Caraang v. Mortgage

• Decision Date: 20 June 2011
• Docket Number: Civil No. 10–00594 LEK–BMK.
• Parties: Edwin Pascua CARAANG and Edna Gorospe Caraang, Plaintiffs,v.PNC MORTGAGE, etc., et al., Defendants.
• Court: U.S. District Court — District of Hawaii

795 F.Supp.2d 1098

Edwin Pascua CARAANG and Edna Gorospe Caraang, Plaintiffs,

v.PNC MORTGAGE, etc., et al., Defendants.

Civil No. 10–00594 LEK–BMK.

United States District Court,D. Hawai‘ii.

June 20, 2011.

James H. Fosbinder, Ivey Fosbinder Fosbinder LLLC, A Limited Liability Law Company, Wailuku, HI, for Plaintiffs.David B. Rosen, Lauren M. Akitake, The Law Office of David B. Rosen, ALC Honolulu, HI, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART PNC DEFENDANTS' MOTION TO DISMISS COMPLAINT

LESLIE E. KOBAYASHI, District Judge.

Defendants PNC Mortgage, a division of PNC Bank, National Association; PNC Bank, National Association in its individual capacity and as successor by merger to National City Mortgage Inc., and National City Bank; and PNC Financial Services Group, Inc. (collectively “PNC Defendants”), filed the instant Motion to Dismiss Complaint (“Motion”) on February 25, 2011. Plaintiffs Edwin Pascua Caraang and Edna Gorospe Caraang (collectively “Plaintiffs”) filed their Opposition to the Motion (“Memorandum in Opposition”) on April 12, 2011, and the PNC Defendants filed their reply on April 19, 2011. This matter came on for hearing on May 23, 2011. Appearing on behalf of the PNC Defendants was David Rosen, Esq., and appearing on behalf of Plaintiffs was James Fosbinder, Esq. Later that day, the PNC Defendants filed their Submission of Supplemental Authority in support of the Motion (“Supplement”). After careful consideration of the Motion, supporting and opposing documents, and the arguments of counsel, the PNC Defendants' Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

BACKGROUND

Plaintiffs filed the instant action on October 12, 2010 against Defendants PNC Mortgage, PNC Bank, N.A., PNC Financial Services Group, Inc., National City Mortgage, National City Bank, and E*Trade Bank (collectively “Defendants”).

The Complaint alleges that, on or about May 27, 2007, Plaintiffs entered into a loan transaction to refinance their property located at 255 Aliiolani Street, Makawao, Hawaii 96768 (“the Property”). [Complaint at ¶¶ 1, 17.] Plaintiffs executed a promissory note in the principal amount of $1,400,000 (“the Note”), secured by a mortgage on the Property (“the Mortgage”). Plaintiffs also executed a second promissory note and mortgage. Although it is not entirely clear from the Complaint, it appears that Plaintiffs' allegations in this case relate to the $1,400,000 loan and not the second loan. [ Id. at ¶ 17.] Plaintiffs state that they followed all directions and submitted all documents that Defendants National City Mortgage and National City Bank, N.A. (collectively “National City”) requested. Plaintiffs claim that, because Defendants, and/or their predecessors in interest, failed to provide Plaintiffs with the necessary documents and failed to make the required disclosures, Plaintiffs could not make a fully informed decision and were lured into a loan which resulted in a financial benefit to National City, and/or its successors in interest, and a financial detriment to Plaintiffs and which substantially increased Plaintiffs' likelihood of default. [ Id. at ¶¶ 19–20.]

Plaintiffs allege that: they were not provided with a signed and dated copy of their loan application; they were not provided with an initial truth-in-lending statement or a good faith estimate within three days of their application; they were not timely provided with other legally required notices, such as a final truth-in-lending disclosure, a HUD settlement statement, or a notification of their consumer rights; National City did not inform them that it was treating Plaintiffs' application as a subprime loan, did not inform them about what assets and income National City was qualifying them based upon, and did not inform them that this was inconsistent with underwriting guidelines and would increase Plaintiffs' likelihood of default; and Defendants' predecessors in interest did not disclose the true terms of the loan. Plaintiffs claim that they did not understand the terms of the proposed loan because of Defendants' failure to make these disclosures, and they were not able to compare the terms of the proposed loan with the terms of loans that other lenders offered. [ Id. at ¶¶ 21–25.]

Plaintiffs argue that Defendants targeted persons who were not financially sophisticated, or were otherwise vulnerable to abusive practices, and offered them unduly expensive credit. Plaintiffs allege that National City approved their loan based on a no-income, no-asset product based on the value of the Property, and National City did not consider Plaintiffs' ability to make payments on the loan. [ Id. at ¶¶ 27–28.] Plaintiffs also argue that Defendants: 1) failed to inform them that Defendants intended to securitize and sell all or parts of their Note and/or Mortgage to other lenders and loan servicers; 2) failed to inform them that Defendants would disclose confidential information to other lenders or investors who sought to purchase bundled loans; and 3) failed to provide Plaintiffs with the required opt-out notice. [ Id. at ¶¶ 35–36.] Plaintiffs allege that Defendants knew or should have known about National City's acts and omissions and therefore National City's acts and omissions are imputed to all Defendants. [ Id. at ¶ 37.]

After Plaintiffs experienced “loan distress”, they sought to modify and/or refinance their loan. [ Id. at ¶ 39.] Defendants refused and allegedly did not deal with Plaintiffs in good faith. [ Id. at ¶ 40.]

Plaintiffs claim that, during the life of the loan, Defendants, and/or their predecessors in interest, sold and/or transferred the Note and Mortgage without proper endorsements or assignments, causing a break in the chain of title, and without disclosing to Plaintiffs all business affiliations. Plaintiffs therefore allege that Defendants, and/or their predecessors in interest, did not have the right to foreclose upon the Property. [ Id. at ¶¶ 44, 48.] Further, Defendants, and/or their predecessors in interest, failed to provide Plaintiffs with timely notice of the foreclosure, rendering the foreclosure and sale void. [ Id. at ¶ 46.] Plaintiffs also allege that Defendants PNC Mortgage and/or PNC Bank, N.A. (“PNC Bank”) had no authority to enforce the Mortgage and Note against Plaintiffs because they were not in possession of the original Note. [ Id. at ¶ 49.]

Plaintiffs claim that, because of the foregoing violations of federal and state law, Defendants cannot file or conduct ejectment proceedings against them. In the alternative, Plaintiffs allege that their defenses, claims, and various rights of action preclude Defendants from filing or conducting ejectment proceedings against them. [ Id. at ¶¶ 50–51.]

Plaintiffs assert the following claims: Count I—violation of the Home Ownership Equity Protection Act (“HOEPA”), 15 U.S.C. § 1639 et seq. ; Count II—violation of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq. ; Count III—violation of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1605 et seq., and Regulation Z, § 226.4; Count IV—fraudulent misrepresentation; Count V—breach of fiduciary duty; Count VI—unjust enrichment; Count VII—civil conspiracy; Count VIII—complaint to quiet title; Count IX—violation of Hawaii Bureau of Conveyances (“BOC”) regulations; Count X—mistake; Count XI—unconscionability; Count XII—unfair and deceptive acts or practices (“UDAP”), in violation of Haw.Rev.Stat. § 480–2 and § 481A–3; Count XIII—failure to act in good faith; Count XIV—recoupment; Count XV—negligent and/or intentional infliction of emotional distress; Count XVI—violation of Hawai'i foreclosure law, Haw.Rev.Stat. Chapter 667; Count XVII—violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692–1692p, as amended; Count XVIII—violation of the Sherman Antitrust Act, 15 U.S.C. § 2; and Count IXX ¹—violation of Hawai'i antitrust/antimonopoly acts.

Plaintiffs seek the following: a judgment of rescission; statutory damages; actual damages; treble damages; punitive damages; a temporary restraining order or injunctive relief; a judgment of recoupment, reimbursement and/or indemnification; and any other appropriate relief.

I. Motion

In the instant Motion, the PNC Defendants first note that Plaintiffs do not deny that they defaulted on their loan obligations, and Plaintiffs did not provide basic information about the loan or attach the relevant documents. The PNC Defendants argue that the Court should consider the documents which are crucial to the Complaint, and the PNC Defendants argue that this would not convert the Motion to a motion for summary judgment. [Mem. in Supp. of Motion at 3 (citations omitted).]

The PNC Defendants therefore filed a Request for Judicial Notice (“RJN”) on February 25, 2011. The PNC Defendants ask the Court to take judicial notice of the following documents:

• Exh. A—the May 16, 2007 Note referred to supra, which Plaintiffs executed in favor of National City Mortgage (“NCM”), a division of National City Bank (“NCB”);

• Exh. B—the May 16, 2007 Mortgage referred to supra, which Plaintiffs executed in favor of NCM, and which was recorded with the Land Court on May 24, 2007, as Document No. 3606310 on Cert. 708,801;

• Exh. C—the Land Court Petition for Order Re: Change of Name/Merger reflecting that NCM was merged with and into NCB on October 1, 2008 (“NCM Land Court Petition”), recorded with the Land Court on February 9, 2009, as LCO 177781;

• Exh. D—the Land Court Petition for Order Re: Change of Name reflecting that NCB was merged with and into PNC Bank on November 6, 2009 (“PNC Land Court Petition”), recorded with the Land Court on December 23, 2009, as LCO 181315;

• Exh. E—the PNC Bank Certificate dated November 6, 2009, as further evidence of the merger of NCB with and into PNC;

• Exh. F—PNC Bank's Notice of Mortgagee's Intention to Foreclose Under Power of Sale (“NOI”), recorded in the BOC on April...