Milosky et al v. Green Tree Servicing LLC et al

Filing 8

ORDER GRANTING MOTION TO DISMISS re 5 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 9/4/2014. "The court grants Defendants' motion to dismiss. If Plaintiffs wish to proceed with this case, they must so notify the co urt in writing by September 15, 2014, including the explanation set forth above. Otherwise, judgment will be entered in favor of Green Tree and MERS, and this case will be closed." (emt, )CERTIFICATE OF SERVI CEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Kenneth George Milosky and Sion Milosky served by first class mail at the address of record on September 4, 2014.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
KENNETH GEORGE MILOSKY, et
al.,

)
)
)
Plaintiffs,
)
)
vs.
)
)
GREEN TREE SERVICING LLC, et )
al.
)
)
Defendants.
)
)
_____________________________ )

CIVIL NO. 14-00334 SOM/BMK
ORDER GRANTING MOTION TO
DISMISS

ORDER GRANTING MOTION TO DISMISS
I.

INTRODUCTION.
Defendants Green Tree Servicing LLC (“Green Tree”) and

Mortgage Electronic Registration Systems, Inc. (“MERS”)
(collectively, “Defendants”) move to dismiss the Complaint filed
by Plaintiffs Kenneth George Milosky and Sion Milosky
(“Plaintiffs”) on May 20, 2014.

The court grants the motion to

dismiss because Plaintiffs fail to state a claim against
Defendants upon which relief can be granted.1
II.

FACTUAL BACKGROUND.
On March 26, 2004, Plaintiffs executed a promissory

note (the “Note”) in connection with a $430,500.00 loan secured
by a mortgage (the “Mortgage”) on real property on Lauoho Road in
Kalaheo on the island of Kauai (the “Property”).

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ECF No. 1-2,

The court decides this matter without a hearing pursuant
to Local Rule 7.2(d).

PageID # 44; ECF No. 5-1, PageID # 63.

The Mortgage lists

Lighthouse Funding Corporation (“Lighthouse”) as the Lender and
MERS as the nominee for the Lender and the Lender’s successors
and assigns.

ECF No. 1-2, PageID # 29-30.

current servicer of the loan.

Green Tree is the

ECF No. 5-1, PageID # 63.

On May 20, 2014, Plaintiffs filed a Complaint against
Defendants in state court.

ECF No. 1-2.

action to this court on July 25, 2014.

Defendants removed the
ECF No. 1.

In their Complaint, Plaintiffs assert a quiet title
claim under section 669-1 of Hawaii Revised Statutes, arguing
that Defendants have created a cloud on their title to the
Property.

ECF No. 1-2, PageID # 18-19.

Plaintiffs also contend

that Green Tree violated sections 480-2(a) and 481A-3 of Hawaii
Revised Statutes by: (1) “[m]aking the Lighthouse loan based on
the value of the Subject Property without regard to Plaintiffs[’]
ability to repay the loan”; (2) “[f]alsely representing that
Defendant Green Tree’s agent would refinance the loan in a few
years so that Plaintiffs could avoid having to pay an adjustable
rate mortgage”; (3) “[f]alsely representing that the Lighthouse
loan was affordable for the Plaintiffs”; and (4) “[f]alsely
representing that it was acting in Plaintiffs[’] best interests.”
Id., PageID # 20.

The alleged false representations are also the

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basis of a fraud claim against Green Tree.

Id. at 21-22.2

Defendants filed their motion to dismiss on July 29,
2014, arguing that Plaintiffs’ Complaint fails to state a claim
upon which relief can be granted.

ECF No. 5.

Plaintiffs failed to file an opposition to Defendants’
motion.

The court left a message for Plaintiffs regarding

whether Plaintiffs intended to oppose the motion, but it was not
returned.
III.

STANDARD.
Under Rule 12(b)(6) of the Federal Rules of Civil

Procedure, the court’s review is generally limited to the
contents of the complaint.

Sprewell v. Golden State Warriors,

266 F.3d 979, 988 (9th Cir. 2001); Campanelli v. Bockrath, 100
F.3d 1476, 1479 (9th Cir. 1996).

If matters outside the

pleadings are considered, the Rule 12(b)(6) motion is treated as
one for summary judgment.

See Keams v. Tempe Tech. Inst., Inc.,

110 F.3d 44, 46 (9th Cir. 1997); Anderson v. Angelone, 86 F.3d
932, 934 (9th Cir. 1996).

Courts may “consider certain

materials--documents attached to the complaint, documents

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Even though Green Tree and MERS are the only two named
Defendants, Plaintiffs’ Complaint also makes reference to
“Defendant Lighthouse Funding Corporation,” “Defendant Akamai
Home Loan,” and “Defendant JP Morgan Chase Bank, N.A.” ECF No.
1-2, PageID # 16, 20, 21. Because Plaintiffs’ Complaint does not
otherwise evidence an intention for these parties to be named as
Defendants and there is no evidence that these parties have been
served, the court does not treat these parties as Defendants in
this action.
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incorporated by reference in the complaint, or matters of
judicial notice--without converting the motion to dismiss into a
motion for summary judgment.”

United States v. Ritchie, 342 F.3d

903, 908 (9th Cir. 2003).
On a Rule 12(b)(6) motion to dismiss, all allegations
of material fact are taken as true and construed in the light
most favorable to the nonmoving party.

Fed’n of African Am.

Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir.
1996).

However, conclusory allegations of law, unwarranted

deductions of fact, and unreasonable inferences are insufficient
to defeat a motion to dismiss.

Sprewell, 266 F.3d at 988; Syntex

Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996).
Additionally, 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, 266 F.3d at 988.
Dismissal under Rule 12(b)(6) may be based on either:
(1) lack of a cognizable legal theory, or (2) insufficient facts
under a cognizable legal theory.

Balistreri v. Pacifica Police

Dept., 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v.
Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.
1984)).
“[T]o survive a Rule 12(b)(6) motion to dismiss,
factual allegations must be enough to raise a right to relief

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above the speculative level, on the assumption that all the
allegations in the complaint are true even if doubtful in fact.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
quotation marks omitted); accord Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“[T]he pleading standard Rule 8 announces does not
require ‘detailed factual allegations,’ but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation”).
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will
not do.”

Twombly, 550 U.S. at 555.

The complaint must “state a

claim to relief that is plausible on its face.”

Id. at 570.

“A

claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”

Iqbal,

556 U.S. at 678.
IV.

ANALYSIS.
A.

Plaintiffs Fail to State a Claim Upon Which Relief
Can Be Granted Against MERS.

Plaintiffs name MERS as a defendant, yet their
Complaint fails to allege any wrongdoing on MERS’ part.

The only

point at which MERS may be mentioned in the allegations of the
Complaint is Plaintiffs’ use of the term “Defendants” with
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reference to the alleged cloud on their title to the Property.
ECF No. 1-2, PageID # 19.

However, nowhere do Plaintiffs

describe any actions taken by MERS.

Without any such

information, Plaintiffs fail to state a plausible claim for
relief against MERS.

See Iqbal, 556 U.S. at 678 (“To survive a

motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.

A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.”) (internal quotation marks and citation
omitted).
B.

Plaintiffs Fail to State a Plausible Claim Against
Green Tree Under Section 480-2 of Hawaii Revised
Statutes.

Plaintiffs fail to state a plausible claim against
Green Tree under section 480-2 of Hawaii Revised Statutes because
such a claim is barred by the applicable statute of limitations.
The statute of limitations for Chapter 480 claims is
four years.

See Haw. Rev. Stat. § 480-24(a) (“Any action to

enforce a cause of action arising under this chapter shall be
barred unless commenced within four years after the cause of
action accrues[.]”); see also Pac. Radiation Oncology, LLC v.
Queen’s Med. Ctr., Civ. No. 12-00064 LEK-KSC, 2014 WL 2450815, at
*5 (D. Haw. May 30, 2014) (“Pursuant to Haw. Rev. Stat. § 480-

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24(a), a four-year statute of limitations applies to claims
arising under Haw. Rev. Stat. Chapter 480.”).

Because the

allegations supporting Plaintiffs’ section 480-2 claim relate to
actions and representations dating from the loan’s origination in
2004, and Plaintiffs offer no basis on which to toll the statute
of limitations, Plaintiffs’ section 480-2 claim is time-barred.
Even if Plaintiffs’ claim was timely, it would not
survive Defendants’ motion to dismiss.

Green Tree did not

originate Plaintiffs’ loan, and it is unclear how Green Tree, the
current servicer, would be responsible for the misconduct alleged
in connection with Plaintiffs’ section 480-2 claim.

Plaintiffs

may be complaining about a loan unrelated to Green Tree, as their
papers refer to J.P. Morgan Chase Bank, without any textual
allegation about that entity, and to a loan with terms different
from the loan Green Tree appears to be servicing.
C.

Plaintiffs Fail to State a Plausible Claim Against
Green Tree Under Section 481A-3 of Hawaii Revised
Statutes.

Plaintiffs contend that Green Tree violated section
481A-3 of Hawaii Revised Statues, but nowhere explain which of
the many subsections of that statute they believe applies to the
circumstances at issue.

Contrary to Plaintiffs’ assertions, the

Uniform Deceptive Trade Practice Act, of which section 481A-3 is
a part, does not appear relevant to the conduct of which
Plaintiffs complain.

Under such circumstances, Plaintiffs fail

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to state a plausible claim against Green Tree under section 481A3.
D.

Plaintiffs Fail to State a Plausible Fraud Claim
Against Green Tree.
1.

Statute of Limitations.

Plaintiffs’ fraud claim based on the allegation that
Green Tree “[f]alsely represented that the Lighthouse loan was
affordable for the Plaintiffs” is barred by the statute of
limitations.

ECF No. 1-2, PageID # 21.

The statute of limitations for fraud is six years.

See

Haw. Rev. Stat. § 657-1; see also Hancock v. Kulana Partners,
LLC, 992 F. Supp. 2d 1053, 1059 (D. Haw. 2014) (“Claims sounding
in fraud, whether based on state or federal law, are governed by
this six-year statute of limitations.”).

“Claims for fraud . . .

arise when the fraud is or should have been discovered.”

Mroz v.

Hoaloha Na Eha, Inc., 360 F. Supp. 2d 1122, 1135 (D. Haw. 2005)
(internal quotation marks omitted).
The alleged fraud based on a misrepresentation as to
the affordability of the loan was capable of being discovered at
the time Plaintiffs received their loan documents in March 2004.
At that time, Plaintiffs would have been apprised of the terms of
the loan and been able to independently evaluate whether they
could afford the loan.

Because Plaintiffs did not assert this

fraud claim until 2014, more than six years past the point at

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which the claim arose, the claim is barred by the statute of
limitations.
2.

Rule 9(b) of the Federal Rules of Civil
Procedure.

Under Rule 9(b) of the Federal Rules of Civil
Procedure, “a party must state with particularity the
circumstances constituting fraud[.]” (Emphasis added).

With

respect to each of Plaintiffs’ bases for their fraud claim,
Plaintiffs fail to meet this standard.
Nowhere do Plaintiffs state who made the alleged
misrepresentations or when the alleged misrepresentations were
made.

Plaintiffs provide no detail regarding the fraudulent

conduct other than conclusory assertions that fraud occurred.
Such allegations fail to meet the standard imposed by Rule 9(b).
See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.
2003) (“Averments of fraud must be accompanied by the who, what,
when, where, and how of the misconduct charged.

A plaintiff must

set forth more than the neutral facts necessary to identify the
transaction.

The plaintiff must set forth what is false or

misleading about a statement, and why it is false.”) (internal
quotation marks, citations, and brackets omitted).
E.

Plaintiffs Fail to State a Plausible Quiet Title
Claim.

Plaintiffs seek to quiet title pursuant to section 6691 of Hawaii Revised Statutes, alleging that Green Tree claims
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title to the Property adversely to Plaintiff and that a “deed and
mortgage recorded [in] March 2004 affect or impair Plaintiffs’
title in the Subject Property and constitute a cloud on
Plaintiffs’ title.”

ECF No. 1-2, PageID # 18-19.

Contrary to Plaintiffs’ assertions, it does not appear
that Green Tree is claiming an interest in the Property adversely
to Plaintiffs.

Green Tree is the current servicer of the loan,

and “routine loan servicing by itself does not constitute a cloud
on title for purposes of a quiet title claim[.]”

Klohs v. Wells

Fargo Bank, N.A., 901 F. Supp. 2d 1253, 1262 (D. Haw. 2012).
Plaintiffs point to a deed and mortgage recorded in March 2004
through which Green Tree allegedly “claims to hold title to the
Subject Property adversely to the claims of the Plaintiffs,” but
there is no plausible factual allegation suggesting that Green
Tree is making any such claim.

ECF No. 1-2, PageID # 18, 19.

Indeed, Plaintiffs’ exhibits indicate that the Mortgage was
recorded in the Bureau of Conveyances by Lighthouse, the lender.
The conclusory allegation that Green Tree, the loan servicer,
claims to hold title to the Property adversely to Plaintiffs is
insufficient to support a plausible quiet title claim.

See

Cortez v. New Century Mortgage Corp., No. 11-01019 CW, 2011 WL
5325524, at *6 (N.D. Cal. Nov. 3, 2011).

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F.

No Leave to Amend.

When a complaint is dismissed, “[l]eave to amend may be
denied if a court determines that allegation of other facts
consistent with the challenged pleading could not possibly cure
the deficiency.”

Abagninin v. AMVAC Chemical Corp., 545 F.3d

733, 742 (9th Cir. 2008) (internal quotation marks and citation
omitted).

The allegation of additional facts consistent with the

Complaint in this matter could not cure the deficiencies of
Plaintiffs’ (1) section 480-2 claim, (2) section 481A-3 claim,
(3) fraud claim based on a misrepresentation as to affordability,
and (4) quiet title claim, as asserted against Green Tree.
Therefore, those claims are dismissed with prejudice and may not
be reasserted in any amended complaint.
Plaintiffs’ claims against MERS and the remaining fraud
claims are dismissed without prejudice.

If this court had any

indication that Plaintiffs desired to prosecute this action, the
court would likely give Plaintiffs leave to file an amended
complaint in which they could attempt to cure the pleading
deficiencies in the claims against MERS and in the remaining
fraud claims.

However, Plaintiffs have filed no written

opposition to the motion to dismiss and have failed to respond to
the court’s telephone message.

Left with no indication that

Plaintiffs retain any desire to proceed with this case, this
court does not give them leave to file an amended complaint.
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If

Plaintiffs do indeed wish to proceed with this case, they must so
notify this court in writing no later than September 15, 2014,
including in that notification an explanation as to why they
filed no written opposition to the motion to dismiss and why they
failed to call the court back in response to the court’s
telephone message.

If the court does not receive written

notification from Plaintiffs by September 15, 2014, the Clerk of
Court will enter judgment for Green Tree and MERS and will close
this case.
V.

CONCLUSION.
The court grants Defendants’ motion to dismiss.

If

Plaintiffs wish to proceed with this case, they must so notify
the court in writing by September 15, 2014, including the
explanation set forth above.

Otherwise, judgment will be entered

in favor of Green Tree and MERS, and this case will be closed.

IT IS SO ORDERED.
DATED: Honolulu, Hawaii, September 4, 2014.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge

Milosky, et al. v. Green Tree Servicing LLC, et al., Civ. No. 14-00334
SOM/BMK; ORDER GRANTING MOTION TO DISMISS

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