Bendeck v. Workman et al

Filing 9

ORDER: (1) DISMISSING FIRST AMENDED COMPLAINT WITHOUT LEAVE TO AMEND 7 ; AND (2) REVOKING PLAINTIFF'S IFP STATUS. Signed by CHIEF JUDGE J. MICHAEL SEABRIGHT on 6/23/2017. (afc) Excerpt of order:"The court f urther finds that any appeal of this Order would not be taken in good faith and therefore, Plaintiff's IFP status is REVOKED.""The Clerk of Court is directed to close this case." MOTION TERMINATED: 8 MOTION t o Quash Service of Process and Dismiss Amended Bill of EquityCERTIFICATE 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
LIZABETH-EMI BENDECK,
Plaintiff,
vs.
U.S. BANK NATIONAL
ASSOCIATION; JP MORGAN CHASE
BANK N.A.,

Civ. No. 17-00180 JMS-RLP
ORDER: (1) DISMISSING FIRST
AMENDED COMPLAINT
WITHOUT LEAVE TO AMEND;
AND (2) REVOKING
PLAINTIFF’S IFP STATUS

Defendants.

ORDER: (1) DISMISSING FIRST AMENDED COMPLAINT WITHOUT
LEAVE TO AMEND; AND (2) REVOKING PLAINTIFF’S IFP STATUS
I. INTRODUCTION
On April 18, 2017, pro se Plaintiff Lizabeth-Emi Bendeck
(“Plaintiff”) filed a document titled “Bill in Equity to Declare an Absolute Deed to
be a Mortgage; Exoneration of Surety; To Construct a Trust upon the
Grantee/Trustee; and Notice of Merger in the Equity Jurisdiction,” which the court
construed as a Complaint.1 ECF No. 1. On May 4, 2017, the court dismissed the
Complaint, with leave to amend, for lack of subject matter jurisdiction and failure

1

Plaintiff also filed an application to proceed in forma pauperis (“IFP”), ECF No. 2,
which was granted on May 4, 2017, ECF No. 6.

to state a plausible claim for relief (“May 4 Order”). ECF No. 6; Bendeck v.
Workman, 2017 WL 1758079, at *4-5 (D. Haw. May 4, 2017).
On May 30, 2017, Plaintiff filed an “Amended Bill in Equity,” which
the court construes as a First Amended Complaint (“FAC”), against Defendants
US Bank National Association (“US Bank”) and JPMorgan Chase Bank N.A.
(“Chase Bank”) (collectively, “Defendants”) asserting claims for breach of
contract, breach of trust, and conversion based on allegations of mortgage and
securities fraud in connection with Plaintiff’s residential mortgage loan. ECF
No. 7. Plaintiff seeks reimbursement of all loan payments, declaratory and
injunctive relief, and an award of fees and costs.
For the reasons set forth below, the court finds that the FAC fails to
state a plausible claim for relief. Further, the court finds that the theories upon
which Plaintiff’s claims and allegations are based are frivolous, and therefore
amendment would be futile. Accordingly, the FAC is DISMISSED without leave
to amend. The court further finds that any appeal of this Order would not be taken
in good faith and therefore, Plaintiff’s IFP status is REVOKED.
II. BACKGROUND
On January 12, 2006, Plaintiff executed a promissory note (“Note”)
for a $302,000 residential mortgage loan (“Mortgage”) from Home 123
Corporation (“Home 123”), secured by real property located at 43 Pakalana Street,
2

Hilo, Hawaii (the “subject property”). FAC ¶¶ 19, 29, 30, 32; Pl.’s Exs. 1, 2. The
Mortgage, recorded at the State of Hawaii Bureau of Conveyances on January 19,
2006, identifies “LIZABETH E. BENDECK” as the Borrower and Home 123 as
the Lender. Pl.’s Ex. 1 at 1, 2. In addition to signing the Mortgage, Plaintiff also
“granted [Home 123] a deed of trust on the [subject property].” FAC ¶ 20. The
FAC alleges that the Note was sold to “[US Bank], as Trustee for Residential Asset
Mortgage Products, Inc., Mortgage Asset Backed Pass-Through Certificates, Series
2006-NC3,” and that Chase Bank is the current loan servicer. FAC ¶¶ 13, 15;
Allonges, Pl.’s Exs. 3, 4.
Initially believing that she had received a loan, Plaintiff allegedly
made “numerous monthly payments” to Home 123 and Chase Bank. Id. ¶¶ 20, 22,
23, 30-31, 37. Sometime thereafter, Plaintiff was “informed of mortgage fraud,”
and now alleges that Home 123 did not actually loan her “the sum of
$302,000.00.” Id. ¶ 33. To establish this belief, the FAC first alleges that Plaintiff
is neither the “Borrower” nor “LIZABETH E. BENDECK,” and thus she is not the
person who allegedly obtained a loan from Home 123. Id. ¶¶ 45, 52(c). Second,
the FAC alleges that that “at no time did [Plaintiff] personally receive a check or
deposit into [her] checking account in the amount of $302,000.00 from Home
123.” Id. ¶ 52(f).

3

Third, the FAC alleges in conclusory fashion that pursuant to federal
banking law and accounting principles: (a) the “Note has cash value,” id. ¶ 64;
(b) Home 123 was required to deposit and record the Note in its books as a bank
asset in the amount of $302,000, id. ¶¶ 54-59; and (c) once recorded, Home 123
became the borrower and owed Plaintiff, the lender, payment of $302,000, id.
¶¶ 54, 57, 60. Thus, the FAC alleges that “payment from a bank in exchange for a
Promissory Note . . . is not a loan, but merely an asset swap.” Id. ¶ 64.
Moreover, the FAC alleges that Home 123 was “not out any money
on [the alleged asset swap] because it had no money in the deal in the first place.”
Id. ¶ 84. Home 123 allegedly “took [Plaintiff’s] Asset/[Note], converted it to [its]
own use as a securities contract,” made “huge profits,” and returned the amount of
the Note to Plaintiff “as a ‘loan.’” Id. ¶¶ 71-73. The loan from Home 123 was
allegedly Plaintiff’s “own funds being returned to her.” Id. ¶ 80.
Based on the foregoing, the FAC alleges that the Note satisfied
Plaintiff’s loan payment obligations at the time of closing. Id. ¶ 148. Because the
loan was “paid at closing,” there was no need for a Mortgage, which was allegedly
“obtained by fraud.” Id. ¶ 149. And by fraudulently “converting the [Note] into a
securities contract and profiting thereby,” Defendants committed “conversion of
property . . . and a breach of trust.” Id. ¶ 153. Additionally, the FAC alleges that

4

the securitization of the Note, by which the Note and Mortgage were separated,
rendered the Mortgage invalid and unenforceable. Id. 90-96.
At some point, US Bank initiated foreclosure proceedings, claiming
that Plaintiff defaulted on the loan. Id. ¶¶ 26, 38. But the FAC alleges that
Defendants have “no standing or lawful authority to foreclose” because they did
not “invest[] a dime to obtain” the subject property. Id. ¶¶ 86-88. This is because
not only was the loan allegedly satisfied at closing, but that pursuant to federal
banking law, Defendants were allegedly reimbursed from insurance for the face
value of the Note 91 days after default. Id. ¶¶ 85, 104.
Plaintiff seeks: (1) an order declaring that she holds equitable and
legal title to the subject property; (2) injunctive relief preventing Defendants from
foreclosing the subject property, and directing Defendants to reimburse Plaintiff
for all payments she made on the loan and all profits obtained from Defendants’
use of the Note; and (3) an award of court fees and costs. Id. ¶¶ 167, 198.
The FAC asserts that this court has diversity jurisdiction over this
action, contending that Plaintiff is “a Private American National born on Birth
State, whose home is on private common law venue within a non-military occupied

5

private estate on Hawaii county, on Hawaii state,”2 id. ¶ 2, Defendant Chase Bank
“is located in Delaware . . . and is a citizen of . . . Delaware,” id. ¶ 3, and
Defendant US Bank “is located [in] . . . Minneapolis, MN . . . and is a citizen of . . .
Minnesota,” id. ¶ 5. The FAC further alleges that “the amount in controversy is
over $75,000.” Id. ¶ 7.
The FAC’s attempt to assert diversity jurisdiction by alleging that US
Bank is located in Delaware, FAC ¶ 3, and Chase Bank is located in Minnesota, id.
¶ 5, is insufficient. “[A] national bank . . . is a citizen of the State in which its main
office, as set forth in its articles of incorporation, is located.” Washovia Bank v.
Schmidt, 546 U.S. 303, 306-07 (2006); see Rouse v. Wachovia Mortg., FSB, 747
F.3d 707, 709 (9th Cir. 2014) (“[U]nder 28 U.S.C. § 1348, a national bank is a
citizen only of the state in which its main office is located.”).
Although the FAC fails to allege where each Defendant’s main office
is located, other courts have determined that both US Bank’s and Chase Bank’s
main offices are located in Ohio. See, e.g., Lowdermilk v. U.S. Bank N.A., 479
F.3d 994, 997 (9th Cir. 2007) (determining that US Bank is a citizen of Ohio,

2

The FAC alleges more fully that Plaintiff is “a ‘non-U.S. citizen,’ non-enemy, preMarch 9, 1933, private American National with purely equitable rights protected by Article 23 of
the Hague Convention on Laws of War, Laws and Customs of War on Land, Hague 4, October
18, 1907, which protects the civilian due process rights of Nationals living in an occupied
country.” FAC ¶ 8.

6

where its main office is located); Oby v. Clear Recon Corp., 2017 WL 714305, at
*3 (E.D. Cal. Feb. 23, 2017) (finding that because Chase Bank’s main office is in
Ohio, it is an Ohio citizen); Guillen v. Countrywide Home Loans, Inc., 2016 WL
7103908, at * 4 (S.D. Tex. Dec. 6, 2016) (recognizing that U.S. Bank is an Ohio
citizen); Robertson v. GMAC Mortg. LLC, 2016 WL 3344570, at *2 (W.D. Wash.
June 16, 2016) (“Chase [Bank] is a citizen of Ohio.”).
Despite the inadequacy of the FAC’s allegations regarding
Defendants’ citizenship, it appears that there is actual diversity of citizenship of the
parties. Thus, for purposes of this Order, the court assumes the existence of
subject matter jurisdiction.
III. STANDARDS OF REVIEW
The court must subject each civil action commenced pursuant to 28
U.S.C. § 1915(a)3 to mandatory screening, and order the dismissal of any claims it
finds “frivolous, malicious, failing to state a claim upon which relief may be
granted, or seeking monetary relief from a defendant immune from such relief.”
28 U.S.C. § 1915(e)(2)(B); see, e.g., Calhoun v. Stahl, 254 F.3d 845, 845 (9th Cir.
2001) (per curiam) (holding that “the provisions of 28 U.S.C. § 1915(e)(2)(B) are
not limited to prisoners”); Lopez v. Smith, 203 F.3d 1122, 1126-27 (9th Cir. 2000)
3

Section 1915(a) governs IFP proceedings.

7

(en banc) (stating that 28 U.S.C. § 1915(e) “not only permits but requires” the
court to sua sponte dismiss an in forma pauperis complaint that fails to state a
claim).
To state a claim, a pleading must contain a “short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
A complaint that lacks a cognizable legal theory or alleges insufficient facts under
a cognizable legal theory fails to state a claim. See UMG Recordings, Inc. v.
Shelter Capital Partners LLC, 718 F.3d 1006, 1014 (9th Cir. 2013) (citing
Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990)). A plaintiff
must allege “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)); see also Weber v. Dep’t of
Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court
must accept as true all of the allegations contained in the complaint -- “is
inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678.
Plaintiff is appearing pro se; consequently, the court liberally
construes the FAC. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Eldridge v.
Block, 832 F.2d 1132, 1137 (9th Cir. 1987) (per curiam). The court also
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
8

an opportunity to amend prior to dismissal of the action.” Lucas v. Dep’t of Corr.,
66 F.3d 245, 248 (9th Cir. 1995); see also Crowley v. Bannister, 734 F.3d 967,
977-78 (9th Cir. 2013). A court may, however, deny leave to amend where further
amendment would be futile. See, e.g., Leadsinger, Inc. v. BMG Music Pub., 512
F.3d 522, 532 (9th Cir. 2008) (reiterating that a district court may deny leave to
amend for, among other reasons, “repeated failure to cure deficiencies by
amendments previously allowed . . . [and] futility of amendment”).
IV. DISCUSSION
Even construed liberally, the FAC fails to state a claim that is
remotely plausible. See Iqbal, 556 U.S. at 678 (explaining that to survive
dismissal, “a complaint must contain sufficient factual matter . . . to state a claim to
relief that is plausible on its face” (internal citation and quotation marks omitted)).
The FAC’s factual allegations are largely conclusory and laden with numerous
pronouncements about federal monetary law and the differences between legal and
equitable doctrines. All claims, however, appear to arise from the erroneous
premise that a promissory note is money, as well as meritless securitization and/or
sovereign citizen theories.
A.

Plaintiff’s “Promissory Note is Money” Assertion is Without Merit
The underlying premise for all of Plaintiff’s claims is that her Note is

the equivalent of cash, FAC ¶ 64, and when she granted the Note to Home 123, it
9

was deposited and recorded as a bank asset, id. ¶¶ 54-59, and then Plaintiff’s
money was returned to her in the form of a mortgage loan, id. ¶¶ 68, 69, 73. In
short, by granting the Note, Plaintiff funded her own mortgage loan. Id. ¶ 80.
From this premise, Plaintiff asserts that rather than receiving a loan, the parties
engaged in an asset swap, id. ¶ 64, and thus, the Note satisfied Plaintiff’s mortgage
loan repayment obligations, id. ¶¶ 74, 147. Obviously, Plaintiff is mistaken.
Courts have easily rejected this theory. For example, Demmler v.
Bank One NA, 2006 WL 640499 (S.D. Ohio Mar. 9, 2006) rejected the assertion
that by giving a bank a promissory note, a plaintiff “gave the bank his ‘money,’
which [the bank] simply lent back to him” as “ridiculous” and without legal
authority. Id. at *4. Thus, Demmler found the complaint to be “utterly frivolous,”
and determined that delving into the lengthy complaint’s allegations would be a
waste of judicial resources. Id. at *3. See also Martinez v. Wells Fargo Bank,
2014 WL 12026058, at *5 (S.D. Cal. Sept. 11, 2014) (“To the extent that plaintiff
means to argue that he satisfied his loan-repayment obligations when he tendered
his promissory note, plaintiff is wrong.”); Johnson v. Wennes, 2009 WL 1228500,
at *4 (S.D. Cal. May 5, 2009) (“It strains the imagination for plaintiff to suggest
that he should have clear title to his home without paying for it.”).

10

This court readily rejects the “promissory note is money” premise as
absurd and frivolous. 4 And to the extent Plaintiff’s claims rely on this premise,
they are DISMISSED.
B.

The Securitization Theory
Plaintiff’s claims are also based, in part, on a securitization theory.

See FAC ¶¶ 25, 93-96. Variations of the securitization theory provide that the
mere securitization of a note and/or the separation of the note and mortgage
renders the note unenforceable. This court and numerous others have rejected
similar claims. See Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034,
1044 (9th Cir. 2011) (rejecting theory that splitting the deed from the note
necessarily creates a situation where no party has the power to foreclose); Leif v.
Umpqua Bank, 2017 WL 1788659, at *1 (D. Or. May 4, 2017) (dismissing claims
4

Plaintiff also alleges that she never received actual legal tender from Home 123 and that
because Defendants did not invest any funds in the subject property, they lack legal standing and
legal authority to foreclose. FAC ¶¶ 52(f), 84-88. The “vapor money” theory provides that
“since 1933 and the New Deal, the United States has been bankrupt and lenders have been
creating unenforceable debts because they are lending credit rather than legal tender.” Ananiev
v. Aurora Loan Servs., LLC, 2012 WL 4099568, at *1 n.3 (N.D. Cal. Sept. 17, 2012). Under this
theory, “loans not based on legal tender are not collectible.” Id. Numerous courts across the
country have rightly rejected such claims. See Marvin v. Capital One, 2016 WL 4548382, at *45 (W.D. Mich. Aug. 16, 2016) (finding the vapor money theory to be without legal basis and
dismissing as frivolous claims arising from such theory) (collecting cases); Miner v. JPMorgan
Chase Bank, 2013 WL 1089909, at *3 (N.D. Cal. Mar. 15, 2013) (finding that “claims based on
the ‘vapor money’. . . theory have no basis in law,” and noting that such claims “have been
brought and rejected across the United States for over 25 years”); Carrington v. Fed. Nat’l
Mortg. Ass’n, 2005 WL 3216226, at *3 (E.D. Mich. Nov. 29, 2005) (finding “fundamentally
absurd and obviously frivolous” plaintiff’s claim that the lender unlawfully “created money”
through its ledger entries).

11

based on the theory that securitization of a loan renders a subsequent foreclosure
void); Meinhart v. CMG Mortg., Inc., 2016 WL 6525832, at *2 (W.D. Wash. Nov.
3, 2016) (“[T]he borrower lacks standing to complain about any securitization
because he is not a party to the securitization contracts.”); Klohs v. Wells Fargo
Bank, N.A., 901 F. Supp. 2d 1253, 1260 (D. Haw. 2012) (rejecting claims based on
the “discredited belief that securitization of a mortgage renders the underlying note
unenforceable”) (citing cases); Fed. Nat’l Mortg. Ass’n v. Kamakau, 2012 WL
622169, at *4 (D. Haw. Feb. 23, 2012) (collecting cases).
Based on the well-settled law set forth above, the court finds that to
the extent Plaintiff’s claims rely on allegations that Defendants securitized the
Note without Plaintiff’s authorization, and/or that the separation of the Note and
Mortgage render the Note unenforceable, they are without merit.
C.

The Sovereign Citizen Theory
Finally, Plaintiff appears to rely on aspects of the widely discredited

sovereign citizen theory. Adherents of this theory “believe that they are not
subject to government authority and employ various tactics in an attempt to, among
other things . . . extinguish debts.” Gravatt v. United States, 100 Fed. Cl. 279, 282
(2011) (citations omitted).
First, Plaintiff employs commonly-used sovereign citizen language
asserting that she is not subject to the law and jurisdiction of the United States, but
12

rather, to purely equitable jurisdiction, under which the court must exercise
equitable powers without reference to any law. See FAC ¶ 8 (alleging that Plaintiff
is “a ‘non-U.S. citizen,’ non-enemy, pre-March 9, 1933 American National with
purely equitable rights” and “requir[ing] this Court’s prerogative power upon the
estate to do complete justice via its Equity jurisdiction as there is no adequate
remedy at law to accomplish complete justice in my case”).
This court and courts across the country have flatly rejected
“sovereign citizen” and similar theories as “frivolous, irrational [and]
unintelligible.” United States v. Alexio, 2015 WL 4069160, at *2-4 (D. Haw. July
2, 2015) (explaining theories in detail and collecting cases); see also Alexio v.
Obama, 2015 WL 5440800, at *3 (D. Haw. Sept. 15, 2015) (noting uniform
rejection of sovereign citizen theories). Thus, Plaintiff’s reliance on the sovereign
citizen theory for her jurisdictional argument is without merit. The court finds that
Plaintiff is subject to the jurisdiction and laws of the United States.
And Plaintiff’s assertion that she is entitled to an equitable remedy
because she cannot obtain relief under the law is specious. The FAC alleges that
Plaintiff has no adequate remedy at law because “[f]oreclosure statutes are used in
violation of the principles of Equity, to commit a fraud against homeowners by
totally ignoring the homeowner’s equitable rights.” FAC ¶ 197. But Plaintiff’s
alleged equitable rights arise from the baseless premise that a promissory note has
13

the same value as cash and/or from the rejected sovereign citizen argument that she
is not subject to government authority and law. Accordingly, the court finds that
Plaintiff is not entitled to equitable remedies merely because she has no claim
under applicable foreclosure law.
Second, Plaintiff employs a common sovereign citizen argument that
a name in all capital letters refers to a separate legal entity. The FAC alleges that
Plaintiff’s name is “Lizabeth Emi Bendeck,” and that she is not and does not know
“LIZABETH E. BENDECK.” FAC ¶¶ 44, 45. Proponents of the sovereign citizen
and/or redemption theory believe that “when ‘a person’s name is spelled . . . with
initial capital letters and small letters, it represents the “real person” . . . [and
w]henever a person’s name is written in total capitals, . . . only [a] “strawman” [or
separate entity] is referenced, and the flesh and blood person is not involved.’”
Santana v. United States, 2017 WL 2470834, at *2 (S.D.N.Y. June 6, 2017).
Again, numerous courts rightly have rejected the argument that “differences in
capitalization of a person’s name create separate legal entities.” U.S. Bank N.A. as
T’ee for Greenpoint Mortg. Funding Tr. Pass Through Certificates Series 2006AR4 v. Edwards, 2017 WL 1396047, at *2 (D. Or. Feb. 23, 2017); see Harris v.
Colombo, 2017 WL 1206262, at *2 (W.D. Mich. Apr. 3, 2017); Santiago v.
Century 21/PHH Mortgage, 2013 WL 1281776, at *5 (N.D. Ala. Mar. 27, 2013).

14

In sum, Plaintiff’s claims are frivolous. She is not entitled to a home
without paying for it. The FAC is DISMISSED for failure to state a plausible
claim for relief.
Plaintiff’s Complaint was also based on the same frivolous and
specious theories. Despite being given leave to amend, the FAC’s claims suffer
from the same defects -- reliance on meritless legal theories. Thus, the court finds
that no further amendment could cure the defects and that granting leave to amend
would be futile. See Leadsinger, Inc., 512 F.3d at 532. Accordingly, the FAC is
DISMISSED without leave to amend.
D.

Revocation of IFP Status
Finally, pursuant to 28 U.S.C. § 1915(a)(3), “[a]n appeal may not be

taken in forma pauperis if the trial court certifies in writing that it is not taken in
good faith.” Good faith is demonstrated when an appellant “seeks appellate review
of any issue not frivolous.” Coppedge v. United States, 369 U.S. 438, 445 (1962).
For purposes of § 1915, an appeal is frivolous if it lacks any arguable basis in law
or fact. Neitzke v. Williams, 490 U.S. 319, 325 (1989). Thus, revocation of IFP
status is appropriate under § 1915 where an appeal lacks any non-frivolous issue or
claim. Hooker v. Am. Airlines, 302 F.3d 1091, 1092 (9th Cir. 2002).

15

The court finds that any appeal of this Order would not be taken in
good faith and would lack any arguable basis in law or fact. Accordingly, the court
REVOKES Plaintiff’s IFP status.
V. CONCLUSION
Based on the foregoing, the FAC is DISMISSED without leave to
amend for failure to state a claim, and Plaintiff’s IFP status is REVOKED. The
Clerk of Court is directed to close this case.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, June 23, 2017.

/s/ J. Michael Seabright
J. Michael Seabright
Chief United States District Judge

Bendeck v. U.S. Bank Nat’l Ass’n, et al., Civ. No. 17-00180 JMS-RLP, Order: (1) Dismissing
First Amended Complaint Without Leave To Amend; and (2) Revoking Plaintiff’s IFP Status

16