Rundgren v. the Bank of N.Y. Mellon

• Citation: 777 F.Supp.2d 1224
• Decision Date: 28 February 2011
• Docket Number: Civil No. 10–00252 JMS/LEK.
• Parties: Michele Colleen RUNDGREN, Plaintiff,v.The BANK OF NEW YORK MELLON, a New York corporation; Countrywide Home Loans, Inc., a California corporation, by merger now Bank of America; and Bank of America, a California corporation, Defendants.
• Court: U.S. District Court — District of Hawaii

777 F.Supp.2d 1224

Michele Colleen RUNDGREN, Plaintiff,

v.The BANK OF NEW YORK MELLON, a New York corporation; Countrywide Home Loans, Inc., a California corporation, by merger now Bank of America; and Bank of America, a California corporation, Defendants.

Civil No. 10–00252 JMS/LEK.

United States District Court, D. Hawai‘i.

Feb. 28, 2011.

Gary Victor Dubin, Frederick J. Arensmeyer, Long Huy Vu, Dubin Law Offices, Honolulu, HI, for Plaintiff.Patricia J. McHenry, Amanda Marie Jones, Cades Schutte, Honolulu, HI, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS SECOND AMENDED COMPLAINT FILED ON NOVEMBER 5, 2010

J. MICHAEL SEABRIGHT, District Judge.

I. INTRODUCTION

Plaintiff originally filed this action on March 10, 2010, alleging claims against various Defendants stemming from mortgage transactions and a subsequent notice of nonjudicial foreclosure concerning real property located at 4487 Emmalani Drive, Princeville, Hawaii 96722 (the “subject property”). After two rounds of motions practice, Plaintiff ultimately filed her Second Amended Complaint (“SAC”), which alleges claims against Defendants Bank of New York Mellon (“BONY”), Countrywide Home Loans, Inc. (“Countrywide”), and Bank of America (“BOA”) (collectively, “Defendants”) for violation of Hawaii Revised Statutes (“HRS”) Ch. 480, 18 U.S.C. § 1001, and wrongful foreclosure.

Currently before the court is Defendants' Motion to Dismiss the SAC on the bases that Plaintiff has failed to correct any of the deficiencies the court previously identified when it dismissed Plaintiff's First Amended Complaint (“FAC”), and that the SAC otherwise fails to state a cognizable claim. Based on the following, the court GRANTS in part and DENIES in part Defendants' Motion to Dismiss.

II. BACKGROUND

A. Factual Background

As alleged in the SAC, on February 15, 2005, Plaintiff received a first and second subprime mortgage loan on the subject property from Countrywide in the amounts of $966,000 and $200,000 respectively. SAC ¶ 10. In processing these loans, Countrywide employees allegedly (1) stated Plaintiff's monthly gross income at $19,750 even though she had no income; (2) exaggerated Plaintiff's assets to be over $2,000,000; (3) listed that Countrywide employees had conducted a “face-to-face interview” even though they received information from Plaintiff via phone; (4) secured a false appraisal of the subject property; (5) rushed Plaintiff through signing the documents without allowing her to read them; and (6) charged Plaintiff exorbitant loan origination and processing fees. Id. ¶¶ 11, 12, 15, 16.

On December 11, 2009, BONY recorded a “Notice of Intention To Foreclose Under Power of Sale” for the subject property at the State Bureau of Conveyances in the City and County of Honolulu. Id. ¶ 18. This Notice stated that BONY was the current assignee of Plaintiff's first mortgage, and that the nonjudicial foreclosure auction sale was scheduled for March 10, 2010 at noon. Id. Although not explicitly alleged in the SAC, BONY was declared the highest bidder and now claims title to the subject property. See Oct. 14 Order, Rundgren v. Bank of N.Y. Mellon, 2010 WL 4066878, at *1 (D.Haw. Oct. 14, 2010); see also SAC ¶ 19.

The SAC asserts that Plaintiff did not learn of the “fraudulent scheme” described above until BONY noticed the nonjudicial foreclosure on December 11, 2009, because Countrywide concealed the “relevant facts” during closing by preventing Plaintiff from seeing the documents she was signing. SAC ¶ 21.

B. Procedural Background

On March 10, 2010, Plaintiff filed her Complaint in the First Circuit Court of the State of Hawaii, and Defendants subsequently removed the action to this court. After certain Defendants moved to dismiss the Complaint, Plaintiff filed a FAC on July 2, 2010, alleging claims for (1) wrongful nonjudicial foreclosure in violation of HRS Ch. 667 against BONY (Count I); (2) violation of HRS §§ 480–12 and 480–13 against all Defendants (Count II); and (3) title accounting against MERS (Count III).

On October 14, 2010, the court granted Moving Defendants' Motion to Dismiss the FAC (the “October 14 Order”). The October 14 Order further granted Plaintiff leave to file a second amended complaint to allege a claim for violation of HRS Ch. 480. In response, on November 5, 2010, Plaintiff filed her SAC alleging claims against Defendants for (1) violation of HRS Ch. 480 (Count I); (2) violation of 18 U.S.C. § 1001 (Count II); and (3) wrongful foreclosure (Count III).

On November 15, 2010, Defendants filed their Motion to Dismiss the SAC. Plaintiff filed an Opposition on January 3, 2011, and Defendants filed a Reply on January 10, 2011. A hearing was held on January 24, 2011. At the hearing, the court required the parties to submit supplemental briefing on the issue of whether HRS § 657–20, which extends the statute of limitations for certain types of claims, applies to a HRS Ch. 480 claim. The parties submitted simultaneous supplemental briefing on February 7, 2011, and responsive supplemental briefing on February 14, 2011.

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss a claim for “failure to state a claim upon which relief can be granted[.]”

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); see also Weber v. Dep't of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir.2008). This tenet—that the court must accept as true all of the allegations contained in the complaint—“is inapplicable to legal conclusions.” Iqbal, 129 S.Ct. at 1949. Accordingly, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Rather, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). Factual allegations that only permit the court to infer “the mere possibility of misconduct” do not show that the pleader is entitled to relief. Id. at 1950.

A claim may be dismissed under Rule 12 as “barred by the applicable statute of limitations only when ‘the running of the statute is apparent on the face of the complaint.’ ” Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir.2010) (quoting Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir.2006)). Such motion should be granted “only if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to prove that the statute was tolled.” Morales v. City of Los Angeles, 214 F.3d 1151, 1153 (9th Cir.2000) (citation omitted).

IV. DISCUSSION

Defendants argue that the SAC should be dismissed for a variety of reasons, and the court addresses each claim in turn.

A. Violation of HRS Ch. 480 (Count I)

The SAC asserts that Defendants committed illegal, unfair and deceptive trade practices in consummating the 2005 mortgage loan transactions with Plaintiff, and seeks damages pursuant to HRS § 480–13 as well as rescission of the transactions pursuant to HRS § 480–12. These allegations are generally the same as those in the FAC, with one major difference—Plaintiff now asserts facts suggesting that Defendants hid from Plaintiff the facts supporting this claim.

Plaintiff included these facts because the October 14 Order explained that HRS Ch. 480 claims are subject to a four-year statute of limitations such that Plaintiff's claim—based on events that occurred over five years before Plaintiff filed this action—is time-barred unless tolling applies. Plaintiff had argued that her claim takes benefit of Hawaii's fraudulent concealment statute, HRS § 657–20, but the October 14 Order rejected this argument because no facts suggested fraudulent concealment. See Oct. 14 Order, Rundgren, 2010 WL 4066878, at *6–7. Prior to the October 14 Order, none of the parties (nor the court) questioned the applicability of § 657–20 to a Ch. 480 claim, and the court therefore raised this issue sua sponte at the January 24, 2011 hearing on Plaintiff's SAC.

Based on the following, the court finds that although the statute of limitations on a Ch. 480 claim generally begins to run from the date of the occurrence of the violation, the limitations period may be tolled based on the equitable tolling doctrine of fraudulent concealment, as opposed to the statutory fraudulent concealment provision of HRS § 657–20.

1. The Statute of Limitations on HRS Ch. 480 Claims

Claims brought pursuant to HRS Ch. 480 are generally subject to a four-year statute of limitations. Specifically, § 480–24(a) provides:

Any action to enforce a cause of action arising under this chapter shall be barred unless commenced within four years after the cause of action accrues.... For the purpose of this section, a cause of action for a continuing violation is deemed to accrue at any time during the period of the violation.

Relying on McDevitt v. Guenther, 522 F.Supp.2d 1272, 1289 (D.Haw.2007), the October 14 Order found that this four-year period begins to run from the date of the occurrence of the violation, as opposed to the date of the discovery of the alleged violation. Although no Hawaii cases had addressed the issue, McDevitt came to this conclusion by relying on federal law that adopted the occurrence rule in interpreting the four-year statute of limitations provision found in 15 U.S.C. § 15b. McDevitt, 522 F.Supp.2d at 1289–90 (relying on Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971), which...