Cablay et al v. Bank of America, N.A. et al
Filing
21
ORDER GRANTING MOTION TO DISMISS COMPLAINT re 7 . Signed by JUDGE J. MICHAEL SEABRIGHT on 4/25/13. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
JAMES CABLAY AND KATHRYN S. )
F. CABLAY,
)
)
Plaintiffs,
)
)
vs.
)
)
BANK OF AMERICA, N.A.,
)
)
Defendant.
)
_______________________________ )
CIVIL NO. 12-00648 JMS-KSC
ORDER GRANTING MOTION TO
DISMISS COMPLAINT
ORDER GRANTING MOTION TO DISMISS COMPLAINT
I. INTRODUCTION
On December 4, 2012, Plaintiffs James Cablay and Kathryn S.F.
Cablay (“Plaintiffs”) filed this action against Defendant Bank of America, N.A.
(“Defendant”) alleging state law claims in connection with two mortgages
currently owned and serviced by Defendant and secured by real property located at
99-1184 Aiea Heights Drive, Aiea, Hawaii (the “subject property”).
By the instant Motion, Defendant seeks dismissal of all counts with
prejudice, contending that Plaintiffs failed to state a claim upon which relief can be
granted. The court GRANTS the Motion with prejudice as to Counts I, II, and IV
and with leave to amend as to Count III.
II. BACKGROUND
A.
Factual Background
The court assumes the Complaint’s factual allegations are true for
purposes of this Motion. See, e.g., Savage v. Glendale Union High Sch., 343 F.3d
1036, 1039 n.1 (9th Cir. 2003). According to the Complaint and its exhibits, on
February 25, 2008, Plaintiffs entered into two loan agreements secured by the
subject property. Doc. No. 1, Compl. ¶ 2; Doc. No. 1-1, Pls.’ Ex. 1; Doc. No. 1-2,
Pls.’ Ex. 2. The first loan, for $625,000, was recorded in the Hawaii Bureau of
Conveyances on February 29, 2008 as Document Number 2008-031109 (“the First
Mortgage”). Doc. No. 1, Compl. ¶ 2; Doc. No. 1-1, Pls.’ Ex. 1. The second loan
was a $160,750 home equity line of credit, recorded as Document Number 2008031110 (“the Second Mortgage”). Doc. No. 1, Compl. ¶ 2; Doc. No. 1-2, Pls.’ Ex.
2. Both Mortgages identify Plaintiffs as the borrowers and Countrywide Bank,
F.S.B.1 as the lender. Doc. No. 1, Compl. ¶ 2; Doc. No. 1-2, Pls.’ Ex. 2.
Plaintiffs imply that they have defaulted on the Mortgages and
foreclosure on the subject property has occurred. See Doc. No. 1, Compl. ¶ 34(b)
(alleging Defendant’s conduct included “charging excessive or improper fees for
1
Plaintiffs allege that Defendant is the successor in interest to Countrywide Bank, F.S.B.
Doc. No. 1, Compl. ¶ 7.
2
default-related services”); see also id. ¶ 68 (“The harm sustained by [Plaintiffs]
includes . . . unaffordable mortgages, threatened loss of home, and loss of
home[].”).
Plaintiffs filed the instant action contending that Defendant’s conduct
in connection with the origination and servicing of the Mortgages was unfair and
deceptive and violated an implied covenant of good faith and fair dealing.
Defendant’s allegedly unfair and deceptive conduct includes:
a. failing to timely and accurately apply payments made
by borrowers and failing to maintain accurate account
statements;
b. charging excessive or improper fees for defaultrelated services;
c. failing to properly oversee third party vendors
involved in servicing activities on behalf of the Banks;
d. imposing force-placed insurance without properly
notifying the borrowers and when borrowers already had
adequate coverage;
e. providing borrowers false or misleading information
in response to borrower complaints; [and]
f. failing to maintain appropriate staffing, training, and
quality control systems.
Id. ¶ 34. Plaintiffs further allege that Defendant’s allegedly “unfair and deceptive
practices” “caused [Plaintiffs] to enter into an unaffordable mortgage loan that led
3
to increased threat of foreclosure.” Id. ¶ 37.
B.
Procedural Background
On December 4, 2012, Plaintiffs filed a Complaint asserting the
following Counts: (1) Count I -- Breach of Implied Covenant of Good Faith and
Fair Dealing; (2) Count II -- Tort Liability for Breach of Implied Covenant of
Good Faith and Fair Dealing; (3) Count III -- Unfair and Deceptive Consumer
Practices with Respect to Loan Servicing; and (4) Count IV -- Unfair and
Deceptive Consumer Practices with Respect to Loan Origination. Doc. No. 1,
Compl. at 9-12.
Plaintiffs seek injunctive relief restraining Defendant from further
unlawful conduct; disgorgement of unlawful gains; compensatory and punitive
damages; restitution; and attorney’s fees and costs. Id. at 12-13. On January 25,
2013, Defendant filed a Motion to Dismiss Complaint. Doc. No. 7. On March 27,
2013, Plaintiffs filed an Opposition, and on April 8, 2013, Defendant filed a Reply.
A hearing was held on April 23, 2013.
III. STANDARDS OF REVIEW
A.
Rule 12(b)(6): Failure to State a Claim
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]” A Rule
4
12(b)(6) dismissal is proper when there is either a “‘lack of a cognizable legal
theory or the absence of sufficient facts alleged.’” UMG Recordings, Inc. v.
Shelter Capital Partners, LLC, ---F.3d---, 2013 WL 1092793, at * 4 (9th Cir. Mar.
14, 2013) (quoting Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.
1990)).
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep’t of Veterans Affairs,
521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must accept as
true all of the allegations contained in the complaint -- “is inapplicable to legal
conclusions.” Iqbal, 556 U.S. at 678. Accordingly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 555); see also Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not
simply recite the elements of a cause of action, but must contain sufficient
allegations of underlying facts to give fair notice and to enable the opposing party
to defend itself effectively.”).
Rather, “[a] claim has facial plausibility when the plaintiff pleads
5
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader
is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.
B.
Federal Rule of Civil Procedure 8
Additionally, the court may dismiss a complaint for failure to comply
with Federal Rule of Civil Procedure 8. Rule 8 mandates that a complaint include
a “short and plain statement of the claim,” Fed. R. Civ. P. 8(a)(2), and that “each
allegation must be simple, concise, and direct.” Fed. R. Civ. P. 8(d)(1). A
complaint that is so confusing that its “‘true substance, if any, is well disguised’”
may be dismissed for failure to satisfy Rule 8. Hearns v. San Bernardino Police
Dep’t, 530 F.3d 1124, 1131 (9th Cir. 2008) (quoting Gillibeau v. City of Richmond,
417 F.2d 426, 431 (9th Cir. 1969)). Put slightly differently, a district court may
dismiss a complaint for failure to comply with Rule 8 where it fails to provide the
defendants fair notice of the wrongs they have allegedly committed. See McHenry
6
v. Renne, 84 F.3d 1172, 1178-80 (9th Cir. 1996) (affirming dismissal of complaint
where “one cannot determine from the complaint who is being sued, for what
relief, and on what theory, with enough detail to guide discovery”); cf. Mendiondo
v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1105 n.4 (9th Cir. 2008) (finding
dismissal under Rule 8 was in error where “the complaint provide[d] fair notice of
the wrongs allegedly committed by defendants and [did] not qualify as overly
verbose, confusing, or rambling”). Rule 8 requires more than “the-defendantunlawfully-harmed-me accusation[s]” and “[a] pleading that offers labels and
conclusions or a formulaic recitation of the elements of a cause of action will not
do.” Iqbal, 556 U.S. at 678 (citations and quotations omitted). “Nor does a
complaint suffice if it tenders naked assertions devoid of further factual
enhancement.” Id. (quotation signals omitted). “The propriety of dismissal for
failure to comply with Rule 8 does not depend on whether the complaint is wholly
without merit.” McHenry, 84 F.3d at 1179.
IV. ANALYSIS
Defendant contends that Plaintiffs failed to state a claim for violation
of both the Hawaii Unfair and Deceptive Business Practice Act (“UDAP”),
codified as Hawaii Revised Statutes (“HRS”) § 480-2, and an implied covenant of
good faith and fair dealing. The court addresses each Count in turn.
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A.
Counts I & II -- Breach and Tortious Breach of Implied Covenant of
Good Faith and Fair Dealing
Count I is entitled “[Defendant’s] Breach of Implied Covenant of
Good Faith and Fair Dealing,” and Count II is entitled “Tort Liability for
[Defendant’s] Breach of Implied Covenant of Good Faith and Fair Dealing.” Doc.
No. 1, Compl. at 9-10. Plaintiffs allege that “[e]very contract or duty” governed by
HRS Chapter 490 “imposes an obligation of good faith in its performance and
enforcement,” Id. ¶¶ 39, 50 (quoting HRS § 490:1-304), and that Defendant’s
“duty” of good faith and fair dealing “is derivative of the Mortgage contracts.” Id.
¶¶ 41, 52. Plaintiffs further allege that they “were harmed” when Defendant failed
to meet Plaintiffs’ reasonable expectations by not exercising its discretionary
power in good faith, but rather “unfairly interfered with [Plaintiffs’] right to
receive the benefits of the [mortgages].” Id. ¶¶ 45-47, 56-58.
Both of these claims assert the tort of “bad faith.” See Best Place v.
Penn Am. Ins. Co., 82 Haw. 120, 128, 920 P.2d 334, 342 (1996) (adopting tort of
bad faith for breach of implied covenant of good faith and fair dealing in an
insurance contract). But, as this court has explained in numerous previous orders,
see, e.g., Menashe v. Bank of New York, 850 F. Supp. 2d 1120, 1139 (D. Haw.
2012); Teaupa v. U.S. Nat’l Bank N.A., 836 F. Supp. 2d 1083, 1092-93 (D. Haw.
2011), the tort of bad faith has not been recognized in Hawaii based upon a
8
mortgage loan contract. See Jou v. Nat’l Interstate Ins. Co. of Haw., 114 Haw.
122, 129, 157 P.3d 561, 568 (Haw. App. 2007) (explaining that “the Hawaii
Supreme Court emphasized that the tort of bad faith, as adopted in [Best Place v.
Penn Am. Ins. Co., 82 Haw. 120, 128, 920 P.2d 334, 342 (1996),] requires a
contractual relationship between an insurer and an insured” (citations omitted)).
Moreover, although commercial contracts for “sale of goods” also
contain an obligation of good faith in their performance and enforcement, this
obligation does not create an independent cause of action. See Stoebner Motors,
Inc. v. Automobili Lamborghini S.P.A., 459 F. Supp. 2d 1028, 1037-38 (D. Haw.
2006). And Hawaii courts have noted that “[o]ther jurisdictions recognizing the
tort of bad faith . . . limit such claims to the insurance context or situations
involving special relationships characterized by elements of fiduciary
responsibility, public interest, and adhesion.” Id. at 1037 (quoting Francis v. Lee
Enters., 89 Haw. 234, 238, 971 P.2d 707, 711 (1999)).
Importantly, even assuming a bad faith tort exists outside the
insurance context, it is well-settled that “[a] party cannot breach the covenant of
good faith and fair dealing before a contract is formed.” Contreras v. Master Fin.,
Inc., 2011 WL 32513, at *3 (D. Nev. Jan. 4, 2011) (citing Indep. Order of
Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 941 (2d Cir. 1998)
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(“[A]n implied covenant relates only to the performance under an extant contract,
and not to any pre-contract conduct.”)). Hawaii follows this distinction. See
Young v. Allstate Ins. Co., 119 Haw. 403, 427, 198 P.3d 666, 690 (2008)
(indicating the covenant of good faith does not extend to activities occurring before
consummation of an insurance contract).
Thus, to the extent Plaintiffs base Counts I and II on pre-contract
activities (conduct that “caused [Plaintiffs] to enter into an unaffordable mortgage
loan”), Defendant cannot be liable for bad faith. See id.; see also Larson v.
Homecomings Fin., LLC, 680 F. Supp. 2d 1230, 1237 (D. Nev. 2009) (“Because
Plaintiffs’ claim revolves entirely around alleged misrepresentations made before
the [mortgage loan] contract was entered into, [the bad faith claim] fails as a matter
of law.”).
And, even if Plaintiffs are attempting to assert bad faith in the
performance of a contractual right to foreclose, “a court should not conclude that a
foreclosure conducted in accordance with the terms of a deed of trust constitutes a
breach of the implied covenant of good faith and fair dealing.” Davenport v. Litton
Loan Servicing, LP, 725 F. Supp. 2d 862, 884 (N.D. Cal. 2010) (citation omitted).2
2
Nothing in the Complaint suggests that Defendant violated the terms of either the First
or Second Mortgage in connection with default and foreclosure proceedings.
10
“The covenant [of good faith] does not ‘impose any affirmative duty of moderation
in the enforcement of legal rights.’” Id. (quoting Price v. Wells Fargo Bank, 213
Cal. App. 3d 465, 479-80, 261 Cal. Rptr. 735, 742 (1989)).3
Accordingly, Counts I and II are DISMISSED. Because further
amendment would be futile, dismissal of Counts I and II is without leave to amend.
B.
Counts III and IV -- Unfair and Deceptive Acts and Practices
Plaintiffs allege that Defendant is liable for unfair and deceptive acts
and practices in connection with loan servicing (Count III) and loan origination
(Count IV). Doc. No. 1, Compl. at 11-12. Plaintiffs base both Counts on the same
allegations of wrongdoing including: (1) “failing to timely and accurately apply
payments . . . and maintain accurate account statements;” (2) “charging excessive
3
Plaintiffs allege that their “reasonable expectations were not met” by Defendants’
“unfair[] interfere[nce] with [Plaintiffs’] right to receive the benefits of the contracts,”
presumably retention of the subject property. Doc. No. 1, Compl. ¶¶ 45, 46, 56, and 57.
Plaintiffs imply that numerous federal initiatives that they list under the heading “The United
States’ Stimulus/Rescue Efforts,” created a reasonable expectation that Defendant would modify
Plaintiffs’ mortgages, thereby avoiding foreclosure. Doc. No. 1, Compl. ¶¶ 17-29. Some or all
of these initiatives arise from the Emergency Economic Stabilization Act of 2008 (“ESSA”), 12
U.S.C. § 5201, et seq., which authorizes the U.S. Treasury to promulgate mortgage modification
programs including, for example, the Home Affordable Modification Program (“HAMP”). 12
U.S.C. § 5219(a)(1). However, neither ESSA nor HAMP provides a private right of action
against lenders who refuse to modify mortgages. See, e.g., Singh v. Wells Fargo Bank, 2011 WL
66167, at *7 (E.D. Cal. Jan. 7, 2011) (collecting cases); see also Gonzalez v. First Franklin Loan
Servs., 2010 WL 144862, at *18 (E.D. Cal. Jan. 11, 2010); Santos v. Countrywide Home Loans,
2009 WL 3756337, at *2 (E.D. Cal. Nov. 6, 2009). Absent the ability to enforce guidelines
promulgated under ESSA or HAMP, Plaintiffs’ reliance on these initiatives as the basis for their
alleged “reasonable expectations” is misplaced.
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or improper fees;” (3) “failing to properly oversee third party vendors involved in
servicing activities on behalf of the Banks;” (4) imposing force-placed insurance
without notif[ication];” (5) providing . . . false or misleading information;” and
(6) “failing to maintain appropriate staffing, training, and quality control systems.”
Id. ¶ 34. In addition, Plaintiffs allege that “[i]n the course of their origination of
[Plaintiffs’] mortgage loans . . . [Defendant] has engaged in a pattern and practice
of unfair and deceptive practices . . . [that] caused [Plaintiffs] to enter into an
unaffordable mortgage loan[.]” Id. ¶ 37.4
1.
Sufficiency of Factual Allegations
Defendant contends that Plaintiffs failed to allege specific facts
sufficient to state a plausible claim. The court agrees. None of the allegations
provides anything more than vague, conclusory statements. Plaintiffs failed to
include any facts connecting specific acts or omissions by Defendant to the
origination or servicing of Plaintiffs’ First or Second Mortgage. Rather, Plaintiffs’
allegations of wrongdoing appear to be general complaints against the banking
industry on behalf of multiple borrowers. See Doc. No. 1, Compl. ¶ 34.
For example, Plaintiff fails to allege: (1) that Plaintiffs made
4
Although clearly applicable to Count IV (Unfair and Deceptive Consumer Practices
with Respect to Loan Origination), this allegation is also incorporated into Count III (Unfair and
Deceptive Consumer Practices with Respect to Loan Servicing). Doc. No. 1, Compl. ¶¶ 60, 66
(incorporating ¶ 37 into each Count).
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payments of certain amounts on specific dates that Defendant did not apply in a
timely and accurate manner to either the First or Second Mortgage; (2) what
specific fees were charged in servicing these specific Mortgages; (3) the identity
and role of third party vendors employed by Defendant in connection with
Plaintiffs’ Mortgages; (4) that Plaintiffs purchased duplicate insurance, for what
price, and the details of allegedly adequate coverage already in their possession;
(5) specific false or misleading information provided by Defendant to Plaintiffs in
response to a specific complaint; or (6) any specific information concerning
whether or not Defendant maintained inadequate staffing, training or quality
control systems and how these matters constitute an unfair and deceptive practice.
In short, Plaintiffs’ allegations as to Counts III and IV do not meet the
requirements of Rule 8. The absence of specific factual allegations leaves only
“naked assertions” that are no more than “the-defendant-unlawfully-harmed-me
accusation[s]” that “will not do” to state a claim upon which relief can be granted.
Iqbal, 556 U.S. at 678. Accordingly, Plaintiffs’ allegations fail to meet Rule 8’s
general pleading requirement.5
5
It is not clear whether Plaintiffs are alleging fraud. Should they choose to amend their
Complaint to include allegations of fraud, Rule 9’s particularity requirement would apply. See
Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.”); see also 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,
(continued...)
13
2.
Elements of a Claim that Defendant Violated HRS § 480-2
Alternatively, even if Plaintiffs’ Complaint contains sufficient factual
allegations to survive Rule 8 scrutiny, Plaintiffs’ allegations fail to state a plausible
UDAP claim. Both Counts III and IV allege violations of UDAP, which makes it
unlawful to engage in “unfair or deceptive acts or practices in the conduct of any
trade or commerce.” HRS § 480-2(a). The Hawaii Supreme Court “has described
a deceptive act or practice as having the capacity or tendency to mislead or
deceive.” Courbat v. Dahana Ranch, Inc., 111 Haw. 254, 261, 141 P.3d 427, 434
(2006) (citation and quotation marks omitted). More specifically, under Hawaii
law, “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. at 262, 141 P.3d at 435
(adopting three-part test set forth in In re Cliffdale Assocs., 103 F.T.C. 110, 165
(1984) (quotation and alteration signals omitted); 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
5
(...continued)
1122 (9th Cir. 2009), to find that HRS Ch. 480 claims that sound in fraud must be pled with
particularity).
14
Novartis Corp. v. FTC, 343 U.S. App. D.C. 111, 223 F.3d 783, 786 (D.C. Cir.
2000)).
Section 480-13 provides a private right of action for § 480-2
violations.6 Pursuant to § 480-13, a successful UDAP claim must establish “four
essential elements: (1) a violation of chapter 480; (2) injury to plaintiff’s business
or property resulting from such violation; (3) proof of the amount of damages; and
(4) a showing that the action is in the public interest or that the defendant is a
merchant.” Davis v. Four Seasons Hotel Ltd., 122 Haw. 423, 455, 228 P.3d 303,
325 (2010).
Without more, Plaintiffs’ allegations do not state a claim under HRS §
480-2. Plaintiffs utterly fail to allege facts establishing some of the essential
elements of a UDAP claim. For example, without allegations of a specific,
material representation, omission, or practice “that is likely to mislead,” Plaintiffs
cannot establish the first prong -- a violation of Chapter 480.
Furthermore, in granting summary judgment against a borrower on a
§ 480-2 claim, this court in McCarty v. GCP Management, LLC, 2010 WL
6
Section 480-13(a) provides a right of action for “any person who is injured in the
person’s business or property by reason of anything forbidden or declared unlawful by this
chapter,” and section 480-13(b) provides a right of action for “[a]ny consumer who is injured by
any unfair or deceptive act or practice forbidden or declared unlawful by section 480-2.” HRS
§ 480-13(a), (b). Remedies include injunctive relief, damages, attorney’s fees and costs. Id.
15
4812763 (D. Haw. Nov. 17, 2010), relied on the general rule that “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.” Id. at 6 (quoting Nymark v. Heart Fed. Sav. & Loan Ass’n, 283
Cal. Rptr. 53, 56 (Cal. App. 1991)). Nothing in the Complaint indicates that
Defendant “exceed[ed] the scope of [a] conventional role as a mere lender of
money.” Counts III and IV fail on that basis alone.
3.
Effect of Defendant’s Relationship to Countrywide Bank, F.S.B.
Plaintiffs allege that Defendant’s unfair and deceptive conduct
“caused [them] to enter into an unaffordable mortgage loan[.]” Doc. No. 1, Compl.
¶ 37.
Chapter 480 “provides for a cause of action against a ‘person, firm,
company, association or corporation’ that actually committed an unfair and
deceptive trade practice.” Araki v. Bank of Am., 2010 WL 5625970, at *6 (D.
Haw. Dec. 14, 2010) (quoting HRS § 480-3.1). Plaintiffs acknowledge that
Countrywide Bank, F.S.B., not Defendant, was the originating lender of the First
and Second Mortgages. Doc. No. 1, Compl. ¶ 2. Thus, Defendant cannot be liable
for unfair or deceptive acts that may have occurred when the loan was
consummated. See Rodenhurst v. Bank of Am., 773 F. Supp. 2d 886, 895-96 (D.
16
Haw. 2011). Nor could Defendant be liable as an assignee7 because
§ 480-2 liability does not attach “merely because one is an assignee.”8 Araki, 2010
WL 5625970, at *6; see Rodenhurst, 773 F. Supp. 2d at 896 (noting that “banks
cannot be held accountable for unfair or deceptive acts and practices based solely
on similar allegations, and more specifically, the allegation that [Bank of America]
is related to or has an alleged parent-subsidiary relationship with Countrywide”)
(citations omitted)).
4.
Effect of Statute of Limitations on Count IV
Finally, even if Defendant could be liable for a UDAP claim in
connection with the origination of Plaintiffs’ Mortgages, Defendant argues that
Count IV is barred by the applicable four-year statute of limitations. See HRS
§ 480-24(a) (barring a Chapter 480 claim “unless commenced within four years
7
Plaintiffs allege that sometime after the origination of Plaintiffs’ Mortgages,
Countrywide Bank, F.S.B. was acquired by Defendant and therefore Defendant is “the successor
in interest to CWB.” Id. ¶ 7.
8
Plaintiffs do not assert a rescission claim. However, a rescission claim under Chapter
480 would stand against an assignee if the underlying contract is void (if, for example, the
consumer lacked capacity to enter into the contract). See, e.g., Skaggs v. HSBC Bank USA, N.A.,
2010 WL 5390127, at *4-6 (D. Haw. Dec. 22, 2010) (analyzing whether a defense of incapacity
can be asserted against a holder in due course seeking to foreclose, and concluding that a
mortgage note that is void under § 480-12 may be subject to such defenses against a subsequent
assignee). If a Chapter 480 violation is established, however, rescission under § 480-12 does not
necessarily or automatically follow. Rather, a plaintiff seeking affirmatively to void a mortgage
transaction under § 480-12 must be able to “place the parties in as close a position as they held
prior to the transaction.” Skaggs v. HSBC Bank USA, N.A., 2011 WL 3861373, at *11 (D. Haw.
Aug. 31, 2011).
17
after the cause of action accrues”). The court agrees. Plaintiffs’ cause of action
accrued on February 25, 2008, when the First and Second Mortgage transactions
were consummated. Plaintiffs’ UDAP claim was filed on December 4, 2012, more
than nine months after the end of the four year statute of limitation.9
Accordingly, Counts III and IV are DISMISSED. Because the court
cannot conclude that an amendment to Count III would be futile, the court will
allow Plaintiffs an opportunity to amend Count III to attempt to state a § 480-2
UDAP claim in connection with the servicing of their Mortgages.
During the hearing, Plaintiffs conceded that if the court applies
Rodenhurst, 773 F. Supp. 2d 886 (finding Bank of America cannot be liable for the
acts of Countrywide under Chapter 480), amendment of Count IV would be futile.
That is, Plaintiffs cannot amend to allege a claim against Defendant based on
Countrywide’s conduct at the time of the origination of Plaintiffs’ Mortgages.
Therefore, Count IV is DISMISSED without leave to amend.
V. CONCLUSION
Based on the foregoing, the Motion to Dismiss Complaint is
GRANTED without leave to amend as to Counts I, II, and IV, and with leave to
9
In Rundgren v. Bank of N.Y. Mellon, 777 F. Supp. 2d 1224 (D. Haw. 2011), this court
determined that fraudulent concealment may equitably toll the statute of limitations for claims
brought pursuant to Chapter 480. Id. at 1229-32. Plaintiffs failed to allege any facts suggesting
that equitable tolling could apply.
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amend as to Count III. Plaintiffs are given leave to amend by May 15, 2013.
Leave is granted to amend only the UDAP claim in connection with servicing of
the Mortgages. Failure to file an amended complaint by May 15, 2013 will result
in automatic dismissal of this action.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, April 25, 2013.
/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge
Cablay, et al. v. Bank of Am., N.A., et al., Civ. No. 12-00648 JMS-KSC, Order Granting Motion
to Dismiss Complaint with Leave to Amend
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