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Pharoah Orlando Martin and Karen Renee Norton v. Gmac Mortgage Corporation; Gmac Mortgage LLC; Mortgage Electronic

November 30, 2011


The opinion of the court was delivered by: Leslie E. Kobayashi United States District Judge


On August 15, 2011, Defendants GMAC Mortgage Corporation ("GMAC Corp."), GMAC Mortgage LLC ("GMACM"), and Mortgage Electronic Registration Systems ("MERS") (all collectively "Defendants") filed the instant Motion for Summary Judgment ("Motion"). Plaintiffs Pharaoh Orlando Martin and Karen Renee Norton (collectively "Plaintiffs") filed their memorandum in opposition on October 3, 2011, and Defendants filed their reply on October 7, 2011. This matter came on for hearing on October 24, 2011. Appearing on behalf of Defendants was Peter Knapman, Esq., and appearing on behalf of Plaintiffs was James Fosbinder, Esq. After careful consideration of the Motion, supporting and opposing memoranda, and the arguments of counsel, Defendants' Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.


Plaintiffs originally filed this action on February 24, 2011. They filed their First Amended Complaint on April 13, 2011. [Dkt. no. 4.] The First Amended Complaint alleges the following claims:

1) violations of the Sherman/Clayton Antitrust Acts by GMAC Corp. and MERS (Count I);

2) violations of the Hawai`i Antitrust/ Antimonopoly Acts by GMAC Corp. and MERS (Count II);

3) intentional misrepresentations by GMAC Corp. (Count III);

4) unfair and deceptive acts or practices ("UDAP") by GMAC Corp.;

5) breach of fiduciary duty by Defendants (Count V);

6) unjust enrichment by GMAC Corp. (Count VI);

7) slander of title claim by Defendants (Count VII); and

8) a claim for injunctive relief against GMACM (Count VIII). The First Amended Complaint seeks: an order enjoining

the sale of Plaintiffs' property during the pendency of this action; a judgment of rescission of both mortgages and the line of credit; statutory, treble, exemplary, and compensatory damages; reasonable attorneys' fees and costs; and any other appropriate relief. [First Amended Complaint at pg. 51.]

I. Factual Background

In the instant Motion and their separate and concise statement of facts in support thereof ("Defendants' CSOF"), Defendants present the pertinent facts as follows.

On December 9, 2005, Plaintiffs executed an InterestFirst Adjustable Rate Note ("First Note") in favor of GMAC Corp. in the amount of $548,000.00. [Defs.' CSOF, Decl. of Peter Knapp ("Knapp Decl."), Exh. 1.] The First Note was secured by a Mortgage ("First Mortgage"), dated December 9, 2005, on 609 Loulu Way, Makawao, Hawaii 96768 ("the Property"). [Knapman Decl., Exh. 2.] The First Mortgage was recorded in the Bureau of Conveyances on December 29, 2005 as Doc. No. 2005-265228. It named MERS as the mortgagee, acting solely as the nominee of the lender, GMAC Corp. [Id. at 1-2.]

Also on December 9, 2005, Plaintiffs executed a Home Equity Line of Credit Agreement ("LOC") in favor of GMAC Corp. for a principal amount of up to $137,000.00. The LOC was secured by an Open End Mortgage ("LOC Mortgage"), dated December 9, 2005, on the Property. [Knapman Decl., Exh. 3.] The LOC Mortgage was recorded in the Bureau of Conveyances on December 29, 2005 as Doc. No. 2005-265229. It named MERS as the mortgagee, acting solely as GMAC Corp.'s nominee. [Id. at 1-2.]

On March 15, 2006, Plaintiffs executed a note in favor of GMAC Corp. for the principal amount of $137,000.00 ("Second Note"). The Second Note was secured by a Mortgage ("Second Mortgage"), dated March 15, 2006, on the Property. [Knapman Decl., Exh. 4.] The Second Mortgage was recorded in the Bureau of Conveyances on March 17, 2006 as Doc. No. 2006-092705. It named MERS as the mortgagee, acting solely as the nominee of the lender, GMAC Corp. [Id. at 1-2.]

On January 13, 2011, MERS executed an Assignment of Mortgage ("Assignment") assigning "all beneficial interest under that certain mortgage dated December 09, 2005, executed by [Plaintiffs] . . . , mortgagor, and recorded in Bureau of Conveyances in Regular System Document Instrument No. 2005-265228 on December 29, 2005" to GMACM. [Knapman Decl., Exh. 5.] The Assignment, however, identified the subject property as 7012 Hawaii Kai Drive 1007, Makawao, HI 96768. The Assignment was recorded in the Bureau of Conveyances on January 25, 2011 as Doc. No. 2011-014691. [Id. at 1.]

Defendants state that Plaintiffs are in default on the First Note and First Mortgage. [Knapp Decl. at ¶¶ 6-7.] On January 25, 2011, GMACM mailed a letter to Plaintiffs notifying them that GMACM intended to pursue a non-judicial foreclosure under power of sale. [Id., Exh. 6.]

II. Motion

In the instant Motion, Defendants first note that Plaintiffs allege Counts I and II (antitrust claims), Count V (breach of fiduciary duty), and Count VII (slander of title) against MERS. Defendants argue that MERS cannot be held liable for the allegedly wrongful acts that occurred during loan origination because MERS acted only as the lender's nominee. [Mem. in Supp. of Motion at 5-7.]

As to the antitrust claims, Defendants assert that both the federal and state claims are time-barred. Both are subject to four-year statutes of limitations. Plaintiffs' alleged injury arose from GMAC Corp.'s agreement to name MERS as the mortgagee and nominee. Although Plaintiffs do not specify which mortgage these claims relate to, Defendants argue that, no matter which mortgage allegedly gave rise to the antitrust claims, all possible antitrust claims are time-barred because any claim arose, at the latest, by April 2010, and Plaintiffs did not file this action until February 2011. Further, even if Plaintiffs' antitrust claims are not time-barred, Plaintiffs cannot establish the required elements of those claims. [Id. at 8-10.]

As to Count III, the fraud claim, Defendants contend that it is based on: Plaintiffs' allegation that GMAC Corp. represented to Plaintiffs that they would be able to refinance, even though GMAC Corp. knew that Plaintiffs would not be able to do so because the Property did not comply with environmental regulations; and Plaintiffs' allegation that GMAC Corp.'s failure to disclose that it intended to sell the First Mortgage improperly induced them into agreeing to the transaction. Defendants' primary argument is that neither theory states a viable claim because a fraud claim cannot be premised on future, promissory events. [Id. at 11-13.]

As to Count IV, the UDAP claim, Defendants first argue that it is time-barred because it is also based on consummation activities. [Id. at 16.]

Defendants contend that Count V, breach of fiduciary duty, fails as a matter of law under the general rule that a financial institution owes no fiduciary duties to a borrower where the institution did not exceed the traditional role as a lender. A fiduciary duty only arises where there is a special relationship between the lender and the borrower, and none existed here. [Id. at 17-18.]

Defendants argue that Count VI, unjust enrichment, fails because Plaintiffs cannot establish that GMAC Corp. received a benefit in the mortgage transactions that it should not retain. Defendants emphasize that: Plaintiffs received the benefit of the $700,000 they acquired through the mortgages; Plaintiffs voluntarily and knowingly entered into the mortgage transactions; and there is no evidence of any wrongdoing by Defendants. [Id. at 18-19.]

As to Count VII, slander of title, Defendants assert that this claim fails as a matter of law because Plaintiffs cannot establish any of the required elements for the claim. The Assignment does not disparage the Property in any way. [Id. at 19-20.] Defendants also note that this claim is based on the assertion that the Assignment is invalid because the First Note and the First Mortgage were separated, but courts have repeatedly rejected this argument. [Id. at 21.]

As to Count VIII, injunctive relief, Defendants argue that the claim fails because there is no independent cause of action for injunctive relief. Further, Plaintiffs have not established that they are entitled to injunctive relief. [Id. at 21-22.]

Defendants therefore urge the Court to grant summary judgment in their favor as to all claims.

III. Plaintiffs' Opposition

Plaintiffs' memorandum in opposition states that Plaintiffs "have stated causes of action for Unfair and Deceptive Acts or Practices and Slander of Title under Hawaii law, and for that reason summary judgment should be denied as to those causes of action." [Mem. in Opp. at 1-2.] They also "believe that their claims for unjust enrichment, quiet title, and injunctive relief are unlikely to prevail as written." [Id. at 10 (citing Phillips v. Bank of America, 2011 WL 240813 at *11-12 (Jan. 21, 2011)).] Plaintiffs therefore request leave to amend those claims. [Id.]

The memorandum in opposition states that, in February 2008, Plaintiffs sought a loan modification with GMAC Corp., but their application was denied because the Property does not conform to Environmental Protection Agency regulations for large capacity cesspools. Plaintiffs emphasize that GMAC Corp. should have been aware of those regulations at the time it entered into the First Mortgage and the Second Mortgage. [Id. at 2 (citing First Amended Complaint at ¶¶ 52-58).] Plaintiffs also state that they tried to refinance with other lenders, but were unsuccessful because those lenders believed that foreclosure was imminent based on the Assignment. [Id. at 2-3.] The Court, however, notes that Plaintiffs' concise statement of facts ("Plaintiffs' CSOF") does not contain any affidavits or supporting documents addressing these allegations.

Plaintiffs emphasize that the Assignment references the wrong property address. [Id. at 3.] They assert that the Assignment is evidence that the foreclosure process is flawed and that they "have recently learned of new information related to the lack of authority conferred upon MERS 'certifying officers' that was not available to them at the time they filed the First Amended Complaint that indicates that the Assignment is invalid, and by extension false." [Id. at 3-4.] Plaintiffs therefore seek leave to file a second amended complaint. [Id. at 4.]

As to the slander of title claim, Plaintiffs argue that the Assignment has been published because it was publicly filed with the Bureau of Conveyances. Plaintiffs have also alleged that Defendants knew the representations in the Assignment were false, and this is all that is required to plead the state of mind for slander of title. Plaintiffs assert that whether Defendants actually had that state of mind is a question of fact which is not appropriate for summary judgment. [Id. at 5-6.] Plaintiffs emphasize that they do not allege that the Assignment disparaged the Property; the Assignment disparaged Plaintiffs' title to the Property. Further, the Property is clearly identified in the Assignment, which refers the First Mortgage securing the Property. Plaintiffs also allege that they have sufficiently pled special damages in the First Amended Complaint - the attorneys' fees and costs incurred in trying to repair their title. Plaintiffs assert that it is not possible for them to be more specific at this point, and the allegations they have raised are sufficient. [Id. at 6-7.] Plaintiffs also argue that there is sufficient evidence of their special damages due to their inability to sell or otherwise dispose of the Property because the Assignment was so widely disseminated as to deprive them of a ...

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