Kawelo et al v. Nationstar Mortgage LLC et al

Filing 54

ORDER DISMISSING COMPLAINT WITH LEAVE TO AMEND re 11 , 22 , 27 , 35 , 37 , 39 , 41 , 42 - Signed by CHIEF JUDGE J. MICHAEL SEABRIGHT on 9/12/2018. For the reasons set forth above, the Requests for Judicial Noti ce are GRANTED, ECF Nos. 13, 23, 35; the Motions to Dismiss filed by Ocwen, Nationstar, MERS, and MTGLQ are GRANTED, ECF Nos. 11, 35; the Motion to Dismiss filed by the AP Defendants and the TMLF Defendants' Joinder to that motion are GRANT ED in part and DENIED in part, ECF Nos. 22, 27; Ocwen's Joinder is GRANTED, ECF No. 37; the AP Defendants' Joinder is GRANTED in part and DENIED in part, ECF No. 39; and the Nationstar Defendants' Joinders are GRANTED, ECF Nos. 41, 4 2. That is, Plaintiffs' claims against Ocwen, Nationstar, MERS, and MTGLQ are DISMISSED with prejudice; George's claims against all Defendants are DISMISSED with prejudice; and Plaintiffs' class claims and § 1983 cla ims are DISMISSED without leave to amend. Rina's claims against the AP and TMLF Defendants are DISMISSED with leave to amend. Rina may amend only her claims against the AP and TMLF Defendants and may not add new claims or name new defendants . George may not amend any of his claims. If Rina chooses to file a First Amended Complaint to attempt to cure the deficiencies identified above, she must so do no later than October 12, 2018. Failure to file a First Amended Complaint by October 12, 2018 will result in automatic dismissal of this action without prejudice. (emt, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
GEORGE KAULANA KAWELO, III,
and RINA CECILY KAWELO, an
individual, on behalf of themselves and
all other similarly situated,

Civ. No. 18-00096 JMS-KSC
ORDER DISMISSING COMPLAINT
WITH LEAVE TO AMEND

Plaintiff,
vs.
NATIONSTAR MORTGAGE LLC, et
al.,
Defendants.

ORDER DISMISSING COMPLAINT WITH LEAVE TO AMEND
I. INTRODUCTION
By this action against numerous Defendants, pro se Plaintiffs George
Kaulana Kawelo, III (“George”) and Rina Cecily Kawelo (“Rina”) (collectively,
“Plaintiffs”) seek to vacate a state court judicial foreclosure and subsequent sale of
real property located at 87-2093 Pakeke Street, Waianae, HI 96706 (the “subject
property”). Compl., ECF No. 1. The Complaint names as Defendants:
(1) Nationstar Mortgage LLC (“Nationstar”); Mortgage Electronic Registration
Systems, Inc. (“MERS”); MTGLQ Investors, LP (“MTGLQ”) (collectively,
“Nationstar Defendants”); Ocwen Loan Servicing, LLC (“Ocwen”); TMLF

Hawaii, LLLC, a law corporation (“TMLF”) and TMLF attorneys Peter Stone
(“Stone”), Derek W.C. Wong (“Wong), and Jason L. Cotton (“Cotton”)
(collectively, the “TMLF Defendants”); Aldridge Pite, LLP, a limited law
partnership (“AP”) and AP attorney Zachary K. Kondo (“Kondo”) (collectively the
“AP Defendants”); “process server” Akoni Shannon (“Shannon”); and “All equity
or persons unknown, claiming any legal or equitable right, title, estate, lien, or
interest in the property described in the Complaint adverse to Plaintiffs’ title, or
any cloud on Plaintiffs’ title thereto and all whose true names are unknown.”
Compl. at 1 &
¶ 37.
Before the court are three Motions to Dismiss, one of which includes
a request for judicial notice, ECF Nos. 11, 22, 35; two additional “Requests for
Judicial Notice,”1 ECF Nos. 13, 23; and multiple Joinders to one or more of the

1

Defendants request that the court take judicial notice of documents filed in the
underlying state court foreclosure action, the United States Bankruptcy Court for the District of
Hawaii, and the State of Hawaii Bureau of Conveyances. See ECF Nos. 13, 23, 35 at 2 n.2.
The court “may take [judicial] notice of proceedings in other courts, both within and
without the federal judicial system, if those proceedings have a direct relation to matters at
issue.” Trigueros v. Adams, 658 F.3d 983, 987 (9th Cir. 2011) (quotation marks and citation
omitted); see also Lee v. City of L.A., 250 F.3d 668, 689-90 (9th Cir. 2001) (“A court may take
judicial notice of matters of public record.”) (citation and quotation marks omitted).
Consideration of “matters of judicial notice” does not require that a motion to dismiss be
converted to a motion for summary judgment. See Sluka v. Rushmore Loan Mgmt. Serv., LLC,
2016 WL 6275387, at *1 n.1 (D. Haw. Oct. 26, 2016) (citing United States v. Ritchie, 342 F.3d
903, 908 (9th Cir. 2003)). Thus, the court GRANTS the Requests.

2

motions and requests, ECF Nos. 27, 37, 39, 41, 42. For the reasons discussed
below, the Complaint is DISMISSED, with leave to amend as to certain claims.
More specifically, the Requests for Judicial Notice are GRANTED, ECF Nos. 13,
23, 35; the Motions to Dismiss filed by Ocwen and the Nationstar Defendants are
GRANTED, ECF Nos. 11, 35; and the Motion to Dismiss filed by the AP
Defendants and the TMLF Defendants’ Joinder to that motion are GRANTED in
part and DENIED in part, ECF Nos. 22, 27. Ocwen’s Joinder is GRANTED, ECF
No. 37; the AP Defendants’ Joinder is GRANTED in part and DENIED in part,
ECF No. 39; and the Nationstar Defendants’ Joinders are GRANTED, ECF Nos.
41, 42.
II. BACKGROUND
A.

Factual Background
On or about February 26, 2007, Plaintiffs obtained a loan of $410,856

from DHI Mortgage Company, that was secured by a mortgage on the subject
property. ECF No. 1 ¶¶ 48, 133; ECF No. 35-3. Ocwen was the loan servicer for
Plaintiffs’ mortgage. ECF No. 1 ¶ 51. On November 25, 2014, the TMLF
Defendants, on behalf of Nationstar, filed an action in the State of Hawaii Circuit
Court of the First Circuit (“state court”) to foreclose on the mortgage and subject
property (the “state foreclosure action”). Id. ¶ 50; ECF Nos. 13-1, 23-1.

3

On March 28, 2016, the state court entered its “Findings of Fact,
Conclusions of Law and Order Granting [Nationstar]’s Motion for Summary
Judgment for Foreclosure Against [Plaintiffs] and for Interlocutory Decree of
Foreclosure” (the “FOF/COL”). 2 ECF No. 13-2. The FOF/COL found that
Plaintiffs executed a valid note to DHI Mortgage Company that required Plaintiff
to make monthly payments. Id. at 2-3. The FOF/COL further found that the note
was secured by a valid mortgage with MERS as the mortgagee “solely as nominee
for DHI Mortgage Company,” that MERS assigned the mortgage to Nationstar on
July 31, 2014, and that after November 1, 2013, Plaintiffs failed to make the
agreed-upon monthly payments on the note. Id. at 2-5. Thus, the FOF/COL
determined that Nationstar was “entitled to foreclose upon the [subject] property”
and to “judgment and an interlocutory decree of foreclosure as a matter of law,”
and appointed a Commissioner to sell the subject property. Id. at 4-6. On April
17, 2017, the state court issued an Order confirming the foreclosure sale to
Nationstar or its nominee, a Writ of Possession, and Judgment (the “State Court
Judgment”). ECF No. 23-1 at 4-5. On July 24, 2017, the Commissioner’s Deed
was recorded in the State of Hawaii Bureau of Conveyances, transferring title to
the subject property to MTGLQ, Nationstar’s nominee. See ECF Nos. 23-3, 35-4.
2

The FOF/COL was signed on March 24, 2016, but not filed until March 28, 2016. ECF
No. 13-2 at 1, 9.

4

Meanwhile, on May 12, 2017, Plaintiffs appealed the State Court
Judgment. ECF Nos. 23-1, 23-4. The Hawaii Intermediate Court of Appeals
(“ICA”) dismissed Plaintiffs’ Appeal on October 27, 2017 for failure to prosecute.
ECF Nos. 23-4, 35-7.
On September 8, 2017, George filed a Chapter 7 bankruptcy action in
the United States Bankruptcy Court for the District of Hawaii (the “bankruptcy
action”). ECF No. 13-3. In his schedule to the bankruptcy action, George
represented that he did not “own or have any legal or equitable interest in any
residen[tial] . . . property.” ECF No. 13-4 at 1. George also indicated that
Nationstar was a secured creditor with an interest in the subject property, and when
asked if he had claims against third parties, answered “no.” Id. 8, 49. On February
5, 2018, the bankruptcy court issued an “Order of Discharge.” ECF No. 13-5.
B.

Procedural Background
On March 14, 2018, Plaintiffs initiated the instant action. ECF No. 1. 3

The Complaint asserts the following claims against all Defendants: “Wrongful Sale
of Subject Property” (Count I); “Fraud” (Counts II and IV); “Unfair or Deceptive

3

On April 16, 2018, executed summonses were filed as to Defendants TMLF, Nationstar,
Ocwen, AP and Stone only. Nevertheless, counsel has entered appearances for the Nationstar
Defendants, the TMLF Defendants, Ocwen, and the AP Defendants. It does not appear that the
Complaint was served on Shannon, nor has counsel entered an appearance on her behalf.

5

Acts or Practices” (Count III); “Breach and Failure to Act in Good Faith” (Count
V); “Unjust Enrichment” (Count VI); “Mistake” (Count VII); “Hawaii Bureau of
Conveyance Regulations Violations” (Count VIII); “Improper Restrictions
Resulting from Securitization Leaves Note and Mortgage Unenforceable” (Count
IX); “Wrongful Conversion of Note - Violation of the Securitization Agreement”
(Count X); “Breach of Contract” (Count XI); and “Quiet Title” (Count XII). Id. at
28-46. The Complaint references multiple federal laws and regulations, but fails to
connect such references to any claims. In addition, the Complaint includes the
following notation at the bottom of each page: “Complaint - Rights Action (42
U.S.C. Section 1983, Section 1985) Wrongful Foreclosure.” Id. at 1-48.
Ocwen filed its Motion to Dismiss and Request for Judicial Notice on
April 13, 2018. ECF Nos. 11, 13. The AP Defendants filed their Motion to
Dismiss and Request for Judicial Notice on April 16, 2018. ECF Nos. 22, 23. On
April 24, 2018, the TMLF Defendants filed a Joinder to the AP Defendants’
Motion to Dismiss. ECF No. 27. On May 14, 2018, the Nationstar Defendants
filed a Motion to Dismiss. ECF No. 35. On June 29, 2018, Ocwen filed a Joinder
to the AP Defendants’ Motion to Dismiss, and the AP Defendants filed a Joinder to
Ocwen’s and the Nationstar Defendants’ Motions to Dismiss. ECF Nos. 37, 39.
On July 2, 2018, the Nationstar Defendants filed Joinders to Ocwen’s and the AP

6

Defendants’ Motions to Dismiss and Requests for Judicial Notice. ECF Nos. 41,
42. Plaintiffs did not file an Opposition to any of the Motions.
On July 16, 2018, Ocwen, the Nationstar Defendants, and the AP
Defendants filed Notices and a Statement of Plaintiffs’ failure to file Oppositions
to the Motions. ECF Nos. 45-48. A hearing was held on July 30, 2018, with
George appearing by telephone. Rina did not appear. ECF No. 49.
III. 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[.]” A Rule 12(b)(6)
dismissal is proper when there is either a “‘lack of a cognizable legal theory or the
absence of sufficient facts alleged.’” UMG Recordings, Inc. v. Shelter Capital
Partners, LLC, 718 F.3d 1006, 1014 (9th Cir. 2013) (quoting Balistreri v. Pacifica
Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990)).
Although a plaintiff need not identify the legal theories that are the
basis of a pleading, see Johnson v. City of Shelby, Mississippi, 135 S. Ct. 346, 346
(2014) (per curiam), a plaintiff must nonetheless 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 Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007)). This tenet — that the court must accept as true all of the

7

allegations contained in the 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); see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)
(“[A]llegations in a complaint or counterclaim may not simply recite the elements
of a cause of action, but must contain sufficient allegations of underlying facts to
give fair notice and to enable the opposing party to defend itself effectively.”).
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.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader
is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.
///
///
///

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IV. DISCUSSION
All three Motions to Dismiss argue that Plaintiffs’ claims are barred
by claim preclusion (or res judicata)4 because of a prior final state court judgment,
and each motion also includes one or more of the following additional arguments:
(1) George is judicially estopped from asserting his claims; (2) George lacks
standing to assert his claims; (3) the Complaint fails to state a plausible claim for
relief; (4) Plaintiffs’ claims are barred by the Rooker-Feldman doctrine; and
(5) Plaintiffs are not adequate class representatives and therefore cannot assert
class action claims. Although Plaintiffs did not file an Opposition, throughout the
hearing, the court asked George for Plaintiffs’ argument or position in response to
Defendants’ arguments.
For the reasons discussed below, the court concludes as follows:
(1) Ocwen and the Nationstar Defendants met their burden of establishing claim
preclusion, but the AP and TMLF Defendants did not; thus the State Court
Judgment precludes Plaintiffs from asserting their claims against Ocwen and the
Nationstar Defendants; (2) George obtained a discharge of his bankruptcy action
based in part on representations that he did not have any claims against Defendants

4

Hawaii law prefers the modern term “claim preclusion” instead of “res judicata.” See
Bremer v. Weeks, 104 Haw. 43, 53 n.14, 85 P.3d 150, 160 n.14 (2004).

9

and, therefore, he is judicially estopped from asserting his claims against all
Defendants; (3) George’s claims belong to his bankruptcy estate and, therefore, he
lacks standing to assert his claims; (4) the Complaint fails to state a plausible claim
against the AP and TMLF Defendants.
The court addresses these issues in turn. 5
A.

Claim Preclusion
Defendants argue that each claim asserted by Plaintiffs relies upon the

allegation that Nationstar was not entitled to enforce the note and foreclose the
mortgage to the subject property. They further argue that the state foreclosure
action adjudicated this precise issue in favor of Nationstar and against Plaintiffs.
See ECF No. 13-2 at 5 (“[Nationstar] is the holder of the Note and Mortgage and is
entitled to enforce them.”); ECF No. 23-1 at 5 (state foreclosure action docket
showing entry of the State Court Judgment).
Federal courts look to the forum state’s law to determine the
preclusive effect of a state court judgment. Migra v. Warren City Sch. Dist. Bd. of
Educ., 465 U.S. 75, 81 (1984) (“It is now settled that a federal court must give to a
state-court judgment the same preclusive effect as would be given that judgment
under the law of the State in which the judgment was rendered.”). To establish
5

Because of these findings, the court does not reach the Rooker-Feldman argument, or
whether each of the Complaint’s Counts states a claim against all Defendants.

10

claim preclusion under Hawaii law, Defendant has “the burden of establishing that
(1) there was a final judgment on the merits, (2) both parties are the same or in
privity with the parties in the original suit, and (3) the claim decided in the original
suit is identical with the one presented in the action in question.” Bremer v. Weeks,
104 Haw. 43, 54, 85 P.3d 150, 161 (2004). It includes not only “issues [that] were
actually litigated in the first action, but also . . . all grounds of claim and defense
which might have been properly litigated[.]” Id., 85 P.3d at 160 (quoting Foytik v.
Chandler, 88 Haw. 307, 314, 966 P.2d 619, 626 (1998)) (emphases omitted). And,
“[i]n Hawaii[,] the doctrine is applied in a robust way.” Albano v. Nw. Fin. Haw.,
Inc., 244 F.3d 1061, 1063 (9th Cir. 2001).
The court addresses each of the three elements in turn.
1.

Final Judgment
“[A] judgment is final where the time to appeal has expired without an

appeal being taken.” Littleton v. State, 6 Haw. App. 70, 75, 708 P.2d 829, 833
(Haw. Ct. App. 1985) (quoting James W. Glover, Ltd. v. Fong, 42 Haw. 560, 574
(1958)). Under Hawaii Rule of Appellate Procedure (“HRAP”) 36(c), an ICA
judgment is final:
(1)

if no application for writ of certiorari is filed,
(A)

upon the thirty-first day after entry or

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(B)

where the time for filing an application for a writ
of certiorari is extended in accordance with
[HRAP 40.1(a)], upon the expiration of the
extension[.]

Here, the ICA dismissed Plaintiffs’ appeal on October 27, 2017. See ECF No. 234. There is no evidence that Plaintiffs filed a writ of certiorari to the Supreme
Court of Hawaii within thirty days or received an extension to file a writ in
accordance with HRAP 40.1(a).
Because “the time to appeal has expired without an appeal being
taken,” Littleton, 6 Haw. App. at 75, 708 P.2d at 833, the State Court Judgment is
final.
2.

Same Parties
The second element requires that the parties be “the same or in privity

with the parties in the original suit.” Bremer, 104 Haw. at 54, 85 P.3d at 161.
Plaintiffs and Nationstar were parties to both this action and the state foreclosure
action. Although MERS, MTGLQ, and Ocwen were not parties to the state
foreclosure action, the court finds that Nationstar’s relationship with MERS,
MTGLQ, and Ocwen establishes privity between Nationstar and each of these
Defendants.
Privity is a “legal conclusion designating a person [or entity] so
identified in interest with a party to a former litigation that [the person or entity]
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represents precisely the same right in the respect to the subject matter involved.”
Headwaters Inc. v. U.S. Forest Serv., 399 F.3d 1047, 1052-53 (9th Cir. 2005)
(internal quotation marks and citation omitted). Under Hawaii law, “[t]he concept
of privity has moved from the conventional and narrowly defined meaning of
‘mutual or successive relationship[s] to the same rights of property’ to ‘merely a
word used to say that the relationship between the one who is a party of record and
another is close enough to include that other within the res adjudicata.’” In re
Dowsett Tr., 7 Haw. App. 640, 646, 791 P.2d 398, 402 (Haw. Ct. App. 1990)
(internal citation omitted). In essence, “the nonparty’s interests and rights [must
have been] represented and protected in the prior action.” Pedrina v. Chun, 97
F.3d 1296, 1302 (9th Cir. 1996) (applying Hawaii law). In the context of home
foreclosures, numerous courts have found that successive loan servicers, assignees,
and assignors are in privity with one another. See, e.g., Varma v. Bank of Am N.A.,
2017 WL 5665008, at *6 (C.D. Cal. Apr. 3, 2017); Amedee v. Citimortgage, Inc.,
2016 WL 1070657, at *4 (N.D. Cal. Mar. 18, 2016); cf. Ounyoung v. Fed. Home
Loan Mortg. Corp., 2012 WL 5880673, at *5 (D. Haw. Nov. 21, 2012); State v.
Magoon, 75 Haw. 164, 191, 858 P.2d 712, 725 (1993).
Here, judicially-noticed documents show that MERS was the original
mortgagee and nominee for Nationstar and Nationstar’s successors and assigns,

13

that MERS assigned Plaintiffs’ mortgage to Nationstar, and that MTGLQ
succeeded Nationstar as owner of the subject property through the foreclosure sale.
See, e.g., ECF Nos. 35-3 to 35-5, 35-10. And Plaintiffs admit that Ocwen was the
loan servicer of the mortgage. Compl. ¶ 51. In short, the relationship between
MERS, Ocwen, and MTGLQ “is close enough” to establish privity. In re Dowsett
Tr., 7 Haw. App. at 646, 791 P.2d at 402.
The AP Defendants however, have failed to meet their burden of
establishing privity. Courts have found that counsel subject to suit for actions
taken in the context of representing parties in a prior lawsuit are in privity with
those parties. See, e.g., Plotner v. AT&T Corp., 224 F.3d 1161, 1169 (10th Cir.
2000) (“The law firm defendants appear by virtue of their activities as
representatives of [their clients] . . . creating privity.”) (citing Henry v. Farmer City
State Bank, 808 F.2d 1228, 1235 n.6 (7th Cir. 1986) (holding that for res judicata
purposes privity exists between a part and its attorneys)); Clemens v. Wells Fargo
Bank, N.A., 2014 WL 7407603, at *3 (D. Kan. Dec. 30, 2014) (applying privity to
counsel for lender in prior foreclosure action).
The AP Defendants admit that they “did not represent Nationstar or
any other party in Nationstar’s foreclosure action; nor were they named as parties
to the case.” ECF No. 22 at 14. And because the TMLF Defendants merely joined

14

with the AP Defendants’ motion, which did not argue for privity based on prior
representation of any of the Nationstar Defendants, they have also failed to meet
their burden of establishing privity. Thus this second element is satisfied as to
Ocwen, Nationstar, MERS, and MTGLQ only.
3.

Same Claims
Third, the “claims” are the same. “To determine whether a litigant is

asserting the same claim in a second action, the court must look to whether the
‘claim’ asserted in the second action arises out of the same transaction, or series of
connected transactions, as the ‘claim’ asserted in the first action.” Kauhane v.
Acutron Co., 71 Haw. 458, 464, 795 P.2d 276, 279 (Haw. 1990) (citing
Restatement (Second) of Judgments § 24 (1982)). That is, claims arising out of the
same transaction “constitute the same ‘claims’ for [claim preclusion] purposes.”
Id. at 464, 795 P.2d at 279; see also Frank v. United Airlines, Inc., 216 F.3d 845,
851 (9th Cir. 2000) (“The central criterion in determining whether there is an
identity of claims between the first and second adjudications is whether the two
suits arise out of the same transactional nucleus of facts.” (internal quotation marks
and citation omitted)) .
Moreover, claim preclusion “applies if the issues ‘could have been
raised in the earlier state court actions.’” Albano, 244 F.3d at 1064 (citations

15

omitted) (applying Hawaii law); see also Bremer, 104 Haw. at 54, 85 P.3d at 15960 (observing that under Hawaii law “[t]he judgment of a court of competent
jurisdiction . . . precludes the relitigation . . . of all grounds of claim and defense
which might have been properly litigated in the first action but were not litigated or
decided”) (citation and emphasis omitted).
The issues raised in this action arise out of “the same transaction, or
series of connected transactions,” Kauhane, 71 Haw. at 464, 795 P.2d at 279, as
the claim asserted in the state foreclosure action. That is, the state foreclosure
action decided the same core issues as alleged here — both lawsuits concern the
validity of the assignment of Plaintiffs’ mortgage to Nationstar and Nationstar’s
right to foreclose, sell, and evict Plaintiffs from the subject property. These issues
may not be relitigated here. Although the instant action also includes claims
regarding the process to evict Plaintiffs from the subject property, which occurred
after the state court Judgment, claims based on the eviction process also rely on
allegations that Nationstar’s foreclosure was improper. And even if any Defendant
engaged in wrongful conduct in violation of state or federal law in connection with
the assignment and servicing of Plaintiffs’ mortgage and the subsequent
foreclosure, Plaintiffs could have raised such issues as counterclaims or affirmative
defenses to the state foreclosure action. See, e.g., Mondragon v. Bank of Am, N.A.,

16

2017 WL 4653021, at *2 (C.D. Cal. June 21, 2017) (noting that “a lender’s
noncompliance with the servicing regulations can be asserted as an affirmative
defense or an equitable defense to a judicial-foreclosure action”) (citation omitted).
They would thus also be barred. See, e.g., Albano, 244 F.3d at 1064.
Because Ocwen, Nationstar, MERS, and MTGLQ established all three
elements of the claim preclusion test, Plaintiffs are barred from bringing the instant
action. And because Plaintiffs are precluded from asserting their claims against
these Defendants, amendment would be futile. Accordingly, Plaintiffs’ claims
against Ocwen, Nationstar, MERS, and MTGLQ are DISMISSED with prejudice.
But because the AP Defendants and TMLF Defendants failed to
establish privity, the doctrine of claim preclusion does not bar Plaintiffs’ claims
against those Defendants.
B.

Judicial Estoppel
Defendants also contend that George is judicially estopped from

asserting this lawsuit against all Defendants based on George’s representations to
the bankruptcy court — that he did not own or have a legal interest in the subject
property, that Nationstar was a secured creditor with an interest in the subject
property, and that he had no claims against Defendants — and the subsequent
discharge of the bankruptcy action.

17

Judicial estoppel is an equitable doctrine, invoked by a court at its
discretion, which “bar[s] a party from [gaining an advantage by] taking a position
in a subsequent lawsuit that is inconsistent with a position it took in a previous
lawsuit.” Ito v. Inv’rs Equity Life Holding Co., 135 Haw. 49, 74, 346 P.3d 118,
143 (2015); see Ah Quin v. Cty. of Kauai Dep’t of Transp., 733 F.3d 267, 270-71
(9th Cir. 2013); Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th
Cir. 2001). The United States Supreme Court identified three factors courts may
consider when determining whether to apply the doctrine of judicial estoppel: (1)
whether the party’s position is “clearly inconsistent with its earlier position”; (2)
whether the first court accepted the party’s earlier position, thereby “creat[ing] the
perception that either the first or second court was misled”; and (3) “whether the
party seeking to assert an inconsistent position would derive an unfair advantage
. . . if not estopped.” New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001)
(citations and internal quotation marks omitted). In addition, the Ninth Circuit
instructs courts to examine whether the party acted mistakenly, inadvertently, or
with any degree of intent to deceive. See Johnson v. Or. Dep’t of Human Res., 141
F.3d 1361, 1369 (9th Cir. 1998).
In the bankruptcy context, this basic default rule applies: “If a
plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the bankruptcy

18

schedules and obtains a discharge . . . , judicial estoppel bars the action.” Ah Quin,
733 F.3d at 271 (citations omitted). And in the Ninth Circuit, a “presumption of
deliberate manipulation” applies if a claim is omitted and the debtor does not file
an amended bankruptcy schedule that properly lists that claim as an asset. Id. at
272-73.
In his bankruptcy action, George represented that he did not “own or
have any legal or equitable interest in any residen[tial] . . . property,”
admitted that Nationstar was a secured creditor with an interest in the subject
property, and denied that he had any claims against third parties. ECF Nos. 13-3 to
13-4. Based on such representations, George obtained an order discharging the
bankruptcy action on February 5, 2018. ECF No. 13-5. Contrary to those
representations, Plaintiffs now contend that they own the subject property, no
Defendant has an interest in the subject property, and that Plaintiffs have
meritorious claims against Defendants.
Based on these facts, judicial estoppel applies to bar George’s claims.
George did not list the claims he now asserts against Defendants in the prior
bankruptcy action, and based on that omission, obtained a discharge of the
bankruptcy action. Thus, the three New Hampshire factors are met. Plaintiffs filed
no Opposition to the instant Motions, and there is no indication that George’s

19

representations in the bankruptcy action were the result of mistake or inadvertence,
or that he has made any attempt to reopen the bankruptcy action in order to
disclose his claims against Defendants. Thus, the “presumption of deliberate
manipulation” applies. See Ah Quin, 733 F.3d at 272-73. This presumption is
further supported by the proximity in time between the two actions — Plaintiffs
filed their Complaint in this action a mere five weeks after George obtained
discharge of his bankruptcy action. Exercising its discretion, this court finds that
George is judicially estopped from asserting his claims against all Defendants in
the instant action. Thus, George’s claims against all Defendants are DISMISSED
with prejudice.
Because Rina was not a party to the bankruptcy action, however, she
is not judicially estopped from asserting her claims (to the extent she is not
otherwise precluded from asserting such claims).
C.

Standing
Defendants further contend that George lacks standing to assert his

claims. The court agrees.
When George filed his bankruptcy petition, all claims that he could
have asserted at that time became the property of his bankruptcy estate. See 11

20

U.S.C. § 541(a)(1); 6 Cusano v. Klein, 264 F.3d 936, 945 (9th Cir. 2001). Only the
bankruptcy trustee has standing to prosecute claims of the bankruptcy estate. See
Estate of Spirtos v. One San Bernardino Cty. Super. Ct. Case Numbered SPR
02211, 443 F.3d 1172, 1176 (9th Cir. 2006) (holding that “the bankruptcy code
endows the bankruptcy trustee with the exclusive right to sue on behalf of the
estate”). And unless the court orders otherwise, estate property that is neither
abandoned nor administered remains the property of the bankruptcy estate, even
after the bankruptcy action is closed. 11 U.S.C. § 554(d) (“Unless the court orders
otherwise, property of the estate that is not abandoned under this section and that is
not administered in the case remains property of the estate.”); see In re PretscherJohnson, 2017 WL 2779977, at *5 (B.A.P. 9th Cir. May 31, 2017) (“A trustee
cannot administer or abandon an unscheduled asset, . . . [and] they remain[]
property of the estate.”); Estate of Spirtos, 443 F.3d at 1176; In re Lopez, 283 B.R.
22, 28 (B.A.P. 9th Cir. 2002) (explaining that property of the bankruptcy estate,
even if not listed on the schedules, that is neither abandoned nor administered
“remains property of the estate even after the case is closed”).

6

Section 541(a)(1) provides in part: “The commencement of a [bankruptcy] case . . .
creates an estate. Such estate [includes] . . . all legal or equitable interests of the debtor in
property as of the commencement of the case.”

21

Thus, George’s claims belong to his bankruptcy estate. And because
he does not own those claims, he lacks standing to assert them in this action. For
this additional reason, George’s claims against all Defendants are DISMISSED
with prejudice.
D.

Failure to State a Claim
Defendants argue that the Complaint fails to state a plausible claim for

relief. Given the court’s determinations above that Plaintiffs are precluded from
asserting claims against Ocwen, Nationstar, MERS, and MTGLQ, and
alternatively, that George is judicially estopped from asserting and lacks standing
to assert his claims against all Defendants, only Rina’s claims against the AP and
TMLF Defendants remain.7 But Rina does not allege any specific wrongdoing by
the AP Defendants. Nor does she allege any actions by the TMLF Defendants

7

Although the Complaint includes a footer that references 42 U.S.C. § 1983, it is not
clear whether Plaintiffs are asserting such a claim. To state a § 1983 claim, Plaintiffs must allege
two essential elements: (1) that a right secured by the Constitution or laws of the United States
was violated, and (2) that the alleged violation was committed by a person acting under the color
of state law. See West v. Atkins, 487 U.S. 42, 48 (1988); Lugar v. Edmondson Oil Co., 457 U.S.
922, 924 (1982) (recognizing that a § 1983 claim requires allegations that violation was
committed by a person acting “under color of any statute, ordinance, regulation, custom, or
usage” of a state). Here, the Complaint fails to allege that any Defendant acted under color of
state law. Thus, Plaintiffs fail to state a claim pursuant to § 1983.

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outside of those performed in their alleged capacities as legal representatives of
one or more of the Nationstar Defendants. 8
Most of the Complaint includes conclusory allegations against all
“Defendants,” fails to explain which claims are brought against which Defendants,
and fails to allege specific facts to support specific claims. The limited allegations
that do refer to the AP or TMLF Defendants include: (1) the TMLF Defendants
“unlawfully and prematurely filed a foreclosure action, ECF No. 1 ¶ 60; (2) the
“[Nationstar] Defendants” and “their attorneys . . . initiated and conducted a
judicial foreclosure,” id. ¶ 72; (3) “Defendants by and through their attorneys sold
our property,” id. ¶ 74; (4) the Nationstar Defendants’ attorneys’ “behavior [was]
that of a foreclosure mill,” id. ¶ 91; and (5) the AP and TMLF Defendants “acted
wantonly or oppressively or with such malice as implies as a spirit of mischief or
criminal indifference to civil obligations, or its action constituted willful
misconduct or that entire want of care which raises the presumption of a conscious
indifference to consequences to the Plaintiffs,” id. ¶ 95.
Such allegations fall far short of Rule 8’s pleading requirements. See
Iqbal, 556 U.S. at 678; Starr, 652 F.3d at 1216. In short, the Complaint does not
8

And to the extent Rina’s claims are based entirely on actions performed by the TMLF
Defendants in the course of their representation of a Nationstar Defendant in connection with
foreclosure proceedings, they likely would be barred by claim preclusion. See Plotner, 224 F.3d
at 1169; Henry, 808 F.2d at 1235 n.6; Clemens, 2014 WL 7407603, at *3.

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provide the AP and TMLF Defendants with fair notice of the bases for claims
against them, in violation of Rule 8. See Cafasso v. Gen. Dynamics C4 Sys., Inc.,
637 F.3d 1047, 1059 (9th Cir. 2011); see also Am. Ass’n of Naturopathic
Physicians v. Hayhurst, 227 F.3d 1104, 1107 (9th Cir. 2000) (“[A] pro se litigant is
not excused from knowing the most basic pleading requirements.”). In short, Rina
fails to state a plausible claim for relief against the AP and TMLF Defendants.
E.

Class Action Claims
To the extent Plaintiffs assert class claims, such claims fail because

Plaintiffs are not adequate class representatives. See Fed. R. Civ. P. 23(a)(4)
(requiring that class representatives be able to “fairly and adequately protect the
interests of the class”); McShane v. United States, 366 F.2d 286, 288 (9th Cir.
1966) (dismissing putative class action because pro se plaintiff lacked authority to
appear as an attorney for others).
In sum, Plaintiffs are precluded from asserting their claims against
Ocwen and the Nationstar Defendants, George is judicially estopped from asserting
his claims against all Defendants, George lacks standing to assert his claims
against all Defendants, the Complaint fails to allege that any Defendant acted
under color of state law, Rina fails to state a plausible claim for relief against the
AP and TMLF Defendants, and Plaintiffs are not adequate class representatives.

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Thus, the Complaint is DISMISSED. Because Plaintiffs are precluded from
asserting their claims against Ocwen and the Nationstar Defendants, amendment
would be futile; thus, Plaintiffs’ claims against Ocwen, Nationstar, MERS, and
MTGLQ are DISMISSED with prejudice. Because George is judicially estopped
from asserting claims and lacks standing to assert claims against all Defendants,
amendment would be futile; thus, George’s claims against all Defendants are
DISMISSED with prejudice. Rina’s claims against the AP and TMLF Defendants
are DISMISSED without prejudice.
E.

Leave to Amend
Claims that are dismissed with prejudice may not be amended. That

is, George may not amend any of his claims and Rina may not amend her claims
against Ocwen, Nationstar, MERS, and MTGLQ. Because Rina may be able to
amend her claims against the AP and TMLF Defendants, the court GRANTS her
leave to amend those claims only. 9 Rina may file an amended complaint on or
before October 12, 2018, to cure the deficiencies in her claims against the AP and
TMLF Defendants, if possible. That is, Rina may amend her claims to add

9

Because Plaintiffs are not adequate class representatives and neither the AP nor TMLF
Defendants are state actors based on the facts underlying this action, granting leave to amend
Plaintiffs’ class and § 1983 claims would be futile. Thus, the court DENIES leave to amend
those claims.

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allegations sufficient to state a claim against the AP and TMLF Defendants only,
but may not add new claims or name new defendants.
If Rina elects to file an amended complaint, she must allege the
specific basis of this court’s jurisdiction. Because all federal claims have been
dismissed and it appears there is no basis for diversity jurisdiction, Rina may want
to consider filing her claims in state court. She must also clearly designate on the
face of the document that it is a “First Amended Complaint.” And she must
comply with the Federal Rules of Civil Procedure and the Local Rules for the
United States District Court for the District of Hawaii. Local Rule 10.3 requires
that an amended complaint be complete in itself without reference to any prior
pleading. An amended complaint will supersede the preceding complaint. See
Ramirez v. Cty. of San Bernadino, 806 F.3d 1002, 1008 (9th Cir. 2015).
Defendants not renamed and claims dismissed without prejudice that are not
realleged in an amended complaint may be deemed voluntarily dismissed. See
Lacey v. Maricopa Cty, 693 F.3d 896, 928 (9th Cir. 2012) (en banc).
V. CONCLUSION
For the reasons set forth above, the Requests for Judicial Notice are
GRANTED, ECF Nos. 13, 23, 35; the Motions to Dismiss filed by Ocwen,
Nationstar, MERS, and MTGLQ are GRANTED, ECF Nos. 11, 35; the Motion to

26

Dismiss filed by the AP Defendants and the TMLF Defendants’ Joinder to that
motion are GRANTED in part and DENIED in part, ECF Nos. 22, 27; Ocwen’s
Joinder is GRANTED, ECF No. 37; the AP Defendants’ Joinder is GRANTED in
part and DENIED in part, ECF No. 39; and the Nationstar Defendants’ Joinders are
GRANTED, ECF Nos. 41, 42.
That is, Plaintiffs’ claims against Ocwen, Nationstar, MERS, and
MTGLQ are DISMISSED with prejudice; George’s claims against all Defendants
are DISMISSED with prejudice; and Plaintiffs’ class claims and § 1983 claims are
DISMISSED without leave to amend. Rina’s claims against the AP and TMLF
Defendants are DISMISSED with leave to amend. Rina may amend only her
claims against the AP and TMLF Defendants and may not add new claims or name
new defendants. George may not amend any of his claims.
///
///
///
///
///
///
///

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If Rina chooses to file a First Amended Complaint to attempt to cure
the deficiencies identified above, she must so do no later than October 12, 2018.
Failure to file a First Amended Complaint by October 12, 2018 will result in
automatic dismissal of this action without prejudice.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, September 12, 2018.

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

Kawelo v. Nationstar Mortg. LLC, et al., Civ. No. 18-00096 JMS-KSC, Order Dismissing
Complaint with Leave to Amend

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