ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS BANK OF NEW YORK’S, BANK OF AMERICA, N.A.’S, AND BAC HOME LOANS SERVICING LP’S MOTION TO DISMISS SECOND AMENDED COMPLAINT FILED ON OCTOBER 12, 2011
I. INTRODUCTION
On May 25, 2010, Plaintiff Perle Menashe (“Plaintiff’) filed this action alleging various claims against Defendants Bank of New York, a New York banking corporation (“BONY”); Bank of America, NA, formerly known as Countrywide Bank FSB (“BAÑA”); and BAC Home Loans Servicing LP, formerly known as Countrywide Home Loan Servicing, Inc. (“BAC”) (collectively, “Defendants”) stemming from a mortgage transaction concerning real property located at 5105 Kapiolani Loop, Princeville, Hawaii 96722 (the “subject property”).
Plaintiff filed her First Amended Complaint (“FAC”) after Defendants filed a Motion for Judgment of the Pleadings on the Complaint, and Plaintiff filed her Second Amended Complaint (“SAC”) after the court dismissed the federal claims and declined jurisdiction over the remaining state law claims.
Currently before the court is Defendants’ Motion to Dismiss, in which they argue that the SAC fails to state a cognizable claim. Based on the following, the court GRANTS in part and DENIES in part Defendants’ Motion to Dismiss.
II. BACKGROUND
A. Factual Background
As alleged in the SAC, on or about June 14, 2007, Plaintiff entered into a loan repayment and security agreement in the amount of $600,000 with Countrywide Bank FSB (“Countrywide”), secured by the subject property. Doc. No. 60, SAC ¶¶ 3, 22. The loan terms provide for a five-year fixed-payment schedule of interest only (resulting in a negative amortization loan and a maximum principal balance of $690,000), followed by a payment rate that would be adjusted annually. Id. ¶ 23.
This loan transaction was a refinancing of Plaintiffs earlier mortgage (which carried a monthly payment of $1,764.81), and Countrywide convinced Plaintiff to refinance with Countrywide for a minimum payment of $2,217.72 per month. Id. ¶ 24. Countrywide did not disclose in any papers, however, that the payments may increase to $4,253.36 or even $6,171.68 per month. Id. ¶ 25. Countrywide also did not explain that it paid a yield spread premium of $1,500, and that refinancing would cause Plaintiff $18,121.42 in prepayment penalties with her previous mortgagee, IndyMac. Id. ¶ 27. Further, although Countrywide determined that an appraisal was unnecessary, the HUD statement lists that Integris was the appraiser for an $800 charge. Id. ¶ 34. According to the SAC, the terms of the transaction stripped, in total, over $70,000 of equity from the subject property due to costs, fees, and pre
The SAC asserts that in making and offering this loan, Countrywide relied on stated income, assets, and liabilities, and failed to make a reasonable determination of whether Plaintiff could truly qualify and repay the loan. Id. ¶¶ 33, 35. Approved, the mortgage broker, also falsely inflated Plaintiffs income, and Countrywide based the loan on that inflated income and a credit check only. Id. ¶ 35. According to the SAC, if Countrywide used more accurate information, Plaintiff would not have qualified for the loan. Id. ¶ 36. Further, although Plaintiff was not approved for the full payment rate and could have qualified for more appropriate loans, Countrywide explained to Plaintiff that she would easily be able to refinance within the initial five-year term, omitting mention of the volatility of the loan product and the financial marketplace. Id. ¶¶ 26, 29-31. The SAC asserts that Countrywide breached its fiduciary duty to place Plaintiff into a loan that she could afford. Id. ¶¶ 32, 37. Indeed, since entering into the loan transaction, Plaintiff has had difficulty making her payments, and has begun to fall behind after filing this action such that she is facing imminent default and foreclosure. Id. ¶¶ 38-39.
In July 2008, Bank of America Corp. acquired Countrywide (and, apparently, the mortgage and note) and changed Countrywide’s name to BANA. Id. ¶ 4. The loan was also apparently serviced by Countrywide Home Loan Servicing, LP (“CHLS”) — the SAC asserts that Bank of America Corp. acquired CHLS and changed its name to BAC. Id. According to the SAC, BANA and BAC were under a duty to inspect and examine the practices of the originators of the loan such that any violations of law and/or illegalities with the loan flow to BOA and BAC. Id. ¶ 49.
Plaintiffs mortgage provides that Mortgage Electronic Registration Systems, Inc. (“MERS”) is the mortgagee, solely as nominee for Countrywide. Doc. No. 63-4, Defs.’ Ex. B.
The SAC asserts that the mortgage was securitized and as a result, BONY does not own the mortgage note and is only a trustee, and BAC is only the servicer for the mortgage pool. Id. ¶¶ 56-58. According to the SAC, this securitization renders the mortgage unenforceable. Id. ¶¶ 59-60.
Finally, as to Defendants’ alleged RES-PA violations, the SAC asserts that on December 21, 2009, Plaintiff, through her attorney, mailed to BANA a qualified written request (“QWR”) requesting “specific servicing related information.” Id. ¶ 40. The December 21, 2009 letter, attached to the SAC as Exhibit 1, requests “a ‘certified’ copy of the original promissory note that was signed,” and “a copy of the appraisal taken at the time of the loan.” Doc. No. 60-1, SAC Ex. 1. On December 31, 2009, BANA requested written authorization from Plaintiff, which Plaintiff returned on January 22, 2010. Doc. No. 60, SAC ¶ 41. On March 18, 2010, Plaintiff renewed her request for the information sought in the December 21, 2009 letter, and additionally requested (1) nineteen categories of documents concerning the mortgage transaction, servicing of the mortgage, sales and/or assignments of the mortgage, and correspondence to Plaintiff, and (2) that BANA answer eleven different questions seeking information on, among other things, the names of the holder(s) of the note and mortgage, the location of the note and mortgage, calculations and rates on the mortgage, and any pooling arrangements of the mortgage loan. Doc. No. 60-2, SAC Ex. 2.
BANA responded in an April 6, 2010 letter by providing a summary of the loan, yet declined all other requests as going “beyond that which is available through a [QWR] made under 12 U.S.C. § 2605(B).” Doc. No. 60-3, SAC Ex. 3. BANA further explained that “Countrywide/Bank of America did not originate the subject loan ... [and] is not responsible for any misunderstanding or lack of communication between the borrower and originating entity.” Id. BANA also explained that “a credit block was placed while the issues in your letter were addressed,” and that “we will not remove the negative credit reporting from our customer’s credit file.” Id. According to the SAC, BANA has yet to provide a complete response to Plaintiffs QWRs, causing Plaintiff damages. Id. ¶¶ 46-47.
B. Procedural Background
On May 25, 2010, Plaintiff filed this action against Defendants and Approved. After BAC and BONY filed a Motion for Judgment on the Pleadings, Plaintiff filed the FAC on November 22, 2010. Defendants subsequently filed a Motion to Dismiss the FAC, and on September 27, 2011, the court dismissed Plaintiffs federal claims with leave for Plaintiff to amend. The September 27, 2011 Order further declined jurisdiction over Plaintiffs remaining state law claims until Plaintiff stated a claim based on federal law (both Plaintiff and Approved are citizens of Hawaii).
On October 11, 2011, Plaintiff filed her SAC, asserting claims against only BONY, BANA, and BAC (Plaintiff declined to continue alleging claims against Approved). The SAC asserts sixteen claims titled: (1) Violation of RESPA (Against BANA) (Count I); (2) Respondeat Superior Liability (Against BANA, BAC and BONY) (Count II); (3) Negligent or Wanton Hiring, Training or Retention (Against BANA, BAC and BONY) (Count III); (4) Negligent Misrepresentation (Against BANA, BAC, and Countrywide) (Count IV); (5) Civil Conspiracy (Against All Defendants) (Count V); (6) Breach of Con
On October 28, 2011, Defendants filed their Motion to Dismiss the SAC. On January 9, 2012, Plaintiff filed her Opposition,
III. STANDARDS OF REVIEW
A. Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss a claim for “failure to state a claim upon which relief can be granted[.]”
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal,
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,
B. Federal Rule of Civil Procedure 9(b)
Federal Rule of Civil Procedure 9(b) requires that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” “Rule 9(b) requires particularized allegations of the circumstances constituting fraud.” In re GlenFed, Inc. Sec. Litig.,
In their pleadings, Plaintiffs must include the time, place, and nature of the alleged fraud; “mere conclusory allegations of fraud are insufficient” to satisfy this requirement. Id. (citation and quotation signals omitted). Where there are multiple defendants, Plaintiffs cannot “lump multiple defendants together” and instead must “differentiate their allegations [between defendants].” Destfino v. Kennedy,
A motion to dismiss for failure to plead with particularity is the functional equivalent of a motion to dismiss under Fed. R.Civ.P. 12(b)(6). Vess v. Ciba-Geigy Corp. USA,
IV. DISCUSSION
Over the last three years, this court has been flooded with numerous actions brought by mortgagors trying to stave off foreclosure. As a result, this court has entered numerous orders outlining the pleading requirements for the various claims the court sees time and again. Plaintiffs counsel is apparently aware of several of these orders — Plaintiff argues that the SAC is similar to other cases that have survived motions to dismiss (without providing any substantive comparison),
A. Violation of RESPA (Count I)
In support of Plaintiffs RE SPA claim, the SAC asserts that BANA violated (1) 12 U.S.C. § 2605(e)(2) by failing and refusing to provide a written response to Plaintiffs
1. Failure to Provide a Complete Response to a QWR
As the court already explained in this action once, see Menashe,
a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that: (i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and (ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.
12 U.S.C. § 2605(e)(1)(B). “Servicing” is defined as:
receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts described in section 2609 of this title, and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan.
12 U.S.C. § 2605©(3).
After receiving the QWR, within sixty days, the loan servicer must, if the servicer determines an error in the account, make appropriate corrections to the borrower’s account and notify the borrower of the correction in writing. 12 U.S.C. § 2605(e)(2)(A). If the servicer determines that the account is not in error, the servicer must provide the borrower with a written explanation or clarification stating the reasons why the servicer believes the borrower’s account is correct. Id. § 2605(e)(2)(B). If the request pertains to a request for information, the servicer must either provide the information to the borrower or explain why such information is unavailable. Id. § 2605(e)(2)(C).
Defendants argue that BANA did not violate § 2605(e)(2) because Plaintiffs letters do not qualify as QWRs, and in any event, BANA properly responded to the letters. As to Defendants’ first argument, the court certainly understands how they came to the conclusion that Plaintiffs letters do not qualify as QWRs — requests seeking information on the validity of the loan and mortgage documents (such as documents relating to the original loan transaction and its subsequent history) simply “do not fall within the confines of RESPA.” Junod v. Dream House Mortg. Co.,
Plaintiffs December 21, 2009 letter requested “a ‘certified’ copy of the original promissory note that was signed,” and “a copy of the appraisal taken at the time of the loan.” Doc. No. 60-1, SAC Ex. 1. Because the information sought was directed to loan origination and not the servicing of the loan, the December 21, 2009 letter does not qualify as a QWR under RESPA. The court therefore GRANTS Defendants’ Motion to Dismiss to the extent Count I asserts that the December 21, 2009 was a QWR.
Plaintiffs March 18, 2010 letter also by and large requests information on the validity of the loan and mortgage documents as opposed to servicing. The March 18, 2010 letter is more akin to a clearly over-broad discovery request than a good-faith QWR. Specifically, Plaintiffs December 21, 2009 letter seeks nineteen categories of documents including, among other things, (1) all documents relating to the original loan transaction; (2) all purchase(s) and sale(s) of the mortgage agreements and/or servicing rights; (3) all deeds; (4) all canceled checks, money orders, drafts, debits, or credit notices issued to any servicer for payment on the account or relating to the mortgage transaction; (5) escrow analyses; (6) all documents evidencing payments on the account; (7) all correspondence from BANA, its representatives, or previous servicers, to Plaintiff; (8) all documents in Plaintiffs loan file; (9) all agreements between BANA and vendors that have been paid from Plaintiffs account, the loan originator, and/or the loan holder, lender, or trustee; and (10) all loan servicing records and documents regarding the accounting of the loan. Doc. No. 60-2, SAC Ex. 2. Plaintiffs March 18, 2010 letter further requests that BANA identify the holder(s) of the note and mortgage, the mortgage broker, all fees provided to the mortgage broker, how the loan rates were calculated, the locations of originals of the loan file, the original promissory note, the current mortgagee, whether the loan is part of a mortgage pool, and any investors who have participated in any mortgage-backed security involving the mortgage loan. Id.
As an initial matter, RESPA merely requires that in response to a QWR, a loan servicer must within sixty days “either provide the information to the borrower or explain why such information is unavailable.” 12 U.S.C. § 2605(e)(2)(C). To the extent Plaintiff suggests that RESPA allows a borrower to request, and forces a servicer to provide, any and all documents vaguely relating to servicing of the loan, the court rejects such proposition. Rather, a servicer must provide information (not necessarily documents) “relating to servicing of’ a loan, which in turn is defined as “receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan.” 12 U.S.C. § 2605(i)(3).
Buried in the March 18, 2010 letter’s nineteen requests for documents, however, are some requests that may plausibly be construed as seeking information regarding servicing — the March 18, 2010 letter broadly seeks, among other things, “all loan servicing records” and documents re
That the March 18, 2010 letter may qualify as a QWR, however, does not end the analysis. A violation of § 2605(e)(2) occurs only if, after receiving a QWR, a loan servicer fails within sixty days to “either provide the information to the borrower or explain why such information is unavailable.” As to this element of Plaintiffs RESPA claim, the SAC asserts that BANA “fail[ed] and refus[ed] to provide a proper written explanation or accurate and complete response to Plaintiffs QWR,” Doc. No. 60, SAC ¶ 68, but includes no factual allegations establishing the plausibility of this claim. Where (1) the March 18, 2010 letter requested a broad range of documents that went well beyond the limited subject matter of a valid QWR, (2) BANA apparently did provide servicing information to Plaintiff in an April 6, 2010 letter (well before RESPA’s 60-day time period),
2. Providing Information to Consumer Reporting Agencies
As to a servicer’s collection efforts while processing a QWR, RESPA provides:
During the 60-day period beginning on the date of the servicer’s receipt from any borrower of a qualified written request relating to a dispute regarding the borrower’s payments, a servicer may not provide information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency (as such term is defined under section 1681a of Title 15).
12 U.S.C. § 2605(e)(3).
The court recognizes that the SAC generally alleges that BANA “provid[ed] information to consumer reporting agencies regarding overdue payments allegedly owed by Plaintiff],” Doc. No. 60, SAC ¶ 70, but this allegation, on its own, is insufficient to assert a violation of § 2605(e)(3)-it is wholly conclusory and fails to describe when and to whom BANA allegedly provided the information. See, e.g., Midouin v. Downey Sav. & Loan Ass’n, FA.,
But BANA’s April 10, 2010 letter, attached to and described by the SAC, provides more details regarding this allegation. BANA’s April 10, 2010 letter provides that “a credit block was placed while the issues in your letter were addressed,” and that BANA “will not remove the negative credit reporting from our customer’s credit file.” Doc. No. 60-3, SAC Ex. 3. Neither party describes precisely what a “credit block” is and/or whether it is the “negative reporting” in Plaintiffs credit file. Read in a light most favorable to Plaintiff, however, a fair interpretation is that after BANA received Plaintiffs March 18, 2010 letter (arguably containing a QWR), it reported negative information to credit reporting agencies. The court finds that these additional facts are sufficient to state a claim and therefore DENIES Defendants’ Motion to Dismiss Plaintiffs RES-PA claim for violation of § 2605(e)(3).
3. Refusing to Cease Collection Efforts after Receiving Plaintiff’s QWR
Defendants argue that Plaintiffs claim that BANA violated RE SPA by “refusing to cease in its collection efforts after receiving Plaintiff’s] QWR,” Doc. No. 60, SAC ¶ 69, is too conclusory to state a claim that is valid on its face. The court agrees.
As an initial matter, § 2605(e) on its face includes no requirement that a servicer cease collection efforts. Rather, after receiving the QWR, within sixty days, the loan servicer must either (1) make appropriate corrections to the borrower’s ac
4. Failure to Allege Damages
As the court already explained, see Menashe,
Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts:
(1) Individuals
In the case of any action by an individual, an amount equal to the sum of—
(A) any actual damages to the borrower as a result of the failure; and
(B) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $1,000.
Because damages are a necessary element of a RE SPA claim, failure to plead damages is fatal to a RESPA claim. See, e.g., Esoimeme v. Wells Fargo Bank,
The requirement that a plaintiff plead damages is interpreted “liberally.” Shepherd,
The court finds that Plaintiff has sufficiently alleged that she suffered damages — although the SAC generally asserts that Plaintiff “suffered and continue^] to suffer damages and costs of suit,” Doc. No. 60, SAC ¶ 71, it further asserts that “Plaintiffs credit has been damaged,” id. ¶ 46, and that BANA placed a “credit block” on her account while responding to Plaintiffs requests for information. Id. ¶ 46. Moreover, BANA’s April 6, 2010 letter suggests that it placed “negative credit reporting” on Plaintiffs credit file. Doc. No. 60-3, SAC Ex. 3. These allegations state a plausible claim for damages. See also Hutchinson v. Del. Sav. Bank FSB,
In sum, the court GRANTS in part and DENIES in part Defendants’ Motion to Dismiss Count I. Plaintiffs RESPA claim for violation of § 2605(e)(3) remains.
B. Respondeat Superior Liability (Count II)
The SAC asserts that Defendants are liable for all of the improper actions of Countrywide because “[a]s a successor in interest to COUNTRYWIDE, Defendant BOA and BAC have hired, directed and controlled the actions of COUNTRYWIDE in its capacity as originator broker of the mortgage loan in this case,” and “engaged in a civil conspiracy to engage in conduct which is unlawful for the purpose of unjustly enriching” the members of the conspiracy. Doc. No. 60, SAC ¶¶ 74-76.
Defendants argue, and the court agrees, that this claim fails to state a claim upon which relief can be granted. “Under the doctrine of respondeat superior, an employer is held vicariously liable for the negligent acts of an [agent or] employee committed while the employee was acting within the scope of the employer’s business.” Y'amane v. Pohlson, 111 Hawai’i 74, 78 n. 7,
In opposition, Plaintiff does not address the actual allegations of the SAC (i.e., that this Count asserts respondeat superior liability between Countrywide and Defendants), and instead appears to suggest that references to Countrywide, the lender, are a short-hand way of referring to Approved, the mortgage broker. Specifically, Plaintiff contends that Approved was an agent of Countrywide such that Countrywide should be held vicariously liable for Approved’s alleged misconduct in obtaining the mortgage loan for Plaintiff. In offering this theory, Plaintiff ignores one major hole in her argument — the SAC does not include any allegations even suggesting the plausibility that Approved is Countrywide’s agent.
In general, a lender is not liable for the actions of a mortgage broker unless there “there is an agency relationship between the lender and the broker.” Gonzalez v. First Franklin Loan Servs.,
Under Hawaii law, “[a]n agency relationship may be created through actual or apparent authority.” See Hoshijo ex rel. White, 102 Hawai’i at 318,
Plaintiff has pled no facts whatsoever plausibly suggesting that any type of agency relationship existed between Approved and Countrywide, whether based on actual or apparent authority. See, e.g., Sipe v. Countrywide Bank,
The court therefore GRANTS Defendants’ Motion to Dismiss Count II.
C. Negligent or Wanton Hiring, Training or Retention (Count III)
The SAC asserts that Defendants “negligently or wantonly hired trained and supervised or retained” Countrywide and “various fictitious defendants” such that Defendants are liable for all damages caused by Countrywide. Doc. No. 60, SAC ¶¶ 79-81.
This claim fails for several reasons. First, for all the reasons described above as to Plaintiffs respondeat superior claim, Defendants did not have an employer/employee and/or agency relationship with Countrywide; rather, RANA is the successor to Countrywide. Plaintiffs Opposition confirms this fact by asserting her new theory of liability — that Countrywide had an agency relationship with Approved and failed to properly supervise it. See Doc. No. 67, Pl.’s Opp’n at 19. As explained above, however, the SAC includes no allegations that Countrywide failed to properly supervise Approved, much less any allegations explaining the relationship between Countrywide and Approved that would impute Approved’s conduct on Countrywide.
The court GRANTS Defendants’ Motion to Dismiss Count II.
D. Negligent Misrepresentation (Count IV)
In support of Plaintiffs negligent misrepresentation claim, the SAC asserts that Countrywide convinced Plaintiff to rely on a prior appraisal of the subject property that included many misrepresentations inflating the value of the subject property, causing Plaintiff to enter into the loan and sustain damages. Doc. No. 60, SAC ¶¶ 83-86.
Defendants argue that this claim is not plead with particularity pursuant to Rule 9(b). Rule 9(b), however, does not apply to a negligent misrepresentation claim under Hawaii law — “[a] negligent misrepresentation claim does not require intent, and accordingly is not subject to Rule 9(b).” Hele Ku KB, LLC v. BAC Home Loans Servicing, LP,
The court finds that the pleading requirements of Rule 9(b) do not apply to Count IV of the SAC. Although Defendants argue that this claim asserts fraudulent, as opposed to negligent misrepresentations, the court disagrees. A fraud claim requires a plaintiff to establish, among other things, that the defendant knew its representations were false, see Shoppe v. Gucci Am., Inc., 94 Hawai’i 368, 386,
The court therefore DENIES Defendants’ Motion to Dismiss Count IV of the SAC.
E. Civil Conspiracy (Count V)
In support of Plaintiffs civil conspiracy claim, the SAC asserts:
88. [Defendants] engaged in an unlawful combination and conspiracy to originate mortgage loans through a pattern and practice of predatory lending, stated income and inflated appraisals to conceal this unlawful activity for purposes of unjustly enriching the joint venture of the conspirators.
89. To accomplish the purposes of the civil conspiracy the members of the conspiracy engaged in conduct against the Plaintiff as set out herein, which includes actions that give rise to claims against [Defendants] of negligence, wantonness, suppression, unjust enrichment, forgery, unfair and deceptive acts and practices and actions which violate regulatory guidance promulgated by national banking in lending authorities....
Doc. No. 60, SAC ¶¶ 88-89.
Under Hawaii law, “ ‘the accepted definition of a conspiracy is a combination of two or more persons [or entities] by concerted action to accomplish a criminal or unlawful purpose, or to accomplish some purpose not in itself criminal or unlawful by criminal or unlawful means.’ ” Annan-Yartey v. Honolulu Police Dep’t,
Plaintiff has merely recited the elements of a conspiracy claim as opposed to any factual allegations establishing the plausibility of this claim. Further, to the extent these claims relate to alleged fraudulent conduct by Defendants, Plaintiff has failed to plead the circumstances of fraud and conspiracy with the required particularity. See Swartz v. KPMG LLP,
F. Breach of Contract (Count VI)
In support of Count VI, the SAC alleges:
92. COUNTRYWIDE, now Defendant BOA and BAC, expressly and impliedly promised the Plaintiff that they would secure for her a mortgage loan available with an implied duty of good faith and fair dealing.
93. COUNTRYWIDE failed to act in good faith to act fairly when they inaccurately and intentionally completed the Federal Loan Application for the Plaintiff. In fact if the Plaintiff earned over $12,500 per month as COUNTRYWIDE over stated on the Federal Loan Application why would COUNTRYWIDE qualify the Plaintiff for negative amortization loan that the Plaintiff could barely afford with her [] real and verifiable income. In fact by obtaining a negative amortization loan for the Plaintiff, Defendants COUNTRYWIDE created the impression that the loan could easily be affordable when in reality the type of loan the Defendants gave the Plaintiff actually created a higher yield spread premium for Countrywide.
94. As a direct result of COUNTRYWIDE now Defendants BOA and BAC’s breach of contract, the Plaintiff continues to suffer considerable damages[.]
Doc. No. 60, SAC ¶¶ 92-94.
Defendants argue that despite this claim being labeled a breach of contract claim, Plaintiff is actually asserting a claim for breach of the covenant of good faith and fair dealing, which fails as a matter of law. The court agrees.
As an initial matter, despite its title, this Count does not appear to state a claim for breach of contract and even if construed as such, it fails to state a claim. Plaintiff fails to allege even the basic elements of a breach of contract claim, much less the factual allegations to support it. Completely missing from this Count is any mention of the particular contract at issue, the particular provision that Countrywide allegedly violated, and whether Plaintiff performed. See, e.g., Velez v. The Bank of New York Mellon,
Given the allegations that Countrywide failed “to act in good faith to act fairly,” it appears that Plaintiff has actually alleged a claim for bad faith. But as this court has explained in numerous previous orders, see, e.g., Teaupa v. U.S. Nat’l Bank N.A,
Importantly, even assuming a bad faith tort exists outside the insurance context, it is well-settled that “[a] party cannot breach the covenant of good faith and fair dealing before a contract is formed.” Contreras v. Master Fin., Inc.,
Because all of Count Vi’s allegations concern pre-contract activities (failing to accurately fill out the loan application and making an improper loan to Plaintiff), De
G. Breach of Fiduciary Duty (Count VII)
Count VII asserts that Plaintiff retained Countrywide as her agent to obtain the most affordable mortgage such that Countrywide owed Plaintiff a “fiduciary duty of the highest degree of loyalty diligence and fidelity,” and that Countrywide breached this duty during the loan consummation through various misdeeds. Doc. No. 60, SAC ¶¶ 96-110.
These allegations fail to state a claim against Defendants. As explained in McCarty v. GCP Mgmt, LLC,
The SAC alleges no “special circumstances” that might impose a fiduciary duty in this mortgage-lending situation against Defendants. See, e.g., Anderson,
In opposition, Plaintiff acknowledges that lenders do not generally owe a fiduciary duty to the borrowers, yet argues that Approved owed Plaintiff a fiduciary duty as Plaintiffs mortgage broker and such duty is imputed to Countrywide on the basis of respondeat superior. As explained above, however, the court rejects that Plaintiff has pled the existence of any agency relationship between Approved and Countrywide. The court therefore GRANTS Defendants’ Motion to Dismiss Count VII.
H. Fraudulent Concealment and Inducement (Counts VIII and IX)
Count VIII asserts that Countrywide fraudulently obtained the mortgage loan by (1) overstating Plaintiffs income in the loan application, (2) approving the loan based solely on stated income, (3) extending credit based on the liquidated
These allegations do not meet Plaintiffs burden under Rule 9(b)-the allegations are conclusory and “fail to assert ‘particularized allegations of the circumstances constituting fraud’ ... such as the time, place, and nature of the alleged actions, and how each Defendant participated in the fraud.” Chun v. Accredited Home Lenders, Inc.,
Further, as this court explained in Long v. Deutsche Bank Nat’l Trust Co.,
Plaintiffs Opposition confirms that these allegations have not been pled with particularity. Specifically, Plaintiff again offers up her new theory for these claims that Approved made the various false statements, and that Countrywide, BAÑA, and BAC are liable through respondeat superi- or. Doc. No. 67, Pl.’s Opp’n at 26-29. Such facts are not pled in support for these claims, and as explained above, Plaintiff has not pled any agency relationship between Countrywide and Approved. Further, even if Plaintiff had pled that Approved was the entity making the fraudulent misrepresentations, then Plaintiff would still need to plead how the actions of Approved were directed to induce Plaintiff, as opposed to Countrywide, to take certain actions.
The court therefore GRANTS Defendants’ Motion to Dismiss Counts VIII and IX.
I. Unfair and Deceptive Acts and Practices — HRS § 480-2 (Count X)
Count X asserts that Defendants failed to disclose various “facts, circumstances and risks” to Plaintiff to hide the actual payment schedule and loan amount. Doc. No. 60, SAC ¶ 132. The SAC further asserts that Defendants engaged in “predatory lending” by failing to disclose all material terms and using “unfair fraudulent and unconscionable” acts including (1) targeting borrowers who are “vulnerable to abusive practices” or could otherwise qualify for mainstream loans, (2) using a teaser rate that ensures negative amortization, (3) stripping equity from the loan through repeated refinancing, (4) failing to warn Plaintiff that “consolidating unsecured debt into [a] mortgage loan secured by [a] home is a bad idea,” (5) paying a
Plaintiffs § 480-2 claim appears to be based at least partly on allegedly fraudulent conduct by Defendants, yet Count X is not plead with the requisite particularity. Specifically, where a Chapter 480 claim is based on fraudulent acts, a plaintiff must plead the claim with particularity. See Smallwood,
The court GRANTS Defendants’ Motion to Dismiss Count X.
J. Improper Securitization of the Loan (Counts XI-XIV)
Counts XI through XIV of the SAC assert claims directed to the fact that the subject loan was securitized. Count XI alleges that (1) the mortgage is a security agreement and may not be modified by one party without written consent of the other; and (2) Defendant unilaterally changed the terms of Plaintiffs mortgage when the mortgage was placed under a servicing and pooling agreement. Doc. No. 60, SAC ¶¶ 139-43. Count XII asserts that the “securitization of the note is a conversion rendering it null, void and unenforceable.” Id. ¶ 145. Count XIII asserts that securitization of the loan separated control over the mortgage and the decision to foreclose from the note holder without Plaintiffs consent. Id. ¶¶ 151-52. Finally, Count XIV asserts that securitization restricts the ability modify the mortgage, interfering with Plaintiffs right to redeem the subject property. Id. ¶¶ 155-56.
These claims fail to state a claim upon which relief can be granted. This court has addressed similar claims in other cases, see Long v. Deutsche Bank Nat’l Trust Co.,
In opposition, Plaintiff points to no law indicating that securitization can be the basis of a cause of action. Instead, Plaintiff argues that her claims should be viewed as a breach of contract claim-Defendants allegedly breached the parties’ agreement that Plaintiff was receiving a “loan” when the mortgage was subsequently converted into a security instrument. Doc. No. 67, Pl.’s Opp’n at 31-32. The court rejects this argument — Plaintiff fails to point to any actual term in the parties’ mortgage that prevented securitization of the loan. The court therefore GRANTS Defendants’ Motion to Dismiss Counts XI through XIV.
K. Quiet Title (Count XV)
Count XV asserts that Plaintiff is entitled to clear title of the subject property and that Defendants are without “legal or equitable right, claim, or interest in the property.” Doc. No. 60, SAC ¶¶ 159-60.
This claim fails to state a claim upon which relief can be granted. As an initial matter, Plaintiff has not alleged sufficient facts regarding interests of the various parties to make out a cognizable claim for “quiet title.” Plaintiff has merely alleged the basic elements of a quiet title claim, and thus the Count fails to state a claim. See Iqbal,
Further, in order to assert a claim for “quiet title” against a mortgagee, a borrower must allege they have paid, or are able to tender, the amount of indebtedness. “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 deed of trust.’ ” Rosenfeld v. JPMorgan Chase Bank, N.A.,
L. Constructive Trust (Count XVI)
Count XVI requests that the court declare a constructive trust. Doc. No. 60, SAC ¶ 165. “[A] constructive trust is not a claim, in and of itself, rather it is a remedy which may be sought by a plaintiff after he or she has established that certain prerequisites have been met.” Kona Enters., Inc. v. Estate of Bishop,
V. CONCLUSION
For the foregoing reasons, the court GRANTS in part and DENIES in part Defendants’ Motion to Dismiss. Count I (to the extent based on a violation of 12 U.S.C. § 2605(e)(3)) and Count III of the SAC remain.
As discussed at the January 30, 2012 hearing, if Plaintiff wishes to seek leave to amend the SAC, she must file an appropriate motion pursuant to Rule 15. Such motion, if filed, should (1) provide as an exhibit the proposed Third Amended Complaint; and (2) address how she has corrected the deficiencies of the SAC outlined in this Order. In attempting to amend the SAC, Plaintiff should carefully read this Order and not simply re-allege claims that this court has already dismissed or that Plaintiff cannot in good faith amend. For example, Plaintiff should not allege (1) a quiet title claim without alleging an ability to tender the loan proceeds; (2) any claims based on securitization of the mortgage loan; (3) a breach of contract claim without identifying the contract at issue, the parties to the contract, whether Plaintiff performed under the contract, the particular provision of the contract allegedly violated by the parties, when and how the parties allegedly breached the contract, and how Plaintiff was injured; or (4) any “claims” that are in actuality remedies.
IT IS SO ORDERED.
Notes
. Plaintiff had named as a Defendant Approved Mortgage, Inc. ("Approved”), which Plaintiff later dropped in her SAC to establish diversity jurisdiction.
. The court takes judicial notice of the mortgage, which is a public document recorded in the Bureau of Conveyances. See United States v. 14.02 Acres of Land More or Less in Fresno Cnty.,
Plaintiff also requests that the court take judicial notice "of the Attorneys General invesligations being conducted by all fifty states against [BANA] based in the same or substantially similar fact patterns alleged by other homeowners." Doc. No. 67, Pl.’s Opp’n at 9. The court denies Plaintiff’s request — Plaintiff fails to explain how such facts are directly relevant to the Motion to Dismiss and/or establish whether Plaintiff has stated a claim upon which relief can be granted. Indeed, whether BANA has been accused of misdeeds in other instances sheds no light on whether BANA has committed misdeeds as alleged in this action. In short, this court is not here to pass judgment on culpability for our nation's recent mortgage collapse.
. Plaintiff also brought a Motion to Strike Defendants' Motion to Dismiss on the basis that Defendants failed to file Corporate Disclosure Statements or Initial Disclosure Statements. Plaintiff subsequently withdrew that Motion.
. In particular, Plaintiff argues that this case is similar to Rundgren v. Bank of New York Mellon,
. BANA's April 6, 2010 letter states that it provided Plaintiff (1) "a summary of the subject loan,” and (2) a "Loan Transaction History Statement” giving a detailed outline of the transactions associated with Plaintiff’s loan including "information on payments received, tax and insurance payments disbursed, funds in the suspense/unapplied funds balance, and late fees assessed and paid.” Doc. No. 60-3, PL's Ex. 3.
. The court also recognizes that the SAC arguably fails to state a claim because Plaintiff’s QWR merely requested information (or, more precisely, documents) regarding servicing of her loan; the letter did not appear to raise any "dispute regarding [Plaintiff's] payments” as required by § 2605(e)(3). Because the parties did not raise this issue in their briefs, the court declines to address it further.
. Plaintiff further suggests that because Approved has dissolved, Plaintiff should be able to recover damages from Countrywide. See Doc. No. 67, PL's Opp'n at 19. That Approved has dissolved, however, provides no legal basis for holding Defendants liable for Approved’s alleged wrongs.
. Although Defendants raise a number of new arguments in their Reply, the court does not address arguments raised for the first time in Reply. See, e.g., Hi-Tech Rockfall Constr., Inc. v. Cnty. of Maui,
. Plaintiff argues that she brings this claim under common law, as opposed to HRS § 669-1. Regardless, it is deficiently pled. Plaintiff further argues that Hawaii caselaw suggests that Plaintiff need not assert the ability to tender the loan proceeds. The cases cited by Plaintiff, however, does not address quiet title claims asserted by a mortgagor and are therefore inapposite. See Alexander & Baldwin, Inc. v. Silva,