Lynch v. Federal National Mortgage Association et al

Filing 40

ORDER GRANTING DEFENDANTS' 7 MOTION TO DISMISS AND GRANTING LEAVE TO AMEND. Signed by JUDGE DERRICK K. WATSON on 11/15/2016. -- Defendants' Motion to Dismiss is GRANTED. Lynch is granted limited leave to fil e an amended complaint, consistent with the terms of this Order. Lynch is cautioned that failure to file an amended complaint by December 16, 2016 will result in the dismissal of this action without prejudice. (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 the date of this docket entry. Modified on 11/15/2016: copy served to Ms. Lynch by First Class Mail on 11/16/2016. (ecs, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI‘I

DONNA LYNCH,

CIVIL NO. 16-00213 DKW-KSC

Plaintiff,
vs.
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, et al.,

ORDER GRANTING
DEFENDANTS’ MOTION TO
DISMISS AND GRANTING LEAVE
TO AMEND

Defendants.

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
AND GRANTING LEAVE TO AMEND
INTRODUCTION
Plaintiff Donna Lynch, proceeding pro se, brings numerous claims against the
lender and loan servicer involved in the nonjudicial foreclosure sale of her property.
Lynch seeks damages, rescission of a 2007 mortgage and to set aside the foreclosure
sale, based upon the fraudulent conduct of unspecified agents acting on behalf of
Defendants. Because several of Lynch’s claims are not alleged with the
particularity required by Federal Rule of Civil Procedure 9(b) and/or otherwise fail
to state a claim for relief, Defendants’ Motion to Dismiss is granted. Lynch is
granted limited leave to file an amended complaint no later than December 16, 2016,
with instructions below.

BACKGROUND
Lynch brings claims against Defendants Federal National Mortgage
Association (“Fannie Mae”), Countrywide Home Loans, Inc. (“Countrywide”), and
Bank of America, N.A. (“BANA”), arising from the nonjudicial foreclosure sale of
her real property located at 66 Haku Hale Place, Lahaina, Hawaii 96761
(“Property”), which took place on June 17, 2010 under a power of sale from a 2007
Mortgage. Complaint ¶¶ 7-15, 31.1 Fannie Mae gained title to the Property
through the foreclosure sale, and thereafter initiated a Complaint for Ejectment in
the Circuit Court of the Second Circuit in the State of Hawaii to obtain possession of
the Property. Defendants’ Ex. B (Quitclaim Deed) and Ex. C (Complaint for
Ejectment). Lynch filed the instant Complaint in state court while the ejectment
action was pending.2 Defendants removed the case to this Court on May 3, 2016.
The Complaint alleges that during the course of refinancing her mortgage
with Countrywide, Lynch “was suffering from a medical condition that affected her

1

The Court GRANTS Defendants’ Request For Judicial Notice. Dkt. No. 8. The Court may
consider documents whose contents are incorporated by reference in the Complaint, including the
2007 Mortgage. Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160 (9th Cir. 2012). The
Court may also consider matters that are the proper subject of judicial notice pursuant to Federal
Rule of Evidence 201, including publicly available and recorded documents. Lee v. City of Los
Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
U.S. 308, 322 (2007); Barber v. Ohana Military Communities, LLC, 2014 WL 3529766, *4 (D.
Haw. July 15, 2014).
2
On August 19, 2015, the state court granted Fannie Mae’s motion for summary judgment and writ
of possession and entered judgment in its favor. Lynch filed a Notice of Appeal in the ejectment
action on March 16, 2016, CAAP-16-0000196. See Defendants’ Ex. E.

2

ability to think clearly,” and notified Countrywide of this fact. Complaint ¶¶ 12-14.
Because of her medical condition, she was unable to leave her home. Therefore,
“Countrywide sent a representative to her house to force her to sign paperwork for
this second refinancing. Relying on representations made by [Countrywide] or its
agents, and for fear of the dire consequences Defendant threatened her with, [Lynch]
reluctantly signed the new loan papers.” Complaint ¶ 15. According to Lynch,
“when she became unable to make payments on this second refinanced loan, [she]
became aware that she had been duped into signing a loan with considerably worse
terms than the first refinance loan.” Complaint ¶ 16.
She attempted to modify the terms of her mortgage, at times communicating
with Countrywide and BANA (as servicer of the loan), “and receiving conflicting
information from each.” Complaint ¶ 22. At an unspecified date, Lynch alleges
that “agents of [BANA] told Plaintiff to stop making mortgage payments, falsely
explaining that she had to be in default in order for her request for a loan
modification to be considered. Relying on the representations of agents of
[BANA], Plaintiff stopped making payments on her mortgage.” Complaint
¶¶ 27-28. She contends that the non-judicial foreclosure sale of the Property
occurred while loan modification negotiations were ongoing and was wrongfully
conducted because the “posting of the intention to foreclose was never put in one of
the Plaintiff’s local papers on Maui. It was apparently posted in the paper on

3

Honolulu. . . . And therefore, it is not considered a ‘local newspaper.’” Complaint
¶ 32.
Lynch alleges the following causes of action: (1) quiet title and wrongful
foreclosure (Count I); (2) fraud and rescission (Count II); (3) violation of the Real
Estate Settlement Procedures Act, 12 U.S.C. § 2605(e) (“RESPA”), and 12 C.F.R.
§ 226.36(c)(1)(iii) (“Regulation Z”) (Count III); (4) violation of the Equal Credit
Opportunity Act, 15 U.S.C. § 1961(“ECOA”), and 12 C.F.R. § 202.9(c)(2)
(“Regulation B”) (Count IV); (5) unfair and deceptive acts and practices (“UDAP”)
under Haw. Rev. Stat. (“HRS”) Chapter 480 (Count V); (6) breach of the implied
covenant of good faith and fair dealing (Count VI); (7) breach of agreement to
negotiate loan modification contract in good faith (Count VII); (8) negligent and/or
intentional misrepresentation (Count VIII); and (9) nullification and avoidance of
note and mortgage due to mental incapacity (Count IX). Defendants move to
dismiss the Complaint with prejudice for failure to state a claim upon which relief
can be granted.
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

4

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. Accordingly,
“[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555).
Rather, “[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.” Id. (citing Twombly, 550 U.S. at 556). Factual
allegations that only permit the court to infer “the mere possibility of misconduct”
do not constitute a short and plain statement of the claim showing that the pleader is
entitled to relief as required by Rule 8(a)(2). Id. at 679.
DISCUSSION
Because Lynch is proceeding pro se, the Court liberally construes her filings.
See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Eldridge v. Block, 832 F.2d 1132,
1137 (9th Cir. 1987) (“The Supreme Court has instructed the federal courts to
liberally construe the ‘inartful pleading’ of pro se litigants.”) (citing Boag v.
MacDougall, 454 U.S. 364, 365 (1982) (per curiam)). The Court recognizes that
“[u]nless it is absolutely clear that no amendment can cure the defect . . . a pro se
litigant is entitled to notice of the complaint’s deficiencies and an opportunity to
amend prior to dismissal of the action.” Lucas v. Dep’t of Corr., 66 F.3d 245, 248

5

(9th Cir. 1995); see also Crowley v. Bannister, 734 F.3d 967, 977-78 (9th Cir. 2013).
As discussed more fully below, even liberally construed, the allegations in the
Complaint are deficient for several reasons. First, the allegations of fraudulent
conduct fall short of the particularity required by Federal Rule of Civil Procedure
9(b), including the time, place, party, and content of the fraudulent representations.
Second, the Complaint fails to provide sufficient factual content to permit the Court
to draw the reasonable inference that any Defendant is liable for the misconduct
alleged. Defendants’ Motion is therefore granted, but with limited leave to amend
consistent with the instructions below.
I.

Count I: Quiet Title
Count I seeks “a judgment quieting title in [Lynch’s] favor, as the subject

Note and Mortgage, and consequently the nonjudicial foreclosure sale conducted on
the subject property and subsequent transfer of title to Defendant [Fannie Mae], are
void and unenforceable[.]” Complaint ¶ 34. The Court construes the claim as
seeking relief pursuant to HRS § 669-1(a), which provides that a quiet title “[a]ction
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.” Lynch, however, has not alleged even the most
basic facts regarding the interests of various parties to make out a cognizable “quiet
title” claim.

6

Further, a plaintiff bringing a statutory quiet title claim against a mortgagee or
purported servicer for the mortgagee is required to allege that she is able to tender
the amount of indebtedness. See Nat’l Mortg. Ass’n v. Kamakau, 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 mortgage].”) (internal
quotation marks and citation omitted); Benoist v. U.S. Bank Nat’l Ass’n, 2012 WL
3202180, at *10 (D. Haw. Aug. 3, 2012) (“[T]ender is required, regardless of
whether the claim is based on common law or statute.”); Caraang v. PNC Mortg.,
795 F. Supp. 2d 1098, 1126 (D. Haw. 2011) (“In order for mortgagors to quiet title
against the mortgagee, the mortgagors must establish that they are the rightful
owners of the property and they have paid, or are able to pay, the amount of their
indebtedness.”). 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 opposed
to merely attacking the title of the defendant.” Amina v. Bank of N.Y. Mellon, 2012
WL 3283513, at *3 (D. Haw. Aug. 9, 2012). Lynch does not allege that she has
paid the outstanding loan balance or that she is able to do so.
For these reasons, Lynch fails to state a claim for quiet title, and Count I is
dismissed. Because amendment may be possible, however, she is granted leave to
attempt to cure the deficiencies in this claim.

7

II.

Count II: Fraud
Lynch alleges in Count II that the “Note and Mortgage are void and

unenforceable as procured by fraud, coercion, and under duress. [Countrywide]
made multiple misrepresentations to [Lynch] . . . [she] was fraudulently induced and
coerced by these statements to sign the second refinance loan documents without
having time to review them or have them reviewed.” Complaint ¶ 35.
A.

Whether Fraud Claims Are Time-Barred

From what the Court can discern, Lynch’s fraud allegations stem from the
refinancing of her 2007 Mortgage. See Defendants’ Ex. A. Specifically, she
claims that Countrywide made misrepresentations that caused her to sign refinance
documents “to her detriment,” and that “she was physically intimidated by loan
officers showing up at her house,” and as a result, “the nonjudicial foreclosure sale
must be set aside.” Complaint ¶¶ 35-36. The only mortgage between Lynch and
Countrywide before the Court is the 2007 Mortgage, which was also the basis for the
nonjudicial foreclosure and eventual state court ejectment action. In opposition to
the Motion, Lynch does not contest that the 2007 Mortgage is the operative
document. Accordingly, the Court construes Count II as relating to fraudulent
conduct arising from the refinancing of the 2007 Mortgage.
Defendants move to dismiss the fraud claims as time-barred. Although the
Complaint does not allege the dates of these encounters with Defendants’ allegedly

8

intimidating representatives, or the specific circumstances that resulted in the
signing of the documents, these allegations appear to relate exclusively to the
origination of the Countrywide Mortgage recorded in the State of Hawaii Bureau of
Conveyances (“BOC”) on May 15, 2007. See Defendants’ Ex. A. Lynch’s fraud
claims are subject to a limitations period of six years under HRS § 657-1(4). Mroz
v. Hoaloha Na Eha, Inc., 360 F. Supp. 2d 1122, 1135 (D. Haw. 2005) (citing
Eastman v. McGowan, 86 Hawai‘i 21, 946 P.2d 1317, 1323 (1997)). As to when
the statute of limitations period for a fraud-based claim begins to run:
Under Hawai‘i law, constructive notice “arise[s] as a legal
inference, where circumstances are such that a reasonably
prudent person should make inquiries, [and, therefore,] the law
charges a person with notice of facts which inquiry would have
disclosed.” SGM Partnership v. Nelson, 5 Haw. App. 526, 529,
705 P.2d 49, 52 (1985) (citation omitted; brackets in original).
Although Hawai‘i courts have not addressed whether the
recording of a deed serves as constructive notice for purposes of
a fraud claim, courts in the state have recognized that the
recording of a document gives notice to the general public of the
conveyance. See Markham v. Markham, 80 Hawai‘i, 274, 281,
909 P.2d 602, 609 (App. 1996) (noting that the “central purpose
of recording a conveyance of real property is to give notice to the
general public of the conveyance and to preserve the recorded
instrument as evidence”). . . . [A] publicly record[ed] document
. . . provides constructive notice where the document itself
constitutes evidence of the fraud.
Fields v. Nationstar Mortg. LLC, 2015 WL 5162469, at *4 (D. Haw. Aug. 31, 2015)
(citation omitted).

9

Based on Lynch’s allegations, the Mortgage itself constitutes evidence of the
alleged fraud. See Complaint ¶¶ 14-19, 35-37. The Mortgage was recorded with
the BOC as Document Number 2007-086966. Defendants’ Ex. A. Thus, Lynch is
charged with constructive knowledge of the contents of the Mortgage on May 15,
2007. In fact, Lynch had actual notice of the contents of the Mortgage when she
signed the document before a notary on May 3, 2007. Lynch filed her Complaint in
state court on April 4, 2016. In other words, whether the statute of limitations
began to run on May 3, 2007 or May 15, 2007, Lynch failed to file her Complaint
within the six-year limitations period.
The Court finds, however, for purposes of the instant Motion, that dismissal
on statute of limitations grounds would not be appropriate in light of Lynch’s
allegations that she was under duress and “mentally incapable of making a rational
decision at that time.” Complaint ¶ 36. Although the Court is not required to
assume the truth of these legal conclusions for the purpose of tolling the statute of
limitations, see Iqbal, 555 U.S. at 678, liberally construed, there may be grounds to
establish equitable or statutory tolling.3 A claim may be dismissed under Rule 12 as

3

See HRS § 657-13 (“If any person entitled to bring any action specified in this part (excepting
actions against the sheriff, chief of police, or other officers) is, at the time the cause of action
accrued, either: (1) Within the age of eighteen years; or, (2) Insane; or, (3) Imprisoned on a
criminal charge. . .; such person shall be at liberty to bring such actions within the respective times
limited in this part, after the disability is removed or at any time while the disability exists.”).
Although Lynch raises issues of her mental capacity to contract, rather than legal insanity for
purposes of tolling under HRS § 657-13, such allegations, read with the required liberality, could

10

“barred by the applicable statute of limitations only when ‘the running of the statute
is apparent on the face of the complaint.’” Von Saher v. Norton Simon Museum of
Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010) (quoting Huynh v. Chase
Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006)). Such motion should be
granted “only if the assertions of the complaint, read with the required liberality,
would not permit the plaintiff to prove that the statute was tolled.” Morales v. City
of Los Angeles, 214 F.3d 1151, 1153 (9th Cir. 2000) (citation omitted); see also
Trost v. Embernate, 2011 WL 6101543, at *2 (D. Haw. Dec. 7, 2011). Liberally
construing her allegations, the Court cannot determine at this preliminary stage of
the litigation whether the otherwise time-barred fraud claims relating to the 2007
Mortgage are tolled. Accordingly, the Motion is denied on this basis.
B.

Failure To Allege Fraud With Particularity

In any event, Count II fails to satisfy the heightened pleading requirements
applicable to such claims.
Fraud and fraudulent misrepresentation share the same elements.
Compare Fisher v. Grove Farm Co., 123 Haw. 82, 103, 230 P.3d
382, 403 (Haw. Ct. App. 2009) (stating the elements of a fraud

also support an argument for application of the statutory tolling provision. See, e.g., Imamoto v.
Soc. Sec. Admin., 2008 WL 2622815, at *6 (D. Haw. July 3, 2008) (“Although HRS § 657-13 does
not define the meaning of ‘insane,’ the Hawaii Supreme Court discussed its contours:
‘[J]urisdictions examining the meaning of insanity in the context of tolling the statute of
limitations have liberally defined the term as: (1) the inability to understand one’s legal rights or
manage one’s affairs; (2) the inability to understand the nature or effect of one’s acts; or (3) the
inability to carry out one’s business and prosecute the claim.’”) (quoting Buck v. Miles, 89 Haw.
244, 252, 971 P.2d 717, 725 (1999)).

11

claim) with Ass’n of Apartment Owners, 115 Haw. at 263, 167
P.3d at 256 (stating the elements of a fraudulent
misrepresentation claim). Like fraudulent misrepresentation,
the elements of fraud are “1) false representations made by the
defendant, 2) with knowledge of their falsity (or without
knowledge of their truth or falsity), 3) in contemplation of
plaintiff’s reliance upon them, and 4) plaintiff’s detrimental
reliance.” Fisher, 123 Haw. at 103, 230 P.3d at 403.
Prim Liab. Co. v. Pace-O-Matic, Inc., 2012 WL 263116, at *8 (D. Haw. Jan. 30,
2012).
Rule 9(b) requires that, when fraud or mistake is alleged, “a party must state
with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P.
9(b). An allegation of fraud is sufficient if it “identifies the circumstances
constituting fraud so that the defendant can prepare an adequate answer from the
allegations.” Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993) (internal
citations and quotations omitted). “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) (quoting Vess v. Ciba-Geigy Corp.
USA, 317 F.3d 1097, 1106 (9th Cir. 2003)). A plaintiff must also explain why the
alleged conduct or statements are fraudulent. In re GlenFed, Inc. Sec. Litig., 42
F.3d 1541, 1548 n.7 (9th Cir. 1994) (en banc), superseded by statute on other
grounds by 15 U.S.C. § 78u-4.
Lynch does not sufficiently allege the circumstances that constitute fraudulent
conduct by Countrywide or its unnamed “agents” in Count II. The Complaint does
12

not identify such facts as the times, dates, places, or other details of the alleged
fraudulent activity. Neubronner, 6 F.3d at 672.
Consequently, Count II fails to satisfy the particularity requirement of Rule
9(b) and is dismissed. Because amendment may be possible, however, Lynch is
granted leave to attempt to cure the deficiencies in this claim.
III.

Count III: RESPA
Lynch alleges in Count III that BANA “acting as servicer . . . [by] not

responding within the statutory time limit and, in fact, not responding at all . . .
violated 12 U.S.C. § 2605(e) and [Regulation Z].” Complaint ¶ 38. She contends
that she “sent multiple written requests to [BANA] disputing the amount of debt she
allegedly owed and requesting documentation. No written response addressing
these issues was ever given to [Lynch]. Failing to provide an accurate statement of
the total outstanding balance of the debt without a reasonable time further violates
[Regulation Z].” Complaint ¶ 38.
A.

Whether RESPA Claims Are Time-Barred

Lynch does not allege the specific dates that she requested documents from
BANA, and the Court cannot determine as a matter of law that her RESPA claims
are time-barred. The Complaint alleges that at “some point not now known to
[Lynch], [BANA] began acting as the servicer of her loan. [Lynch] does not recall
receiving any notice of such a change in violation of 12 U.S.C. § 2605 of [RESPA].”

13

Complaint ¶ 21. She further alleges that, before the initiation of the nonjudicial
foreclosure, she had a series of communications with BANA regarding the terms of
the Mortgage and her attempted loan modification. See Complaint ¶¶ 21-29.
Although it appears that certain requests were made prior to the nonjudicial
foreclosure sale, the dates of the other relevant communications are absent.
According to Lynch,
[a]fter months of stressful delay, [she] was sent the HAMP
paperwork by [BANA]. Plaintiff was sent this paperwork three
days prior to the initiation of a nonjudicial foreclosure process by
[BANA].
Subsequently, a nonjudicial foreclosure sale was wrongfully
conducted on the subject property before Ms. Lynch had time to
properly assess her options and while the loan modification
negotiations were still ongoing.
Complaint ¶¶ 30-31. The foreclosure sale took place on June 17, 2010. See
Defendants’ Ex. B (Quitclaim Deed).
The statute of limitations for a RESPA claim is either one or three years from
the date of the violation, depending on the type of violation. Specifically, 12 U.S.C.
§ 2614 provides:
Any action pursuant to the provisions of section 2605, 2607, or
2608 of this title may be brought in the United States district
court or in any other court of competent jurisdiction, for the
district in which the property involved is located, or where the
violation is alleged to have occurred, within 3 years in the case of
a violation of section 2605 of this title and 1 year in the case of a
violation of section 2607 or 2608 of this title from the date of the
occurrence of the violation[.]
14

To the extent Lynch alleges a violation of Section 2605, her claims are subject
to the three-year limitations period. It is not clear from the allegations in the
Complaint, however, when Lynch actually requested documents from BANA, or
when any corresponding limitations period for a civil action based on BANA’s
purported failure to comply with its statutory obligations began to run.
Accordingly, the Motion is denied on this basis.
B.

Failure To State A RESPA Claim

In any event, Count III fails to state a RESPA claim. To the extent Lynch
attempts to assert a claim for violation of 12 U.S.C. § 2605(e) based on BANA’s
failure to respond to a Qualified Written Request (“QWR”), her allegations are
deficient. RESPA provides that “[i]f any servicer of a federally related mortgage
loan receives a [QWR] from the borrower (or an agent of the borrower) for
information relating to the servicing of such loan, the servicer shall provide a written
response acknowledging receipt of the correspondence within 20 days[.]” 12
U.S.C. § 2605(e)(1)(A). After receiving the QWR, within sixty days, the loan
servicer must either correct the borrower’s account or, after conducting an
investigation, provide the borrower with a written explanation of: (1) why the
servicer believes the account is correct; or (2) why the requested information is
unavailable. See 12 U.S.C. § 2605(e)(2).

15

Lynch asserts in only the most vague terms the existence of a QWR—Lynch
does not attach a copy of the request, does not allege facts to establish when and how
she communicated with BANA, does not describe the content of these
communications, including whether they concerned the servicing of her loan, as
defined by RESPA, and generally does not describe the communications in
sufficient detail to determine whether they triggered a duty to respond.
Accordingly, she fails to state a cognizable RESPA claim. See Rey v. Countrywide
Home Loans, Inc., 2012 WL 253137, at *6 (D. Haw. Jan. 26, 2012) (citing
Lettenmaier v. Fed. Home Loan Mortg. Corp., 2011 WL 3476648, at *12 (D. Or.
Aug. 8, 2011) (dismissing RESPA claim where “plaintiffs fail to attach a copy of
their correspondence to the Complaint or to allege facts showing that the
communication concerned servicing of the loan as defined by the statute”); Manzano
v. Metlife Bank N.A., 2011 WL 2080249, at *7 (E.D. Cal. May 25, 2011) (Plaintiff
“cannot simply allege in conclusory fashion that the written correspondence
constituted QWRs.”).
The RESPA claim here also fails because Lynch has not alleged any actual
damages. Pursuant to 12 U.S.C. § 2605(f)(1), Lynch has a burden to plead and
demonstrate that she has suffered damages. Because damages are a necessary
element of a RESPA claim, failure to plead damages is fatal. See, e.g., Rey, 2012
WL 253137, at *5 (citing Esoimeme v. Wells Fargo Bank, 2011 WL 3875881, at *14

16

(E.D. Cal. Sept. 1, 2011) (dismissing claim where the plaintiff failed to “allege any
pecuniary loss from defendant’s alleged failure to respond to the QWR”); Shepherd
v. Am. Home Mortg. Servs., 2009 WL 4505925, at *3 (E.D. Cal. Nov. 20, 2009)
(“[A]lleging a breach of RESPA duties alone does not state a claim under RESPA.
Plaintiff must, at a minimum, also allege that the breach resulted in actual
damages.”) (quoting Hutchinson v. Del. Sav. Bank FSB, 410 F. Supp. 2d 374, 383
(D.N.J. 2006)). Lynch fails to allege that she suffered any actual damages as a
result of the alleged RESPA violations. See Shepherd, 2009 WL 4505925, at *3.
Indeed, although the requirement that a borrower plead damages is interpreted
“liberally,” id., “the [borrower] must at least allege what or how the [borrower]
suffered the pecuniary loss.” Ash v. OneWest Bank, FSB, 2010 WL 375744, at *6
(E.D. Cal. Jan. 26, 2010).
In sum, Lynch fails to allege a RESPA claim against any party and
Defendants’ Motion is granted as to Count III. Because amendment may be
possible, however, Lynch is granted leave to attempt to cure the deficiencies in this
claim.
IV.

Count IV: ECOA
Count IV alleges that BANA violated ECOA and Regulation B by failing to

notify her within 60 days of “the action taken on said loan modification application.”
Complaint ¶ 39. According to Lynch, she “never received any written response,

17

and every time she called [BANA] to inquire about the status of her application she
was rudely dismissed or told they had misplaced her paperwork.” Complaint ¶ 39.
Defendants first seek dismissal on statute of limitations grounds. The ECOA
currently provides that actions brought under that statute must be commenced within
“5 years after the date of occurrence of the violation.” 15 U.S.C. § 1691e(f).4 As
discussed previously, Lynch alleges she had a series of communications with both
BANA and Countrywide concerning loan modification negotiations prior to the
nonjudicial foreclosure sale. See Complaint ¶¶ 21-31. It is not clear from the
allegations in the Complaint, however, when Lynch actually sent her loan
modification application to BANA, or when any corresponding limitations period
for a civil action based on BANA’s purported failure to comply with its statutory
obligations began to run. That is, the Complaint does not state that the loan
modification application was submitted prior to the June 17, 2010 foreclosure sale.
Accordingly, the Court cannot determine whether the ECOA claims are time-barred
based upon the ambiguous allegations in the Complaint.

4

At the time of the 2007 Mortgage loan origination, however, the ECOA contained a two-year
limitations period. 15 U.S.C. § 1691e(f)(2010), amended by Dodd–Frank Wall Street Reform
and Consumer Protection Act (Dodd–Frank Act), Pub.L. No. 111–203, 124 Stat. 1376 (2010).
Courts have held that Congress did not clearly manifest an intent for the longer limitations period
enacted in July 2010 to apply retroactively, and, therefore, the two-year limitations period applies
to claims that accrued before July 2010. See Colquitt v. Manufacturers & Traders Trust Co., 144
F. Supp. 3d 1219, 1229 (D. Or. 2015). Because it is not clear from the face of the Complaint
when Lynch allegedly sent her loan modification application to BANA, or when the alleged
violation of ECOA occurred, it is not clear whether the two-year or five-year limitations period
applies under the circumstances presented.

18

In any event, because the allegations are vague, conclusory and fail to set
forth the required elements, Count IV is dismissed for failure to state a claim with
leave to amend. In general, a plaintiff alleges an ECOA violation by asserting that
“(1) she is a member of a protected class; (2) she applied for credit with defendants;
(3) she qualified for credit; and (4) she was denied credit despite being qualified.”
Hafiz v. Greenpoint Mortg. Funding, Inc., 652 F. Supp. 2d 1039, 1045 (N.D. Cal.
2009); Blair v. Bank of Am., N.A., 2012 WL 860411, at *12 (D. Or. Mar. 13, 2012).
First, Lynch does not allege that she is a member of a protected class. Under
Section 1691(a)(1), it is unlawful to discriminate against any applicant on the basis
of race, color, religion, national origin, sex or marital status, or age. The Complaint
is silent in this regard.
Second, with respect to that portion of her ECOA claim related to BANA’s
non-responses or denials of her modification application during the unspecified time
period, Lynch fails to allege she was qualified to receive a modification or to allege
any facts from which the Court could infer she was qualified to receive any
modification. Accordingly, Lynch fails to state a claim for violation of the ECOA
as to any portion of her ECOA claim that is timely.
The Court grants Defendants’ Motion and dismisses Count IV. Because
amendment may be possible, dismissal is with leave to amend.

19

V.

Count V: UDAP
Count V alleging unfair and deceptive acts and practices is insufficiently

pled.5 Lynch seeks an order that her Note and Mortgage are void and unenforceable
under Chapter 480, on the grounds that:
the origination of the subject loan being based not on Plaintiff’s
ability to pay, but upon the brokers’ and lenders’ and their
agents’, successors’, and assignees’ ability to recover substantial
fees and commissions from the transaction, and their ability to
recover upon the foreclosure value of the subject property,
entitling Plaintiff to a declaration that the underlying mortgage
contract is null and void pursuant to Section 480-12[.]
Complaint ¶ 40. She also alleges that BANA caused her “default and delayed her
loan modification processing to increase her default and late fees making any default
cure virtually impossible and ensuring she have no foreclosure alternative.”
Complaint ¶ 41.
Count V fails state a Chapter 480 claim. Pursuant to Section 480-13, a
successful UDAP claim must establish three elements: (1) a violation of HRS
chapter 480; (2) which causes an injury to the plaintiff’s business or property; and
(3) proof of the amount of damages. Davis v. Four Seasons Hotel Ltd., 122 Hawai‘i
423, 435, 228 P.3d 303, 315 (2010). Section 480-2(a) states: “Unfair methods of
competition and unfair or deceptive acts or practices in the conduct of any trade or

5

Although Defendants move to dismiss the claim as time-barred, for the same reasons discussed
previously with respect to her Count II fraud claim, the Court declines to dismiss on statute of
limitations grounds at this early stage due to the possibility of equitable or statutory tolling.

20

commerce are unlawful.” 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 Hawai‘i 254, 261, 141 P.3d 427, 434 (2006) (citation
and quotation marks omitted). More specifically, under Hawaii law, “a deceptive
act or practice is (1) a representation, omission, or practice that (2) is likely to
mislead consumers acting reasonably under circumstances where (3) the
representation, omission, or practice is material.” Id. at 262, 141 P.3d at 435
(quotation 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.
(citing Novartis Corp. v. FTC, 223 F.3d 783, 786 (D.C. Cir. 2000)).
A UDAP claim alleging fraudulent business practices must be pled with
particularity pursuant to Rule 9(b). Smallwood v. Ncsoft Corp., 730 F. Supp. 2d
1213, 1232 (D. Haw. 2010). Lynch fails to allege the time, place and specific
content of the unfair and deceptive practice as well as the identities of the parties to
the action. See Neubronner, 6 F.3d at 672.
Moreover, a UDAP claim cannot be based on a HAMP guidelines violation
because no private right of action exists to enforce them. See Rey v. Countrywide
Home Loans, Inc., 2012 WL 253137, at *9 (D. Haw. Jan. 26, 2012). Finally,
Lynch’s UDAP claim cannot be based on any alleged failure to offer a loan

21

modification because she has not established a right to such modification. And to
the extent her UDAP claims are based on BANA’s refusal to modify the loan or
negotiate in good faith, she does not present a sufficient factual basis for the alleged
promise to modify the loan, or subsequent “bait and switch.” See Dias v. Fed. Nat.
Mortg. Ass’n, 990 F. Supp. 2d 1042, 1055 (D. Haw. 2013).
Consequently, Count V fails to satisfy the particularity requirement of Rule
9(b) and fails to state a claim under Rule 12(b)(6). Because amendment may be
possible, dismissal is with leave to amend.
VI.

Count VI: Breach Of Implied Covenant Of Good Faith And Fair Dealing
Count VI alleges that:
[BANA], by requiring Ms. Lynch to default prior to entering into
loan modification negotiations, acted with dishonest purpose and
conscious wrongdoing. Through its participation in HAMP,
[BANA] receives financial payments solely for the purpose of
helping homeowners such as Ms. Lynch, by permanently
modifying their loans. HAMP guidelines only require a
homeowner to be facing ‘imminent default’ and, contrary to the
misrepresentations made by [BANA] and its agents, does not
require a homeowner to be in default or even behind in
payments. By making these misrepresentations, [BANA] acted
dishonestly for the purposes of inducing Ms. Lynch to give up
the benefit of her loan contracts, thus breaching the covenant of
good faith and fair dealing that is implied in every contract
within the state of Hawaii[.]

Complaint ¶ 43.
Although commercial contracts for the “sale of goods” contain an obligation
of good faith in their performance and enforcement, this obligation does not create
22

an independent cause of action. See Stoebner Motors, Inc. v. Automobili
Lamborghini S.P.A., 459 F. Supp. 2d 1028, 1037-38 (D. Haw. 2006). Breach of the
implied covenant of good faith is not its own claim but merely part of a breach of
contract analysis. See id. at 1037. Hawaii courts have regularly held that this
theory provides no basis for a plaintiff to sue for damages or to set aside a note or a
mortgage in the context of a mortgage loan contract. See Au v. Republic State
Mortgage Co., 2012 WL 3113147, at *10 (D. Haw. July 31, 2012).
At best, this claim asserts the tort of “bad faith.” See Best Place v. Penn Am.
Ins. Co., 82 Haw. 120, 128, 920 P.2d 334, 342 (1996) (adopting tort of bad faith for
breach of implied covenant of good faith and fair dealing in an insurance contract).
Although bad faith is an accepted tort where the plaintiff is a party to an insurance
contract, the tort has not been recognized in Hawaii based upon a mortgage loan
contract. See Jou v. Nat’l Interstate Ins. Co. of Haw., 114 Hawai‘i 122, 129, 157
P.3d 561, 568 (Ct. App. 2007) (explaining that “the Hawaii Supreme Court
emphasized that the tort of bad faith, as adopted in [Best Place v. Penn Am. Ins. Co.]
requires a contractual relationship between an insurer and an insured”) (citations
omitted). In fact, Hawaii federal district courts have uniformly held that a tort
cause of action for bad faith does not exist in the context of a mortgage loan contract.
Ramelb v. Newport Lending Corp., 2014 WL 229186, *3 (D. Haw. Jan. 14, 2014)
(citing Jou v. Nat’l Interstate Ins. Co. of Haw., 157 P.3d 561, 568 (Haw. App.

23

2007)); Gray v. OneWest Bank, Fed. Sav. Bank, 2014 WL 3899548, *9 (D. Haw.
Aug. 11, 2014); Tedder v. Deutsche Bank Nat. Trust Co., 863 F. Supp. 2d 1020,
1039 (D. Haw. 2012).
Accordingly, the Motion is granted as to Count VI. Because amendment
would be futile, dismissal of Count VI is without leave to amend.
VII. Count VII: Breach Of Agreement To Negotiate In Good Faith
Lynch alleges in Count VII that BANA “entered into a valid agreement to
negotiate a loan modification contract in good faith.” Complaint ¶ 44. She
contends that she “relied on [BANA’s] promise and direction and entered into
default to her obvious detriment. But for this promise of good faith negotiation,
Ms. Lynch would not have entered into default. . . . These negotiation tactics were in
bad faith and breached said promise of good faith negotiations.” Complaint ¶ 45.
Count VII is facially deficient for several reasons. First, for the same
reasons discussed above with respect to the breach of the covenant of good faith and
fair dealing, no independent cause of action exists for failure to negotiate in good
faith. Second, even assuming such a claim existed, a party cannot breach an
agreement before a contract is formed. See Contreras v. Master Fin., Inc., 2011
WL 32513, at *3 (D. Nev. Jan. 4, 2011) (“[A]n implied covenant relates only to the
performance under an extant contract, and not to any pre-contract conduct.”) (citing
Indep. Order of Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 941 (2d

24

Cir. 1998)); see also Larson v. Homecomings Fin., LLC, 680 F. Supp. 2d 1230, 1237
(D. Nev. 2009) (“Because Plaintiffs’ claim revolves entirely around alleged
misrepresentations made before the [mortgage loan] contract was entered into, [the
bad faith claim] fails as a matter of law.”); Young v. Allstate Ins. Co., 119 Hawai‘i
403, 427, 198 P.3d 666, 690 (2008) (indicating the covenant of good faith does not
extend to activities occurring before consummation of an insurance contract).
Third, to the extent the allegations are based on BANA’s failure to offer a loan
modification or to negotiate a HAMP modification in good faith, Lynch fails to state
a claim. This district court and 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, 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.”); Dias v. Fed. Nat. Mortg.
Ass’n, 990 F. Supp. 2d 1042, 1054 (D. Haw. 2013) (“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. Thus, Plaintiffs lack standing to challenge
HAMP compliance.”) (citations and quotations omitted).

25

Accordingly, Lynch’s claim for breach of agreement to negotiate in good faith
is dismissed. Because amendment would be futile, dismissal of Count VII is
without leave to amend.
VIII. Count VIII: Negligent and/or Fraudulent Misrepresentation
Count VIII alleges that BANA “fraudulently induced Ms. Lynch into
defaulting upon her loan with materially misleading statements that she would have
to be in default to receive any benefit under the federal HAMP program. These
statements could have been made for no other purpose than to induce default, as
[BANA] and its agents surely knew that this is not the law.” Complaint ¶ 47.
Lynch asserts that she “was duped by all of the statements made that the bank wants
to help her and would try earnestly to work out a modification. This constitutes
Intentional, or, at least Negligent Misrepresentation by [BANA] and its agents.”
Complaint ¶ 47.
As discussed more fully below, Lynch does not adequately plead claims for
intentional or negligent misrepresentation. Although Count VIII purports to
encompass both fraudulent misrepresentations and negligent misrepresentations, it
should, but does not, provide any indication as to which statements are alleged to
have been made fraudulently, and which negligently. See Illinois Nat. Ins. Co. v.
Nordic PCL Const., Inc., 870 F. Supp. 2d 1015, 1037 (D. Haw. 2012) (Plaintiff

26

“may not evade Rule 9’s particularity requirements by saying that
misrepresentations were made either fraudulently or negligently.”).
A.

Intentional/Fraudulent Misrepresentation

Under Hawaii law, fraudulent misrepresentation requires that: “(1) false
representations were made by defendants, (2) with knowledge of their falsity (or
without knowledge of their truth or falsity), (3) in contemplation of plaintiff’s
reliance upon these false representations, and (4) plaintiff did rely upon them.”
Shoppe v. Gucci Am., Inc., 94 Hawai‘i 368, 386, 14 P.3d 1049, 1067 (2000) (internal
quotation marks and citations omitted). Fraud claims, “in addition to pleading with
particularity, also must plead plausible allegations. That is, the pleadings must
state ‘enough fact[s] to raise a reasonable expectation that discovery will reveal
evidence of [the misconduct alleged].’” Cafasso ex rel. United States v. Gen.
Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 566 (2007)).
To the extent Lynch’s claims are premised on a promised loan modification,
the Complaint fails to offer sufficient details as to the time, place, or content of the
allegedly fraudulent statements. Further, the fraud claims with regard to a potential
loan modification appear to be based on future events or inferences of mere broken
promises.
[U]nder Hawai‘i law, the false representation forming the basis
of a fraud claim “must relate to a past or existing material fact
27

and not the occurrence of a future event.” Joy A. McElroy,
M.D., Inc. v. Maryl Group, Inc., 107 Hawai‘i 423, 433, 114 P.3d
929, 939 (Ct. App. 2005) (citations and block quote format
omitted) (emphasis in original). Further, even if the allegations
satisfy the other elements of a fraud claim, “[f]raud cannot be
predicated on statements which are promissory in their nature, or
constitute expressions of intention, and an actionable
representation cannot consist of mere broken promises,
unfulfilled predictions or expectations, or erroneous conjectures
as to future events[.]” Id. (citations and block quote format
omitted) (emphasis in original). The exception to this general
rule is that “[a] promise relating to future action or conduct will
be actionable, however, if the promise was made without the
present intent to fulfill the promise.” Id. (citations and block
quote format omitted).
Doran v. Wells Fargo Bank, 2011 WL 2160643, at *12 (D.Haw. May 31, 2011). In
the present case, Lynch’s allegation that Defendants somehow promised her that she
would qualify for loan modification, or even that BANA promised her that it would
consider her application if she defaulted, cannot support a plausible fraud claim
unless Lynch can also allege that, when Defendants made those promises, they never
intended to fulfill them. Absent such a state of mind, the alleged representations
amount only to broken promises and not fraud.
Moreover, to the extent Lynch’s claims are based on BANA’s alleged
misrepresentations regarding loan modification, those claims are not alleged with
the particularity required by Rule 9(b). See, e.g., Shroyer v. New Cingular Wireless
Servs., Inc., 622 F.3d 1035, 1042 (9th Cir. 2010) (stating that plaintiffs “must allege
the time, place, and content of the fraudulent representation; conclusory allegations

28

do not suffice”) (citation omitted). These allegations fall short of the heightened
pleading standards for fraud claims.
Because the Court finds that Lynch may be able to cure the deficiencies set
forth above, the Court DISMISSES this portion of Count VIII with leave to amend.
B.

Negligent Misrepresentation

To prevail on a negligent misrepresentation claim under Hawaii law, a
plaintiff must demonstrate that “(1) false information be supplied as a result of the
failure to exercise reasonable care or competence in communicating the
information; (2) the person for whose benefit the information is supplied suffered
the loss; and (3) the recipient relies upon the misrepresentation.” Soriano v. Wells
Fargo Bank, N.A., 2013 WL 310377, at *7 (D. Haw. Jan. 25, 2013) (quoting Blair v.
Ing, 95 Hawai‘i 247, 269, 21 P.3d 452, 474 (2001)). To the extent Count VIII
alleges negligent misrepresentation, those allegations are not governed by Rule 9(b).
Illinois Nat. Ins. Co., 870 F. Supp. 2d at 1038.
Although Count VIII is alternatively styled as a claim for negligent and/or
intentional misrepresentation, upon reviewing the specifics of her claims, Lynch’s
allegations are grounded in fraudulent conduct – intentionally misleading statements
– rather than negligent misrepresentations. She alleges that BANA “fraudulently
induced” her into defaulting by means of “materially misleading statements,” which
“could have been made for no other purpose than to induce default.” Complaint

29

¶ 47. The gravamen of this conduct is fraud and deception – not negligence or
failure to exercise reasonable care. See Smallwood v. NCsoft Corp., 730 F. Supp.
2d 1213, 1232 (D. Haw. 2010) (“Plaintiff has not alleged a negligent
misrepresentation claim because Plaintiff’s allegations in this regard all sound in
fraud. . . . Accordingly, because these allegations are grounded in fraud and not pled
with specificity, any purported claim for negligent misrepresentation is
dismissed[.]”); Prim Liab. Co. v. Pace-O-Matic, Inc., 2012 WL 263116, at *7 (D.
Haw. Jan. 30, 2012) (Dismissing claim where “[a]lthough the title of Count IV refers
to ‘Negligent Misrepresentation,’ the text of Count IV itself states neither the
elements of a negligent misrepresentation claim nor facts relevant to reasonable
care, competent communication, or reliance. To the contrary, Count IV alleges that
Pace acted with scienter and intent. It is the absence of scienter and intent that
separates negligent misrepresentation from intentional misrepresentation.”).
Likewise here, Lynch fails to state a claim for negligent misrepresentation.
Because the Court finds that Lynch may be able to cure the deficiencies set
forth above, the Court DISMISSES Count VIII with leave to amend.
IX.

Count IX: Mental Incapacity
Count IX seeks to set aside Lynch’s loan based on “mental incapacity.”

Lynch alleges that she “clearly lacked the capacity the time the second refinance was
signed to enter into a contract. Plaintiff was suffering from an illness which

30

affected her ability to think coherently and notified Defendant Countrywide of said
infliction.” Complaint ¶ 48. She contends that the “second refinanced Note and
accompanying Mortgage should be held to be null and void, the original refinance
loan should be reinstated with any closing costs and overpayments made by Plaintiff
to be reimbursed, and the nonjudicial foreclosure sale set aside as being based upon
void contracts.” Complaint ¶ 48.
Although Lynch cites no legal authority for this claim, the Court liberally
construes the claim as seeking rescission of the 2007 Mortgage. See Bischoff v.
Cook, 118 Hawai‘i 154, 160, 185 P.3d 902, 908 (Ct. App. 2008) (“Plainly stated, the
remedy of rescission is an avoidance of a transaction, the extinguishment of an
agreement such that in contemplation of law it never existed, even for the purpose of
being broken.”). For many of the reasons discussed previously, Count IX fails to
state a claim as currently alleged.
A.

Count IX Fails To State A Claim Under Chapter 480

A rescission claim under Chapter 480 may be possible where the consumer
lacked capacity to enter into the relevant contract. See, e.g., Skaggs v. HSBC Bank
USA, N.A., 2010 WL 5390127, at *4-6 (D. Haw. Dec. 22, 2010) (analyzing whether
a defense of incapacity can be asserted against a holder in due course seeking to
foreclose, and concluding that a mortgage note that is void under § 480-12 may be
subject to such defenses against a subsequent assignee); Young v. Bank of N.Y.

31

Mellon, 848 F. Supp. 2d 1182, 1193 (D. Haw. 2012) (Allowing Chapter 480
rescission claim to proceed where plaintiff presented evidence of significant
impairments “e.g., her advanced age, inability to see or hear, and her dementia),
[which] rendered her ‘incapable of reading, writing, and understanding re-finance
mortgage documents,’. . . . Her doctor also indicates she was ‘legally blind and
almost deaf, and was suffering from dementia.’”).
If a Chapter 480 violation is established, however, rescission under Section
480-12 does not necessarily or automatically follow. Rather, a plaintiff seeking
affirmatively to void a mortgage transaction under Section 480-12 must be able to
“place the parties in as close a position as they held prior to the transaction.”
Skaggs, 2011 WL 3861373, at *11; see also Beazie v. Amerifund Fin., Inc., 2011
WL 2457725, at *12 (D. Haw. June 16, 2011) (“Indeed, avoidance of a contract and
restitution and/or rescission, i.e., treating the agreements as void ab initio and
placing the parties in the positions they held prior to the transaction, go hand-in-hand
to carry out this result and prevent a windfall to one party.”); Lee v. HSBC Bank
USA, 121 Hawai‘i 287, 292, 218 P.3d 775, 780 (2009) (holding that where an
agreement created at a foreclosure sale is void and unenforceable for failure to
comply with HRS § 667-5, then “[t]he high bidder at such a sale is entitled only to
return of his or her downpayment plus accrued interest”).

32

Lynch does not allege she has the ability to tender loan proceeds back to the
lender, as necessary to obtain rescission. See, e.g., Young v. Bank of N.Y. Mellon,
848 F. Supp. 2d 1182, 1193-94 (D. Haw. 2012) (“[A] plaintiff seeking affirmatively
to void a mortgage transaction under § 480-12 must be able to ‘place the parties in as
close a position as they held prior to the transaction.’”) (quoting Skaggs, 2011 WL
3861373, at *11); Au v. Republic State Mortg. Co., 2013 WL 1339738, at *13 (D.
Haw. Mar. 29, 2013).
B.

Count IX Fails To State A Claim Based On Fraudulent Conduct

To the extent Lynch seeks to void her loan based upon fraudulent inducement
by Countrywide, this remedy does not appear to be available against any bona fide
purchaser. See Beazie v. Amerifund Fin., Inc., 2011 WL 2457725, at *10 (D. Haw.
June 16, 2011) (“To establish that the mortgage transaction is void for fraud—and
can be cancelled against a bona fide purchaser such as DBNTC — Plaintiff must
establish fraud in the factum, as opposed to fraud in the inducement. See Aames
Funding Corp. v. Mores, 107 Haw. 95, 103-104, 110 P.3d 1042, 1050–51 (Haw.
2005) (explaining the three types of fraud in the mortgage context, including fraud in
the factum, fraud in the inducement, and constructive fraud).”) (footnote omitted).
Accordingly, even if Countrywide induced Lynch to enter into a mortgage
transaction that she otherwise would not have entered into, Lynch cannot seek

33

rescission and/or cancellation of this transaction against any bona fide purchaser
who was not a party to the fraudulent transaction.
Because amendment may be possible, however, she is granted leave to
attempt to cure the deficiencies in this claim.
X.

Limited Leave To Amend Is Granted
The Court GRANTS limited leave to file an amended complaint, consistent

with the terms of this Order, by December 16, 2016. Lynch is granted leave to
attempt to amend the following claims: Count I (quiet title); Count II (fraud); Count
III (RESPA); Count IV (ECOA); Count V (UDAP); Count VIII (negligent and/or
fraudulent misrepresentation); and Count IX (rescission). To be clear, this Order
limits Plaintiff to the filing of an amended complaint that attempts to cure the
specific deficiencies identified in this Order.
If Lynch chooses to file an amended complaint, she must write short, plain
statements, which clearly allege the following: (1) the constitutional or statutory
right she believes was violated; (2) the name of the defendant who violated that right
or law; (3) exactly what that defendant did or failed to do; (4) how the action or
inaction of that defendant is connected to the violation of law; and (5) what specific
injury Plaintiff suffered because of that defendant’s conduct. See Rizzo v. Goode,
423 U.S. 362, 371-72 (1976). Plaintiff must repeat this process for each person or
entity named as a defendant. If Plaintiff fails to affirmatively link the conduct of

34

each named defendant with the specific injury suffered, the allegation against that
defendant will be dismissed for failure to state a claim. As noted in this Order,
allegations of fraud must be stated with the particularity required by Rule 9(b).
An amended complaint generally supersedes a prior complaint, and must be
complete in itself without reference to the prior superseded pleading. King v.
Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987), overruled in part by Lacey v. Maricopa
Cty., 693 F.3d 896 (9th Cir. 2012) (en banc). Claims dismissed without prejudice
that are not re-alleged in an amended complaint may be deemed voluntarily
dismissed. See Lacey, 693 F.3d at 928 (stating that claims dismissed with prejudice
need not be re-alleged in an amended complaint to preserve them for appeal, but
claims that are voluntarily dismissed are considered waived if they are not re-pled).
Lynch may not re-allege any claims dismissed with prejudice.
The amended complaint must designate that it is the “First Amended
Complaint” and may not incorporate any part of the original Complaint. Rather,
any specific allegations must be retyped or rewritten in their entirety. Failure to file
an amended complaint by December 16, 2016 will result in automatic dismissal of
this action without prejudice.

35

CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss is GRANTED.
Lynch is granted limited leave to file an amended complaint, consistent with
the terms of this Order. Lynch is cautioned that failure to file an amended
complaint by December 16, 2016 will result in the dismissal of this action without
prejudice.
IT IS SO ORDERED.
DATED: November 15, 2016 at Honolulu, Hawai‘i.

Lynch v. Fed. Nat’l Mortgage Ass’n et al.; CV 16-00213 DKW-KSC; ORDER
GRANTING DEFENDANTS’ MOTION TO DISMISS AND GRANTING
LEAVE TO AMEND

36