Au v. Republic State Mortg. Co.

• Decision Date: 29 March 2013
• Docket Number: CIVIL NO. 11-00251 JMS/KSC
• Parties: RONALD AU, Plaintiff, v. REPUBLIC STATE MORTGAGE COMPANY; CHAD COTTON; SAND CANYON CORPORATION, f.k.a. OPTION ONE MORTGAGE CORPORATION; HOMEWARD RESIDENTIAL, INC., f.k.a. AMERICAN HOME MORTGAGE SERVICING, INC.; and WELLS FARGO BANK, N.A., AS TRUSTEE FOR OPTION ONE MORTGAGE LOAN TRUST 2007-5 ASSET-BACKED CERTIFICATES, SERIES 2007-5, Defendants.
• Court: U.S. District Court — District of Hawaii

RONALD AU, Plaintiff,

v. REPUBLIC STATE MORTGAGE COMPANY;CHAD COTTON; SAND CANYON CORPORATION,f.k.a. OPTION ONE MORTGAGE CORPORATION;HOMEWARD RESIDENTIAL, INC.,f.k.a. AMERICAN HOME MORTGAGE SERVICING, INC.;and WELLS FARGO BANK, N.A., AS TRUSTEE FOROPTION ONE MORTGAGE LOAN TRUST 2007-5ASSET-BACKED CERTIFICATES, SERIES 2007-5, Defendants.

CIVIL NO. 11-00251 JMS/KSC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

DATED: March 29, 2013

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANT

REPUBLIC STATE MORTGAGE

COMPANY'S MOTION FOR

SUMMARY JUDGMENT, AND

DENYING PLAINTIFF'S MOTION

FOR PARTIAL SUMMARY

JUDGMENT

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT

REPUBLIC STATE MORTGAGE COMPANY'S MOTION FOR

SUMMARY JUDGMENT, AND DENYING PLAINTIFF'S MOTION FOR

PARTIAL SUMMARY JUDGMENT

I. INTRODUCTION

In this action, pro se Plaintiff Ronald Au ("Plaintiff" or "Au")¹ seeksto void a note and mortgage, as well as to recover damages, resulting from a February 2007 refinancing transaction on real property located at 45-030 Springer Place, Kaneohe, Hawaii (the "subject property"). Defendant Republic State Mortgage Company ("Republic") moves for summary judgment on all claims asserted against it in Plaintiff's Fourth Amended Complaint ("Fourth AC"). Doc. No. 208. In response, Plaintiff has filed a corresponding Motion for Partial Summary Judgment, seeking summary judgment in his favor against Republic on Counts Three (misrepresentation), Four (violation of Hawaii Revised Statutes ("HRS") Chapter 454), and Five (violation of the Truth in Lending Act ("TILA")). Doc. No. 220.²

The court decides the Motions without an oral hearing under Local Rule 7.2(d). For the reasons set forth to follow, Republic's Motion is GRANTED IN PART and DENIED IN PART, and Plaintiff's Motion is DENIED.

II. BACKGROUND

The parties and the court are well-aware of the background and procedural history of this action, which has resulted in several Orders as to variousDefendants and different versions of Plaintiff's Complaint. See Au v. Republic State Mortg. Co., 2011 WL 3422780 (D. Haw. Aug. 4, 2011) (granting in part Republic's Motion to Dismiss First Amended Complaint) ("Au I"); Au v. Republic State Mortg. Co., 2012 WL 760316 (D. Haw. Mar. 8, 2012) (granting Defendant Homeward Residential Inc.'s ("Homeward") Motion to Dismiss Counts Three and Five of the Third Amended Complaint) ("Au II"); Au v. Republic State Mortg. Co., 2012 WL 3113147 (D. Haw. July 31, 2012) (granting in part Motions to Dismiss the Fourth Amended Complaint) ("Au III"); Au v. Republic State Mortg. Co., 2012 WL 6726384 (D. Haw. Dec. 27, 2012) (denying Plaintiff's Motion to File Fifth Amended Complaint) ("Au IV").

The present Motions concern claims against Republic only, and thus the court reiterates only the relevant background as necessary to resolve claims as to Republic. The court begins by summarizing the allegations of the Fourth AC regarding Republic. Where appropriate, the court refers to the evidentiary record -- construed in the light most favorable to Plaintiff -- and notes where those allegations are supported by evidence (or points out if the record lacks such evidence).

The action arises from a February 2, 2007 refinancing transaction on the subject property. During the transaction, Plaintiff dealt with Defendant ChadCotton ("Cotton"),³ who was, or represented himself to be, associated with Republic. Doc. No. 128, Fourth AC ¶ 3. Cotton informed Plaintiff that Republic could refinance the subject property for $680,000 at a rate of 7.5% per annum as long as the loan closed by the first week of February 2007. Id. ¶ 9.⁴ Although Plaintiff allegedly was not provided a Good Faith Estimate confirming these terms prior to closing,⁵ Plaintiff did not doubt Cotton because Plaintiff had previously financed other property though Cotton, and he trusted him. Id.; Doc. No. 208-3 at 13, Au. Dep. at 64.

The February 2, 2007 closing documents, all knowingly signed by Au(as he admits),⁶ indicated that the mortgage was for $700,000 at an adjustable interest rate, initially set at 8.925%, with closing costs of over $19,000. Doc. No. 128, Fourth AC ¶ 10.⁷ (The closing costs were evidently rolled into the $680,000 principal.) Plaintiff questioned the figures at the time and called Cotton, but Cotton represented to Plaintiff by telephone conversation that (1) Republic had "misunderstood" that there was a loan commitment for 7.5%; and (2) after closing, Republic would "adjust" or modify the mortgage and promissory note to reflect the correct interest rate, and rebate certain closing costs. Allegedly relying on theserepresentations, Plaintiff proceeded to close escrow. Id. Plaintiff alleges that Republic or Cotton or both were not licensed mortgage brokers or solicitors in Hawaii, and therefore the note and mortgage entered into on February 2, 2007 are void and unenforceable under a then-applicable statutory provision, HRS § 454-8.⁸ Id. ¶ 35.

On February 8, 2007, Republic assigned the note and mortgage to Defendant Sand Canyon Corporation (known at that time as Option One Mortgage Corporation) ("Sand Canyon").⁹ Id. ¶ 12. Subsequently, Sand Canyon assigned the note to Wells Fargo Bank, N.A. ("Wells Fargo") on April 1, 2007 as part of a loan securitization Pooling and Service Agreement ("PSA"). Id. ¶ 29A. The mortgage (not the note) was assigned by Sand Canyon on January 4, 2012 (after this action was filed), and that assignment was recorded in the Hawaii Bureau of Conveyances on January 12, 2012. Id. Ex. G.

In March and April 2007, Plaintiff allegedly contacted representatives of Republic, who claimed that Cotton did not represent Republic, but instead wasassociated with "the Funding Group." Id. ¶ 11. He also later contacted the loan servicer at the time, Homeward (then known as American Home Mortgage Servicing, Inc.), but was told to direct his questions regarding the mortgage terms to Republic. Id. ¶ 12.

On February 6, 2009, Plaintiff wrote a letter to Republic and Homeward stating that "I believe that I am entitled to a loan modification in the interest rate and principal that you are assessing monthly." Doc. No. 208-3 at 60, Au Dep. Ex. 9. He then explained his version of events, as alleged in the different versions of the Complaint. Id. at 60-61. He wrote, in part:

On closing [on February 2, 2007], I first learned that the settlement charges were over $19,000, and the loan was at 8.9%. This was not what was represented by the representative of Republic State Mortgage. I immediately called him before signing any documentation. I was not able to reach him at his number, which I believe to be Texas. I spoke to a representative of the company where Mr. Cotton is employed, and they advised me that they owned or worked very closely with Republic State Mortgage and that the difference in settlement charges would be rebated to me after closing. I was further advised that because of their close connection to Republic State Mortgage, that the interest rate would be adjusted and I would receive documents for modification.

. . . .

I believe that there has been misrepresentation and fraud by the representative of Republic State Mortgage in soliciting the refinancing through Republic State Mortgage.. . . .

I have been making good faith payments pursuant to the loan statement by the loan servicing company, in good faith so as not to jeopardize my mortgage. Pursuant to the Federal law, I am demanding a loan modification as to the interest rate and to the excessive settlement charges that were assessed without prior notice.

Id. at 61.

Subsequently, in email communications in 2009 and 2010, Republic told Plaintiff that it would investigate Plaintiff's file. Through counsel, Republic told Plaintiff, among other things, that it "ha[s] ordered the file from storage," that "the company which has your loan documents bases part of its operations in [I]ndia," and "we are literally trying to get documents sent to us from India." Doc. No. 128, Fourth AC Exs. C & D; Doc. No. 231-12, Pl.'s Opp'n CSF Ex. 12.

III. STANDARD OF REVIEW

Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Rule 56(a) mandates summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).

"A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323); see also Jespersen v. Harrah's Operating Co., 392 F.3d 1076, 1079 (9th Cir. 2004). "When the moving party has carried its burden under Rule 56[(a)] its opponent must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal quotation signals omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (stating that a party cannot "rest upon the mere allegations or denials of his pleading" in opposing summary judgment).

"An issue is 'genuine' only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is 'material' only if it could affect the outcome of the suit under the governing law." In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson, 477 U.S. at 248). When considering the evidence on a motion for summary...