Hele Ku KB, LLC v. BAC Home Loans Servicing, LP

• Decision Date: 30 July 2012
• Docket Number: Civil No. 11–00183 LEK–KSC.
• Citation: 873 F.Supp.2d 1268
• Parties: HELE KU KB, LLC, a Hawai'i limited liability company, Plaintiff, v. BAC HOME LOANS SERVICING, LP, a Texas limited partnership, et al., Defendants.
• Court: U.S. District Court — District of Hawaii

873 F.Supp.2d 1268

HELE KU KB, LLC, a Hawai'i limited liability company, Plaintiff,

v.BAC HOME LOANS SERVICING, LP, a Texas limited partnership, et al., Defendants.

Civil No. 11–00183 LEK–KSC.

United States District Court, D. Hawai‘i.

May 31, 2012.

Order Denying Reconsideration July 30, 2012.

Chanelle Mari Chung Fujimoto, Steven K.S. Chung, Steven Chung & Associates LLLC, Gregory A. Ferren, Honolulu, HI, for Plaintiff.

Andrew James Lautenbach, Brandi J. Buehn, Starn O'Toole Marcus & Fisher, Sharon V. Lovejoy, Honolulu, HI, John S. Siamas, Reed Smith LLP, San Francisco, CA, for Defendants.

ORDER DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, PARTIAL SUMMARY JUDGMENT; AND DENYING PLAINTIFF'S COUNTER–MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING BREACH OF CONTRACT CLAIM

LESLIE E. KOBAYASHI, District Judge.

Before the Court are: Plaintiff Hele Ku KB, LLC's ¹ (“Plaintiff” or “Hele Ku”) Motion for Partial Summary Judgment (“Plaintiff's Motion”), filed on January 4, 2012; [dkt. no. 85;] Defendant BAC Home Loans Servicing, LP's (“Defendant” or “BAC”) Motion for Summary Judgment, or in the Alternative, Partial Summary Judgment (“Defendant's Motion”), filed on February 1, 2012; [dkt. no. 107;] and Plaintiff's Counter–Motion for Partial Summary Judgment Regarding Breach of Contract Claim (“Plaintiff's Counter–Motion”), filed on April 3, 2012 [dkt. no. 155]. Defendant filed its memorandum in opposition to Plaintiff's Motion on April 4, 2012. [Dkt. no. 159.] Plaintiff filed its reply in support of Plaintiff's Motion on April 11, 2012. [Dkt. no. 166.] Plaintiff's Counter–Motion is also its memorandum in opposition to Defendant's Motion. Defendant filed its reply in support of Defendant's Motion on April 11, 2012. [Dkt. no. 168.]

These matters came on for hearing on April 30, 2012. Appearing on behalf of Plaintiff was Steven Chung, Esq., and appearing on behalf of Defendant were Sharon Lovejoy, Esq., and Andrew Lautenbaugh, Esq. Pursuant to this Court's order, [dkt. no. 187,] Plaintiff filed a supplemental declaration and exhibit on May 1, 2012, [dkt. no. 190,] and Defendant filed its supplemental declarations and exhibit on May 3, 2012 [dkt. no. 191]. After careful consideration of the motions, supporting and opposing documents, and the arguments of counsel, Plaintiff's Motion and Plaintiff's Counter–Motion are HEREBY DENIED, and Defendant's Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

BACKGROUND

Plaintiff filed the instant action on February 28, 2011 in state court. Defendant removed the action on March 21, 2011 based on diversity jurisdiction. [Notice of Removal at 4.]

Plaintiff filed its Second Amended Complaint on February 7, 2012. [Dkt. no. 116.] The Second Amended Complaint alleges the following claims: breach of contract (“Count I”); negligence (“Count II”); fraud/fraudulent misrepresentations (“Count III”); negligent misrepresentations (“Count IV”); and Promissory Estoppel (“Count V”).² The Second Amended Complaint prays for the following relief: an order of specific performance requiring Defendant to convey the Property to Plaintiff; actual, special, compensatory, expectation, consequential, general, treble, exemplary and/or punitive damages; attorneys' fees and costs; and any other appropriate relief. ³I. Factual Background

The instant case arises from Plaintiff's attempt to purchase 811 Hele Ku Street, Lahaina, Hawai'i 96761 (“the Property”) at a foreclosure auction.

Vincent M. Sampson and Authurina N. Sampson are the owners of the Property. [Def.'s Revised Concise Statement of Facts in Supp. of Def.'s Motion (“Def.'s CSOF”),⁴ filed 4/23/12, Decl. of Authurina N. Sampson (dkt. no. 176–1) (“Sampson Decl.”) at ¶ 3.] The Federal National Mortgage Association (“Fannie Mae” or “FNMA”) owns the beneficial interest in the Sampsons' loans. Defendant is not a current beneficiary or investor in the Sampsons' loans; Defendant is only the loan servicer. [Def.'s CSOF, Decl. of Nicole Bensend (dkt. no. 176–2) (“Bensend Decl.”) at ¶¶ 6–8.]

In June 2009, Mrs. Sampson contacted Defendant to inquire about a loan modification under the Making Home Affordable/Home Affordable Modification Program (“HAMP”). On or around July 27, 2009, she completed a HAMP application over the phone and was informed that she was approved for a HAMP trial plan, and that any foreclosure proceedings would be put on hold as long as the Sampsons made the $2,425.65 payments for the next three months. Mrs. Sampson authorized the first payment on the same date. [Sampson Decl. at ¶¶ 7–9.] By August 25, 2009, however, the Sampsons had not received any documents for the loan modification. [ Id. at ¶ 11.] Nicole Bensend, Defendant's Associate Vice President, Operations Team Lead for Litigation Management Foreclosure Servicing, states that all the terms of a written HAMP agreement apply to an orally-approved HAMP modification trial plan. [Bensend Decl. at ¶¶ 1, 15.]

Also on August 24, 2009, Defendant directed Mrs. Sampson to provide additional information in support of their application, which she did. Based on the additional information, Defendant informed Mrs. Sampson that they could make monthly payments of $1,689.50 instead of $2,425.65. Defendant again represented that foreclosure would not occur as long as the Sampsons made the new monthly payments. The Sampsons made the monthly payments from August 2009 to August 2010. [Sampson Decl. at ¶¶ 12–14.] They were never delinquent in their HAMP trial plan payments. [ Id. at ¶ 17.]

According to Ms. Bensend, however, Defendant mistakenly failed to cancel the Sampson's first HAMP modification trial plan in one of its databases. Thus, whenever the Sampsons made their $1,689.50 monthly payment, Defendant's system treated it as a partial payment under the first HAMP modification trial plan. [Bensend Decl. at 1127, 29.] On November 16, 2009 and January 22, 2010, Defendant sent the Sampsons correspondence referring to the erroneous $2,425.65 monthly payment. [ Id. at ¶¶ 30–31, Exhs. 31–32 (dkt. no. 175–14, 175–15).] On May 7, 2010, Defendant sent the Sampsons a letter stating that they had been declined for a permanent HAMP modification because they did not make all of their trial plan payments. Defendant also sent the Sampsons documents for a Fannie Mae modification with monthly payments of $3,727.41. The Fannie Mae documents had to be returned by May 17, 2010. [Bensend Decl. at 133, Exh. 34 (dkt. no. 175–17).] Mrs. Sampson contacted Defendant on May 14, 2010, and Defendant's agents assured her that the Sampsons had in fact made all required payments, their HAMP modification application was still pending, and foreclosure would not occur as long as they continued to make their payments. The Sampsons therefore did not go forward with the Fannie Mae modification. [Sampson Decl. at ¶ 22.]

On June 22, 2010, Defendant internally noted that, because it did not receive the Fannie Mae modification documents by the deadline, the Sampsons' forbearance agreement was cancelled. The forbearance plan, however, was still in effect, and could not have been cancelled by Defendant because the Sampsons complied with the second HAMP modification trial plan. [Bensend Decl. at ¶¶ 34, 37.] On July 19, 2010, Defendant sent the Sampsons a letter notifying them of the cancellation of the forbearance agreement. [ Id. at ¶ 36, Exh. 37 (dkt. no. 175–20).]

On July 27, 2010, Mrs. Sampson contacted Defendant regarding the status of the permanent modification. Defendant informed her that the documents were being sent to her and assured her that foreclosure would not proceed as long as they made the $1,689.50 payments. When Mrs. Sampson asked about any foreclosure, the agent told her “we are a long way from that.” [Sampson Decl. at ¶ 24.] On that same day, Defendant requested that Fannie Mae postpone the foreclosure on the Property for ninety days, but Fannie Mae did not approve the request until September 11, 2010. [Bensend Decl. at ¶¶ 38–39.] Ms. Bensend states the postponement request “was not communicated to [Defendant's] foreclosure counsel, Routh Crabtree Olsen (‘RCO’) prior to the sale.” [ Id. at ¶ 40.]

On August 5, 2010, without knowledge of the Sampsons' forbearance agreement or Defendant's continuance request to Fannie Mae, RCO conducted a nonjudicial foreclosure sale of the Property (“the Sale”). Plaintiff was the highest bidder at the Sale with a bid of $650,000.00. [Def.'s CSOF, Decl. of Derek Wong (dkt. no. 176–3) (“Wong Decl.”) at ¶¶ 3–4.] Ms. Bensend states that Plaintiff signed a “Sale Agreement” and submitted a $65,000.00 deposit. [Bensend Decl. at SI 42, Exh. 40 (dkt. no. 174–15).] Exhibit 40 contains a provision limiting Plaintiff's recovery to the return of its deposit if title to the Property was not conveyed for any reason other than Plaintiff's failure to perform its obligations under the parties' agreement.⁵ [Bensend Decl., Exh. 40.] The Court will refer to this provision as the “Limitation Clause”.

On September 7, 2010, Mrs. Sampson contacted Defendant to find out why the Property had been foreclosed. Defendant began an investigation into the matter in late November 2010. Defendant determined that the Sale occurred because the Sampsons were incorrectly deemed to be in default due to the failure to pay the correct amount under the HAMP modification trial plan. On December 9, 2010, Defendant requested that the Sale be rescinded, and Fannie Mae approved the request on December 31, 2010. Thus, Defendant has not closed the Sale. [Bensend Decl. at ¶¶ 43–47, Exh. 42 (dkt. no. 175–24).]

RCO recorded a Mortgagee's Affidavit of Foreclosure under Power of Sale (“Foreclosure Affidavit”) on August 27, 2010, but they were still unaware that the Sale should not have gone forward. After receiving a letter from the Sampsons' attorney, Mr. Wong contacted Steve Lee, Plaintiff's...