Billete et al v. Deutsche Bank National Trust Company et al

Filing 15

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS PLAINTIFFS' COMPLAINT FILED JANUARY 16, 2013 re: 5 . Signed by JUDGE LESLIE E. KOBAYASHI on 5/28/2013. ~ Order grants plaintiffs leave to file a First Amended Complaint; plaintiffs must file their First Amended Complaint by no later than July 1, 2013 ~ [Order follows hearing held on May 13, 2013. Minutes of hearing: doc no. 14 ] (afc) CERTIFICATE OF SER VICEParticipants 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
JOSEPH BILLETE; MARIVEL
BILLETE,

)
)
)
)
Plaintiffs,
)
vs.
)
)
DEUTSCHE BANK NATIONAL TRUST )
)
COMPANY, NATIONAL BANKING
ASSOCIATION AS TRUSTEE FOR
)
)
GSR 2006-OA1; MORTGAGE
)
ELECTRONIC REGISTRATION
SYSTEMS, INC.; and DOES 1-50, )
)
)
Defendants.
_____________________________ )
)

CIVIL NO. 13-00061 LEK-KSC

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S
MOTION TO DISMISS PLAINTIFFS’ COMPLAINT FILED JANUARY 16, 2013
On February 12, 2013, Defendant Deutsche Bank National
Trust Company, National Banking Association as Trustee for GSR
2006-OA1 (“Deutsche Bank”) filed its Motion to Dismiss
Plaintiffs’ Complaint Filed January 16, 2013 (“Motion”).
no. 5.]

[Dkt.

Plaintiffs Joseph Billete and Marivel Billete

(“Plaintiffs”) filed their memorandum in opposition on April 22,
2013, and Deutsche Bank filed its reply on April 29, 2013.
nos. 12, 13.]

[Dkt.

This matter came on for hearing on May 13, 2013.

Appearing on behalf of Deutsche Bank was Sofia McGuire, Esq., and
appearing on behalf of Plaintiffs was Katherine Holstead, Esq.
After careful consideration of the Motion, supporting and
opposing memoranda, and the arguments of counsel, Deutsche Bank’s

Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the
reasons set forth below.
BACKGROUND
Plaintiffs purchased their residence, 91-1031 Makaike
Street, Ewa Beach, Hawai`i (“the Property”), in 2000.
at ¶¶ 3, 7.]

[Complaint

The Deed to the Property was recorded with the Land

Court on July 31, 2000 as document number 2641152 on certificate
of title number 559,260, and certificate of title number 559,741
was issued.

[Id., Exh. 1.]

In 2006, Plaintiffs obtained a

$530,000.00 loan from HCL Finance, Inc. (“HCL”), secured by a
Mortgage on the Property.

The Mortgage was recorded with the

Land Court on March 10, 2006 as document number 3402137 on
certificate of title number 559,741.

[Complaint, Exh. 2.]

The

Mortgage identifies Defendant Mortgage Electronic Registration
Systems, Inc. (“MERS”) as a separate corporation acting as a
nominee for HCL and HCL’s successors and assigns.

[Id. at 1.]

The Complaint alleges that, on August 24, 2012,
Deutsche Bank filed an ejectment action in a state district
court, based upon a nonjudicial foreclosure of the Mortgage.
[Complaint at ¶ 9.]

Deutsche Bank’s Quitclaim Deed Pursuant to

Power of Sale (“Quitclaim Deed”) to the Property was recorded
with the Land Court on July 5, 2012 as document number T-8221287
on certificate number 559,741, and a new certificate of title was
issued, number 1044607.

[Id., Exh. 3.]

2

Plaintiffs allege that

Deutsche Bank did not have standing either to foreclose on the
Property or to sue for ejectment because it never properly
obtained the Mortgage.

Plaintiffs allege the Assignment in which

MERS purportedly transferred ownership of the Mortgage from HCL
to Deutsche Bank is ineffective because it was procured by fraud.
The Assignment is dated August 6, 2009, and was recorded with the
Land Court on September 16, 2012 as document number 3898298 on
certificate number 559,741.
(Assignment).]

[Complaint at ¶¶ 10-12; id., Exh. 4

According to Plaintiffs, HCL informed them that

it had sold Plaintiffs’ loan to IMPAC Funding Corporation
(“IMPAC”).

[Complaint at ¶ 13; id., Exh. 5 (letter dated 3/20/06

to Plaintiffs from HCL Customer Service).]

Thus, Plaintiffs

allege that, at the time of the Assignment, HCL no longer had an
ownership interest in Plaintiffs’ loan and, in fact, the entity
itself had already been dissolved.

[Complaint at ¶¶ 14-15.]

Further, Deutsche Bank’s trust, to which the Assignment
purportedly assigned Plaintiffs’ loan (“the Trust”), closed by
its own terms on August 24, 2006, and Plaintiffs allege that the
Trust could not have accepted new assets in 2009.

Plaintiffs

allege that Deutsche Bank had no authority either to accept
Plaintiffs’ loan in 2009 or to foreclose upon the loan in 2012.
[Id. at ¶¶ 17-18, 22.]
In addition, Plaintiffs assert that the foreclosure is
void because the terms of their loan were predatory and because

3

the manner in which the loan servicer, IndyMac Bank (“IndyMac”),
abruptly increased Plaintiffs’ monthly payments violated certain
provisions of the loan documents.

Plaintiffs claim that any

default that they committed should be excused because it was the
direct result of the lender’s illegal acts.

[Id. at ¶¶ 24-30.]

Plaintiffs also allege that IndyMac’s actions when Plaintiffs
inquired about a loan modification constitute unfair and
deceptive acts.

[Id. at ¶ 31.]

Plaintiffs allege the following claims: wrongful
foreclosure and wrongful ejectment against Deutsche Bank (“Count
I”);1 a claim for injunctive relief against Deutsche Bank (“Count
II”); fraud against Deutsche Bank and MERS (“Count III”); breach
of contract against Deutsche Bank (“Count IV”); and unfair and
deceptive acts and practices (“UDAP”) against Deutsche Bank and
MERS (“Count V”).

Plaintiffs seek the following relief: a

declaratory judgment that the Assignment and all of the
foreclosure documents are null and void; an order striking the
Assignment and the foreclosure documents from the Land Court
records; an injunction against Deutsche Bank and against any
prior or subsequent trustee or agent of the Trust precluding the

1

Although Count I is titled “Wrongful Foreclosure, Wrongful
Ejectment and Quiet Title Against Deutsche Bank”, [Complaint at
pg. 14,] Plaintiffs’ counsel represented at the hearing that
there is not a quiet title claim in the Complaint. Further, the
lack of the required tender allegation, see Klohs v. Wells Fargo
Bank, N.A., 901 F. Supp. 2d 1253, 1262-63 (D. Hawai`i 2012), also
indicates that Plaintiffs are not asserting a quiet title claim.
4

enforcement of either the mortgage loan or the foreclosure;
actual and treble damages; attorneys’ fees and costs; and any
other appropriate relief.
I.

Motion
In the instant Motion, Deutsche Bank characterizes

Plaintiffs’ Complaint as an effort to stall their inevitable
ejectment from the Property, which Plaintiffs no longer own.
Deutsche Bank emphasizes that it prevailed in the state district
court ejectment action and that the state district court filed
the Judgment for Possession and Writ of Possession on November
15, 2012.

Further, on January 8, 2013, the state district court

denied Plaintiffs’ motion for reconsideration of its dispositive
order denying Plaintiffs’ motion to dismiss and granting Deutsche
Bank’s motion for summary judgment.

Plaintiffs have appealed the

state district court’s rulings, and the appeal is currently
pending before the Intermediate Court of Appeals (“ICA”).
Deutsche Bank argues that the instant case is an attempt to
relitigate the same defenses to the ejectment that the parties
litigated in the state district court.

[Mem. in Supp. of Motion

at 1-2.]
Deutsche Bank contends that Plaintiffs’ claims merely
make general, unsupported legal conclusions that do not support
liability by Deutsche Bank.

Plaintiffs’ claims of superior title

are not plausible because the Land Court cancelled the

5

Certificate of Title that reflected Plaintiffs as the registered
owners of the Property and entered a new Certificate of Title
setting forth Deutsche Bank as the registered owner.

[Id. at 2-

3; Motion, Decl. of Derek Wong (“Wong Decl.”), Exh. A (copy of
cancelled Certificate of Title No. 559741, recorded 5/7/10, and
transferred Certificate of Title 1044697, entered 7/5/122).]
Deutsche Bank urges this Court to give effect to the
new Certificate of Title and to dismiss Plaintiffs’ claims.
[Mem. in Supp. of Motion at 4.]

Deutsche Bank argues that,

pursuant to Aames Funding Corp. v. Mores, 107 Hawai`i 95, 110
P.3d 1042 (2005), Lee v. HSBC Bank USA, 121 Hawai`i 287, 218 P.3d
775 (2009), and Haw. Rev. Stat. § 501-118, Plaintiffs cannot
challenge the foreclosure of the Property because the Mortgagee’s
Affidavit of Foreclosure under Power of Sale (“Foreclosure
Affidavit”) has been recorded and the new Certificate of Title
has been entered.

[Id. at 6-8.]

In addition, Deutsche Bank

argues that Plaintiffs’ quiet title claim and request for
injunctive relief fail because Plaintiffs have not alleged, and
cannot allege, that they have either paid off their mortgage loan
or are able to tender the full amount.

[Id. at 9.]

Deutsche Bank also argues that Plaintiffs’ fraud and
UDAP claims fail because Plaintiffs did not plead these claims

2

Deutsche Bank’s counsel obtained these from an internet
application for retrieving documents recorded at the State of
Hawai`i Bureau of Conveyances. [Wong Decl. at ¶ 3.]
6

with particularity, and Plaintiffs expressly granted MERS the
right to transfer the lender’s interest.

Further, Plaintiffs

cannot overcome the controlling precedent rejecting these types
of claims and recognizing MERS’s power to act as the mortgagee.
Deutsche Bank argues that the Assignment cannot be the product of
fraud because there is no dispute that Plaintiffs executed the
Mortgage, and the conveyance language in the Mortgage is clear.
[Id. at 9-12.]

Deutsche Bank emphasizes that Plaintiffs have not

alleged any specific facts setting forth the alleged defect in
the transfer of Plaintiffs’ loan.

The unsubstantiated allegation

of fraud in the Assignment is not enough to invalidate the
foreclosure.

[Id. at 14.]

Deutsche Bank argues that, to the extent that
Plaintiffs’ claims are based on the alleged “failed
securitization” of their loan, this district court and courts
around the country have rejected similar claims on the ground
that a borrower is neither a party to nor a third party
beneficiary of a trust’s Pooling and Servicing Agreement (“PSA”).
In other words, a borrower/plaintiff lacks standing to challenge
the securitization of the loan because he is not an investor in
the loan trust.

Securitization does not change the rights of, or

the relationship between, the original parties to the loan, and
there is nothing improper about the process of securitization, in
and of itself.

Deutsche Bank argues that, for the same reasons,

7

all of Plaintiffs’ claims based on the allegedly improper
securitization fail.

[Id. at 14-18.]

As to Plaintiffs’ UDAP claim, Deutsche Bank argues that
Plaintiffs failed to allege how Deutsche Bank violated Haw. Rev.
Stat. Chapter 480 because Plaintiffs cannot show either how the
Assignment was improper, that their title to the Property is
superior to Deutsche Bank’s, or that the Mortgage or the
Assignment is otherwise unenforceable.

Plaintiffs have not

implicated Deutsche Bank in the alleged wrongdoing regarding
predatory lending, loan origination, increased payments, and
consideration for loan modification.

Deutsche Bank therefore

urges this Court to summarily dismiss Plaintiffs’ UDAP claim.
[Id. at 18-20.]
Ultimately, Deutsche Bank urges this Court to dismiss
all of Plaintiffs’ claims with prejudice.
II.

Memorandum in Opposition
In their memorandum in opposition, Plaintiffs

acknowledge that the underlying facts of this case are largely
undisputed.

Plaintiffs emphasize that Deutsche Bank does not

dispute that: Plaintiffs contacted IndyMac in January and
February 2009 to request a loan modification, but IndyMac’s
representatives told Plaintiffs “no such thing existed[;]” the
Trust closed more than three years prior to the execution of the
purported Assignment; and HCL was dissolved approximately six

8

months prior to the execution of the Assignment.
at 2-4.]

[Mem. in Opp.

Plaintiffs note that they were forcibly removed from

the Property pursuant to the writ of ejectment entered in the
state district court.

[Id. at 4 (citing Mem. in Opp., Decl. of

Counsel (“Pltfs.’ Counsel Decl.”), Exh. 1 (Writ of Possession)).]
Plaintiffs emphasize that they filed the Complaint in the instant
case prior to the entry of judgment in the ejectment action.
[Id. at 4-5.]
Plaintiffs argue that the Foreclosure Affidavit and the
new Certificate of Title do not have conclusive effect because
there is a fraud exception to Aames and Haw. Rev. Stat. § 501118.

In support of this proposition, Plaintiffs cite to a

transcript of a 2011 Land Court proceeding.

[Id. at 7-8 (citing

Pltfs.’ Counsel Decl., Exh. 2 (In re Estate of James Campbell,
3/16/11 Hrg. Trans.)).]

Plaintiffs contend that the execution

and recording of the Assignment, and the subsequent non-judicial
foreclosure, were fraudulent because of the prior closure of the
Trust and the dissolution of HCL.

Plaintiffs also argue that

Haw. Rev. Stat. § 667-8, which allowed foreclosure affidavits to
serve as evidence that the power of sale was duly executed, was
repealed by Act 183, sections 51 to 54, effective June 28, 2012.
[Id. at 8-9.]
As to Count III and Count V, Plaintiffs assert that
they pled these claims with sufficient particularity because they

9

allege the exact date and location of the fraudulent execution
and recordation of the Assignment and of the non-judicial
foreclosure.

Plaintiffs also argue that sufficient information

about the alleged fraudulent acts is included in the recorded
documents.

As to Deutsche Bank’s argument that Plaintiffs

expressly agreed that MERS would have the right to act on behalf
of the lender, Plaintiffs respond that this is not the basis of
their fraud claims.

MERS acted fraudulently because it could not

have been acting as nominee or agent of HCL, which had already
been dissolved by the time of the Assignment.

[Id. at 9-10.]

Plaintiffs argue that they have standing to challenge
the Assignment because they have suffered a concrete and
particularized injury, the foreclosure of their home.

They also

allege that there is a direct causal connection between the
improper Assignment and Plaintiffs’ harm.

Further, this Court

can remedy their injury either by issuing a declaratory judgment
that Deutsche Bank lacked the authority to foreclose or by
awarding damages.

Plaintiffs therefore contend that they can

establish a sufficient personal stake in the outcome of the
proceeding.

Plaintiffs acknowledge that courts have denied

standing to borrowers on prudential grounds because the borrower
was neither a party to, nor a third-party beneficiary of, the
Assignment.

Plaintiffs, however, argue that none of the cases so

holding are binding precedent.

Plaintiffs also argue that a

10

Hawai`i debtor is in a unique position because, where the
mortgage contains a power of sale provision, Haw. Rev. Stat.
Chapter 667 allows foreclosure without prior judicial
authorization.

Thus, a Hawai`i debtor, unlike debtors in other

states, cannot challenge an assignment when the assignee seeks to
obtain the foreclosed property through a judicial action.
Plaintiffs thus assert that aggrieved Hawai`i debtors have a
stronger argument for standing than debtors in other states.
[Id. at 10-13.]
Plaintiffs also allege that they have pled a viable
UDAP claim because: the original lender negotiated a predatory
loan; IndyMac violated the terms of the underlying Note;
IndyMac’s response to their loan modification inquiry supports a
UDAP claim against Deutsche Bank because IndyMac is Deutsche
Bank’s agent and servicer; Plaintiffs pled the facts establishing
the fraudulent Assignment with particularity; and Plaintiffs
sufficiently pled their injury.

[Id. at 14-15.]

Plaintiffs therefore ask this Court to deny the Motion
or, at a minimum, grant them leave to amend their Complaint.
III. Reply
In its reply, Deutsche Bank reiterates that Plaintiffs’
securitization arguments are baseless and have been rejected in
prior cases.

Further, Deutsche Bank argues that, assuming

arguendo that there is a fraud exception for the Aames doctrine,

11

Plaintiffs have not specifically pled why the Assignment is
allegedly fraudulent.

Deutsche Bank reiterates that the new

Certificate of Title recognizing Deutsche Bank as the owner of
the Property must be given preclusive effect and that this Court
must dismiss Plaintiffs’ claims.

[Reply at 2-3.]

As to

Plaintiffs’ argument that there is no binding case law holding
that borrowers lack standing to challenge the assignment of their
loan, Deutsche Bank argues that this district court has applied
the rule in several recent cases.

[Id. at 4 (citing cases).]

Deutsche Bank also points out that Hawai`i state courts have
applied the same rule.

[Id. at 5 (citing cases).]

Deutsche Bank argues that Plaintiffs failed to plead
their fraud claims with particularity because they have not, and
cannot, argue why the execution and the recording of the
Assignment was fraudulent.

Deutsche Bank also contends that

HCL’s dissolution prior to the execution of the Assignment does
not render the Assignment invalid because MERS is the nominee for
HCL, as well as for HCL’s successors and assigns.

[Id. at 5-6.]

As to the UDAP claim, Deutsche Bank argues that the
claim is derivative of Plaintiffs’ general fraud claims regarding
securitization and the Assignment and therefore the UDAP claim
fails for the same reasons.

Further, there is no cause of action

for predatory lending, and Plaintiffs’ lender was under no duty
to ensure that Plaintiffs would be able to pay their loan.

12

[Id.

at 7-8 (citing cases).]
Deutsche Bank urges this Court to dismiss all of the
claims in Plaintiffs’ Complaint with prejudice.
STANDARD
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[.]”
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). . . .
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).
Hawaii Motorsports Inv., Inc. v. Clayton Group
Servs., Inc., 693 F. Supp. 2d 1192, 1195-96 (D.
Hawai`i 2010).
This Court, however, notes that the tenet
that the court must accept as true all of the
13

allegations contained in the complaint — “is
inapplicable to legal conclusions.” Iqbal, 129 S.
Ct. at 1949. Factual allegations that only permit
the court to infer “the mere possibility of
misconduct” do not show that the pleader is
entitled to relief. Id. at 1950.
“Dismissal without leave to amend is improper
unless it is clear that the complaint could not be
saved by any amendment.” Harris v. Amgen, Inc.,
573 F.3d 728, 737 (9th Cir. 2009) (citation and
quotation marks omitted).
Enriquez v. Countrywide Home Loans, FSB, 814 F. Supp. 2d 1042,
1055 (D. Hawai`i 2011) (some citations omitted).
Deutsche Bank attached exhibits to the instant Motion
and there are several relevant exhibits attached to the Complaint
itself.

This district court has recognized that:
When a defendant attaches exhibits to a motion to
dismiss, the court ordinarily must convert the
motion into a summary judgment motion so that the
plaintiff has an opportunity to respond. Parrino
v. FHP, Inc., 146 F.3d 699, 706 n.4 (9th Cir.
1998). However, a court “may consider evidence on
which the complaint ‘necessarily relies’ if: (1)
the complaint refers to the document; (2) the
document is central to the plaintiff’s claim; and
(3) no party questions the authenticity of the
copy attached to the 12(b)(6) motion.” Marder v.
Lopez, 450 F.3d 445, 448 (9th Cir. 2006). The
court may treat such a document as “part of the
complaint, and thus may assume that its contents
are true for purposes of a motion to dismiss under
Rule 12(b)(6).” United States v. Ritchie, 342
F.3d 903, 908 (9th Cir. 2003).

Yamalov v. Bank of Am. Corp., CV. No. 10–00590 DAE–BMK, 2011 WL
1875901, at *7 n.7 (D. Hawai`i May 16, 2011).

14

DISCUSSION
I.

Count I - Wrongful Foreclosure/Wrongful Ejectment
In Count I, Plaintiffs ask this Court to invalidate the

foreclosure and ejectment because: MERS’s assignment to Deutsche
Bank was fraudulent because MERS executed the assignment six
months after the dissolution of HCL; Deutsche Bank’s Trust had
already closed at the time of the Assignment; and the nonjudicial
foreclosure of the Property did not comply with the requirements
of Haw. Rev. Stat. § 667-5.3

[Complaint at ¶¶ 33-34.]

First, to the extent that Count I asserts that the
foreclosure of the Property did not comply with § 667-5, this
Court concludes that the issue is not properly before it at this
time.

Whether Plaintiffs can challenge the foreclosure based

upon alleged failures to comply with § 667-5 was an issue for the
ejectment action, and the state district court’s rulings in that
action are currently on appeal before the ICA.

This Court

therefore expresses no opinion as to the merit of this portion of
Count I and, to the extent that Deutsche Bank’s Motion seeks
dismissal of this portion of Count I, Deutsche Bank’s Motion is
DENIED WITHOUT PREJUDICE.4
3

Count I also alleges that Defendants’ acts constitute
fraud and UDAPs and therefore Plaintiffs are entitled to damages.
[Complaint at ¶ 35.] This Court will address these allegations
infra, Discussion sections III and V.
4

Similarly, to the extent that any portions of Counts II,
(continued...)
15

Second, Plaintiffs’ argument that the foreclosure and
ejectment were improper because the Trust was closed at the time
of the Assignment fails because, as this district court and
others have repeatedly held, Plaintiffs “are third parties and
lack standing to raise a violation of the PSA, and . . .
noncompliance with the terms of a PSA is irrelevant to the
validity of an assignment.”

See Nottage v. Bank of New York

Mellon, Civil No. 12–00418 JMS/BMK, 2012 WL 5305506, at *4 (D.
Hawai`i Oct. 25, 2012) (citing Benoist v. U.S. Bank Nat’l Ass’n,
2012 WL 3202180, at *5 (D. Hawai`i Aug. 3, 2012); Abubo v. Bank
of New York Mellon, 2011 WL 6011787, at *8 (D. Hawai`i Nov. 30,
2011)); see also id. at *5 (discussing similar cases from other
jurisdictions).
This Court therefore GRANTS Deutsche Bank’s Motion as
to Count I to the extent that Count I is based upon the closure
of the Trust and any other alleged violations of the PSA.
Further, insofar as this Court finds that this portion of Count I
cannot be saved by any amendment, see Harris, 573 F.3d at 737,
this Court HEREBY DISMISSES that portion of Count I WITH
PREJUDICE.

4

(...continued)
III, IV, or V are premised upon the alleged violation of Haw.
Rev. Stat. § 667-5, this Court expresses no opinion at this time
as to the merits of those portions of the claims. To the extent
that Deutsche Bank’s Motion seeks dismissal of those portions of
Counts II, III, IV, or V, Deutsche Bank’s Motion is DENIED
WITHOUT PREJUDICE.
16

This Court, however, finds that, liberally construed,
the factual allegations in the Complaint regarding the execution
of the Assignment approximately six months after HCL’s
dissolution are sufficient to support Plaintiff’s claim that the
Assignment, and therefore the subsequent foreclosure and
ejectment, were invalid.

This Court notes that it is likely that

Deutsche Bank can establish whether, prior to dissolution, HCL
made some type of arrangement for the ownership of its assets.
Such an inquiry, however, is appropriate in a motion for summary
judgment, not in a motion to dismiss.

See Nottage, 2012 WL

5305506, at *4.
This Court therefore DENIES Deutsche Bank’s Motion as
to Count I, to the extent that Count I is based on the assertion
that HCL could not have assigned Plaintiffs’ Mortgage because it
was dissolved prior to the Assignment.
II.

Count II - Injunctive Relief
It is well-settled that declaratory relief and

injunctive relief “are remedies and not independent causes of
actions.”

See, e.g., Wagner v. Aurora Loan Servicing, Civil No.

10–00729 LEK–BMK, 2011 WL 6819041, at *6 (D. Hawai`i Dec. 27,
2011) (some citations omitted) (citing Caniadido v. MortgageIT,
Civil No. 11-00078 JMS/BMK, 2011 WL 3837265, at *5–6 (D. Hawai`i
Aug. 26, 2011) (citing Ballard v. Chase Bank USA, NA, 2010 WL
5114952, at *8 (S.D. Cal. Dec. 9, 2010) (“A claim for declaratory

17

relief ‘rises or falls with [the] other claims.’”); Jensen v.
Quality Loan Serv. Corp., 702 F. Supp. 2d 1183, 1201 (E.D. Cal.
2010) (“A request for injunctive relief by itself does not state
a cause of action.”))).
independent claim for

Thus, insofar as Count II asserts an

injunctive relief, Plaintiffs cannot cure

the defects in Count II by amendment.

This Court therefore

GRANTS Deutsche Bank’s Motion as to Count II and DISMISSES Count
II WITH PREJUDICE.
This Court, however, emphasizes that, although there is
no independent cause of action for injunctive relief, the remedy
may be available to Plaintiffs if they are able to prevail on any
independent cause of action.
III. Count III - Fraud
Plaintiffs’ fraud claim against Deutsche Bank is based
upon the same allegations that: Deutsche Bank recorded the
Assignment after HCL ceased to exist; Deutsche Bank conducted the
nonjudicial foreclosure and the ejectment proceedings when it
knew or should have known that HCL’s dissolution rendered the
Assignment fraudulent and that Deutsche Bank was not the proper
mortgagee, assignee, or holder of Plaintiffs’ Mortgage.
[Complaint at ¶¶ 38-43.]
Federal Rule of Civil Procedure 9(b) requires that
“[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.”

18

Rule 9(b) requires that a party make particularized allegations
of the circumstances constituting fraud.

See Sanford v.

MemberWorks, Inc., 625 F.3d 550, 557-58 (9th Cir. 2010).
In order to sufficiently plead their fraud-based
claims, 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) (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)).

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.

Twombly, 550 U.S. at 563 n.8

19

(citation omitted).
Plaintiffs’ Complaint, which incorporates the
Assignment as an exhibit, sets forth who executed the allegedly
fraudulent assignment, as well as when and where it was executed.
Plaintiffs also allege that “MERS knowingly created a fraudulent
Assignment of the subject property from HCL to [Deutsche Bank]”
and that Deutsche Bank “knew or should have known that the
company it was supposedly purchasing an interest in property from
was no longer conducting business and any Assignment in its name
was fraudulent.”

[Complaint at ¶¶ 40-41.]

Further, in the

Complaint and the exhibits thereto, Plaintiffs allege that HCL’s
dissolution was a matter of public record.

This Court therefore

concludes that, in light of the standards set forth supra,
Plaintiffs have pled Count III with sufficient particularity, to
the extent that their fraud claim is based upon the allegation
that the Assignment was fraudulent because of HCL’s dissolution.
As stated, supra Discussion section I, Deutsche Bank may be able
to establish proper ownership in a motion for summary judgment,
but Plaintiffs have pled this portion of Count III with
sufficient particularity to survive a motion to dismiss.
Although it is not entirely clear from the Complaint
whether Plaintiffs also base their fraud claim on the improper
securitization allegations, for the same reasons as set forth,
supra Discussion section I, this Court concludes that any portion

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of Count III based upon alleged violations of the PSA fails to
state a claim upon which relief can be granted.

Further,

Plaintiffs cannot cure the defects in that portion of Count III
by amendment.
This Court therefore DENIES Deutsche Bank’s Motion as
to the portion of Count III based upon HCL’s dissolution prior to
the Assignment, and GRANTS Deutsche Bank’s Motion as to the
portion of Count III based on the closure of the Trust and any
other alleged violations of the PSA.

That portion of Count III

is HEREBY DISMISSED WITH PREJUDICE.
IV.

Count IV - Breach of Contract
Plaintiffs’ breach of contract claim against Deutsche

Bank merely alleges that: 1) “the original lender HCL breached
its contractual duties outlined in Plaintiffs’ Note Section 3(F),
by drastically increasing the monthly payments prior to the
principal cap being reached and not giving them an accurate
accounting of the amounts actually owed[;]” and 2) Plaintiffs are
entitled to damages because HCL’s breach led to Plaintiffs’
default, which led to the foreclosure.

[Id. at ¶¶ 47-48.]

Implicit in Count IV is an assertion that Deutsche Bank
is liable for HCL’s breach of contract.

Plaintiffs, however,

have failed to provide any plausible factual allegations that, if
proven, would support a finding that Deutsche Bank is liable for
any breach by HCL.

This Court has stated:

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To allege breach of contract, the complaint must,
at a minimum, cite the contractual provision
allegedly violated. See Otani v. State Farm Fire
& Cas. Co., 927 F. Supp. 1330, 1335 (D. Haw. 1996)
(“Generalized allegations of a contractual breach
are not sufficient.”). Plaintiff fails to allege
even the basic elements of a breach of contract
claim, much less factual allegations to support
such a claim. See [Ashcroft v.] Iqbal, [556 U.S.
662, 678 (2009)] (stating that Rule 8 requires
more than “the-defendant-unlawfully-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”). The [Third Amended Complaint] does not
identify: (1) the contract at issue, (2) the
parties to the contract, (3) whether Plaintiffs
performed under the contract, and (4) the
particular provision that Defendants allegedly
violated. See Rodenhurst v. Bank of America, 773
F. Supp. 2d 886, 898 (D. Haw. 2011). . . .
Valencia v. Carrington Mortg. Servs., LLC, Civil No. 10–00558
LEK–RLP, 2013 WL 375643, at *7 (D. Hawai`i Jan. 29, 2013) (some
alterations in Valencia) (some citations omitted).
In the present case, as in Valencia, Plaintiffs’
general allegations in Count IV are insufficient to survive a
motion to dismiss.

This Court, however, finds that it is

arguably possible for Plaintiffs to cure the defects in Count IV
by amendment.

This Court therefore GRANTS Deutsche Bank’s Motion

as to Count IV, and DISMISSES Count IV WITHOUT PREJUDICE.
V.

Count V - UDAP
Plaintiffs’ UDAP claim is based on all of the factual

allegations in the Complaint, including: the invalid assignment
from HCL after its dissolution; Deutsche Bank’s and MERS general

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lack of authority to execute and record the relevant documents;
IndyMac’s failure to disclose the possibility of a loan
modification; and HCL’s predatory lending and violation of the
terms of the Note.

[Complaint at ¶¶ 49, 51.]

First, to the extent that Count V is based upon the
allegedly improper Assignment from HCL after dissolution, this
Court concludes, for the reasons set forth, supra Discussion
sections I and III, that Plaintiffs have sufficiently pled this
claim for purposes of a motion to dismiss.

Deutsche Bank’s

Motion is therefore DENIED as to the portion of Count V based
upon HCL’s dissolution prior to the Assignment.
To the extent that Count V is based upon the alleged
violations of the PSA, this Court concludes, for the reasons set
forth supra Discussion sections I and III, that Plaintiffs fail
to state a claim upon which relief can be granted and Plaintiffs
cannot cure the defects in this portion of the claim by
amendment.

Deutsche Bank’s Motion is therefore GRANTED as to the

portion of Count V based upon the closure of the Trust and any
other alleged violations of the PSA, and that portion of Count V
is DISMISSED WITH PREJUDICE.
This Court also contends that the remainder of
Plaintiffs’ allegations in Count V fail to state a claim.
Plaintiffs’ allegations regarding IndyMac, in its capacity as the
mortgagee’s servicer of Plaintiffs’ loan, occurred in January and

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February 2009, prior to the Assignment.

[Complaint at ¶ 31.]

Plaintiffs have failed to plead sufficient factual allegations
that, if proven, would establish that Deutsche Bank is liable for
IndyMac’s or HCL’s UDAPs.

Further, except for the alleged breach

of contract, Plaintiffs’ allegations regarding IndyMac’s and
HCL’s actions address Plaintiffs’ ability to repay their loan and
whether they were eligible for a more favorable loan program.
These claims fail for the reasons stated in Stanton v. Bank of
America, N.A.:
to the extent that Plaintiff bases her UDAP claim
against BOA on allegations that Countrywide did
not consider her ability to repay the loans or
whether she qualified for a more favorable loan
program, those claims also fail. This district
court has recognized 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.’” McCarty v. GCP Mgmt.,
LLC, 2010 WL 4812763, at *6 (D. Haw. Nov. 17,
2010) (quoting Champlaie v. BAC Home Loans
Servicing, LP, 706 F. Supp. 2d 1029, 1061
(E.D. Cal. 2009)). See also Sheets v. DHI
Mortg. Co., 2009 WL 2171085, at *4 (E.D. Cal.
July 20, 2009) (reasoning that no duty exists
“for a lender ‘to determine the borrower’s
ability to repay the loan. . . . The
lender’s efforts to determine the
creditworthiness and ability to repay by a
borrower are for the lender’s protection, not
the borrower’s.’” (quoting Renteria v. United
States, 452 F. Supp. 2d 910, 922–23 (D. Ariz.
2006))).
“[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
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scope of its conventional role as a mere
lender of money.” Nymark v. Heart Fed. Sav.
& Loan Ass’n, [231 Cal. App. 3d 1089] 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 *12–13 (D. Hawai`i May 4,
2011) (alterations in Casino).
834 F. Supp. 2d 1061, 1082 (D. Hawai`i 2011).
Thus, this Court concludes that the portions of Count V
based on IndyMac’s and HCL’s actions fail to state a claim upon
which relief can be granted.

It is, however, arguably possible

for Plaintiffs to cure the defects in those portions of Count V
by amendment.

This Court therefore GRANTS Deutsche Bank’s Motion

as to the portions of Count V regarding loan modification,
predatory lending, and changes to the monthly payment amount.
Those portions of Count V are DISMISSED WITHOUT PREJUDICE.
CONCLUSION
On the basis of the foregoing, Deutsche Bank’s Motion
to Dismiss Plaintiffs’ Complaint Filed January 16, 2013, filed
February 12, 2013, is HEREBY GRANTED IN PART AND DENIED IN PART.
Specifically,
•the Motion is DENIED as to the portions of Count I, Count
III, and Count V based on the assertion that the
Assignment is invalid because HCL was dissolved prior
to the Assignment;
•the Motion is DENIED WITHOUT PREJUDICE as to the portions
of Plaintiffs’ claims alleging that the foreclosure is
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invalid because Deutsche Bank failed to comply with
Haw. Rev. Stat. § 667-5;
•the Motion is GRANTED as to the portions of Count I, Count
III, and Count V based upon the closure of the Trust
and any other alleged violations of the PSA; those
claims are HEREBY DISMISSED WITH PREJUDICE; and
•as to all other claims asserted in Plaintiffs’ Complaint,
the Motion is GRANTED, and those claims are HEREBY
DISMISSED WITHOUT PREJUDICE.
To the extent that Plaintiffs’ claims have been dismissed without
prejudice, this Court GRANTS Plaintiffs leave to file a First
Amended Complaint consistent with the terms of this Order.
Plaintiffs must file their First Amended Complaint by no later
than July 1, 2013.

This Court CAUTIONS Plaintiffs that, if they

fail to file their First Amended Complaint by July 1, 2013, the
claims which this Order dismissed without prejudice may be
dismissed with prejudice.

Further, if Plaintiffs’ First Amended

Complaint fails to cure the defects identified in this Order or
adds new parties, claims, or theories of liability, this Court
may dismiss those claims with prejudice.
IT IS SO ORDERED.

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DATED AT HONOLULU, HAWAII, May 28, 2013.

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

JOSEPH BILLETE, ET AL. V. DEUTSCHE BANK NATIONAL TRUST CO., ET
AL; CIVIL NO. 13-00061 LEK-KSC; ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT’S MOTION TO DISMISS PLAINTIFFS’
COMPLAINT FILED JANUARY 16, 2013

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