JPMorgan Chase Bank, N.A. v. Moniz
AMENDED ORDER GRANTING DEFENDANT'S 10 MOTION TO DISMISS. Signed by JUDGE DERRICK K. WATSON on 10/25/2016. -- Moniz's Motion to Dismiss is hereby GRANTED. The Clerk of the Court is directed to close the cas e. Re: 23 Order (ecs, )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 10/26/2016.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I
JPMORGAN CHASE BANK, N.A.,
CIVIL NO. 15-00512 DKW-BMK
AMENDED ORDER GRANTING
MOTION TO DISMISS
AMENDED ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS
Plaintiff JPMorgan Chase Bank, N.A. filed a breach of contract claim
against Defendant Stacy Moniz on December 11, 2015, alleging that Moniz
defaulted on a 2005 loan agreement. Dkt. No. 1. Because this breach of contract
claim arises out of the same transaction or occurrence that is the subject of Moniz’s
still-pending state court complaint filed four years ago, it is a compulsory
counterclaim that must be brought, if at all, in that prior proceeding. Accordingly,
the Court GRANTS Moniz’s Motion to Dismiss, but it does so without prejudice to
Chase bringing its breach of contract claim as a compulsory counterclaim in the
state court action. Because the Court dismisses Chase’s Complaint on procedural
grounds, this order does not operate as an adjudication on the merits.
State Court Action (Civil No. 11-1-2733-11 KTN)
On April 9, 2012, Moniz and his wife, Bonny Moniz, filed an Amended
Verified Complaint (“AVC”) in the First Circuit Court for the State of Hawaii
(“Circuit Court): Moniz v. Chase, et al., Civil No. 11-1-2733-11 KTN. Exh. A,
Dkt. No. 10-3.1 In the AVC, Mr. and Mrs. Moniz allege various claims, including
fraud, unjust enrichment, quiet title, and declaratory relief. Id. The claims stem
from allegations that certain Mortgage Loan Documents that the Moniz’s executed
on November 9, 2005 with Chase’s predecessor-in-interest are void and
unenforceable. See id. at 30. The AVC defines the “Mortgage Loan Documents”
as including “the Mortgage, the Fixed Rate Rider, the Note and the Signature
Name Affidavit.” Id. at 4. Among the named defendants in that action is Chase
Home Finance LLC, now JPMorgan Chase Bank, N.A. Dkt. No. 10-1 at 4.
After an entry of default was entered against Chase for failure to reply in a
timely fashion, Chase moved to set aside the default. Exh. B, Dkt. No. 10-4. By
order dated October 2, 2012, the state court ordered Chase to file its responsive
pleading and “any counterclaims” by October 4, 2012. Id. at 2. Chase filed its
Pursuant to Federal Rule of Evidence 201, the Court takes judicial notice of Moniz’s Exhibits A
through F and H through J, which are public records. See Mir v. Little Co. of Mary Hosp., 844
F.2d 646, 649 (9th Cir. 1988) (providing that a court may “take judicial notice of matters of
public record outside the pleadings and consider them for purposes of a motion to dismiss”)
responsive pleading on October 4, 2012, but did not allege any counterclaims
against Mr. and Mrs. Moniz. Exh. C, Dkt. No. 10-5.
On April 22, 2014, Chase filed a Motion for Leave to file Counterclaim and
Third Party-Complaint for Foreclosure, Quantum Meruit, and Equitable Lien,
which the state court denied without prejudice. Exhs. D, E, Dkt. Nos. 10-6, 10-7.
The state court action remains pending.
Federal Court Action (Civil No. 15-00512 DKW-BMK)
On December 11, 2015, during the pendency of the state court action, Chase
filed a one-count breach of contract claim in this Court against Moniz, alleging that
Moniz had defaulted on a 2005 loan that was memorialized by an Interest First
Adjustable Rate Note, the same promissory note referenced in Moniz’s state court
action as among the Mortgage Loan Documents. Dkt. No. 1 (“Complaint”).
Specifically, the Complaint alleges in relevant part:
On or around November 9, 2005, Mr. Moniz obtained a
$483,000 loan (“Subject Loan”) from lender PHH Mortgage
Corporation (“PHH”). The Subject Loan was memorialized by
an Interest First Adjustable Rate Note (“Subject Note”), which
was executed by Mr. Moniz. The Subject Note details Mr.
Moniz’s repayment obligations and the consequences that may
result from default. . . .
Chase (or its duly-authorized agent) currently possesses the
original Subject Note. The original Subject Note bears a blank
endorsement from PHH. As the bearer of the original Subject
Note, Chase is entitled to enforce the contract.
Mr. Moniz made payments on the Subject Note for more than
four years, but has not made any payments on the Subject Note
since on or about March 1, 2010. Mr. Moniz is in default, as he
has failed to make payments as required by the Subject Note for
the past five years and nine months.
Complaint ¶¶ 6-8 (footnote omitted).
In a footnote, Chase states:
As security for the repayment of the Subject Loan and the
performance and observance of Mr. Moniz’s obligations under
the Subject Note, Mr. Moniz executed a Mortgage dated
November 9, 2005. The Mortgage lists Mr. Moniz and
Bonny Kanani Onaona Moniz as “borrowers,” PHH Mortgage
Corporation as the “lender,” and Mortgage Electronic
Registration Systems, Inc. as the nominal mortgagee. The
Mortgage encumbers Mr. and Mrs. Moniz’s real property . . . .
On January 14, 2016, Moniz filed the instant motion, asserting that this
Court should dismiss this action because, contrary to Chase’s representation in the
Complaint, both the Note and the Mortgage are at issue in the state court action.
Dkt. Nos. 10, 10-1. As such, Moniz argues that Chase’s breach of contract claim
premised on the Note should have been brought as a compulsory counterclaim in
the state court action. Dkt. No. 10-1 at 8-14. Moniz also raises alternative
arguments relating to abstention. Dkt. No. 10-1 at 17-28.
On February 2, 2016, Chase filed its opposition, asserting that Chase’s
breach of contract claim is not a compulsory counterclaim and that abstention is
inappropriate. Dkt. No. 14.
On February 22, 2016, Moniz filed his reply, attaching as an exhibit a
motion that Chase had filed in the state court action on December 2, 2015, entitled
“Motion for Summary Adjudication on Enforceability of the Subject Note.” Dkt.
No. 17; Exh. J. Thereafter, Chase moved to strike Moniz’s reply as untimely and
improper. Dkt. No. 19.
On March 4, 2016, the Court held a hearing on Moniz’s Motion to Dismiss.
Dkt. Nos. 20-21.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss for
failure to state a claim upon which relief can be granted. Pursuant to Ashcroft v.
Iqbal, “[t]o 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.’”
555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554,
570 (2007)). “[T]he tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions.” Id.
Under Rule 12(b)(6), review is generally limited to the contents of the
complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001);
Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996). However, courts
may “consider certain materials—documents attached to the complaint, documents
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). Accordingly, the Court takes
judicial notice of the fact of the filing or issuance of the publicly recorded
documents attached to Moniz’s Motion to Dismiss and Reply.2
“Hawaii state law governs the preclusive effect of the failure to raise a
compulsory counterclaim in an earlier state court action.” Peelua v. Impac
Funding Corp., Civil No. 10-00090 JMS/KSC, 2011 WL 1042559, at *10 (D.
Haw. Mar. 18, 2011) (citing Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246,
1249 (9th Cir. 1987)). Under Hawaiʻi law, “where a defendant has had the
opportunity but has failed to assert a compulsory counterclaim in an action, Rule
13(a) estops him from asserting such claim in a subsequent action.” Bailey v.
State, 57 Haw. 144, 148, 552 P.2d 365, 369 (1976). Hawaii Rule of Civil
Procedure 13(a), which defines a compulsory counterclaim, is substantively
identical to its federal counterpart. This compulsory counterclaim provision
provides in relevant part:
A pleading shall state as a counterclaim any claim which at the
time of serving the pleading the pleader has against any
opposing party, if it arises out of the transaction or occurrence
that is the subject matter of the opposing party’s claim and does
not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction.
The Court denies Chase’s request to strike Moniz’s reply brief and exhibits attached thereto.
Haw. R. Civ. P. 13(a) (emphasis added).
Similar to this circuit, Hawaiʻi applies the “logical relationship” test to
determine whether two claims arise out of the same “transaction or occurrence.”
See Booth v. Lewis, 8 Haw. App. 249, 253, 798 P.2d 447, 449 (1990). “Under
Hawaii law, a counterclaim is compulsory if there is a logical relation between the
original claim and the counterclaim-i.e., it arises out of the same aggregate of
operative facts as the original claim.” Eastern Savings Bank, FSB v. Esteban, 129
Hawaii 154, 161 n.13, 296 P.3d 1062, 1069 n.13 (2013) (citing Haw. R. Civ. P.
13(a)). “This flexible approach to Rule 13 problems attempts to analyze whether
the essential facts of the various claims are so logically connected that
considerations of judicial economy and fairness dictate that all the issues be
resolved in one lawsuit.” Pochiro, 827 F.2d at 1249 (internal quotations marks and
citation omitted); see also Bailey, 57 Haw. at 148, 552 P.2d at 368 (noting that the
rationale behind Rule 13(a) was “to prevent multiplicity of actions and to achieve
resolution in a single lawsuit of all disputes arising out of common matters”).
Applying this test, the Court concludes that Chase’s breach of contract claim
before this Court is logically related to Moniz’s state court claims because Chase’s
claim “arises out of the same aggregate of operative facts as [Moniz’s] original
claim[s].” Eastern Savings Bank, 129 Hawai’i at 161 n.13, 296 P.3d at 1069 n.13.
As a preliminary matter, both Moniz and Chase are parties to both the state and
federal court actions, and Chase’s breach of contract claim had matured by the
time Moniz initiated his state court action several years ago. Chase argues that
only the Mortgage, not the Note, is at issue in the state court case. That contention,
however, represents too narrow a reading of the AVC. The AVC makes clear that
Moniz is contesting the validity, and therefore the enforceability, of the Mortgage
Loan Documents, which are broadly defined as including “the Mortgage, the Fixed
Rate Rider, the Note and the Signature Name Affidavit.” AVC ¶ 19 (emphasis
added). The allegations contained in the AVC make equally clear that the Note is
at issue because it contains claims of fraud (Count III) and, as Moniz highlights,
“unjust enrichment [(Count IX)] which could only arise from [Moniz’s] payments
made to CHASE pursuant to the mortgage and the Note.” Dkt. No. 17 at 9.
Moreover, if any doubt existed, Chase’s December 2, 2015 motion filed in
the state court action makes it explicit that the enforceability of the Note is, in fact,
at issue.3 See Exh. J, Dkt. No. 17-3. In the motion, Chase acknowledges, in
[Mr. and Mrs. Moniz] seek “a judgment that the Mortgage Loan
Documents dated November 9, 2005 are void and
unenforceable.” (AVC pg. 30). The AVC defines the term
“Mortgage Loan Documents” to include the mortgage, the fixed
The out-of-circuit cases relied on by Chase do not have any bearing on the result here, as they
do not present factually similar circumstances. See Dkt. No. 14 at 13-16 (citing Wells Fargo
Bank, N.A., 20 N.E.3d 1236 (Ohio Ct. App. 2014); Bauman v. Bank of Am., N.A., 808 F.3d 1097
(6th Cir. 2015); Valencia v. Anderson Bros. Ford, 617 F.2d 1278 (7th Cir. 1980), rev’d on other
grounds, 452 U.S. 205 (1981)).
rate rider attached to the mortgage, the note secured by the
mortgage, and Stacy’s Signature Name Affidavit. (AVC ¶ 19).
Id. at 5. The Court finds it curious that, while maintaining before this Court that
the Note is not at issue in the state court action, Chase is actively seeking before
the state court “summary adjudication on the issue of whether the note secured by
the mortgage is ‘void and unenforceable’”. Id. It is difficult, if not impossible, to
comprehend how the enforceability of the Note is not at issue in the state court
action when Chase itself is asking the state court to rule on the Note’s
enforceability. If this action was to proceed, there could be, and indeed, there
likely would be, an imminent risk of inconsistent rulings and duplicative litigation,
precisely the outcomes that Rule 13(a) seeks to avoid.
In sum, there is clearly a logical relationship between Moniz’s Complaint in
the state court action and Chase’s present Complaint, such that all claims should be
tried together in the interests of judicial economy and fairness.4 Because Chase
failed to raise a counterclaim asserting breach of the Note in the state court action,
the compulsory counterclaim rules bar it from raising that claim now in this
On March 11, 2016, Chase notified this Court that it had filed in the state court action a Motion
for Clarification of Intended Scope of October 2, 2012 Order and Contingent Motion for Leave
to Amend Answer and File Counterclaim for Breach of Contract on Promissory Note. Dkt. No.
22. The Court takes no position as to whether the state court should grant Chase leave to file its
breach of contract claim as a counterclaim.
Because of the grounds for dismissal, the Court need not reach other arguments presented in
Moniz’s motion, including those addressing abstention.
For the foregoing reasons, Moniz’s Motion to Dismiss is hereby
GRANTED. The Clerk of the Court is directed to close the case.
IT IS SO ORDERED.
DATED: October 25, 2016 at Honolulu, Hawai‘i.
JPMorgan Chase Bank, N.A. v. Moniz; CV 15-00512 DKW-BMK; AMENDED
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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