Swartz v. City Mortg., Inc.

• Decision Date: 28 November 2012
• Docket Number: Civil No. 10–00651 LEK–RLP.
• Citation: 911 F.Supp.2d 916
• Parties: Burton SWARTZ and Nancy D. Swartz, Plaintiffs, v. CITY MORTGAGE, INC.; ABN Amro Mortgage Group, Inc.; American Guardian Financial Group, Inc.; First National Mortgage Services, LLC; John Does 1–10; Jane Roes 1–10; Doe Corporations, Partnerships or Other Entities 1–10, Defendants.
• Court: U.S. District Court — District of Hawaii

911 F.Supp.2d 916

Burton SWARTZ and Nancy D. Swartz, Plaintiffs,

v.CITY MORTGAGE, INC.; ABN Amro Mortgage Group, Inc.; American Guardian Financial Group, Inc.; First National Mortgage Services, LLC; John Does 1–10; Jane Roes 1–10; Doe Corporations, Partnerships or Other Entities 1–10, Defendants.

Civil No. 10–00651 LEK–RLP.

United States District Court, D. Hawai‘i.

Nov. 28, 2012.

Robin R. Horner, RRH & Associates, Honolulu, HI, for Plaintiffs.

Cheryl A. Nakamura, Lisa Kay Strandtman, Rush Moore LLP, A Limited Liability Law Partnership, Honolulu, HI, for Defendants.

ORDER GRANTING DEFENDANTS CITI MORTGAGE, INC. AND ABN AMRO MORTGAGE GROUP, INC.'S MOTION FOR SUMMARY JUDGMENT ON ALL CLAIMS AGAINST MOVANTS IN THE COMPLAINT FILED ON NOVEMBER 8, 2010

LESLIE E. KOBAYASHI, District Judge.

On October 3, 2012, Defendants Citi Mortgage, Inc. (“CMI”) and ABN Amro Mortgage Group, Inc. (“ABN”, collectively “Moving Defendants”) filed their Notice of Re–Filing of Motion for Summary Judgment on All Claims Against Movants in the Complaint Filed on November 8, 2010 (“Notice”). [Dkt. no. 56.] Defendants originally filed the underlying Motion for Summary Judgment on All Claims Against Movants in the Complaint Filed on November 8, 2010 (“Motion”) on March 18, 2011. [Dkt. no. 17.] Plaintiffs Burton F. Swartz and Nancy D. Swartz (“Plaintiffs”) filed their memorandum in opposition to the Motion on May 20, 2011, and the Moving Defendants filed their reply on May 26, 2011. [Dkt. nos. 27, 29.] After the filing of the Notice, this Court gave the parties the opportunity to file supplemental memoranda addressing any changes in the relevant facts or applicable law since the original briefing. [Dkt. no. 57.] Plaintiffs, however, chose not to file a supplemental memorandum in opposition, and therefore the Moving Defendants could not file a supplemental reply. This matter came on for hearing on October 29, 2012. Appearing on behalf of the Moving Defendants was Cheryl Nakamura, Esq., and appearing on behalf of Plaintiffs was Robin Horner, Esq. After careful consideration of the Motion, supporting and opposing memoranda, and the arguments of counsel, the Moving Defendants' Motion is HEREBY GRANTED for the reasons set forth below.

BACKGROUND

Plaintiffs filed the instant action on November 8, 2010 against CMI, ABN, American Guardian Financial Group, Inc. (“American Guardian”), and First National Mortgage Services, LLC. (“First National”, all collectively, “Defendants”). The instant case arises from the loan origination and eventual mortgage foreclosure upon Plaintiffs' property. Also on November 8, 2010, Plaintiffs filed a Notice of Pendency of Action stating, inter alia, that the case relates to 75–635 Makapono Place, Kailua–Kona, Hawaii 96740, TMK (3)7–5–016–078 (“the Property”). [Dkt. no. 4.] Plaintiffs have not filed any evidence that they served their Complaint on any of the Defendants. CMI and ABN, however, appeared in the action and eventually filed an answer on March 4, 2011.¹ [Dkt. no. 16.]

I. Factual Background

Plaintiffs state that they spoke with First National in late 2006 about obtaining a single loan to finance the purchase of the Property. According to Plaintiffs, First National represented that it would arrange one loan with one monthly payment. [Complaint at ¶¶ 13–15.] Plaintiffs state that they “were financially unsophisticated and lacked the ability to negotiate loan terms” and therefore they put their “trust and faith” in First National, and any lenders it worked with, to provide Plaintiffs with “a suitable loan product.” [ Id. at ¶ 16.] First National secured a commitment for a thirty-year, fixed conventional loan for Plaintiffs. Plaintiffs state that they entered into the transaction in reliance on the representations that First National made. [ Id. at ¶¶ 17–18.] According to Plaintiffs, they provided First National with a loan application containing accurate information, but First National “prepared a loan application that greatly overstated Plaintiffs [sic] income and assets without Plaintiffs [sic] knowledge or consent.” [ Id. at ¶ 19.] Plaintiffs also allege that they did not receive an initial truth-in-lending statement within three days of submitting their loan application. [ Id. at ¶ 20.]

The closing for Plaintiffs' loan was scheduled on September 25, 2006. On that day, Plaintiffs expected that the transaction would involve one loan, as they requested. First American, ABN, and American Guardian, however, prepared documents for two loans. According to Plaintiffs, prior to that date, none of the Defendants disclosed to Plaintiffs that the transaction would involve two separate loans. [ Id. at ¶¶ 21–23.] Plaintiffs questioned why they needed two loans instead of one and why the interest rate was higher than the rate they were promised. Plaintiffs state that “Defendants explained that the specific terms did not matter because Plaintiffs were going to refinance within 2 months at no charge into a jumbo loan.” [ Id. at ¶ 24.] Plaintiffs signed all of the loan documents that First American, ABN, and American Guardian presented to them, but Plaintiffs allege that First American, ABN, and American Guardian did not explain the documents and did not allow Plaintiffs to read what they were signing. Plaintiffs also claim that, at the time they applied for the loan, they had good credit and should have qualified for a fixed thirty-year loan, which would have been best for Plaintiffs under their financial circumstances. Plaintiffs further allege that they did not receive signed and dated good faith statements in connection with the loans. [ Id. at ¶¶ 26–29.] Plaintiffs also complain that the second loan was not “a fully amortized thirty year loan” and that the combined monthly payments for the first loan and the second loan “substantially exceeded Plaintiffs' gross monthly income in 2005 and 2006.” [ Id. at ¶¶ 38–39.]

Plaintiffs acknowledge that CMI's parent acquired ABN. [ Id. at ¶ 31.]

Plaintiffs allege that they experienced “extreme hardship” making their loan payments and asked CMI for a loan modification. CMI represented that it would consider modifying Plaintiffs' loan, but later informed Plaintiffs that the owner of the loan, or loans, would not approve modification. CMI referred the matter to an attorney for foreclosure. At the same time, however, CMI gave Plaintiffs a letter instructing them to submit further financial information to allow CMI to review their loan modification request. [ Id. at ¶¶ 32–37.]

The Complaint alleges the following claims: violations of the Federal Truth–in–Lending Act (“TILA”), 15 U.S.C. § 1601, et seq., and the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq. (“Count I”); violation of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., (“Count II”); fraudulent misrepresentation (“Count III”); breach of fiduciary duty (“Count IV”); unjust enrichment (“Count V”); civil conspiracy (“Count VI”); complaint to quiet title (“Count VII”); violation of Hawaii Bureau of Conveyances Regulations (“Count VIII”); mistake; (“Count IX”); unconscionability (“Count X”); unfair and deceptive acts or practices (“UDAP”), in violation of Haw.Rev.Stat. §§ 480–2(a) and/or 481A–3 (“Count XI”); failure to act in good faith (“Count XII”); recoupment (“Count XIII”); negligent and/or intentional infliction of emotional distress (“NIED”, “IIED” and “Count XIV”); violation of the right to privacy under the Hawai'i Constitution (“Count XV”); violation of Haw.Rev.Stat. Chapter 667 (“Count XVI”); violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692–1692p, as amended (“Count XVII”); and violations of the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691, et seq., and the Home Mortgage Disclosure Act (“HMDA”), 12 U.S.C. § 2801, et seq., (“Count XVIII”).

The Complaint prays for: a judgment of rescission; statutory, actual, treble, and punitive damages; a temporary restraining order or an injunction; a judgment of recoupment, reimbursement and/or indemnification; and any other appropriate relief.

II. Motion

In connection with the instant Motion, the Moving Defendants state that, on or about September 26, 2006, Plaintiffs applied for a loan to purchase the Property. Plaintiffs applied by telephone through First National, a mortgage broker. [Moving Defs.' Concise Statement in Supp. of Motion (“Defs.' CSOF”), filed 3/18/11 (dkt. no. 18), Decl. of Defs.' Agent (“Agent Decl.”),² at ¶ 4A, Exh. A (Uniform Residential Loan Application—“Loan Application”)).] The purchase price of the Property was $990,000.00. [Agent Decl. at ¶ 4E; Loan Application at 4; Agent Decl., Exh. E (U.S. Department of Housing and Urban Development Settlement Statement—“Settlement Statement”).]

First National prepared two loan applications on Plaintiffs' behalf, the first for a $625,000.00 loan from ABN at a fixed rate of 7.25%, to be secured by a first mortgage on the Property. [Loan Application at 1.] This loan is the subject of the instant Motion.³ [Mem. in Supp. of Motion at 2.] ABN “did not obtain any information directly from Plaintiffs, made no representations to Plaintiffs during the loan application process, and did not prepare their loan application.” [Agent Decl. at ¶ 5.]

Plaintiffs executed a promissory note dated September 27, 2006 for the loan from ABN (“First Note”). [ Id. at ¶ 4B, Exh. B.] Plaintiffs also executed a Mortgage dated September 27, 2006 (“First Mortgage”) in favor of ABN, recorded on October 5, 2006 in the Bureau of Conveyances of the State of Hawai'i (“BOC”) as Document No. 2006–182768. [Agent Decl. at ¶ 4C, Exh. C] As part of the loan transaction, Plaintiffs both signed: a Truth–in–Lending Disclosure Statement (“TILA Disclosure”), acknowledging having received and read the disclosure; [Agent Decl. at ¶ 4D, Exh. D;] the Settlement Statement, which authorized the disbursements indicated therein; [Agent Decl. at ¶ 4E, Settlement Statement at 3;] and a...