Federal Home Loan Mortgage Corp. v. Kama
Filing
28
ORDER DENYING COUNTERCLAIM/THIRD-PARTY PLAINTIFF'S MOTION TO STAY PROCEEDINGS PENDING APPEAL OF RELATED CASES 24 AND GRANTING IN PART AND DENYING IN PART COUNTERCLAIM DEFENDANT AND THIRD-PARTY DEFENDANTS' MOTION TO DISMISS COUNTERCLAIM AN D THIRD-PARTY COMPLAINT 7 . Signed by JUDGE ALAN C KAY on 10/3/2014. Excerpt of Conclusion: "The Court...GRANTS Kama leave to file an amended complaint within thirty (30) days of the date of this Order to address the ru lings set forth in this order. The Court CAUTIONS Kama that, if he fails to timely file an amended complaint, the claims which this Court has dismissed without prejudice will be automatically dismissed with prejudice. Further, if the amended complain t fails to address the defects identified in this Order, the Court may dismiss such claims with prejudice." [Written Order follows hearing held 9/15/2014 on Motion to Dismiss (minutes: doc no. 23 ). Motion to Stay considered by Judge Kay re: doc (26)] (afc) CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
)
)
)
Plaintiff,
)
)
vs.
)
)
ROBERT H.Y. KAMA,
)
Defendant/Counterclaim)
Plaintiff/Third-Party )
)
Plaintiff,
)
)
vs.
)
)
FEDERAL HOME LOAN MORTGAGE
)
CORPORATION, FEDERAL HOUSING
FINANCE AGENCY, BANK OF AMERICA,)
N.A., AS SUCCESSOR-IN-INTEREST )
)
TO BAC HOME LOANS SERVICING,
L.P., AND FHLMC S/A 3-DAY ARC- )
)
125949,
)
Counterclaim Defendant)
)
and Third-Party
)
Defendants.
)
)
FEDERAL HOME LOAN MORTGAGE
CORPORATION,
Civ. No. 14-00137 ACK-KSC
ORDER DENYING COUNTERCLAIM/THIRD-PARTY PLAINTIFF’S MOTION TO STAY
PROCEEDINGS PENDING APPEAL OF RELATED CASES AND GRANTING IN PART
AND DENYING IN PART COUNTERCLAIM DEFENDANT AND THIRD-PARTY
DEFENDANTS’ MOTION TO DISMISS COUNTERCLAIM AND THIRD-PARTY
COMPLAINT
1
BACKGROUND1/
This matter arises from the foreclosure of
residential property located on the Big Island of Hawaii. The
relevant procedural and factual background is as follows.
On December 22, 2006, Robert Kama and non-party Lisa
Kama2/ entered into a transaction with Finance Factors, Limited
(“Finance Factors”), obtaining a $180,000 loan (“Note”) secured
by a mortgage (“Mortgage”) on their residence at 17-287 Volcano
Road, Kurtistown, Hawaii 96760 (“Property”). (Mot. to Dismiss
Exs. A & B.)3/ The State of Hawaii Bureau of Conveyances recorded
1/
The facts as recited in this Order are for the purpose of
disposing of the current motion and are not to be construed as
findings of fact that the parties may rely on in future
proceedings.
2/
Robert and Lisa Kama were married at the time the Mortgage
was recorded, but divorced in 2011. There is no record of Lisa
Kama having been released from liability under the subject Note
and Mortgage.
3/
Pursuant to the “incorporation by reference” doctrine, the
Court considers the exhibits attached to the instant Motion to
Dismiss. See Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006)
(“Generally, the scope of review on a motion to dismiss for
failure to state a claim is limited to the contents of the
complaint. 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. 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).”)
(internal quotations and citations omitted); and Knievel v. ESPN,
393 F.3d 1068, 1076 (9th Cir. 2005) (noting that the Ninth
Circuit has extended the incorporation by reference doctrine “to
situations in which the plaintiff’s claim depends on the contents
(continued...)
2
the Mortgage on December 29, 2006, as document number 2006239434. (Id. Ex. B.) The Mortgage names Robert and Lisa Kama as
“Borrower[s],” Finance Factors as the “Lender,” and Mortgage
Electronic Registration Systems, Inc. (“MERS”) as nominee for
Lender and as mortgagee under the Mortgage. (Id.)
On September 22, 2010, MERS, as nominee for Finance
Factors, executed an Assignment of Mortgage (“Assignment”),
evidencing the assignment of all right, title and interest under
the Mortgage to Bank of America, N.A. (“BANA”), as successor-ininterest to BAC Home Loans Servicing, L.P. (Id. Ex. C.) The State
of Hawaii Bureau of Conveyances recorded the Assignment on
October 7, 2010, as document number 2010-151037. (Id.)
On October 21, 2010, BANA, as mortgagee under the
Mortgage, recorded a Notice of Mortgagee’s Intention to Foreclose
Under Power of Sale (“Notice of Sale”). (Id. Ex. D.) On April 21,
2011, the State of Hawaii Bureau of Conveyances recorded a
Mortgagee’s Affidavit of Foreclosure Under Power of Sale
(“Affidavit of Sale”), evidencing the sale of the Property on
April 11, 2011, to BANA. (Id. Ex. E.)4/ On June 22, 2011, BANA,
3/
(...continued)
of the document, the defendant attaches the document to its
motion to dismiss, and the parties do not dispute the
authenticity of the document, even though the plaintiff does not
explicitly allege the contents of that document in the
complaint”).
4/
The Affidavit of Sale states that BANA:
(continued...)
3
4/
(...continued)
(a) By certified mail or personal service,
caused to be forwarded a Mortgagee’s Notice
of Mortgagee’s Intention to Foreclose Under
Power of Sale in form attached hereto as
Exhibit “B” and made a part hereof, to all
parties who have recorded encumbrances, liens
and/or other claims which have attached
against the subject mortgaged property, a
list of said parties [which includes Robert
and Lisa Kama] being attached hereto as
Exhibit “C” and made a part hereof.
(b) Not less than 21 days before the date of
the public auction sale, caused a copy of
Notice of Mortgagee’s Intention to Foreclose
Under Power of Sale to be posted on the
subject mortgaged property, as evidenced by
the Return of Posting attached as Exhibit “D”
and made a part hereof.
(c) Once in each of three successive weeks,
with the last publication having been not
less than 14 days before the date of the
public auction sale, caused publication in
The Honolulu Star-Advertiser, a newspaper
having a general circulation in the County of
Hawaii, State of Hawaii, an advertisement
setting forth a summary description of the
subject mortgaged property, the mortgagee’s
intention to foreclose pursuant to the power
of sale under the mortgage, and the date,
time, and place for the public auction sale,
a copy of which notice is attached hereto as
Exhibit “E” and made part hereof.
(d) Upon the scheduled date, time and place,
caused said sale to be postponed to 04/11/11.
Each postponement was publicly announced by
crying out the postponement date at the time
and place of the scheduled auction. The sale
was conducted and the subject mortgaged
property declared sold to BAC Home Loans
Servicing, LP, a Texas Limited Partnership or
its nominee, for $187,249.20, which was the
(continued...)
4
as mortgagee, executed a Mortgagee’s Quitclaim Deed Pursuant to
Power of Sale (“Quitclaim Deed”) in which BANA quitclaimed its
interest in the Property to Federal Home Loan Mortgage
Corporation (“Freddie Mac”). (Id. Ex. F.)
On March 21, 2012, Freddie Mac filed an Ejectment
Complaint in the District Court of the Third Circuit, Puna
Division, State of Hawaii (“state district court”), to remove
Robert Kama (hereinafter “Kama”) from the Property. On August 20,
2012, the state district court dismissed without prejudice
Freddie Mac’s Ejectment Complaint.
Subsequently, on October 18, 2012, Freddie Mac filed an
Ejectment Complaint in the Circuit Court of the Third Circuit,
State of Hawaii (“state circuit court”). (Id. at 4.)
In response to the Ejectment Complaint, on August
20, 2013, Kama filed in the state circuit court his
Counterclaim5/ and Third-Party Complaint (collectively “Third-
4/
(...continued)
highest bid at said sale.
(e) Based on the foregoing, none of the
borrower(s) or mortgagor(s) is in the
military service as evidenced by a true and
correct copy of the Department of Manpower
Data Center report(s), attached hereto as
Exhibit “F.”
(Mot. to Dismiss Ex. E at 2-3.)
5/
Kama incorrectly labeled his Counterclaim a “CounterComplaint.” (See Doc. No. 1 (“Notice of Removal”) Ex. A.)
5
Party Complaint”) against Counterclaim Defendant Freddie Mac and
Third-Party Defendants BANA,6/ Federal Housing Finance Agency
(“FHFA”), and FHLMC S/A 3 Day ARC-125949 (“FHLMC Trust”). (Doc.
No. 1 (“Notice of Removal”) Ex. A.) The Third-Party Complaint is
based primarily on the following allegations.
First, Kama alleges that BANA was not the owner of
the Note and Mortgage at the time of foreclosure and, therefore,
lacked legal authority to conduct the non-judicial foreclosure of
the Property. (Third-Party Compl. ¶¶ 69-71.) According to Kama,
BANA was merely the Mortgage servicer, and FHLMC Trust was the
actual owner of the Note and Mortgage when the Property was
foreclosed upon. (Id. ¶¶ 17 & 70.)
Next, Kama alleges that BANA postponed the
Property’s foreclosure sale date, but failed to publicly announce
the continued sale date. (Id. ¶ 75.) Kama alleges that, as a
consequence, he was “unable to ascertain if or when the
6/
The Third-Party Complaint erroneously names “BAC Home
Loans Servicing, L.P.” (rather than BANA) as a third-party
defendant. Exhibit “B” to Kama’s opposition to Freddie Mac’s
Motion for Summary Judgment on the Ejectment Complaint, which was
filed in state circuit court, is a letter (dated March 6, 2011)
sent from “Bank of America Home Loans” and addressed to Robert
and Lisa Kama. The first paragraph of the letter provides:
“IMPORTANT MESSAGE ABOUT YOUR LOAN. We want to let you know that
effective July 1, 2011, the servicing of home loans by our
subsidiary - BAC Home Loans Servicing, LP, will transfer to our
parent company - Bank of America, N.A. Based upon our records as
of June 26, 2011, your home loan account . . . is affected by
this servicing transfer.” Because Kama filed his Third-Party
Complaint on August 20, 2013, he incorrectly named BAC Home Loans
Servicing, L.P. as a third-party defendant.
6
foreclosure would take place, and other interested bidders were
prevented from attending the sale.” (Id. ¶ 76.)
Kama also asserts that, after suffering a workplace
injury and temporary reduction in his income, he sought a loan
modification from BANA through the federal Home Affordable
Modification Program (“HAMP”) in 2010. (Id. ¶ 20.) Kama claims
that a BANA representative named “Bonita” told him “that it
looked like he qualified for a HAMP loan modification” and “that
as long as he complied with the terms of the paperwork . . .
which [were] forthcoming in the mail, he would not be foreclosed
on.” (Id. ¶ 22.) Kama further claims that he “complied with all
requests for paperwork from [BANA] and was told verbally over the
telephone by a [BANA] representative in early April 2011, that
his HAMP application was complete and no further documentation
was needed from him.” (Id. ¶ 21.) Additionally, Kama asserts that
Bonita told him that she mailed a loan modification agreement to
him. (Id. ¶ 77.) According to Kama, BANA foreclosed on the
Property while he was waiting for the loan modification agreement
to arrive in the mail. (Id. ¶ 24.)
In addition, Kama alleges that BANA failed to send
him a “non-approval notice,” informing him that his HAMP
application had been denied. (Id. ¶ 23.) Kama further alleges
that HAMP guidelines required BANA to send the non-approval
notice and allow for a thirty-day “borrower response period”
7
following issuance of that notice before it could foreclose on
the Property. (Id. ¶ 27.)
Kama’s Third-Party Complaint requests the following
relief: set aside the April 11, 2011 foreclosure sale and
transfer of title to Freddie Mac; determine that Kama is the
prevailing party; and award damages and costs, as well as treble
damages, punitive damages, attorney’s fees and costs. (Id. at
40.)
On September 11, 2013, Freddie Mac filed a “reply”
to the Third-Party Complaint in state circuit court.7/
On November 25, 2013, approximately three months after
Kama filed his Third-Party Complaint, Freddie Mac filed a Motion
for Summary Judgment on the Ejectment Complaint in the state
circuit court. (Mot. to Dismiss Ex. G.) On February 25, 2014, the
state circuit court granted Freddie Mac’s Motion for Summary
Judgment. (Id.) On March 10, 2014, the state circuit court
entered a “Judgment on Order Granting Plaintiff Federal Home Loan
Mortgage Corporation’s Motion for Summary Judgment Filed Herein
on November 15, 2013, and For Possession.” (Id. Ex. H.)
On March 18, 2014, Freddie Mac removed the case to
this Court, pursuant to 12 U.S.C. § 1452(f). (Doc. No. 1.) That
statute provides that “all civil actions to which [Freddie Mac]
7/
BANA, FHLMC Trust, and FHFA did not file a responsive
pleading to Kama’s Third-Party Complaint in state circuit court.
8
is a party shall be deemed to arise under the laws of the United
States, and the district courts of the United States shall have
original jurisdiction of all such actions, without regard to
amount or value[.]” Id. The statute further provides that any
state action to which Freddie Mac is a party may at any time
before trial be removed to a United States district court by
Freddie Mac. Id.
On April 1, 2014, Freddie Mac, BANA, and FHLMC Trust
(hereinafter, collectively, “Third-Party Defendants”) filed the
instant Motion to Dismiss the Third-Party Complaint. (Doc. No.
7.)8/ Third-Party Defendants seek to dismiss the Third-Party
Complaint in its entirety with prejudice and without leave to
amend. (Id.)
Also, on April 1, 2014, FHFA filed a separate Motion
to Dismiss the Third-Party Complaint. (Doc. No. 10.) FHFA’s
Motion only seeks to dismiss the Third-Party Complaint’s Seventh
Cause of Action. (Id.) On May 13, 2014, however, Kama filed a
“Notice of Voluntary Dismissal of Claims Against Defendant
Federal Housing Finance Agency” wherein Kama voluntarily
dismissed not only the Seventh Cause of Action as to FHFA, but
8/
Third-Party Defendants also filed a Motion to Dismiss the
Third-Party Complaint in state circuit court on February 24,
2014. See Circuit Court of the Third Circuit, State of Hawaii,
Electronic Docket, Federal Home Loan Mortgage Corp. v. Kama, Civ.
No. 12-1-0515 (Doc. No. 28.) However, it appears that the state
circuit court did not issue a ruling on Third-Party Defendants’
Motion to Dismiss before the case was removed to this Court.
9
also every other cause of action in the Third-Party Complaint
asserted against FHFA. (Doc. No. 18.) As a result, FHFA is
dismissed from this action, and FHFA’s Motion is deemed
withdrawn.
On August 25, 2014, Kama filed an Opposition to
Third-Party Defendants’ Motion to Dismiss. (Doc. No. 20.)
On August 29, 2014, Third-Party Defendants filed a
Reply in support of their Motion to Dismiss. (Doc. No. 21.)
The Court held a hearing regarding Third-Party
Defendants’ Motion to Dismiss on September 15, 2014.
At the September 15, 2014 hearing, Kama orally moved to
stay these proceedings. The Court directed Kama to file a written
motion to stay the proceedings. On September 22, 2014, Kama filed
a Motion to Stay Proceedings Pending Appeal of Related Cases.
(Doc. No. 24.) On September 26, 2014, Third-Party Defendants
filed an opposition to Kama’s Motion. (Doc. No. 27.)
STANDARD
I.
Motion to Stay
A court may stay proceedings as part of its inherent
power “to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and for
litigants.” Landis v. North Am. Co., 299 U.S. 248, 254 (1936);
see also Clinton v. Jones, 520 U.S. 681, 706 (1997) (“The
District Court has broad discretion to stay proceedings as an
10
incident to its power to control its own docket.”)
The inherent power to stay includes granting an order
to stay “pending resolution of independent proceedings which bear
upon the case.” Leyva v. Certified Grocers of California, Ltd.,
593 F.2d 857, 863 (9th Cir. 1979). Where a stay is sought pending
the resolution of another action, the court need not find that
two cases possess identical issues; a finding that the issues are
substantially similar is sufficient to support a stay. See
Landis, 299 U.S. at 254. Courts should weigh the competing
interests of the parties. See id. at 254-55. The issues involved
in the pending proceedings need not be “controlling of the action
before the court” for a stay to be ordered. See Leyva, 593 F.2d
at 864.
In determining the propriety of a stay, courts consider
the possible effects of judicial economy as well as the potential
harm to the parties and the public interest. See Dependable
Highway Express v. Navigators Ins. Co., 498 F.3d 1059, 1066-67
(9th Cir. 2007).
The party seeking to stay the proceedings carries “the
burden of establishing its need.” Clinton, 520 U.S. at 708
(citing Landis, 299 U.S. at 255).
II.
Motion to Dismiss Under Rule 12(b)(6)
Federal Rule of Civil Procedure (“Rule”) 12(b)(6)
authorizes the Court to dismiss a complaint that fails “to state
11
a claim upon which relief can be granted.” Rule 12(b)(6) is read
in conjunction with Rule 8(a), which requires only “a short and
plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a)(2). The Court may dismiss a
complaint either because it lacks a cognizable legal theory or
because it lacks sufficient factual allegations to support a
cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901
F.2d 696, 699 (9th Cir. 1988).
In resolving a Rule 12(b)(6) motion, the court must
construe the complaint in the light most favorable to the
plaintiff and accept all well-pleaded factual allegations as
true. Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, 783
(9th Cir. 2012). The complaint must contain sufficient factual
matter accepted as true to “state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “The plausibility standard . . . asks for more than a
sheer possibility that a defendant has acted unlawfully. Where a
complaint pleads facts that are ‘merely consistent with’ a
defendant’s liability, it ‘stops short of the line between
possibility and plausibility of entitlement to relief.’” Iqbal,
556 U.S. at 678 (quoting Twombly, 550 U.S. at 556-57). However,
in considering a motion to dismiss, “the court is not deciding
whether a claimant will ultimately prevail but rather whether the
12
claimant is entitled to offer evidence to support the claims
asserted.” Tedder v. Deutsche Bank Nat. Trust Co., 863 F. Supp.
2d 1020, 1030 (D. Haw. 2012) (citing Twombly, 550 U.S. at 563 n.
8).
Should a claim be dismissed, the court should grant
leave to amend “even if no request to amend the pleading was
made, unless it determines that the pleading could not be cured
by the allegation of other facts.” OSU Student Alliance v. Ray,
699 F.3d 1053, 1079 (9th Cir. 2012).
III.
Applicability of Rule 9(b)
Rule 9(b) imposes a heightened pleading standard on
a party alleging fraud and requires the party to “state with
particularity the circumstances constituting fraud[.]” Fed. R.
Civ. P. 9(b). “Averments of fraud must be accompanied by the
‘who, what, when, where and how’ of the misconduct charged.”
Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009).
This district court has previously held that “where
a Chapter 480 claim is based on fraudulent acts, a plaintiff must
plead with particularity.” Long v. Deutsche Bank Nat. Trust Co.,
Civ. No. 10-00359 JMS/KSC, 2011 WL 2650219, at *7 (D. Haw. July
5, 2011); see also Smallwood v. NCsoft Corp., 730 F.Supp.2d 1213,
1232-33 (D. Haw. 2010) (finding that plaintiff’s H.R.S. § 480-2
claim based on “fraudulent concealment” was subject to Rule
9(b)’s particularity requirement). Here, some of Kama’s
13
allegations in support of his H.R.S. § 480-2 unfair and deceptive
practices claim (Fourth Cause of Action) sound in fraud: Kama
alleges, inter alia, that BANA “provided false and misleading
statements concerning its alleged ownership of the loan and the
loss mitigation process, and failed to properly process [his]
documents and disclose facts relating to” his HAMP application.
(Third-Party Compl. ¶ 95.) Accordingly, these allegations are
subject to Rule 9(b)’s heightened pleading standard.
DISCUSSION
I.
Motion to Stay Proceedings
Kama moves to stay proceedings in this case pending the
outcome of the following cases currently on appeal in the Ninth
Circuit:
•
Bald v. Wells Fargo Bank, Civ. No. 13-00135 SOMKSC (Ninth Circuit Case No. 13-16622)
•
Gibo v. U.S. Bank N.A., Civ. No. 12-00514 SOM-RLP
(Ninth Circuit Case No. 13-16092)
•
Lima v. Deutsche Bank National Trust Company, Civ.
No. 12-00509 SOM-RLP (Ninth Circuit Case No. 1316091)
•
Lowther v. U.S. Bank N.A., Civ. No. 13-00235 LEKBMK (Ninth Circuit Case No. 14-16345)
•
Lizza v. Deutsche Bank National Trust Company,
Civ. No. 13-00190 HG-BMK (Ninth Circuit Case No.
14
14-16483)
•
Sigwart v. U.S. Bank N.A., Civ. No. 13-00529 LEKRLP (Ninth Circuit Case No. 14-16346)
(Mot. to Stay at 5.)9/
In Bald, Gibo, and Lima, the plaintiffs alleged
wrongdoing by defendants Wells Fargo Bank, Deutsche Bank and U.S.
Bank (collectively, the “Banks”) in connection with the Banks’
nonjudicial foreclosure sales of the subject properties. Bald v.
Wells Fargo Bank, Civ. No. 13-00135 SOM-KSC, 2013 WL 3864449 (D.
Haw. July 25, 2013); Lima v. Deutsche Bank Trust Co., 943
F.Supp.2d 1093 (D. Haw. 2013), as amended (May 6, 2013)
(dismissing both Gibo v. U.S. Bank N.A., Civ. No. 12-00514 SOMRLP and Lima et al. v. Deutsche Bank National Trust Company, Civ.
No. 12-00509 SOM-RLP). Specifically, the plaintiffs asserted that
the Banks advertised that they were selling the subject
properties via quitclaim deed, rather than by warranty deed,
which brought a lower price, thereby allegedly breaching a duty
to the plaintiffs to get the best possible price for the subject
9/
Kama also appears to argue that the Court should stay
proceedings in this case pending the result of two Hawaii state
court cases: (1) Ilar v. Lava Rock Properties LLC, Civ. No. 11-1003091 (pending in the Circuit Court of the First Circuit, State
of Hawaii) and (2) Sigwart v. Rosen, Civ. No. 13-1-002097 (on
appeal to the Hawaii Intermediate Court of Appeals). (Mot. to
Stay at 6.) However, Kama has not pointed out any claims or
issues in Lava Rock and Rosen that are similar to those in the
present case. Accordingly, the Court declines to grant Kama’s
Motion to Stay based on these two state court cases.
15
properties. E.g., Bald, 2013 WL 3864449, at *3. The plaintiffs
further asserted that the Banks violated H.R.S. § 667-5 by
failing to publish notices of the postponements of the
foreclosure auctions. Id. The Bald, Gibo, and Lima plaintiffs
argued that the Banks’ alleged failures on these fronts
constituted both a violation of H.R.S. § 667-5, as well as a
violation of H.R.S. § 480-2, which prohibits unfair and deceptive
acts and practices. Id.
In her orders granting the Banks’ respective motions to
dismiss, Judge Mollway ruled that Hawaii’s nonjudicial
foreclosure law does not require a nonjudicial foreclosure sale
to result in a conveyance by more than a quitclaim deed, or
prohibit “advertisements stating that only quitclaim deeds will
be provided.” Id. at *4. Judge Mollway further ruled that
Hawaii’s nonjudicial foreclosure law does not require “that
notice of the postponement of a nonjudicial foreclosure be
published in a newspaper.” Id. at *6. Finally, Judge Mollway
found that the Bald, Gibo, and Lima plaintiffs did not state a
violation of H.R.S. § 480-2 because their “allegations regarding
advertisement of or conveyance by quitclaim deed, as well as
their allegations regarding the postponement of foreclosures
sales, fail[ed] to assert actionable misconduct by” the Banks.
Id.
On appeal, the Bald, Gibo, and Lima plaintiffs frame
16
the issues as whether the district court erred in dismissing
claims brought under H.R.S. § 480-2 where the plaintiffs allege
that the Banks committed unfair and deceptive acts and practices
by (1) offering the subject properties by “quitclaim deed only”
and (2) selling the subject properties without publishing the
continued foreclosure sale date.10/ See Briefs of PlaintiffsAppellants in Bald et al. v. Wells Fargo Bank, N.A., et al., No.
13-16622 (9th Cir. December 18, 2013); Gibo v. U.S. Bank et al.,
No. 13-16092 (9th Cir. Oct. 4, 2013); and Lima et al. v. Deutsche
Bank National Trust Company et al., No. 13-16091 (9th Cir. Oct.
4, 2013).
The Ninth Circuit’s rulings in Bald, Gibo, and Lima
will not affect the claims contained in Kama’s Third-Party
Complaint. Unlike the plaintiffs in Bald, Gibo, and Lima, Kama
does not allege that BANA breached a duty to obtain the best
possible price for the Property by advertising that the Property
would be sold by “quitclaim deed only.” Further, Kama does not
10/
In In re Kekauoha-Alisa, No. 05-01215, 2007 WL 1752266, at
*4 (Bankr. D. Haw. June 15, 2007), Judge Faris of the U.S.
Bankruptcy Court for the District of Hawaii interpreted H.R.S. §
667 as only requiring oral announcement of a postponed
foreclosure sale date. Judge Faris’s June 15, 2007 order was not
appealed to the Ninth Circuit. In In re Kekauoha-Alisa, 674 F.3d
1083 (9th Cir. 2012), which was an appeal of another order in the
same bankruptcy case, the Ninth Circuit held that a lender
violated H.R.S. § 667 by failing to make public announcement of
the postponed foreclosure sale date. Id. at 1088. The Ninth
Circuit also held that this defect was a deceptive practice under
H.R.S. § 480-2. Id. at 1091.
17
appear to allege that BANA violated H.R.S. § 667 by failing to
publish the continued foreclosure sale date of the Property.11/
Rather, Kama asserts that BANA violated § 667 by not publicly
announcing the postponed foreclosure sale date. (Third-Party
Compl. ¶ 75.)12/ Moreover, and importantly, Kama’s H.R.S. § 480-2
claims are not premised on the allegations at issue in Bald,
Gibo, and Lima. Instead, Kama’s § 480-2 claims are based on BANA
allegedly providing false and misleading statements, and failing
to disclose facts, concerning the loan modification process. (Id.
¶¶ 95-96.) Accordingly, the Court concludes that it is
inappropriate to stay proceedings in this case pending the Ninth
Circuit’s rulings in Bald, Gibo, and Lima.13/
11/
Paragraph 57 of the Third-Party Complaint provides: “The
non-judicial foreclosure auction allegedly held on April 11,
2011[,] was defective in several respects including but not
limited to the failure of [BANA] to publish the continued sale
date and time.” (Third-Party Compl. ¶ 57.) However, Kama’s Second
Cause of Action alleges a violation of H.R.S. Chapter 667 for
“Failure to [P]rovide Public Announcement of Continued
[Foreclosure Sale] Date.” (Id. at 25.) The Court construes the
Third-Party Complaint as containing the latter, but not the
former, claim. In any event, H.R.S. § 667-5 only requires public
announcement of a postponement and not publishing in a newspaper.
12/
Kama’s Third-Party Complaint also alleges that BANA did
not own the Note or Mortgage at the time of foreclosure and thus
lacked standing to conduct the non-judicial foreclosure sale of
the Property. (Third-Party Compl. ¶ 71.) Kama alleges that, as a
result, BANA violated H.R.S. § 667-5 by foreclosing on the
Property. (Id. ¶ 67.) Such claims are not present in Bald, Gibo,
and Lima.
13/
The Court notes that Judge Watson stayed proceedings in
three cases before him “in light of the similar legal issues
(continued...)
18
Regarding Lowther, Lizza, and Sigwart, the Ninth
Circuit’s rulings in these cases likewise will not affect Kama’s
claims in his Third-Party Complaint. The claims made by the
plaintiffs in Lowther, Lizza, and Sigwart are different than
those made by Kama in the instant action. See Lowther v. U.S.
Bank, N.A., Civ. No. 13-00235 LEK-BMK, 2014 WL 2452598 (D. Haw.
May 30, 2014) (dismissing first amended complaint in its
entirety); Lizza v. Deutsche Bank Nat. Trust Co., Civ. No. 1300190 HG-BMK, 2014 WL 3101322 (D. Haw. July 3, 2014) (striking
second amended complaint and dismissing the case with prejudice);
and Sigwart v. U.S. Bank N.A., Civ. No. 13-00529 LEK-RLP, 2014 WL
13/
(...continued)
raised in” Bald, Gibo, and Lima. E.g., Degamo v. Bank of America,
N.A., Civ. No. 13-00141, DKW-BMK (Doc. No. 51) (minute order
staying Degamo). These three cases are as follows: Ilar v. Routh
Crabtree, Civ. No. 13-00145 DKW-BMK; Degamo v. Bank of America,
N.A., Civ. No. 13-00141, DKW-BMK; and Fergerstrom v. PNC Bank,
N.A., Civ. No. 13-00526 DKW-RLP. Unlike the instant case, the
plaintiffs in Ilar, Degamo, and Fergerstrom made similar
allegations as the plaintiffs in Bald, Gibo, and Lima. For
instance, in Routh Crabtree, the plaintiffs asserted that the
defendants violated H.R.S. § 480-2 by falsely advertising the
subject properties “for sale without covenants or warranties as
to title, and, on many occasions, as sales by mortgagee’s
quitclaim conveyances,” and failing to publish notices of the
postponed foreclosure auctions’ dates and times. See First
Amended Complaint ¶¶ 185 & 188 in Routh Crabtree, Civ. No. 1300145 (Doc. No. 10).
Kama argues that the Court should stay proceedings in this
case because he is a putative class member in Ilar, Degamo, and
Fergerstrom. (Mot. to Stay at 11.) As noted, Judge Watson has
stayed and administratively closed these three cases due to the
Bald, Gibo, and Lima appeals. However, Kama does not explain how
he is a putative class member of these cases or in any event how
that might be relevant to the subject case.
19
1322813 (D. Haw. Mar. 31, 2014) (dismissing complaint in its
entirety with partial leave to amend). Indeed, several of the
claims alleged by the plaintiffs in Lowther, Lizza, and Sigwart
are similar to those alleged by the plaintiffs in Bald, Gibo, and
Lima. For example, in Lizza and Sigwart, the plaintiffs asserted
that the defendant banks were required to sell the subject
properties on the “best reasonable terms” and violated that
obligation by advertising that the subject properties would be
sold by quitclaim deed only. E.g., Lizza, 2014 WL 3101322, at *3.
And, in Sigwart, the plaintiff asserted that defendant U.S. Bank
violated H.R.S. § 480-2 by failing to publish notice of a new
sale date when U.S. Bank moved the foreclosure auction date back.
Sigwart, 2014 WL 1322813, at *2. As discussed above, Kama does
not assert any such claims in his Third-Party Complaint.
Furthermore, and importantly, at the time of the issuance of this
Order, the plaintiffs in Lowther, Lizza, and Sigwart have not
filed their opening briefs with the Ninth Circuit and, therefore,
this Court is unable to determine what issues will be presented
on appeal.
For the foregoing reasons, the Court denies Kama’s
Motion to Stay Proceedings Pending Appeal of Related Cases.
Having determined that a stay is inappropriate in this case, the
Court now turns to Third-Party Defendants’ Motion to Dismiss.
II.
Motion to Dismiss
20
The Third-Party Complaint contains the following causes
of action: (1) Violation of H.R.S. Chapter 66714/ (“Lack of Legal
Right to Foreclose”) (against all Third-Party Defendants); (2)
Violation of H.R.S. Chapter 667 (“Failure to Provide Public
Announcement of Continued [Foreclosure Sale] Date and to Follow
Initial Terms of Sale”) (against BANA and FHLMC Trust only); (3)
Breach of Contract (“Third-Party Beneficiary of HAMP Contract
Between [BANA] and Freddie Mac and the U.S. Treasury”) (against
BANA and FHLMC Trust only); (4) Violation of H.R.S. § 480-2
(against all Third-Party Defendants); (5) Wrongful Foreclosure
(against BANA and FHLMC Trust only); (6) Promissory Estoppel
(against BANA only); (7) Violation of Fifth Amendment Due Process
Clause (against Freddie Mac and FHLMC Trust only); and (8) Quiet
14/
H.R.S. Chapter 667 sets forth the procedures governing
non-judicial foreclosures in the State of Hawaii. H.R.S. Chapter
667 was substantially amended on May 5, 2011, and again on June
18, 2012. See 2011 Haw. Sess. Laws Act 48 (approved May 5, 2011)
and 2012 Haw. Sess. Laws Act 182 (approved June 18, 2012); see
also Everett Kaneshige and Seth Corpuz-Lahne, The New Foreclosure
Law, Haw. B.J., October 2012 (examining the content and history
of these measures). These amendments do not apply to foreclosures
that took place prior to their approval. See § 45 of Act 48 and §
69 of Act 182 (stating that “[t]his Act shall take effect upon
its approval”); see also Taniguchi v. Ass’n of Apartment Owners
of Kind Manor, Inc., 114 Haw. 37, 48 (Haw. 2007) (holding that
all statutes are to be prospectively construed unless the
legislature “expressly declared or . . . necessarily implied” its
intention or purpose for retrospective application in the
language of the statute). Because the foreclosure of the Property
occurred on April 11, 2011, these amendments do not apply to the
foreclosure procedures used in this case. Accordingly, all
citations to H.R.S. Chapter 667 in this Order are to the 2008
version.
21
Title (against “Defendants Claiming Any Interest in the Subject
Property”).
The Court will address whether each cause of action
states a claim upon which relief can be granted.
A. First Cause of Action: Violation of H.R.S.
Chapter 667 Regarding the Alleged Lack of Authority
to Foreclose
In the First Cause of Action, Kama alleges that BANA
did not own the Note or Mortgage at the time of foreclosure and,
therefore, was not authorized to conduct the non-judicial
foreclosure sale of the Property on April 11, 2011. (Third-Party
Compl. ¶ 71.) Kama alleges that BANA therefore violated H.R.S. §
667-5 by foreclosing on the Property. (Id. ¶ 67.) That statute
provides, in relevant part, that “the mortgagee, the mortgagee’s
successor in interest, or any person authorized by the power to
act in the premises” may foreclose where the mortgage contains a
power of sale. H.R.S. § 667-5(a).
As noted above, on September 22, 2010, MERS, as
nominee for Finance Factors, assigned all right, title and
interest under the Mortgage to BANA. (Mot. to Dismiss Ex. C.) The
Mortgage specifically states that MERS is the mortgagee and has
authority to act on behalf of Finance Factors. (Id. Ex. B at 1.)
Further, the Mortgage expressly grants to MERS “and to the
successors and assigns of MERS” the power of sale. (Id. at 2.)
Kama does not contest the validity of the Assignment.
22
Accordingly, BANA did not violate H.R.S. § 667-5(a) because, as
mortgagee, it had the authority to foreclose on the Property,
pursuant to the power of sale clause contained in the Mortgage.
Moreover, to the extent Kama argues that BANA was
not authorized to pursue a non-judicial foreclosure on the
Property because BANA did not own or hold the original Note or
Mortgage at the time of foreclosure,15/ such an argument is
unavailing. This district court has consistently rejected claims
that a mortgagee is required to prove that it possesses or owns
the original Note or Mortgage in order to lawfully foreclose
under H.R.S. § 667-5. See, e.g., Krakauer v. Indymac Mortg.
Servs., Civ. No. 09–00518 ACK-BMK, 2010 WL 5174380, at *9 (D.
Haw. Dec. 14, 2010) (rejecting plaintiffs’ contentions that
defendants lacked standing to institute a non-judicial
foreclosure sale because defendants did not possess the original
note and mortgage); Pascual v. Aurora Loan Servs., LLC, Civ. No.
10-00759 JMS-KSC, 2012 WL 3583530, at *3 (D. Haw. Aug. 20, 2012)
(“According to its plain language, H.R.S. § 667-5 contains no
requirement that a mortgagee affirmatively prove that it holds
15/
In his Opposition, Kama argues that his First Cause Action
is not based on the “holder of the note” theory. (Opp’n at 15.)
At the same time, however, Kama asserts that Third-Party
Defendants “have failed to show who actually owned the debt
foreclosed on at the time of [the] foreclosure of the Subject
Property.” (Id. at 16.) In an abundance of caution, the Court
will therefore address whether BANA had authority to foreclose on
the Property even though it allegedly did not own or hold the
original Note or Mortgage.
23
the note. Indeed, Plaintiffs do not cite and the court is not
aware of any authority under Hawaii law affirmatively stating
that a mortgagee’s power of sale under Hawaii’s non-judicial
foreclosure statute is tied to the presentment of the underlying
note.”) (emphasis in original); Brenner v. Indymac Bank, F.S.B.,
Civ. No. 10-00113 SOM/BMK, 2010 WL 4666043, at * 7 (D. Haw. Nov.
9, 2010) (finding that “[n]o law requires a lender to show a
borrower an ‘original’ mortgage” prior to initiating
foreclosure); Del Piano v. Mortgage Elec. Registration Systems,
Inc., Civ. No. 11-00140 SOM/BMK, 2012 WL 621975, at * 10 (D. Haw.
Feb. 24, 2012) (“[Plaintiff] cites no provision requiring the
lender to show her the original Note.”).
Because BANA was not required to possess the
original Note or Mortgage prior to conducting the non-judicial
foreclosure of the Property, and because the chain of title
indicates that BANA as mortgagee was authorized under H.R.S. §
667-5 to institute the non-judicial foreclosure, Kama’s First
Cause of Action fails to state a claim for which relief may be
granted.
B. Second Cause of Action: Violation of H.R.S.
Chapter 667 Regarding the Alleged Failure to
Provide Public Announcement of the Continued
Foreclosure Sale Date and to Follow the Initial
Terms of Sale
In the Second Cause of Action, Kama alleges an
additional violation of H.R.S. § 667-5. That statute provides in
24
pertinent part:
(d) Any sale, of which notice has been given
pursuant to subsections (a) and (b) may be
postponed from time to time by public
announcement made by the mortgagee or by a
person acting on the mortgagee’s behalf.
H.R.S. § 667-5(d). Kama specifically alleges that BANA postponed
the Property’s foreclosure sale date, but failed to publicly
announce the continued sale date, in violation of H.R.S. § 6675(d). (Third-Party Compl. ¶ 75.)16/
Kama’s allegations are belied by the Mortgagee’s
Affidavit of Foreclosure Under Power of Sale. (Mot. to Dismiss
Ex. E.) That recorded document states that:
(d) Upon the scheduled date, time and place,
caused said sale to be postponed to 04/11/11.
Each postponement was publicly announced by
crying out the postponement date at the time
and place of the scheduled auction.
(Id.)
Under Hawaii law, the recorded Mortgagee’s Affidavit
of Foreclosure Under Power of Sale may be admitted as evidence
that the sale was conducted in conformity with H.R.S. Chapter
667. Specifically, pursuant to H.R.S. § 667-8,
16/
The Court notes that Section 22 of the Mortgage provides
that “[i]f Lender invokes the power of sale, Lender shall give
Borrower notice of sale in the manner provided in Section 15.”
(Mot. to Dismiss Ex. B at 10.) Section 15, in turn, provides that
“. . . [i]f any notice required by this Security Instrument is
also required under Applicable Law, the Applicable Law
requirement will satisfy the corresponding requirement under this
Security Instrument.” (Id. at 8.) In this case, the “Applicable
Law” is H.R.S. § 667-5.
25
[i]f it appears by the affidavit that the
affiant has in all respects complied with the
requirements of the power of sale and the
statute, in relation to all things to be done
by the affiant before selling the property,
and has sold the same in the manner required
by the power, the affidavit, or a duly
certified copy of the record thereof, shall
be admitted as evidence that the power of
sale was duly executed.
See U.S. Bank Nat. Ass’n v. Castro, 131 Haw. 28, 40 (Haw. 2013)
(“That the affidavit shall be admitted as evidence that the power
of sale was duly executed demonstrates the legislature’s intent
to promote the finality of properly conducted sales.”)(emphasis
in original); see also Fed. R. Evid. 902(4) (providing that
certified copies of public records are self-authenticating and
require no extrinsic evidence of authenticity in order to be
admitted).
Here, the Mortgagee’s Affidavit of Foreclosure Under
Power of Sale, recorded on April 11, 2011, indicates that the
power of sale was duly executed and that H.R.S. § 667-5(d)’s
notice requirement was satisfied. The Court must therefore
conclude that the foreclosure sale was conducted in conformity
with Hawaii law. Accordingly, Kama’s claim that BANA did not
publicly announce the continued foreclosure sale date of the
Property is dismissed without prejudice.
In addition, the Court notes that Kama alleges in the
Second Cause of Action that “[t]he bid by Freddie Mac was [] in
violation of the terms of sale initially announced.” (Third-Party
26
Compl. ¶ 78.) The Court finds that this claim is vague and
conclusory, and contains insufficient factual detail to meet Rule
8's pleading standard. Accordingly, Kama’s claim that Freddie
Mac’s bid violated the initial terms of sale is dismissed without
prejudice.
C. Third Cause of Action: Breach of Contract
Kama alleges in the Third Cause of Action that BANA
failed to abide by HAMP guidelines and “breached its duty to []
Kama as the intended third party beneficiary of its agreement
with Freddie Mac and the U.S. Treasury under HAMP[.]” (ThirdParty Compl. ¶ 91.)
In Newell v. Wells Fargo Bank, N.A., the court
explained that
HAMP is a loan modification program designed
to reduce delinquent and at-risk borrowers’
monthly mortgage payments. HAMP was
authorized by Congress as part of the
Emergency Economic Stabilization Act of 2008,
which has the stated purpose of giving the
Secretary of Treasury the ‘authority and
facilities’ necessary to ‘restore liquidity
and stability to the financial system of the
United States.’ 12 U.S.C. [§] 5201(1).
Under the terms of the HAMP agreement and
Treasury regulations, [a lender] is required
to evaluate borrowers for loan modifications
within thirty days, grant loan modifications
to qualified borrowers, forebear from
foreclosure during the time that an
application for a loan modification is
pending, and advise loan modification
applicants of the prohibition on foreclosure
sales (see Dkt. No. 11 (Treasury Department’s
Supplemental Directive 10-02)).
27
No. C 10-05138 WHA, 2012 WL 27783, at *5 (N.D. Cal. Jan. 5,
2012). HAMP guidelines also require a lender to notify a borrower
that his HAMP loan modification request has been denied and allow
the borrower thirty days to respond to the “non-approval notice”
before a foreclosure sale may take place. (Opp’n Ex. G (“U.S.
Dep’t of Treasury, HAMP Supplemental Directive 10-02").)17/
In this case, the Court concludes that Kama lacks
standing to enforce the HAMP guidelines. This district court and
17/
Kama attaches several exhibits to his Opposition to the
instant Motion to Dismiss and requests that the Court take
judicial notice of these exhibits. (Opp’n at 5.) Because these
exhibits are matters of public record, and because Third-Party
Defendants do not object to Kama’s request, the Court considers
the exhibits attached to Kama’s Opposition to the instant Motion
to Dismiss. See U.S. v. Ritchie, 342 F.3d 903, 908 (9th Cir.
2003) (finding that courts may consider “matters of judicial
notice” without converting a 12(b)(6) motion to dismiss into a
motion for summary judgment); and Intri-Plex Technology, Inc. v.
Crest Group, Inc., 499 F.3d 1048, 1052 (9th Cir. 2007) (“[A]
court may take judicial notice of matters of public record
without converting a motion to dismiss into a motion for summary
judgment, as long as the facts noticed are not subject to
reasonable dispute.”) (internal quotation marks and citation
omitted).
Further, the Court notes that Kama attempts to incorporate
by reference exhibits attached to his Memorandum in Opposition to
Freddie Mac’s Motion for Summary Judgment on the Ejectment
Complaint, which, as noted, was filed in state circuit court on
November 25, 2013. This Court has recently held that the Federal
Rules of Civil Procedure do not authorize a party to incorporate
by reference exhibits attached to prior briefing. See Barnes v.
Sea Hawaii Rafting, Civ. No. 13-00002 ACK-RLP, Doc. No. 120, at
11 n. 9 (D. Haw. September 2, 2014) (finding no authority under
the Federal Rules of Civil Procedure for plaintiff’s attempt to
incorporate by reference exhibits attached to three prior
motions). Nevertheless, the Court will consider these exhibits
since Third-Party Defendants expressed no opposition, and the
Court finds no prejudice to Third-Party Defendants.
28
numerous other district courts within the Ninth Circuit have made
clear that there is no express or implied private right of action
to sue lenders or service providers for HAMP violations. See,
e.g., Northern Trust, NA v. Wolfe, Civ. No. 11-00531 LEK-BMK,
2012 WL 1983339, at *20 (D. Haw. May 31, 2013) (“Although Wolfe
contends that Northern Trust had a duty under HAMP not to proceed
with foreclosure while evaluating him for loan modification,
there is no express or implied private right of action for a
violation of HAMP.”); Soriano v. Wells Fargo Bank, N.A., Civ. No.
11-00044 SOM/KSC, 2013 WL 310377, at *9 (D. Haw. Jan. 25, 2013)
(“This court is not persuaded that there is a private right of
action for a violation of HAMP Guidelines.”); Ingalsbe v. Bank of
Am., N.A., 2010 WL 5279839, at *5 (E.D. Cal. Dec. 13, 2010) (“The
consensus among district courts in the Ninth Circuit is that
there is no private right of action under HAMP.”).
Moreover, Kama is not an intended third-party
beneficiary of any HAMP agreement between Third-Party Defendants
and the U.S. Treasury. “Before a third party can recover under a
contract, it must show that the contract was made for its direct
benefit - that it is an intended beneficiary of the contract.”
Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206,
1210 (9th Cir. 2000). The vast majority of district courts in
this circuit have determined that mortgage loan borrowers are not
intended third-party beneficiaries of HAMP agreements. See, e.g.,
29
Escobedo v. Countrywide Home Loans, Inc., No. 09cv1557 BTM(BLM),
2009 WL 4981618, at *3 (S.D. Cal. Dec. 15, 2009) (concluding that
qualified borrowers were incidental beneficiaries of Service
Provider Agreement (“SPA”) between Countrywide Home Loans and
Fannie Mae and did not have enforceable rights under the
contract); Morales v. Chase Home Finance LLC, No. C10-02068 JSW,
2011 WL 1670045, at *9 (N.D. Cal. Apr. 11, 2011) (“As many
district courts in the Ninth Circuit have determined, individual
borrowers do not have standing to sue under the SPA because they
are not intended third party beneficiaries of the SPA.”); Hoffman
v. Bank of America, N.A., No. C 10-2171 SI, 2010 WL 2635773, at
*4 (N.D. Cal. June 30, 2010) (finding that individual borrower
was “an incidental and not an intended beneficiary to the HAMP
servicer’s agreement”).
In Kilaita v. Wells Fargo Home Mortg., the court
explained the reasoning behind many of these district court
decisions:
HAMP sets forth guidelines that loan
servicers should consider in reviewing a
modification request, and does not require
that loan servicers agree to modify anything.
See Escobedo v. Countrywide Home Loans, Inc.,
09CV1557 BTM(BLM), 2009 WL 4981618, at *2-*3
(S.D. Cal. Dec. 15, 2009). The nature of HAMP
does not provide Plaintiffs with a private
right of action. Parties benefitting from a
government contract “are generally assumed to
be incidental beneficiaries, and may not
enforce the contract absent a clear intent to
the contrary.” Zendejas v. GMAC Whole Sale
Mortg. Corp., 1:10-CV00184, 2010 WL 2629899,
30
*3 (E.D. Cal. June 29, 2010) (citing
Escobedo, 2009 WL 4981618, at *1-*2).
Qualified borrowers under HAMP “‘would not be
reasonable in relying on the Agreement as
manifesting an intention to confer a right on
him because the agreement does not require [a
loan servicer to] modify eligible loans.’”
Id. (quoting Escobedo, 2009 WL 49181618, at
*3). Thus, Plaintiffs lack standing to
challenge HAMP compliance.
No. CV 11-00079 EJD, 2011 WL 6153148, at *9 (N.D. Cal. Dec. 12,
2011).
Notwithstanding the above-mentioned decisions, Kama
argues in his Opposition that “[i]t is widely accepted that
United States [h]omeowners are the intended beneficiaries of
HAMP.” (Opp’n at 20.) In support, Kama relies solely on two
decisions issued by the United States District Court for the
Southern District of California in the same action: Marques v.
Well Fargo Mortgage, Inc., Civ. No. 09-cv-1985-L(RBB), 2010 WL
3212131 (S.D. Cal. Aug. 12, 2010) (“Marques I”) and Marques v.
Well Fargo Mortgage, Inc., Civ. No. 09-cv-1985-L(RBB), 2011 WL
2005837 (S.D. Cal. May 23, 2011) (“Marques II”).
In Marques I, the court held that the plaintiffborrower “may be able to state a claim” against defendant Wells
Fargo as an intended beneficiary of the HAMP agreement between
Wells Fargo and Fannie Mae. Marques I, at *7. However, this
holding was mere dicta because the Court subsequently found that
the plaintiff-borrower alleged insufficient facts to state a
claim for breach of the HAMP agreement and, therefore, dismissed
31
the plaintiff-borrower’s complaint with leave to amend.
Id. (finding, inter alia, that plaintiff-borrower “did not allege
whether he contacted [Wells Fargo] in reference to the
modification”). In Marques II, the court concluded that the
plaintiff-borrower’s amended complaint cured the defects noted in
the court’s prior order and thus allowed him to proceed on the
theory that he was an intended third-party beneficiary of the
HAMP agreement. Marques II, at *3.
This Court declines to follow Marques I and Marques II.
As discussed above, the weight of authority indicates that
individual mortgage loan borrowers are not intended third-party
beneficiaries of HAMP agreements. Further, and importantly, as
noted by Third-Party Defendants, the case on which the Marques
court relied extensively on, County of Santa Clara v. Astra USA,
Inc., 588 F.3d 1237 (9th Cir. 2009), was reversed by the United
States Supreme Court. See Astra USA, Inc. v. Santa Clara County,
Cal, 131 S. Ct. 1342 (2011). As one federal district court
explained, the Astra decision supports the conclusion that an
individual homeowner is not entitled to enforce a HAMP agreement
under a third-party beneficiary theory:
Astra involved a third-party beneficiary
theory brought by health care facilities that
had been over-charged by pharmaceutical
companies in violation of the Pharmaceutical
Pricing Agreement (“PPA”), which the
pharmaceutical companies had entered into
with the United States Department of Health
and Human Services. The PPA was created
32
pursuant to the Public Health Services Act
(“PHSA”), 42 U.S.C. § 256b. In passing PHSA,
Congress provided no private right of action
to enforce its provisions. Upon reviewing
these facts, the Supreme Court held that
allowing health care facilities to sue as
third party beneficiaries to the PPA was
“incompatible with the statutory regime.” The
Court reasoned since the PPA agreements serve
as the mechanism by which pharmaceutical
companies opt-in to PHSA’s statutory scheme,
a third-party private action would amount to
direct enforcement of the PHSA.
Likewise, Defendant - and other banks - optin to the [Troubled Asset Relief Program] and
HAMP statutory scheme by signing the SPA with
the United States Treasury. Allowing the
Plaintiffs to enforce the SPA under a thirdparty beneficiary theory would open a
“backdoor” to a private right of action to
enforce HAMP, in contravention of Congress’
wishes. As the Supreme Court held in Astra,
this kind of third-party beneficiary theory
is “incompatible with the statutory regime.”
Turbeville v. JP Morgan Chase Bank, No. SA CV 10-01464 DOC(JCGx),
2011 WL 7163111, at *7-*8 (C.D. Cal. Apr. 4, 2011).
Thus, because Kama is not a third-party beneficiary
of any HAMP agreement, and because he has no private cause of
action for the alleged HAMP violations, his breach of contract
claim based upon HAMP must fail. Therefore, the Third Cause of
Action is dismissed without prejudice.
D. Fourth Cause of Action: Violation of H.R.S. §
480-2
In the Fourth Cause of Action, Kama alleges that
[BANA], on behalf of Freddie Mac and its
mortgage trust [FHLMC Trust], failed to
provide [Kama] with the opportunity to
33
process a loan mitigation application of his
loan before proceeding with the non-judicial
foreclosure sale. [BANA] provided false and
misleading statements concerning its alleged
ownership of the loan and the loss mitigation
process and failed to properly process
[Kama’s] documents and disclose facts
relating to [Kama’s] HAMP application for
modification of his mortgage loan.
(Id. ¶ 95.) Kama further alleges that BANA was required under
HAMP guidelines “to offer good faith loss mitigation of [] Kama’s
loan, but [BANA] failed to disclose this fact to [] Kama.” (Id. ¶
96.)
H.R.S. § 480-2(a) provides: “Unfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce are unlawful.” The wording of
H.R.S. § 480-2(a) “indicates that its prohibition is directed at
two separate types of activity: unfair methods of competition and
unfair or deceptive acts or practices.” Dash v. Wayne, 700 F.
Supp. 1056, 1058 (D. Haw. 1988) (emphasis in original). Here,
Kama only alleges a violation of the latter clause of the
statute. Accordingly, the Court will only address whether Kama
sufficiently alleged that BANA engaged in “unfair or deceptive
acts or practices.”
The Hawaii Supreme Court “has described a deceptive act
or practice as having the capacity or tendency to mislead or
deceive.” Courbat v. Dahana Ranch, Inc., 111 Haw. 254, 261 (Haw.
2006) (internal quotation marks and citation omitted). Under the
34
three-part test adopted by the Hawaii Supreme Court in Courbat, a
deceptive act or practice 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.” Id. at 262 (internal quotation
marks and alteration signals omitted). “A representation,
omission, or practice is considered ‘material’ if it involves
‘information that is important to consumers and, hence, likely to
affect their choice of, or conduct regarding, a product.’” Id.
(quoting Novartis Corp. v. FTC, 223 F.3d 783, 786 (D.C. Cir.
2000)).
H.R.S. § 480-13(b) states, in relevant part, that
“[a]ny consumer who is injured by any unfair or deceptive act or
practice” that violates § 480-2 “[m]ay sue for damages sustained
by the consumer.” H.R.S. § 480-13(b)(1). “To obtain relief under
section 480-13(b)(1), a consumer must establish three elements:
‘(1) a violation of [section] 480-2; (2) injury to the consumer
caused by such a violation; and (3) proof of the amount of
damages.’” Compton v. Countrywide Financial Corp., No. 11-17158,
2014 WL 3805529, at *3 (9th Cir. Aug. 4, 2014) (quoting Davis v.
Wholesale Motors, Inc., 86 Haw. 405, 417 (Haw. Ct. App. 1997)).
In this case, “it is undisputed that [Kama] qualifies
as a ‘consumer,’ and that [BANA’s] lending and loan modification
activities involve the ‘conduct of any trade and commerce.’” Id.
35
at *6 (citing Hawaii Cmty. Fed. Credit Union v. Keka, 94 Haw.
213, 227 (Haw. 2000)).
Further, for purposes of the instant Motion to Dismiss,
the Court finds that Kama has adequately alleged that BANA
engaged in “unfair or deceptive acts or practices” in violation
of H.R.S. § 480-2. The crux of Kama’s H.R.S. § 480-2 claims is
that BANA allegedly provided false and misleading statements, and
failed to disclose facts, regarding the loan modification
process. Kama alleges that, as a consequence, he was unable to
obtain a loan modification before BANA foreclosed on the Property
or seek other relief such as filing for bankruptcy. The ThirdParty Complaint’s “description of [BANA’s] misleading behavior
sufficiently alleges a ‘representation, omission, or practice’
that is likely to deceive a reasonable consumer.” Compton, 2014
WL 3805529, at *6 (quoting Courbat, 111 Haw. at 262). “Moreover,
[BANA’s alleged] misrepresentations and misleading conduct were
material, in that they involved information important to a
consumer attempting to negotiate with a mortgagor to prevent
foreclosure.” Id. Thus, Kama’s Third-Party Complaint sets forth
allegations that satisfy the three-part test in Courbat for
violations of H.R.S. § 480-2. See Courbat, 111 Haw. at 261.
Additionally, the Court finds that Kama’s allegations
in support of his H.R.S. § 480-2 claims satisfy Rule 9(b)’s
heightened pleading standard which, as discussed hereinbefore,
36
apply to Chapter 480 claims that sound in fraud. See Smallwood,
730 F.Supp.2d at 1232-33. Specifically, Kama alleges that
“Bonita,” a BANA representative, told him that he qualified for a
loan modification and that, as long as he abided by the terms of
BANA’s paperwork, “which [were] forthcoming in the mail,” the
Property would not be foreclosed upon. (Third-Party Compl. ¶ 22.)
Kama further alleges that in early April 2011 a different BANA
representative told him that his loan modification application
was complete and that no other documentation was needed. (Id. ¶
21.) Additionally, and importantly, Kama alleges that Bonita told
him that she mailed a loan modification agreement to him. (Id. ¶
77.)18/
Finally, the Court concludes that Kama’s allegations
satisfy the “proof of the amount of damages” element in H.R.S. §
480-13(b). The Ninth Circuit has recognized that “Hawaii courts
have not set a high bar for proving [this] element[].” Compton,
2014 WL 3805529, at *3. In Compton, the court found that the
plaintiff-borrower’s allegations that she incurred transaction
costs during her loan modification negotiations with the
mortgagee, such as the cost of sending and notarizing documents,
were sufficient to meet the statute’s proof of damages
requirement. Id. at *7. Here, the alleged damages suffered by
18/
The Court notes that the allegations in support of Kama’s
H.R.S. § 480-2 claims and Hawaii promissory estoppel claim are
similar. See pages 41-44 of this Order infra.
37
Kama are substantially greater than the plaintiff-borrower in
Compton, specifically, the loss of the Property and Kama’s equity
therein. (Third-Party Compl. ¶ 98.)
Accordingly, Kama has sufficiently alleged that BANA
engaged in “unfair or deceptive acts or practices.”19/ The Court
denies Third-Party Defendants’ Motion to Dismiss as to the Fourth
Cause of Action.20/
19/
The Court notes that, by letter dated March 6, 2011, and
addressed to both Robert and Lisa Kama, BANA requested each
borrower to provide, by March 21, 2011, a signed and dated copy
of IRS form 4506-T. (Ex. C attached to Kama’s memorandum in
opposition to Freddie Mac’s Motion for Summary Judgment filed in
state circuit court.) That letter stated that IRS form 4506-T was
needed from each borrower as part of the HAMP eligibility review
process. (Id.) Although Robert Kama submitted his IRS form 4506-T
to BANA by the March 21, 2011 deadline, it appears that Lisa Kama
did not submit this document to BANA. (Id. Ex. F.)
The Court further notes that at the hearing Kama’s counsel
stated Kama was still trying to obtain, and submit to BANA, the
written agreement of his ex-wife, who is personally liable under
the Note and Mortgage, to the proposed loan modification
(although Kama’s counsel later stated he was unsure and needed to
verify). That effort by Kama appears incongruous with the alleged
oral representations by a BANA representative in early April 2011
that Kama had submitted all necessary documents.
20/
The Court observes that Third-Party Defendants do not
argue in their moving papers that Kama’s H.R.S. § 480-2 claims
are barred by Hawaii’s Statute of Frauds because they are
predicated on oral statements made to Kama by BANA
representatives. “[T]he Statute of Frauds is an affirmative
defense, which must be particularly plead.” Estate of Tahilan v.
Friendly Care Home Health Services, Inc., 731 F.Supp.2d 1000,
1006 (D. Haw. 2010) (citing Fed. R. Civ. P. 8(c) (“In responding
to a pleading, a party must affirmatively state any avoidance or
affirmative defense, including: . . . statute of frauds[.]”)).
Since Freddie Mac did not plead the Statute of Frauds as an
affirmative defense in its “reply” to the Third-Party Complaint,
(continued...)
38
E. Fifth Cause of Action: Wrongful Foreclosure
In the Fifth Cause of Action, Kama alleges that the
Property’s foreclosure “was wrongful and without right” because
[a]t the same time that representative
‘Bonita’ of [BANA], was reassuring [] Kama
that the scheduled foreclosure sale of his
home would be postponed during [] Kama’s
pending HAMP loss mitigation, the attorneys
for [BANA] proceeded to conduct a foreclosure
sale of his home unbeknownst to him.
(Id. ¶¶ 103-04.)
“A wrongful foreclosure claim is a state law claim.”
Lowther v. U.S. Bank, N.A., 971 F.Supp.2d 989, 1011 (D. Haw.
2013). “There is no case law from Hawaii state courts addressing
whether Hawaii recognizes this claim[.]” Id.
Although Hawaii courts have not expressly recognized
a common law wrongful cause of action, this district court has
concluded that
there are circumstances where a wrongful
foreclosure may exist under Hawaii law. For
example, a wrongful foreclosure claim may
exist where the foreclosure process failed to
comply with Haw. Rev. Stat. Chapter 667
because the foreclosing party allegedly
failed to provide the required notices or
whether the foreclosure was allegedly invalid
because the entity that purportedly assigned
the foreclosing party its interest in the
subject loan was dissolved prior to executing
the assignment.
20/
(...continued)
and since Third-Party Defendants did not raise the defense in
their moving papers, the Court will not address this issue.
39
Id. (citing Swartz v. City Mortg., Inc., 911 F.Supp.2d 916, 947
(D. Haw. 2012); Matsumura v. Bank of Am., N.A., Civ. No. 11-00608
JMS-BMK, 2012 WL 463933, at *3 (D. Haw. Feb. 10, 2012); and
Billete v. Deutsche Bank Nat. Trust Co., Civ. No. 13-00061 LEKKSC, 2013 WL 2367834, at *7 (D. Haw. May 29, 2013)).
In Matsumura, this district court found that a
wrongful foreclosure claim will not lie where the foreclosing
party properly provided all required notices, and
although Hawaii has not specifically
recognized a common law wrongful foreclosure
cause of action, “[s]ubstantive wrongful
foreclosure claims [in other jurisdictions]
typically are available after foreclosure and
are premised on allegations that the borrower
was not in default, or on procedural issues
that resulted in damages to the borrower.”
Cervantes v. Countywide Home Loans, 656 F.3d
1034, 1043 (9th Cir. 2011).
2012 WL 463933, at *3.
As discussed supra with respect to the First and Second
Causes of Action, Kama’s H.R.S. Chapter 667 claims, which are
premised on allegations that BANA lacked authority to foreclose
on the Property and failed to provide public notice of the
continued foreclosure sale date, are insufficient to survive the
instant Motion to Dismiss. Accordingly, Kama cannot assert a
wrongful foreclosure claim based on violations of H.R.S. Chapter
667. Additionally, the Court notes that Kama’s wrongful
foreclosure claim is not premised on allegations that he was not
in default. See Cervantes, 656 F.3d at 1043.
40
While this count is pled in a vague manner, it appears
Kama’s claims under H.R.S. § 480-2 and for promissory estoppel
include the assertions and relief he is seeking in this count.
Because of the vague pleading the Court will grant the dismissal
of this count without prejudice and allow Kama to file an
amendment should he wish to pursue this claim.
F. Sixth Cause of Action: Promissory Estoppel
Kama alleges in the Sixth Cause of Action that he
justifiably relied on [BANA’s] statement that
no foreclosure would be held while he was in
the loss mitigation process, and that [Kama]
would be able to lower his monthly mortgage
payments permanently if he complied with the
terms of a HAMP loan modification offer that
was allegedly forthcoming.
[] Kama’s reliance was to his substantial
economic detriment, as he passed up other
opportunities, including seeking another type
of loan modification, refinancing his home
loan or even bankruptcy, and now he must take
extraordinary actions to annul and void a
defective and improperly held foreclosure
sale of his home.
(Third-Party Compl. ¶¶ 107-08.)
To establish a promissory estoppel claim under
Hawaii law, Kama must satisfy the following four elements:
(1) There must be a promise; (2) The promisor
must, at the time he or she made the promise,
foresee that the promisee would rely upon the
promise (foreseeability); (3) The promisee
does in fact rely upon the promisor’s
promise; and (4) Enforcement of the promise
is necessary to avoid injustice.
Gonsalves v. Nissan Motor Corp. in Hawaii, Ltd., 100 Haw. 149,
41
164-65 (Haw. 2002) (citing In re Herrick, 82 Haw. 329, 337-38
(Haw. 1996)).
In this case, the Court finds that, for purposes of
the instant Motion to Dismiss, Kama sufficiently alleges the
required elements of a Hawaii promissory estoppel claim.
Specifically, as previously discussed, Kama alleges that was told
by a BANA representative in early April 2011 that his HAMP
application was complete and that no other documentation was
needed. (Third-Party Compl. ¶ 21.) Kama further alleges that, on
a separate occasion, he was told by a BANA representative named
“Bonita” that it looked like he qualified for a HAMP loan
modification and that, as long as he abided by the terms of
paperwork which were forthcoming in the mail, no foreclosure
would take place. (Id. ¶ 22.) Additionally, and importantly, Kama
alleges that Bonita told him that she sent him a loan
modification agreement in the mail. (Id. ¶ 77.) Kama asserts that
he justifiably relied to his detriment on these statements21/ by
21/
At the September 15, 2014 hearing, Kama’s counsel stated
that Kama was attempting to acquire certain documents from his
ex-wife in order to complete the HAMP loan modification
application (although Kama’s counsel later stated he was unsure).
However, as previously noted, Kama alleges in his Third-Party
Complaint that he was told by a BANA representative in early
April 2011 that his HAMP application was complete and that no
other documents were needed. (Third-Party Compl. ¶ 22.) Although
this incongruity raises some question as to whether Kama’s
reliance on the BANA representative’s statement was reasonable,
the Court concludes that it is insufficient alone to grant ThirdParty Defendants’ Motion to Dismiss as to Kama’s Hawaii
(continued...)
42
passing up other opportunities, including refinancing through
other lenders and bankruptcy. (Id. ¶ 108.)
Third-Party Defendants assert that the “allegations
in the Third-Party Complaint show the lack of any specific
promise, as [Kama] alleges not that he was promised a loan
modification, but that he was told by BANA ‘that it looked like
he qualified for a HAMP loan modification.’” (Mot. to Dismiss at
18) (quoting Third-Party Compl. ¶ 22) (emphasis added by ThirdParty Defendants.) Contrary to Third-Party Defendants’ assertion,
Hawaii law does not require a plaintiff to show a specific and
definite promise in order to establish a promissory estoppel
claim. The Hawaii Supreme Court “has defined a ‘promise’ for
purposes of promissory estoppel to be a ‘manifestation of
intention to act or refrain from acting in a specified way, so
made as to justify a promisee in understanding that a commitment
has been made.’” Gonsalves, 100 Haw. at 165 (quoting In re
Herrick, 82 Haw. at 338). “More specifically, a ‘promisor
manifests an intention’ if he or she ‘believes or has reason to
believe that the promisee will infer that intention from his [or
her] words or conduct.’” Id. Here, Kama sufficiently alleges that
BANA representatives had reason to believe that Kama would infer
from their statements that he qualified for a HAMP loan
21/
(...continued)
promissory estoppel claim.
43
modification and that if he complied with the terms of the
paperwork from BANA which were forthcoming in the mail, the
Property would not be foreclosed upon. (Third-Party Compl. ¶ 22.)
For these reasons, the Court concludes that Kama
adequately pleads a promissory estoppel claim under Hawaii law
and, therefore, Third-Party Defendants’ Motion is denied as to
the Sixth Cause of Action.22/
23/
G. Seventh Cause of Action: Violation of 5th
Amendment Due Process Clause
Kama alleges in the Seventh Cause of Action that
Freddie Mac and FHLMC Trust are government actors who violated
his due process rights under the Fifth Amendment to the U.S.
Constitution by participating in the
non-judicial foreclosure
sale of the Property. (Id. ¶¶ 113-30.) This cause of action fails
for two reasons. First, although Freddie Mac acquired the
Property by quitclaim deed (see Mot. to Dismiss Ex. F), Freddie
Mac and FHLMC Trust were not involved in the foreclosure sale of
the Property. Rather, BANA conducted the non-judicial foreclosure
22/
Although the Court denies Third-Party Defendants’ Motion
to Dismiss with respect to Kama’s Hawaii promissory estoppel
claim, in the event Kama decides to file an amended complaint,
the Court directs him to provide more specific factual
allegations regarding this claim, particularly regarding the
names of the BANA representatives who allegedly made oral
representations to him.
23/
The Court will not address whether Hawaii’s Statute of
Frauds bars Kama’s promissory estoppel claim. See footnote 20 of
this Order supra.
44
sale of the Property. (Id. Exs. D & E). Second, as will be
explained directly below, Freddie Mac is not a government actor
subject to liability under the Fifth Amendment.
The Fifth Amendment provides that no person shall
“be deprived of life, liberty, or property, without due process
of law[.]” U.S. Const. amend V. It is well-settled that the Fifth
Amendment applies only to federal government actors. Lee v. City
of Los Angeles, 250 F.3d 668, 687 (9th Cir. 2001). In Lebron v.
National Railroad Passenger Corp., 513 U.S. 374, 400 (1995), the
Supreme Court held that government-created corporations like
Freddie Mac are federal governmental actors if they are created
by special law for the furtherance of governmental objectives and
if the government has permanent authority to appoint a majority
of the directors of the corporation. Applying this holding of
Lebron, the Ninth Circuit has concluded “that Freddie Mac is not
a government agency subject to the Fifth Amendment’s Due Process
Clause.” Am. Bankers Mortg. Corp. v. Fed. Home Loan Mortg. Corp.,
75 F.3d 1401, 1409 (9th Cir. 1996).
This Court notes that Am. Bankers was issued before
FHFA, a federal agency, became Freddie Mac’s conservator in 2008.
However, numerous district courts have held that Freddie Mac, and
similar entity Federal Nation Mortgage Association (“Fannie
Mae”), which was also placed into FHFA’s conservatorship, did not
become federal governmental actors post-conservatorship. See,
45
e.g., Herron v. Fannie Mae, 857 F.Supp.2d 87, 92 (D.D.C. 2012)
(“Further, the imposition of conservatorship and the execution of
the Financial Agency Agreement did not transform Fannie Mae into
a governmental actor.”); Dias v. Fed. Nat. Mortg. Ass’n et al.,
990 F.Supp.2d 1042, 1062 (D. Haw. 2013) (“The Court agrees with
those courts in this Circuit and others that have considered and
rejected Plaintiff’s argument that Fannie Mae is a government
actor by virtue of the FHFA conservatorship.”); Fannie Mae v.
Mandry, No. 12-13236, 2013 WL 687056, at *4 (E.D. Mich. Feb. 26,
2013) (finding that “FHFA’s conservatorship [of Fannie Mae] does
not create the type of permanent control required under Lebron”).
A court in this circuit has discussed the reasoning behind these
decisions:
[FHFA], as conservator for Freddie Mac,
“step[ed] into the shoes” of Freddie Mac,
much like a bankruptcy trustee. See 12 U.S.C.
§ 4617(b)(2)(A)(I) (FHFA Conservator,
immediately upon the inception of
conservatorship, succeeds to “all rights,
titles, powers, and privileges of the
regulated entity, and of any stockholder,
officer, or director”); Herron v. Fannie Mae,
857 F.Supp.2d 87, 2012 WL 1476051 (D.D.C.
Apr. 30, 2012) (“Thus, like FDIC when it
serves as conservator or receiver of a
private party, FHFA when it serves as
conservator ‘step[s] into the shoes’ of the
private corporation, Fannie Mae.”); O’Melveny
& Myers v. FDIC, 512 U.S. 79, 86-87 (1994)
(under a materially identical statute, “the
FDIC as receiver ‘steps into the shoes’ of
the [pre-existing institution], obtaining the
rights ‘of th[e] institution that existed
prior to receivership”); Am. Nat. Ins. Co. v.
FDIC, 642 F.3d 1137, 1144 (D.C. Cir. 2011);
46
United States v. Beszborn, 21 F.3d 62, 68
(5th Cir. 1994). Therefore, Freddie Mac does
not become a governmental actor for Fifth
Amendment purposes merely because it is
placed into conservatorship. The [FHFA’s]
“control” is merely the control that Freddie
Mac had before the conservatorship. As the
Court in Herron succinctly concluded, “Fannie
Mae was not converted into a government
entity when it was placed into
conservatorship; instead, FHFA stepped into
the shoes of Fannie Mae. FHFA as conservator
for Fannie Mae is not a government actor.
Herron, 2012 WL 1476051 at *6. In addition,
the temporary nature of the Federal Housing
Finance Agency’s conservatorship of Freddie
Mac also supports the conclusion that Freddie
Mac has not been transformed into a
governmental actor. Herron, 2012 WL 1476051
at *7 (holding that because the Federal
Housing Finance Agency’s conservatorship “is
by nature temporary, the government has not
acceded to permanent control over the entity
and Fannie Mae remains a private
corporation.”).
Syriani v. Freddie Mac Multiclass Certificates, Series 3365, No.
CV 12-3035-JFW (JEMx), 2012 WL 6200251, at *4 (C.D. Cal. July 10,
2012).
Kama asserts that Freddie Mac is a federal entity
because it has signed a Financial Agency Agreement (“FAA”) with
the U.S. Department of Treasury wherein Freddie Mac agrees to
“serve as a financial agent of the United States.” See “Financial
Agency Agreement for a Homeownership Preservation Program under
the Emergency Economic Stabilization Act of 2008,” available at
http://www.treasury.gov/initiatives/financial-stability/procureme
nt/faa/Financial_Agency_Agreements/Freddie%20Mac%20Financial%20Ag
47
ency%20Agreement.pdf. In Herron, the court found that the FAA
between Fannie Mae and the Treasury did not transform Fannie Mae
into a federal entity because the FAA stated that Fannie Mae was
“distinct from the government and must maintain a fiduciary duty
of loyalty to the federal government.” 857 F.Supp.2d at 96.
Likewise, the FAA between Freddie Mac and the Treasury indicates
that Freddie Mac is distinct from the government, with a
“fiduciary duty of loyalty to the United States” and potential
liability to the Treasury for various acts or omissions. See FAA
§§ 5, 19. Accordingly, the Court finds that the FAA between
Freddie Mac and the Treasury does not establish that Freddie Mac
is a federal entity subject to Fifth Amendment liability.
In sum, and consistent with the federal court
decisions discussed above, this Court concludes that neither the
FAA nor FHFA’s conservatorship transforms Freddie Mac into a
federal governmental actor that can be held liable for Fifth
Amendment due process violations. Thus, even if the Court assumed
arguendo that Freddie Mac (rather than BANA) conducted the nonjudicial foreclosure sale of the Property, Kama’s Fifth Amendment
due process claim would still fail. Accordingly, the Seventh
Cause of Action is dismissed without prejudice.
H. Eighth Cause of Action: Quiet Title
Kama alleges in the Eighth Cause of Action that
Third-Party Defendants have “no estate, right, title or interest
48
in the Subject Property” and, therefore, Kama is entitled to a
declaration that “the title to the Subject Property is vested in
him alone[.]” (Third-Party Compl. ¶ 139.)
The Court infers that Kama is making a claim under
H.R.S. § 669-1(a). That statute provides that a quiet title
action “may be brought by any person against another person who
claims, or who may claim adversely to the plaintiff, an estate or
interest in real property, for the purpose of determining the
adverse claim.”
A plaintiff bringing a statutory quiet title claim
against a mortgagee or purported servicer for the mortgagee is
required to allege that he is able to tender the amount of
indebtedness. See Nat’l Mortg. Ass’n v. Kamakau, Civ. No. 1100475 JMS/BMK, 2012 WL 622169, at *9 (D. Haw. Feb. 23, 2012) (“A
basic requirement of an action to quiet title is an allegation
that plaintiffs are the rightful owners of the property, i.e.,
that they have satisfied their obligations under the [note and
note and mortgage].”) (internal quotation marks and citation
omitted); and Benoist v. U.S. Bank Nat. Ass’n, Civ. No. 10-00350
JMS-KSC, at *10, 2012 WL 3202180 (D. Haw. Aug. 3, 2012)
(“[T]ender is required, regardless of whether the claim is based
on common law or statute.”). “Cases from this district and
elsewhere rely on this rule requiring a plaintiff ‘to establish
his superior title by showing the strength of his title as
49
opposed to merely attacking the title of the defendant.’” Id.
(quoting Amina v. Bank of N.Y. Mellon, Civ. No. 11-00714 JMS/BMK,
2012 WL 3283513, at *3 (D. Haw. Aug. 9, 2012)).
Here, although Kama asserts in his memorandum in
opposition that he is “eager, willing, and able to pay his
mortgage,” he has not alleged in his Third-Party Complaint that
he has paid off the Note or is able to tender all amounts owing.
Accordingly, Kama fails to state a claim for quiet title. The
Eighth Cause of Action is therefore dismissed without prejudice.
CONCLUSION
For the foregoing reasons, the Court DENIES Kama’s
Motion to Stay Proceedings Pending Appeal of Related Cases.
The Court also GRANTS IN PART AND DENIES IN PART ThirdParty Defendants’ Motion to Dismiss as follows:
(1) GRANTS Third-Party Defendants’ Motion to Dismiss as
to the First Cause of Action (Lack of Legal Right to Foreclose)
and dismisses the claims WITHOUT PREJUDICE;
(2) GRANTS Third-Party Defendants’ Motion to Dismiss as
to the Second Cause of Action (Violation of H.R.S. Chapter 667)
regarding Kama’s claim that BANA failed to publicly announce the
continued foreclosure sale date and dismisses the claim WITHOUT
PREJUDICE, and GRANTS Third-Party Defendants’ Motion to Dismiss
as to the Second Cause of Action regarding Kama’s claim that
Freddie Mac’s bid violated the initial terms of sale and
50
dismisses the claim WITHOUT PREJUDICE;
(3) GRANTS Third-Party Defendants’ Motion to Dismiss as
to the Third Cause of Action (Breach of HAMP Contract) and
dismisses the claims WITHOUT PREJUDICE;
(4) DENIES Third-Party Defendants’ Motion to Dismiss as
to the Fourth Cause of Action (Violation of H.R.S. § 480-2);
(5) GRANTS Third-Party Defendants’ Motion to Dismiss as
to the Fifth Cause of Action (Wrongful Foreclosure) and dismisses
the claims WITHOUT PREJUDICE;
(6) DENIES Third-Party Defendants’ Motion to Dismiss as
to the Sixth Cause of Action (Promissory Estoppel);
(7) GRANTS Third-Party Defendants’ Motion to Dismiss as
to the Seventh Cause of Action (Violation of Fifth Amendment Due
Process Clause) and dismisses the claims WITHOUT PREJUDICE; and
(8) GRANTS Third-Party Defendants’ Motion to Dismiss as
to the Eighth Cause of Action (Quiet Title) and dismisses the
claims WITHOUT PREJUDICE.
The Court also GRANTS Kama leave to file an amended
complaint within thirty (30) days of the date of this Order to
address the rulings set forth in this Order. The Court CAUTIONS
Kama that, if he fails to timely file an amended complaint, the
claims which this Court has dismissed without prejudice will be
automatically dismissed with prejudice. Further, if the amended
51
complaint fails to address the defects identified in this Order,
the Court may dismiss such claims with prejudice.
IT IS SO ORDERED
DATED:
Honolulu, Hawai#i, October 3, 2014.
___________________________________
Alan C. Kay
Senior United States District Judge
Federal Home Loan Mortgage Corporation v. Kama, Civ. No. 14-00137 ACK-KSC:
ORDER DENYING COUNTERCLAIM/THIRD-PARTY PLAINTIFF’S MOTION TO STAY PROCEEDINGS
PENDING APPEAL OF RELATED CASES AND GRANTING IN PART AND DENYING IN PART
COUNTERCLAIM DEFENDANT AND THIRD-PARTY DEFENDANTS’ MOTION TO DISMISS
COUNTERCLAIM AND THIRD-PARTY COMPLAINT
52
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