, or offers to make, negotiate, or acquire a
mortgage loan on behalf of a borrower seeking a mortgage loan.”
. . . . In turn, § 454-2(6) provided that chapter 454 “does not apply to
[a] . . . [f]oreign lender as defined in section 207–11.” And HRS
§ 207–11(C) defines a “foreign lender” as, among other things, “a
lender approved by the Secretary of the United States Department of
Housing and Urban Development for participation in any mortgage
insurance program under the National Housing Act.”
Au, 2013 WL 1339738, at *9 (quoting Skaggs, 2011 WL 3861373, at *7)).2
As in both Au and Skaggs, Defendants here have provided undisputed
evidence that Resmae was a lender approved by the U.S. Department of Housing
and Urban Development (“HUD”) in 2005. Specifically, a letter from HUD
“confirms [that] Resmae Mortgage Corporation was a Federal Housing
Administration-approved lender in 2005.” Colman Decl., Ex. J (April 7, 2014
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March, like the plaintiff in Au, relies on Beneficial Hawaii, Inc. v. Kida, 96 Hawai‘i 289 (2001)
for her argument that the mortgage is void under HRS § 454-8. In Kida, the Hawai‘i Supreme
Court held that “HRS § 454–8 must be interpreted to invalidate . . . those contracts into which
unlicensed mortgage brokers enter in their capacity as mortgage brokers within the meaning of
HRS § 454–1.” Id. at 309. This Court’s holding today, identical to the holding in Au, is that
Resmae is not an unlicensed mortgage broker within the meaning of HRS § 454-1, and therefore,
HRS § 454-8 does not apply. Au, 2013 WL 1339738, at *9; see HRS § 454-2(6) (repealed 2011)
(“This chapter does not apply to . . . [a] [f]oreign lender as defined in section 207-11.”).

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HUD letter). Consequently, because Resmae was a foreign lender as defined by
HRS § 207-11, and was therefore exempt from Chapter 454, March is not entitled
to summary judgment on her claim that her mortgage was void under HRS § 4548.
B.

March May Not Challenge the Assignment of the Mortgage

March also argues that she is entitled to summary judgment because MERS
did not have the authority to assign the note and mortgage, and therefore, Lasalle
Bank (and consequently Bank of America and U.S. Bank) never acquired any
actual interest in the mortgage. The Court concludes that March has no standing to
challenge the assignment and, even if she did, MERS had the requisite authority to
assign the note and mortgage, contrary to March’s assertions.
The recorded assignment states that MERS, as nominee for Resmae,
transferred all of its right, title and interest in the note and mortgage to Lasalle
Bank on December 22, 2008. Colman Decl., Ex. C (Assignment from MERS to
Lasalle). In light of the express disclosures in the Mortgage giving MERS the
authority to act on behalf of Resmae and the transfer of the note and mortgage to
Lasalle Bank, March has no basis to challenge that Assignment, or the later
transfers to Bank of America and U.S. Bank.
Indeed, in numerous instances, courts within this district have rejected
similar claims by borrowers challenging MERS’s authority to assign a mortgage on
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behalf of a lender. See, e.g., Dias v. Fed. Nat’l Mortg. Ass’n, 2013 WL 6894453,
at *4 (D. Haw. December 31, 2013); Fed. Nat’l Mortg. Ass’n v. Kamakau, 2012
WL 622169, at *4 & *5 n. 5 (D. Haw. Feb. 23, 2012) (explaining that a borrower
cannot challenge an assignment to which he was not a party, and that plaintiff may
not assert claims based on the argument that MERS lacked authority to assign its
right to foreclose); Lindsey v. Meridias Cap., Inc., 2012 WL 488282, at *3 n. 6 (D.
Haw. Feb. 14, 2012) (“‘[A]ny 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, 656 F.3d 1034 (9th Cir.
2011).]’” (quoting Velasco v. Sec. Nat’l Mortg. Co., 2011 WL 4899935, at *11 (D.
Haw. Oct. 14, 2011))); Abubo v. Bank of New York Mellon, 2011 WL 6011787, at
*8 (D. Haw. Nov. 30, 2011) (holding that “the involvement of MERS in the
assignment cannot be a basis for voiding the assignment”).
Accordingly, March is not entitled to summary judgment on her claim that
the assignment from MERS to Lasalle Bank (as well as the transfers to Bank of
America and U.S. Bank) was invalid. MERS had the authority to transfer the
mortgage, and March may not challenge an assignment to which she was not a
party.

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II.

U.S. Bank’s Counterclaim
In light of the Court’s determination above that the assignment and transfers

of the note and mortgage are valid, U.S. Bank is presently the owner of the note
and mortgage, and JPMorgan Chase is the servicer. March contends, however, that
U.S. Bank does not have standing to assert its counterclaim to foreclose on the
property. The Court disagrees.
Under Hawai‘i law, a party who shows “a direct chain of paper title that he
is the owner of the land demonstrates prima facie evidence of their contents and
that title is vested in that [party].” Deutsche Bank Trust Co. v. Beesley, 2012 WL
5383555, at *3 (D. Haw. Oct. 30 2012). Here, U.S. Bank has submitted recorded
documents indicating: that the note and mortgage were executed by March in favor
of Resmae, with MERS acting as Resmae’s nominee; that MERS assigned the note
and mortgage to Lasalle Bank; that Bank of America became the successor by
merger of Lasalle Bank; and finally, that U.S. Bank has succeeded to the interests
of Bank of America. Under these circumstances, U.S. Bank has established its
standing to assert its rights under the note and mortgage. See, e.g., id.; Krakauer v.
Indmac Mortg. Servs., 2013 WL 704861, at *3 (D Haw. Feb. 26, 2013). March is
not entitled to summary judgment on U.S. Bank’s counterclaim.

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CONCLUSION
March’s motion for summary judgment (Dkt. No. 89) is hereby DENIED.
IT IS SO ORDERED.
DATED: September 26, 2014 at Honolulu, Hawai‘i.

March v. Mortgage Electronic Registration Systems, Inc., et al.; CV 12-00306
DKW/BMK; ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT

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