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

Filing 73

ORDER GRANTING MOTION BY DEFENDANT DEUTSCHE BANK NATIONAL TRUST COMPANY TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT (ECF NO. 62) WITH LEAVE TO AMEND re 62 - Signed by JUDGE HELEN GILLMOR on 2/27/2014. "Defendant's Motion to Dismiss Plaintiffs' First Amended Complaint (ECF No. 62) is GRANTED.1. Plaintiffs' WRONGFUL FORECLOSURE claims are DISMISSED WITH PREJUDICE. 2. Plaintiffs' HAWAII UNFAIR DECEPTIVE TRADE PRACTICES ACT claims are DISMISSED WI TH LEAVE TO AMEND. a. If Plaintiffs elect to include a UDAP claim in an amended complaint, Plaintiffs must comply with the heightened pleading requirement of Federal Rule of Civil Procedure 9(b) in alleging a violation of Haw. Rev. Stat. Ch. 480, s pecifying the time, place and content of the fraudulent representation. Plaintiffs must also allege how they were injured and proof of damages. b. Plaintiffs' UDAP claims cannot be based on any alleged failure by Defendant to refer to the sec uritization process in the recorded assignments or in filings related to the non-judicial foreclosures of Plaintiffs' Properties. Plaintiffs' UDAP claims also cannot be based on the allegation that the assignment was unauthorized by the L iquidation Trustee in the New Century bankruptcy proceedings. 3. Plaintiffs' INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE claims are DISMISSED WITH PREJUDICE. 4. Plaintiffs' UNCLEAN HANDS/TORTFEASOR CONDUCT AGAINST PUBLIC POLICY claims are DISMISSED WITH PREJUDICE. Plaintiffs may file a Proposed Amended Complaint, alleging a UDAP claim, against Deutsche Bank, in its trustee capacity, by March 31, 2014." (emt, )< FONT SIZE=1>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
KARL P. LIZZA, GARY L. DEAN,
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JOHN J. MAUCH, individually and )
on behalf of all others
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similarly situated,
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Plaintiffs,
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vs.
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DEUTSCHE BANK NATIONAL TRUST
COMPANY and DOE DEFENDANTS 1- )
)
50,
)
)
Defendants.
)
)
)
)
)
)
)
)

CIV. NO. 13-00190 HG-BMK

ORDER GRANTING MOTION BY DEFENDANT DEUTSCHE BANK NATIONAL TRUST
COMPANY TO DISMISS PLAINTIFFS’ FIRST AMENDED COMPLAINT
(ECF No. 62) WITH LEAVE TO AMEND

Plaintiffs, individually and on behalf of all others
similarly situated, brought suit against Defendant Deutsche Bank
National Trust Company. Plaintiffs allege that Defendant engaged
in improper and deceptive practices related to the non-judicial
foreclosures of Plaintiffs’ Properties. The case was filed as a

putative class action, but has not yet progressed to
certification.
Defendant moves to dismiss for lack of standing and failure
to state a claim.
Defendant’s Motion to Dismiss the First Amended Complaint
(ECF No. 62) is GRANTED with leave to amend.

PROCEDURAL HISTORY

On March 12, 2013, Plaintiffs Karl P. Lizza, Gary L. Dean,
and John J. Mauch, individually and on behalf of others similarly
situated, filed a Complaint in the Circuit Court of the First
Circuit of the State of Hawaii.
On April 22, 2013, Defendant Deutsche Bank National Trust
Company removed the action to the Hawaii Federal District Court.
(ECF No. 1.)
On May 22, 2013, Plaintiffs filed a Motion for Remand. (ECF
No. 34.)
On June 24, 2013, while the Motion for Remand was pending,
Plaintiffs filed a First Amended Complaint. (ECF No. 44.)
On July 3, 2013, the Court issued a Minute Order, setting
Defendant’s deadline for filing a response to the First Amended
Complaint at twenty days after the Court’s decision on the Motion
for Remand. (ECF No. 51.)

2

On September 24, 2013, the Court denied the Motion for
Remand, as federal jurisdiction was authorized by the Class
Action Fairness Act. (ECF No. 59.)
On October 15, 2013, Defendant timely filed a Motion to
Dismiss the First Amended Complaint. (ECF No. 62.)
On November 4, 2013, Plaintiffs filed an Opposition. (ECF
No. 68.)
On November 19, 2013, Defendant filed a Reply. (ECF No. 69.)
On November 29, 2013, Plaintiffs filed a Statement of
additional authorities in opposition to Defendant’s Motion to
Dismiss, pursuant to Local Rule 7.8. (ECF No. 70.)
On November 30, 2013, Defendant filed a Statement of
additional authorities in support of dismissal, pursuant to Local
Rule 7.8. (ECF No. 71.)
On December 5, 2013, a hearing was held on the Motion to
Dismiss.

BACKGROUND

Plaintiffs Karl P. Lizza, Gary L. Dean, and John J. Mauch
brought a putative class action against Defendant Deutsche Bank
National Trust Company (“Deutsche Bank”), on behalf of themselves
and all others similarly situated. Plaintiffs allege that their
mortgages and/or notes for residential real properties in Hawaii
3

were unlawfully assigned to Defendant Deutsche Bank, as trustee
for three particular trusts, who then non-judicially foreclosed
upon the properties. (Am. Compl. at ¶ 7, ECF No. 44.)
The Plaintiffs challenge Defendant’s position as to when the
assignments to the Deutsche Bank trusts took place and whether
such assignments were valid.
The mortgages and/or notes in dispute were originally
executed by Plaintiffs to secure loans from subsidiaries of New
Century Financial Corporation (“New Century”).

Securitization
Defendant Deutsche Bank states the Plaintiffs’ mortgages and
notes were assigned to Deutsche Bank trusts as part of a
securitization process, between 2004 and 2007. Securitization
occurs when an original lender bundles the beneficial interest in
individual loans and sells the bundles to investors as mortgagebacked securities. Cervantes v. Countrywide Home Loans, Inc., 656
F.3d 1034, 1039 (9th Cir. 2011); Almaden v. Peninsula Mortgage,
Inc., CIV. 12-00390 HG-BMK, 2012 WL 6738512, at *4 (D. Haw. Dec.
31, 2012). Deutsche Bank attaches to its Motion to Dismiss
various SEC filings regarding the three Deutsche Bank securitized
trusts, which ultimately foreclosed upon Plaintiffs’ Properties.1
1

Exhibits 6, 7, 8, and 10 relate to the trust that foreclosed
upon Plaintiff Lizza’s Property, the New Century Home Equity Loan
Trust 2004-4. The Exhibits are certain portions of the Indenture,
4

The Filings include Pooling and Servicing Agreements, reflecting
that mortgages and notes naming New Century as the original
lender and mortgagee were transferred to the three Deutsche Bank
trusts. (Motion to Dismiss Exs. 6, 7, 8, 10, 12, 14, 16, and 17,
ECF No. 62.) The mortgages and notes were transferred to one or
more intermediary companies before ultimately being deposited
with the Deutsche Bank trusts. (Id.)

Bankruptcy
New Century filed bankruptcy proceedings in April 2007. As
of August 1, 2008, pursuant to an order of the Bankruptcy Court,

the Amended and Restated Trust Agreement, a Servicing Agreement,
and the Mortgage Loan Sale and Contribution Agreement. The
Exhibits are dated as of December 16, 2004.
Exhibits 12 and 14 relate to the trust that foreclosed upon
Plaintiff Dean’s Property, Morgan Stanley ABS Capital I Inc.
Trust 2007-NC3. Exhibit 12 is certain portions of the Pooling and
Servicing Agreement, dated as of May 1, 2007. Exhibit 14 is
certain portions of the Schedule of Information, filed with the
SEC on July 17, 2007.
Exhibits 16 and 17 relate to the trust that foreclosed upon
Plaintiff Mauch’s Property, Carrington Home Equity Loan Trust,
Series 2005-NC4 Asset-Backed Pass-Through Certificates. The
Exhibits are certain portions of the Pooling and Servicing
Agreement, dated as of August 1, 2005.
The above Exhibits are filed with the Securities and
Exchange Commission. The court may consider the Exhibits without
converting the motion to dismiss into one for summary judgment,
as they are a matter of public record. Dreiling v. American Exp.
Co., 458 F.3d 942, 946 n.2 (9th Cir. 2006)

5

New Century’s remaining assets were transferred to a Liquidation
Trust. (Motion to Dismiss Ex. 22, Order Confirming the Modified
Second Am. Joint Ch. 11 Plan of Liquidation Dated as of Sept. 30,
2009, ECF No. 62.)

Recorded Assignments
Deutsche Bank recorded assignments of Plaintiffs’ mortgages
and notes from New Century to the Deutsche Bank trusts in the
Hawaii Bureau of Conveyances. The assignments were recorded after
August 1, 2008, but prior to the commencement of the non-judicial
foreclosures.2 Deutsche Bank views the assignments recorded in

2

The assignments recorded in the Hawaii Bureau of Conveyances
are as follows:
Plaintiff Lizza’s mortgage was assigned by New Century
Mortgage Corporation to Deutsche Bank, as Indenture Trustee, for
New Century Home Equity Loan Trust 2004-4. The assignment, as
recorded on October 7, 2010, indicated it was executed on
September 15, 2010. (Am. Comp. Ex. 1.)
Plaintiff Dean’s mortgage was assigned by Mortgage
Electronic Registration Systems, Inc., as nominee for New Century
Mortgage Corporation, its successors and assigns, to Deutsche
Bank, as Trustee for Morgan Stanley, MSAC 2007-NC3. The
assignment, as recorded on January 22, 2009, indicated it was
executed on January 19, 2009. (Am. Compl. Ex. 2.)
Plaintiff Mauch’s mortgage was assigned by New Century
Mortgage Corporation to Deutsche Bank, as Trustee, for Carrington
Home Equity Loan Trust, Series 2005-NC4 Asset Backed Pass-Through
Certificates. The assignment, as recorded on November 16, 2009,
indicated it was executed on November 10, 2009. (Am. Compl. Ex.
3.)
6

the Hawaii Bureau of Conveyances as merely recording the earlier
transfers through securitization.
Plaintiffs, relying on the dates contained in the recorded
assignments, allege that their mortgages and/or notes were
assigned to Deutsche Bank trusts after August 1, 2008. Plaintiffs
claim that the assignments are invalid, as New Century was not
authorized to make assignments without the approval of the
Liquidation Trustee at that time. (Am. Compl. ¶¶ 7, 9, ECF No.
44.) According to Plaintiffs, the post-August 1, 2008 assignments
constitute unfair and deceptive acts, and the non-judicial
foreclosures based upon such assignments were wrongful. (Am.
Compl. at ¶¶ 9, 39, ECF No. 44.)
It is Plaintiffs’ position that, even if their mortgages and
notes were securitized and assigned to Deutsche Bank trusts prior
to August 1, 2008, the recorded assignments are unlawful, because
they omit the securitization process, including the intermediary
assignments.
Plaintiffs claim that the assignments recorded in the Hawaii
Bureau of Conveyances, which purport to directly assign
Plaintiffs’ mortgages from New Century to Deutsche Bank trusts,
were created by Deutsche Bank to conceal “any defects or
unresolved complexities that might exist in the chain of title,”
in order to expedite its ability to foreclose upon the
properties. (Am. Compl. at ¶¶ 10, 39 (emphasis added), ECF No.

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44.) The Amended Complaint does not include any information
alleging any irregularities.

Plaintiffs’ Claims
On March 12, 2013, Plaintiffs filed suit in Hawaii State
Court alleging wrongful foreclosure and various unfair and
deceptive practices relating to the assignments of their
mortgages and/or notes and the subsequent non-judicial
foreclosures of their Properties. Defendant timely removed the
action to the United States District Court for the District of
Hawaii. (ECF No. 1.)
Plaintiffs’ Amended Complaint, filed on June 25, 2013,
raises claims for:
(1)

wrongful foreclosure,

(2)

violation of the Hawaii Unfair and Deceptive Practices
Act, Haw. Rev. Stat. Ch. 480, and

(3)

intentional interference with prospective economic
advantage, and

(4)

“unclean hands/tortfeasor conduct against public
policy.”

(Am. Compl. at ¶¶ 39-53, ECF No. 44.) Plaintiffs seek damages and
a declaration that the alleged post-August 1, 2008 assignments to
Deutsche Bank trusts are null and void. (Am. Compl. at pgs. 2627, ECF No. 44.)

8

Defendant moves to dismiss for lack of prudential standing
and failure to state a claim. (ECF No. 62.)

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) allows dismissal
where a complaint fails “to state a claim upon which relief can
be granted,” including when a plaintiff has not been granted
statutory standing to bring a claim. Salmon Spawning & Recovery
Alliance v. Gutierrez, 545 F.3d 1220, 1225 (9th Cir. 2008).
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. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998).
Conclusory allegations of law and unwarranted inferences are
insufficient to defeat a motion to dismiss. Id.

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); Daniels-Hall v.
Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010)(documents
attached to the complaint and matters of public record may be
considered on a motion to dismiss).

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The complaint must contain “a short and plain statement of
the claim showing that the pleader is entitled to relief.”

Fed.

R. Civ. P. Rule 8(a)(2). In Bell Atlantic Corporation v. Twombly
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
relief above the speculative level.” 550 U.S. 544, 555 (2007).
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, thedefendant-unlawfully-harmed-me-accusation.”
Twombly, 550 U.S. at 555).

Id. at 678 (quoting

A complaint survives a motion to

dismiss when it contains sufficient factual matter, accepted as
true, to state a claim for relief that is plausible on its face.
Id. (quoting Twombly, 550 U.S. at 570).
A claim is facially plausible when the factual content of
the complaint allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged. Iqbal,
556 U.S. at 678. The plausibility standard does not require
probability, but it requires “more than a sheer possibility that
a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S.

10

at 556). A complaint that pleads facts that are “merely
consistent with” a defendant’s liability “stops short of the line
between possibility and plausibility of ‘entitlement to relief.’”
Id. (quoting Twombly, 550 U.S. at 557).

ANALYSIS

I.

PLAINTIFFS’ WRONGFUL FORECLOSURE CLAIMS
Plaintiffs Karl P. Lizza, Gary L. Dean, and John J. Mauch

claim that Defendant Deutsche Bank National Trust Company
(“Deutsche Bank”), as trustee for three securitized trusts,
wrongfully foreclosed upon their Properties.
Wrongful foreclosure is a state law claim. The federal
district court in Hawaii has been presented with a number of
actions relating to Hawaii state foreclosure law. The district
court cases have considered a wrongful foreclosure claim to be
viable (1) where the foreclosure process fails to comply with
Hawaii’s Foreclosure Statutes, Haw. Rev. Stat. Ch. 667, or
(2) where the interest in the loan was never validly assigned to
the foreclosing party, because the assigning entity was dissolved
prior to executing the assignment. Swartz v. City Mortg., Inc.,
911 F.Supp.2d 916, 947 (D. Haw. 2012); Dias v. Fed. Nat. Mortgage

11

Ass'n, No. 12-00394, 2013 WL 6894453, at *11 (D. Haw. Dec. 31, 2013).
Plaintiffs challenge Defendant’s non-judicial foreclosures
of their Properties. A mortgagee’s right to proceed by nonjudicial foreclosure is contractual, created by a mortgage with a
power of sale vested in the mortgagee, and must be authorized by
law. In re Kekauoha-Alisa, 674 F.3d 1083, 1091 (9th Cir. 2012).3

CONTEXT
Between 2004 and 2006, Plaintiffs executed mortgages and
notes in favor of subsidiaries of New Century Financial
Corporation (“New Century”) to secure loans. Plaintiffs’
mortgages vest the mortgagee with a power of sale upon default of
Plaintiffs’ loan payments. (Motion to Dismiss Ex. 3, Lizza
Mortgage at ¶ 22; Ex. 4, Dean Mortgage at ¶ 22; Ex. 5, Mauch
Mortgage at ¶ 22.)
Plaintiffs’ original mortgagee, New Century, was an active
participant in the secondary mortgage market. It was New
Century’s practice to pool and securitize notes and mortgages in
the form of a securitized trust, such as those that foreclosed

3

At the time of the foreclosures of Plaintiffs’ Properties,
Hawaii’s Non-Judicial Foreclosure Statute, Haw. Rev. Stat. § 6675, set forth the procedures by which a mortgagee, a mortgagees’
successor in interest, or any authorized person was permitted to
initiate a non-judicial foreclosure, based on the power of sale
in a mortgage. Hawaii’s Non-Judicial Foreclosure Statute was
substantially amended in 2012. See Everett S. Kaneshige & Seth J.
Corpuz-Lahne, The New Foreclosure Law, Haw. B.J., October 2012,
at 4.
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upon Plaintiffs’ Properties. A description of the process is
found in In re Wright, No. 10-03893, 2012 WL 27500 (Bankr. D.
Haw. Jan. 5, 2012) reconsideration denied, 2012 WL 260744 (Bankr.
D. Haw. Jan. 27, 2012). The securitized trusts raise funds from
investors, acquire a large number of mortgage obligations,
collect payment on the mortgages, and allocate cash flow to
investors. See In re Wright, 2012 WL 27500; In re New Century TRS
Holdings, Inc., 407 B.R. 576, 580 (D. Del. 2009).
In April 2007, Plaintiffs’ original lender, New Century,
filed for chapter 11 bankruptcy. In re New Century TRS Holdings,
Inc., 407 B.R. 576, 580 (D. Del. 2009). Effective August 1, 2008,
New Century’s remaining assets were transferred to a Liquidating
Trust. In re New Century TRS Holdings, Inc., 465 B.R. 38, 42
(Bankr. D. Del. 2012) reconsideration denied, 2013 WL 5231456
(Bankr. D. Del. Sept. 17, 2013).
After August 1, 2008, assignments of Plaintiffs’ mortgages
and notes from New Century to Deutsche Bank trusts were recorded
in the Hawaii Bureau of Conveyances. Those trusts subsequently
non-judicially foreclosed upon Plaintiffs’ Properties.
It is Defendant’s position that Plaintiffs’ mortgages and
notes were securitized and transferred to the Deutsche Bank
trusts between 2004 and 2007. Defendant claims that the recorded
assignments “merely confirmed” the earlier conveyances. Defendant
supports its position by relying on various Agreements regarding

13

each securitized trust, which were filed with the Securities and
Exchange Commission. (Motion to Dismiss Exs. 6, 7, 8, 10, 12, 16,
and 17, ECF No. 62.) According to the Agreements, the closing
date of each trust occurred between 2004 and 2007.

MORTGAGORS WERE NOT ENTITLED TO BE NOTIFIED OF ASSIGNMENTS
Pursuant to Plaintiffs’ mortgage documents, New Century was
not required to notify Plaintiffs of the sale of their mortgages
and notes in the secondary mortgage market. (Lizza Mortgage at
¶ 20, attached as Ex. 3 to Motion to Dismiss; Dean Mortgage at
¶ 20, attached as Ex. 4; Mauch Mortgage at ¶ 20, attached as Ex.
5, ECF No. 62.)

PLAINTIFFS’ CLAIMS OF WRONGFUL FORECLOSURE
Plaintiffs’ allege three wrongful foreclosure claims:
(1) Plaintiffs claim that Deutsche Bank’s status as a proper
mortgagee with the right to non-judicially foreclose depends upon
the assignments recorded in the Hawaii Bureau of Conveyances
after August 1, 2008. Plaintiffs assert that the recordings
establish the date their mortgages and notes were actually
conveyed to the Deutsche Bank trusts.
(2) Plaintiffs claim that their mortgages were invalidly
assigned to the Deutsche Bank trusts after August 1, 2008.
Plaintiffs contend that, after August 1, 2008, a valid assignment

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required the authorization of the Liquidation Trustee appointed
in the New Century bankruptcy proceedings. Plaintiffs claim that
Deutsche Bank was not a proper mortgagee because the assignments
were unauthorized by the Liquidation Trustee.
(3) Plaintiffs claim that they are entitled to be informed
of the transfers that resulted in the securitization and
conveyance of their mortgages to the Deutsche Bank trusts.
Plaintiffs allege that the complete chain of assignments “might
reveal some irregularity.” According to Plaintiffs, the recorded
assignments improperly fail to identify the complete chain of
assignments by which the Deutsche Bank trusts obtained
Plaintiffs’ mortgages.

A.

Plaintiffs’ First Claim: That Their Foreclosures Should
Be Reversed Because of the Dates of Deutsche Bank’s
Recording of Their Assignments

Plaintiffs move to reverse their foreclosures because of the
dates Defendant Deutsche Bank recorded their assignments in the
Hawaii Bureau of Conveyances. According to Plaintiffs, a
mortgagee must present a complete chain of mortgage assignments
to establish themselves as proper mortgagees with the right to
non-judicially foreclose. Plaintiffs claim that “[p]hysical
possession of a mortgage is meaningless unless there is an
instrument assigning the mortgage for every step in the chain.”
(Opp. at pg. 16, ECF No. 68.)
15

Plaintiffs’ position ignores the terms of their mortgages,
which do not require that the mortgagor be notified of any
assignment. (Lizza Mortgage at ¶ 20, attached as Ex. 3 to Motion
to Dismiss; Dean Mortgage at ¶ 20, attached as Ex. 4; Mauch
Mortgage at ¶ 20, attached as Ex. 5, ECF No. 62.)
In addition to the contractual impediment to their position,
the Hawaii law of non-judicial foreclosure does not support
Plaintiffs’ reasoning.
Hawaii follows the lien theory of mortgages. Haw. Rev. Stat.
§ 506-1. A mortgage creates a lien as security for an obligation,
but does not pass title. Haw. Rev. Stat. § 506-1(a). Upon
default, a mortgagee has a possessory interest in the property,
but ownership remains subject to the mortgagor’s equity of
redemption, until the property is foreclosed upon. Fed. Home Loan
Mortgage Corp. v. Transamerica Ins. Co., 969 P.2d 1275, 1282
(Haw. 1998).
In contrast, in states that follow the title of theory of
mortgages, a mortgage is a conveyance of the title or an interest
in the property, defeasible upon payment of money or performance
of some other condition. In a title theory state, the granting of
a mortgage vests title in the mortgagee to the land placed as
security for the underlying debt. Livonia Prop. Holdings LLC v.
12840-12976 Farmington Road Holdings LLC, 717 F.Supp.2d 724, 750-

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51 (E.D. Mich. 2010), aff’d, 399 F. App'x 97 (6th Cir.
2010)(differentiating the title theory from lien theory).
As a mortgage in Hawaii is a mere security interest incident
to an underlying obligation, the transfer of a note necessarily
includes a transfer of the mortgage with it. In re Wright, No.
10-BR-03893, 2012 WL 27500, at *3 (Bankr. D. Haw. Jan. 5, 2012).
The failure to record an assignment of a mortgage does not
invalidate an assignment or create a private right of action for
a defaulting mortgagor against a foreclosing party who is the
rightful noteholder. Swartz v. City Mortgage, Inc., 911 F.Supp.2d
916, 939-40 (D. Haw. 2012). Recordation merely gives notice of a
conveyance to the general public. Markham v. Markham, 909 P.2d
602, 609 (Haw. App. 1996). It is general practice for a mortgage
assignment not to be recorded until the underlying loan is in
default and a party intends to foreclose. Billete v. Deutsche
Bank Nat. Trust Co., No. 13-00061 LEK-KSC, 2013 WL 5840105, at *4
(D. Haw. Oct. 30, 2013). A lender is not required to go back and
establish that every person or entity who assigned a note and
mortgage had the power to do so. Bateman v. Countrywide Home
Loans, No. 12-00033, 2012 WL 5593228, at *3 (D. Haw. Nov. 14,
2012).
A proper noteholder is necessarily a proper mortgagee, and
may invoke the power of sale in a mortgage. In re Wright, No. 10BR-03893, 2012 WL 27500, at *3 (Bankr. D. Haw. Jan. 5, 2012);

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Swartz v. City Mortgage, Inc., 911 F.Supp.2d 916, 939-40 (D. Haw.
2012).
In In re Wright 2012 WL 27500, at *3, the bankruptcy court
relied on New Century’s Liquidating Trustee to establish that a
note had been transferred to a securitization trust prior to the
August 1, 2008 transference of New Century’s assets to the
Liquidation Trust. The mortgagor attempted to establish the time
of the conveyance by relying on a mortgage assignment, recorded
in the Hawaii Bureau of Conveyances. The recorded assignment was
executed by New Century in August 2009 and assigned the mortgage,
“together with the promissory note.” The Court held that the date
of the recorded mortgage assignment was irrelevant, as the
mortgage was automatically transferred with the underlying note,
years before the recorded mortgage assignment. Id.; In re Banks,
457 B.R. 9, 11 n.6 (Bank. App. 8th Cir. 2011)(if New Century
remained the titular owner of a mortgage, but had previously
transferred its substantive rights, a later assignment of the
mortgage would not violate an order of the bankruptcy court); In
re New Century TRS Holdings, Inc., 450 B.R. 504, 510 (Bankr. D.
Del. 2011)(mortgage did not become part of bankruptcy estate
because New Century previously transferred its interest in the
note).
The Deutsche Bank trusts became proper mortgagees at the
time they were assigned Plaintiffs’ notes. At that time, the

18

trusts attained the right to non-judicially foreclose upon
Plaintiffs’ Properties, pursuant to the power of sale in
Plaintiffs’ mortgages and the effective Hawaii Non-Judicial
Foreclosure Statute. The trusts were not required to first record
the assignments or establish the chain of assignments by which
they received the mortgages.
The assignments recorded in the Hawaii Bureau of Conveyances
do not establish the date that Plaintiffs’ mortgages were
conveyed to the Deutsche Bank trusts.
Plaintiffs’ claims, that their mortgages were assigned
without notice and recorded late, fail as a matter of law.

B.

Plaintiffs’ Second Claim: That the Assignments to the
Deutsche Bank Trusts Were Invalid

Plaintiffs allege that the assignments of their mortgages to
the Deutsche Bank trusts are invalid.
Plaintiffs speculate that New Century may have owned their
mortgages and notes at the time New Century’s assets were
transferred to the Liquidating Trust in the New Century
bankruptcy proceedings. According to Plaintiffs, starting on
August 1, 2008, the Liquidation Trustee had the sole authority to
assign any New Century asset, including Plaintiffs’ mortgages
and/or notes. (Am. Compl. at ¶¶ 30-31, ECF No. 44.) Plaintiffs
claim the assignments of their mortgages to the three Deutsche
Bank trust are void, because they were assigned after August 1,
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2008, without any approval by the Liquidation Trustee, as
Plaintiffs maintain was necessary. (Id.)
As this is a motion to dismiss and not one for summary
judgment, evidence as to the actual date of conveyance of
Plaintiffs’ mortgages to the Deutsche Bank trusts is not before
the Court. Such evidence is not required, however, as Plaintiffs’
lack standing to challenge the assignments as lacking the
approval of the Liquidation Trustee.

1.

An Assignment that is Unauthorized by the
Bankruptcy Liquidation Trustee is Voidable Rather
Than Void

A plaintiff-mortgagor’s standing to challenge an assignment
depends on whether the challenge would render an assignment void,
rather than merely voidable. A void contract is invalid from its
inception, whereas a voidable contract may be voided by one or
more of the parties to the contract, if they so elect. Deutsche
Bank Trust Co. v. Beesley, No. 12-00067 SOM, 2012 WL 5383555 (D.
Haw. Oct. 30, 2012). A plaintiff-mortgagor only has standing to
assert a challenge that would render an assignment void, as
opposed to voidable at the election of a party to a contract. Id.
Certain transfers that are unauthorized in connection with a
bankruptcy proceeding are void, while others are voidable at the
option of the bankruptcy trustee. In determining that some
unauthorized transfers are voidable, as opposed to void, courts
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look to the language of 11 U.S.C. § 549. Section 549 provides
that a bankruptcy trustee may avoid a transfer of property by an
estate that occurs after the commencement of a bankruptcy case
and is not authorized by bankruptcy law or by the court. 11
U.S.C. § 549(a).
The Ninth Circuit Court of Appeals has held, based in part
on its interpretation of 11 U.S.C. § 549(a), that violations of a
restriction in bankruptcy law aimed at protecting a debtor are
generally void, whereas violations of a restriction protecting a
creditor are generally voidable. In re Schwartz, 954 F.2d 569,
574 (9th Cir. 1992); In re Tippett, 542 F.3d 684, 691 (9th Cir.
2008).
In Omretzi v. Aurora Bank FSB, No. 12-00730, 2013 WL 3242520
(W.D. Tex. Jun. 25, 2013), the court rejected a plaintiffmortgagor’s standing to challenge an assignment as lacking the
authorization of the trustee or violating the automatic stay. The
court determined that such assignments would be voidable at the
option of the trustee, as opposed to void. 2013 WL 3242520, at
*3-6.
The creation of a Liquidation Trust for New Century’s
assets, which required the approval of the Liquidation Trustee
before the assignment of those assets, is an order aimed at
protecting New Century’s creditors, and not New Century as a
debtor. In re New Century TRS Holdings, Inc., 407 B.R. 576, 584

21

(D. Del. 2009)(“The liquidating trust is for the benefit of
holders of unsecured claims against the Holding Company Debtors
and holders of unsecured claims against the Operating Company
Debtors.”) An assignment from the Liquidation Trust, without the
approval of the Liquidation Trustee may be voidable at the option
of the Trustee, but is not void as a matter of law.
Plaintiffs do not have standing to challenge the assignments
as lacking the required approval of the Liquidation Trustee, even
if they are correct in alleging when the assignments were made.

2.

Plaintiffs Incorrectly Rely on the Hawaii Law
Applicable to Judicial Foreclosures

Plaintiffs, in asserting that they have standing,
incorrectly rely on cases involving judicial foreclosures.
In a judicial foreclosure, a mortgagee must establish its
standing to foreclose. Deutsche Bank Trust Co. v. Beesley, No.
12-00067, 2012 WL 5383555, *4 (D. Haw. Oct. 30, 2012). A
mortgagee’s standing to judicially foreclose may be challenged by
a defending mortgagor. Id.
Plaintiffs rely primarily on the case of Deutsche Bank
National Trust Company v. Williams, 2012 WL 1081174 (D. Haw. Mar.
29, 2012). In Williams, Deutsche Bank was the plaintiff in a
judicial foreclosure action. The defendant-mortgagors challenged
Deutsche Bank’s standing to foreclose. The Williams court held
that Deutsche Bank had not established its standing to foreclose.
22

The Williams court distinguished the situation before it, in
which a mortgagor can challenge a foreclosing party’s standing to
foreclose, from a plaintiff-mortgagor attempting to bring a claim
of improper assignment. The Williams court pointed out that the
mortgagor has no standing to challenge the assignment in the
latter case. Id. at *4.
Plaintiffs’ reliance on the Williams case fails for two
reasons. First, Plaintiffs’ case here is not a judicial
foreclosure. Second, Plaintiffs here are challenging the
completed non-judicial foreclosures of their Properties, by
attempting to bring a class action suit against a defendantmortgagee. In Williams, the mortgagors were attempting to prevent
the judicial foreclosure of their properties, not trying to
belatedly reverse a non-judicial foreclosure.
Plaintiffs also attempt to rely on the Massachusetts federal
district court case, Ross v. Deutsche Bank Nat. Trust Co., 933
F.Supp.2d 225 (D. Mass. 2013). Their reliance is misplaced.
In Ross, a plaintiff-mortgagor sought to prevent a nonjudicial foreclosure, claiming that the defendant-mortgagee
lacked standing to non-judicially foreclose because it was not
validly assigned the plaintiff’s mortgage. The defendantmortgagee moved to dismiss, claiming that the plaintiff-mortgagor
had no right to contest the validity of the assignment. The court
denied the motion to dismiss, permitting the plaintiff to

23

challenge the assignment. Ross v. Deutsche Bank Nat. Trust Co.,
933 F.Supp.2d 225 (D. Mass. 2013).
As the Ross plaintiff sought to prevent a non-judicial
foreclosure, its analysis is more akin to requiring a party
seeking a judicial foreclosure to establish its rightful standing
to foreclose.
Here, Plaintiffs’ Properties have already been foreclosed
upon.
To the extent that Ross’s analysis is not confined to a preforeclosure claim, it relies upon an interpretation of
Massachusetts law, which follows the title theory of mortgages.
No case interpreting Hawaii law, which follows the lien theory,
has permitted such a challenge.
In Livonia Prop. Holdings LLC v. 12840-12976 Farmington Road
Holdings LLC, 717 F.Supp.2d 724 (E.D. Mich. 2010), aff’d, 399 F.
App'x 97 (6th Cir. 2010), a plaintiff-mortgagor attempted to rely
on Massachusetts law to support its claim of standing to
challenge the assignment of his mortgage. The court denied the
plaintiff-mortgagor’s argument, distinguishing Massachusetts law
from Michigan law, which follows the lien theory of mortgages.
The court explained that, under Massachusetts law, a foreclosing
mortgagee must establish that it was validly assigned the
mortgage, even when it holds the underlying note. Under

24

Massachusetts law, a blank mortgage assignment is ineffective.
717 F.Supp.2d 724, 750.
Hawaii’s foreclosure law, like Michigan law, does not permit
mortgagor-plaintiff standing to challenge an assignment. Courts
interpreting Hawaii law have only permitted a plaintiff-mortgagor
to challenge an assignment that was made by an entity that no
longer existed at the time of the assignment, as such an
assignment would be void. Billete v. Deutsche Bank Nat'l Trust
Co., No. 13–00061, 2013 WL 1367834, at *7

(D. Haw. May 29,

2013)(no standing to bring wrongful foreclosure and Unfair and
Deceptive Trade Practices Act claims alleging that an assignment
occurred after the closing date of a Pooling and Service
Agreement, but permitting claims alleging that an assignment was
made after the assignor mortgagee’s dissolution); Nottage v. Bank
of New York Mellon, No. 12-00418, 2012 WL 5305506, at *4 (D. Haw.
Oct. 25, 2012)(permitting claims alleging that an assignment was
made when the assignor no longer existed, having been acquired by
another entity).
Plaintiffs’ allegations that the assignments were
unauthorized by the bankruptcy court, do not raise a challenge
that would render the assignments void. Plaintiffs lack standing
to challenge the foreclosures of their Properties on that ground.

25

C.

Plaintiffs’ Third Claim: That Defendant Is Required to
Establish the Transfers by Which It Was Assigned
Plaintiffs’ Mortgages

Plaintiffs allege that, even if their notes and mortgages
were securitized and transferred to Deutsche Bank trusts prior to
August 1, 2008, the assignments recorded in the Hawaii Bureau of
Conveyances fraudulently omit intermediary assignments. (Am.
Compl. at ¶ 10.) Plaintiffs’ claim is based upon a belief that
they are entitled to know of all assignments in order to discover
some possible irregularity in the transfers.
Plaintiffs claim they were required to be notified of the
various transfers reflected in the Pooling and Service Agreements
(“PSA”) presented by Deutsche Bank, which set forth process of
securitizing Plaintiffs’ notes and mortgages. (Motion to Dismiss
Exs. 6, 7, 8, 10, 12, 16, and 17, ECF No. 62.) Plaintiffs point
to the fact that, in each PSA, the Depositor of the notes and
mortgages is identified as a company other than New Century.
Plaintiffs allege that the recorded assignments fraudulently omit
the intermediary assigning entities, and the non-judicial
foreclosures based upon those assignments were wrongful.
Plaintiffs’ mortgages specifically provide that Plaintiffs
are not entitled to be notified of the assignment of their
mortgages. (Lizza Mortgage at ¶ 20, attached as Ex. 3 to Motion

26

to Dismiss; Dean Mortgage at ¶ 20, attached as Ex. 4; Mauch
Mortgage at ¶ 20, attached as Ex. 5, ECF No. 62.)
Plaintiffs’ position is also contrary to Hawaii law. The
Hawaii Non-Judicial Foreclosure Statute, Haw. Rev. Stat. 667-5,
in effect at the time of the foreclosures on Plaintiffs'
Properties, provided:
(a) When a power of sale is contained in a mortgage, and
where the mortgagee, the mortgagee's successor in interest,
or any person authorized by the power to act in the
premises, desires to foreclose under power of sale upon
breach of a condition of the mortgage, the mortgagee,
successor, or person shall be represented by an attorney who
is licensed to practice law in the State and is physically
located in the State. The attorney shall:
(1) Give notice of the mortgagee's, successor's, or
person's intention to foreclose the mortgage and of the
sale of the mortgaged property, by publication of the
notice once in each of three successive weeks (three
publications), the last publication to be not less than
fourteen days before the day of sale, in a newspaper
having a general circulation in the county in which the
mortgaged property lies; and
(2) Give any notices and do all acts as are authorized
or required by the power contained in the mortgage.
(b) Copies of the notice required under subsection (a) shall
be:
(1) Filed with the state director of taxation; and
(2) Posted on the premises not less than twenty-one
days before the day of sale.
Haw. Rev. Stat. § 667–5 (repealed by Laws 2012, ch. 182, eff.
June 28, 2012). A mortgagee who fails to comply with the
procedures of the Non-Judicial Foreclosure Statute lacks legal

27

authority to exercise its power of sale. Lee v. HSBC Bank USA,
218 P.3d 775, 780 (Haw. 2009).
The Hawaii Non-Judicial Foreclosure Statute, in effect at
the time of the disputed foreclosures, did not require that
intermediary assignments be recorded, nor did it require a
mortgagee to record an assignment before commencing a nonjudicial foreclosure. Miller v. Deutsche Bank Trust Co., 2011 WL
1750741 (D. Haw. May 5, 2011).
Where the plain language of a statute, such as the NonJudicial Foreclosure Statute, outlines the required procedure for
a lawful foreclosure, the court will not read additional
requirements into the statute, without statutory support. Lee v.
Mortgage Electronic Registration Sys., No. 10-00687, 2012 WL
6726382, at *7 (D. Haw. Dec. 26, 2012); Rundgren v. Bank of New
York Mellon, No. 10-00252, 2010 WL 4066878, at *3-4 (D. Haw. Oct.
14, 2010)(“[W]here the terms of a statute are plain, unambiguous
and explicit, we are not at liberty to look beyond that language
for a different meaning”).
Neither Defendant’s failure to record intermediary
assignments, nor its omission of any interim assignments in the
recorded assignment, violates any Hawaii statute or otherwise
provides Plaintiffs with a cause of action.
Some state non-judicial foreclosure statutes, unlike Haw.
Rev. Stat. §

667-5, do require that all assignments of a note or

28

mortgage be recorded before a party may commence a non-judicial
foreclosure. Even courts interpreting those state’s statutes,
however, do not require the recording of interim assignments,
which occur during the securitization process. Thompson v. Bank
of N.Y. Mellon, No. 12-cv-00066, 2012 WL 1253203 (D. Or. Apr. 12,
2012)(citing Or. Rev. Stat. § 86.735(1))(MERS need not record
transfers of underlying loan); Livonia Prop. Holdings LLC v.
12840-12976 Farmington Road Holdings LLC, 717 F.Supp.2d 724 (E.D.
Mich. 2010), aff’d, 399 F. App'x 97, 100 (6th Cir. 2010)
(rejecting claim that parties to the PSA were not reflected in
the recorded document failed to satisfy the record-chain-of-title
requirement).
Plaintiffs challenge the fact that Defendant’s filings
related to the non-judicial foreclosure reference the assignments
recorded in the Hawaii Bureau of Conveyances, and omit any
information about the actual conveyance through securitization.
Plaintiffs claim that Defendant took such actions to conceal “any
defects or unresolved complexities that might exist in the chain
of title,” in order to expedite the foreclosures of Plaintiffs’
Properties. (Am. Compl. at ¶ 10, ECF No. 44.) Plaintiffs do not
provide any evidence of wrongdoing by Defendant Deutsche Bank,
but instead only allege that defects are “possible.”
Defendant was not required to establish its chain of custody
in its filings related to the non-judicial foreclosure, and

29

Defendant’s omission of information regarding the securitization
of Plaintiffs’ mortgages does not violate Hawaii’s Non-Judicial
Foreclosure Statute, in effect at the time of the foreclosures.
Lee, 2012 WL 6726382 (no violation of Haw. Rev. Stat. §

667-5

where MERS improperly identified the party it was acting on
behalf of in the Notice of Intent to foreclose); Rundgren, 2010
WL 4066878, at * 5-6 (refusing to read into Haw. Rev. Stat. §
667-5 a requirement that a notice to foreclose include all the
bidding instructions or excluded a mortgagee from making a credit
bid).
Plaintiffs have not alleged a failure to comply with
statutory requirements of Hawaii’s Non-Judicial Foreclosure
Statute. Plaintiffs are not entitled to examine the chain of
assignments with the hope of finding a possible defect.

ALL THREE OF PLAINTIFFS’ WRONGFUL FORECLOSURE CLAIMS FAIL
Plaintiffs’ wrongful foreclosure claims are based on the
allegations that (1) Defendant’s mortgagee status depends on the
recorded assignments; (2) the assignments lacked the required
approval of the Liquidation Trustee appointed in the New Century
bankruptcy proceedings; and (3) the Defendant failed to provide
information about the chain of transfers by which it was assigned
plaintiffs’ mortgages. The claims fail as a matter of law.

30

Plaintiffs’ Amended Complaint appears to allege that some
other theory may exist, which would provide a wrongful
foreclosure claim. Such speculation is insufficient. It is clear
from Plaintiffs’ Amended Complaint that Plaintiffs cannot state a
claim falling within the types of wrongful foreclosure claims
that have been recognized by federal district courts interpreting
Hawaii law.
Plaintiffs’ wrongful foreclosure claims are DISMISSED WITH
PREJUDICE.

II.

PLAINTIFFS’ HAWAII UNFAIR AND DECEPTIVE TRADE PRACTICES ACT
CLAIM

Plaintiffs allege that Defendant violated Hawaii’s Unfair
and Deceptive Trade Practices Act, Haw. Rev. Stat. § 480-2, by
engaging in unfair or deceptive acts or practices (“UDAP”).
According to Plaintiffs, Deutsche Bank recorded “false”
assignments of their mortgages as part of a deceptive scheme to
non-judicially foreclose upon Plaintiffs’ Properties. Plaintiffs
allege that the assignments were “false” because they were
unauthorized by bankruptcy law, “forged” by agents of Deutsche
Bank, and omitted information about the securitization process.
(Am. Compl. at ¶¶ 38-46, ECF No. 44.)

31

Section 480-2 of the Hawaii Revised Statutes outlaws
“unfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce.” Haw. Rev.
Stat. § 480-2(a). A practice is unfair when it “offends
established public policy and when the practice is immoral,
unethical, oppressive, unscrupulous or substantially injurious to
consumers.” Balthazar v. Verizon Haw., Inc., 123 P.3d 194, 202
(Haw. 2005). An act is deceptive when it is (1) a representation,
omission, or practice that (2) is likely to mislead consumers
acting reasonably under the circumstances where (3) the
representation omission or practice is material. In re
Kekauoha-Alisa, 674 F.3d 1083, 1091 (9th Cir. 2012).
Only consumers, the attorney general, or the director of the
office of consumer protection may bring a UDAP claim. Haw. Rev.
Stat. 480-2(d). A consumer bringing a UDAP claim must allege: (1)
a violation of Haw. Rev. Stat. Chapter 480; (2) injury to
plaintiff's business or property resulting from such violation;
and (3) proof of the amount of damages. Hawaii Med. Ass'n v.
Hawaii Med. Serv. Ass'n, Inc., 148 P.3d 1179, 1215–16 (Haw.
2006); In re Kekauoha-Alisa, 674 F.3d 1083, 1092 (9th Cir. 2012);
Haw. Rev. Stat. 480-13(b)(1). An injury must be “fairly traceable
to the defendant's actions.” Flores v. Rawlings Co., LLC, 177
P.3d 341, 359 n.23 (Haw. 2008)(internal citation omitted).
A UDAP claim alleging fraudulent business practices must be

32

pled with particularity, pursuant to Federal Rule of Civil
Procedure 9(b). 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[.]” 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); see Alan Neuman Prod., Inc. v. Albright, 862 F.2d 1388,
1393 (9th Cir. 1988).
Plaintiffs’ UDAP claims appear to be based on the same
allegations as their wrongful foreclosure claims. For the reasons
set forth in the dismissal of Plaintiffs’ wrongful foreclosure
claims, no legal authority supports finding that the recorded
assignments and subsequent non-judicial foreclosures were unfair
or deceptive. Deutsche Bank was not required to include
intermediary assigning entities in the mortgage assignments
recorded in the Hawaii Bureau of Conveyances. Nor was Deutsche
Bank required to refer to the securitization process in its
filings related to the non-judicial foreclosures. Plaintiffs fail
to articulate how they were injured by a material
misrepresentation, as they have not alleged a wrongful nonjudicial foreclosure.

33

To the extent that Plaintiffs’ UDAP claims are based on the
same allegations as their wrongful foreclosure claims, the claims
are not cognizable under Hawaii law. Tom v. GMAC Mortgage, LLC,
No. 10-00653, 2011 WL 2133705, at *7-9 (D. Haw. May 25,
2011)(dismissing UDAP claim as no legal authority supported
Plaintiffs allegations that Defendant’s initiation of a
non-judicial foreclosure was unfair or that their filings related
to the non-judicial foreclosure were deceptive).
Plaintiffs’ Amended Complaint speculates as to possible
additional grounds for a UDAP claim. Plaintiffs allege that
Defendant attempted to conceal defects or complexities that might
exist in the chain of title, but fails to identify any defect.
(Am. Compl. at ¶ 10, ECF No. 44.) Plaintiffs also speculate, in
their Opposition, that “perhaps” the assignments to Deutsche Bank
trusts may have failed for some reason, such as “questions
concerning the endorsements of Plaintiffs’ notes.” No facts
supporting this theory are provided. Plaintiffs’ allegation of
forgery is similarly unsupported. Such speculation and conclusory
allegations fall short of the specificity required by Rule 9(b).
UDAP claims are generally subject to a four-year statute of
limitations. Haw. Rev. Stat. § 480-24(a). The statute of
limitations period starts to run upon the occurrence of
Defendant's alleged violation. Dodds v. BAC Home Loans Servicing,
LP, No. 10-00371, 2011 WL 1483971, at *7 (D. Haw. Apr. 19, 2011).

34

It is unclear from the speculative allegations in the
Amended Complaint which specific acts, other than those
specifically addressed by this Order, Plaintiffs claim to be
UDAPs. As the appropriate date for the accrual of a UDAP claim
depends on the specific UDAP alleged, the Court finds it
inappropriate to decide the date of accrual and statute of
limitations issue at this time.
Plaintiffs shall be permitted to amend their UDAP claims to
comply with the specificity requirement of Rule 9(b). Plaintiffs
must allege a violation of Haw. Rev. Stat. Ch. 480, an injury,
and proof of the amount of damages. Haw. Rev. Stat. 480-2,
480-13. The amended claims shall not be based on the allegations
which the Court has determined to be lacking in merit.
Plaintiffs’ UDAP claims are DISMISSED WITH LEAVE TO AMEND.

III. PLAINTIFFS’ INTENTIONAL INTERFERENCE WITH PROSPECTIVE
BUSINESS ADVANTAGE CLAIMS
Plaintiffs allege that Defendant Deutsche Bank expedited the
foreclosure of their Properties, by wrongfully concealing
possible defects or unresolved complexities in the chain of
title. Plaintiffs allege that Defendant intentionally interfered
with their prospective economic advantages by depriving them of
the ability to rent or sell their Properties during the time that
it allegedly would have taken Defendant to properly establish its

35

right to foreclose upon the Properties. (Am. Compl. at ¶¶ 47, 51,
ECF No. 44.)
An intentional interference with prospective economic
advantage (“IIPEA”) claim requires a plaintiff to establish:
(1) the existence of a valid business relationship or a
prospective advantage or expectancy sufficiently definite,
specific, and capable of acceptance in the sense that there is a
reasonable probability of it maturing into a future economic
benefit to the plaintiff;
(2) knowledge of the relationship, advantage, or expectancy
by the defendant;
(3) a purposeful intent to interfere with the relationship,
advantage, or expectancy;
(4) legal causation between the act of interference and the
impairment of the relationship, advantage, or expectancy; and
(5) actual damages. Bodell Construction Co. v. Ohio Pacific
Tech, Inc., 458 F.Supp.2d 1153, 1163 (D. Haw. 2006)(quoting
Robert's Haw. Sch. Bus, Inc. v. Laupahoehoe Transp. Co., 982 P.2d
853, 887 (Haw. 1999), superseded by statute, Haw. Sess. Laws
2012, Act 229, § 2, as recognized in Haw. Med. Ass'n v. Haw. Med.
Servs. Ass'n, 148 P.3d 1179, 1208 (2006)).
In Lowther v. U.S. Bank N.A., the plaintiff argued that he
had adequately met the first element by showing that the
defendant had interfered with plaintiff’s opportunity to rent or

36

sell the property. The court rejected the claim, as plaintiff had
not alleged the expectancy as to the rental or sale of the
property prior to the interfering conduct. A general allegation
that a plaintiff was deprived of an economic opportunity is not
sufficiently definite. The court dismissed the IIPEA claim with
prejudice. Lowther v. U.S. Bank N.A., No. 13-00235, 2013 WL
4777129, at *24-25 (D. Haw. Sept. 4, 2013).
Plaintiffs’ Amended Complaint here similarly fails to allege
a sufficiently definite prospective economic benefit, such as the
rental or sale of the Plaintiffs’ properties, prior to the
Defendant’s allegedly interfering conduct. The Amended Complaint
also fails to allege that Defendant knew of a Plaintiff’s
prospective economic use of their Properties, or acted with a
purposeful intent to interfere with that prospective economic
advantage. Plaintiffs have failed to allege that Defendant
improperly expedited the foreclosure of their Properties, or
otherwise acted wrongfully.
Plaintiffs, in their Opposition, additionally concede that
Plaintiffs Mauch and Dean’s claims for IIPEA fall outside the
two-year statute of limitations. (Opp. at pg. 37 n.18, ECF No.
68.)
Plaintiffs’ IIPEA claims are DISMISSED WITH PREJUDICE.

37

IV.

PLAINTIFFS’ UNCLEAN HANDS/TORTFEASOR CONDUCT AGAINST PUBLIC
POLICY CLAIM
The Amended Complaint alleges that Defendant is liable for

“unclean hands/tortfeasor conduct against public policy.” (Am.
Compl. at ¶ 51, ECF No. 44.)
Defendant’s Motion to Dismiss raises the issue that Hawaii
law does not recognize such a claim. (Motion to Dismiss at pg.
33, ECF No. 62.) Plaintiffs offer no support for the position
that “unclean hands/tortfeasor conduct against public policy” is
a separate cause of action.
The Court finds no support for such a cause of action.
Plaintiffs’ claims for unclean hands/tortfeasor conduct against
public policy are DISMISSED WITH PREJUDICE.

V.

LEAVE TO AMEND
Defendant claims that Plaintiffs may only bring suit against

Defendant in its capacity as a trustee, and not in its individual
capacity. (Motion at pg. 42, ECF No. 62.) Defendant further
claims that Plaintiffs lack standing to assert claims against
Defendant as trustee for any trust other than the trusts that
owned and held Plaintiffs loans. (Motion at pg. 43, ECF No. 62.)
Plaintiffs’ allegations are based entirely on Deutsche
Bank’s actions as trustee for the particular trust which
foreclosed upon each Plaintiff’s Property. Plaintiffs are limited
to bringing suit against Defendant in its trustee capacity. The
38

Court need not address any claim implicating a trust unrelated to
Plaintiffs' mortgages, as the claims of class members other than
the named Plaintiffs are not currently before the court. Lima v.
Deutsche Bank Nat. Trust Co., CIV. 12-00509 SOM/RL, 2013 WL
1856255 (D. Haw. Apr. 30, 2013).
Plaintiffs may propose an Amended Complaint against
Defendant Deutsche Bank, in its trustee capacity, alleging a UDAP
claim, within the limits specified by this Order. Plaintiffs may
file a Proposed Amended Complaint by March 31, 2014.

CONCLUSION

Defendant’s Motion to Dismiss Plaintiffs’ First Amended
Complaint (ECF No. 62) is GRANTED.
1.

Plaintiffs’ WRONGFUL FORECLOSURE claims are DISMISSED
WITH PREJUDICE.

2.

Plaintiffs’ HAWAII UNFAIR DECEPTIVE TRADE PRACTICES ACT
claims are DISMISSED WITH LEAVE TO AMEND.
a.

If Plaintiffs elect to include a UDAP claim in an
amended complaint, Plaintiffs must comply with the
heightened pleading requirement of Federal Rule of
Civil Procedure 9(b) in alleging a violation of
Haw. Rev. Stat. Ch. 480, specifying the time,
place and content of the fraudulent
39

representation. Plaintiffs must also allege how
they were injured and proof of damages.
b.

Plaintiffs’ UDAP claims cannot be based on any
alleged failure by Defendant to refer to the
securitization process in the recorded assignments
or in filings related to the non-judicial
foreclosures of Plaintiffs’ Properties.
Plaintiffs’ UDAP claims also cannot be based on
the allegation that the assignment was
unauthorized by the Liquidation Trustee in the New
Century bankruptcy proceedings.

3.

Plaintiffs’ INTENTIONAL INTERFERENCE WITH PROSPECTIVE
ECONOMIC ADVANTAGE claims are DISMISSED WITH PREJUDICE.

4.

Plaintiffs’ UNCLEAN HANDS/TORTFEASOR CONDUCT AGAINST
PUBLIC POLICY claims are DISMISSED WITH PREJUDICE.

//
//
//
//
//
//
//

40

Plaintiffs may file a Proposed Amended Complaint, alleging a UDAP
claim, against Deutsche Bank, in its trustee capacity, by March
31, 2014.

IT IS SO ORDERED.
DATED:

Honolulu, Hawaii, February 27, 2014.

/s/ Helen Gillmor
Helen Gillmor
United States District Judge

______________________________________________________________
KARL P. LIZZA, GARY L. DEAN, JOHN J. MAUCH, individually and on
behalf of all others similarly situated v. DEUTSCHE BANK NATIONAL
TRUST COMPANY and DOE DEFENDANTS 1-50, Civ. No. 13-00190 HG-BMK;
Order Granting Motion by Defendant Deutsche Bank National Trust
Company to Dismiss Plaintiffs’ First Amended Complaint (ECF No.
62) With Leave to Amend

41