Abubo v. Bank of N.Y. Mellon

• Decision Date: 15 October 2013
• Docket Number: Civil No. 11–00312 JMS–BMK.
• Citation: 977 F.Supp.2d 1037
• Parties: Edward Yuzon ABUBO, and Saranne Kagel Abubo, Plaintiffs, v. The BANK OF NEW YORK MELLON; Countrywide Home Loans, Inc.; Mortgage Electronic Registration Systems, Inc.; Bank of America, N.A.; And Does 1–50, Defendants.
• Court: U.S. District Court — District of Hawaii

977 F.Supp.2d 1037

Edward Yuzon ABUBO, and Saranne Kagel Abubo, Plaintiffs,

v.The BANK OF NEW YORK MELLON; Countrywide Home Loans, Inc.; Mortgage Electronic Registration Systems, Inc.; Bank of America, N.A.; And Does 1–50, Defendants.

Civil No. 11–00312 JMS–BMK.

United States District Court, D. Hawai‘i.

Oct. 15, 2013.

Frederick J. Arensmeyer, Gary Victor Dubin, Simeon Lane Vance, Benjamin Ruel Brower, Dubin Law Offices, Honolulu, HI, for Plaintiffs.

Patricia J. McHenry, Mitsuko T. Louie, Cades Schutte, Honolulu, HI, for Defendants.

ORDER DENYING DEFENDANT BANK OF NEW YORK MELLON'S MOTION FOR SUMMARY JUDGMENT

J. MICHAEL SEABRIGHT, District Judge.

I. INTRODUCTION

This action is again before the court after two prior dispositive Orders. Defendant Bank of New York Mellon (“Defendant” or “BONYM”) moves for summary judgment on Plaintiffs Edward and Saranne Abubo's (the “Abubos” or “Plaintiffs”) only remaining Count—a claim for damages under 15 U.S.C. § 1640(a) for BONYM's alleged failure to honor Plaintiffs' notice of rescission under 15 U.S.C. § 1635. Based on the following, the Motion is DENIED.

II. BACKGROUND

The court's two previous Orders have narrowed and refined the scope of this action, which arises from a January 22, 2007 refinancing transaction where Plaintiffs borrowed $1,375,000 from former Defendant Countrywide Home Loans, Inc. (“Countrywide”), secured by a promissory note and real property located in Hanalei, Hawaii (the “subject property”). See Abubo v. Bank of N.Y. Mellon, 2011 WL 6011787 (D.Haw. Nov. 30, 2011) (“Abubo I ”); Abubo v. Bank of N.Y. Mellon, 2012 WL 2022327 (D.Haw. June 5, 2012) (“ Abubo II ”). The parties are familiar with those Orders, and the court need not repeat all of the factual background. Instead, the court reiterates only the particular details of the transaction and of the court's prior rulings that are necessary to understand the context for this Motion.

A. Factual Background

In January 2007, a Countrywide loan officer solicited Plaintiffs to refinance their loan on the subject property. Doc. No. 29, Third Amended Complaint (“TAC”) ¶ 8.¹ On January 22, 2007, Countrywide loaned Plaintiffs $1,375,000 for that purpose. Doc. No. 67, Def.'s Concise Statement of Facts (“CSF”) ¶ 1. The loan was a “subprime,” interest-only, adjustable rate loan with an initial annual interest rate of 6.25%, requiring initial monthly payments of $7,161.46. Doc. No. 29, TAC ¶¶ 10–11. Plaintiffs allege that they were given a Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., disclosure form that stated the wrong amount financed ($1,370,207.55, rather than $1,375,000). Id. ¶ 14. The TAC also alleges that Plaintiffs were not each provided with two completed and signed copies of the Notice of Right to Cancel form as required under TILA, and instead they were only given a single blank copy of the form. Id. ¶ 13.

BONYM has, however, produced a copy of a January 23, 2007 Notice of Right to Cancel form with Plaintiffs' signatures and initials “acknowledg[ing] receipt of two copies” of the Notice. Doc. No. 67–6, Def.'s Ex. D. Plaintiffs do not dispute that they signed and initialed the form, but deny actually receiving completed and signed copies of the Notices. See Doc. No. 67–16, Def.'s Ex. N, Edward Abubo Dep. at 116 (“That's my signature.... My understanding is that I should have been given this at the time of closing. And I don't believe I was.”); Doc. No. 67–17, Def.'s Ex. O, Saranne Abubo Dep. at 112 (“I think it was inaccurate but we signed it.”); Doc. No. 77–1, Pls.' Decl. ¶ 7 (“Upon signing all of the closing documents, we were not each provided with two completed and signed copies of the Notice of Right to Cancel form [.]”).²

From January 2007 through March 2009, Plaintiffs made regular monthly payments on their loan. Doc. No. 67, Def.'s CSF ¶ 11. In April, May, June, and August 2009, however, Plaintiffs failed to make their payments, and thus defaulted on their loan. Id. Accordingly, Bank of America (which had acquired Countrywide in the meantime) sent Notices of Intent to Accelerate to Plaintiffs in May and August 2009, but the default was not cured. Id. ¶¶ 12–13.

The mortgage was assigned on October 12, 2009 by Mortgage Electronic Registration Systems, Inc. (“MERS”) (as nominee for Countrywide) to BONYM, “acting as Trustee of the Alternative Loan Trust 2007–HY3 Mortgage Pass–Through Certificates, Series 2007–HY3,” which is a “mortgage securitization trust and Pooling and Servicing Agreement.” Doc. No. 29, TAC ¶ 15; Doc. No. 77, Pls.' CSF ¶ 3. The assignment to BONYM was recorded in the Hawaii Bureau of Conveyances on October 28, 2009. Doc. No. 29–6, TAC Ex. 6. After being assigned the Mortgage, BONYM initiated non judicial foreclosure proceedings on the subject property. Specifically, on or about October 13, 2009, BONYM issued a “Notice of Mortgagee's Intention to Foreclose Under Power of Sale,” which set an auction date of December 18, 2009. Doc. No. 67, Def.'s CSF ¶¶ 14–15.

On December 17, 2009, Plaintiffs attempted to cancel the January 22, 2007 loan transaction by sending a cancellation letter from their counsel, Gary Dubin, by certified mail to “all current and former parties to the mortgage loan contract.” Doc. No. 77, Pls.' CSF ¶ 5; Doc. No. 77–6, Pls.' Ex. 5. Although many of the Defendants received the letter after the auction was to be held, see Doc. No. 77–7, Pls.' Ex. 6, the letter also indicates that a copy was hand delivered on December 17, 2009 to the office of David Rosen, Esq., who was identified on the foreclosure notice as counsel for BONYM. Doc. No. 77–6, Pls.' Ex. 5.

Despite Plaintiffs' cancellation letter, the foreclosure auction proceeded on December 18, 2009. Doc. No. 67, Def.'s CSF ¶ 15. At the auction, BONYM purchased the subject property for $1,021,500.00, id. Ex. L at 2, with a “credit bid.” Doc. No. 77, Pls.' CSF ¶ 6. On March 10, 2010, BONYM recorded a quitclaim deed to obtain title to the subject property. Doc. No. 67, Defs.' CSF ¶ 16 & Ex. M. BONYM then filed an ejectment action against Plaintiffs in state court. The TAC alleges that the Plaintiffs “have since prevailed in that ejectment action, which was dismissed for lack of subject matter jurisdiction.” Doc. No. 29, TAC ¶ 21.³ Undisputed bank records indicate that no regular payments have been made on the loan since July 2009. Doc. No. 67–10, Def.'s Ex. H.

B. Procedural Background

A year after their attempted cancellation, Plaintiffs filed a December 17, 2010 Complaint in the Circuit Court of the First Circuit, State of Hawaii (“State Court”). Doc. No. 15, State Ct. Docket, at 3. On April 11, 2011, Plaintiffs filed a First Amended Complaint in State Court, and Defendants removed the action to this court on May 12, 2011. Doc. No. 1, Notice of Removal. Plaintiffs then filed a Second Amended Complaint (“SAC”) on August 12, 2011, Doc. No. 18, which the court dismissed on November 30, 2011. See Abubo I, 2011 WL 6011787 at *1.

Abubo I dismissed all Counts of the SAC, including Plaintiffs' claim for rescission of the refinancing transaction under 15 U.S.C. § 1635(a). ⁴ The court, however, granted Plaintiffs “leave to file a TILA claim for damages based upon the allegedly wrongful refusal to rescind the transaction after Defendants received the December 17, 2009 notice of cancellation.” 2011 WL 6011787, at *11. Accordingly, on December 15, 2011, Plaintiffs filed the TAC, asserting a single claim entitled “TILA Cancellation and Rescission (Failure to Rescind).” Doc. No. 29, TAC at 8–9. It alleges:

[B]ecause Defendants ignored [the cancellation] notice, failed to rescind the subject mortgage loan, and instead moved forward with an alleged nonjudicial foreclosure to Plaintiffs' detriment, Plaintiffs are entitled under TILA, including [15 U.S.C.] Sections 1640 and 1641 thereof, to recover damages from Defendants based upon their wrongful failure to rescind the subject mortgage loan.

Id. ¶ 24. Section 1640(a) provides in pertinent part, that

any creditor who fails to comply with any requirement imposed under this part, including any requirement under section 1635 of this title ... with respect to any person is liable to such person in an amount equal to the sum of—

(1) any actual damage sustained by such person as a result of the failure; (2)(A)(i) in the case of an individual action twice the amount of any finance charge in connection with the transaction, ... or (iv) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $400 or greater than $4,000 .... [and]

(3) in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined to have a right of rescission under section 1635 or 1638(e)(7) of this title, the costs of the action, together with a reasonable attorney's fee as determined by the court[.]

In turn, 15 U.S.C. § 1641(a), regarding liability of assignees, provides in part that an action “which may be brought against a creditor may be maintained against an assignee of such creditor” (such as BONYM), if the violation “is apparent on the face of the disclosure statement[.]” Id. Such an action for damages under § 1640(a) may be brought “within one year from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e).

On June 5, 2012, Abubo II dismissed the § 1640(a) claim against MERS and Countrywide, but allowed it to proceed against BONYM. 2012 WL 2022327, at *4–5. Among other matters, Abubo II rejected the argument that the claim was time-barred under § 1640(e), ruling that the one-year limitations period did not begin to run until BONYM failed to respond to the December 17, 2009 cancellation letter (and by statute, BONYM had twenty days within which to respond). Id. at *3 (citing 15 U.S.C. § 1635(b)). That is, the action—having been filed on December 17, 2010—was timely filed within a year of BONYM's alleged failure to honor...