Stanton v. Bank of Am., N.A.

• Decision Date: 30 November 2011
• Docket Number: Civil No. 09–00404 LEK–BMK.
• Citation: 834 F.Supp.2d 1061
• Parties: Carolyn Rosemary Espina STANTON, Plaintiff, v. BANK OF AMERICA, N.A., Successor by Merger to Countrywide Bank, N.A., et al., Defendant.
• Court: U.S. District Court — District of Hawaii

834 F.Supp.2d 1061

Carolyn Rosemary Espina STANTON, Plaintiff,

v.BANK OF AMERICA, N.A., Successor by Merger to Countrywide Bank, N.A., et al., Defendant.

Civil No. 09–00404 LEK–BMK.

United States District Court,

D. Hawai‘i.

Nov. 30, 2011.

Colin A. Yost, Law Office of Colin A. Yost, Michael R. Cruise, Leavitt, Yamane & Soldner, Honolulu, HI, George J. Zweibel, Law Office of George J. Zweibel, Honokaa, HI, for Plaintiff.

Patricia J. McHenry, Cades Schutte, Jade L. Ching, James B. Rogers, Kurt S. Fritz, Laura P. Moritz, Alston Hunt Floyd & Ing Honolulu, Honolulu, HI, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART BANK OF AMERICA, N.A.'S MOTION FOR SUMMARY JUDGMENT AND DENYING FIDELITY ESCROW NATIONAL TITLE & ESCROW OF HAWAII, INC.'S RENEWED MOTION FOR SUMMARY JUDGMENT ON COUNTS 8, 12, & 14 OF PLAINTIFF'S FIRST AMENDED COMPLAINT

LESLIE E. KOBAYASHI, District Judge.

On June 15, 2011, Defendant Bank of America, N.A., successor by merger to Countrywide Bank, N.A. (“BOA”), filed its Motion for Summary Judgment (“BOA Motion”) and its concise statement of facts in support of the BOA Motion (“BOA CSOF”). Also on June 15, 2011, Defendant Fidelity National Title & Escrow of Hawaii, Inc. (“Fidelity Escrow”) filed its Renewed Motion for Summary Judgment on Counts 8, 12, & 14 of Plaintiff's First Amended Complaint (“Fidelity Escrow Motion”) and its concise statement of facts in support thereof (“Fidelity Escrow CSOF”). On September 14, 2011, Plaintiff Carolyn Rosemary Espina Stanton (“Plaintiff”) filed her: memorandum in opposition to the BOA Motion; concise statement of facts in opposition to the BOA Motion (“Plaintiff's BOA CSOF”); memorandum in opposition to the Fidelity Escrow Motion; and concise statement of facts in opposition to the Fidelity Escrow Motion (“Plaintiff's Fidelity Escrow CSOF”). On September 14, 2011, Fidelity Escrow filed a statement of no position as to the BOA Motion. BOA filed its reply memorandum (“BOA Reply”) on September 21, 2011, and Fidelity Escrow filed its reply memorandum (“Fidelity Escrow Reply”) on September 20, 2011.

These matters came on for hearing on October 5, 2011. Patricia McHenry, Esq., appeared on behalf of BOA. Jade Ching, Esq., and J. Blaine Rogers, Esq., appeared on behalf of Fidelity Escrow. Colin Yost, Esq., and George Zweibel, Esq., appeared on behalf of Plaintiff. After careful consideration of the motions, supporting and opposing memoranda, and the arguments of counsel, the BOA Motion is HEREBY GRANTED IN PART AND DENIED IN PART, and the Fidelity Escrow Motion is HEREBY DENIED for the reasons set forth below.

BACKGROUND

Plaintiff filed this action on August 27, 2009. Defendant Loan Network LLC (“Loan Network”) failed to respond to the Complaint, and Plaintiff obtained an entry of default on October 1, 2009. On April 12, 2010, pursuant to a stipulation by the parties, [dkt. no. 25,] Plaintiff filed her First Amended Complaint [dkt. no. 26].

Some of the basic facts of this case are set forth in a dispositive order filed before the case was reassigned to this Court.

I. The Transaction

Plaintiff alleges that she purchased the property located at 5404 Poola Street, Honolulu, Hawai'i 96821 (the “Property”) in 2003. (“[First Amended] Compl.” ¶ 18, Doc. # 26.) In late 2006, Plaintiff states that she discussed refinancing the Property with the mortgage broker for the transaction, Defendant Loan Network LLC (“Loan Network”) in order to “obtain cash for house upgrades and improvements.” ( Id. ¶¶ 18–19.) The lender for the transaction was Defendant Bank of America, N.A., successor by merger to Countrywide Bank, N.A. (“Countrywide”). ( Id. ¶¶ 8, 24–25.) Pursuant to written instructions from the parties, and specifically the instructions between Plaintiff and Defendant Fidelity National Title & Escrow of Hawaii, Inc. (“Fidelity Escrow” or “Defendant”), Fidelity Escrow served as the escrow depository for the refinancing loan transaction. ( Id. ¶ 29; Doc. # 32, Declaration of Dot Yoza, “Yoza Decl.” ¶ 3 & Ex. D.) The escrow instructions signed and accepted by Plaintiff (the “Escrow Instructions”) provide, inter alia, that:

[Fidelity Escrow] serves ONLY as an Escrow Holder in connection with these instructions and cannot give legal advice to any party hereto.

Escrow Holder is not to be accountable or liable for the sufficiency or correctness as to form, manner of execution, or validity of any instrument deposited in this escrow, nor as to the identity, authority or rights of any person executing the same. Escrow Holder's duties hereunder shall be limited to the proper handling of such money and the proper safekeeping of such instruments, or other documents received by Escrow Holder, and for the disposition of same in accordance with the written instructions accepted by Escrow Holder.

(Yoza Decl., Ex. D ¶ 19.)

As alleged by Plaintiff, the principal amount of the first loan was $1,500,000.00. ( [First Amended] Compl. ¶ 37.) The first loan is evidenced by a mortgage dated February 1, 2007 and recorded February 12, 2007, in the Office of the Assistant Registrar of the Land Court of the State of Hawai'i (“Land Court”) as Document No. 3558893 (the “First Mortgage”). ( Id.; Doc. # 32, Declaration of Moritz “Moritz Decl.,” Ex. B.) The principal amount of the second loan was $215,000.00, and the second loan is evidenced by a mortgage dated February 1, 2007 and recorded February 12, 2007, in the Land Court as Document No. 3558894 (the “Second Mortgage”) (collectively, the First Mortgage and Second are hereinafter the “Loan”). ( [First Amended] Compl. ¶ 49; Moritz Decl., Ex. C.) Plaintiff states that she signed the relevant Loan documents at Fidelity Escrow's offices and did not read them. ( [First Amended] Compl. ¶¶ 31, 32, 34, 46.) Plaintiff refinanced her Property with the two loans and obtained over $330,000 in cash. ( Id., Exs. E, F.)Stanton v. Bank of Am., N.A., Cv. No. 09–00404 DAE–LEK, 2010 WL 4176375, at *1 (D.Hawai'i Oct. 19, 2010).¹

Plaintiff alleges that, before she signed the Loan Documents, Loan Network made various representations to her about what the terms of the loans would be.

• Although Plaintiff did not qualify for the single, fixed-rate loan that she wanted, she would still qualify for “excellent rates” and would have a combined mortgage payment of “well under $8,500” per month. [First Amended Complaint at ¶¶ 20–22; Pltf.'s BOA CSOF, Decl. of Carolyn Rosemary Espina Stanton (“Stanton BOA Decl.”) at ¶ 9.]

• The loans would have no more than a one-year prepayment penalty. [Stanton BOA Decl. at ¶ 10.]

• According to two Good Faith Estimates dated January 2, 2007 that Loan Network provided from Countrywide (“1/2/07 Good Faith Estimates”): the first loan, for $1,505,000, would be a thirty-year loan at 6.500% per annum, with a monthly principal and interest payment of $4,840.67; and the second loan, for $215,000, would be a fifteen-year loan at 6.000% per annum, with a monthly principal and interest payment of $1, 289.03.² [ Id. at ¶¶ 11, 13.]

Plaintiff states that she relied upon these representations in deciding to obtain the two loans, and she did not receive any communications about changes to the terms of the loans between her receipt of the 1/2/07 Good Faith Estimates and the closing. [ Id. at ¶¶ 15, 17.] She states that, on the closing date, she was not given copies to keep of any of the documents that she signed. [ Id. at ¶¶ 22–23.] Plaintiff did not discover the true terms of the loans until sometime after she received her copies of the documents on or about February 12 or 13, 2007. [ Id. at ¶¶ 26–27.] The true loan terms include:

• The interest on the first loan was initially 8.500% per annum and “was to be adjusted each month equal to the applicable 12–month U.S. Treasury Securities rate (the ‘index’) plus 3.575% (the ‘margin’), up to a maximum of 9.950%.” [First Amended Complaint at ¶ 37; Stanton BOA Decl. at ¶ 28.]

• The monthly payments for the first year would be $5,358.65 based on a rate of 1.750%, and would be adjusted each year thereafter. A payment cap, however, limited the amount that the resulting monthly payments could exceed the prior year's payments. This would result in negative amortization up to 115% of the original principal amount, at which time the monthly payments could change more frequently and would not be subject to the cap. [First Amended Complaint at ¶¶ 38–39; Stanton BOA Decl. at ¶ 29.]

• Countrywide estimated that the monthly payments would increase to $13,612.59 in less than three-and-a-half years. [Pltf.'s BOA CSOF, Decl. of Colin A. Yost (“Yost BOA Decl.”), Exh. 7 (Truth in Lending Disclosure Statement, dated February 1, 2007, stating that the first loan had 319 payments of $13,612.59 and a final payment of $13,608.96).]

• The first loan had a three-year prepayment penalty. [Yost BOA Decl., Exh. 8 (Prepayment Penalty Addendum for first loan).]

• The second loan was a home equity line of credit of up to $215,000 that Plaintiff could draw from for five years, with a possible five-year extension. The rate was initially 10.625% per annum, but was “to be adjusted each month to equal the applicable highest prime rate published in The Wall Street Journal (the ‘index’) plus 2.375% (the ‘margin’), up to a maximum of 18.000% per annum.” [First Amended Complaint at ¶ 49; Stanton BOA Decl. at ¶ 28.]

• At the 10.625% rate, the monthly, interest-only payments during the draw period would be $1,903.65. [First Amended Complaint at ¶ 52.]

• After the draw period, there was “a 15–year repayment period, during which minimum payments equal to 1/180th of the outstanding principal balance plus accrued finance charges would be required.” [ Id. at ¶ 51.]

Plaintiff states that, if she “had been provided with the loan documents and/or an estimated settlement statement on February 1, 2007, [she] would have cancelled the transaction on or before February 5, 2007.” [Stanton BOA Decl. at ¶ 35.] Plaintiff also states that “[o]ver a period of many...