Lowther v. U.S. Bank N.A., Civil No. 13–00235 LEK–BMK.

• Decision Date: 04 September 2013
• Docket Number: Civil No. 13–00235 LEK–BMK.
• Parties: Patrick LOWTHER, individually and on behalf of all others similarly situated, Plaintiffs, v. U.S. BANK N.A. and Doe Defendants 1–50, Defendants.
• Court: U.S. District Court — District of Hawaii

971 F.Supp.2d 989

Patrick LOWTHER, individually and on behalf of all others similarly situated, Plaintiffs,
v.
U.S. BANK N.A. and Doe Defendants 1–50, Defendants.

Civil No. 13–00235 LEK–BMK.

United States District Court, D. Hawai'i.

Sept. 4, 2013.

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Brandee J. Faria, John F. Perkin, Perkin & Faria, James J. Bickerton, Bickerton Lee Dang & Sullivan, Stanley H. Roehrig, Law Office of Stanley H. Roehrig, Van–Alan H. Shima, Affinity Law Group, Honolulu, HI, for Plaintiffs.

James B. Rogers, Paul Alston, Alston Hunt Floyd & Ing, Honolulu, HI, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS COMPLAINT FILED ON APRIL 4, 2013
LESLIE E. KOBAYASHI, District Judge.

On May 31, 2013, Defendant U.S. Bank National Association as Trustee under Pooling and Servicing Agreement Dated as of December 1, 2006 MASTR Asset Backed Securities Trust 2006–HE5 Mortgage Pass-through Certificates Series 2006–HE5 (“Defendant” or “U.S. Bank”), filed its Motion to Dismiss Complaint Filed on April 4, 2013 (“Motion”). [Dkt. no. 9.] Plaintiff Patrick Lowther (“Plaintiff”) filed his memorandum in opposition on July 22, 2013, and Defendant filed its reply on July 29, 2013. [Dkt. nos. 18, 19.]

The Court finds this matter suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for

[971 F.Supp.2d 993]

the District of Hawai'i (“Local Rules”). After careful consideration of the Motion, supporting and opposing memoranda, and the relevant legal authority, Defendant's Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

BACKGROUND

On April 4, 2013, Plaintiff filed this purported class action against Defendant in state court. [Notice of Removal, filed 5/14/13 (dkt. no. 1), Exh. 1 (“Complaint”).¹] On May 14, 2013, Defendant removed the instant action to this district court. [Dkt. no. 1.]

Plaintiff owned real property located at 74–5058 Huaala Street, Kailua–Kona, Hawai'i (the “Property”). [Complaint at ¶ 19.] The Complaint asserts that, on or about July 13, 2006, Plaintiff executed a loan in favor of New Century Mortgage Corporation (“New Century”), secured by a mortgage (“Mortgage”) on the Property. On or about July 25, 2006, the Mortgage was recorded in the State of Hawai'i Bureau of Conveyances (“BOC”) by or on behalf of New Century, as Document No. 2006–135170. [ Id. at ¶¶ 7, 19, 21.]

The Complaint alleges that New Century and Home 123 Corporation (“Home 123”) ² engaged in lending to sub-prime borrowers in Hawai'i, and were subsidiaries or divisions of New Century Financial Corporation, subsequently known as New Century TRS Holdings, Inc. On or about April 2, 2007, all three entities initiated bankruptcy proceedings in the State of Delaware, and the bankruptcy court order appointed a trustee in liquidation (“Trustee”), effective August 1, 2008. Thus, Plaintiff alleges that “[f]rom and after August 1, 2008, no person or entity other than the Trustee had any power to transfer, assign, convey or otherwise dispose of any asset, title or interest, legal or equitable of Home 123 or New Century.” [ Id. at ¶¶ 7, 22–24.]

Plaintiff alleges that, on or prior to February 18, 2009, Defendant caused the execution of an assignment of the Mortgage and related note (“Note”) from New Century to U.S. Bank (“Assignment”). Plaintiff alleges that the Assignment “was signed purportedly on behalf of New Century by a person who was in fact an agent of U.S. Bank who falsely claimed to be authorized to sign on behalf of New Century.” [ Id. at ¶ 25 (citing Complaint, Exh. 1).] At the time Defendant accepted Assignment, it knew that only the Trustee had authority to transact business on behalf of New Century, and that those executing the Assignment had no such authority. Plaintiff therefore alleges that Defendant executed the Assignment in violation of Haw.Rev.Stat. § 708–852(1). ³ On February 24, 2009, Defendant recorded the Assignment in the BOC, as Document No. 2009–027272. Defendant subsequently commenced a non-judicial foreclosure of the Property pursuant to

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Haw.Rev.Stat. § 667–5, ⁴ and the foreclosure sale took place on April 30, 2009. [ Id. at ¶¶ 27, 29–32.] Plaintiff alleges that Defendant used the “unauthorized, improper, void ab initio, unfair and deceptive” Assignment in order to:

(a) Purportedly establish U.S. BANK as a mortgagee qualified to use the non-judicial foreclosure procedure;

(b) Purportedly create an unfair and deceptive “chain of title” in the official state records which would purportedly show U.S. BANK as having the ability to convey title by virtue of the foreclosure;

(c) Unfairly and deceptively give the published notice of foreclosure sale required by Chapter 667 an appearance of having been published by an entity with the legal right and title to foreclose; and/or

(d) Conceal or obscure defects or the existence of other entities in the chain of title from New Century or Home 123 by which U.S. BANK might otherwise have been required to claim ownership of the notes and/or mortgages of the right to foreclose.

Id. at ¶ 32.

Plaintiff asserts that he is a “consumer” within the meaning of Haw.Rev.Stat. § 480–1, and that he is entitled to damages under § 480–13. [ Id. at ¶ 39.] Plaintiff therefore alleges a claim for unfair and deceptive practices within the meaning of Haw.Rev.Stat. Chapter 480 (“UDAP” or “Count I”), based on: the fact that Defendant lacked authority from New Century and the Trustee to execute the Assignment; [ id. at ¶¶ 25, 27;] the fact that Defendant's execution of the Assignment was in violation of § 708–852(1); [ id. at ¶ 30, 32, 34;] Defendant's preparation, receipt, and use of the Assignment of the Mortgage and Note; [ id. at ¶ 28;] Defendant's act of recording the Assignment in the BOC; [ id. at ¶ 29;] and Defendant's “knowing use and recordation” of the Assignment to cause the foreclosure sale of the Property [ id. at ¶ 34.]. Plaintiff also asserts that, based on the Complaint's allegations of Defendant's conduct, Defendant is liable to Plaintiff for: wrongful foreclosure of the Property (“Count II”); intentional interference with prospective economic advantage (“Count III”); and trespass (“Count IV”). [ Id. at ¶¶ 32, 34, 36, 37.]

Plaintiff seeks the following relief: actual damages; reimbursement of costs and expenses under Haw.Rev.Stat. Chapter 480, including attorneys' fees; treble damages as provided by law; prejudgment interest; punitive damages; declaratory relief stating that the Assignment is null and void; equitable and injunctive relief to impose a constructive trust on the Property and monies obtained by Defendant through the use of the Assignment; equitable and injunctive relief to enjoin Defendant from “using, asserting or relying on any assignment from New Century or Home 123, executed after August 1, 2008, that is not executed by or with the express authorization of the Trustee in bankruptcy [;]” and any other appropriate relief.

I. Motion

Defendant filed its Motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and asserts that the Complaint fails to state a claim upon which relief can be granted. [Motion at 1–2.] At the outset, Defendant contends that all claims contained in the Complaint are time-barred. Defendant argues that, because the defects in the Complaint cannot be

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remedied by an amendment, the Complaint should be dismissed with prejudice. [Mem. in Supp. of Motion at 2.]

A. Count I—UDAP

Defendant argues that Count I is time-barred under the applicable four-year statute of limitations. Defendant contends that the statute of limitations for UDAP claims, pursuant to Haw.Rev.Stat. § 480–24(a) and the relevant case law, “begins to run from the date of the occurrence of the violation, not the date of discovery.” [ Id. at 5–6 (some citations omitted) (citing Haw.Rev.Stat. § 480–24(a); Teaupa v. U.S. Nat'l Bank N.A., 836 F.Supp.2d 1083, 1099–1100 (D.Hawai'i 2011)).]

According to Defendant, the allegations supporting Count I are based upon Defendant's act of executing the Assignment. Defendant argues, therefore, that Count I accrued on the date Defendant allegedly executed the Assignment, February 18, 2009. Applying a four-year limitations period, Defendant contends that Plaintiff would had to have brought Count I before February 18, 2013. [Mem. in Supp. of Motion at 6–7 (citing Complaint at ¶¶ 25, 28, 29, 32).] Because Plaintiff did not file his the Complaint until April 4, 2013, and does not offer any justification for equitable tolling of the statute of limitations, Defendant argues that Count I is time-barred and should be dismissed with prejudice. [ Id. at 7.]

B. Plaintiff's Other Claims

Defendant appears to categorize Counts II, III, and the Complaint's other allegations, as tort claims.⁵ Defendant notes that the Complaint repeatedly alleges claims for “wrongful foreclosure” and “unclean hands/tortfeasor conduct against public policy.” Defendant argues that this Court has previously held that Hawai'i courts do not recognize a common law cause of action for wrongful foreclosure. [ Id. (quoting Valencia v. Carrington Mortg. Servs., LLC, Civil No. 10–00558 LEK–RLP, 2013 WL 375643, at *6 (D.Hawai'i Jan. 29, 2013)).] Defendant further argues that there is no cause of action for “unclean hands” or “tortfeasor conduct against public policy,” and that the former is only an affirmative defense. Defendant contends that, on this basis alone, these tort claims should be dismissed. [ Id. (citations omitted).]

Defendant next argues that Count III also fails on its face. Defendant asserts that, in order to state an intentional interference claim,

a plaintiff must allege facts showing: (1) the existence of a prospective business relationship sufficiently definite and specific such that there is a reasonable probability of it coming to fruition[;] (2) knowledge of the relationship; (3) a purposeful...