Almaden v. Peninsula Mortgage, Inc. et al

Filing 30

ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS THE COMPLAINT (DOC. 4 , DOC. 9 ). Signed by JUDGE HELEN GILLMOR on 12/28/2012. ~ Excerpt of conclusion: "The Complaint...is DISMISSED in its entirety, WITH LEAVE TO AM END THE COMPLAINT IN PART, as followed: (1) Count II...is DISMISSED WITH PREJUDICE. (2) Counts I, III, and V (sic)...are DISMISSED WITH LEAVE TO FILE A MOTION TO AMEND THE COMPLAINT." ~ (Order follows hearing on motions to dismiss held 9/21 /2012. Minutes of hearing: doc no. 25 ). (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
Gena Almaden,
Plaintiff,
vs.

Peninsula Mortgage, Inc.;
Flagstar Bank, FSB;
Mortgage Electronic
Registration Systems, Inc.;
Federal Home Loan Mortgage
Corporation; John DOES 120; Jane DOES 1-10; DOE
Partnerships 1-10; DOE
Corporations 1-10; DOE
Entities 1-10 and DOE
Governmental Units 1-10.
Defendants.

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Civ. No. 12-00390 HG-BMK

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS
THE COMPLAINT (DOC. 4, DOC. 9)
On February 16, 2012, Plaintiff Gena Almaden filed a
Complaint asserting various claims in connection with a mortgage
loan transaction.

Plaintiff challenges the non-judicial

foreclosure of the mortgage and requests a variety of other
relief.

Defendants seek dismissal of the Complaint for failure

to state a claim.
Defendants Flagstar Bank, FSB, Mortgage Electronic

Registration Systems, Inc., and Federal Home Loan Mortgage
Corporation’s Motion to Dismiss (Doc. 4) is GRANTED WITH LEAVE
TO FILE A MOTION TO AMEND.
1

Defendant Peninsula Mortgage, Inc.’s Motion to Dismiss (Doc.
9) is GRANTED WITH LEAVE TO FILE A MOTION TO AMEND.

PROCEDURAL HISTORY
On February 16, 2012, Plaintiff Gena Almaden (“Plaintiff” or
“Almaden”) filed a four-count Complaint in the Circuit Court for
the Third Circuit, State of Hawaii.
Defendants Flagstar Bank FSB (“Flagstar Bank”), Mortgage
Electronic Registration Systems, Inc. (“MERS”), and Federal Home
Loan Mortgage Corporation (“Freddie Mac”) removed the action to
this Court on July 11, 2012.
On July 18, 2012, Defendants Flagstar Bank, MERS, and
Freddie Mac filed a Motion to Dismiss (“Flagstar, MERS, and
Freddie Mac’s Motion to Dismiss”).

(Doc. 4.)

On July 20, 2012 Defendant Peninsula Mortgage, Inc.
(“Peninsula Mortgage”) filed a Motion to Dismiss (“Peninsula
Mortgage’s Motion to Dismiss”).

(Doc. 9.)

On July 23, 2012 Defendant Peninsula Mortgage filed a motion
to join Defendants Flagstar Bank, MERS, and Freddie Mac’s Motion
to Dismiss.

(Doc. 11.)

On September 19, 2012 the Court granted Peninsula Mortgage’s
Motion for Joinder (Doc. 24).
On September 21, 2012 the Court held a hearing on the
Motions to Dismiss.
2

BACKGROUND
On August 9, 2007 Plaintiff Almaden entered into a mortgage
agreement to finance the purchase of real property located at 432030 Pohakea Mauka Road, Paauilo, Hawaii 96776 (“Property”)
(Flagstar, MERS, and Freddie Mac’s Motion to Dismiss Ex. B,
Mortgage1; Complaint at ¶¶ 15-16.)

Defendant Peninsula Mortgage

is listed as the lender on the Mortgage and Defendant MERS is
listed as the mortgagee “acting solely as nominee for Lender and
Lender’s successors and assigns.” (Id.)
acted as servicer for the Mortgage.

Defendant Flagstar Bank

(Complaint at ¶ 31.)

On March 6, 2010, Flagstar Bank notified Plaintiff her
Mortgage was in default. (Id. at ¶ 32.)

On May 19, 2010, MERS,

as nominee for Peninsula Mortgage, assigned the Mortgage and Note
to Flagstar Bank (“First Assignment”).

(Id. at ¶ 33.)

The First

Assignment was recorded in the State of Hawaii Bureau of
Conveyances on June 1, 2010 as Document Number 2010-075091.
(Flagstar, MERS, and Freddie Mac’s Motion to Dismiss Ex. D,
Assignment.)
On July 6, 2010, Flagstar Bank recorded a Notice of

1

Pursuant to Federal Rule of Evidence 201, the Court takes
judicial notice of copies of the mortgage, assignment of the
mortgage, and related documents, because they are public
documents. See Cootey v. Countrywide Home Loans, Inc., 2011 WL
2441707, at *1 n. 2 (D. Haw. 2011); MGIC Indem. Corp. v. Weisman,
803 F.2d 500, 504 (9th Cir. 1986) (“On a motion to dismiss, we
may take judicial notice of matters of public record outside the
pleadings.”).
3

Mortgagee’s Non-Judicial Foreclosure Under Power of Sale, which
advised of Flagstar Bank’s intention to sell the Property.
(Flagstar, MERS, and Freddie Mac’s Motion to Dismiss Ex. E, NonJudicial Foreclosure Notice.)

On February 24, 2011, the Property

was sold at a non-judicial foreclosure sale to Flagstar Bank.
(Id. Ex. F, Mortgagee’s Affidavit of Foreclosure Under Power of
Sale.)
On April 14, 2011 Flagstar Bank conveyed the Property to
Freddie Mac by quitclaim deed (“Second Assignment”). (Id. Ex. E,
Quitclaim Deed.)

The Second Assignment was recorded in the State

of Hawaii Bureau of Conveyances on May 3, 2011 as Document Number
2011-072046. (Id.)
Plaintiff challenges the loan origination, the assignments
of the mortgage, and the non-judicial foreclosure on the
property.

(Complaint at ¶¶ 21-29, 33-37, 39-45.) Plaintiff also

claims she was entitled to a loan modification.

(Complaint at ¶¶

46-59.)
Defendants move to dismiss the Complaint for failure to
state a claim upon which relief can be granted pursuant to Fed.
R. Civ. P. 12(b)(6).

STANDARD OF REVIEW
The Court must dismiss a complaint as a matter of law
pursuant to Federal Rule of Civil Procedure 12(b)(6) where it
4

fails “to state a claim upon which relief can be granted.”
Factual allegations asserted in the Complaint are considered true
for the purposes of Defendants’ Motion to Dismiss.

See Savage v.

Glendale Union High Sch., 343 F.3d 1036, 1039 n.1 (9th Cir.
2003).

Rule 8(a)(2) of the Federal Rules of Civil Procedure

requires “a short and plain statement of the claim showing that
the pleader is entitled to relief.”

When considering a Rule

12(b)(6) motion to dismiss, the Court must presume all
allegations of material fact to be true and draw all reasonable
inferences in favor of the non-moving party.
139 F.3d 696, 699 (9th Cir. 1998).

Pareto v. F.D.I.C.,

Conclusory allegations of law

and unwarranted inferences are insufficient to defeat a motion to
dismiss.

Id. at 699.

The Court need not accept as true

allegations that contradict matters properly subject to judicial
notice or allegations contradicting the exhibits attached to the
complaint.

Sprewell v. Golden State Warriors, 266 F.3d 979, 988

(9th Cir. 2001).
In Bell Atl. Corp. V. Twombly, the United States Supreme
Court addressed the pleading standards under the Federal Rules of
Civil Procedure in the anti-trust context.

550 U.S. 544 (2007).

The Supreme Court stated that Rule 8 of the Federal Rules of
Civil Procedure “requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action,” and
that “[f]actual allegations must be enough to raise a right to

5

relief above the speculative level.”

Id. at 555.

Most recently, in Ashcroft v. Iqbal, the Supreme Court
clarified that the principles announced in Twombly are applicable
in all civil cases.

556 U.S. 662 (2009).

The Court stated that

“the pleading standard Rule 8 announces does not require
‘detailed factual allegations,’ but it demands more than an
unadorned, the-defendant-unlawfully-harmed-me-accusation.”
at 678 (citing Twombly, 550 U.S. at 555).

Id.

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.

Id. (quoting Twombly, 550 U.S. at 570).

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.
Twombly, 550 U.S. at 556).

Id. (citing

The plausibility standard is not akin

to a “probability requirement,” but it asks for more than a sheer
possibility that a defendant has acted unlawfully.
Twombly, 550 U.S. at 556).

Id. (quoting

Where a complaint pleads facts that

are “merely consistent with” a defendant’s liability, it “stops
short of the line between possibility and plausibility of
‘entitlement to relief.’”

Id. (quoting Twombly, 550 U.S.

at 557).

6

Rule 9(b) Heightened Pleading Standard for Fraud Claims
When pled in federal court, fraud claims must meet the
heightened pleading standard of Federal Rule of Civil Procedure
9(b). See, e.g., Kapahu v. BAC Home Loans Servicing, LP, 2010 WL
2734774, at *3 (D. Haw. 2010).2

Rule 9(b) requires a party

asserting a fraud or mistake claim to “state with particularity
the circumstances constituting fraud or mistake.” Fed. R. Civ. P.
9(b).

The claim must “be accompanied by the ‘who, what, when,

where, and how’ of the misconduct charged.” Kearns v. Ford Motor
Co., 567 F.3d 1120 (9th Cir. 2009) (internal citation and
quotation marks omitted).

A plaintiff “must state the time,

place and specific content of the false representations as well
as the identities of the parties to the misrepresentation.” Alan
Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1393 (9th
Cir. 1988).

The circumstances constituting fraud must be

“specific enough to give defendants notice of the particular
misconduct . . . so that they can defend against the charge and
not just deny that they have done anything wrong.” Vess v. CibaGeigy Corp. USA, 371 F.3d 1097, 1106 (9th Cir. 2003) (quoting
Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993)).

2

Hawaii Rule of Civil Procedure 9(b) similarly requires
averments of fraud to be plead with heightened particularity. See
Giles v. Giles, 37 P.3d 589, 593 (Haw. Ct. App. 2001).
7

ANALYSIS
The Complaint lists four counts:
Count I:

Fraud

Count II:

Quiet Title

Count III:

Unfair and Deceptive Acts or Practices

Count V [sic]3:

Intentional Infliction of Emotional Distress

Defendants move to dismiss all counts for failure to state
claims upon which relief can be granted.

COUNT I: FRAUD
Under Hawaii Law, a party claiming fraud must establish the
following elements: “(1) false representations were made by
defendants, (2) with knowledge of their falsity (or without
knowledge of their truth or falsity), (3) in contemplation of
plaintiff's reliance upon these false representations, and (4)
plaintiff did rely upon them.”

Shoppe v. Gucci Am., Inc., 94

Haw. 368, 386, 14 P.3d 1049, 1067 (2000)(internal quotation marks
and citations omitted).

A.

The Loan Initiation Process
Almaden alleges Peninsula Mortgage and its “agents”

falsified her loan application, improperly qualified her for a

3

The Complaint numbers this count as Count V, although it
is in actuality the fourth count alleged by Plaintiff.
8

loan, and did not provide her with the required loan
documentation.

(Complaint at ¶¶ 19, 21-22, 25-26, 28).

Almaden

fails to specify by who, when, where, and how any fraudulent
conduct occurred.

See Kapahu v. BAC Home Loans Servicing, LP,

Civ. No. 10-00097, 2010 WL 2734774, at *5 (D. Haw. July 8, 2010).
Additionally, Almaden fails to plead the time and the place of
the fraud.

Id.

“These allegations are insufficient to meet

Plaintiffs' burden under Rule 8, much less the more rigorous
requirements of Rule 9 that apply to these claims."

Id.

Qualifying a borrower for a loan she may not be able to
afford is not fraudulent conduct.

Abubo v. Bank of New York

Mellon, Civ. No. 11-00312 JMS-BMK, 2011 WL 6011787, at *6 (D.
Haw. Nov. 30, 2011) (citing Phillips v. Bank of Am., Civ. No. 1000551, 2011 WL 240813, at *10 (D. Haw. Jan. 21, 2011) (stating
that “lenders generally owe no duty to a borrower not to place
borrowers in a loan even where there was a foreseeable risk
borrowers would be unable to repay” (citation and quotation marks
omitted)).
Hawaii courts do not recognize predatory lending as a
common-law cause of action.

Vertido v. GMAC Mortg. Corp., Civ.

No. 11-00360 DAE-KSC, 2012 WL 139212, at *12 (Jan. 17, 2012).
Almaden’s allegations that Peninsula Mortgage utilized predatory
lending practices fail to state a claim.
Almaden appears to claim that Peninsula Mortgage was an

9

unlicensed mortgage broker and she is therefore released from
honoring the Mortgage.

(Compl. at ¶ 29.)

Hawaii Revised Statute

Chapter 454 regulated mortgage brokers in Hawaii prior to its
repeal on January 1, 2011.4

Almaden executed the Mortgage

Agreement in February 2007.

The statutory provisions of HRS

Chapter 454 in effect in 2007 apply to Plaintiff’s loan.

HRS §

454-8 provided, in pertinent part, that “[a]ny contract entered
into by any person with an unlicensed mortgage broker . . . shall
be void and unenforceable.”

The definition of a mortgage broker

is not consistent with Plaintiff’s allegations against Peninsula
Mortgage.

HRS § 454-1 defined “mortgage broker” as a person “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.”

Plaintiff does not

allege that Peninsula Mortgage acted as a broker on her behalf.
Plaintiff’s argument that Peninsula Mortgage is an
unlicensed mortgage broker rests on a notation on the recorded
Mortgage document stating “After recording Return To: Flagstar
Bank.” (Flagstar, MERS, and Freddie Mac’s Motion to Dismiss Ex.
B, Mortgage.)

4

HRS Chapter 454 was replaced by the Secure and Fair
Enforcement for Mortgage Licensing Act, HRS Chapter 454F,
effective July 1, 2010. See 2010 Haw. Sess. Laws Ch. 84, §§ 29,
38. In order to facilitate the transition to licensing under
Chapter 454F, all licenses issued under Chapter 454 remained in
effect until December 31, 2010. The repeal of Chapter 454 took
effect on January 1, 2011. Id.
10

In her Complaint she uses this notation as a basis for her
allegation that Peninsula Mortgage is an unlicensed broker:

“it

appears that PMI [Peninsula Mortgage] was an unlicensed mortgage
broker acting as a table lender.”

(Compl. at ¶ 29.)

Plaintiff’s

reasoning appears to be that Flagstar Bank was the actual lender
rather than Peninsula Mortgage.

Her position is contradicted by

her statement in her Complaint that Flagstar Bank was the
servicer of the loan.

(Compl. at ¶ 31.)

It is also clear that

the assignment to Flagstar Bank did not take place until almost
three years later.
Plaintiff’s Opposition does not address the fact that the
Mortgage Agreement clearly states that “Lender is Peninsula
Mortgage, Inc.”5

(Flagstar, MERS, and Freddie Mac’s Motion to

Dismiss Ex. B, Mortgage.)

The allegations in the Complaint do

not state a claim against Peninsula Mortgage for violation of HRS
Chapter 454 as an unlicensed broker.

B.

Loan Securitization
Securitization occurs when the original lenders bundle the

beneficial interest in individual loans and sell the bundles to

5

A district court “‘may take judicial notice of matters of
public record’” and consider them without converting a Rule 12
motion into one for summary judgment.” United States v. 14.02
Acres of Land More or Less in Fresno County, 547 F.3d 943, 955
(9th Cir. 2008) (citing Lee v. City of Los Angeles, 250 F.3d 668,
688 (9th Cir. 2001)).
11

investors as mortgage-backed securities.

Cervantes at 1039.

Securitization in general does not give rise to a cause of
action.

Sarmiento v. Bank of New York Mellon, Civ. No. 10-00349

JMS-BMK, 2011 WL 884457 at *6 (D. Haw. Mar. 10, 2011)(citing
Haskins v. Hoynihan, 2010 WL 2691562, at *2 (D. Ariz. July 6,
2010)(rejecting claims based on securitization because Plaintiffs
could point to no law indicating that securitization of a
mortgage is unlawful, and “Plaintiffs fail to set forth facts
suggesting that Defendants ever indicated that they would not
bundle or sell the note in conjunction with the sale of mortgagebacked securities”)).
Plaintiff alleges that Peninsula Mortgage “and/or Flagstar
concealed the ‘alleged’ assignment and/or transfer of Plaintiff’s
loan to various parties,” sold the loan “to at least one
undisclosed investor,” and “advanced payments to the undisclosed
third-party investors.”

(Compl. at ¶¶ 42, 62-63, 71-72.) Almaden

fails to show how the undisclosed identity of beneficial owner(s)
of the Mortgage caused her any injury by, for example, affecting
the terms of her loan, her ability to repay the loan, and her
obligations as a borrower.

See Cervantes at 1042.

Plaintiff’s

bare assertions fail to explain how the non-disclosures actually
affected her efforts to identify and contact the relevant party
to modify her loan.

(Id.)

Plaintiff fails to state a claim for

fraud based on the non-disclosure of investors.

12

C.

The First Assignment - Assignment of the Mortgage and Note
to Flagstar Bank
As a preliminary matter, Almaden is barred from challenging

the validity of the assignment because she was not a party to the
contract nor a third party intended beneficiary.

Velasco v.

Security Nat. Mortg. Co., 823 F.Supp.2d 1061, 1067 (D. Haw.
2011).
Even assuming Almaden can challenge the assignment, the
language contained in the Mortgage Agreement and First Assignment
undercut her allegations.

Plaintiff alleges that MERS’s May 19,

2012 assignment of the Mortgage to Flagstar Bank was fraudulent
because MERS, “solely as nominee,” could not transfer the Note to
Flagstar. (Complaint at ¶¶ 33-34).

The Mortgage Agreement states

that “MERS is a separate corporation that is acting solely as a
nominee for Lender and Lender’s successors and assigns.”
(Flagstar, MERS, and Freddie Mac’s Motion to Dismiss Ex. B,
Mortgage.)

The Mortgage clearly granted MERS the authority to

act on behalf of the lender Peninsula Mortgage and its successors
and assigns.

Velasco, 823 F.Supp.2d at 1068; see also Camat v.

Fed. Nat. Mortg. Ass’n, Civ. No. 12-00149, 2012 WL 2370201, at *7
(D. Haw. June 22, 2012).
While not entirely clear, Almaden appears to argue that the
loan was securitized and sold to Freddie Mac before the
assignment and therefore MERS, as nominee for Peninsula Mortgage,
13

did not have proper authority to assign the Mortgage.
¶¶ 62-63.)

(Compl. at

This argument fails because even if the Mortgage was

sold to Freddie Mac before the assignment, MERS could still
assign the Mortgage on behalf of the “lender’s successor” Freddie
Mac.
The mortgage agreement states that “Borrower does hereby
mortgage, grant and convey to MERS (solely as nominee for Lender
and Lender’s successors and assigns) and to the successors and
assigns of MERS, with power of sale [.]”

(Flagstar, MERS, and

Freddie Mac’s Motion to Dismiss Ex. B, Mortgage.)

Under the

express mortgage terms, MERS, as nominee for the lender and
lender’s successors and assigns, had the power to assign its
right to foreclose on the Property to Flagstar Bank.
“[I]n light of the explicit terms of the mortgage signed by
Plaintiffs, it does not appear that the [P]laintiffs were
misinformed about MERS’s role in their home loan.”

Abubo, 2011

WL 6011787, at *8 (quoting Cervantes v. Countrywide Home Loans,
Inc., 656 F.3d 1034, 1042 (9th Cir. 2011).

Plaintiff’s

allegations are insufficient to meet her burden under Fed. R.
Civ. P. 8 and 9(b).

D.

Wrongful Foreclosure
When Flagstar Bank commenced non-judicial foreclosure

proceedings on February 24, 2011, Hawaii law required “the

14

mortgagee, the mortgagees’ successor in interest, or any person
authorized by the power to act in the premises” initiate the nonjudicial foreclosure.

Haw. Rev. Stat. ¶ 667-5(a) (repealed by

Laws 2012, ch. 182, eff. June 28, 2012).

Flagstar Bank was the

mortgagee and the lender’s successor in interest to the Mortgage
and Note.

(Flagstar, MERS, and Freddie Mac’s Motion to Dismiss

Ex. D, First Assignment.)

Additionally, as loan servicer,

Flagstar Bank had authority to foreclose as an agent of the
beneficial owner.

See White v. IndyMac Bank, FSB, No. 09-00571,

2012 WL 966638, at *7-8 (D. Haw. Mar. 20, 2012). (recognizing a
servicer can foreclose on behalf of the beneficial owner of the
loan).

Plaintiff fails to state a claim for fraud based on

allegations that Flagstar Bank lacked the power to foreclose.

1.

The Court Rejects Plaintiff’s “Show me the Note” Theory

To the extent Plaintiff alleges a “show me the note” theory,
(See Complaint at ¶¶ 67), this claim fails because possession or
production of the note is not required to commence non-judicial
foreclosure proceedings.

Brenner v. IndyMac Bank, F.S.B., Civ.

No. 10-00113 SOM-BMK, 2010 WL 4666043, at *7 (D. Haw. Nov. 9,
2010; Long v. JP Morgan Chase Bank, Nat. Ass'n, 848 F. Supp. 2d
1166, 1180 (D. Haw. 2012) (citing Diessner v. Mortgage Electronic
Registration Systems, 618 F.Supp.2d 1184, 1187 (D. Ariz.2009);
Wallis v. IndyMac Fed. Bank, 717 F.Supp.2d 1195, 1200-01 (W.D.

15

Wash. 2010); Mansour v. Cal-Western Reconveyance Corp., 618
F.Supp.2d 1178, 1181 (D. Ariz. 2009)).
Flagstar Bank held title to the Mortgage and the Note when
it commenced non-judicial foreclosure proceedings on February 24,
2011.

Almaden’s allegations do not raise any plausible claim

that Flagstar Bank lacked the authority to foreclose.

2.

The Court Rejects Plaintiff’s “Split the Note” Argument

Plaintiff alleges that there is no evidence that the Note
was transferred to Flagstar Bank and without the Note, the
foreclosure was invalid. (Complaint at ¶¶ 34-36).

To the extent

that Plaintiff appears to advance a variation of the “split the
note” argument - that the note and deed are split so no party is
in a position to foreclose - that argument has been rejected by
the Ninth Circuit Court of Appeals.

See Cervantes v. Countrywide

Home Loans Inc., 656 F.3d 1034, 1044-45 (9th Cir. 2011).

In

Cervantes, the court explained:
[T]he deed and note must be held together [to initiate
foreclosure] because the holder of the note is only
entitled to repayment, and does not have the right under
the deed to use the property as a means of satisfying
repayment. Conversely, the holder of the deed alone does
not have a right to repayment and, thus, does not have an
interest in foreclosing on the property to satisfy
repayment.
Id. at 1039.

In addressing the “split the note” theory, the

court held that the notes and deeds are not irreparably split
when MERS holds the deed and the lender holds the note, the split
16

only renders the mortgage unenforceable if MERS or the party who
initiated foreclosure in the name of the lender, as nominal
holders of the deed, are not agents of the lender.

Id. at 1044.

In this case, MERS acted as an agent of the lender in assigning
the Mortgage and Note to Flagstar Bank.

Flagstar Bank initiated

the non-judicial foreclosure as record holder of the Mortgage and
Note and servicer of the loan.
Plaintiff Almaden has not raised a plausible claim that
Defendants committed fraud during the non-judicial foreclosure
proceedings.

E.

The Second Assignment - Assignment of the Property to
Freddie Mac
Almaden does not sufficiently allege facts to support a

fraud claim based on the Second Assignment which involved the
transaction between Flagstar Bank and Freddie Mac.

Plaintiff

alleges that “loans sold or transferred to Freddie Mac must meet
its underwriting criteria or are subject to repurchase” and “the
subject loan does not meet the proper underwriting criteria.”
(Compl. at ¶¶ 38-39.)
Flagstar Bank obtained title to the Property at the nonjudicial foreclosure sale on February 24, 2011.

(Flagstar, MERS,

and Freddie Mac’s Motion to Dismiss Ex. F, Mortgagee’s Affidavit
of Foreclosure Under Power of Sale.)

17

Flagstar Bank conveyed “all

of the estate, right, title, and interest” in the Property to
Freddie Mac via Quitclaim Deed.

The Quitclaim Deed was recorded

in the State of Hawaii Bureau of Conveyances on April 14, 2011.
(Id. Ex. G, Quitclaim Deed.)

Plaintiff’s generalized allegations

that the assignment to Freddie Mac did not meet “proper
underwriting criteria” fail to state a claim for fraud.

F.

Loan Modification
Under Hawaii Law, “[f]raud cannot be predicated on

statements which are promissory in their nature, or constitute
expressions of intention, and an actionable representation cannot
consist of mere broken promises, unfulfilled predictions or
expectations, or erroneous conjectures as to future events, even
if there is no excuse for failure to keep the promise, and even
though a party acted in reliance on such promise.”

Joy A.

McElroy, M.D., Inc. v. Maryl Group, Inc., 114 P.3d 929, 939 (Haw.
Ct. App. 2005).

Plaintiff claims that “Flagstar should have

considered, reviewed and allowed Plaintiff to obtain a loan
modification,” she was “misled into believing that she would be
eligible for a loan modification,” and that Flagstar Bank
represented it would provide loan relief then “failed to allow a
loan modification to be considered for Freddie Mac portfolio
loans.” (Complaint at ¶¶ 46, 70, 73).
Plaintiff fails to allege who, when, where, and how the

18

alleged misrepresentations occurred.

Plaintiff’s claim does not

allege that Flagstar Bank lacked a present intent to fulfill a
promise to consider her for a modification at the time it
allegedly made such a promise.

See Tedder v. Deutsche Bank Nat.

Trust Co., 863 F. Supp. 2d. 1020, 1033 (D. Haw. 2012)
(“Plaintiff’s argument that Defendants somehow promised her that
she would qualify for loan modification, or even that Defendants
promised her that it would consider her application, cannot
support a plausible fraud claim unless Plaintiff can also allege
that, when Defendants made those promises, it never intended to
fulfill them”).

Plaintiff’s allegations are insufficient under

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

G.

Improper Credit Reporting
Plaintiff’s improper credit reporting allegations fail to

meet the Fed. R. Civ. P. 8 and 9(b) requirements to plead a
sufficient claim for fraud.

In Rey v. Countrywide Home Loans,

Inc., Civ. No. 11-00142 JMS-KSC, 2012 WL 253137 (D. Haw. Jan. 26,
2012), the court addressed similar improper credit reporting
allegations.6

The court granted the defendant’s motion to

dismiss, holding that the Complaint “fails to include any factual

6

Plaintiff’s counsel in Rey was also Robin Horner. Prior to
granting the motion to dismiss the Second Amended Complaint, the
court issued sanctions against Horner because the Amended
Complaint suffered from many of the same deficiencies as the
original Complaint. Rey, 2012 WL 253137 at *3.
19

allegations whatsoever explaining what information Defendants
reported to the credit reporting agencies, when Defendants
provided the information, why this information was false, and
precisely how this information lowered her credit scores.” Id. at
*8.

The types of detailed allegations missing from the Complaint

in Rey are also missing from Almaden’s Complaint.

Almaden has

failed to meet her obligations under Fed. R. Civ. P. 8 and Fed.
R. Civ. P. 9(b).
Count I for fraud is DISMISSED WITH LEAVE TO FILE A MOTION
TO AMEND.

COUNT II: QUIET TITLE
Under Hawaii Revised Statute § 669-1(a), "[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."
H.R.S. § 669-1(a).
Plaintiff’s claim for quiet title against Peninsula
Mortgage, Flagstar Bank, and MERS fails because these Defendants
do not have claims on the Subject Property.

See Haw. Rev. Stat.

¶ 669-1(a); see also Amina v. WMC Mortg. Corp., No. 10-00165,
2011 WL 1869835, at *8 (D. Haw. May 16, 2011).

MERS, as nominee

of Peninsula Mortgage, assigned the Mortgage and Note on the
Property to Flagstar Bank on May 19, 2010.

20

Flagstar Bank

transferred its title and interest in the property to Freddie
Mac.
The quiet title claim against Freddie Mac fails because
under Hawaii Revised Statue § 669-1, a borrower "may not assert
‘quiet title' against a mortgagee without first paying the
outstanding debt" on the property.

Rosenfeld v. JPMorgan Chase

Bank, N.A., et al., 732 F. Supp. 2d 952, 975 (quoting Kelley v.
Mort. Elec. Registration Sys., 642 F. Supp. 2d. 1048, 1057 (N.D.
Cal. 2009); Mier v. Lordsman Inc., Civ. No. 10-00584, 2011 U.S.
Dist. LEXIS 8484, at* 15-17 (D. Haw. Jan. 26, 2011)("[T]o assert
a claim for quiet title against a mortgagee, a borrower must
allege they have paid, or are able to tender, the amount of the
indebtedness.").
Almaden does not dispute that she defaulted on her Mortgage
payments, (see Complaint at ¶ 32), nor does she allege that she
tendered the loan amount.

Instead, Almaden alleges "a formulaic

recitation of the elements of the cause of action" for quiet
title.

Iqbal, 129 S. Ct. At 1949.

valid claim for quiet title.

Almaden does not state a

The Complaint alleges facts that

would bar any such relief.
Plaintiff’s quiet title claim is DISMISSED WITH PREJUDICE.

COUNT III: UNFAIR AND DECEPTIVE TRADE PRACTICES ACT
Under the Hawaii Unfair and Deceptive Business Practice Act

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(“UDAP”) it is unlawful to engage in “unfair or deceptive acts or
practices in the conduct of any trade or commerce.”
Stat. § 480-2(a).

Haw. Rev.

The Hawaii Supreme Court describes “deceptive

acts or practices” as having “the capacity or tendency to mislead
or deceive.”

Courbat v. Dahana Ranch, Inc., 141 P.3d 427,

434-435 (Haw. 2006) (quoting State by Bronster v. U.S. Steel
Corp., 919 P.2d 294, 312-13 (Haw. 1996)).

The Hawaii Supreme

Court has adopted the Federal Trade Commission’s three-part
analytical Cliffdale Assocs. test for deception.

Id. (citing In

re Cliffdale Assocs., Inc., 103 F.T.C. 110, Trade Cas. (CCH)
P22137 (1984)).

Under the Cliffdale Assocs. test, a deceptive

act or practice is (1) a representation, omission, or practice
that (2) is likely to mislead consumers acting reasonably under
circumstances where (3) the representation, omission, or practice
is material.

Id.; see FTC v. Pantron I Corp., 33 F.3d 1088, 1095

(9th Cir. 1994).

“A representation, omission, or practice is

considered ‘material’ if it involves ‘information that is
important to consumers and, hence, likely to affect their choice
of, or conduct regarding, a product.’”

Id. (citing Novartis

Corp. v. FTC, 343 U.S. App. D.C. 111, 223 F.3d 783, 786 (D.C.
Cir. 2000)).
Any allegation under H.R.S. § 480-2(a) involving claims of
fraudulent business practices must be plead with particularity
pursuant to Fed. R. Civ. P. 9(b).

22

Smallwood v. NCsoft Corp., 730

F. Supp. 2d 1213, 1232-1233 (D. Haw. 2010).

Rule 9(b) requires a

party asserting a claim involving fraud to “state with
particularity the circumstances constituting fraud[.]”
Civ. P. 9(b).

Fed. R.

The claim must “be accompanied by the ‘who, what,

when, where, and how’ of the misconduct charged.”

Kearns v. Ford

Motor Co., 567 F.3d 1120 (9th Cir. 2009) (internal citation and
quotation marks omitted); see Alan Neuman Prod., Inc. v.
Albright, 862 F.2d 1388, 1393 (9th Cir. 1988).

A. Unfair and Deceptive Business Practice Act Claims Based on
Fraud
Count III is based on the same factual allegations that fail
to state a claim for fraud.

Almaden alleges that “Peninsula

Mortgage and/or Flagstar Bank have manufactured or reverse
engineered documents in order to facilitate a wrongful
foreclosure in addition to predatory servicing practices.”
(Complaint at ¶ 90).

Plaintiff claims that “Peninsula Mortgage

and Flagstar Bank have failed to disclose the real party in
interest in a timely manner that would have allowed Plaintiff to
know who the investor was and see if a work out would be honored
without the necessity of engaging in litigation.”
¶ 90).

(Complaint at

Plaintiff also argues Defendants failed to grant

Plaintiff a loan modification or work out.
90(d).)

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(See Complaint at ¶

Count III appears to be derivative of Count I.

Count III

fails to state a claim because it is not pled with the requisite
particularity.

Abubo, 2011 WL 6011787, at *9 (citing Smallwood

v. NCsoft Corp., 730 F.Supp.2d 1213, 1232-33 (D. Haw.
2010)(relying on Kearns v. Ford Motor Co., 567 F.3d 1120, 1122
(9th Cir. 2009) to hold that HRS Ch. 480 claims that sound in
fraud must be pled with particularity).

B. HAMP Guidelines
To the extent Plaintiff asserts that Defendants breached the
Home Affordable Modification Program (“HAMP”) guidelines,
(Complaint at ¶¶ 46-59), "there is no express or implied private
right of action to sue lenders or loan servicers for violation of
HAMP." Rey, 2012 WL 253137, at *9 (citing Dodd v. Fed. Home Loan
Mortg. Corp., 2011 WL 6370032, at *12 (E.D. Cal. Dec. 19, 2011)
(collecting cases)).
Allowing Count III to proceed pursuant to H.R.S. § 480-2(a)
would not give Defendants sufficient notice of Plaintiff’s
claims.

Count III is DISMISSED WITH LEAVE TO FILE A MOTION TO

AMEND.

COUNT V [sic]: INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
To state a claim for intentional infliction of emotional
distress a plaintiff must allege: "(1) that the act allegedly
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causing the harm was intentional or reckless, (2) that the act
was outrageous, and (3) that the act caused (4) extreme emotional
distress to another." Enoka v. AIG Haw. Ins. Co., 128 P.3d 850,
872 (Haw. 2006) (internal citation and quotation marks omitted).
Generalized allegations that are lacking in clarity fail to
satisfy the requirements of Fed. R. Civ. P. 8.

Kapahu, 2010 WL

2734774, at *7; see also Rymal v. Bank of America, 2011 WL
1361441, at *10-11.

Default and foreclosure proceedings

generally do not rise to the level of extreme and outrageous
conduct because denying a loan modification which might result in
foreclosure is no more “outrageous in character” than actually
foreclosing. Doran v. Wells Fargo Bank, Civ. No. 11-00132 LEKKSC, 2011 WL 5239738, at *10-11 (D. Haw. Oct. 31, 2011) (quoting
Uy v. Wells Fargo Bank, N.A., Civ. No. 10-00204, 2011 WL 1235590,
at *14 (D. Haw. Mar. 28, 2011).
Plaintiff claims that she suffered mental and emotional
distress due to “Peninsula Mortgage and Flagstar Bank’s failure
to disclose the real investor in a timely manner” and “due to
Flagstar’s lies about modification[.]”

(Complaint at ¶ 93.)

These generalized allegations do not satisfy the requirements of
Fed. R. Civ. P. 8.
Plaintiff’s claim for intentional infliction of emotional
distress is DISMISSED WITH LEAVE TO FILE A MOTION TO AMEND.

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MOTION TO AMEND
If Plaintiff wishes to proceed with her lawsuit, Plaintiff
must attach a proposed amended complaint to any motion for leave
to file an amended complaint.

Any proposed amended complaint

must contain sufficient factual detail, including the dates of
the relevant transactions for statute of limitations purposes, to
state a claim for relief that is plausible. Ashcroft v. Iqbal,
129 S.Ct. 1937, 1949 (2009); see also Parrino, 146 F.3d at 706
(plaintiffs should not be able to survive a “Rule 12(b)(6) motion
by deliberately omitting references to documents upon which their
claims are based . . . .”).
Plaintiff’s counsel is strongly advised to review the
requirements of Fed. R. Civ. P. 11 before filing a motion to
amend and proposed amended complaint.

Any claim asserted by the

Plaintiff must contain a factual basis, which Plaintiff must
specifically allege for each claim asserted.

Plaintiff must

distinguish between the Defendants, and specifically identify
which Defendant is alleged to have committed which wrongful acts.
Any proposed amended complaint must expressly state whether any
claims are based on acts committed by the original lender or an
assignee.
If it becomes clear that Plaintiff’s counsel is seeking to
assert claims that lack any identifiable basis in fact, and is
merely attempting to improperly prolong the litigation or advance

26

a purpose that is improper under Fed. R. Civ. P. 11, the Court
may impose sanctions.

CONCLUSION
Defendants Flagstar Bank FSB, Mortgage Electronic
Registration Systems, Inc., Federal Home Loan Mortgage
Corporation’s Motion to Dismiss (Doc. 4) is GRANTED and Defendant
Peninsula Mortgage, Inc.’s Motion to Dismiss (Doc. 9) is GRANTED.
The Complaint (Doc. 1) is DISMISSED in its entirety, WITH
LEAVE TO AMEND THE COMPLAINT IN PART, as followed:
(1)

Count II fails to state a claim for which relief can be
granted and, therefore, is DISMISSED WITH PREJUDICE.

(2)

Counts I, III, and V [sic] fail to state claims for
which relief can be granted.

As pled, Counts I, III,

and V [sic] fail to allege sufficient plausible facts
that would give rise to a cause of action and are
DISMISSED WITH LEAVE TO FILE A MOTION TO AMEND THE
COMPLAINT.
Plaintiff must attach a proposed amended complaint to any motion
for leave to amend.

The proposed amended complaint must state

claims that satisfy the standards identified in this Order.
Plaintiff does not have leave to add any new defendants, causes
of action, or theories of liability.

Any such motion shall be

filed no later than January 31, 2013. If Plaintiff fails to file
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a motion for leave to amend the complaint by that date, the
Complaint against Defendants will automatically be dismissed with
prejudice.
Defendants shall file any response to the motion for leave
to amend the complaint by February 21, 2013.

IT IS SO ORDERED.
Dated: December 28, 2012, Honolulu, Hawaii.

/S/ Helen Gillmor
Helen Gillmor
United States District Judge

Gena Almaden v. Peninsula Mortgage, Inc., et al.; Civil No. 1200390 HG-BMK; ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS
THE COMPLAINT (DOC. 4, DOC. 9)

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